<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1997
Registration No. 333-29731
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------
AFC ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Minnesota 5812 58-2016606
(State or other jurisdiction of (Primary Standard Industrial (Employer
incorporation or organization) Classification Code Identification No.)
Number)
</TABLE>
Six Concourse Parkway, Suite 1700
Atlanta, Georgia 30328-5352
(770) 391-9500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------------
Samuel N. Frankel
Executive Vice President, General Counsel and Secretary
AFC Enterprises, Inc.
Six Concourse Parkway, Suite 1700
Atlanta, Georgia 30328-5352
(770) 391-9500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
COPIES TO:
Timothy F. Sylvester, Esq. Allan J. Tanenbaum, Esq.
Riordan & McKinzie Cohen Pollock Merlin
300 South Grand Avenue Axelrod & Tanenbaum
29th Floor 2100 Riveredge Parkway, Suite 300
Los Angeles, California 90071 Atlanta, Georgia 30328
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
--------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
3.1+ Articles of Incorporation of AFC Enterprises, Inc. ("AFC"), as amended to date.
3.2+ Amended and Restated Bylaws of AFC (formerly known as America's Favorite Chicken Company),
as amended to date.
4.1+ Indenture dated as of May 21, 1997 between AFC and United States Trust Company of New
York, as Trustee, with respect to the 10 1/4% Senior Subordinated Notes due 2007.
4.2+ Purchase Agreement, dated May 16, 1997, by and among AFC, Goldman, Sachs & Co., CIBC
Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette Securities Corporation.
4.3+ Exchange and Registration Rights Agreement, dated as of May 21, 1997, by and among AFC,
Goldman, Sachs & Co., CIBC Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation.
4.4+ Credit Agreement dated as of May 21, 1997 between AFC and the financial institutions listed
therein (collectively, "Lenders"), Goldman Sachs Capital Partners L.P., as syndication and
arranging agent, and Canadian Imperial Bank of Commerce ("CIBC"), as administrative agent for
Lenders.
4.5+ Security Agreement, dated as of May 21, 1997, by and between AFC and CIBC, as
Administrative Agent.
4.6+ Pledge Agreement, dated as of May 21, 1997, by and between AFC and CIBC, as Administrative
Agent.
4.7+ Trademark Collateral Security Agreement, dated as of May 21, 1997, by and between AFC and CIBC, as
Administrative Agent.
4.8+ Patent and Copyright Collateral Security Agreement, dated as of May 21, 1997, by and between AFC and
CIBC, as Administrative Agent.
4.9+ Collateral Account Agreement, dated as of May 21, 1997, by and between AFC and CIBC, as
Administrative Agent.
4.10+ Form of Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated May 21,
1997, between AFC, and CIBC as Administrative Agent.
5.1++ Opinion of Riordan & McKinzie as to the legality of securities registered hereunder.
10.1+ Stock Purchase Agreement dated February 23, 1996 among AFC, FS Equity Partners, L.P. III
("FSEP III"), and FS Equity Partners International, L.P. ("FSEP International").
10.2+ Stockholders Agreement dated April 11, 1996 among FSEP III and FSEP International, CIBC,
Pilgrim Prime Rate Trust, Van Kampen American Capital Prime Rate Income Trust, Senior Debt
Portfolio, ML IBK Positions Inc., Frank J. Belatti, Dick R. Holbrook, Samuel N. Frankel
(collectively, the "Stockholders") and AFC.
10.3+ Amendment No. 1 to Stockholders Agreement dated May 1, 1996 among the Stockholders, AFC
and PENMAN Private Equity and Mezzanine Fund, L.P.
10.4+ Asset Purchase Agreement dated March 24, 1997 by and between AFC and Atlanta Franchise
Development Company, LLC.
10.5+ Asset Purchase Agreement dated May 5, 1997 among AFC, The American Bagel Company d/b/a
Chesapeake Bagel Bakery, Michael Robinson, and Alan Manstof.
10.6+ Form of Popeye's Development Agreement
10.7+ Form of Church's Development Agreement
10.8+ Form of Popeye's Franchise Agreement
10.9+ Form of Church's Franchise Agreement
10.10+ Formula Agreement dated July 2, 1979 among Alvin C. Copeland, Gilbert E. Copeland, Mary L.
Copeland, Catherine Copeland, Russell J. Jones, A. Copeland Enterprises, Inc. and Popeyes
Famous Fried Chicken, Inc. (a predecessor of AFC).
10.11+ Amendment to Formula Agreement dated March 21, 1989 by and among Alvin Copeland, New
Orleans Spice Company, Inc. and Biscuit Investments, Inc. (a predecessor of AFC).
10.12+ Second Amendment to Formula Agreement dated March 21, 1989 by and among Alvin C.
Copeland, Biscuit Investments, Inc. and New Orleans Spice Company, Inc.
10.13+ Supply Agreement dated March 21, 1989 between New Orleans Spice Company, Inc. and Biscuit
Investments, Inc.
10.14+ Recipe Royalty Agreement dated March 21, 1989 by and among Alvin C. Copeland, New Orleans
Spice Company, Inc. and Biscuit Investments, Inc.
10.15+ Licensing Agreement dated March 11, 1976 between King Features Syndicate Division of The
Hearst Corporation and A. Copeland Enterprises, Inc.
10.16+ Assignment and Amendment dated January 1, 1981 between A. Copeland Enterprises, Inc.,
Popeyes Famous Fried Chicken, Inc. and King Features Syndicate Division of The Hearst
Corporation.
10.17+ Popeye License Agreement dated January 1, 1981 between King Features Syndicate Division of
The Hearst Corporation and Popeyes Famous Fried Chicken, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
10.18+ Letter Agreement dated September 17, 1981 between King Features Syndicate Division of The
Hearst Corporation, A. Copeland Enterprises, Inc. and Popeyes Famous Fried Chicken, Inc.
10.19+ License Agreement dated December 19, 1985 by and between King Features Syndicate, Inc., The
Hearst Corporation, Popeyes, Inc. and A. Copeland Enterprises, Inc.
10.20+ Letter Agreement dated July 20, 1987 by and between King Features Syndicate, Division of The
Hearst Corporation, Popeyes, Inc. and A. Copeland Enterprises, Inc.
10.21+ Employment Agreement dated November 5, 1992 between AFC and Frank J. Belatti.
10.22+ Amendment No. 1 to Employment Agreement dated November 5, 1995 between AFC and Frank
J. Belatti.
10.23+ Employment Agreement dated as of November 5, 1992 between AFC and Dick R. Holbrook.
10.24+ Amendment No. 1 to Employment Agreement dated November 5, 1995 between AFC and Dick R.
Holbrook.
10.25+ Employment Agreement dated December 4, 1995 between AFC and Samuel N. Frankel.
10.26+ 1992 Stock Option Plan of AFC (formerly America's Favorite Chicken Company) effective as of
November 5, 1992.
10.27+ First Amendment to 1992 Stock Option Plan dated July 19, 1993.
10.28+ Second Amendment to 1992 Stock Option Plan dated December 17, 1993.
10.29+ Third Amendment to 1992 Stock Option Plan dated April 11, 1996.
10.30+ 1996 Nonqualified Performance Stock Option Plan (Executive) of AFC effective as of April 11,
1996.
10.31+ 1996 Nonqualified Performance Stock Option Plan (General) of AFC effective as of April 11,
1996.
10.32+ 1996 Nonqualified Stock Option Plan of AFC effective as of April 11, 1996.
10.33+ Form of Nonqualified Stock Option Agreement (Executive) between AFC and certain key
executives.
10.34+ Form of Nonqualified Stock Option Agreement (General) between AFC and stock option
participants.
10.35+ 1996 Employee Stock Bonus Plan (Executive) of AFC effective as of April 11, 1996.
10.36+ 1996 Employee Stock Bonus Plan (General) of AFC effective as of April 11, 1996.
10.37+ Form of Stock Bonus Agreement (Executive) between AFC and certain executive officers.
10.38+ Form of Stock Bonus Agreement (General) between AFC and certain key officers and employees.
10.39+ Form of Secured Promissory Note issued to certain members of management.
10.40+ Form of Stock Pledge Agreement between AFC and certain members of management.
10.41+ AFC 1994 Supplemental Benefit Plan for Executive Officers dated May 9, 1994.
10.42+ AFC 1994 Supplemental Benefit Plan for Senior and Executive Staff Officers dated April 19,
1994.
10.43+ AFC 1994 Supplemental Benefit Plan for Senior Officers/General Managers dated May 9, 1994.
10.44+ AFC 1994 Supplemental Benefit Plan for Designated Officers dated May 9, 1994.
10.45+ Settlement Agreement between Alvin C. Copeland, Diversified Foods and Seasonings, Inc.,
Flavorite Laboratories, Inc. and AFC dated May 29, 1997.
10.46+ Sublease dated March 1, 1997 by and between AFC and Foresight Software, Inc.
10.47+ Lease dated December 31, 1992 by and between Concourse VI Associates and AFC.
10.48+ First Amendment to Lease Agreement dated January 1993 by and between AFC and Concourse
VI Associates.
10.49+ Second Amendment to Lease Agreement dated June 24, 1993 by and between AFC and
Concourse VI Associates.
10.50+ Third Amendment to Lease Agreement dated June 17, 1994 by and between AFC and Concourse
VI Associates.
10.51+ Indemnification Agreement dated April 11, 1996 by and between AFC and William M. Wardlaw.
10.52+ Indemnification Agreement dated April 11, 1996 by and between AFC and Ronald P. Spogli.
10.53+ Indemnification Agreement dated April 11, 1996 by and between AFC and John M. Roth.
10.54+ Indemnification Agreement dated May 1, 1996 by and between AFC and Kelvin J. Pennington.
10.55+ Indemnification Agreement dated April 11, 1996 by and between AFC and Dick R. Holbrook.
10.56+ Indemnification Agreement dated May 1, 1996 by and between AFC and Todd W. Halloran.
10.57+ Indemnification Agreement dated April 11, 1996 by and between AFC and Samuel N. Frankel.
10.58+ Indemnification Agreement dated April 11, 1996 by and between AFC and Matt L. Figel.
10.59+ Indemnification Agreement dated July 2, 1996 by and between AFC and Paul H. Farrar.
10.60+ Indemnification Agreement dated April 11, 1996 by and between AFC and Mark J. Doran.
10.61+ Indemnification Agreement dated April 11, 1996 by and between AFC and Frank J. Belatti.
21.1+ Subsidiaries of AFC.
23.1++ Consent of Riordan & McKinzie (contained in Exhibit 5.1).
23.2* Consent of Arthur Andersen LLP.
24.1+ Power of Attorney.
25.1++ Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of
United States Trust Company of New York.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
99.1++ Form of Letter of Transmittal with respect to the Exchange Offer.
99.2++ Form of Notice of Guaranteed Delivery.
</TABLE>
- --------------------
* Filed as an exhibit to the Registration Statement on Form S-4 (Registration
No. 333-29731) on June 20, 1997 and incorporated by reference herein).
+ Filed herewith.
++ To be filed by amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Atlanta, State of Georgia, on July 2, 1997.
AFC Enterprises, Inc.
By: /s/ Samuel N. Frankel
_____________________
Samuel N. Frankel
Executive Vice President, General
Counsel and Secretary
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chief Executive Officer, July 2, 1997
- ----------------------- Chairman of the Board and Director
Frank J. Belatti (Principal Executive Officer)
* President, Chief Operating Officer, July 2, 1997
- ----------------------- and Director
Dick R. Holbrook
* Executive Vice President, July 2, 1997
- ----------------------- General Counsel, Secretary and
Samuel N. Frankel Director
* Chief Financial Officer (Principal July 2, 1997
- ----------------------- Financial and Accounting Officer)
Gerald J. Wilkins
* Director July 2, 1997
- -----------------------
Mark J. Doran
* Director July 2, 1997
- -----------------------
Paul Farrar
* Director July 2, 1997
- -----------------------
Matt L. Figel
* Director July 2, 1997
- -----------------------
Todd M. Halloran
* Director July 2, 1997
- -----------------------
Kelvin J. Pennington
* Director July 2, 1997
- -----------------------
John M. Roth
* Director July 2, 1997
- -----------------------
Ronald P. Spogli
* Director July 2, 1997
- -----------------------
William M. Wardlaw
</TABLE>
*By: /s/ Samuel N. Frankel
-----------------------
Samuel N. Frankel
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
<C> <S> <C>
3.1+ Articles of Incorporation of AFC Enterprises, Inc. ("AFC"), as amended to
date.
3.2+ Amended and Restated Bylaws of AFC (formerly known as America's
Favorite Chicken Company), as amended to date.
4.1+ Indenture dated as of May 21, 1997 between AFC and United States
Trust Company of New York, as Trustee, with respect to the 10 1/4%
Senior Subordinated Notes due 2007.
4.2+ Purchase Agreement, dated May 16, 1997, by and among AFC, Goldman,
Sachs & Co., CIBC Wood Gundy Securities Corp. and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.3+ Exchange and Registration Rights Agreement, dated as of May 21, 1997,
by and among AFC, Goldman, Sachs & Co., CIBC Wood Gundy Securities
Corp. and Donaldson, Lufkin & Jenrette Securities Corporation.
4.4+ Credit Agreement dated as of May 21, 1997 between AFC and the
financial institutions listed therein (collectively, "Lenders"), Goldman Sachs
Capital Partners L.P., as syndication and arranging agent, and Canadian
Imperial Bank of Commerce ("CIBC"), as administrative agent for Lenders.
4.5+ Security Agreement, dated as of May 21, 1997, by and between AFC and
CIBC, as Administrative Agent.
4.6+ Pledge Agreement, dated as of May 21, 1997, by and between AFC and
CIBC, as Administrative Agent.
4.7+ Trademark Collateral Security Agreement, dated as of May 21, 1997, by and
between AFC and CIBC, as Administrative Agent.
4.8+ Patent and Copyright Collateral Security Agreement, dated as of May 21, 1997, by
and between AFC and CIBC, as Administrative Agent.
4.9+ Collateral Account Agreement, dated as of May 21, 1997, by and
between AFC and CIBC, as Administrative Agent.
4.10+ Form of Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing, dated May 21, 1997, between AFC, and CIBC as Administrative
Agent.
5.1++ Opinion of Riordan & McKinzie as to the legality of securities registered
hereunder.
10.1+ Stock Purchase Agreement dated February 23, 1996 among AFC, FS
Equity Partners, L.P. III ("FSEP III"), and FS Equity Partners International,
L.P. ("FSEP International").
10.2+ Stockholders Agreement dated April 11, 1996 among FSEP III and FSEP
International, CIBC, Pilgrim Prime Rate Trust, Van Kampen American
Capital Prime Rate Income Trust, Senior Debt Portfolio, ML IBK Positions
Inc., Frank J. Belatti, Dick R. Holbrook, Samuel N. Frankel (collectively,
the "Stockholders") and AFC.
10.3+ Amendment No. 1 to Stockholders Agreement dated May 1, 1996 among
the Stockholders, AFC and PENMAN Private Equity and Mezzanine Fund,
L.P.
10.4+ Asset Purchase Agreement dated March 24, 1997 by and between AFC
and Atlanta Franchise Development Company, LLC.
10.5+ Asset Purchase Agreement dated May 5, 1997 among AFC, The American
Bagel Company d/b/a Chesapeake Bagel Bakery, Michael Robinson, and
Alan Manstof.
10.6+ Form of Popeye's Development Agreement
10.7+ Form of Church's Development Agreement
10.8+ Form of Popeye's Franchise Agreement
10.9+ Form of Church's Franchise Agreement
10.10+ Formula Agreement dated July 2, 1979 among Alvin C. Copeland,
Gilbert E. Copeland, Mary L. Copeland, Catherine Copeland, Russell J.
Jones, A. Copeland Enterprises, Inc. and Popeyes Famous Fried Chicken,
Inc. (a predecessor of AFC).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----
<C> <S> <C>
10.11+ Amendment to Formula Agreement dated March 21, 1989 by and among
Alvin Copeland, New Orleans Spice Company, Inc. and Biscuit
Investments, Inc. (a predecessor of AFC).
10.12+ Second Amendment to Formula Agreement dated March 21, 1989 by and
among Alvin C. Copeland, Biscuit Investments, Inc. and New Orleans
Spice Company, Inc.
10.13+ Supply Agreement dated March 21, 1989 between New Orleans Spice
Company, Inc. and Biscuit Investments, Inc.
10.14+ Recipe Royalty Agreement dated March 21, 1989 by and among Alvin C.
Copeland, New Orleans Spice Company, Inc. and Biscuit Investments, Inc.
10.15+ Licensing Agreement dated March 11, 1976 between King Features
Syndicate Division of The Hearst Corporation and A. Copeland Enterprises,
Inc.
10.16+ Assignment and Amendment dated January 1, 1981 between A. Copeland
Enterprises, Inc., Popeyes Famous Fried Chicken, Inc. and King Features
Syndicate Division of The Hearst Corporation.
10.17+ Popeye License Agreement dated January 1, 1981 between King Features
Syndicate Division of The Hearst Corporation and Popeyes Famous Fried
Chicken, Inc.
10.18+ Letter Agreement dated September 17, 1981 between King Features
Syndicate Division of The Hearst Corporation, A. Copeland Enterprises,
Inc. and Popeyes Famous Fried Chicken, Inc.
10.19+ License Agreement dated December 19, 1985 by and between King
Features Syndicate, Inc., The Hearst Corporation, Popeyes, Inc. and A.
Copeland Enterprises, Inc.
10.20+ Letter Agreement dated July 20, 1987 by and between King Features
Syndicate, Division of The Hearst Corporation, Popeyes, Inc. and A.
Copeland Enterprises, Inc.
10.21+ Employment Agreement dated November 5, 1992 between AFC and Frank
J. Belatti.
10.22+ Amendment No. 1 to Employment Agreement dated November 5, 1995
between AFC and Frank J. Belatti.
10.23+ Employment Agreement dated as of November 5, 1992 between AFC and
Dick R. Holbrook.
10.24+ Amendment No. 1 to Employment Agreement dated November 5, 1995
between AFC and Dick R. Holbrook.
10.25+ Employment Agreement dated December 4, 1995 between AFC and
Samuel N. Frankel.
10.26+ 1992 Stock Option Plan of AFC (formerly America's Favorite Chicken
Company) effective as of November 5, 1992.
10.27+ First Amendment to 1992 Stock Option Plan dated July 19, 1993.
10.28+ Second Amendment to 1992 Stock Option Plan dated December 17,
1993.
10.29+ Third Amendment to 1992 Stock Option Plan dated April 11, 1996.
10.30+ 1996 Nonqualified Performance Stock Option Plan (Executive) of AFC
effective as of April 11, 1996.
10.31+ 1996 Nonqualified Performance Stock Option Plan (General) of AFC
effective as of April 11, 1996.
10.32+ 1996 Nonqualified Stock Option Plan of AFC effective as of April 11,
1996.
10.33+ Form of Nonqualified Stock Option Agreement (Executive) between AFC
and certain key executives.
10.34+ Form of Nonqualified Stock Option Agreement (General) between AFC and
stock option participants.
10.35+ 1996 Employee Stock Bonus Plan (Executive) of AFC effective as of
April 11, 1996.
10.36+ 1996 Employee Stock Bonus Plan (General) of AFC effective as of
April 11, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----
<C> <S> <C>
10.37+ Form of Stock Bonus Agreement (Executive) between AFC and certain
executive officers.
10.38+ Form of Stock Bonus Agreement (General) between AFC and certain key
officers and employees.
10.39+ Form of Secured Promissory Note issued to certain members of
management.
10.40+ Form of Stock Pledge Agreement between AFC and certain members of
management.
10.41+ AFC 1994 Supplemental Benefit Plan for Executive Officers dated May 9,
1994.
10.42+ AFC 1994 Supplemental Benefit Plan for Senior and Executive Staff
Officers dated April 19, 1994.
10.43+ AFC 1994 Supplemental Benefit Plan for Senior Officers/General Managers
dated May 9, 1994.
10.44+ AFC 1994 Supplemental Benefit Plan for Designated Officers dated May 9,
1994.
10.45+ Settlement Agreement between Alvin C. Copeland, Diversified Foods and
Seasonings, Inc., Flavorite Laboratories, Inc. and AFC dated May 29,
1997.
10.46+ Sublease dated March 1, 1997 by and between AFC and Foresight
Software, Inc.
10.47+ Lease dated December 31, 1992 by and between Concourse VI
Associates and AFC.
10.48+ First Amendment to Lease Agreement dated January 1993 by and
between AFC and Concourse VI Associates.
10.49+ Second Amendment to Lease Agreement dated June 24, 1993 by and
between AFC and Concourse VI Associates.
10.50+ Third Amendment to Lease Agreement dated June 17, 1994 by and
between AFC and Concourse VI Associates.
10.51+ Indemnification Agreement dated April 11, 1996 by and between AFC and
William M. Wardlaw.
10.52+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Ronald P. Spogli.
10.53+ Indemnification Agreement dated April 11, 1996 by and between AFC and
John M. Roth.
10.54+ Indemnification Agreement dated May 1, 1996 by and between AFC and
Kelvin J. Pennington.
10.55+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Dick R. Holbrook.
10.56+ Indemnification Agreement dated May 1, 1996 by and between AFC and
Todd W. Halloran.
10.57+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Samuel N. Frankel.
10.58+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Matt L. Figel.
10.59+ Indemnification Agreement dated July 2, 1996 by and between AFC and
Paul H. Farrar.
10.60+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Mark J. Doran.
10.61+ Indemnification Agreement dated April 11, 1996 by and between AFC and
Frank J. Belatti.
21.1+ Subsidiaries of AFC.
23.1++ Consent of Riordan & McKinzie (contained in Exhibit 5.1).
23.2* Consent of Arthur Andersen LLP.
24.1+ Power of Attorney.
25.1++ Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New York.
99.1++ Form of Letter of Transmittal with respect to the Exchange Offer.
99.2++ Form of Notice of Guaranteed Delivery.
</TABLE>
<PAGE>
- --------------------
* Filed as an exhibit to the Registration Statement on Form S-4 (Registration
No. 333-29731) on June 20, 1997 and incorporated by reference herein).
+ Filed herewith.
++ To be filed by amendment.
<PAGE>
ARTICLES OF INCORPORATION
OF
AMERICA'S FAVORITE CHICKEN COMPANY
To form a Minnesota business corporation under and pursuant to the
Minnesota Business Corporation Act, the following articles of incorporation are
adopted:
ARTICLE 1. NAME
----------------
The name of the Corporation is "America's Favorite Chicken Company."
ARTICLE 2. REGISTERED OFFICE
-----------------------------
The address of the registered office of the Corporation in Minnesota
is CT Corporation System, Inc., 405 Second Avenue South, Minneapolis, Minnesota
55401.
ARTICLE 3. AUTHORIZED SHARES
-----------------------------
Section 1. Authorized Classes of Stock. The total number of
---------------------------
shares which this Corporation is authorized to issue is 27,500,000 shares, of
which 25,000,000 shares of the par value of $.01 per share are designated Common
Stock (herein referred to as "Common Stock") and 2,500,000 shares of the par
value of $.01 per share are designated Preferred Stock (herein referred to as
"Preferred Stock"). Shares of any class of stock of the Corporation may be
issued for such consideration and for such corporate purposes as the Board of
Directors may from time to time determine.
Section 2. Description of Capital Stock. The following is a
----------------------------
description of each of the classes of capital stock which the Corporation has
authority to issue with the designations, preferences, voting powers and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof.
PREFERRED STOCK
A. Rights and Restrictions of Preferred Stock. Authority is hereby
------------------------------------------
expressly vested in the Board of Directors of the Corporation, subject to the
provisions of this Article 3 and to the limitations prescribed by law, to
authorize the issue from time to time of one or more series of Preferred Stock
and with
<PAGE>
respect to each such series to fix by resolution or resolutions adopted by the
affirmative vote of a majority of the whole Board of Directors providing for the
issue of such series the voting powers, full or limited, if any, of the shares
of such series and the designations, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereof. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, the determination or fixing of
the following:
(1) The number of shares constituting such series and the
designation of such series.
(2) The dividend rate of such series, which may be fixed or
variable, the conditions and dates upon which such dividends shall be payable,
the relation which such dividends shall bear to the dividends payable on any
other class or classes or series of the Corporation's capital stock, and whether
such dividends shall be cumulative or noncumulative.
(3) Whether the shares of such series shall be subject to
redemption by the Corporation at the option of either the Corporation or the
holder or both or upon the happening of a specified event, and, if made subject
to any such redemption, the times or events, prices and other terms and
conditions of such redemption.
(4) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series.
(5) Whether or not the shares of such series shall be convertible
into, or exchangeable for, at the option of either the holder or the Corporation
or upon the happening of a specified event, shares of any other class or classes
or of any other series of the same or any other class or classes of the
Corporation's capital stock, and, if provision be made for conversion or
exchange, the times or events, prices, rates, adjustments, and other terms and
conditions of such conversions or exchanges.
(6) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock, including increases or decreases in the number of
shares of any series subsequent to the issue of shares of that series.
(7) The rights of the holders of the shares of such series upon
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.
2
<PAGE>
(8) Any right to vote with holders of shares of any other series
or class and any right to vote as a class, either generally or as a condition to
specified corporate action, in addition to any voting powers required by law.
(9) The preemptive rights, if any, of the holders of the shares
of such series.
COMMON STOCK
B. Rights and Restrictions of Common Stock. The holders of the
---------------------------------------
Common Stock shall have and possess all rights as shareholders of the
Corporation, except as such rights may be limited by the preferences, rights,
limitations and restrictions of the Preferred Stock. Subject to provisions of a
resolution or resolutions of the Board of Directors establishing a series of
Preferred Stock, dividends may be declared by the Board of Directors and paid
from time to time out of any funds legally available therefor. In the event of
any dissolution, liquidation or winding up of the affairs of the Corporation,
all assets and funds of the Corporation remaining after paying all amounts
payable to the holders of Preferred Stock, as provided by a resolution or
resolutions of the Board of Directors establishing a series of Preferred Stock,
shall be distributed to the holders of Common Stock ratably according to the
number of shares of Common Stock held.
OTHER PROVISIONS
C. Preemptive Rights. Except as otherwise provided with respect to
-----------------
a series of Preferred Stock by the resolution or resolutions of the Board of
Directors establishing such series of Preferred Stock, the holders of shares of
this Corporation shall have the preemptive rights provided by section 302A.413
of the Minnesota Statutes.
D. Cumulative Voting Rights. No holder of any shares of capital
------------------------
stock of the Corporation shall have any cumulative voting rights.
E. Voting by Classes. Except as otherwise required by law or by the
-----------------
provisions of a resolution or resolutions of the Board of Directors establishing
a series of Preferred Stock, all matters shall be voted upon without distinction
as to classes or series of stock.
3
<PAGE>
ARTICLE 4. DIRECTOR LIABILITY
------------------------------
A director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) under sections 302A.559 or 80A.23 of the Minnesota
Statutes; (iv) for any transaction from which the director derived an improper
personal benefit; or (v) for any act or omission occurring prior to the date
when this Article 4 became effective.
If the Minnesota Business Corporation Act is hereafter amended to
authorize any further limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Minnesota Business Corporation Act, as amended.
Any repeal or modification of the foregoing provisions of this Article
4 by the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE 5. INCORPORATOR
------------------------
The name and address of the incorporator, who is a natural person of
full age, are Gary L. Tygesson, 2200 First Bank Place East, Minneapolis,
Minnesota 55402.
Dated: July 24, 1992
--------------------
/s/
--------------------------
Gary L. Tygesson
4
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
AMERICA'S FAVORITE CHICKEN COMPANY
1. The name of the corporation is America's Favorite Chicken Company, a
Minnesota corporation.
2. The following amendments were adopted by the shareholders of the Company at
a special meeting of shareholders held on April 1, 1996:
a. RESOLVED, that Article 3, Section 1 of the Company's Articles of
Incorporation is hereby amended and restated as follows:
"Section 1. Authorized Classes of Stock. The total number of shares
---------------------------
which this Corporation is authorized to issue is 52,500,000 shares, of
which 50,000,000 shares of the par value of $.01 per share are
designated Common Stock (herein referred to as "Common Stock") and
2,500,000 shares of the par value of $0.1 per share are designated
Preferred Stock (herein referred to as "Preferred Stock"). Shares of any
class of stock of the Corporation may be issued for such consideration
and for such corporate purposes as the Board of Directors may from time
to time determine."
b. RESOLVED, that Article 3, Section 2, Subsection C of the Company's
Articles of Incorporation is hereby amended and restated as follows:
"C. Preemptive Rights. The holders of shares of capital stock of the
-----------------
Corporation shall not have any preemptive rights to subscribe for or
acquire securities or rights to purchase securities of any class, kind,
or series of the Corporation."
c. RESOLVED, that Article 3, Section 2 of the Company's Articles of
incorporation is hereby amended to include the following Subsection:
"F. Business Combinations. Section 302A.673 of the Minnesota Statutes
---------------------
shall not apply to the Corporation nor to any of its shares of capital
stock."
<PAGE>
d. RESOLVED, that the Company's Articles of Incorporation are hereby
amended to include the following:
"ARTICLE 6. WRITTEN ACTION OF BOARD OF
-------------------------------------
DIRECTORS
---------
An action required or permitted to be taken at a meeting of the
Board of Directors of the Corporation may be taken by a written action
signed, or counterparts of a written action signed in the aggregate,
by all of the Directors unless the action need not be approved by the
shareholders of the Corporation, in which case the action may be taken
by a written action signed, or counterparts of a written action signed
in the aggregate, by the number of Directors that would be required to
take the same action at a meeting of the Board of Directors of the
Corporation at which all of the Directors were present."
3. The above amendments have been adopted pursuant to Chapter 302A of the
Minnesota Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, the Chief Executive Officer of
America's Favorite Chicken Company, being duly authorized on behalf of America's
Favorite Chicken Company, has executed this document this 11th day of April,
1996.
/s/ Frank J. Belatti
----------------------------
Frank J. Belatti,
Chief Executive Officer
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
APR 11 1996
/s/ JOAN ANDERSON GROWE
SECRETARY OF STATE
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
AMERICA'S FAVORITE CHICKEN COMPANY
1. The name of the corporation is America's Favorite Chicken Company, a
Minnesota corporation.
2. The Articles of Incorporation of the corporation are hereby amended to
change the name of the corporation to AFC Enterprises, Inc.
3. The above amendment was adopted by the shareholders of the corporation at a
special meeting of shareholders held on September 30, 1996.
4. The above amendment has been adopted pursuant to Chapter 302A of Minnesota
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, the Chief Executive Officer of
America's Favorite Chicken Company, being duly authorized on behalf of America's
Favorite Chicken Company, has executed this document this 1st day of October,
1996.
/s/ Frank J. Belatti
------------------------------
Frank J. Belatti
Chief Executive Officer
[SEAL OF THE STATE OF MINNESOTA]
DEPARTMENT OF STATE
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
AMERICA'S FAVORITE CHICKEN COMPANY
ARTICLE I
OFFICES, CORPORATE SEAL
Section 1.1 Registered Office. The registered office of the corporation
-----------------
in Minnesota shall be that set forth in the Articles of Incorporation or in the
most recent amendment of the Articles of Incorporation or resolution of the
Board of Directors filed with the Secretary of State of the State of Minnesota
changing the registered office.
Section 1.2 Other Offices. The corporation may have offices at such other
-------------
places, within or without the State of Minnesota, as the Board of Directors
shall, from time to time, determine.
Section 1.3 Corporate Seal. The corporate seal shall be in a form as
--------------
prescribed by the Board of Directors and shall have inscribed thereon the name
of the corporation, the word "Minnesota" and the words "Corporate Seal".
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 Place and Time of Meetings. Except as provided otherwise by
--------------------------
the Minnesota Business Corporation Act, meetings of the shareholders may be held
at any place, within or without the State of Minnesota, as may from time to time
be designated by the Board of Directors. In the absence of a designation of
place, meetings shall be held at the principal executive office of the
corporation. In the absence of a designation of time, meetings shall be held at
10:00 am. local time at the place where the meeting is to be held.
Section 2.2 Regular Meetings.
----------------
(a) A regular meeting of the shareholders shall be held on an annual
basis on such date as the Board of Directors shall by resolution establish.
(b) At a regular meeting the shareholders, voting as provided in the
Articles of Incorporation and these Bylaws, shall elect qualified successors for
directors whose terms have expired and shall transact such other business as may
properly come before them.
<PAGE>
Section 2.3 Special Meetings Special meetings of the shareholders may be
----------------
held at any time and for any purpose and may be called by (i) the chief
executive officer, (ii) the chief financial officer, (iii) two or more directors
or (iv) a shareholder or shareholders holding 10% or more of the voting power of
all shares entitled to vote except that a special meeting for the purpose of
considering any action 0 directly or indirectly facilitate or affect a business
combination, including an action to change or otherwise affect the composition
of the Board of Directors for t at purpose, must be called by 25% or more of the
voting power of all shares entitled to vote. A shareholder or shareholders
holding the requisite percentage of the voting power may demand a special
meeting of the shareholders by written notice of demand given to the chief
executive officer or chief financial officer of the corporation and containing
the purposes of the meeting. Within 30 days after receipt of demand by one of
those officers, the Board of Directors shall cause a special meeting of
shareholders to be called and held on notice no later than 90 days after receipt
of the demand, at the expense of the corporation. Special meetings 5 all be
held on the date and at the time and place fixed by the chief executive officer
or the Board of Directors, except that a special meeting called by or at the
demand of a shareholder or shareholders shall be held in the county where the
principal executive office is located. The business transacted at a special
meeting shall be limited to the purposes stated in the notice of the meeting.
Section 2.4 Quorum, Adjourned Meetings. The holders of a majority of the
--------------------------
shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, those present shall adjourn the meeting to such day as
they shall, y majority vote, agree upon, and a notice of such adjournment and
the date nd time at which such meeting shall be reconvened shall be mailed to
each shareholder entitled to vote at least five days before such adjourned
meeting. If a quorum is present, a meeting may be adjourned from time to time
without notice other than announcement at the meeting. At adjourned meetings at
which a quorum is present any business may be transacted which might have been
transacted at the meeting as originally noticed. If a quorum is present when a
meeting is convened, the shareholders present may continue to transact business
until adjournment notwithstanding the withdrawal of enough shareholders
originally present to leave less than a quorum.
Section 2.5 Voting. At each meeting of the shareholders every shareholder
------
having the right to vote shall be entitled to vote either in person or by proxy.
Each shareholder, unless the Articles of Incorporation or statutes provide
otherwise, shall have one vote for each share having voting power registered in
such shareholder's name on the books of the corporation. Jointly owned shares
may be voted joint owner unless the corporation receives written notice from any
one of them denying the authority of that person to vote those shares. Upon the
demand of any shareholder, the vote upon any question before the meeting shall
be by ballot. All questions shall be decided by a majority vote of the number
of shares entitled to vote and represented at the meeting at the time of the
vote except if otherwise required by statute, the Articles of Incorporation or
these Bylaws.
2.
<PAGE>
Section 2.6 Record Date. The Board of Directors may fix a date, not
-----------
exceeding 60 days preceding the date of any meeting of shareholders, as a record
date for the determination of the shareholders entitled to notice of, and to
vote a- such meeting, notwithstanding any transfer of shares on the books of the
corpora on after any record date so fixed. If the Board of Directors fails to
fix a record date for determination of the shareholders entitled to notice of,
and to vote at, any meeting of shareholders, the record date shall be the 20th
day preceding the date of such meeting.
Section 2.7 Notice of Meetings. Except as otherwise specified in Section
------------------
2.04 or required by law, written notice of each meeting of the shareholders,
stating the date, time and place and, in the case of a special meeting, the
purpose or purposes, shall be given at least 10 days and not more than 60 days
prior to the meeting to every holder of shares entitled to vote at such meeting.
The business transacted at a special meeting of shareholders shall be limited to
the purposes stated in the notice of the meeting.
Section 2.8 Waiver of Notice. Notice of any regular or special meeting
----------------
may be waived by any shareholder either before, at or after such meeting orally
o in writing signed by such shareholder or a representative entitled to vote the
s ares of such shareholder. A shareholder, by his or her attendance at any
meeting of shareholders, shall be deemed to have waived notice of such meeting,
except where the shareholder objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened,
or objects before a vote on an item of business because the item may not
lawfully be considered at that meeting and the shareholder does not participate
in the consideration of the item at that meeting.
Section 2.9 Written Action. Any action which might be taken at a meeting
--------------
of the shareholders may be taken without a meeting if done in writing and signed
by all of the shareholders entitled to vote on that action.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the corporation
--------------
shall be managed by or under the direction of the Board of Directors, except as
otherwise permitted by statute.
Section 3.2 Number, Qualification and Term of Office. The number of
----------------------------------------
directors shall be seven. The number of directors may be increased or decreased
from time to time by resolution of the Board of Directors or the shareholder
provided, however, that the number of directors shall be an odd number an shall
not be less than five nor more than eleven Directors need not be shareholders.
Each of the directors shall hold office until the regular
3.
<PAGE>
meeting of shareholders next held after such director's election and until such
director's successor shall have been elected and shall qualify, or until the
earlier death, resignation, removal or disqualification of such director.
Section 3.3 Board Meetings. Meetings of the Board of Directors may be
--------------
held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
Section 3.4 Calling Meetings; Notice. Meetings of the Board of Directors
------------------------
may be called by the chief executive officer by giving at least twenty-four
hours' notice or by any other director by giving at least five days' notice, of
the date, time and place thereof to each director by mail, telephone, telegram
or in person. If the day or date, time and place of a meeting of the Board of
Directors has been announced at a previous meeting of the Board, no notice is
required. Notice of an adjourned meeting of the Board of Directors need not be
given other than by announcement at the meeting at which adjournment is taken.
Section 3.5 Waiver of Notice. Notice of any meeting of the Board of
----------------
Directors may be waived by any director either before, at, or after such meeting
orally or in a writing signed by such director. A director, by his or her
attendance at any meeting of the Board of Directors, shall be deemed to have
waived notice of such meeting, except where the director objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.
Section 3.6 Quorum. A majority of the directors holding office
------
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting.
Section 3.7 Absent Directors. A director may give advance written consent
----------------
or opposition to a proposal to be acted on at a meeting of the Board of
Directors. If such director is not present at the meeting, consent or opposition
to a proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantial]y the same effect as the proposal to
which the director has consented or objected.
Section 3.8 Conference Communications. Any or all directors may
-------------------------
participate in any meeting of the Board of Directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.08 shall be deemed present in
4.
<PAGE>
person at the meeting; and the place of the meeting shall be the place of
origination of the conference telephone conversation or other comparable
communication technique.
Section 3.9 Vacancies; Newly Created Directorships. Subject to the rights
--------------------------------------
of the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
by a majority vote of the directors then in office though less than a quorum,
and directors so chosen shall hold office for a term expiring at the next annual
meeting of shareholders.
Section 3.10 Removal. Any directors, or the entire Board of Directors,
-------
may be removed from office at any time, with or without cause, but only by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the corporation entitled to vote generally in the election of
directors, voting together as a single class. A director named by the Board of
Directors to fill a vacancy may be removed from office at any time, with or
without cause, by the affirmative vote of the remaining directors if the
shareholders have not elected directors in the interim between the time of the
appointment to fill such vacancy and the time of the removal. In the event that
the entire Board or any one or more directors be so removed, new directors may
be elected at the same meeting.
Section 3.11 Committees. A resolution approved by the affirmative vote of
----------
a majority of the Board of Directors may establish committees having the
authority of the Board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors. A majority of the members of the committee present at a meeting
shall constitute a quorum for the transaction of business, unless a larger or
smaller proportion or number is provided in a resolution approved by the
affirmative vote of a majority of the Board of Directors.
Section 3.12 Written Action. Any action which might be taken at a meeting
--------------
of the Board of Directors, or any duly constituted committee thereof, may be
taken without a meeting if done in writing and signed by all of the directors or
committee members, unless the Articles of Incorporation provide otherwise and
the action need not be approved by the shareholders.
Section 3.13 Compensation. Directors who are not salaried officers of
------------
this corporation shall receive such compensation as shall be determined, from
time to time, by resolution of the Board of Directors. Unless otherwise
determined by resolution of the Board, all directors shall receive their
expenses, if any, of attendance at meetings of the
5.
<PAGE>
Board of Directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
ARTICLE IV
OFFICERS
Section 4.1 Number and Designation. The corporation shall have one or
----------------------
more natural persons exercising the functions of the offices of chief executive
officer and chief financial officer. The Board of Directors may elect or
appoint such other officers or agents as it deems necessary for the operation
and management of the corporation, with such powers, rights, duties and
responsibilities as may be determined by the Board, including, without
limitation, a Chairman of the Board, a Vice Chairman of the Board, a President,
one or more Vice Presidents, a Secretary, a Treasurer, and such assistant
officers or other officers as may from time to time be elected or appointed by
the Board. Each such officer shall have the powers, rights, duties and
responsibilities set forth in these Bylaws unless otherwise determined by the
Board. Any number of offices may be held by the same person.
Section 4.2 Election, Term of Office and Qualifications. The Board of
-------------------------------------------
Directors shall elect or appoint all officers, from within or without their
number, by resolution approved by the affirmative vote of a majority of the
directors present. Each officer shall have the term of office provided for in
these Bylaws or a resolution of the Board of Directors not inconsistent
therewith. All officers who may be directors shall continue to hold office
until the election and qualification of their successors, notwithstanding an
earlier termination of their directorship.
Section 4.3 Removal and Vacancies. Any officer may be removed from his
---------------------
office by the Board of Directors at any time, with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy in an office of the corporation by
reason of death, resignation or otherwise, such vacancy shall be filled for the
unexpired term by the Board of Directors.
Section 4.4 Chairman and Vice Chairman of the Board. The Chairman of the
---------------------------------------
Board, if one is elected by the Board, shall preside at all meetings of the
directors and shall have such other duties as may be prescribed from time to
time by the Board of Directors. In the absence of the Chairman of the Board,
the Vice Chairman of the Board, if one is elected by the Board, shall preside at
all meetings of the directors and shall have such other duties as may be
prescribed from time to time by the Board of Directors.
Section 4.5 Chief Executive Officer. Either the Chairman of the Board or
-----------------------
the President of the corporation may be designated from time to time by the
Board to be the
6.
<PAGE>
chief executive officer of the corporation. Unless provided otherwise by a
resolution adopted by the Board of Directors, the chief executive officer (a)
shall have general active management of the business of the corporation; (b)
shall, when present, preside at all meetings of the shareholders; (c) shall see
that all orders and resolutions of the Board are carried into effect; (d) shall
sign and deliver in the name of the corporation any deeds, mortgages, bonds,
contracts or other instruments pertaining to the business of the corporation,
except in cases in which the authority to sign and deliver is required by law to
be exercised by another person or is expressly delegated by these Bylaws or the
Board to some other officer or agent of the corporation; (e) may maintain
records of and certify proceedings of the Board and shareholders; and (f) shall
perform such other duties as may from time to time be assigned to him by the
Board.
Section 4.6 Chief Operating Officer. The chief operating officer, if one
-----------------------
is elected by the Board, shall be either the President or a Vice President. He
shall be responsible for the management of all of the operations of the
corporation's business and shall have such other authority and duties as the
Board of Directors or the chief executive officer from time to time may
prescribe. He shall report to the chief executive officer and be responsible to
him. He may also execute and deliver in the name of the corporation any
instruments or documents pertaining to the business of the corporation which
could be executed by the chief executive officer.
Section 4.7 Chief Financial Officer. Unless provided otherwise by a
-----------------------
resolution adopted by the Board of Directors, the chief financial officer (a)
shall keep accurate financial records for the corporation; (b) shall deposit all
monies, drafts and checks in the name of and to the credit of the corporation in
such banks and depositories as the Board of Directors shall designate from time
to time; (c) shall endorse for deposit all notes, checks and drafts received by
the corporation as ordered by. the Board, making proper vouchers therefor; (d)
shall disburse corporate funds and issue checks and drafts in the name of the
corporation, as ordered by the Board; (e) shall sign and deliver in the name of
the corporation any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the corporation, except in cases in which the
authority to sign and deliver is required by law to be exercised by another
person or is expressly delegated by these Bylaws or the Board to some other
officer or agent of the corporation; (f) shall render to the chief executive
officer and the Board of Directors, whenever requested, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation; and (g) shall perform such other duties as may be prescribed by the
Board of Directors or the chief executive officer from time to time.
Section 4.8 President. Unless otherwise determined by the Board, the
---------
President shall be the chief executive officer of the corporation and shall
supervise and control the business affairs of the corporation. If an officer
other than the President is designated chief
7.
<PAGE>
executive officer, the President shall perform such duties as may from time to
time be assigned to him by the Board.
Section 4.9 Vice President. The Board of Directors may designate one or
--------------
more Vice Presidents, who shall have such designations and powers and shall
perform such duties as prescribed by the Board of Directors or by the President.
In the event of the absence or disability of the President, Vice Presidents
shall succeed to his power and duties in the order designated by the Board of
Directors.
Section 4.10 Secretary. The Secretary shall be secretary of and shall
---------
attend all meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. Except
as otherwise required or permitted by statute or by these Bylaws, the Secretary
shall give notice of meetings of shareholders and directors. The Secretary
shall perform such other duties as may from time to time be prescribed by the
Board of Directors or by the chief executive officer.
Section 4.11 Treasurer. Unless otherwise determined by the Board, the
---------
Treasurer shall be the chief financial officer of the corporation. If an
officer other than the Treasurer is designated chief financial officer, the
Treasurer shall perform such duties as may from time to time be assigned to him
by the Board.
Section 4.12 Authority and Duties. In addition to the foregoing authority
--------------------
and duties, all officers of the corporation shall respectively have such
authority and perform such duties in the management of the business of the
corporation as may be determined from time to time by the Board of Directors.
Unless prohibited by a resolution of the Board of Directors, an officer elected
or appointed by the Board may, without specific approval of the Board, delegate
some or all of the duties and powers of an office to other persons.
Section 4.13 Compensation. The officers of the corporation shall receive
------------
such compensation for their services as may be determined, from time to time, by
resolution of the Board of Directors.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.1 Certificates for Shares. All shares of the corporation shall
-----------------------
be certificated shares. Every owner of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
Board of Directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares shall be numbered in the
order in which they shall be issued and shall be signed, in the name of the
corporation, by the President or any Vice President and by the Secretary or
8.
<PAGE>
an Assistant Secretary or by such officers as the Board of Directors may
designate. If the certificate is signed by a transfer agent or registrar, such
signatures of the corporate officers may be by facsimile if authorized by the
Board of Directors. Every certificate surrendered to the corporation for
exchange or transfer shall be cancelled, and no new certificate or certificates
shall be issued in exchange for any existing certificate until such existing
certificate shall have been so cancelled, except in cases provided for in
Section 5.04.
Section 5.2 Issuance of Shares. The Board of Directors is authorized to
------------------
cause to be issued shares of the corporation up to the full amount authorized by
the Articles of Incorporation in such amounts as may be determined by the Board
of Directors and as may be permitted by law. Shares may be issued for any
consideration, including, without limitation, in consideration of cash or other
property, tangible or intangible, received or to be received by the corporation
under a written agreement, or of services rendered or to be rendered to the
corporation under a written agreement. At the time of approval of the issuance
of shares, the Board of Directors shall state, by resolution, its determination
of the fair value to the corporation in monetary terms of any consideration
other than cash for which shares are to be issued.
Section 5.3 Transfer of Shares. Transfer of shares on the books of the
------------------
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney-in-fact, and upon surrender of the certificate or the certificates for
such shares. The corporation may treat as the absolute owner of shares of the
corporation, the person or persons in whose name shares are registered on the
books of the corporation. The Board of Directors may appoint one or more
transfer agents and registrars to maintain the share records of the corporation
and to effect share transfers on its behalf.
Section 5.4 Loss of Certificates. Any shareholder claiming a certificate
--------------------
for shares to be lost, stolen, or destroyed shall make an affidavit of that fact
in such form as the Board of Directors shall require and shall, if the Board of
Directors so requires, give the corporation a bond of indemnity in form, in an
amount, and with one or more sureties satisfactory to the Board of Directors, to
indemnify the corporation against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged to
have been lost, stolen or destroyed.
9.
<PAGE>
ARTICLE VI
DISTRIBUTIONS, RECORD DATE
Section 6.1 Distributions. Subject to the provisions of the Articles of
-------------
Incorporation, of these Bylaws and of law, the Board of Directors may authorize
and cause the corporation to make distributions whenever, and in such amounts or
forms as, in its opinion, are deemed advisable.
Section 6.2 Record Date. Subject to any provisions of the Articles of
-----------
Incorporation, the Board of Directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any distribution as the record date
for the determination of the shareholders entitled to receive payment of the
distribution and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such distribution notwithstanding any
transfer of shares on the books of the corporation after the record date.
ARTICLE VII
BOOKS AND RECORDS, FISCAL YEAR
Section 7.1 Share Register. The Board of Directors of the corporation
--------------
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the Board:
(1) a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of shares
held by each shareholder; and
(2) a record of the dates on which certificates or transaction
statements representing shares were issued.
Section 7.2 Other Books and Records. The Board of Directors shall cause
-----------------------
to be kept at its principal executive office, or, if its principal executive
office is not in Minnesota, shall make available at its Minnesota registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by the
Minnesota Business Corporation Act, Section 302A.461, originals or copies of:
(1) records of all proceedings of shareholders for the last three
years;
(2) records of all proceedings of the Board for the last three years;
10.
<PAGE>
(3) its Articles and all amendments currently in effect;
(4) its Bylaws and all amendments currently in effect;
(5) financial statements required by the Minnesota Business
Corporation Act, Section 302A.463 and the financial statements for the
most recent interim period prepared in the course of the operation of
the corporation for distribution to the shareholders or to a
governmental agency as a matter of public record;
(6) reports made to shareholders generally within the last three
years;
(7) a statement of the names and usual business addresses of its
directors and principal officers; and
(8) any shareholder voting or control agreements of which the
corporation is aware.
Section 7.3 Fiscal Year. The fiscal year of the corporation shall be
-----------
determined by the Board of Directors.
ARTICLE VIII
LOANS, GUARANTEES, SURETYSHIP
Section 8.1 The corporation may lend money to, guarantee an obligation of,
become a surety for, or otherwise financially assist a person if the
transaction, or a class of transactions to which the transaction belongs, is
approved by the affirmative vote of a majority of the directors present, and:
(1) is in the usual and regular course of business of the corporation;
(2) is with, or for the benefit of, a related corporation, an
organization in which the corporation has a financial interest, an
organization with which the corporation has a business relationship,
or an organization to which the corporation has the power to make
donations;
(3) is with, or for the benefit of, an officer or other employee of
the corporation or a subsidiary, including an officer or employee who
is a director of the corporation or a subsidiary, and may reasonably
be expected, in the judgment of the Board, to benefit the corporation;
or
11.
<PAGE>
(4) has been approved by (a) the holders of two-thirds of the voting
power of the shares entitled to vote which are owned by persons other
than the interested person or persons or (b) the unanimous affirmative
vote of the holders of all outstanding shares whether or not entitled
to vote.
Such loan, guarantee, surety contract or other financial assistance may be
with or without interest, and may be unsecured, or may be secured in the manner
as a majority of the directors present approve, including, without limitation, a
pledge of or other security interest in shares of the corporation. Nothing in
this Section shall be deemed to deny, limit or restrict the powers of guaranty
surety or warranty of the corporation at common law or under a statute of the
State of Minnesota.
ARTICLE IX
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.1 The corporation shall indemnify officers and directors of the
corporation, for such expenses and liabilities, in such manner, under such
circumstances and to such extent as permitted by the Minnesota Business
Corporation Act, Section 302A.521, as now enacted or hereafter amended.
ARTICLE X
AMENDMENTS
Section 10.1 These Bylaws may be amended or altered by a vote of the
majority of the whole Board of Directors at any meeting, provided that notice of
such proposed amendment shall have been given in the notice given to the
directors of such meeting. Such authority of the Board of Directors is subject
to the power of the shareholders, exercisable in the manner provided in the
Minnesota Business Corporation Act, Section 302A.181, Subd. 3, to adopt, amend
or repeal bylaws adopted, amended or repealed by the Board of Directors. The
Board of Directors shall not make or alter any bylaws fixing a quorum for
meetings of shareholders, prescribing procedures for removing directors or
filling vacancies in the Board of Directors, or fixing the number of directors
or their classifications, qualifications or terms of office, except that the
Board of Directors may adopt or amend any bylaw to increase their number.
12.
<PAGE>
ARTICLE XI
SECURITIES OF OTHER CORPORATIONS
Section 11.1 Voting Securities Held by the Corporation. Unless otherwise
-----------------------------------------
ordered by the Board of Directors, each of the chief executive officer, chief
operating officer and chief financial officer, acting alone, shall have full
power and authority on behalf of the corporation (a) to attend any meeting of
security holders of other corporations in which the corporation may hold
securities and to vote such securities on behalf of this corporation; (b) to
execute any proxy for such meeting on behalf of the corporation; and (c) to
execute a written action in lieu of a meeting of such other corporation on
behalf of this corporation. At such meeting, the chief executive officer, chief
operating officer or chief financial officer, as the case may be, shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities that the corporation possesses. The Board of Directors may, from
time to time, confer such powers to one or more other persons.
Section 11.2 Purchase and Sale of Securities. Unless otherwise ordered by
-------------------------------
the Board of Directors, the chief executive officer shall have full power and
authority on behalf of the corporation to purchase, sell, transfer or encumber
any and all securities of any other corporation owned by the corporation, and
may execute and deliver such documents as may be necessary to effectuate such
purchase,sale, transfer or encumbrance. The Board of Directors may, from time
to time, confer such powers to one or more other persons.
Adopted: _________________, 1992
13.
<PAGE>
AMENDMENT TO SECTION 3.12 OF THE BYLAWS ADOPTED BY
THE BOARD OF DIRECTORS ON MARCH 20, 1996, WHICH
BECAME EFFECTIVE UPON COMPLETION OF THE FREEMAN SPOGLI
TRANSACTION ON APRIL 11, 1996, AND AMENDMENT OF THE
ARTICLES OF INCORPORATION FILED ON APRIL 11, 1996.
"Section 3.12. Written Action. An action required or permitted to be taken at
--------------
a meeting of the Board of Directors of the Corporation may be taken by a written
action signed, or counterparts of a written action signed in the aggregate, by
all of the Directors unless the action need not be approved by the shareholders
of the Corporation, in which case the action may be taken by a written action
signed, or counterparts of a written action signed in the aggregate, by the
number of Directors that would be required to take the same action at a meeting
of the Board of Directors of the Corporation at which all of the Directors were
present."
14.
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
- --------------------------------------------------------------------------------
AFC ENTERPRISES, INC.
As Issuer
---------
to
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
----------
-------------------
Indenture
Dated as of May 21, 1997
-------------------
Up To $250,000,000
10-1/4% SENIOR SUBORDINATED NOTES DUE 2007
- --------------------------------------------------------------------------------
<PAGE>
AFC ENTERPRISES, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a) (1) .............................. 6.09
(a) (2) .............................. 6.09
(a) (3) .............................. N.A.
(a) (4) .............................. N.A.
(a) (5) .............................. 6.09
(b) .............................. 6.08
6.10
(c) .............................. N.A.
311(a) .............................. 6.13
(b) .............................. 6.13
(c) .............................. N.A.
312(a) .............................. 7.01
7.02(a)
(b) .............................. 7.02(b)
(c) .............................. 7.02(c)
313(a) .............................. 7.03(a)
(b) .............................. 7.03(a)
(c) .............................. 7.03(a)
(d) .............................. 7.03(b)
314(a) .............................. 7.04
(b) .............................. N.A.
(c)(1) .............................. 1.02
(c)(2) .............................. 1.02
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 1.02
(f) .............................. N.A.
315(a) .............................. 6.01
(b) .............................. 6.02
(c) .............................. 6.01
(d) .............................. 6.01
(e) .............................. 5.14
316(a) .............................. 1.01
(a)(1)(A) .............................. 5.02
5.12
(a)(1)(B) .............................. 5.13
</TABLE>
- ----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be part of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
(a)(2) ........................... N.A.
(b) ........................... 5.08
(c) ........................... 1.04
317(a)(1) ........................... 5.03
(a)(2) ........................... 5.04
(b) ........................... 10.03
318(a) ........................... 1.07
(b) ........................... N.A.
(c) ........................... 1.07
</TABLE>
- ----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS WAS GENERATED
AND IS LOCATED AT END OF DOCUMENT
- ---------------------
Note: This table of contents shall not, for any purpose, be deemed to be
part of the Indenture.
-i-
<PAGE>
INDENTURE, dated as of May 21, 1997, among AFC ENTERPRISES,
INC., a corporation duly organized and existing under the laws of
the State of Minnesota (herein called the "Company"), having its
principal office at Six Concourse Parkway, Suite 1700, Atlanta,
Georgia 30328, and UNITED STATES TRUST COMPANY OF NEW YORK, a New
York corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 10-1/4%
Senior Subordinated Notes due 2007 (herein called the "Notes") of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture. As provided
herein, the Notes will be limited to $250,000,000 in aggregate principal amount
Outstanding, of which $175,000,000 in aggregate principal amount will be
initially issued on the date hereof. Subject to the conditions set forth
herein, the Company may issue up to an additional $75,000,000 aggregate
principal amount of Notes. The Notes may consist of either or both of Original
Notes or Exchange Notes, each as defined herein. In addition, any such
additional Notes may be initially issued in the form of Registered Notes, as
provided herein. All such Original Notes, Registered Notes and the Exchange
Notes shall rank pari passu with one another and shall together constitute a
---- -----
single class of securities.
All things necessary (a) to make the Notes, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and (b) to make this Indenture a
valid agreement of the Company in accordance with its requirements, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually
<PAGE>
2
agreed, for the equal and proportionate benefit of all Holders of the Notes, as
follows:
ARTICLE I
Definitions and Other Provisions
--------------------------------
of General Application
----------------------
SECTION 1.01. Definitions. For all purposes of this Indenture,
------------
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP, and, except as otherwise
herein expressly provided, the term "GAAP" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;
(d) all references in this Indenture, the Notes and any Guaranties to
interest in respect of any Notes shall be deemed to include all Special
Interest, if any, in respect of such Notes, unless the context otherwise
requires, and express mention of the payment of Special Interest in any
provision hereof or thereof shall not be construed as excluding reference
to Special Interest in those provisions hereof or thereof where such
express mention is not made; all references in this Indenture, the Notes
and any Guaranties to principal in respect of any Notes shall be deemed to
include any Redemption Price or Purchase Price payable in respect of such
Notes pursuant to any redemption or Offer to Purchase hereunder (and all
such references to the Stated Maturity of the principal in respect of any
Notes shall be deemed to include the Redemption Date with respect to any
such Redemption Price and the Purchase Date with respect to any such
Purchase Price), and express mention of the payment of any Redemption Price
or Purchase Price in any provision hereof or thereof shall not be construed
as excluding reference to any Redemption Price or Purchase Price in those
<PAGE>
3
provisions hereof or thereof where such express reference is not made);
(e) unless the context otherwise requires, any reference to "Article",
"Section" or "Annex" refers to an Article or Section of or Annex to this
Indenture; and
(f) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Additional Notes" shall mean up to $75,000,000 in aggregate principal
amount of Notes initially issued subsequent to the date hereof pursuant to
Section 3.01(b) (exclusive of (x) any Exchange Notes issued pursuant to Section
3.03 in exchange for Original Notes issued on the date hereof or (y) any
Substitute Notes).
"Affiliate" shall mean, with respect to any specified Person, (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person or (ii) any officer or
director of any such Person or other Person or with respect to any natural
Person, any person having a relationship with such Person by blood, marriage or
adoption not more remote than first cousin. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the rules
and procedures of the Depositary for such Notes, Euroclear and Cedel, in each
case to the extent applicable to such transaction and as in effect at the time
of such transfer or transaction.
"Asset Disposition" shall mean any transfer, conveyance, sale, lease
or other disposition by the Company or any of its Subsidiaries (including a
consolidation or
<PAGE>
4
merger or other sale of any Subsidiary with, into or to another Person in a
transaction in which such Subsidiary ceases to be a Subsidiary of the Company),
of (i) shares of Capital Stock (other than directors' qualifying shares) or
other ownership interests of a Subsidiary or (ii) the property or assets of the
Company or any Subsidiary representing a division or line of business or (iii)
other assets or rights of the Company or any Subsidiary outside of the ordinary
course of business, but excluding in each case in clause (i), (ii) and (iii),
(s) a disposition by a Subsidiary of the Company to the Company or a Wholly
Owned Subsidiary or a Subsidiary Guarantor or by the Company or a Subsidiary to
a Wholly Owned Subsidiary or a Subsidiary Guarantor, (t) the disposition of all
or substantially all of the assets of the Company on a consolidated basis in a
manner permitted pursuant to the provisions of Article VIII, (u) any disposition
that constitutes a Restricted Payment or Permitted Investment that is permitted
pursuant to the provisions described in Section 10.10, (v) sale-leaseback
transactions completed within one year following the acquisition of the subject
assets, (w) sales, leases or transfers of restaurant properties to franchisees
pursuant to the Company's "turn key" development programs; (x) sales, leases or
transfers of franchises and related assets and properties repossessed or
reacquired by the Company from franchisees and subsequently resold to new
franchisees all in the ordinary course of business, (y) by sales or disposition
of (1) obsolete equipment or other assets in the ordinary course of business and
(2) restaurant-related properties and assets that are no longer in operation and
are surplus to the Company's needs in the ordinary course of business in an
amount not in excess of $5 million in any twelve month period; and (z) exchanges
of properties or assets for other properties or assets (other than cash or cash
equivalents) that (1) are useful in the business of the Company 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 Board Resolution in the case of transactions having a fair market
value in excess of $1 million) in the ordinary course of business.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Notes.
"Bank Facility" shall mean that certain Credit Agreement, dated as of
May 21, 1997, among the Company, Goldman, Sachs Credit Partners L.P., as
syndication agent and arranging agent, Canadian Imperial Bank of Commerce, as
administrative agent, and the lenders listed therein, as the same may be
amended, supplemented or otherwise modified from
<PAGE>
5
time to time (including by any extension of the maturity thereof) or as the same
may be renewed, extended, refinanced, replaced or refunded in one or more
successive transactions (including any such transaction that changes the amount
available thereunder, replaces such agreement or document, or provides for other
agents or lenders).
"Base Interest" means the interest that would otherwise accrue on the
Notes under the terms thereof and the Indenture, without giving effect to any
Special Interest.
"Board of Directors" shall mean the Board of Directors of the Company
or any committee of such Board of Directors duly authorized to act under the
Indenture.
"Board Resolution" shall mean a copy of a resolution, certified by the
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" shall mean any day other than a Saturday or Sunday or
other day on which banks in New York, New York or the city in which the
Trustee's Office is located or Atlanta, Georgia are authorized or required to be
closed.
"Capital Lease Obligation" of any Person shall mean any obligations of
such Person and its Subsidiaries on a consolidated basis under any capital lease
of a real or personal property which and to the extent, in accordance with GAAP,
has been or will be recorded as a capitalized lease obligation.
"Capital Stock" of any Person shall mean any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity interests in the case of entities other than
corporations, whether now outstanding or issued after the date of the Indenture.
"Cash Equivalents" shall mean (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality, (iii) certificates of
deposit and Eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any United States domestic
commercial bank or savings and loan association having capital and surplus in
excess of $500 million and a Keefe
<PAGE>
6
Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having one
of the two highest rating categories obtainable from Moody's or S&P in each case
maturing within six months after the date of acquisition, (vi) readily
marketable direct obligations issued by any State of the United States of
America or any political subdivision thereof having one of the two highest
rating categories obtainable from Moody's or S&P and (vii) money market mutual
funds investing substantially all of their assets in investments of the types
permitted in clauses (i) through (vi).
"Cedel" means Cedel, S.A. (or any successor securities clearing
agency).
"Change of Control" shall mean the occurrence of, after the date of
the Indenture, any of the following events: (a) any Person (other than a
Permitted Holder) or any Persons (other than any Permitted Holders) acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto), together with Affiliates
thereof (other than any Permitted Holders) (a "Group"), together with any
Affiliates thereof (other than any Permitted Holders) shall beneficially own (as
defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto) at least 50% of the aggregate voting power of all classes of Voting
Stock of the Company, (b) any Person or Group other than Permitted Holders,
becomes the beneficial owner of more than 33-1/3% of the total voting power of
the Company's Voting Stock, and the Permitted Holders beneficially own, in the
aggregate, a lesser percentage of the total voting power of the Voting Stock of
the Company than such other Person or Group and the Permitted Holders do not
otherwise have the right or ability to elect a majority of the Board of
Directors of the Company or (c) any Person (other than a Permitted Holder) or
Group (other than any Permitted Holders) together with any Affiliates thereof
(other than any Permitted Holders) shall succeed in having a sufficient number
of its nominees who are not Continuing Directors elected to the Board of
Directors of the Company such that such nominees when added to any existing
director remaining on the Board of Directors of the Company after such election
who is an Affiliate (other than any Permitted Holder) of such Group, will
constitute a majority of the Board of Directors of the Company. "Continuing
Director" shall mean any director who was a member of the Board of Directors on
the date of the issuance of the Notes or whose nomination
<PAGE>
7
for election as a director, or appointment as a director, was approved by a
majority of the Continuing Directors then in office.
"Change of Control Offer" has the meaning specified in Section 10.15.
"Change of Control Purchase Price" has the meaning specified in
Section 10.15.
"Closing Date" shall mean the date on which the Notes are originally
issued under the Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" of any Person shall mean Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Comparable Treasury Issue" means, on any date, the United States
Treasury Notes selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Notes on such date that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of a maturity
comparable to the remaining term of the Notes on such date. "Independent
Investment Banker" means Goldman, Sachs & Co. or, if such firm is unwilling or
unable to select the Comparable
<PAGE>
8
Treasury Issue, an independent investment banking institution of national
standing appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (a) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (b) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (i) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(ii) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
Redemption Date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day preceding such Redemption
Date.
"Consolidated EBITDA" of any Person shall mean for any period the
Consolidated Net Income for such period increased by the sum of (i) Consolidated
Interest Expense of such Person for such period, plus (ii) Consolidated Income
----
Tax Expense of such Person for such period, plus (iii) the consolidated
----
depreciation and amortization expense deducted in determining the Consolidated
Net Income of such Person for such period, plus (iv) any other non-cash charges
----
to the extent deducted in computing Consolidated Net Income of such Person for
such period (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 minus
-----
(v) any non-cash charges which increased Consolidated Net Income of such Person
for such period; provided, however, that the Consolidated Income Tax Expense and
-------- -------
consolidated depreciation and amortization expense of a Consolidated Subsidiary
of such Person shall be added to the Consolidated Net Income pursuant to the
foregoing only (x) to the extent and in the same proportion that the
Consolidated Net Income of such Consolidated Subsidiary was included in
calculating the Consolidated Net Income of such Person and (y) only to the
extent that the amount specified in clause (x) is not subject to restrictions
that prevent the payment of dividends or the making of distributions to such
Person.
<PAGE>
9
"Consolidated EBITDA Ratio" of any Person shall mean for any period
the ratio of (i) Consolidated EBITDA of such Person for such period to (ii) the
sum of (A) Consolidated Interest Expense of such Person for such period plus (B)
----
the annual interest expense (including the amortization of indebtedness
discount) with respect to any Indebtedness incurred or proposed to be Incurred
by such Person or its Consolidated Subsidiaries since the beginning of such
period to the extent not included in clause (ii)(A) or proposed to be Incurred
as part of the transaction for which the Consolidated EBITDA Ratio is being
determined, minus (C) Consolidated Interest Expense of such Person with respect
-----
to any Indebtedness that is no longer outstanding or that will no longer be
outstanding as a result of the transaction with respect to which the
Consolidated EBITDA Coverage Ratio is being calculated, to the extent included
within clause (ii)(A), each such calculation to be made on a pro forma basis as
if the Indebtedness had been Incurred or paid off on the first day of such
period; provided, however, that in making such computation, the Consolidated
-------- -------
Interest Expense of such Person attributable to interest on any Indebtedness
bearing a floating interest rate shall be computed on a pro forma basis as if
the rate in effect on the date of computation had been the applicable rate for
the entire period; except that (without duplication) to the extent any such
Indebtedness has been hedged pursuant to a Permitted Hedging Agreement, the
interest rate in respect thereof shall be the effective rate provided
thereunder; and provided further that, in the event such Person or any of its
----------------
Consolidated Subsidiaries has made acquisitions or dispositions of assets not in
the ordinary course of business (including any acquisitions of any other Persons
by merger, consolidation or purchase of Capital Stock) during or after such
period, the computation of the Consolidated EBITDA Coverage Ratio (and for the
purpose of such computation, the calculation of Consolidated Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
EBITDA) shall be made on a pro forma basis as if the acquisitions or
dispositions had taken place on the first day of such period.
"Consolidated Income Tax Expense" of any Person shall mean for any
period the consolidated provision for income taxes of such Person and its
Consolidated Subsidiaries for such period determined in accordance with GAAP.
"Consolidated Interest Expense" of any Person shall mean for any
period the consolidated interest expense included in a consolidated income
statement (net of interest income) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with GAAP, including
<PAGE>
10
for such period without limitation or duplication (or, to the extent not so
included, with the addition of), (i) the portion of any rental obligation in
respect of any Capital Lease Obligation allocable to interest expense in
accordance with GAAP; (ii) the amortization of Indebtedness discount; (iii) any
fees with respect to letters of credit, bankers' acceptances or similar
facilities; (iv) fees with respect to Hedging Agreements to the extent it would
be permitted or required to be recorded as an adjustment to interest expense in
accordance with GAAP; (v) any Preferred Stock dividends declared and paid or
payable in cash; and (vi) any interest capitalized in accordance with GAAP, but
excluding for such period without duplication any amortization of deferred
financing fees.
"Consolidated Net Income" of any Person shall mean for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
--------
there shall be excluded therefrom (a) the net income (or loss) of any Person
acquired by such Person or a Subsidiary of such Person in a pooling-of-interests
transaction for any period prior to the date of such transaction (subject to the
final proviso of the definition of Consolidated EBITDA Coverage Ratio when
Consolidated Net Income is being computed for purposes of calculating the
Consolidated EBITDA Coverage Ratio), (b) the net income (but not net loss) of
any Consolidated Subsidiary of such Person that is subject to restrictions that
prevent the payment of dividends or the making of distributions to such Person
to the extent of such restrictions, (c) the net income (or loss) of any Person
that is not a Consolidated Subsidiary of such Person except to the extent of the
amount of dividends or other distributions actually paid to such Person by such
other Person during such period, (d) gains or losses on asset dispositions by
such Person or its Consolidated Subsidiaries, (e) any net income (loss) of a
Consolidated Subsidiary that is attributable to a minority interest in such
Consolidated Subsidiary, (f) all extraordinary gains and extraordinary losses
and (g) the tax effect of any of the items described in Clauses (a) through (f)
above.
"Consolidated Subsidiaries" of any Person shall mean all other Persons
that would be accounted for as consolidated Persons in such Person's financial
statements in accordance with GAAP.
"Consolidated Total Assets" of any Person at any date means the
consolidated total assets of such Person and its Subsidiaries at such date, as
determined on a consolidated basis in accordance with GAAP.
<PAGE>
11
"Corporate Trust Office" shall mean the office of the Trustee
maintained in New York, New York, at which at any particular time its corporate
trust business shall be administered.
"corporation" shall mean a corporation, association, company, joint-
stock company or business trust.
"Default" shall mean any event which is, or after notice or the
passage of time or both, would be an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.08.
"Depositary" shall mean, with respect to any Notes, a clearing agency
that is registered as such under the Exchange Act and is designated by the
Company to act as Depositary for such Notes (or any successor securities
clearing agency so registered).
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Bank Facility and (ii) any other Senior Indebtedness (a) which at the
time of determination exceeds $20 million in aggregate principal amount or
funding commitments, (b) which is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the
Company and (c) as to which the Trustee has been given written notice of such
designation.
"DTC" shall mean The Depository Trust Company, a New York corporation.
"Eligible Institution" shall mean a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt that is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor.
"Euroclear" shall mean the Euroclear Clearance System (or any
successor securities clearing agency).
"Event of Default" has the meaning specified in Section 5.01.
<PAGE>
12
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means (i) with respect to
the Notes initially issued on the date hereof, the Exchange and Registration
Rights Agreement, dated as of May 21, 1997, among the Company and the relevant
Initial Purchasers, as purchasers, and the Holders from time to time as provided
therein, as such agreement may be amended from time to time and (ii) with
respect to any Additional Notes, any Exchange and Registration Rights Agreement
entered into among the Company and the relevant initial purchasers, as
purchasers, and the Holders from time to time provided therein, as the same may
be amended from time to time.
"Exchange Offer" means an offer made by the Company pursuant to an
Exchange and Registration Rights Agreement and under an effective registration
statement under the Securities Act to Exchange Notes substantially identical in
all material respects to Outstanding Original Notes (except for the differences
provided for herein) for such Outstanding Original Notes.
"Exchange Registration Statement" means a registration statement of
the Company under the Securities Act registering Exchange Notes for distribution
pursuant to an Exchange Offer.
"Exchange Notes" means the Notes issued pursuant to an Exchange Offer
and their Successor Notes.
"Expiration Date" has the meaning specified in Section 1.04.
"Franchising Business" shall mean (i) the operation of and/or
licensing of others to operate businesses, providing products or services in a
proprietary format and subject to proprietary rights with respect to the quality
and presentation of the products or services offered and (ii) without limiting
the foregoing, each business in which the Company is engaged on the issue date.
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect on the Issue Date, consistently applied.
"Global Note" means a Note that is registered in the Note Register in
the name of a Depositary or a nominee thereof.
<PAGE>
13
"Guaranty" by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness, or dividends or
distributions on any equity security, of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (ii) to purchase property, security or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guaranty by any Person shall not include
-------- -------
endorsements by such person for collection or deposit, in either case, in the
ordinary course of business.
"Hedging Agreement" shall mean any interest rate, currency or
commodity swap agreement, interest rate, currency or commodity future agreement,
interest rate cap or collar agreement, interest rate, currency or commodity
hedge agreement, any put, call or other agreement relating to interest rates,
currencies or commodities or any similar agreement.
"Holder" means a Person in whose name a Note is registered in the Note
Register.
"Incur" shall mean, with respect to any Indebtedness of any Person or
any Lien securing Indebtedness, to create, issue, incur (by conversion, exchange
or otherwise), assume, Guaranty or otherwise become liable in respect of such
Indebtedness or Lien, or the taking of any other action which would cause such
Indebtedness, in accordance with GAAP to be recorded on the balance sheet of
such Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall
have meanings correlative to the foregoing); provided that, the Indebtedness of
--------
any other Person becoming a Subsidiary of such Person will be deemed for this
purpose to have been Incurred by such Person at the time such other Person
becomes a Subsidiary of such Person; provided, however, that a change in GAAP
-------- -------
that results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness.
<PAGE>
14
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all obligations for the deferred purchase price of
property or services (excluding any accounts payable and other accrued current
liabilities incurred in the ordinary course of business), (iv) all obligations
of such Person in connection with any letters of credit and acceptances issued
under letter of credit facilities, acceptance facilities or other similar
facilities, now or hereafter outstanding,(v) all Capital Lease Obligations and
all obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property) to the
extent required to be reflected as a liability in accordance with GAAP, but
excluding accounts payable arising in the ordinary course of business, (vi) the
maximum fixed redemption or repurchase price of Redeemable Interests of such
Person at the time of determination, (vii) all obligations under Hedging
Agreements of such Person, (viii) all Indebtedness referred to in clauses (i)
through (vii) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (provided that the amount of such Indebtedness
--------
under this clause shall be limited to the amount of the fair market value of the
property of such Person subject to such Lien), (ix) all Guaranteed Indebtedness
of such Person (provided that the amount of such Guaranteed Indebtedness under
--------
this clause shall be limited to the maximum amount for which such Person could
be liable with respect to the Indebtedness of another Person pursuant to the
relevant Guaranty), and (x) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (i) through (x) above.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust
<PAGE>
15
Indenture Act that are deemed to be a part of and govern this instrument and any
such supplemental indenture, respectively.
"Independent Investment Banker" has the meaning specified in the
definition of "Comparable Treasury Issue".
"Initial Purchasers" means the Persons named as the initial purchasers
of the Notes from the Company pursuant to a Note Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Notes.
"Investment" by any Person in any other Person shall mean (i) any
direct or indirect loan, advance or other extension of credit (including any
Guaranty of Indebtedness or other obligations) or capital contribution to or for
the account of such other Person (by means of any transfer of cash or other
property to any Person or any payment for property or services for the account
or use of any Person, or otherwise), (ii) any direct or indirect purchase or
other acquisition of any Capital Stock, bond, note, debenture or other
indebtedness or equity security or evidence of Indebtedness, or any other
ownership interest, issued by such other Person, whether or not such acquisition
is from such or any other Person, (iii) any direct or indirect payment by such
Person on a Guaranty of any obligation of or for the account of such other
Person or any direct or indirect issuance by such Person of such a Guaranty or
(iv) any other commitment of cash or other property by such Person in or for the
account of such other Person that is treated as an "investment" in such other
Person in accordance with GAAP.
"Issue Date" shall mean that date of original issuance of the Notes.
"Lien" shall mean any mortgage, lien (statutory or other), pledge,
security interest, encumbrance, claim, hypothecation, assignment for security,
deposit arrangement or preference or other security agreement of any kind or
nature whatsoever. A Person shall be deemed to own subject to a Lien any
property which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to Indebtedness of such Person.
"Marketable Securities" shall mean (i) U.S. Government Obligations;
(ii) any certificate of deposit maturing not more than 270 days after the date
of acquisition issued by, or time deposit of, an Eligible
<PAGE>
16
Institution, (iii) commercial paper maturing not more than 270 days after the
date of acquisition issued by a corporation (other than an Affiliate of the
Company) with a rating at the time as of which any investment therein is made,
of "A-1" (or higher) according to Standard & Poor's or "P-1" (or higher)
according to Moody's Investor Service, Inc., (iv) any banker's acceptances or
money market deposit accounts issued or offered by an Eligible Institution; and
(v) any fund investing exclusively investments of the types described in clauses
(i) through (iv) above.
"Material Subsidiary" shall mean a Subsidiary that, as of the end of
the most recent fiscal quarter accounted for 10% or more of the Company's
consolidated (i) total assets, (ii) shareholders' equity or (iii) operating
income (calculated for the four most recent fiscal quarters), determined in each
case in accordance with GAAP.
"Maturity" shall mean, with respect to any Note, the date on which the
principal of such Note becomes due and payable as provided in such Note or the
Indenture, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Moody's" shall mean Moody's Investor Service, Inc. or any successor
to the rating agency business thereof.
"Net Available Proceeds" from any Asset Disposition by the Company or
any Subsidiary shall mean cash or readily marketable cash equivalents received
(including by way of sale, discounting or payment of a note, installment
receivable or other instrument or obligation, but excluding any other
consideration received in the form of assumption by the acquiree of Indebtedness
or other obligations relating to such properties or assets or received in any
other noncash form) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its Subsidiaries on any Indebtedness that is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or that must, by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) amounts provided as a reserve
by such Person or its Subsidiaries, in accordance with GAAP, against (a)
liabilities under any indemnification obligations to the buyer, (b) liabilities
with respect to representations and
<PAGE>
17
warranties, (c) liabilities retained by the Company or such Subsidiary, and (d)
employee termination and similar costs relating to such Asset Disposition
(except to the extent and at the time any such amounts are released from any
such reserve, such amounts shall constitute Net Available Proceeds) and (iv) all
distributions and other payments made to minority interest holders in
Subsidiaries of such Person or joint ventures as a result of such Asset
Disposition.
"Net Offering Proceeds" of any Public Offering by any Person means the
aggregate proceeds consisting of cash and Cash Equivalents received by such
Person from such Public Offering, net of all underwriting and placement
discounts, commissions and similar costs.
"Note Purchase Agreement" means (i) with respect to the Notes
initially issued on the date hereof, the Purchase Agreement, dated as of May 16,
1997, between the Company and the Initial Purchasers named therein, as such
agreement may be amended from time to time and (ii) with respect to any
Additional Notes, any purchase or underwriting agreement entered into by the
Company and the initial purchasers or underwriters with respect thereto.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 3.06.
"Notes" has the meaning specified in the first paragraph of the
recitals to this instrument and includes the Exchange Notes.
"Notes Payment" means any payment or distribution of any kind, whether
in cash, property or securities (including any payment or distribution
deliverable by reason of the payment of any other Indebtedness subordinated to
the Notes) on account of the principal of (and premium, if any) or interest on
the Notes or on account of the purchase or redemption or other acquisition of
Notes by the Company or any Subsidiary of the Company. In the event that,
notwithstanding the foregoing, the Trustee or the Holder of any Note receives
any Notes Payment before all Senior Indebtedness of the Company is paid in full
or payment thereof is provided for in cash or Cash Equivalents or otherwise in a
manner satisfactory to the holders of such Senior Indebtedness, then and in such
event such Notes Payment will be required to be paid over or delivered forthwith
to the holders of Senior Indebtedness for application to the payment of all
Senior Indebtedness of the Company remaining unpaid, to the extent necessary to
pay such Senior Indebtedness in full.
<PAGE>
18
"Notice of Default" means a written notice of the kind specified in
Section 5.01(d).
"Obligations" shall mean any principal (including reimbursement
obligations and guarantees), premium, if any, interest (including interest
accruing on or after the filing of, or which would have accrued but for the
filing of, any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), penalties, fees, expenses, indemnifications, reimbursements,
claims for rescission, damages, gross-up payments and other liabilities payable
under the documentation governing any Indebtedness or otherwise.
"Offer Document" has the meaning specified in the definition of "Offer
to Purchase".
"Offer Expiration Date" has the meaning specified in the definition of
"Offer to Purchase".
"Offer to Purchase" means an offer, set forth in a writing (the "Offer
Document") sent by the Company by first-class mail, postage prepaid, to each
Holder at his address appearing in the Note Register on the date of the Offer
Document, to purchase up to the principal amount of Notes specified in such
Offer Document at the purchase price (the "Purchase Price") specified in such
Offer Document (as determined pursuant to this Indenture). Unless otherwise
required by applicable law, the Offer Document shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer Document and a settlement date (the
"Purchase Date") for the purchase of Notes within five Business Days after the
Offer Expiration Date. The Company shall notify the Trustee in writing at least
15 Business Days (or such shorter period as is acceptable to the Trustee) prior
to the mailing of the Offer Document of the Company's obligation to make an
Offer to Purchase, and the Offer Document shall be mailed by the Company or, at
the Company's request, by the Trustee in the name and at the expense of the
Company. The Offer Document shall contain information concerning the business
of the Company and its Subsidiaries which the Company in good faith believes
will enable such Holders to make an informed decision with respect to the Offer
to Purchase, which at a minimum will include (a) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" required to be filed with the
Trustee pursuant to Section 10.16 (which requirements may be satisfied by
<PAGE>
19
delivery of such documents together with the Offer Document), (b) a description
of material developments in the Company's business subsequent to the date of the
latest of such financial statements referred to in Clause (a) (including a
description of the events requiring the Company to make the Offer to Purchase),
(c) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring the Company to make the Offer to
Purchase and (d) any other information required by applicable law to be included
therein. The Offer Document shall contain all instructions and materials
necessary to enable such Holder to tender Notes pursuant to the Offer to
Purchase. The Offer Document shall also state:
(i) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the Offer Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the Outstanding Notes offered
to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined as required by this Indenture) (the "Purchase Amount");
(iv) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to this Indenture);
(v) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(vi) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(vii) that interest on any Notes not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(viii) that on the Purchase Date the Purchase Price will become due
and payable upon each Note accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue after the Purchase
Date;
<PAGE>
20
(ix) that each Holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such Note at the place or places
specified in the Offer Document prior to the close of business on the Offer
Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing and
bearing appropriate signature guarantees);
(x) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the Offer Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder tendered, the certificate number
of the Notes the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(xi) that (A) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (B)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(xii) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer Document for such Offer to Purchase.
"Officers' Certificate" of the Company means a certificate signed by
the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice
President,
<PAGE>
21
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, as the case may be, and delivered to the Trustee.
One of the officers signing an Officers' Certificate given pursuant to Section
10.21 shall be the principal executive, financial or accounting officer of the
Company. Unless the context otherwise requires, each reference herein to an
"Officers' Certificate", shall mean an Officers' Certificate of the Company.
References herein, or in any Notes to any officer of a partnership shall mean
such officer of the partnership or, if none, of a general partner of the
partnership authorized thereby to act on its behalf.
"Opinion of Counsel" shall mean a written opinion of counsel to the
Company or any other Person (who may be an employee of the Company) reasonably
satisfactory to the Trustee.
"Original Notes" means all Notes that are subject to an Exchange and
Registration Rights Agreement, other than Exchange Notes issued in exchange
therefor.
"Outstanding", when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
------
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancelation;
(b) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as a Paying Agent) for the Holders of
such Notes; provided that, if such Notes are to be redeemed, notice of such
--------
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(c) Notes which have been defeased pursuant to Section 12.02; and
(d) Notes which have been issued pursuant to Section 3.07 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Company;
<PAGE>
22
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or of such other obligor.
"pari passu" when used with respect to the ranking of any Indebtedness
---- -----
of any Person in relation to other Indebtedness of such Person, means that each
such Indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is subordinate in right of payment to
the same Indebtedness of such Person as is the other Indebtedness and is so
subordinate to the same extent and (b) is not subordinate in right of payment to
the other Indebtedness or to any Indebtedness of such Person as to which the
other Indebtedness is not so subordinate.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Notes on behalf of the
Company.
"Permitted Hedging Agreement" of any Person shall mean any Hedging
Agreement entered into in the ordinary course of business and not for
speculation or trading purposes that is designed to protect such Person against
fluctuations in interest rates or currency exchange rates or commodity prices
with respect to Indebtedness Incurred or proposed to be Incurred or assets used
in the business in the ordinary course and which in the case of agreements
relating to interest rates shall have a notional amount no greater than the
payments due with respect to the Indebtedness being hedged thereby.
"Permitted Holder" shall mean any member of senior management of the
Company, Freeman Spogli & Co. Incorporated or PENMAN Asset Management, L.P., and
any successor entity thereof controlled by the principals of Freeman Spogli &
Co. Incorporated or PENMAN Asset Management, L.P., as the case
<PAGE>
23
may be, and any entity controlled by either of them or under common control with
either of them.
"Permitted Investment" shall mean (i) any Investment in a Qualified
Foreign Joint Venture (including the purchase or acquisition of any Capital
Stock of a Qualified Foreign Joint Venture) and any Investment consisting of
loans or reimbursement obligations relating to Guarantees of Indebtedness of
franchisees pursuant to the Company's "turnkey" store construction programs,
provided the aggregate amount of Investments under this clause (i) shall not
exceed $30 million at any time outstanding, (ii) accounts receivable and other
extensions of credit in the ordinary course of business, loans and advances to
employees for travel, relocation and other corporate purposes or to make
investments in the Company's Capital Stock in each case in the ordinary course
of business, (iii) any Investment in a Subsidiary, (iv) any Investment in a
Person as a result of which such Person becomes a Subsidiary, (v) any Investment
in Marketable Securities or in stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company, (vi) Investments made as a result of the receipt of noncash
consideration from an Asset Disposition that was made pursuant to and in
compliance with the covenant described in Section 10.14, and (vii) Investments
not otherwise permitted pursuant to clauses (i) through (vi) above, in an amount
not exceeding $5 million at any time outstanding.
"Permitted Junior Securities" means any payment or distribution in the
form of equity securities or subordinated securities of the Company or any
successor obligor provided for by a plan of reorganization or readjustment that,
in the case of any such subordinated securities, are subordinated in right of
payment to all Senior Indebtedness that may at the time be outstanding to at
least the same extent as the Notes are so subordinated as provided in this
Indenture.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
estate, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Note" of any particular Note means every Note issued
before, and evidencing all or a portion of the same debt as that evidenced by,
such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 3.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen
<PAGE>
24
Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Note.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
The amount of any Preferred Stock shall be the highest of at the time of
determination (i) the liquidation value thereof, (ii) the maximum fixed
redemption price thereof and (iii) the maximum fixed repurchase price hereof.
"Public Offering" means any underwritten public offering of Common
Stock pursuant to a registration statement filed under the Securities Act.
"Purchase Amount" has the meaning specified in the definition of
"Offer to Purchase".
"Purchase Date" has the meaning specified in the definition of "Offer
to Purchase".
"Purchase Price" has the meaning specified in the definition of "Offer
to Purchase".
"Qualified Foreign Joint Venture" shall mean a corporation,
partnership or other entity (x) formed to be, or currently, engaged in the
Franchising Business outside the United States as a franchise of the Company and
(y) in which the Company owns, directly or indirectly, a 10% or greater
interest.
"Redeemable Interest" of any Person shall mean any equity security of
or other ownership interest in such Person that by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable) or
otherwise (including upon the occurrence of an event) matures or is required to
be redeemed (pursuant to any sinking fund obligation or otherwise) or is
convertible into or exchangeable for Indebtedness or is redeemable at the option
of the holder thereof, in whole or in part, at any time prior to the final
Stated Maturity of the Notes.
"Redemption Date" shall mean each date fixed for redemption pursuant
to the provisions described under "Optional Redemption".
"Refinance" shall have the meaning provided in Section 10.08.
<PAGE>
25
"Registered Notes" means Exchange Notes and all other Notes sold or
otherwise disposed of pursuant to an effective registration statement under the
Securities Act, including, as applicable, (i) all Original Notes sold pursuant
to a Shelf Registration Statement, (ii) all Exchange Notes and (iii) all
Additional Notes initially offered and sold pursuant to a registration statement
under the Securities Act, together with their respective Successor Notes.
"Registration Default" means the occurrence of any of the following
events: (a) the Company has not filed the Exchange Registration Statement or
Shelf Registration Statement on or before the date on which such registration
statement is required to be filed pursuant to the Exchange and Registration
Rights Agreement, (b) the Exchange Registration Statement or Shelf Registration
Statement has not become effective or been declared effective by the Commission
on or before the date on which such registration statement is required to become
or be declared effective under the requirements of the Exchange and Registration
Rights Agreement, (c) the Exchange Offer has not been completed within 45 days
after the initial effective date of the Exchange Registration Statement relating
to the Exchange Offer (if the Exchange Offer is then required to be made under
the Exchange and Registration Rights Agreement) or (d) any Exchange Registration
Statement or Shelf Registration Statement required to be filed pursuant to the
Exchange and Registration Rights Agreement is filed and declared effective but
shall thereafter either be withdrawn by the Company or shall become subject to
an effective stop order issued pursuant to Section 8(d) of the Securities Act
suspending the effectiveness of such registration statement (except as
specifically permitted herein) without being succeeded immediately by an
additional registration statement filed and declared effective.
"Registration Default Period" means any period during which a
Registration Default has occurred and is continuing.
"Regular Record Date" for the interest payable on any Interest Payment
Date means May 1 and November 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the
form set forth in Annex A.
<PAGE>
26
"Regulation S Global Notes" has the meaning specified in Section 2.01.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Notes set forth in Section 2.02 to be placed upon
Regulation S Notes.
"Regulation S Notes" means all Notes required pursuant to Section
3.06(c) to bear a Regulation S Legend. Such term includes the Regulation S
Global Notes.
"Regulatory Shares" shall mean shares issued to Persons other than the
Company or a Wholly Owned Subsidiary in response to regulatory requirements of
foreign jurisdictions pursuant to a resolution of the Board of Directors, so
long as such shares do not exceed 1% of the total outstanding shares and any
owners of such shares irrevocably covenant with the Company to remit to the
Company or waive any dividends or distributions paid or payable in respect of
such shares.
"Reinvested Amounts" has the meaning specified in Section 10.14(a).
"Related Person" of any Person shall mean, without limitation, any
other Person owning (a) 5% or more of the outstanding Common Stock of such
Person or (b) 5% or more of the Voting Stock of such Person.
"Required Filing Dates" has the meaning specified in Section 10.16.
"Restricted Global Notes" has the meaning specified in Section 2.01.
"Restricted Notes" means all Notes required pursuant to Section
3.06(c) to bear a Restricted Notes Legend. Such term includes the Restricted
Global Notes.
"Restricted Notes Certificate", means a certificate substantially in
the form set forth in Annex B.
"Restricted Notes Legend" means a legend substantially in the form of
the legend required in the form of Notes set forth in Section 2.02 to be placed
upon a Restricted Note.
"Restricted Payments" shall have the meaning specified in Section
10.10.
"Restricted Period" means the period of 41 consecutive days beginning
on and including the later of
<PAGE>
27
(a) the day on which Notes are first offered to persons other than distributors
(as defined in Regulation S) in reliance on Regulation S and (b) the last
original issue date of the Notes.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Notes" means the Notes purchased by the Initial Purchasers
from the Company pursuant to a Note Purchase Agreement, other than Regulation S
Notes or Registered Notes.
"Securities Act" means the Securities Act of 1933 (or any successor
statute), as it may be amended from time to time.
"Securities Act Legend" means a Restricted Notes Legend or a
Regulation S Legend.
"Senior Indebtedness" means with respect to the Company (x)
Indebtedness created pursuant to the Bank Facility, (y) Indebtedness of the
types referred to in Clauses (i), (ii), (iv), (v) and (vii) of the definition of
Indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter Incurred and (z) Guaranties by the Company of any Indebtedness of the
type referred to in the foregoing clause (y); provided, however, the following
-------- -------
shall not constitute Senior Indebtedness: (1) any Indebtedness owed to a Person
when such Person is a Subsidiary of the Company, (2) any Indebtedness which by
the terms of the instrument creating or evidencing the same is expressly made
pari passu or subordinate in right of payment to the Notes, (3) any Indebtedness
- ---- -----
Incurred in violation of the Indenture to the extent of such violation, (4) any
Indebtedness which is subordinate in right of payment in any respect to any
other Indebtedness of the Company or (5) any Indebtedness constituting trade
payables, state or Federal taxes. For purposes of this definition,
"Indebtedness" includes any obligation to pay principal, premium (if any),
interest, penalties, reimbursement or indemnity amounts, fees and expenses
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-petition interest is allowed in such proceeding).
"Shelf Registration Statement" means a shelf registration statement
under the Securities Act filed by the Company, if required by, and meeting the
requirements of, an
<PAGE>
28
Exchange and Registration Rights Agreement, registering Original Notes for
resale.
"Special Interest" has the meaning specified in the form of the Notes
set forth in Section 2.02.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Company pursuant to Section 3.08.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor to the rating agency business thereof.
"Stated Maturity," when used with respect to the principal of any
Indebtedness or any installment of interest thereof, shall mean the date
specified in such Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest is due and payable.
"Subsidiary" of any Person shall mean (i) any corporation of which
more than 50% of the outstanding shares of Capital Stock having ordinary voting
power for the election of directors is owned directly or indirectly by such
Person and (ii) any partnership, limited liability company, association, joint
venture or other entity in which such Person, directly or indirectly, has more
than a 50% equity interest, and, except as otherwise indicated herein,
references to Subsidiaries shall refer to Subsidiaries of the Company.
"Subsidiary Guaranty" shall mean an unconditional senior subordinated
guaranty of the Notes pursuant to a supplemental indenture to this Indenture as
provided for in Section 9.07. Each Subsidiary Guaranty shall terminate by its
terms upon such Subsidiary ceasing to be a Subsidiary upon (i) a disposition of
all of the Capital Stock of such Subsidiary owned by the Company to a Person
other than an Affiliate of the Company or (ii) the merger, consolidation or
liquidation of such Subsidiary with another Person (other than an Affiliate of
the Company and other than in circumstances where the survivor would be a
Subsidiary).
"Subsidiary Guarantor" shall mean a Subsidiary of the Company that
shall have executed and delivered to the Trustee (i) a supplemental indenture
providing for a Subsidiary Guaranty as provided in Sections 9.01 and 9.07 and
such Subsidiary Guaranty shall be in full force and effect and (ii) certain
Opinions of Counsel as provided for in Section 9.07.
<PAGE>
29
"Substitute Note" shall have the meaning specified in Section 3.01.
"Successor Note" of any particular Note means every Note issued after,
and evidencing all or a portion of the same debt as that evidenced by, such
particular Note; and, for purposes of this definition, any Note authenticated
and delivered under Section 3.07 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Note shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Note.
"Surviving Entity" shall have the meaning specified in Section 8.01.
"Treasury Yield" means, with respect to any Redemption Date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee", shall mean such successor Trustee.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such
<PAGE>
30
depository receipt; provided that (except as required by law) such custodian is
--------
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository receipt.
"Unrestricted Notes Certificate" means a certificate substantially in
the form set forth in Annex C.
"Vice President", when used with respect to the Company, or the
Trustee, means any vice president of such Person, whether or not designated by a
number or a word or words added before or after the title "vice president" and
shall also include the Chief Financial Officer.
"Voting Stock" shall mean stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time, stock
of any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Weighted Average Life" shall mean, as of any date, with respect to
any indebtedness security, the quotient obtained by dividing (i) the sum of the
products of the number of years from such date to the dates of each successive
scheduled principal payment (including any sinking fund payment requirements) of
such indebtedness security multiplied by the amount of such principal payment,
by (ii) the sum of all such principal payments.
"Wholly Owned Subsidiary" of any Person shall mean a Subsidiary of
such Person, all of the Capital Stock (other than Directors' qualifying shares
or Regulatory Shares) or other ownership interests of which 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.
SECTION 1.02. Compliance Certificates and Opinions. Upon any
-------------------------------------
application or request by the Company to the Trustee to take or refrain from
taking any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act or this Indenture. Each such certificate or opinion
shall be given in the form of an Officers' Certificate, if to be given by an
officer of the Company, or an Opinion of Counsel, if to be given by
<PAGE>
31
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any case
---------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in
<PAGE>
32
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Opinions of Counsel
required to be delivered to the Trustee may have qualifications customary for
opinions of the type required and counsel delivering such Opinions of Counsel
may rely on certificates of the Company or government or other officials
customary for opinions of the type required, including certificates certifying
as to matters of fact, including that various financial covenants have been
complied with.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders; Record Dates. Any request, demand,
------------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments (and, for each instrument signed by an agent, the writing duly
appointing such agent as agent of any Holders) are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
<PAGE>
33
The ownership of Notes shall be proved by the Note Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Note shall bind every future Holder of the
same Note and the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Notes entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Notes; provided that the Company may not set a record date for, and
--------
the provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Notes on such record date (or their duly appointed proxies), and no
other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such action
--------
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date (as defined herein) by Holders of the requisite principal amount
of Outstanding Notes on such record date. Nothing in this paragraph shall be
construed to prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Notes on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Company,
at its own expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Trustee in
writing and to each Holder of Notes in the manner set forth in Section 1.06.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Notes entitled to join in the giving or
making of (a) any Notice of Default, (b) any declaration of acceleration
referred to in Section 5.02, (c) any request to institute proceedings referred
to in Section 5.07(b) or (d) any direction referred
<PAGE>
34
to in Section 5.12. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Notes on such record date (or their duly designated
proxies), and no other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
--------
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Notes on such record date.
Nothing in this paragraph shall be construed to prevent the Trustee from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding Notes
on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Notes in the manner set forth in Section 1.06.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
--------
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Notes in the manner set forth in Section 1.06, on
or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled to take any action
hereunder with regard to any particular Note may do so with regard to all or any
part of the principal amount of such Note or by one or more duly appointed
agents each of which may do so pursuant to such appointment with regard to all
or any part of such principal amount.
<PAGE>
35
SECTION 1.05. Notices, etc., to Trustee and Company. Any request,
--------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with:
(a) the Trustee by any Holder, the Company, or any holder of or agent
for any Senior Indebtedness of the Company, shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing and hand
delivered, mailed with first-class postage prepaid, sent by facsimile or
delivered by recognized overnight courier to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration,
facsimile number: 212-852-1626, or at any other address or facsimile
number previously furnished in writing to the Holders, the Company or any
holder of or agent for any Senior Indebtedness of the Company by the
Trustee; or
(b) the Company by the Trustee, any Holder or any holder of or agent
for any Senior Indebtedness of the Company shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in
writing and hand delivered, mailed with first-class postage prepaid, sent
by facsimile or delivered by recognized overnight courier to it at the
address of the Company's principal office specified in the first paragraph
of this instrument (facsimile number: 770-353-3028) or at any other
address or facsimile number previously furnished in writing to the Trustee,
the Holders or any holder of or agent for any Senior Indebtedness of the
Company by the Company.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail with first-class postage prepaid, if
mailed; when receipt acknowledged, if sent by facsimile; and the next Business
Day after timely delivery to the courier, if sent by recognized overnight
courier guaranteeing next-day delivery.
SECTION 1.06. Notice to Holders; Waiver. Where this Indenture
--------------------------
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and hand
delivered, mailed with first-class postage prepaid or delivered by recognized
overnight courier, to each Holder affected by such event, at his address as it
appears in the Note Register, not later than the latest date (if any), and not
earlier than the earliest date (if any), prescribed for the
<PAGE>
36
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail with first-class postage prepaid, if
mailed; and the next Business Day after timely delivery to the courier, if sent
by a recognized overnight courier guaranteeing next-day delivery.
SECTION 1.07. Conflict with Trust Indenture Act. If any provision
----------------------------------
hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act that is required under such Act to be a part of and govern this Indenture,
the latter provision shall control. If any provision of this Indenture modifies
or excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Until such time as this
Indenture shall be qualified under the Trust Indenture Act, this Indenture, the
Company and the Trustee shall be deemed for all purposes hereof to be subject to
and governed by the Trust Indenture Act to the same extent as would be the case
if this Indenture were so qualified on the date hereof.
SECTION 1.08. Effect of Headings and Table of Contents. The Article
-----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
<PAGE>
37
SECTION 1.09. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
--------------------
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in
----------------------
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the Holders of Notes and the holders of
any Senior Indebtedness, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 1.12. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE
--------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF).
SECTION 1.13. Legal Holidays. In any case where any Interest Payment
---------------
Date, Redemption Date, Purchase Date or Stated Maturity of any Notes shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or of the Notes or any Subsidiary Guaranty) payment of interest or principal
(and premium, if any) need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date, Redemption Date or Purchase Date or at the Stated
Maturity; provided that no interest shall accrue for the period from and after
--------
such Interest Payment Date, Redemption Date, Purchase Date or Stated Maturity,
as the case may be.
SECTION 1.14. No Recourse Against Others. A director, officer,
---------------------------
employee, stockholder or incorporator, as such, of the Company or any of its
Subsidiaries shall not have any liability for any obligations of the Company or
any of its Subsidiaries under the Notes or this Indenture for any claim based
on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of the Notes.
<PAGE>
38
ARTICLE II
Notes Forms
-----------
SECTION 2.01. Forms Generally; Initial Forms of Rule 144A and
-----------------------------------------------
Regulation S Notes. The Notes and the Trustee's certificates of authentication
- -------------------
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with law or the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such Notes
as evidenced by their execution thereof.
The definitive Notes shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
on which the Notes may be listed, all as determined by the officers executing
such Notes as evidenced by their execution thereof.
Upon their original issuance, Rule 144A Notes shall be issued in the
form of one or more Global Notes registered in the name of DTC, as Depositary,
or its nominee and deposited with the Trustee, as custodian for DTC, for credit
by DTC to the respective accounts of beneficial owners of the Notes represented
thereby (or such other accounts as they may direct). Such Global Notes,
together with their Successor Notes which are Global Notes other than the
Regulation S Global Notes are collectively herein called the "Restricted Global
Notes".
Upon their original issuance, Regulation S Notes shall be issued in
the form of one or more Global Notes registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee, as custodian for DTC,
for credit by DTC to the respective accounts of beneficial owners of the Notes
represented thereby (or such other accounts as they may direct); provided that
--------
upon such deposit all such Notes shall be credited to or through accounts
maintained at DTC by or on behalf of Euroclear or Cedel. Such Global Notes,
together with their Successor Notes which are Global Notes other than the
Restricted Global Notes are collectively herein called the "Regulation S Global
Notes".
<PAGE>
39
SECTION 2.02. Form of Face of Notes. [IF THE NOTE IS A RESTRICTED
----------------------
NOTE, THEN INSERT -- THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.]
[IF THE NOTE IS A REGULATION S NOTE, THEN INSERT -- THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS
NOTE IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
[IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- THIS IS A GLOBAL NOTE
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED
IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE
OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE.]
[IF THE NOTE IS A GLOBAL NOTE AND THE DEPOSITORY TRUST COMPANY IS TO
BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
<PAGE>
40
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
AFC ENTERPRISES, INC.
10-1/4% SENIOR SUBORDINATED NOTES DUE 2007
[If Restricted Global Note - CUSIP No.[ ]]
[If Regulation S Note - CUSIP No.[ ]]
[If Regulation S Global Note - ISIN No.[ ]]
No. $
-------------- -----------------
AFC Enterprises, Inc., a corporation duly organized and existing under
the laws of Minnesota (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ____________, or registered assigns, the
principal sum of ______________ Dollars [IF THE NOTE IS A GLOBAL NOTE, THEN
INSERT -- , or such other principal amount (which, when taken together with the
principal amounts of all other Outstanding Notes, shall not exceed $250,000,000
in the aggregate at any time) as may be set forth in the records of the Trustee
hereinafter referred to in accordance with the Indenture,] on May 15, 2007 and
to pay interest thereon from the date of original issuance of this Note or any
Predecessor Note (including in the case of any Exchange Note any Original Note
exchanged therefor) or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on May 15 and
November 15 in each year commencing on [INSERT FIRST INTEREST PAYMENT DATE], at
the rate of 10 1/4% per annum, until the principal hereof is paid or made
available for payment; provided that any amount of principal of (and premium, if
--------
any) and interest on this Note which is overdue shall bear interest (to the
extent that payment thereof shall be legally enforceable) at the rate of 12-1/4%
per annum, from the date such amount is due to the day it is paid or made
available for payment, and such overdue interest shall be payable on demand [IF
THE NOTE IS AN ORIGINAL NOTE THAT IS SUBJECT TO AN EXCHANGE AND REGISTRATION
RIGHTS AGREEMENT, THEN INSERT -- ; provided further that, if any Registration
-------- -------
Default occurs under the Exchange and Registration Rights Agreement applicable
hereto, as liquidated damages for such Registration Default, special interest
("Special Interest"), in addition to the Base Interest, shall accrue during the
Registration Default Period for such Registration Default at a per annum rate of
0.25% for the first 90 days of such Registration Default Period, at a per annum
rate of 0.50% for the second 90 days of such Registration Default Period, at a
per annum rate of 0.75% for the third 90 days of such Registration Default
<PAGE>
41
Period and at a per annum rate of l.0% thereafter for the remaining portion of
such Registration Default Period. Such Special Interest will be payable in cash
semiannually in arrears on each Interest Payment Date; and the amount of accrued
Special Interest shall be determined on the basis of the number of days actually
elapsed].
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date [IF THE NOTE IS AN ORIGINAL
NOTE, THEN INSERT --; provided that any accrued and unpaid interest (including
--------
Special Interest, if any) on this Note upon the issuance of an Exchange Note in
exchange for this Note shall cease to be payable to the Holder hereof and shall
be payable on the next Interest Payment Date for such Exchange Note to the
Holder thereof on the related Regular Record Date]. Any such interest not so
punctually paid or duly provided for, and interest on such Defaulted Interest at
the interest rate borne by the Notes, to the extent lawful, will forthwith cease
to be payable to the Holder on the relevant Regular Record Date and may either
be paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Company, with the consent of the
Trustee, notice whereof shall be given to Holders of Notes not less than 10 days
prior to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements (if applicable) of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Interest on this Note shall be computed on the basis set forth in the Indenture.
[IF THE NOTE IS A GLOBAL NOTE, THEN INSERT -- All payments in respect
of this Note will be payable to the holder of the Global Note in its capacity as
the registered Holder under the Indenture.] [IF THE NOTE IS NOT A GLOBAL NOTE,
THEN INSERT -- Payment of the principal of (and premium, if any) and interest on
this Note will be made at the office or agency of the Company in the Borough of
Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Company for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts;
<PAGE>
42
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Note Register; provided further, that all payments
----------------
of the principal (and premium, if any) and interest on Notes, the Holders of
which have given wire transfer instructions to the Company or its agent at least
10 Business Days prior to the applicable payment date will be required to be
made by wire transfer of immediately available funds to the accounts specified
by such Holders in such instructions.]
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
AFC ENTERPRISES, INC.
[SEAL] By:_________________________________________
Attest:
- ------------------------------------------
SECTION 2.03. Form of Reverse of Notes. This Note is one of a duly
-------------------------
authorized issue of Notes of the Company designated as its 10-1/4% Senior
Subordinated Notes due 2007 (herein called the "Notes"), issued and to be issued
under an Indenture, dated as of May 21, 1997 (herein called the "Indenture",
which term shall have the meaning assigned to it in such instrument), among the
Company and United States Trust Company of New York, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights,
<PAGE>
43
duties and immunities thereunder of the Company, the Trustee, the holders of the
Senior Indebtedness and the Holders of the Notes and of the terms upon which the
Notes, are, and are to be, authenticated and delivered. The Notes will be
limited to $250,000,000 in aggregate principal amount Outstanding of which
$175,000,000 in aggregate principal amount was initially issued on May 21, 1997.
The Notes are redeemable, at the option of the Company, as a whole or
in part, at any time on or after May 15, 2002 at the Redemption Prices
(expressed as percentages of the principal amount thereof) set forth below
together with accrued and unpaid interest to the Redemption Date, if redeemed
during the 12-month period beginning on May 15 of the years indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
<S> <C>
2002.................. 105.125%
2003.................. 103.416%
2004.................. 101.708%
2005 and thereafter... 100.000%
</TABLE>
At any time, or from time to time, prior to May 15, 2000, up to 40% in
aggregate principal amount of Notes originally issued under the Indenture will
be redeemable, at the option of the Company, from the net proceeds of one or
more Public Offerings of Capital Stock (other than Redeemable Interests) of the
Company, at a Redemption Price equal to 110.25% of the principal amount thereof,
together with accrued but unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date); provided that the notice of redemption with respect to any
--------
such redemption is mailed within 60 days following the closing of the
corresponding public offering; and provided further that following such
----------------
redemption at least $100 million in aggregate principal amount of Notes remains
Outstanding.
At any time on or prior to May 15, 2002, the Notes may also be
redeemed as a whole but not in part at the option of the Company upon the
occurrence of a Change of Control, (but in no event more than 90 days after the
occurrence of such Change of Control) at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued but
unpaid interest, if any, to the Redemption Date (subject to the right of
<PAGE>
44
Holders on the relevant record date to receive interest due on the relevant
interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 5.125% of the principal amount of such Note (which
represents the redemption premium otherwise payable on May 15, 2002) and (ii)
the excess of (A) the sum of the present values at such time of (1) the
redemption price of such Note at May 15, 2002 as set forth in the table above
plus (2) all scheduled interest payments (excluding accrued interest for which
the scheduled payment date has not yet occurred) due on such Note through May
15, 2002, computed in each case using a discount rate equal to the Treasury Rate
plus 50 basis points, over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to May 15, 2002, provided, however, that if the
-------- -------
period from the Redemption Date to May 15, 2002, is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to May 15, 2002, is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee not more than 60
days prior to the Redemption Date by such method as the Trustee shall deem fair
and appropriate and in a manner that complies with applicable legal and
securities exchange requirements, if any; provided, however, that Notes will be
-------- -------
redeemed in amounts equal to $1,000 or any integral multiple thereof. Notice of
redemption shall be mailed by first-class mail not less than 30 nor more than 60
days prior to the Redemption Date to each Holder of each Note to be redeemed at
such Holder's registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the
<PAGE>
45
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancelation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
The Notes do not have the benefit of any sinking fund obligations.
The Indenture provides that, subject to certain conditions, if (A)
certain Net Available Proceeds are available to the Company as a result of Asset
Dispositions or (B) a Change of Control occurs, the Company shall be required to
make an Offer to Purchase all or a specified portion of the Notes.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Note in part only, a new Note or Notes of like tenor for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancelation hereof.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (1)
the entire indebtedness of this Note or (2) certain restrictive covenants and
Events of Default with respect to this Note, in each case upon compliance with
certain conditions set forth therein.
The Notes shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain existing or past defaults
under the Indenture and their consequences. The Indenture also provides that,
without notice to or the consent of any Holder, the Company and the Trustee may
enter into one or more supplemental indentures to, among other things, cure
<PAGE>
46
any ambiguity, defect or inconsistency, or make any other change, in each case,
that does not adversely affect the rights of any Holder in any material respect.
Any such consent or waiver by the Holder of this Note or any such supplemental
indenture shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Notes issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default, the Holders of not less
than 25% in aggregate principal amount of the Notes at the time Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee, offered the Trustee reasonable
indemnity, the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of Notes at the time Outstanding a direction
inconsistent with such request, and the Trustee shall have failed to institute
any such proceeding for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Note for the
enforcement of any payment of principal hereof or any premium, if any, or
interest hereon on or after the respective due dates expressed herein (or, in
the case of redemption, on or after the Redemption Date or, in the case of any
purchase of this Note required to be made pursuant to an Offer to Purchase, on
the Purchase Date).
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at the office
or agency of the Company in the Borough of Manhattan, The City of New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar duly executed by the Holder
hereof or his attorney duly authorized in writing, and thereupon one
<PAGE>
47
or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee, the Note Registrar, any Paying Agent and any of their
agents may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Company, the Trustee, the Note Registrar, any Paying Agent nor any such agent
shall be affected by notice to the contrary.
A director, officer, employee, stockholder or incorporator, as such,
of the Company or any of its Subsidiaries shall not have any liability for any
obligations of the Company or any of its Subsidiaries under this Note or the
Indenture for any claim based on, in respect of or by reason of such obligations
or their creation. Each Holder by accepting this Note waives and releases all
such liability.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
The Indenture and this Note shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
<PAGE>
48
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety by
the Company pursuant to Section 10.14 or 10.15 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Note purchased by the
Company pursuant to Section 10.14 or 10.15 of the Indenture, state the amount
(which must be $1,000 or an integral multiple thereof): $______________
Dated:_____________ Your Signature:____________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Trustee in addition to,
or in substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
SECTION 2.04. Form of Trustee's Certificate of Authentication. This
------------------------------------------------
is one of the Notes referred to in the within-mentioned Indenture.
United States Trust Company of
New York, as Trustee
By:____________________________________________
Authorized Signature
<PAGE>
49
ARTICLE III
The Notes
---------
SECTION 3.01. Title and Terms. (a) The aggregate principal amount
----------------
of Notes which may be authenticated and delivered under this Indenture is
limited to $250,000,000, except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of other Notes
pursuant to Sections 3.03, 3.04, 3.05, 3.06, 3.07, 9.06, 11.08 or in connection
with an Offer to Purchase pursuant to Section 10.14 or 10.15 (all Notes referred
to in this exception being deemed "Substitute Notes"). The Company may issue
Exchange Notes from time to time pursuant to an Exchange Offer, in each case
pursuant to a Board Resolution and subject to Section 3.03, in authorized
denominations in exchange for a like principal amount of Original Notes. Upon
any such exchange the Original Notes shall be canceled in accordance with
Section 3.10 and shall no longer be deemed Outstanding for any purpose. Subject
to the terms and conditions hereof, (i) $175,000,000 in aggregate principal
amount of Notes will be authenticated and delivered on the date hereof and (ii)
in accordance with clause (b) below, up to $75,000,000 of Additional Notes may
be authenticated and delivered in the future (which may be Restricted Notes or
Regulation S Notes (which may be subject to an Exchange and Regulation Rights
Agreement) or may be Registered Notes as specified in the relevant Board
Resolution); provided, however, that in no event shall the aggregate principal
-------- -------
amount of all Notes Outstanding (including all Restricted Notes, Regulation S
Notes and Registered Notes at the time Outstanding) exceed $250,000,000.
The Notes shall be known and designated as the "10-1/4% Senior
Subordinated Notes due 2007" of the Company. Their Stated Maturity shall be May
15, 2007 and they shall bear interest at the rate of 10-1/4% per annum (the
"Base Interest"), from May 21, 1997 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on May 15 and November 15, commencing November 15, 1997,
until the principal thereof is paid or made available for payment; provided,
--------
however, with respect to Original Notes, that if a Registration Default occurs,
- -------
as liquidated damages for such Registration Default, Special Interest, in
addition to the Base Interest, shall accrue during the Registration Default
Period for such Registration Default at a per annum rate of 0.25% for the first
90 days of such Registration Default Period, at a per annum rate of 0.50% for
the second 90 days of such Registration Default Period, at a per annum rate of
0.75% for the third 90 days of such Registration
<PAGE>
50
Default Period and at a per annum rate of 1.0% thereafter for the remaining
portion of such Registration Default Period. The Company shall provide written
notice to the Trustee of any Registration Default and of the end of the
Registration Default Period for such Registration Default. Accrued Special
Interest, if any, shall be paid in cash in arrears semi-annually on May 15 and
November 15 in each year, and the amount of accrued Special Interest shall be
determined on the basis of the number of days actually elapsed.
Any accrued and unpaid interest (including Special Interest, if any)
on this Note upon the issuance of an Exchange Note in exchange for this Note
shall cease to be payable to the Holder hereof but such accrued and unpaid
interest (including Special Interest, if any) shall be payable on the next
Interest Payment Date for such Exchange Note to the Holder thereof on the
related Regular Record Date.
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Company for such purpose; provided,
--------
however, that at the option of the Company payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Note Register; provided further that all payments of the principal
----------------
(and premium, if any) and interest on Notes, the Holders of which have given
wire transfer instructions to the Company or its agent at least 10 Business Days
prior to the applicable payment date, will be required to be made by wire
transfer of immediately available funds to the accounts specified by such
Holders in such instructions.
The Notes shall be subject to redemption as provided in Article XI.
The Notes shall be subject to repurchase by the Company pursuant to an
Offer to Purchase as provided in Sections 10.14 and 10.15.
The Notes shall not have the benefit of any sinking fund obligations.
The Notes shall be subject to defeasance at the option of the Company
as provided in Article XII.
The Notes shall be subordinated in right of payment to Senior
Indebtedness of the Company and, if any,
<PAGE>
51
each of the Subsidiary Guarantors, respectively, as provided in Article XIV and,
if any, each indenture supplemental hereto in the form of Annex D, respectively.
Unless the context otherwise requires, the Original Notes, the
Exchange Notes and any Registered Notes shall constitute one series for all
purposes under the Indenture, including with respect to any amendment, waiver,
acceleration or other Act of Holders, redemption or Offer to Purchase.
(b) With respect to any Notes issued after the Issue Date (except for
Exchange Notes or Substitute Notes) there shall be established in or pursuant to
a Board Resolution, and subject to Section 3.03, set forth, or determined in a
manner provided in an Officers' Certificate, or established in one or more
indentures supplemental hereto, prior to the issuance of such Notes:
(i) the aggregate principal amount of such Notes which may be
authenticated and delivered under this Indenture which shall be in
aggregate principal amounts of not less than $10 million per issuance and
which together with all other issuances under this clause (b) shall not
exceed $75 million;
(ii) the date from which interest on such Notes shall accrue;
(iii) whether such Notes shall be initially issued as Original Notes
(in the form of Restricted Notes and/or Regulation S Notes) that are
subject to an Exchange and Registration Rights Agreement, or instead shall
be issued in the form of Registered Notes pursuant to a registration
statement under the Securities Act; and
(iv) the price at which such Additional Notes have initially been sold
to the public (exclusive of any underwriter); provided, however, that no
-------- -------
Additional Note may be issued at a price that would cause such Note to have
"original issue discount" within the meaning of Section 1273 of the
Internal Revenue Code of 1986, as amended.
A copy of an appropriate record of such action shall be certified by
the Secretary or any Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Officers' Certificate or the trust
indenture supplemental hereto setting forth the terms of such Notes.
<PAGE>
52
SECTION 3.02. Denominations. The Notes shall be issuable only in
--------------
registered form without coupons, and only in denominations of $1,000 and any
integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
-----------------------------------------------
Notes shall be executed on behalf of the Company by its Chairman of the Board,
its Vice Chairman of the Board, Chief Executive Officer, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes executed by the Company, together
with a Company Order for the authentication and delivery of such Notes; and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Notes as in this Indenture provided and not otherwise. In addition, in the
case of the original issuance of any Additional Notes, the Company shall deliver
the Officers' Certificate referred to in Section 3.01(b).
At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of a registration statement under the
Securities Act with respect thereto, the Company may deliver Exchange Notes
executed by the Company, to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Exchange Notes and a
like principal amount of Original Notes for cancelation in accordance with
Section 3.10 of this Indenture, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Notes. Prior to authenticating such
Exchange Notes, and accepting any additional responsibilities under this
Indenture in relation to such Notes, the Trustee shall be entitled to receive,
if
<PAGE>
53
requested, and (subject to Section 6.01) shall be fully protected in relying
upon, an Opinion of Counsel stating in substance:
(a) that all conditions hereunder precedent to the authentication and
delivery of such Exchange Notes have been complied with and that such
Exchange Notes endorsed thereon, when such Notes have been duly
authenticated and delivered by the Trustee (and subject to any other
conditions specified in such Opinion of Counsel), have been duly issued and
delivered and will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors, rights
and to general equity principles; and
(b) that the issuance of the Exchange Notes in exchange for Original
Notes has been effected in compliance with the Securities Act.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
SECTION 3.04. Temporary Notes. Pending the preparation of definitive
----------------
Notes, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Notes, which Notes are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as evidenced by their execution thereof.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes, upon
surrender of the temporary Notes at any office or agency of the Company
designated pursuant to Section 10.02,
<PAGE>
54
without charge to the Holder. Upon surrender for cancelation of any one or more
temporary Notes, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive Notes of
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 3.05. Global Notes. (a) Each Global Note authenticated
-------------
under this Indenture shall be registered in the name of the Depositary
designated by the Company for such Global Note or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and
each such Global Note shall constitute a single Note for all purposes of this
Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Note may be exchanged in whole or in part for Notes registered, and no transfer
of a Global Note in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Note or a nominee thereof
unless (i) such Depositary (A) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Note or (B) has ceased to be a
clearing agency registered as such under the Exchange Act, and in either case
the Company fails to appoint a successor Depositary, (ii) the Company executes
and delivers to the Trustee a Company Order stating that it elects to cause the
issuance of the Note in certificated form and that all Global Notes shall be
exchanged in whole for Notes that are not Global Notes (in which case such
exchange shall be effected by the Trustee) or (iii) there shall have occurred
and be continuing an Event of Default with respect to such Global Notes.
(c) If any Global Note is to be exchanged for other Notes or canceled
in whole, it shall be surrendered by or on behalf of the Depositary or its
nominee to the Trustee, as Note Registrar, for exchange or cancelation as
provided in this Article III. If any Global Note is to be exchanged for other
Notes or canceled in part, or if another Note is to be exchanged in whole or in
part for a beneficial interest in any Global Note, then either (i) such Global
Note shall be so surrendered for exchange or cancelation as provided in this
Article III or (ii) the principal amount thereof shall be reduced or increased
by an amount equal to the portion thereof to be so exchanged or canceled, or
equal to the principal amount of such other Notes to be so exchanged for a
beneficial interest therein, as the case may be, by means of an appropriate
adjustment made on the records of the Trustee, as Note Registrar, whereupon the
Trustee, in accordance with the Applicable Procedures, shall
<PAGE>
55
instruct the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Note, the Trustee shall, subject to Section 3.06(c) and as otherwise provided in
this Article III, authenticate and deliver any Notes issuable in exchange for
such Global Notes (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depositary or its authorized
representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph, the
Company shall promptly make available to the Trustee a reasonable supply of
Notes that are not in the form of Global Notes. The Trustee shall be entitled
to rely upon any order, direction or request of the Depositary or its authorized
representative which is given or made pursuant to this Article III if such
order, direction or request is given or made in accordance with the Applicable
Procedures.
(d) Every Note authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Note or any portion
thereof, whether pursuant to this Article III or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Note, unless
such Note is registered in the name of a Person other than the Depositary for
such Global Note or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Note, shall be the Holder of such Global Note for all purposes under the
Indenture and the Notes, and owners of beneficial interests in a Global Note
shall hold such interests pursuant to the Applicable Procedures. Accordingly,
any such owner's beneficial interest in a Global Note will be shown only on, and
the transfer of such interest shall be effected only through, records maintained
by the Depositary or its nominee or its Agent Members.
SECTION 3.06. Registration, Registration of Transfer and Exchange
---------------------------------------------------
Generally; Restrictions on Transfer and Exchange; Securities Act Legends. (a)
- -------------------------------------------------------------------------
Registration, Registration of Transfer and Exchange Generally. The Company
- --------------------------------------------------------------
shall cause to be kept at the Corporate Trust Office of the Trustee a register
(the register maintained in such office and in any other office or agency of the
Company designated pursuant to Section 10.02 being herein sometimes collectively
referred to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers and exchanges of Notes. The Trustee is hereby
appointed "Note Registrar" for the purpose of registering Notes and transfers
and exchanges of Notes as herein
<PAGE>
56
provided. Such Note Register shall distinguish between Original Notes and
Exchange Notes.
Upon surrender for registration of transfer of any Note at an office
or agency of the Company designated pursuant to Section 10.02 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Notes of
any authorized denominations, of a like aggregate principal amount and bearing
such restrictive legends as may be required by this Indenture on each such new
Note.
At the option of the Holder, and subject to the other provisions of
this Section 3.06, Notes may be exchanged for other Notes of any authorized
denominations, of a like aggregate principal amount, each such new Note executed
by the Company, upon surrender of the Note to be exchanged at any such office or
agency. Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Notes which the
Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange shall
be the valid Obligations of the Company, and (except for the differences between
Original Notes and Exchange Notes provided for herein) entitled to the same
benefits under this Indenture, as the Notes, surrendered upon such registration
of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Section 3.03, 3.04, 3.05, 3.06, 9.06, 10.14, 10.15 or 11.08 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Notes during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 11.05 and ending at
<PAGE>
57
the close of business on the day of such mailing, (ii) to register the transfer
of or exchange any Notes so selected for redemption in whole or in part, except
the unredeemed portion of any Notes being redeemed in part or (iii) to register
the transfer of or to exchange any Notes between a record date and the next
succeeding Interest Payment Date.
(b) Certain Transfers and Exchanges. Notwithstanding any other
--------------------------------
provision of this Indenture or the Notes, transfers and exchanges of Notes and
beneficial interests in a Global Note of the kinds specified in this Section
3.06(b) shall be made only in accordance with this Section 3.06(b).
(i) Restricted Global Note to Regulation S Global Note. If the owner
---------------------------------------------------
of a beneficial interest in the Restricted Global Note wishes at any time
to transfer such interest to a Person who wishes to acquire the same in the
form of a beneficial interest in the Regulation S Global Note, such
transfer may be effected only in accordance with the provisions of this
Clause (b)(i) and Clause (b)(vii) below and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Note Registrar, of (A) an
order given by the Depositary or its authorized representative directing
that a beneficial interest in the Regulation S Global Note in a specified
principal amount be credited to a specified Agent Member's account and that
a beneficial interest in the Restricted Global Note in an equal principal
amount be debited from another specified Agent Member's account and (B) a
Regulation S Certificate, satisfactory to the Trustee and duly executed by
the owner of such beneficial interest in the Restricted Global Note or his
attorney duly authorized in writing, then the Trustee, as Note Registrar
but subject to Clause (b)(vii) below, shall reduce the principal amount of
the Restricted Global Note and increase the principal amount of the
Regulation S Global Note by such specified principal amount as provided in
Section 3.05(c).
(ii) Regulation S Global Notes to Restricted Global Note. If the
----------------------------------------------------
owner of a beneficial interest in the Regulation S Global Note wishes at
any time to transfer such interest to a Person who wishes to acquire the
same in the form of a beneficial interest in the Restricted Global Note,
such transfer may be effected only in accordance with this Clause (b)(ii)
and subject to the Applicable Procedures. Upon receipt by the Trustee, as
Note Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the
<PAGE>
58
Restricted Global Note in a specified principal amount be credited to a
specified Agent Member's account and that a beneficial interest in the
Regulation S Global Note in an equal principal amount be debited from
another specified Agent Member's account and (B) if such transfer is to
occur during the Restricted Period, a Restricted Notes Certificate,
satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Regulation S Global Note or his attorney duly
authorized in writing, then the Trustee, as Note Registrar, shall reduce
the principal amount of the Regulation S Global Note and increase the
principal amount of the Restricted Global Note by such specified principal
amount as provided in Section 3.05(c).
(iii) Restricted Non-Global Note to Restricted Global Note or
-------------------------------------------------------
Regulation S Global Note. If the Holder of a Restricted Note (other than a
-------------------------
Global Note) wishes at any time to transfer all or any portion of such
Notes to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Restricted Global Note or the Regulation S
Global Note, such transfer may be effected only in accordance with the
provisions of this Clause (b)(iii) and Clause (b)(vii) below and subject to
the Applicable Procedures. Upon receipt by the Trustee, as Note Registrar,
of (A) such Restricted Note as provided in Section 3.06(a) and instructions
satisfactory to the Trustee directing that a beneficial interest in the
Restricted Global Note or Regulation S Global Note in a specified principal
amount not greater than the principal amount of such Note be credited to a
specified Agent Member's account and (B) a Restricted Note Certificate, if
the specified account is to be credited with a beneficial interest in the
Restricted Global Note, or a Regulation S Certificate, if the specified
account is to be credited with a beneficial interest in the Regulation S
Global Note, in either case satisfactory to the Trustee and duly executed
by such Holder or his attorney duly authorized in writing, then the
Trustee, as Note Registrar but subject to Clause (b)(vii) below, shall
cancel such Restricted Note (and issue a new Restricted Note in respect of
any untransferred portion thereof) as provided in Section 3.06(a) and
increase the principal amount of the Restricted Global Note or the
Regulation S Global Note, as the case may be, by the specified principal
amount as provided in Section 3.05(c).
(iv) Regulation S Non-Global Note to Restricted Global Note or
---------------------------------------------------------
Regulation S Global Note. If the Holder
-------------------------
<PAGE>
59
of a Regulation S Note (other than a Global Note) wishes at any time to
transfer all or any portion of such Restricted Note to a Person who wishes
to take delivery thereof in the form of a beneficial interest in the
Restricted Global Note or the Regulation S Global Note, such transfer may
be effected only in accordance with this Clause (b)(iv) and Clause (b)(vii)
below and subject to the Applicable Procedures. Upon receipt by the
Trustee, as Note Registrar, of (A) such Restricted Note as provided in
Section 3.06(a) and instructions satisfactory to the Trustee directing that
a beneficial interest in the Restricted Global Note or Regulation S Global
Note in a specified principal amount not greater than the principal amount
of such Note be credited to a specified Agent Member's account and (B) if
the transfer is to occur during the Restricted Period and the specified
account is to be credited with a beneficial interest in the Restricted
Global Note, a Restricted Notes Certificate satisfactory to the Trustee
and duly executed by such Holder or his attorney duly authorized in
writing, then the Trustee, as Note Registrar but subject to Clause (b)(vii)
below, shall cancel such Restricted Note (and issue a new Restricted Note
in respect of any untransferred portion thereof) as provided in Section
306(a) and increase the principal amount of the Restricted Global Note or
the Regulation S Global Note, as the case may be, by the specified
principal amount as provided in Section 3.05(c).
(v) Non-Global Note to Non-Global Note. A Note that is not a Global
-----------------------------------
Note may be transferred, in whole or in part, to a Person who takes
delivery in the form of another Note that is not a Global Note as provided
in Section 3.06(a); provided that if the Note to be transferred in whole or
--------
in part is a Restricted Note, or is a Regulation S Note and the transfer is
to occur during the Restricted Period, then the Trustee shall have received
(A) a Restricted Notes Certificate, satisfactory to the Trustee and duly
executed by the transferor Holder or his attorney duly authorized in
writing, in which case the transferee Holder shall take delivery in the
form of a Restricted Note, or (B) a Regulation S Certificate, satisfactory
to the Trustee and duly executed by the transferor Holder or his attorney
duly authorized in writing, in which case the transferee Holder shall take
delivery in the form of a Regulation S Note (subject in every case to
Section 3.06(c)).
(vi) Exchanges between Global Note and Non-Global Note. A beneficial
--------------------------------------------------
interest in a Global Note may be
<PAGE>
60
exchanged for a Note that is not a Global Note as provided in Section 3.05;
provided that, if such interest is a beneficial interest in the Restricted
--------
Global Note, or if such interest is a beneficial interest in the Regulation
S Global Note and such exchange is to occur during the Restricted Period,
then such interest shall be exchanged for a Restricted Note (subject in
each case to Section 3.06(c)). A Note that is not a Global Note may be
exchanged for a beneficial interest in a Global Note only if (A) such
exchange occurs in connection with a transfer effected in accordance with
Clause (b)(iii) or (iv) above or (B) such Note is a Regulation S Note and
such exchange occurs after the Restricted Period.
(vii) Regulation S Global Note to Be Held Through Euroclear or Cedel
--------------------------------------------------------------
During Restricted Period. The Company shall use its best efforts to cause
-------------------------
the Depositary to ensure that, until the expiration of the Restricted
Period, beneficial interests in the Regulation S Global Note may be held
only in or through accounts maintained at the Depositary by Euroclear or
Cedel (or by Agent Members acting for the account thereof), and no person
shall be entitled to effect any transfer or exchange that would result in
any such interest being held otherwise than in or through such an account;
provided that this Clause (b)(vii) shall not prohibit any transfer or
--------
exchange of such an interest in accordance with Clause (b)(ii) or (vi)
above.
(c) Securities Act Legends. Rule 144A Notes and their respective
-----------------------
Successor Notes shall bear a Restricted Notes Legend, and Regulation S Notes and
their Successor Notes shall bear a Regulation S Legend, subject to the
following:
(i) subject to the following Clauses of this Section 3.06(c), a Note
or any portion thereof which is exchanged, upon transfer or otherwise, for
a Global Note or any portion thereof shall bear the Securities Act Legend
borne by such Global Note while represented thereby;
(ii) subject to the following Clauses of this Section 3.06(c), a new
Note which is not a Global Note and is issued in exchange for another Note
(including a Global Note) or any portion thereof, upon transfer or
otherwise, shall bear the Securities Act Legend borne by such other Note;
provided that if such new Note is required pursuant to Section 3.06(b)(v)
--------
or (vi) to be issued in the form of a Restricted Note, it shall bear
<PAGE>
61
a Restricted Note Legend and, if such new Note is so required to be issued
in the form of a Regulation S Note, it shall bear a Regulation S Legend;
(iii) Registered Notes shall not bear a Securities Act Legend;
(iv) at any time after the Note may be freely transferred without
registration under the Securities Act or without being subject to transfer
restrictions pursuant to the Securities Act, a new Note which does not bear
a Securities Act Legend may be issued in exchange for or in lieu of a Note
(other than a Global Note) or any portion thereof which bears such a legend
if the Trustee has received an Unrestricted Note Certificate, satisfactory
to the Trustee and duly executed by the Holder of such legended Note or his
attorney duly authorized in writing, and after such date and receipt of
such certificate, the Trustee shall authenticate and deliver such a new
Note in exchange for or in lieu of such other Note as provided in this
Article III;
(v) a new Note which does not bear a Securities Act Legend may be
issued in exchange for or in lieu of a Note (other than a Global Note) or
any portion thereof which bears such a legend if, in the Company's
judgment, placing such a legend upon such new Note is not necessary to
ensure compliance with the registration requirements of the Securities Act,
and the Trustee, at the direction of the Company and, if requested by the
Trustee, upon delivery of an Opinion of Counsel, shall authenticate and
deliver such a new Note as provided in this Article III; and
(vi) notwithstanding the foregoing provisions of this Section 3.06(c),
a Successor Note of a Note that does not bear a particular form of
Securities Act Legend shall not bear such form of legend unless the Company
has reasonable cause to believe that such Successor Note is a "Restricted
Note" within the meaning of Rule 144, in which case the Trustee, at the
direction of the Company, shall authenticate and deliver a new Note bearing
a Restricted Note Legend in exchange for such Successor Note as provided in
this Article III.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Notes. If any
--------------------------------------------
mutilated Note is surrendered to the Trustee, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a new Note of
<PAGE>
62
like tenor and principal amount, bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(b) such security or indemnity as may be required by either of them to save each
of them and any agent of either of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
new Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies of any Holder with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 3.08. Payment of Interest; Interest Rights Preserved.
-----------------------------------------------
Interest on any Note which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid to the Person in whose name that
Note (or one or more Predecessor Notes) is registered at the close of business
on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall
<PAGE>
63
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in Clause (a) or (b)
below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Company, with the consent of the Trustee,
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Company shall
promptly notify the Trustee of such Special Record Date and the Company or
the Trustee, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder of Notes at such Holder's address as it appears in the Note
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed
<PAGE>
64
payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the grace period provided for in Section 5.01(a) hereof shall be
paid to the Holders of the Notes as of the Regular Record Date for the Interest
Payment Date for which interest has not been paid.
SECTION 3.09. Persons Deemed Owners. Prior to due presentment of a
----------------------
Note for registration of transfer, the Company, the Trustee, the Note Registrar,
any Paying Agent and any of their agents may treat the Person in whose name
such Note is registered as the owner of such Note for the purpose of receiving
payment of principal of (and premium, if any) and (subject to Section 3.08)
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, and neither the Company, the Trustee, the Note Registrar, any
Paying Agent nor any such agent shall be affected by notice to the contrary.
SECTION 3.10. Cancelation. All Notes surrendered for payment,
------------
redemption, repurchase pursuant to any Offer to Purchase, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancelation any Note previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Trustee. No Note shall be authenticated in lieu of or in exchange for any Note
canceled as provided in this Section, except as expressly permitted by this
Indenture. Subject to the record retention requirements of the Exchange Act,
all canceled Notes held by the Trustee, together with any Subsidiary Guaranties
that may be endorsed thereon, shall be disposed of by the Trustee as directed by
Company Order and the Trustee will certify as to such disposal to the reasonable
satisfaction of the Company. The Trustee shall provide the Company with a list
of all Notes that have been canceled from time to time as requested by the
Company.
<PAGE>
65
SECTION 3.11. Computation of Interest. Interest on the Notes shall
------------------------
be computed on the basis of a 360-day year of twelve 30-day months; provided,
--------
however, that any Special Interest on Original Notes and any interest on overdue
- -------
principal of (and premium, if any) and interest on any Note, shall be computed
on the basis of a 365-day or 366-day year, as the case may be, and the number of
days actually elapsed during the relevant Registration Default Period or the
period of default in the payment of such overdue principal (and premium, if any)
or interest.
SECTION 3.12. CUSIP Number. The Company shall in issuing the Notes
-------------
use a CUSIP number, and the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to the Holders; provided, that any such
--------
notice may state that no representation is made as to the accuracy or
correctness of the CUSIP number printed in the notice or on the certificates
representing the Notes and that reliance may be placed only on the other
identification numbers printed on the certificates representing the Notes.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This
----------------------------------------
Indenture shall cease to be of further effect (except as to any surviving rights
of registration of transfer or exchange of Notes herein expressly provided for),
and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when:
(a) either
(i) all Notes theretofore authenticated and delivered (other than
(A) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.07 and (B) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
10.03) have been delivered to the Trustee for cancelation; or
(ii) all such Notes not theretofore delivered to the Trustee for
cancelation
(A) have become due and payable, or
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66
(B) will become due and payable at their Stated Maturity
within one year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
the purpose cash in U.S. dollars, U.S. Government Obligations, which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, or any combination
thereof, an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Trustee
for cancelation, for principal (and premium, if any) and interest to
the date of such deposit (in the case of Notes which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case
may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to Clause a(ii) of this Section,
the obligations of the Trustee under Section 4.02 and the last paragraph of
Section 10.03 shall survive.
SECTION 4.02. Application of Trust Money. Subject to the provisions
---------------------------
of the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01 shall be held in trust and applied by it, in accordance
with the provisions of the Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying
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67
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money has
been deposited with the Trustee.
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
------------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of 30
days;
(b) default in the payment of the principal of or premium, if any, on
any Note at its Maturity (upon acceleration, optional redemption, required
purchase or otherwise) or the cessation to be in full force and effect
(other than as a result of a termination pursuant to its terms) of a
Subsidiary Guaranty issued by a Subsidiary that is at the time a Material
Subsidiary;
(c) default in the performance of obligations of Sections 8.01, 10.14
or 10.15;
(d) default in the performance, or breach, of any covenant or
warranty of the Company contained in this Indenture (other than a default
in the performance, or breach, of a covenant or warranty which is
specifically dealt with in clause (a), (b) or (c) above) and continuance of
such default or breach for a period of 60 days after written notice
(identifying the default or breach and stating that the notice constitutes
a notice of an Event of Default) shall have been given to the Company by
the Trustee or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the Notes then outstanding;
(e) one or more defaults in the (A) payment of principal of or
premium, if any, on Indebtedness of the Company or a Subsidiary Guarantor
aggregating $5 million or more, when the same becomes due and payable at
the final maturity thereof, and such default
<PAGE>
68
or defaults shall have continued after any applicable grace period and
shall not have been cured or waived or (B) Indebtedness of the Company or a
Subsidiary Guarantor aggregating $5 million or more shall have been
accelerated or otherwise declared due and payable, or required to be
prepaid or repurchased (other than by regularly scheduled prepayment) prior
to the stated maturity thereof;
(f) one or more final judgments or orders shall be rendered against
the Company or a Subsidiary Guarantor for the payment of money, either
individually or in an aggregate amount, in excess of $5 million and shall
not be discharged and either (A) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order and such proceeding
shall not have been stayed within 5 days or (B) there shall have been a
period of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, was not in
effect;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Subsidiary
Guarantor that is at the time a Material Subsidiary in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company or any Subsidiary Guarantor that is at the time a Material
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any such Subsidiary Guarantor under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any such Subsidiary Guarantor or of any substantial part of
the property of the Company or any such Subsidiary Guarantor or ordering
the winding up or liquidation of the affairs of the Company or any such
Subsidiary Guarantor and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(h) the commencement by the Company or any Subsidiary Guarantor of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by the Company or any Subsidiary Guarantor to the entry of a decree
or
<PAGE>
69
order for relief in respect of the Company or any Subsidiary Guarantor in
an involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company or any Subsidiary Guarantor or the filing by the Company or any
Subsidiary Guarantor of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by the Company or any Subsidiary Guarantor to the filing of such a
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or any Subsidiary Guarantor or of any substantial part of
the property of the Company or any Subsidiary Guarantor, or the making by
the Company or any Subsidiary Guarantor of an assignment for the benefit of
creditors, or the admission by the Company or any Subsidiary Guarantor in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or any Subsidiary Guarantor
in furtherance of any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
---------------------------------------------------
If an Event of Default (other than an Event of Default specified in Section
5.01(g) or 5.01(h)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Notes may declare the principal of all the Notes to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by the Holders), and upon any such declaration such principal and any
accrued interest, if any, shall become immediately due and payable; provided,
--------
however, that, so long as any Indebtedness permitted to be incurred pursuant to
- -------
the Bank Facility shall be outstanding, no such acceleration shall be effective
until the earlier of (x) acceleration of any such Indebtedness under the Bank
Facility or (y) five business days after the giving of written notice to the
Company and the administrative agent under the Bank Facility of such
acceleration. Upon the effectiveness of such declaration, such principal and
interest will be due and payable immediately. If an Event of Default specified
in Section 5.01(g) or 5.01(h) occurs and is continuing, the principal of and any
accrued interest, if any, on the Notes then Outstanding shall automatically, and
without any declaration or other action on the part of the Trustee or any
Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for
<PAGE>
70
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Notes, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if:
(a) the Company has paid or deposited, or caused to be paid or
deposited, with the Trustee a sum sufficient to pay:
(i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensa tion, expenses, disbursements
and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes that has
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Notes and (iv) to the extent
that payment of such interest is lawful, interest upon overdue
interest at the rate borne by the Notes, and
(b) all Events of Default, other than the non-payment of principal of
the Notes which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
In the event of any Event of Default specified in clause (e) above,
such Event of Default and all consequences thereof (including without limitation
any acceleration or resulting payment default) shall be annulled, waived and
rescinded, automatically and without any action by the Trustee or the Holders of
the Notes, if, within 20 days after such Event of Default arose, (x) the
Indebtedness that is the basis for such Event of Default has been discharged,
(y) the holders thereof have rescinded or waived the acceleration, notice or
action (as the case may be) giving rise to such Event of Default or (z) if the
default that is the basis for such Event of Default has been cured.
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71
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if:
- --------
(a) default is made in the payment of any interest on any Note when
such interest becomes due and payable and such default continues for a
period of 30 days; or
(b) default is made in the payment of the principal of (or premium, if
any, on) any Note at the Maturity thereof or, with respect to any Note
required to have been purchased pursuant to an Offer to Purchase made by
the Company, at the Purchase Date thereof;
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal (and premium, if any) and interest, and, to the extent that payment of
such interest shall be legally enforceable, interest on any principal (and
premium, if any) and interest that is overdue, at the rate provided therefor in
the Notes, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of any
---------------------------------
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or its creditors, the Trustee shall be entitled
and empowered, by intervention in such proceeding or otherwise, to take any and
all actions, including participation as a member, voting or otherwise, of any
committee of creditors, authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
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72
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07.
Notwithstanding the foregoing, no provision of this Indenture shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of such Holders,
-------- -------
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other such committee.
SECTION 5.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
SECTION 5.06. Application of Money Collected. Subject to Article
-------------------------------
XIV and any Subsidiary Guaranty pursuant to an indenture supplemental hereto in
the form of Annex D, if any, any money collected by the Trustee pursuant to this
Article shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Notes and
the notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Notes
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73
for principal (and premium, if any) and interest, respectively.
SECTION 5.07. Limitation on Suits. No Holder of any Notes shall have
--------------------
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent (in the reasonable opinion of the
Trustee) with such written request has been given to the Trustee during
such 60-day period by the Holders of a majority in aggregate principal
amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders To Receive Principal,
----------------------------------------------------
Premium and Interest. Notwithstanding any other provision in this Indenture,
- ---------------------
but subject to the provisions of Article XIV and any Subsidiary Guaranty
pursuant to an indenture supplemental hereto in the form of Annex D, if any, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.08) interest on such Note on the respective Stated Maturities
expressed in such Note (or, in
<PAGE>
74
the case of redemption or repurchase, on the Redemption Date or the Purchase
Date, as the case may be) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or
-----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. Except as otherwise
-------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in the last paragraph of Section 3.07, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of
-----------------------------
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
-------------------
aggregate principal amount of the Outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided that:
--------
(a) such direction shall not be in conflict with any rule of law or
with this Indenture and
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75
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Defaults. The Holders of not less than a
-------------------
majority in aggregate principal amount of the Outstanding Notes, upon written
notice to the Company and the Trustee, may on behalf of the Holders of all the
Notes waive any existing or past Default or Event of Default hereunder and its
consequences, except a default:
(a) in the payment of the principal of (or premium, if any) or
interest on any Notes (including any Note which is required to have been
purchased pursuant to an Offer to Purchase made by the Company); or
(b) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture, or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the costs of such
suit, and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided that neither this
--------
Section nor the Trust Indenture Act shall be deemed to authorize any court to
require such an undertaking or to make such an assessment in any suit instituted
by the Company, the Trustee or any Holder, or group of Holders, holding in the
aggregate at least 10% in aggregate principal amount of the Outstanding Notes or
in any suit instituted by any Holder for the enforcement of the payment of
principal of (and premium, if any) or interest on any Notes on or after the
respective Stated Maturities expressed in such Notes (or, in the case of
redemption, on or after the Redemption Date or, in the case of any purchase
required to be made pursuant to an Offer to Purchase, on or after the Purchase
Date).
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76
SECTION 5.15. Waiver of Stay, Usury or Extension Laws. The Company
----------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, usury or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
The Trustee
-----------
SECTION 6.01. Certain Duties and Responsibilities. The duties and
------------------------------------
responsibilities of the Trustee shall be as provided by the Trust Indenture Act,
as may be necessary to protect and enforce the rights of the Holders under the
Notes and this Indenture and as otherwise required by the other provisions of
this Indenture. Notwithstanding the foregoing, no provision of this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or
thereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not herein or therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.02. Notice of Defaults. The Trustee shall give the Holders
-------------------
notice of any default that has occurred and is continuing hereunder as and to
the extent provided by the Trust Indenture Act; provided, however, that in the
-------- -------
case of any default of the character specified in Section 5.01(c), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
<PAGE>
77
SECTION 6.03. Certain Rights of Trustee. Subject to the provisions
--------------------------
of Section 6.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolu tion, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(c) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically pre scribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate.
(d) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its reasonable discretion, may make such
further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
<PAGE>
78
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney.
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent (other than an agent who is an employee
of the Trustee) or attorney appointed with due care by it hereunder.
(h) Except with respect to Section 10.01, the Trustee shall have no
duty to inquire as to the performance by the Company of the covenants set
forth in Article X beyond its good faith review of any certificates or
other notices received by it from the Company.
SECTION 6.04. Not Responsible for Recitals or Issuance of Notes. The
--------------------------------------------------
recitals contained herein and in the Notes, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or the
Notes. The Trustee shall not be accountable for the use or application by the
Company of Notes or the proceeds thereof.
SECTION 6.05. May Hold Notes. The Trustee, any Authenticating Agent,
---------------
any Paying Agent, any Note Registrar or any other agent of the Company or the
Trustee, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 6.08 and 6.13, may otherwise deal with
the Company and any other obligor upon the Notes with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Note Registrar
or such other agent.
SECTION 6.06. [Section Intentionally Left Blank]
SECTION 6.07. Compensation and Reimbursement. The Company agrees:
-------------------------------
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all
<PAGE>
79
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its gross negligence, willful misconduct or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without gross negligence, willful
misconduct or bad faith on its part, arising out of or in connection with
the acceptance or administration of this trust, including the costs and
expenses, of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder;
provided, however, the Trustee shall notify the Company promptly of any
-------- -------
claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder
except to the extent such failure shall have materially prejudiced the
Company. The Company shall defend the claim and the Trustee shall
cooperate in the defense. If the Trustee is advised by counsel in writing
that it may have available to it defenses which are in conflict with the
defenses available to the Company, then the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
SECTION 6.08. Disqualification; Conflicting Interests. If the
----------------------------------------
Trustee has or shall acquire a conflicting interest within the meaning of the
Trust Indenture Act, the Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to the provisions of,
the Trust Indenture Act and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility. There shall
----------------------------------------
at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such, has a combined capital and
surplus of at least $50 million and has its Corporate Trust Office located in
the Borough of Manhattan, The City of New York. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined
<PAGE>
80
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor. (a)
--------------------------------------------------
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in aggregate principal amount of the Outstanding Notes, delivered to
the Trustee and the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Note for at least six months; or
(ii) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of
<PAGE>
81
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in aggregate principal amount of the Outstanding Notes
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Note for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.06. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every
---------------------------------------
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
<PAGE>
82
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the Trustee may be merged or converted or
- ---------
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder; provided such
--------
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
SECTION 6.13. Preferential Collection of Claims Against Company. If
--------------------------------------------------
and when the Trustee shall be or become a creditor of the Company, or any other
obligor upon the Notes, the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Company or
any such other obligor.
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may
------------------------------------
appoint an Authenticating Agent or Agents which shall be authorized to act on
behalf of the Trustee to authenticate Notes issued upon original issue and upon
exchange, registration of transfer, partial redemption or partial purchase or
pursuant to Section 3.07, and Notes so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if such Notes had been authenticated by the Trustee hereunder. Wherever
reference is made in this Indenture to the authentication and delivery of Notes
by the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent and a certificate of authentication executed on
behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than $50
million and subject to supervision or examination by Federal or State authority.
<PAGE>
83
If such Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent; provided such corporation shall be otherwise eligible
--------
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appoint ment first-class postage prepaid, to each Holder of Notes at such
Holder's address as it appears in the Note Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.07.
<PAGE>
84
If an appointment is made pursuant to this Section, the Notes may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Notes described in the within-mentioned Indenture.
--------------------------------'
As Trustee
by ______________________________'
As Authenticating Agent
by _______________________________
Authorized Officer
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
-------------------------------------------------
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders. The Company will furnish or cause to be furnished to the Trustee:
- -------
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Note Registrar.
SECTION 7.02. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in
<PAGE>
85
its capacity as Note Registrar. The Trustee may destroy any list furnished to
it as provided in Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Notes, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same, agrees
with the Company, the Subsidiary Guarantors and the Trustee that neither the
Company, the Subsidiary Guarantors nor the Trustee nor any agent of any of them
shall be held accountable by reason of any disclosure of information as to names
and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee. (a) The Trustee shall transmit to
-------------------
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which the Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Notes are listed on any securities
exchange.
SECTION 7.04. Reports by Company and Subsidiary Guarantors. The
---------------------------------------------
Company and any Subsidiary Guarantors shall file with the Trustee and the
Commission, and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant to such Act;
provided that any such information, documents or reports required to be filed
- --------
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall
be filed with the Trustee within 15 days after the same is so required to be
filed with the Commission.
SECTION 7.05. Officers' Certificate with Respect to Change in
-----------------------------------------------
Interest Rates. Within five days after the day on which any Special Interest
- ---------------
begins accruing, and within five days after any Special Interest ceases to
accrue, the Company shall deliver an Officers' Certificate to the Trustee
stating the interest rate thereupon in effect for the Notes and the date on
which such rate became effective and ceased, as applicable.
<PAGE>
86
ARTICLE VIII
Merger, Consolidation, etc.
---------------------------
SECTION 8.01. Consolidation, Merger and Sale of Assets. The Company
-----------------------------------------
shall not, directly or indirectly (including through transactions by
Subsidiaries), in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, transfer, lease or otherwise dispose of all or substantially all of the
properties and assets of the Company and the Subsidiaries on a consolidated
basis to any Person or group of affiliated Persons unless in such a transaction:
(i) either (A) the Company shall be the continuing corporation or (B)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance,
transfer, lease or disposition the properties and assets of the Company
substantially as an entirety (the "Surviving Entity") shall be a
corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and
shall, in either case, expressly assume all the obligations of the Company
under the Notes and the Indenture;
(ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing; and
(iii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, except in the case of the consolidation
or merger of any Subsidiary with or into the Company or a Wholly Owned
Subsidiary of the Company, the Company or the Surviving Entity could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the Consolidated EBITDA Ratio test in the first paragraph of Section 10.08.
In connection with any consolidation, merger, transfer or lease
contemplated hereby, the Company shall deliver, or cause to be delivered, to the
Trustee, in the form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer or lease and the supplemental indenture in
respect thereto comply with the provisions described herein and that all
conditions
<PAGE>
87
precedent herein provided for or relating to such transaction have been complied
with.
SECTION 8.02. Successor Substituted. Upon any consolidation or
----------------------
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, the successor corporation formed by such a
consolidation or into which the Company is merged or to which such transfer is
made shall succeed to, shall be substituted for and may exercise every right and
power of the Company under the Notes and the Indenture, with the same effect as
if such successor corporation had been named as the Company therein and herein.
In the event of any transaction (other than a lease) described and listed in
Section 8.01 in which the Company is not the continuing corporation, the
successor Person formed or remaining shall succeed to, be substituted for and
may exercise every right and power of the Company, and the Company shall be
discharged from all obligations and covenants under the Notes and the Indenture.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
---------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution of the Company and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee (which form in the case of clause (f) below shall be
substantially similar to the form provided for in Annex D), for any of the
following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Notes; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to secure the Notes pursuant to the requirements of Section 10.12
or otherwise; or
(d) to comply with any requirements of the Commission in order to
effect qualification of this Indenture under the Trust Indenture Act in
connection with the issuance of the Exchange Notes and thereafter
<PAGE>
88
maintain the qualification of this Indenture under the Trust Indenture Act;
or
(e) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture or the Notes which shall not be inconsistent with the
provisions of this Indenture or the Notes; provided that such action
--------
pursuant to this Clause (e) shall not adversely affect the interests of the
Holders in any material respect; or
(f) subject to the provisions of Section 9.07, to add new Subsidiary
Guarantors; or
(g) to add to, change or eliminate any of the provisions of this
Indenture to permit or facilitate the issuance of Global Notes and matters
related thereto; provided that such action pursuant to this Clause (g)
--------
shall not adversely affect the interests of the Holders in any material
respect; or
(h) to provide for the issuance of Additional Notes in accordance with
Section 3.01(b).
SECTION 9.02. Supplemental Indentures with Consent of Holders. With
------------------------------------------------
the consent of the Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution of the
Company and the Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture and, subject to Section
5.08, any existing Default or Event of Default and its consequences or
compliance with any provision of this Indenture or the Notes may be waived;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Note affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Note or any premium or interest thereon is payable, or impair
<PAGE>
89
the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date or, in the case of an Offer to Purchase which has
been made, on or after the applicable Purchase Date); or
(b) reduce the percentage in principal amount of the Outstanding
Notes, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture; or
(c) modify any of the provisions of this Section, Section 5.13 or
Section 10.22 except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Note affected
thereby; or
(d) modify any of the provisions of Article XIV of this Indenture or
any indenture supplemental hereto, in the form of Annex D, if any, in a
manner adverse to the Holders in any material respect; or
(e) modify Sections 10.14 and 10.15 of this Indenture in a manner
adverse to the Holders in any material respect; or
(f) following the mailing to a Holder of an Offer Document with
respect to an Offer to Purchase, modify the provisions of this Indenture
with respect to such Offer to Purchase in a manner adverse to such Holder
in any material respect.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
-------------------------------------
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such
<PAGE>
90
supplemental indenture which adversely affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
----------------------------------
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Notes theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act. Every
------------------------------------
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 9.07. Execution of Supplemental Indentures for Subsidiary
---------------------------------------------------
Guaranties. In executing, or accepting the trusts created by, any supplemental
- ----------
indenture executed pursuant to Section 9.01(f), the Trustee shall be entitled to
receive an Opinion of Counsel stating that such supplemental indenture and other
documents required to be provided pursuant to the definition of Subsidiary
Guarantor have been duly authorized, executed and delivered by such Subsidiary
and the supplemental indenture and each other document constitutes a legal,
valid, binding and enforceable obligation of such Subsidiary Guarantor.
SECTION 9.08. Revocation and Effect of Consents of Holders. Until a
---------------------------------------------
supplemental indenture becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of that Note or
portion of that Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. However, except
as provided in the succeeding paragraph, any such Holder or subsequent Holder
may revoke the consent as to his Note or portion of a Note. Such revocation
shall be effective only if the Trustee receives written notice of such
revocation
<PAGE>
91
before the date the supplemental indenture becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any supplemental
indenture. If a record date is fixed, then, notwithstanding the last two
sentences of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons
who were Holders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such supplemental indenture
by written notice received by the Trustee or withdraw any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date, unless the relevant supplemental indenture to which such
consent relates has become effective, in which event such Persons who were
Holders at such record date shall no longer be entitled to revoke any consent
previously given and such consent shall continue to be valid and effective.
ARTICLE X
Covenants
---------
SECTION 10.01. Payment of Principal, Premium and Interest. The
-------------------------------------------
Company will duly and punctually pay the principal of (and premium, if any) and
interest on the Notes in accordance with the terms of the Notes and this
Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company will
--------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
<PAGE>
92
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 10.03. Money for Notes Payments To Be Held in Trust. If the
---------------------------------------------
Company shall at any time act as its own Paying Agent, it will, on or before
each due date of the principal of (and premium, if any) or interest on any of
the Notes, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of (and premium, if any) or interest
on any Notes, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (a) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent (or, until such time as this Indenture shall
be qualified under the Trust Indenture Act, which would be applicable to it as
Paying Agent if the Indenture were so qualified) and (b) during the continuance
of any default by the Company (or any other obligor upon the Notes) in the
making of any payment in respect of the Notes, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
<PAGE>
93
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Subject to any applicable abandoned property laws, any money deposited
with the Trustee or any Paying Agent, or then held by the Company, in trust for
the payment of the principal of (and premium, if any) or interest on any Notes
and remaining unclaimed for two years after such principal (and premium, if any)
or interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Notes shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
-------- -------
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 10.04. Existence. Subject to Article VIII, the Company will
----------
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence, rights (charter and statutory) and franchises;
provided, however, that the Company shall not be required to preserve any such
- -------- -------
right or franchise if the Board of Directors of the Company shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and that the loss thereof would not be reasonably expected to
have a material adverse effect on the Company's ability to perform its
obligations hereunder or under the Notes.
SECTION 10.05. Maintenance of Properties. The Company will cause
--------------------------
substantially all properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good working order,
reasonable wear and tear excepted, and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company
<PAGE>
94
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section shall prevent the Company or any Subsidiary from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and would not be reasonably
expected to have a material adverse effect on the Company's ability to perform
its obligations hereunder or under the Notes.
SECTION 10.06. Payment of Taxes and Other Claims. The Company will
----------------------------------
pay or discharge or cause to be paid or discharged (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 10.07. Maintenance of Insurance. The Company shall, and the
-------------------------
Company shall cause its Subsidiaries to, keep at all times all of their
properties which are of an insurable nature insured against loss or damage with
insurers believed by the Company to be responsible in accordance with good
business practice.
SECTION 10.08. Limitation on Indebtedness and Subsidiary Preferred
---------------------------------------------------
Stock. The Company shall not Incur any Indebtedness, and shall not permit any
- ------
of its Subsidiaries to Incur any Indebtedness or Preferred Stock (excluding in
each case Permitted Indebtedness), except that the Company or a Subsidiary
Guarantor may Incur Indebtedness if at the time of such Incurrence and after
giving effect thereto on a pro forma basis the Company's Consolidated EBITDA
Ratio for the four (4) full fiscal quarters immediately preceding such event,
taken as one period calculated on the assumption that such Indebtedness had been
Incurred on the first day of such four quarter period, is greater than or equal
to 2.00:1.00.
Without regard to the foregoing limitations, the Company and its
Subsidiaries may Incur the following ("Permitted Indebtedness"):
(i) Indebtedness of the Company under the Notes other than any
Additional Notes;
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95
(ii) Indebtedness of the Company under the Bank Facility, provided
--------
that the aggregate principal amount at any time outstanding thereunder
shall not exceed the maximum commitment provided thereunder at such time;
(iii) Indebtedness of the Company or any of its Subsidiaries
outstanding on the Issue Date;
(iv) Indebtedness of the Company or any of its Subsidiaries
consisting of Permitted Hedging Agreements;
(v) Indebtedness of any Wholly Owned Subsidiary of the Company owed
to and held by the Company or owed to and held by another Wholly Owned
Subsidiary;
(vi) Indebtedness or Preferred Stock Incurred by a Person prior to
the time (A) such Person became a Subsidiary of the Company or (B) such
Person is amalgamated, merged or consolidated with or into the Company or a
Subsidiary of the Company, which Indebtedness or Preferred Stock was not
Incurred in anticipation of such transaction and was outstanding prior to
such transaction; provided that (1) such Person is or becomes a Subsidiary
--------
Guarantor and (2) after giving pro forma effect in the calculation of the
Consolidated EBITDA Ratio to (x) such transaction and (y) any Refinancing
of Indebtedness or Preferred Stock that occurs concurrently with such
transaction, and treating any Indebtedness or Preferred Stock of such
acquired Person as having been Incurred at the time of such transaction,
the Company could Incur at least $1.00 of additional Indebtedness pursuant
to the ratio test specified in the first paragraph of this covenant;
(vii) Indebtedness of the Company or a Subsidiary Guarantor Incurred
in exchange for or to renew, extend, refinance, replace or refund
(collectively "Refinance") any outstanding Indebtedness Incurred (x)
pursuant to the ratio test set forth in the first paragraph of this
covenant or (y) pursuant to clauses (i), (iii) (other than Indebtedness
proposed to be repaid with the proceeds of the Notes) or (vi) above;
provided, however, that such Indebtedness does not exceed the principal
-------- -------
amount of Indebtedness so Refinanced plus the amount of any premium
required to be paid or reasonably determined by the Company to be necessary
to accomplish such Refinancing plus the amount of the fees and expenses of
the Company reasonably incurred in connection with such Refinancing; and
provided further, that Indebtedness the proceeds of which are used to
----------------
<PAGE>
96
Refinance the Notes, Indebtedness which is pari passu to the Notes or a
---- -----
Subsidiary Guaranty, or Indebtedness which is subordinate in right of
payment to the Notes or a Subsidiary Guaranty shall only be permitted if
(A) in the case of any Refinancing of Indebtedness which is pari passu to
---- -----
the Notes or a Subsidiary Guaranty, the Refinancing Indebtedness is made
pari passu to the Notes or such Subsidiary Guaranty, or subordinated to the
---- -----
Notes or such Subsidiary Guaranty, and, in the case of any Refinancing of
Indebtedness which is subordinated to the Notes or a Subsidiary Guaranty,
the Refinancing Indebtedness is made subordinated to the Notes or such
Subsidiary Guaranty, to substantially the same extent as, or a greater
extent than, the Notes or such Subsidiary Guaranty are subordinated to
Senior Indebtedness of the Company or such Subsidiary as described under
the subordination provisions described under "Subordination" above and (B)
such Refinancing Indebtedness (x) does not have a final Stated Maturity
earlier than the final Stated Maturity of the Refinanced Indebtedness or
permit redemption or other retirement of such Indebtedness (including
pursuant to an offer to purchase by the Company) at the option of the
holder thereof prior to the final Stated Maturity of the Indebtedness being
Refinanced, other than a redemption or other retirement at the option of
the holder of such Indebtedness on terms and in circumstances that are
substantially similar to those on and in which the Indebtedness being
Refinanced may be redeemed or otherwise retired and (y) does not have a
Weighted Average Life less than the Weighted Average Life of the
Indebtedness being Refinanced;
(viii) Indebtedness of any Subsidiary Guarantor consisting of a
Guaranty of the Notes or any Senior Indebtedness of the Company Incurred in
compliance with this covenant;
(ix) Indebtedness of the Company or any of its Subsidiaries in
connection with one or more trade or standby letters of credit (not
constituting Guaranties of Indebtedness) or performance, surety, indemnity,
statutory or similar bonds, in each case, issued in the ordinary course of
business or pursuant to self-insurance obligations;
(x) Indebtedness of the Company or any of its Subsidiaries
represented by property, liability and workers' compensation insurance
(which may be in the form of letters of credit);
<PAGE>
97
(xi) Indebtedness of the Company (including Guaranties) relating to
"turnkey" store construction programs in an aggregate principal amount not
to exceed $25 million at any time outstanding;
(xii) Indebtedness of the Company and the Subsidiary Guarantors, in
addition to Indebtedness otherwise permitted to be incurred pursuant to
clauses (i) through (xi) above, that does not exceed $35 million aggregate
principal amount at any time outstanding.
For purposes of determining compliance with this Section 10.08, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness the Company or a Subsidiary is permitted to Incur pursuant
to the foregoing clauses (i) through (xii) or pursuant to the first paragraph of
this covenant, the Company shall have the right, in its sole discretion, to
classify such item of Indebtedness and shall only be required to include the
amount and type of such Indebtedness under the clause permitting the
Indebtedness as so classified.
SECTION 10.09. Limitation on Senior Subordinated Indebtedness. The
-----------------------------------------------
Company will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Indebtedness unless (i) such Indebtedness is pari passu or
---- -----
subordinated in right of payment to the Notes and (ii) such Indebtedness (A) has
a final Stated Maturity which (1) in the case of Indebtedness that is pari passu
---- -----
in right of payment with the Notes, is not earlier than the final Stated
Maturity of the Notes and (2) in the case of Indebtedness which is subordinate
in right of payment of the Notes is later than the final Stated Maturity of the
Notes and (B) has a Weighted Average Life which (1) in the case of Indebtedness
that is pari passu in right of payment to the Notes, is not shorter than the
---- -----
Weighted Average Life of the Notes and (2) in the case of Indebtedness that is
subordinate in right of payment to the Notes, is longer than the Weighted
Average Life of the Notes.
SECTION 10.10. Limitation on Restricted Payments. Neither the
----------------------------------
Company nor any of its Subsidiaries shall, directly or indirectly:
(i) declare or pay any dividend, or make any distribution, of any
kind or character (whether in cash, property or securities) in respect of
the Capital Stock of the Company or to the holders thereof in their
capacity as such (excluding any dividends or
<PAGE>
98
distributions (x) to the extent payable in shares of the Capital Stock of
the Company (other than Redeemable Interests) or in options, warrants or
other rights to acquire the Capital Stock of the Company (other than
Redeemable Interests), (y) to the extent paid by a Subsidiary to another
Subsidiary or to the Company and (z) which are paid in cash on a pro rata
basis by a Subsidiary to holders of both minority and majority interests in
such Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value (a)
any Capital Stock of the Company (other than the Company's 10% Preferred
Stock) or any Capital Stock of or other ownership interests in any
Subsidiary or any Affiliate or Related Person of the Company or (b) any
options, warrants or rights to purchase or acquire shares of Capital Stock
of the Company or any Capital Stock of or other ownership interests in any
Subsidiary or any Affiliate or Related Person of the Company (excluding, in
each case of (a) and (b), the purchase, redemption, acquisition or
retirement by any Subsidiary of any of its Capital Stock, other ownership
interests or options, warrants or rights to purchase such Capital Stock or
other ownership interests, in each case, owned by the Company or a Wholly
Owned Subsidiary);
(iii) make any Investment other than a Permitted Investment; or
(iv) redeem, defease, repurchase, retire or otherwise acquire or
retire for value prior to any scheduled maturity, repayment or sinking fund
payment, Indebtedness of the Company that is subordinate in right of
payment to the Notes;
(each of the transactions described in clauses (i) through (iv) being a
"Restricted Payment"), if both before and after giving effect to such Restricted
Payment:
(1) an Event of Default, or an event that with the lapse of time or
the giving of notice, or both, would constitute an Event of Default, shall
have occurred and be continuing;
(2) the Company would, if such Restricted Payment had been made at the
beginning of the most recently ended four full fiscal quarter period for
which internal financial statements are available immediately preceding the
date of such Restricted Payment, not have been permitted to Incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated EBITDA
<PAGE>
99
Coverage Ratio test set forth in the first paragraph of Section 10.08; or
(3) the aggregate of all Restricted Payments (excluding Restricted
Payments permitted by clauses (ii) and (iii) of the next succeeding
paragraph) from the date of the Indenture (the amount so expended, if other
than in cash, determined in good faith by the Board of Directors) exceeds
the sum, without duplication, of: (a) 50% of the aggregate Consolidated
Net Income (or, in case Consolidated Net Income shall be negative, less
100% of such deficit) for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment; (b) 100% of the aggregate net proceeds, including the
fair market value of property other than cash (as determined in good faith
by a resolution of the Board of Directors), received by the Company after
the Issue Date from the issuance and sale of Capital Stock (other than
Redeemable Interests) of the Company and options, warrants or other rights
to acquire Capital Stock (other than Redeemable Interests and Indebtedness
convertible into Capital Stock) of the Company and the principal amount of
Indebtedness and Redeemable Interests of the Company that has been
converted into Capital Stock (other than Redeemable Interests) of the
Company after the date of the Indenture, provided that any such net
--------
proceeds received by the Company from an employee stock ownership plan
financed by loans from the Company or a Subsidiary of the Company shall be
included only to the extent such loans have been repaid with cash on or
prior to the date of determination.
The foregoing covenant will not be violated by reason of:
(i) the payment of any dividend within 60 days after declaration
thereof if at the declaration date such payment would have complied with
the foregoing covenant;
(ii) any Refinancing of Indebtedness permitted pursuant to clause
(vii) of the definition of Permitted Indebtedness or in exchange for or in
an amount not in excess of the amount of the net cash proceeds of a
substantially concurrent sale (other than to a Subsidiary or employee stock
ownership plan financed by loans from the Company or a Subsidiary of the
Company)
<PAGE>
100
of Capital Stock (other than Redeemable Interests) of the Company; provided
--------
that the amount of any such net cash proceeds that are utilized for any
such purchase, redemption or other acquisition or retirement for value
shall be excluded from Clause (3)(b) in the foregoing paragraph;
(iii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company in
exchange for, or in an amount not in excess of the net cash proceeds of,
the substantially concurrent sale (other than to a Subsidiary or employee
stock ownership plan financed by loans from the Company or a Subsidiary of
the Company) of Capital Stock (other than Redeemable Interests) of the
Company; provided that the amount of any such net cash proceeds that are
--------
utilized for any such purchase, redemption or other acquisition or
retirement for value shall be excluded from Clause (3)(b) in the foregoing
paragraph;
(iv) the purchase of Capital Stock of the Company, or options,
warrants or rights to purchase or acquire shares of Capital Stock of the
Company, from employees or former employees of the Company or its
Subsidiaries (or their estates or beneficiaries thereof) upon death,
disability, retirement or termination of employment in an amount not to
exceed a $2 million in any fiscal year (plus the amounts, if any, paid
pursuant to the exercise by Frank J. Belatti, Dick R. Holbrook or Samuel N.
Frankel of repurchase rights relating to options granted under the
Company's 1992 Nonqualified Stock Option Plan); provided, however, that the
-------- -------
net cash proceeds received from the sale of qualified Capital Stock of the
Company to employees of the Company or its Subsidiaries during such fiscal
year shall be added to the limitation set forth in this clause (iv) and,
any excess of such net cash proceeds received in each fiscal year over the
total gross proceeds used to make purchases which qualify under this clause
(iv) for such fiscal year shall be added to the limitation in the next
fiscal year; provided further that the amount of any such net cash proceeds
----------------
that are utilized for any such purchase shall be excluded from clause
(3)(b) in the foregoing paragraph; and
(v) the purchase or redemption of subordinated Indebtedness
pursuant to asset sale or change of control of provisions contained in the
Indenture or other governing instrument relating thereto; provided
--------
<PAGE>
101
that (a) no offer or purchase obligation may be triggered in respect of
such Indebtedness unless a corresponding obligation also arises for the
Notes; and (b) in all events, no repurchase or redemption of such
Indebtedness may be consummated unless and until the Company shall have
satisfied all repurchase obligations with respect to any required purchase
offer made with respect to the Notes.
SECTION 10.11. Limitations Concerning Distributions by Subsidiaries.
-----------------------------------------------------
The Company may not, and may not permit any Subsidiary to, suffer to exist any
consensual encumbrance or restriction on the ability of such Subsidiary (i) to
pay, directly or indirectly, dividends or make any other distributions in
respect of its Capital Stock or other ownership interests or pay any
Indebtedness or other obligation owed to the Company or any other Subsidiary;
(ii) to make loans or advances to the Company or any other Subsidiary; or (iii)
to sell, lease or transfer any of its property or assets to the Company or any
Wholly Owned Subsidiary, except, in any such case, any encumbrance or
restriction:
(a) pursuant to the Notes, the Indenture or any other agreement in
effect on the date of the Indenture;
(b) pursuant to the Bank Facility, including any Guaranties of or
Liens securing the Senior Indebtedness Incurred thereunder;
(c) pursuant to an agreement relating to any Indebtedness Incurred by
a Person prior to the time (A) such Person became a Subsidiary of the
Company or (B) such Person is amalgamated, merged or consolidated with a
Subsidiary of the Company, which Indebtedness was not Incurred in
anticipation of such transaction and was outstanding prior to such
transaction;
(d) pursuant to an agreement which has been entered into for the
pending sale or disposition of all or substantially all of the Capital
Stock, other ownership interests or assets of such Subsidiary, provided
--------
that such restriction terminates upon consummation or abandonment of such
disposition and upon termination of such agreement;
(e) pursuant to customary non-assignment provisions in leases or other
agreements entered into in the ordinary course of business;
(f) pursuant to purchase money obligations for property acquired in
the ordinary course of business or
<PAGE>
102
liens in connection therewith that impose restrictions of the nature
described in Clause (iii) above on the property so acquired; or
(g) pursuant to an agreement effecting a refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (a), (b) or (c)
above; provided, however, that the provisions relating to such encumbrance
-------- -------
or restriction contained in such renewal, extension, refinancing or
refunding agreement are no more restrictive in any material respect than
the provisions contained in the agreement it replaces, as determined in
good faith by the Board of Directors.
SECTION 10.12. Limitation on Certain Liens. (a) The Company may
----------------------------
not, and may not permit any Subsidiary to, Incur any Lien on property or assets
of the Company or such Subsidiary to secure Indebtedness that is pari passu or
---- -----
subordinate in right of payment to the Notes without making, or causing such
Subsidiary to make, effective provision for securing the Notes (and, if the
Company so determines, any other Indebtedness of the Company or of such
Subsidiary that is not pari passu with or subordinated in right of payment to
---- -----
the Notes) so that, (i) in the case of a Lien securing Indebtedness that is pari
----
passu with the Notes the Lien securing the Notes is senior in priority or pari
- ----- ----
passu with the Lien securing such Indebtedness and (ii) in the case of a Lien
- -----
securing Indebtedness that is subordinated in right of payment to the Notes the
Lien securing the Notes is senior in priority to the Lien.
(b) Notwithstanding the foregoing, any security interest granted by
the Company or any Subsidiary to secure the Notes created pursuant to paragraph
(a) above shall provide by its terms that such security interest shall be
automatically and unconditionally released and discharged upon the release by
the holders of the Indebtedness of the Company or any Subsidiary described in
paragraph (a) above of their security interest (including any deemed release
upon payment in full of all obligations under such Indebtedness), at a time when
(A) no other Indebtedness that is pari passu or subordinated in right of payment
---- -----
to the Notes has been secured by such property or assets of the Company or any
such Subsidiary or (B) the holders of all such other Indebtedness which is
secured by such property or assets of the Company or any such Subsidiary release
their security interest in such property or assets (including any deemed release
upon payment in full of all obligations under such Indebtedness).
SECTION 10.13. Limitation on Transactions with Affiliates. The
-------------------------------------------
Company may not, directly or indirectly,
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103
enter into any transaction (or series of related transactions) after the date of
the Indenture with any Affiliate or Related Person unless:
(i) such Affiliate or Related Person is (both before and after such
transaction) (a) a Wholly Owned Subsidiary of the Company or (b) another
Subsidiary of the Company the minority interests in which are not held by
any Affiliate or Related Person; or
(ii) where the total consideration given or to be provided by the
Company or such Subsidiary in or pursuant to such transaction (or series)
(including cash, the fair value of non-cash property and the assumption of
Indebtedness (a) will be no more than $1 million, the Chief Executive
Officer, the Chief Operating Officer or the Chief Financial Officer
certifies in an Officer's Certificate that the terms of the transaction (or
series) are in the best interests of the Company and are no less favorable
to the Company than those that could be obtained in a comparable arm's-
length transaction with an entity that is not an Affiliate or Related
Person, (b) will be in excess of $1 million but no more than $5 million, a
majority of the disinterested members of the Board of Directors determines
in its good faith judgment that the terms of the transaction are in the
best interests of the Company and are no less favorable to the Company than
those that could be obtained in a comparable arm's-length transaction with
an entity that is not an Affiliate or a Related Person; or (c) will be in
excess of $5 million (1) the Company complies with the foregoing clause (b)
and (2) the Company obtains a written opinion addressed to the Board of
Directors prior to consummation of such transaction (or series) from a
nationally recognized investment banking firm (which may not be an
Affiliate or Related Person of the Company) that the terms of the
transaction (or series) are fair to the Company from a financial point of
view.
Notwithstanding the foregoing limitation, the Company and its
Subsidiaries may enter into or suffer to exist the following:
(i) any transaction pursuant to any contract in existence on the
Closing Date;
(ii) any Restricted Payment permitted to be made pursuant to the
provisions of Section 10.10;
(iii) any transaction or series of transactions between the Company
and one or more of its Subsidiaries
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104
or between two or more of its Subsidiaries (provided that no more than 5%
--------
of the equity interest in any such Subsidiary is owned, directly or
indirectly (other than by direct or indirect ownership of an equity
interest in the Company), by any Affiliate or Related Person of the Company
other than a Subsidiary);
(iv) the payment of compensation (including amounts paid pursuant to
employee benefit plans) for the personal services of officers, directors
and employees of the Company or any of its Subsidiaries in the ordinary
course of business;
(v) loans or advances for travel expenses, relocation expenses and
other amounts in the ordinary course of business;
(vi) loans to employees to purchase Capital Stock of the Company or
pay income taxes in respect of awards of Capital Stock in the ordinary
course of business not in excess of $2.5 million at any time Outstanding
(exclusive of loans outstanding on the Issue Date); and
(vii) sales of Capital Stock (other than Redeemable Interests) of the
Company, when such sales are exclusively for cash.
SECTION 10.14. Limitation on Asset Dispositions.
---------------------------------
(a) The Company may not make and may not permit any Subsidiary to make any
Asset Disposition unless:
(i) the Company receives consideration at the time of such disposition
at least equal to the fair market value of the shares or the assets
disposed of, as determined in good faith by the Board of Directors for any
transaction (or series of transactions) involving in excess of $1 million;
(ii) at least 75% of the consideration received by the Company
consists of (x) cash or Cash Equivalents, (y) the assumption of
Indebtedness or other liabilities reflected on the consolidated balance
sheet of the Company in accordance with GAAP (excluding Indebtedness or any
other liabilities subordinate in right of payment to the Notes) and release
from all liability on such Indebtedness or other liabilities assumed or (z)
any combination thereof (except that this clause (ii) shall not apply to
any sale of all or a portion of the Company's Far West equipment
manufacturing division); and
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105
(iii) 100% of the Net Available Proceeds from such Asset Disposition
(including from the sale of any marketable Cash Equivalents received
therein) are applied by the Company within one year from the later of the
date of such Asset Disposition or the receipt of such Net Available
Proceeds, (A) first, to repayment of Senior Indebtedness of the Company
- -----
then outstanding under any agreements or instruments which would require
such application or which would prohibit payments pursuant to Clause (C)
following; (B) second, to the repayment of Senior Indebtedness of the
------
Company then outstanding, if so elected by the Company, provided that the
--------
amount of such Senior Indebtedness outstanding, or permitted to be borrowed
under the relevant facility or agreement, is permanently reduced in an
amount equal to the amount so prepaid; (C) third, to the extent Net
-----
Available Proceeds are not applied to Senior Indebtedness as specified in
clause (A) or (B), to purchases of Outstanding Notes pursuant to an Offer
to Purchase (to the extent such an offer is not prohibited by the terms of
any Senior Indebtedness then outstanding) at a purchase price equal to 100%
of their principal amount plus accrued interest to the date of purchase
(the "Offer Price") (subject to the rights of Holders of record on the
relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the purchase date) and, to the extent required
by the terms thereof, any other Indebtedness of the Company that is pari
----
passu with the Notes on a pro rata basis at a price no greater than 100% of
-----
the principal amount thereof plus accrued interest to the date of purchase;
and (D) fourth, to the extent of any remaining Net Available Proceeds
------
following completion of such Offer to Purchase, to any other use as
determined by the Company which is not otherwise prohibited by the
Indenture.
Notwithstanding the foregoing, the Company will not be required to
comply with the provisions of the Indenture described in clause (iii) of the
preceding paragraph, (x) if the Net Available Proceeds (less any amounts
("Reinvested Amounts") that are invested within 360 days from the later of the
date of the related Asset Disposition and the receipt of such Net Available
Proceeds in assets that will be used in the Franchising Business (determined by
the Board of Directors in good faith)) are less than $5 million is this
paragraph (such lesser amount to be carried forward on a cumulative basis for
purposes of determining the application of this paragraph) or (y) to the extent
the Company elects to redeem the Notes with the Net Available Proceeds pursuant
to the first paragraph of Section 11.01. For purposes of clause (x) of the
preceding
<PAGE>
106
sentence, there shall be used in performing such calculation only those Net
Available Proceeds that have not been invested or applied, as the case may be,
as contemplated by such clause (x) or clauses (A),(B) or (C) of clause (iii) of
the immediately preceding paragraph within the 360-day or one-year period
allotted, as the case may be, for such investment or application.
(b) The Company shall mail the Offer Document for an Offer to
Purchase required pursuant to Section 10.14(a) within 30 days after the date on
which the aggregate amount of Net Available Proceeds is equal to or exceeds $5
million (such aggregate amount of Net Available Proceeds to be determined in
accordance with the last paragraph of clause (a) immediately above). The
aggregate principal amount of the Notes to be offered to be purchased pursuant
to the Offer to Purchase shall equal the Net Available Proceeds required to be
made available therefor pursuant to Clause (iii)(C) of Section 10.14(a) (rounded
down to the next lowest integral multiple of $1,000). Each Holder shall be
entitled to tender all or any portion of the Notes owned by such Holder pursuant
to the Offer to Purchase, subject to the requirement that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its
obligations under this Section 10.14 for the principal amount of any Notes
acquired or redeemed by the Company otherwise than pursuant to the Offer to
Purchase pursuant to this Section 10.14.
(c) Not later than the date of the Offer Document with respect to an
Offer to Purchase pursuant to this Section 10.14, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the Purchase Amount, (ii) the
allocation of the Net Available Proceeds from the Asset Disposition pursuant to
which such Offer to Purchase is being made, including, with respect to
Reinvested Amounts, that such assets will be used in the Franchising Business,
and (iii) the compliance of such allocation with the provisions of Section
10.14(a).
The Company shall perform its obligations specified in the Offer
Document for the Offer to Purchase. On or prior to the Purchase Date, the
Company shall (i) accept for payment (on a pro rata basis, if necessary) of the
Notes or portions thereof tendered pursuant to the Offer to Purchase, (ii)
deposit with the Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.03) money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted and (iii) deliver or cause to
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107
be delivered to the Trustee all Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof accepted for payment by the
Company. The Paying Agent (or the Company, if so acting) shall promptly mail or
deliver to Holders of Notes so accepted payment in an amount equal to the
Purchase Price for each $1,000 principal amount of Notes so accepted, and the
Company shall promptly execute a new Note or Notes equal in principal amount to
any unpurchased portion of the Note surrendered, and the Subsidiary Guarantors,
if any, shall promptly execute their Subsidiary Guaranties to be endorsed
thereon, and thereafter the Trustee shall promptly authenticate and mail or
deliver to such Holders such new Note or Notes. Any Note not accepted for
payment shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Offer to
Purchase on or as soon as practicable after the Purchase Date.
Notes to be purchased shall, on the Purchase Date, be due and payable
and after such date (unless the Company shall default in the payment of the
Purchase Price) such Notes shall cease to bear interest; provided, however, that
installments of interest whose Stated Maturity or date of scheduled payment is
on or prior to the Purchase Date shall be payable to the Holders of such Notes,
or one or more Predecessor Notes, registered as such on the relevant record date
according to their terms and the provisions of Section 3.08 hereof. If any Note
tendered for purchase shall not be so paid upon surrender thereof by deposit of
funds with the Trustee or the Paying Agent, the principal thereof (and premium,
if any) shall, until paid, bear interest from the Purchase Date at the default
rate provided for by such Note.
The Company shall comply with the applicable tender offer rules,
including Rule 14e under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer to Purchase. To the extent that
such laws and regulations are inconsistent with this Section 10.14, such laws
and regulations will control.
(d) Notwithstanding the foregoing, this Section 10.14 shall not apply
to any Asset Disposition which constitutes a transfer, conveyance, sale, lease
or other disposition of all or substantially all of the properties and assets of
the Company and its Subsidiaries subject to Section 8.01.
SECTION 10.15. Offer to Purchase Upon Change of Control. Upon the
-----------------------------------------
occurrence of a Change of Control, the Company will be required to make an offer
(a "Change of Control Offer") to purchase all Outstanding Notes at a
<PAGE>
108
purchase price (the "Change of Control Purchase Price") equal to 101% of their
principal amount plus accrued and unpaid interest, if any, to the date of
purchase; provided, however, that installments of interest whose Stated Maturity
-------- -------
or date scheduled payment is on or prior to the date of purchase shall be
payable to the Holders of such Notes, or one or more Predecessor Notes,
registered as such at the close of business on the relevant record date
according to their terms and the provisions of Section 3.08.
The Company shall, within 30 days following the date the Company
becomes aware of the consummation of a transaction that results in a Change of
Control, mail an Offer Document with respect to an Offer to Purchase all
Outstanding Notes. Each holder shall be entitled to tender all or any portion
of the Notes owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Note tendered must be tendered in an
integral multiple of $1,000 principal amount. Any Note that is to be purchased
only in part shall be surrendered to the Paying Agent with, if the Company or
Trustee so requires, due endorsement by or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing.
The Company shall perform its obligations specified in the Offer
Document for the Offer to Purchase. On or prior to the Purchase Date, the
Company shall (i) accept for payment Notes or portions thereof tendered pursuant
to the Offer to Purchase, (ii) deposit with the Paying Agent (or, if the Company
is acting as its own Paying Agent, segregate and hold in trust as provided in
Section 10.03) money sufficient to pay the Purchase Price of all Notes or
portions thereof so accepted and (iii) deliver or cause to be delivered to the
Trustee all Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof accepted for payment by the Company. The Paying Agent
(or the Company, if so acting) shall promptly mail or deliver to Holders of
Notes so accepted payment in an amount equal to the Purchase Price for each
$1,000 of Notes so accepted, and the Company shall promptly execute and the
Trustee shall, upon receipt of such Officers' Certificate, promptly authenticate
and mail or deliver to such Holders a new Note or Notes equal in principal
amount to any unpurchased portion of the Note surrendered as requested by the
Holder. Any Note not accepted for payment shall be promptly mailed or delivered
by the Company to the Holder thereof. The Company shall publicly announce the
results of the Offer to Purchase on or as soon as practicable after the Purchase
Date.
<PAGE>
109
Unless the Company defaults in the payment of the Purchase Price, any
Note accepted for payment pursuant to the Offer to Purchase shall cease to
accrue interest after the Purchase Date. If an offer is made to repurchase the
Notes pursuant to a Change of Control Offer, the Company shall comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14(e) thereunder, to
the extent applicable to such offer. To the extent that such laws and
regulations are inconsistent with this Section 10.15, such laws and regulations
will control.
SECTION 10.16. Provision of Financial Information. Whether or not
-----------------------------------
the Company is required to be subject to Section 13(a) or 15(d) of the Exchange
Act or any successor provision thereto, to the extent permitted by the
Commission, the Company will file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto if the Company were so required, such documents to
be filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so required. The Company shall also in any event
(a) within 15 days of each Required Filing Date (i) transmit by mail to all
Holders, as their names and addresses appear in the Note Register, without cost
to such Holders, and (ii) file with the Trustee, copies of the annual reports,
quarterly reports and other documents which the Company files with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provisions
thereto or would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provisions thereto if the Company were
required to comply with such Sections and (b) if filing such documents by the
Company with the Commission is not permitted by the Commission promptly upon
written request supply copies of such documents to any prospective Holder.
SECTION 10.17. Resale of Acquired Notes. The Company shall not, and
-------------------------
shall cause its Affiliates not to, resell or otherwise dispose of any Notes
acquired by them, whether pursuant to Section 10.14 or 10.15, in the open market
or otherwise, and shall, and shall cause its Affiliates to, surrender all such
Notes acquired to the Trustee for cancelation.
SECTION 10.18. Limitation on Issuances of Guaranties of Indebtedness
-----------------------------------------------------
by Subsidiaries. The Company will not permit any Subsidiary, directly or
- ----------------
indirectly, to Guaranty any Indebtedness unless such Subsidiary
<PAGE>
110
simultaneously executes and delivers a Subsidiary Guaranty Supplemental
Indenture in the form attached hereto as Annex D, and in accordance with Article
IX hereof, providing for a Subsidiary Guaranty of the Notes.
SECTION 10.19. Limitation on Sale of Capital Stock of Subsidiaries.
----------------------------------------------------
The Company shall not, and shall not permit any Subsidiary to, issue, transfer,
convey, sell, lease or otherwise dispose of any shares of Capital Stock of or
other ownership interests in a Subsidiary, or options, warrants or other rights
to acquire, or securities convertible into or exchangeable for, such Capital
Stock or other ownership interests, to any Person (other than the Company or a
Wholly Owned Subsidiary) except in a transaction that consists of a transfer,
conveyance, sale, lease or other disposition of all the Capital Stock of and
other ownership interests in such Subsidiary owned by the Company or any
Subsidiary of the Company, and that is in accordance with the provisions of
Section 10.14, to the extent applicable; provided, however, that the pledging of
-------- -------
shares of Capital Stock of any Subsidiary of the Company pursuant to the Bank
Facility shall not constitute such an issuance, transfer, conveyance, sale,
lease or other disposition.
SECTION 10.20. Limitation on Dispositions of Assets to Subsidiaries.
-----------------------------------------------------
The Company will not sell, convey, lease, transfer or otherwise contribute or
dispose of a substantial portion of its assets or property (including any
shares of Capital Stock of any Subsidiary of the Company (but excluding the
granting in the ordinary course of business of licenses to trademarks owned or
licensed by the Company) existing on the Issue Date (each referred to for the
purpose of this covenant as a "disposition") to any Subsidiary of the Company,
other than dispositions (a) made in the ordinary course of business, (b)
intercompany loans and cash equity contributions, including, without limitation,
any such loans or contributions for the purpose of effecting the payment of any
tax owed by any such Subsidiary to any governmental entity), (c) of trade or
other receivables and assets relating to trade and (d) permitted by Section
10.10.
Notwithstanding the foregoing, the Company may make a disposition of a
substantial portion of its assets or property existing on the Issue Date to any
Subsidiary of the Company, provided that such Subsidiary is a Subsidiary
--------
Guarantor.
SECTION 10.21. Statement by Officers as to Default; Compliance
-----------------------------------------------
Certificates. (a) The Company will deliver to the Trustee, within 90 days
- -------------
after the end of each
<PAGE>
111
fiscal year of the Company ending after the date of this Indenture an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company or any Subsidiary Guarantor is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company or any Subsidiary Guarantor shall be in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 30 days after the Company becomes aware of the occurrence of
an Event of Default or an event which, with notice or the lapse of time or both,
would constitute an Event of Default, an Officers' Certificate setting forth the
details of such Event of Default or default, and the action which the Company
proposes to take with respect thereto.
SECTION 10.22. Waiver of Covenants. The Company and any Subsidiary
--------------------
Guarantor may omit in any particular instance to comply with any covenant or
condition set forth in Section 8.01 and Sections 10.04 through 10.21, inclusive,
if before the time for such compliance the Holders of at least a majority in
aggregate principal amount of the Outstanding Notes shall, by Act of such
Holders delivered in writing to the Company and the Trustee, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and each of the Subsidiary
Guarantors and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect; provided, however, with respect
-------- -------
to an Offer to Purchase as to which an Offer Document has been mailed, no such
waiver may be made or shall be effective against any Holder tendering Notes
pursuant to such Offer to Purchase, and the Company may not omit to comply with
the terms of such Offer Document as to such Holder, unless such Holder shall
have waived such requirement.
ARTICLE XI
Redemption of Notes
-------------------
SECTION 11.01. Redemption at the Election of the Company. Subject to
------------------------------------------
Article XIV and any Subsidiary Guaranty pursuant to an indenture supplemental
hereto in the form of Annex D, if any, the Notes may be redeemed at the election
<PAGE>
112
of the Company, at the times and the Redemption Prices and subject to the
conditions and other requirements specified in the form of Notes hereinbefore
set forth.
SECTION 11.02. Applicability of Article. Redemption of Notes, either
-------------------------
at the election of the Company or mandatory, as permitted or required by any
provision of the Notes and this Indenture, shall be made in accordance with such
provision and the applicable provisions of this Article.
SECTION 11.03. Election to Redeem; Notice to Trustee. The election
--------------------------------------
of the Company to redeem any Note pursuant to Section 11.01 shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of less than all the Notes, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed. In addition, in case of any
redemption at the election of the Company pursuant to Section 11.01, the Company
shall, at least 60 days prior to the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee), furnish the Trustee with an Officers'
Certificate evidencing compliance with Section 11.01 (after giving effect to
such proposed redemption).
SECTION 11.04. Selection by Trustee of Notes to Be Redeemed. If less
---------------------------------------------
than all the Notes are to be redeemed, the particular Notes to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Notes not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate (and in a manner that complies
with applicable legal and securities exchange requirements, if any) and which
may provide for the selection for redemption of portions (equal to $1,000 or any
integral multiple thereof) of the principal amount of Notes of a denomination
larger than $1,000.
The Trustee shall promptly notify the Company and each Note Registrar
in writing of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
In the event that the Company is required to make an Offer to Purchase
pursuant to Sections 10.14 and 10.15 and the amount available for such Offer is
not an integral multiple of $1,000, the Trustee shall promptly refund to the
<PAGE>
113
Company any remaining proceeds, which shall be less than $1,000.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the principal amount of such Notes which has been or is to be redeemed.
SECTION 11.05. Notice of Redemption. Notice of redemption shall be
---------------------
given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Notes to be
redeemed, at his address appearing in the Note Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) a brief statement setting forth the Company's right to effect such
redemption and the Company's basis therefor;
(4) if less than all the Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption of any Notes, the
principal amounts) of the particular Notes to be redeemed;
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note to be redeemed and that interest thereon
will cease to accrue after said date;
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price;
(7) that in the case that a Note is only redeemed in part, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
of such Note without service charge, a new Note or Notes in an aggregate
amount equal to the unredeemed portion of the Note;
(8) the aggregate principal amount of all Notes that will have been
redeemed pursuant to Section 11.02 through and including the Redemption
Date for which such notice is being given; and
<PAGE>
114
(9) the CUSIP number of the Notes that are being redeemed.
Notice of redemption of Notes to be redeemed pursuant to this Article
XI shall be given by the
Company; provided that notice of redemption shall be given by the Trustee in the
--------
name and at the expense of the Company where the Company has so requested.
The notice, if mailed in the manner herein provided, shall
conclusively be presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Note.
SECTION 11.06. Deposit of Redemption Price. In the case of
----------------------------
redemption pursuant to Section 11.01, on or prior to any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Notes which are to be redeemed on that date other
than Notes or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancelation. Subject to any
applicable abandoned property laws, all money earned on funds held in trust by
the Trustee or any Paying Agent and any excess remaining funds shall be remitted
to the Company.
SECTION 11.07. Notes Payable on Redemption Date. Notice of
---------------------------------
redemption having been given as aforesaid, the Notes so to be redeemed shall, on
the Redemption Date, become due and payable at the Redemption Price therein
specified, and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Notes for redemption in accordance
with said notice, such Notes shall be paid by the Company or Paying Agent, at
the Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Stated Maturity is on or
- -------- -------
prior to the Redemption Date shall be payable to the Holders of such Notes, or
one or more Predecessor Notes, registered as such at the close of business on
the relevant Regular Record Date according to their terms and the provisions of
Section 3.08.
<PAGE>
115
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of (and premium, if any) and interest on
such Note shall be deemed overdue and shall, until paid, bear interest from the
Redemption Date at the rate provided by such Note.
SECTION 11.08. Notes Redeemed in Part. Any Note which is to be
-----------------------
redeemed only in part shall be surrendered at an office or agency of the Company
designated for that purpose pursuant to Section 10.02 (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes, of any authorized denomination
as requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so surrendered.
ARTICLE XII
Defeasance and Covenant Defeasance
----------------------------------
SECTION 12.01. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance. The Company may at its option by Board Resolution, and at any time,
- -----------
elect to have either Section 12.02 or Section 12.03 applied to the Outstanding
Notes upon compliance with the conditions set forth below in this Article XII.
SECTION 12.02. Defeasance and Discharge. Upon the Company's exercise
-------------------------
of the option provided in Section 12.01 applicable to this Section, the Company
shall be deemed to have been discharged from its obligations with respect to the
Outstanding Notes and the provisions of Article XIV and any Subsidiary Guaranty
pursuant to an indenture supplemental hereto in the form of Annex D, if any,
shall cease to be effective, on and after the date the conditions set forth
below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the Outstanding Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Notes to receive, solely from the
trust fund described in
<PAGE>
116
Section 12.04 and as more fully set forth in such Section, payments in respect
of the principal of (and premium, if any) and interest on such Notes when such
payments are due, (B) the Company's obligations with respect to such Notes under
Sections 3.04, 3.05, 3.06, 3.07, 10.02 and 10.03, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article XII.
Subject to compliance with this Article XII, the Company may exercise its option
under this Section 12.02 notwithstanding the prior exercise of its option under
Section 12.03.
SECTION 12.03. Covenant Defeasance. Upon the Company's exercise of
--------------------
the option provided in Section 12.01 applicable to this Section, (i) the Company
shall be released from its obligations under Sections 10.05 through 10.20
inclusive, and Clause (iii) of Section 8.01, (ii) the occurrence of an event
specified in Section 5.01(c) (with respect to Section 8.01, only Clause (iii)
thereof), 501(d) (with respect to any of Sections 10.05 through 10.20,
inclusive), 5.01(e) and 5.01(f) shall not be deemed to be an Event of Default
and (iii) the provisions of Article XIV hereof and any Subsidiary Guaranty
pursuant to an indenture supplemental hereto in the form of Annex D, if any,
shall cease to be effective on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"). For this purpose, such
covenant defeasance means that the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section, Clause or Article, whether directly or indirectly by reason of
any reference elsewhere herein to any such Section, Clause or Article or by
reason of any reference in any such Section, Clause or Article to any other
provision herein or in any other document; but the remainder of this Indenture
and such Notes shall be unaffected thereby.
SECTION 12.04. Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 12.02 or
Section 12.03 to the then Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 6.09 who shall agree to comply with the provisions of this Article XII
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Notes, (A) cash in U.S. dollars, (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
<PAGE>
117
later than one day before the due date of any payment or (C) a combination
thereof, in an amount sufficient in the opinion of a nationally recognized firm
of independent public accountants expressed in a written opinion with respect
thereto delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge, the
principal of (premium, if any) and each installment of interest on the Notes on
the Stated Maturity of such principal or installment of interest in accordance
with the terms of this Indenture and of such Notes.
(2) In the case of an election under Section 12.02, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling, or (y) since the date of this Indenture there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding Notes
will not recognize gain or loss for Federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
(3) In the case of an election under Section 12.03, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and covenant defeasance
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and covenant
defeasance had not occurred.
(4) At the time of such deposit: (A) no default in the payment of
all or a portion of principal of (or premium, if any) or interest on any Senior
Indebtedness of the Company shall have occurred and be continuing, and no event
of default with respect to any Senior Indebtedness of the Company shall have
occurred and be continuing and shall have resulted in such Senior Indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable and (B) no other event of default with
respect to any Senior Indebtedness of the Company shall have occurred and be
continuing permitting (after notice or the lapse of time, or both) the holders
of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to
declare such Senior Indebtedness due and payable prior to the date on which it
would otherwise have
<PAGE>
118
become due and payable, or, in the case of either Clause (A) or Clause (B)
above, each such default or event of default shall have been cured or waived or
shall have ceased to exist.
(5) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default shall have occurred and be continuing
on the date of such deposit or, insofar as subsections 5.01(g) and (h) are
concerned, at any time during the period ending on the 91st day after the date
of such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(6) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Notes are in default within the meaning of such Act).
(7) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any other material
agreement or instrument to which the Company is a party or by which it is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 12.02 or
the covenant defeasance under Section 12.03 (as the case may be) have been
complied with.
(9) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company as defined in
the Investment Company Act of 1940, as amended from time to time, or such trust
shall be qualified under such act or exempt from regulation thereunder.
SECTION 12.05. Deposited U.S. Government Obligations to be Held in
---------------------------------------------------
Trust; Other Miscellaneous Provisions. Subject to the provisions of the last
- --------------------------------------
paragraph of Section 10.03, all money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee--
collectively, for purposes of this Section 12.05, the "Trustee") pursuant to
Section 12.04 in respect of the Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes, of all sums due and to become due thereon in respect of principal
(and premium, if any) and
<PAGE>
119
interest, but such money need not be segregated from other funds except to the
extent required by law. Money so held in trust shall not be subject to the
provisions of Article XIV or any Subsidiary Guaranty pursuant to an indenture
supplemental hereto in the form of Annex D, if any.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Notes.
Anything in this Article XII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request and be relieved of all liability with respect to any money or U.S.
Government Obligations held by it as provided in Section 12.04 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written opinion with respect thereto delivered to the Trustee,
are in excess of the amount thereof which would then be required to be deposited
to effect an equivalent defeasance or covenant defeasance.
SECTION 12.06. Reinstatement. If the Trustee or the Paying Agent is
-------------
unable to apply any money in accordance with Section 12.02 or 12.03 by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to this Article Twelve until such
time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 12.02 or 12.03; provided, however, that if the Company
-------- -------
makes any payment of principal of (and premium, if any) or interest on any Notes
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or the Paying Agent.
ARTICLE XIII
[Article Intentionally Left Blank]
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120
ARTICLE XIV
Subordination of Notes
----------------------
SECTION 14.01. Notes Subordinate to Senior Indebtedness. The Company
-----------------------------------------
covenants and agrees, and each Holder of a Note, by his acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article (subject to the provisions of Article IV and Article
XII and Section 11.01), the payment of the principal of (and premium, if any)
and interest on the Notes and any other Obligations in respect of the Notes
(including any obligation to repurchase Notes) are hereby expressly made
subordinate and subject in right of payment to the prior payment in full in cash
or Cash Equivalents of all Senior Indebtedness of the Company.
SECTION 14.02. Payment Over of Proceeds Upon Dissolution, Etc. Upon
-----------------------------------------------
any payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets and liabilities or any bankruptcy, insolvency
or similar proceedings of the Company, the holders of Senior Indebtedness of the
Company will be entitled to receive payment in full of all principal, premium
(if any), interest, penalties, reimbursement or indemnity amounts, fees and
expenses in respect of such Senior Indebtedness (including, as provided below,
any post-petition interest, whether or not an allowed claim) including all
amount due or to become due on all such Senior Indebtedness, or provision will
be made for payment in cash or Cash Equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, before the Holders of
the Notes are entitled to receive any Notes Payments other than payments in
Permitted Junior Securities.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Note shall have received any Notes
Payment before all Senior Indebtedness of the Company is paid in full or payment
thereof provided for in cash or Cash Equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, then and in such event
such Notes Payment shall be paid over or delivered forthwith to the holders of
Senior Indebtedness for application to the payment of such Senior Indebtedness
remaining unpaid, to the extent necessary to pay such Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of such Senior Indebtedness.
<PAGE>
121
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed to fall within this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer such properties and assets as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article VIII.
SECTION 14.03. No Payment When Senior Indebtedness in Default. In
-----------------------------------------------
the event that any Senior Payment Default (as defined below) shall have occurred
and be continuing, then no Notes Payment shall be made by the Company (other
than payments in Permitted Junior Securities) unless and until such Senior
Payment Default shall have been cured or waived or shall have ceased to exist or
all amounts then due and payable in respect of such Senior Indebtedness of the
Company to which such Senior Payment Default relates shall have been paid in
full, or provision shall have been made for such payment in cash or otherwise in
a manner satisfactory to the holders of such Senior Indebtedness. "Senior
Payment Default" means (i) any default in the payment of principal of (or
premium, if any) or interest on any Senior Indebtedness of the Company and (ii)
any event of default with respect to Senior Indebtedness of the Company which
has resulted in such Senior Indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable.
In the event that any Senior Nonmonetary Default (as defined below)
shall have occurred and be continuing, then, upon the receipt by the Company and
the Trustee of written notice of such Senior Nonmonetary Default from the
representative of the Designated Senior Indebtedness (the "Representatives"), no
Notes Payment shall be made (other than payments in Permitted Junior Securities)
during the period (the "blockage period") commencing on the date of such receipt
of such written notice and ending on the earlier of (i) 179 days after such date
and (ii) the date, if any, on which the Senior Indebtedness of the Company to
which such default relates is discharged or such default is waived or otherwise
cured. No more than one blockage period may be commenced with respect to the
Notes during any consecutive 360-day period. For all purposes of this
paragraph, no Senior Nonmonetary Default that existed or was continuing on the
date of commencement of any blockage period with respect to the Senior
Indebtedness of the
<PAGE>
122
Company shall be, or be made, the basis for the commencement of a subsequent
blockage period whether or not within a period of 360 consecutive days by
holders of Senior Indebtedness of the Company or their representatives unless
such default shall have been cured for a period of not less than 90 consecutive
days. "Senior Nonmonetary Default" means the occurrence or existence and
continuance of any event of default, or of any event which, after notice or
lapse of time (or both), would become an event of default, under the terms of
any instrument pursuant to which any Designated Senior Indebtedness of the
Company is outstanding, permitting (after notice or lapse of time or both) one
or more holders of such Senior Indebtedness (or a trustee or agent on behalf of
the holders thereof) to declare such Senior Indebtedness due and payable prior
to the date on which it would otherwise become due and payable, other than a
Senior Payment Default.
In the event that, notwithstanding the foregoing, the Company shall
make any Notes Payment (other than Permitted Junior Securities), as the case may
be, to the Trustee or any Holder prohibited by the foregoing provisions of this
Section, then and in such event such Notes Payment shall be paid over and
delivered forthwith to the holders of the Senior Indebtedness of the Company.
The provisions of this Section shall not apply to any Notes Payment
with respect to which Section 14.02 would be applicable.
SECTION 14.04. Certain Payments Permitted. Nothing contained in this
---------------------------
Article or elsewhere in this Indenture or in any of the Notes shall prevent the
Company, at any time except during the pendency of any proceeding referred to in
Section 14.02 or under the conditions described in Section 14.03, from making
Notes Payments.
SECTION 14.05. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness. Subject to the payment in full in cash of all amounts due or to
- -------------
become due on or in respect of Senior Indebtedness of the Company, or the
provision for such payment in cash or Cash Equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, the Holders of the
Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to such Senior Indebtedness until the principal of (and
premium, if any) and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of the Company of any cash, property or securities to which the
Holders of the Notes or the Trustee
<PAGE>
123
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior
Indebtedness of the Company by Holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness of the Company.
SECTION 14.06. Provisions Solely to Define Relative Rights. The
--------------------------------------------
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders on the one hand and the holders of
Senior Indebtedness on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall (a) impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Notes, the obligation of the Company, which is absolute
and unconditional (and which, subject to the rights under this Article of the
holders of Senior Indebtedness, is intended to rank equally with all other
general obligations of the Company), to pay to the Holders of the Notes the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Notes and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon any default under this Indenture,
subject to the rights, if any, under this Article of the holders of Senior
Indebtedness to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 14.07. Trustee to Effectuate Subordination. Each Holder of a
------------------------------------
Note by his acceptance thereof authorizes and directs the Trustee on his behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee his attorney-in-
fact for any and all such purposes.
SECTION 14.08. No Waiver of Subordination Provisions. No right of
--------------------------------------
any present or future holder of any Senior Indebtedness to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture,
<PAGE>
124
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter or
increase, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 14.09. Notice to Trustee. The Company shall give prompt
------------------
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.01, shall be entitled in all
respects to assume that no such facts exist; provided that nothing in this
--------
Section 14.09 shall impair the subordination provisions of this Article XIV.
Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
representative or agent therefor) to establish that such notice has been given
by a holder of Senior Indebtedness (or a trustee, representative or agent
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or
<PAGE>
125
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 14.10. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent. Upon any payment or distribution of assets or securities of
- ------------------
the Company referred to in this Article, the Trustee, subject to the provisions
of Section 6.01, and the Holders of the Notes shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Notes, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION 14.11. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- -------------
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 14.12. Rights of Trustee as Holder of Senior Indebtedness;
---------------------------------------------------
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
- ---------------------------------
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.07.
<PAGE>
126
SECTION 14.13. Article Applicable to Paying Agents. In case at any
------------------------------------
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Section 14.12
-------- -------
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
SECTION 14.14. Defeasance of this Article Fourteen. The
------------------------------------
subordination of the Notes provided by this Article XIV is expressly made
subject to the provisions for defeasance or covenant defeasance in Articles IV
and XII and, anything herein to the contrary notwithstanding, upon the
effectiveness of any such defeasance or covenant defeasance, the Notes then
outstanding shall thereupon cease to be subordinated pursuant to this Article
XIV.
ARTICLE XV
Jurisdiction and Consent to Service of Process
----------------------------------------------
SECTION 15.01. Jurisdiction and Consent to Service of Process. (a)
-----------------------------------------------
The Company hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to the Notes, this Indenture or for recognition or enforcement of any
judgment, and the Company hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. The Company agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Article XV shall affect any right that any Holder or the Trustee may otherwise
have to bring any action or proceeding relating to the Notes or this Indenture
against the Company or its properties in the courts of any jurisdiction.
(b) The Company hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or
<PAGE>
127
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to the Notes or this Indenture in any New York State or
Federal court. The Company hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) The Company irrevocably consents to service of process in the
manner provided for notices in Section 1.05. Nothing in this Agreement will
affect the right of any Holder or the Trustee to serve process in any other
manner permitted by law.
------------------------
This instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
<PAGE>
128
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
AFC ENTERPRISES, INC.
By:/s/ Samuel Frankel
-------------------------
Name: Samuel Frankel
Title: Executive Vice
President, General
Counsel and
Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:/s/ Christine C. Collins
-----------------------
Name: Christine C. Collins
Title: Assistant Vice
President
<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to (S) 3.06(b)(i), (iii) and (v)
of the Indenture)
United States Trust Company of
New York
[Address]
Re: 10-1/4% Senior Subordinated Notes
due 2007 of AFC Enterprises, Inc.
(the "Notes")
---------------------------------
Reference is made to the Indenture, dated as of May 21, 1997 (the
"Indenture"), from AFC Enterprises, Inc. (the "Company"), to United States Trust
Company of New York, as Trustee. Terms used herein and defined in the Indenture
or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), are used herein as so defined.
This certificate relates to U.S. $______________________ principal amount
of Notes, which are evidenced by the following certificate(s) (the "Specified
Notes"):
CUSIP No(s). _____________________________
CERTIFICATE No(s). _______________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Notes or (ii) it is acting on behalf of all the beneficial owners of
the Specified Notes and is duly authorized by them to do so. Such beneficial
owner or owners are referred to herein collectively as the "Owner". If the
Specified Notes are represented by a Global Note, they are held through the
Depositary or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Notes are not represented by a Global Note, they
are registered in the name of the Undersigned, as or on behalf of the Owner.
A-1
<PAGE>
The Owner has requested that the Specified Notes be transferred to a Person
(the "Transferee") who will take delivery in the form of a Regulation S Note.
In connection with such transfer, the Owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with Rule 904 or Rule 144
under the Securities Act and with all applicable securities laws of the states
of the United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
------------------
accordance with Rule 904:
(A) the owner is not a distributor of the Notes, an affiliate of
the Company or any such distributor or a person acting on behalf of
any of the foregoing;
(B) the offer of the Specified Notes was not made to a person in
the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee
was outside the United States or the Owner and any person acting
on its behalf reasonably believed that the Transferee was outside
the United States, or
(ii) the transaction is being executed in, on or through the
facilities of, the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Notes, and the transfer is to occur during the Restricted
Period, then the requirements of Rule 904(c)(1) have been satisfied;
and
A-2
<PAGE>
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 If the transfer is being effected pursuant to Rule 144:
--------
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Notes were last acquired from the Company
or from an affiliate of the Company, whichever is later, and is being
effected in accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Notes were last acquired
from the Company or from an affiliate of the Company, whichever is
later, and the Owner is not, and during the preceding three months has
not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated: ____________________________________________________________
(Print the name of the Undersigned, as such term is defined
in the second paragraph of this certificate.)
By:
----------------------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of the
Undersigned must be stated.)
A-3
<PAGE>
ANNEX B -- Form of Restricted
Notes Certificate
RESTRICTED NOTES CERTIFICATE
(For transfers pursuant to (S) 3.06(b)(ii), (iii), (iv) and (v) of the
Indenture)
United States Trust Company of New York
[Address]
Re: 10-1/4% Senior Subordinated Notes
due 2007 of AFC Enterprises, Inc.
(the "Notes")
---------------------------------
Reference is made to the Indenture, dated as of May 21, 1997 (the
"Indenture"), from AFC Enterprises, Inc. (the "Company") to United States Trust
Company of New York, as Trustee. Terms used herein and defined in the Indenture
or in Rule 144A or Rule 144 under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), are used herein as so defined.
This certificate relates to U.S. $_________________ principal amount of
Notes, which are evidenced by the following certificates) (the "Specified
Notes"):
CUSIP No(s). ____________________________
ISIN No(s), If any. _____________________
CERTIFICATE No(s). ______________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Notes or (ii) it is acting on behalf of all the beneficial owners of
the Specified Notes and is duly authorized by them to do so. Such beneficial
owner or owners are referred to herein collectively as the "Owner". If the
Specified Notes are represented by a Global Note, they are held through the
Depositary or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Notes are not represented by a Global Notes, they
are registered in the name of the Undersigned, as or on behalf of the Owner.
B-1
<PAGE>
The Owner has requested that the Specified Notes be transferred to a Person
(the "Transferee") who will take delivery in the form of a Restricted Note. In
connection with such transfer, the owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with Rule 144A or Rule
144 under the Securities Act and all applicable securities laws of the states of
the United States and other jurisdictions. Accordingly, the owner hereby
further certifies as:
(1) Rule 144A Transfers. If the transfer is being effected in
--------------------
accordance with Rule 144A:
(A) the Specified Notes are being transferred to a person that
the Owner and any person acting on its behalf reasonably believe is
a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the
Owner may be relying on Rule 144A in connection with the transfer;
and
(2) Rule 144 Transfers. If the transfer is being effected pursuant
------------------
to Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Notes were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner
of sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Notes were last acquired
from the Company or from an affiliate of the Company, whichever is
later, and the Owner is not, and during the preceding three months
has not been, an affiliate of the Company.
B-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated: _________________________________________________
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
-----------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Notes Certificate
[UNRESTRICTED NOTES CERTIFICATE]
(For removal of Securities Act Legends pursuant to (S) 306(c))
United States Trust Company of New York
[Address]
Re: 10-1/4% Senior Subordinated Notes
due 2007 of AFC Enterprises, Inc.
(the "Notes")
---------------------------------
Reference is made to the Indenture, dated as of May 21, 1997 (the
"Indenture"), from AFC Enterprises, Inc. (the "Company"), to United States Trust
Company of New York, as Trustee. Terms used herein and defined in the Indenture
or in Rule 144 under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), are used herein as so defined.
This certificate relates to U.S. $_________________ principal amount of
Notes, which are evidenced by the following certificates) (the "Specified
Notes"):
CUSIP No(s). ___________________________
CERTIFICATE No(s).______________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Notes or (ii) it is acting on behalf of all the beneficial owners of
the Specified Notes and is duly authorized by them to do so. Such beneficial
owner or owners are referred to herein collectively as the "Owner". If the
Specified Notes are represented by a Global Note, they are held through the
Depositary or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Notes are not represented by a Global Note, they are
registered in the name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Notes be exchanged for Notes
bearing no Securities Act Legend pursuant to Section 3.06(c) of the Indenture.
In connection with such exchange, the Owner hereby certifies that the exchange
is occurring after a holding period of at least two
<PAGE>
years (computed in accordance with paragraph (d) of Rule 144) has elapsed since
the Specified Notes were last acquired from the Company or from an affiliate of
the Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company. The Owner also
acknowledges that any future transfers of the Specified Notes must comply with
all applicable securities laws of the states of the United States and other
jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated: __________________________________________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By:
--------------------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS OF THE COMPANY
ARTICLE I Definitions and Other Provisions of General
-------------------------------------------
Application
-----------
SECTION 1.01. Definitions................................ 2
-----------
SECTION 1.02. Compliance Certificates and Opinions....... 30
------------------------------------
SECTION 1.03. Form of Documents Delivered to Trustee..... 31
--------------------------------------
SECTION 1.04. Acts of Holders; Record Dates.............. 32
-----------------------------
SECTION 1.05. Notices, etc., to Trustee and Company...... 35
-------------------------------------
SECTION 1.06. Notice to Holders; Waiver.................. 35
-------------------------
SECTION 1.07. Conflict with Trust Indenture Act.......... 36
---------------------------------
SECTION 1.08. Effect of Headings and Table of Contents... 36
----------------------------------------
SECTION 1.09. Successors and Assigns..................... 37
----------------------
SECTION 1.10. Separability Clause........................ 37
-------------------
SECTION 1.11. Benefits of Indenture...................... 37
---------------------
SECTION 1.12. GOVERNING LAW.............................. 37
-------------
SECTION 1.13. Legal Holidays............................. 37
--------------
SECTION 1.14. No Recourse Against Others................. 37
--------------------------
ARTICLE II Notes Forms
-----------
SECTION 2.01. Forms Generally; Initial Forms of
---------------------------------
Rule 144A and Regulation S Notes........... 37
--------------------------------
SECTION 2.02. Form of Face of Notes...................... 38
---------------------
SECTION 2.03. Form of Reverse of Notes................... 42
------------------------
SECTION 2.04. Form of Trustee's Certificate of
--------------------------------
Authentication............................. 48
--------------
ARTICLE III The Notes
---------
SECTION 3.01. Title and Terms............................ 49
---------------
SECTION 3.02. Denominations.............................. 52
-------------
SECTION 3.03. Execution, Authentication, Delivery
-----------------------------------
and Dating................................. 52
----------
SECTION 3.04. Temporary Notes............................ 53
---------------
SECTION 3.05. Global Notes............................... 54
------------
SECTION 3.06. Registration, Registration of
-----------------------------
Transfer and Exchange Generally;
--------------------------------
Restrictions on Transfer and
----------------------------
Exchange; Securities Act Legends........... 55
--------------------------------
SECTION 3.07. Mutilated, Destroyed, Lost and
------------------------------
Stolen Notes............................... 61
------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.08. Payment of Interest; Interest Rights
------------------------------------
Preserved.................................. 62
---------
SECTION 3.09. Persons Deemed Owners...................... 64
---------------------
SECTION 3.10. Cancelation................................ 64
-----------
SECTION 3.11. Computation of Interest.................... 65
-----------------------
SECTION 3.12. CUSIP Number............................... 65
------------
ARTICLE IV Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture.... 65
---------------------------------------
SECTION 4.02. Application of Trust Money................. 66
--------------------------
ARTICLE V Remedies
--------
SECTION 5.01. Events of Default.......................... 67
-----------------
SECTION 5.02. Acceleration of Maturity; Rescission
------------------------------------
and Annulment.............................. 69
-------------
SECTION 5.03. Collection of Indebtedness and Suits
------------------------------------
for Enforcement by Trustee................. 71
--------------------------
SECTION 5.04. Trustee May File Proofs of Claim........... 71
--------------------------------
SECTION 5.05. Trustee May Enforce Claims Without
----------------------------------
Possession of Notes........................ 72
-------------------
SECTION 5.06. Application of Money Collected............. 72
------------------------------
SECTION 5.07. Limitation on Suits........................ 73
-------------------
SECTION 5.08. Unconditional Right of Holders To
---------------------------------
Receive Principal, Premium and Interest.... 73
---------------------------------------
SECTION 5.09. Restoration of Rights and Remedies......... 74
----------------------------------
SECTION 5.10. Rights and Remedies Cumulative............. 74
------------------------------
SECTION 5.11. Delay or Omission Not Waiver............... 74
----------------------------
SECTION 5.12. Control by Holders......................... 74
------------------
SECTION 5.13. Waiver of Defaults......................... 75
------------------
SECTION 5.14. Undertaking for Costs...................... 75
---------------------
SECTION 5.15. Waiver of Stay, Usury or Extension Laws.... 76
---------------------------------------
ARTICLE VI The Trustee
-----------
SECTION 6.01. Certain Duties and Responsibilities........ 76
-----------------------------------
SECTION 6.02. Notice of Defaults......................... 76
------------------
SECTION 6.03. Certain Rights of Trustee.................. 77
-------------------------
SECTION 6.04. Not Responsible for Recitals or Issuance
----------------------------------------
of Notes................................... 78
--------
SECTION 6.05. May Hold Notes............................. 78
--------------
SECTION 6.06. [Section Intentionally Left Blank]......... 78
----------------------------------
SECTION 6.07. Compensation and Reimbursement............. 78
------------------------------
SECTION 6.08. Disqualification; Conflicting Interests.... 79
---------------------------------------
SECTION 6.09. Corporate Trustee Required; Eligibility.... 79
---------------------------------------
SECTION 6.10. Resignation and Removal; Appointment
------------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
of Successor............................... 80
------------
SECTION 6.11. Acceptance of Appointment by Successor..... 81
--------------------------------------
SECTION 6.12. Merger, Conversion, Consolidation or
------------------------------------
Succession to Business..................... 82
----------------------
SECTION 6.13. Preferential Collection of Claims
---------------------------------
Against Company............................ 82
---------------
SECTION 6.14. Appointment of Authenticating Agent........ 82
-----------------------------------
ARTICLE VII Holders' Lists and Reports by
-----------------------------
Trustee and Company
-------------------
SECTION 7.01. Company to Furnish Trustee Names and
------------------------------------
Addresses of Holders....................... 84
--------------------
SECTION 7.02. Preservation of Information;
----------------------------
Communications to Holders.................. 84
-------------------------
SECTION 7.03. Reports by Trustee......................... 85
------------------
SECTION 7.04. Reports by Company and Subsidiary
---------------------------------
Guarantors................................. 85
----------
SECTION 7.05. Officers' Certificate with Respect to
-------------------------------------
Change in Interest Rates................... 85
------------------------
ARTICLE VIII Merger, Consolidation, etc.
---------------------------
SECTION 8.01. Consolidation, Merger and Sale of Assets... 86
----------------------------------------
SECTION 8.02. Successor Substituted...................... 87
---------------------
ARTICLE IX Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent
---------------------------------------
of Holders................................. 87
----------
SECTION 9.02. Supplemental Indentures with Consent
------------------------------------
of Holders................................. 88
----------
SECTION 9.03. Execution of Supplemental Indentures....... 89
------------------------------------
SECTION 9.04. Effect of Supplemental Indentures.......... 90
---------------------------------
SECTION 9.05. Conformity with Trust Indenture Act........ 90
-----------------------------------
SECTION 9.06. Reference in Notes to Supplemental
----------------------------------
Indentures................................. 90
----------
SECTION 9.07. Execution of Supplemental Indentures
------------------------------------
for Subsidiary Guaranties.................. 90
-------------------------
SECTION 9.08. Revocation and Effect of Consents of
------------------------------------
Holders.................................... 90
-------
ARTICLE X Covenants
---------
SECTION 10.01. Payment of Principal, Premium and
---------------------------------
Interest................................... 91
--------
SECTION 10.02. Maintenance of Office or Agency............ 91
-------------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 10.03. Money for Notes Payments To Be Held
-----------------------------------
in Trust................................... 92
--------
SECTION 10.04. Existence.................................. 93
---------
SECTION 10.05. Maintenance of Properties.................. 93
-------------------------
SECTION 10.06. Payment of Taxes and Other Claims.......... 94
---------------------------------
SECTION 10.07. Maintenance of Insurance................... 94
------------------------
SECTION 10.08. Limitation on Indebtedness and
------------------------------
Subsidiary Preferred Stock................. 94
--------------------------
SECTION 10.09. Limitation on Senior Subordinated
---------------------------------
Indebtedness............................... 97
------------
SECTION 10.10. Limitation on Restricted Payments.......... 97
---------------------------------
SECTION 10.11. Limitations Concerning Distributions
------------------------------------
by Subsidiaries............................ 01
---------------
SECTION 10.12. Limitation on Certain Liens................ 02
---------------------------
SECTION 10.13. Limitation on Transactions with
-------------------------------
Affiliates................................. 02
----------
SECTION 10.14. Limitation on Asset Dispositions........... 04
--------------------------------
SECTION 10.15. Offer to Purchase Upon Change of
--------------------------------
Control.................................... 07
-------
SECTION 10.16. Provision of Financial Information......... 08
----------------------------------
SECTION 10.17. Resale of Acquired Notes................... 09
------------------------
SECTION 10.18. Limitation on Issuances of Guaranties
-------------------------------------
of Indebtedness by Subsidiaries............ 09
-------------------------------
SECTION 10.19. Limitation on Sale of Capital Stock of
--------------------------------------
Subsidiaries............................... 10
------------
SECTION 10.20. Limitation on Dispositions of Assets
------------------------------------
to Subsidiaries............................ 10
---------------
SECTION 10.21. Statement by Officers as to Default;
------------------------------------
Compliance Certificates.................... 10
-----------------------
SECTION 10.22. Waiver of Covenants........................ 11
-------------------
ARTICLE XI Redemption of Notes
-------------------
SECTION 11.01. Redemption at the Election of the
---------------------------------
Company.................................... 111
-------
SECTION 11.02. Applicability of Article................... 112
------------------------
SECTION 11.03. Election to Redeem; Notice to Trustee...... 112
-------------------------------------
SECTION 11.04. Selection by Trustee of Notes to Be
-----------------------------------
Redeemed................................... 112
--------
SECTION 11.05. Notice of Redemption....................... 113
--------------------
SECTION 11.06. Deposit of Redemption Price................ 114
---------------------------
SECTION 11.07. Notes Payable on Redemption Date........... 114
--------------------------------
SECTION 11.08. Notes Redeemed in Part..................... 115
----------------------
ARTICLE XII Defeasance and Covenant Defeasance
----------------------------------
SECTION 12.01. Company's Option to Effect Defeasance
-------------------------------------
or Covenant Defeasance..................... 115
----------------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 12.02. Defeasance and Discharge................... 115
------------------------
SECTION 12.03. Covenant Defeasance........................ 116
-------------------
SECTION 12.04. Conditions to Defeasance or Covenant
------------------------------------
Defeasance................................. 116
----------
SECTION 12.05. Deposited U.S. Government Obligations
-------------------------------------
to be Held in Trust; Other Miscellaneous
----------------------------------------
Provisions................................. 118
----------
SECTION 12.06. Reinstatement.............................. 119
-------------
ARTICLE XIII
[Intentionally Left Blank]
ARTICLE XIV Subordination of Notes
----------------------
SECTION 14.01. Notes Subordinate to Senior
---------------------------
Indebtedness............................... 120
------------
SECTION 14.02. Payment Over of Proceeds Upon
-----------------------------
Dissolution, Etc........................... 120
----------------
SECTION 14.03. No Payment When Senior Indebtedness in
--------------------------------------
Default.................................... 121
-------
SECTION 14.04. Certain Payments Permitted................. 122
--------------------------
SECTION 14.05. Subrogation to Rights of Holders of
-----------------------------------
Senior Indebtedness........................ 122
-------------------
SECTION 14.06. Provisions Solely to Define Relative
------------------------------------
Rights..................................... 123
------
SECTION 14.07. Trustee to Effectuate Subordination........ 123
-----------------------------------
SECTION 14.08. No Waiver of Subordination Provisions...... 123
-------------------------------------
SECTION 14.09. Notice to Trustee.......................... 124
-----------------
SECTION 14.10. Reliance on Judicial Order or
-----------------------------
Certificate of Liquidating Agent........... 125
--------------------------------
SECTION 14.11. Trustee Not Fiduciary for Holders of
------------------------------------
Senior Indebtedness........................ 125
-------------------
SECTION 14.12. Rights of Trustee as Holder of Senior
-------------------------------------
Indebtedness; Preservation of Trustee's
---------------------------------------
Rights..................................... 125
------
SECTION 14.13. Article Applicable to Paying Agents........ 126
-----------------------------------
SECTION 14.14. Defeasance of this Article Fourteen........ 126
-----------------------------------
ARTICLE XV Jurisdiction and Consent to
---------------------------
Service of Process
------------------
SECTION 15.01. Jurisdiction and Consent to Service
-----------------------------------
of Process................................. 126
----------
</TABLE>
ANNEX A -- Form of Regulation S Certificate
v
<PAGE>
Page
----
ANNEX B -- Form of Restricted Notes Certificate
ANNEX C -- Form of Unrestricted Notes Certificate
ANNEX D -- Form of Supplemental Indenture For Subsidiary
Guaranties
vi
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
AFC ENTERPRISES, INC.
By: /s/ Samuel Frankel
---------------------------
Name: Samuel Frankel
Title: Executive Vice President,
General Counsel and Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ Christine C. Collins
----------------------------
Name: Christine C. Collins
Title: Assistant Vice President
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
AFC ENTERPRISES, INC.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2007
Purchase Agreement
- ------------------
May 16, 1997
Goldman, Sachs & Co.
CIBC Wood Gundy Securities Corp.
Donaldson, Lufkin & Jenrette Securities Corporation
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
AFC Enterprises, Inc., a Minnesota corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$175,000,000 principal amount of the Notes specified above (the "Securities").
1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:
(a) A preliminary offering circular, dated April 30, 1997 (the
"Preliminary Offering Circular"), and an offering circular, dated May 16,
1997 (the "Offering Circular"), in each case including the international
supplement thereto, if any, has been prepared in connection with the
offering of the Securities. Any reference to the Preliminary Offering
Circular or the Offering Circular shall be deemed to refer to and include
any Additional Issuer Information (as defined in Section 5(f)) furnished by
the Company prior to the completion of the distribution of the Securities.
The Preliminary Offering Circular or the Offering Circular and any
amendments or supplements thereto did not and will not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Purchasers through
Goldman, Sachs
<PAGE>
2
& Co. expressly for use therein;
(b) AFC Properties, Inc. ("AFC Properties") is the sole subsidiary of the
Company;
(c) Neither the Company nor AFC Properties has sustained since the date
of the latest audited financial statements included in the Offering
Circular any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Offering Circular; and,
since the respective dates as of which information is given in the Offering
Circular, there has not been any change in the capital stock or long-term
debt of the Company or AFC Properties or any material adverse change, or
any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and AFC
Properties, otherwise than as set forth or contemplated in the Offering
Circular;
(d) The Company and AFC Properties have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property
by the Company and AFC Properties; and any real property and buildings held
under lease by the Company and AFC Properties are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and AFC Properties;
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Minnesota, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Offering Circular, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and AFC
Properties has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Georgia;
(f) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and non-assessable; and all of the issued shares of capital stock of AFC
Properties have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims, except for
equities arising under or pursuant to the Credit Agreement (as defined
herein);
(g) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits
<PAGE>
3
provided by the indenture to be dated as of May 21, 1997 (the "Indenture"),
between the Company and U.S. Trust Company of New York, as Trustee (the
"Trustee"), under which they are to be issued, which will be substantially
in the form previously delivered to you; the Indenture has been duly
authorized and, when executed and delivered by the Company and the Trustee,
the Indenture will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the Securities and the Indenture will conform to the
descriptions thereof in the Offering Circular and will be in substantially
the form previously delivered to you;
(h) None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(i) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities;
(j) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities and this Agreement and
the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or AFC Properties is a party or by which the Company or AFC
Properties is bound or to which any of the property or assets of the
Company or AFC Properties is subject, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or AFC
Properties or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture except for the filing of a
registration statement by the Company with the Securities and Exchange
Commission (the "Commission") pursuant to the United States Securities Act
of 1933, as amended (the "Act"), pursuant to Section 5(k) hereof and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Purchasers;
(k) Neither the Company nor AFC Properties is in violation of its
Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, or any other
material lease or other agreement or instrument to which it is a party
<PAGE>
4
or by which it or any of its properties may be bound;
(l) The statements set forth in the Offering Circular under the caption
"Description
of Notes" insofar as they purport to constitute a summary of the terms of
the Securities, under "Business - Trademarks and Licenses - Formula
Agreement" insofar as they purport to be a summary of the terms of the
Formula Agreement (as defined herein), under "Business - Litigation"
insofar as they purport to describe the legal proceedings discussed
therein, and under the captions "Certain Federal Income Tax Consequences"
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate and complete;
(m) Other than as set forth in the Offering Circular, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(n) The Company is not, and after giving effect to the offering and sale
of the Securities, will not be an "investment company", or an entity
"controlled" by an "investment company", as such terms are defined in the
United States Investment Company Act of 1940, as amended (the "Investment
Company Act");
(o) Assuming compliance by the Purchasers with the obligations set forth
in Section 3(c) hereof, neither the Company, nor any person acting on its
or their behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under
the Act or, with respect to Securities sold outside the United States to
non-U.S. persons (as defined in Rule 902 under the Act), by means of any
directed selling efforts within the meaning of Rule 902 under the
Securities Act and the Company, any affiliate of the Company and any person
acting on its or their behalf has complied with and will implement the
"offering restriction" within the meaning of such Rule 902;
(p) Within the preceding six months, neither the Company nor any other
person acting on behalf of the Company has offered or sold to any person
any Securities, or any securities of the same or a similar class as the
Securities, other that Securities offered or sold to the Purchasers
hereunder. The Company will take reasonable precautions designed to insure
that any offer or sale, direct or indirect, in the United States or to any
U.S. person (as defined in Rule 902 under the Act) of any Securities or any
substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Securities has been
completed (as notified to the Company by Goldman, Sachs & Co.), is made
under restrictions and other circumstances reasonably designed not to
affect the status of the offer and sale of the Securities in the United
States and to U.S. persons contemplated by this Agreement as transactions
exempt from the registration provisions of
<PAGE>
5
the Securities Act;
(q) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes; and
(r) Arthur Andersen LLP who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder.
(s) The exchange and registration rights agreement to be dated as of May
21, 1997 (the "Registration Rights Agreement"), between the Company and the
Purchasers, has been duly authorized by the Company, when executed and
delivered by the Company (assuming the due authorization, execution and
delivery by the Purchasers), will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally, and to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law) and
the discretion of the court before which any proceeding therefor may be
brought and (ii) as any rights to indemnity or contribution thereunder may
be limited by applicable securities laws and public policy considerations.
(t) The credit agreement to be dated as of May 21, 1997 (the "Credit
Agreement"), between the Company and Goldman Sachs Credit Partners L.P., as
arranging and syndication agent, Canadian Imperial Bank of Commerce, as
administrative agent and certain other financial institutions identified
therein, has been duly authorized by the Company and, when executed and
delivered by the Company (assuming due authorization, execution and
delivery by the other parties thereto), will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms except (i) that the enforcement thereof may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and the discretion of the court before which any proceeding
therefor may be brought and (ii) as any rights to indemnity or contribution
thereunder may be limited by applicable securities laws and public policy
considerations.
(u) Each of the Information Technology Agreement, dated August 22, 1994
(the "IGS Agreement"), between IBM Global Services (formerly known as
Integrated Systems Solutions Corporation) and the Company, the Agreement,
dated July 2, 1979 (the "Formula Agreement"), as amended, among Alvin
Copeland, et al., New Orleans Spice Company and the Company (as successor
to Biscuit Investments, Inc.) and the Company's chicken supply agreements
existing on the date hereof have been duly authorized, executed and
delivered by the Company and constitute (assuming due authorization,
execution and delivery by the other parties thereto) valid and legally
binding obligations of the Company.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and
<PAGE>
6
sell to each of the Purchasers, and each of the Purchasers agrees, severally and
not jointly, to purchase from the Company, at a purchase price of 97.0% of the
principal amount thereof, plus accrued interest, if any, from May 21, 1997 to
the Time of Delivery hereunder, the principal amount of Securities set forth
opposite the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company that:
(a) It will offer and sell the Securities only to (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A or, (ii) upon the terms and conditions set forth in Annex I to this
Agreement; and
(b) It is a QIB; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through the facilities of The Depository Trust Company
("DTC"), for the account of such Purchaser, against payment by or on behalf of
such
Purchaser of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House (next
day) funds. The Company will cause the certificates representing the Securities
to be made available for checking and packaging at least twenty-four hours prior
to the Time of Delivery (as defined below) at the office of DTC (the "Designated
Office"). The Securities to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in federal (same day) funds, by causing DTC to credit the Securities to the
account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be 9:30 a.m.,
New York City time, on May 21, 1997 or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and date are
herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross-receipt for
the Securities and any additional documents requested by the Purchasers pursuant
to Section 7(j) hereof, will be delivered at such
<PAGE>
7
time and date at the offices of O'Melveny & Myers LLP, 153 East 53rd Street, New
York, NY 10022, (the "Closing Location"), and the Securities will be delivered
at the Designated Office, all at the Time of Delivery. A meeting will be held
at the Closing Location at 12:00 p.m., New York City time, on the New York
Business Day next preceding the Time of Delivery, at which meeting the final
drafts of the documents to be delivered pursuant to the preceding sentence will
be available for review by the parties hereto. For the purposes of this Section
4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make no
amendment or any supplement to the Offering Circular which shall be disapproved
by you promptly after reasonable notice thereof; and to furnish you with copies
thereof;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Purchasers with 4 copies of the Offering Circular and each
amendment or supplement thereto with the independent accountants' report(s) in
the Offering Circular, and any amendment or supplement containing amendments to
the financial statements covered by such report(s), signed by the accountants,
and additional copies thereof in such quantities as you may from time to time
reasonably request, and if, at any time prior to the expiration of nine months
after the date of the Offering Circular, any event shall have occurred as a
result of which the Offering Circular as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Offering Circular is
delivered, not misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Offering Circular,
to notify you and upon your request to prepare and furnish without charge to
each Purchaser and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Offering Circular or a supplement
to the Offering Circular which will correct such statement or omission or effect
such compliance;
(d) During the period beginning from the date hereof and continuing until the
date six months after the Time of Delivery, not to offer, sell contract to sell
or otherwise dispose of, except as provided hereunder any securities of the
Company that are substantially similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of three years
after the Time of Delivery, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment Company Act;
<PAGE>
8
(f) At any time when the Company is not subject to Section 13 or 15(d) of the
Exchange Act, for the benefit of holders from time to time of Securities, to
furnish at its expense, upon request, to holders of Securities and prospective
purchasers of securities information (the "Additional Issuer Information")
satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act;
(g) If requested by you, to use its best efforts to cause such Securities to
be eligible for the PORTAL trading system of the National Association of
Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(i) During a period of five years from the date of the Offering Circular, to
furnish to you copies of all reports or other communications (financial or
other) furnished to stockholders of the Company, and to deliver to you (i) as
soon as they are available, copies of any reports and financial statements
furnished to or filed with the Commission or any securities exchange on which
the Securities or any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During the period of three years after the Time of Delivery, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144
under the Securities Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any of them;
(k) The Company shall file and use its best efforts to cause to be declared or
become effective under the Securities Act, on or prior to 60 days after the Time
of Delivery, a registration statement on Form S-4 providing for the registration
of (i) another series of debt securities of the Company, with terms identical in
all material respects to the Securities (the "Exchange Securities"), and the
exchange of the Securities for the Exchange Securities, all in a manner which
will permit persons who acquire the Exchange Securities to resell the Exchange
Securities pursuant to Section 4(1) of the Securities Act; and
(l) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Offering Circular
under the caption "Use of Proceeds".
6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
issue of the Securities and all other expenses in connection with the
preparation, printing and filing of the Preliminary Offering Circular and the
<PAGE>
9
Offering Circular and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Purchasers and dealers; (ii) the cost of
printing or producing any Agreement among Purchasers, this Agreement, the
Indenture, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
reasonable fees and disbursements of counsel for the Purchasers in connection
with such qualification and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Securities; (v) the cost of preparing the Securities; (vi) the fees and expenses
of the Trustee and any agent of the Trustee and the fees and disbursements of
counsel for the Trustee in connection with the Indenture and the Securities;
(vii) any cost incurred in connection with the designation of the Securities for
trading in PORTAL and all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) Cravath, Swaine & Moore, counsel for the Purchasers, shall have furnished
to you such opinion or opinions, the form and substance satisfactory to you,
dated the Time of Delivery, with respect to such matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(b) Cohen Pollock Merlin Axelrod & Tanenbaum, counsel for the Company, shall
have furnished to you their written opinion, the form of which is attached as
Annex III(b) hereto, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly qualified for the transaction of business
and is in good standing under the laws of each jurisdiction set forth in
such opinion; and
(ii) AFC Properties has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Georgia.
In addition, such counsel shall state that they have participated in
conferences with officers and representatives of the Company, representatives of
the independent public accountants for the Company, independent consultants,
representatives of the Purchasers and counsel for the Purchasers at which
conferences inquiries of such officers, representatives and accountants were
made and, on the basis of the foregoing (without, except solely as stated in
such counsel's opinion, taking any action to verify independently the statements
made in the Offering Circular and without, except solely as stated in such
counsel's opinion, assuming any responsibility for the accuracy, completeness or
fairness of such statements), such counsel shall state that
<PAGE>
10
nothing has come to such counsel's attention that causes them to believe that
the Offering Circular and any further amendments or supplements thereto made by
the Company prior to the Time of Delivery (other than the financial statements
and other financial data (whether historical or prospective) contained in the
Offering Circular, as to which such counsel need express no opinion) contained
as of its date or contains as of the Time of Delivery an untrue statement of a
material fact or omitted or omits, as the case may be, to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Riordan & McKinzie, special counsel for the Company, shall have furnished
to you their written opinion, the form of which is attached as Annex III(c)
hereto, dated the Time of Delivery, in form and substance satisfactory to you,
to the effect that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Minnesota, with
power and authority to own its properties and conduct its business as
described in the Offering Circular;
(ii) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and non-assessable;
(iii) This Agreement has been duly authorized, executed and delivered by
the Company;
(iv) The Securities have been duly authorized, executed, authenticated,
issued and delivered and constitute valid and legally binding obligations
of the Company entitled to the benefits provided by the Indenture subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles; and the Securities and the Indenture conform to
the descriptions thereof in the Offering Circular; the Securities have been
duly authorized by the Company; the temporary global Security has been duly
executed, authenticated, issued and delivered and constitutes a valid and
legally binding obligation of the Company entitled to the benefits provided
by the Indenture subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; the
Securities in definitive form, when executed, authenticated, issued and
delivered in exchange for the temporary global Security in accordance with
the terms of the Indenture, will have been duly executed, authenticated,
issued and delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
Indenture subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
temporary global Security and the Indenture conform, and the Securities
will conform, to the descriptions thereof in the Offering Circular;
(v) Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and constitutes a
valid and legally binding instrument of the Company, enforceable against
the Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other
<PAGE>
11
laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(vi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by
the Company of the transactions contemplated by this Agreement or the
Indenture, except such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities by
the Purchasers;
(vii) The statements set forth in the Offering Circular under the
caption "Description of Notes" insofar as they purport to constitute a
summary of the terms of the Securities and under the caption "Certain
Federal Income Taxation Consequences", insofar as they purport to describe
the provisions of the laws and documents referred to therein, are accurate
and complete in all material respects;
(viii) No registration of the Securities under the Act, and no
qualification of an indenture under the United States Trust Indenture Act
of 1939 with respect thereto, is required for the offer, sale and initial
resale of the Securities by the Purchasers in the manner contemplated by
this Agreement; and
(ix) The Company is not an "investment company" or an entity "controlled"
by an "investment company", as such terms are defined in the Investment
Company Act.
In addition, such counsel shall state that they have participated in
conferences with officers and representatives of the Company, representatives of
the independent public accountants for the Company, independent consultants,
representatives of the Purchasers and counsel for the Purchasers at which
conferences inquiries of such officers, representatives and accountants were
made and, on the basis of the foregoing (without, except solely as stated in
such counsel's opinion, taking any action to verify independently the statements
made in the Offering Circular and without, except solely as stated in such
counsel's opinion, assuming any responsibility for the accuracy, completeness or
fairness of such statements), such counsel shall state that nothing has come to
such counsel's attention that causes them to believe that the Offering Circular
and any further amendments or supplements thereto made by the Company prior to
the Time of Delivery (other than the financial statements and other financial
data (whether historical or prospective) contained in the Offering Circular, as
to which such counsel need express no opinion) contained as of its date or
contains as of the Time of Delivery an untrue statement of a material fact or
omitted or omits, as the case may be, to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Samuel N. Frankel, General Counsel of the Company, shall have furnished to
you his written opinion, the form of which is attached as Annex III(d) hereto,
dated the Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly qualified for the transaction of business
and is in good standing under the laws of each U.S. jurisdiction in which
it owns or leases properties or conducts any business so as to require such
qualification, except where the failure to so
<PAGE>
12
qualify would not result in a material adverse effect on the Company;
(ii) All of the issued shares of capital stock of AFC Properties have
been duly and validly authorized and issued, are fully paid and non-
assessable, and are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims, except for equities
or claims arising under or pursuant to the Credit Facility;
(iii) To the best of such counsel's knowledge, other than as set forth
in the Offering Circular, there are no legal or governmental proceedings
pending to which the Company or AFC Properties is a party or of which any
property of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or AFC Properties, would individually
or in the aggregate have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of
operations of the Company and AFC Properties; and, to the best of such
counsel's knowledge, no such proceedings are threatened by governmental
authorities or threatened by others;
(iv) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation of
the transactions herein and therein contemplated will not (a) conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or AFC
Properties is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or AFC
Properties is subject, (b) result in any violation of any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or AFC Properties or any of their
properties or (c) result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company, except in the case
of (a) or (b) above, such breaches, violations or defaults that would not
have a material adverse effect on the Company and AFC Properties;
(v) Neither the Company nor AFC Properties is (a) in violation of its
Certificate of Incorporation or By-laws or (b) in default in the
performance or observance of any obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound, except in the case of (b) above, such
defaults that would not have a material adverse effect on the Company and
AFC Properties;
(vi) Except as set forth in the Offering Circular, the IGS Agreement has
been duly executed and delivered and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms subject to applicable bankruptcy, insolvency and other laws
affecting the enforcement of creditors' rights generally, to general
equitable principles, to the fact that the availability of equitable
remedies is in the discretion of a court of competent jurisdiction and to
the fact that such counsel expresses no opinion as to the enforceability,
in any particular circumstance, of any provision of such agreement which
provides for the severability of illegal or unenforceable provisions; and
<PAGE>
13
(vii) The statements set forth in the Offering Circular under the
caption "Business-Trademarks and Licenses- Formula Agreement" insofar as
they purport to be a summary of the terms of the Formula Agreement and
under the caption "Business- Litigation" insofar as they purport to
describe of the legal proceedings discussed therein, all accurate and
complete in all material respects.
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Arthur Andersen LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto;
(f) (i) Neither the Company nor AFC Properties shall have sustained since the
date of the latest audited financial statements included in the Offering
Circular any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Offering Circular, and (ii) since the respective
dates as of which information is given in the Offering Circular there shall not
have been any change in the capital stock or long-term debt of the Company or
AFC Properties or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in Clause (i) or (ii),
is in the judgment of the Purchasers so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in this Agreement and in
the Offering Circular;
(g) On or after the date hereof (i) no downgrading shall have occurred in the
rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a general moratorium on
commercial banking activities declared by either Federal or New York or State
authorities; or (iii) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iii) in the
judgment of the Purchasers makes it impracticable or inadvisable to proceed with
the offering or the delivery of the Securities on the terms and in the manner
contemplated in the Offering Circular; or (iv) the occurrence of any material
adverse change in the existing, financial, political or economic conditions in
the United States or elsewhere which, in the judgment of the Representatives,
would materially and adversely affect the financial markets or the markets for
the Securities and other debt securities;
(i) The Securities have been designated for trading on PORTAL;
(j) The Company shall have furnished or caused to be furnished to you at the
Time of Delivery certificates of officers of the Company satisfactory to you as
to the accuracy of the representations
<PAGE>
14
and warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth in
subsection (f) of this Section and as to such other matters as you may
reasonably request.
(k) The Company and the lenders shall have entered into the Credit Agreement,
which shall be in full force and effect and the Company shall have a minimum of
$50 million of borrowing capacity thereunder.
8. (a) The Company will indemnify and hold harmless each Purchaser against
any losses, claims, damages or liabilities, joint or several, to which such
Purchaser may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Circular or the Offering
Circular, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to make the statements therein not misleading, and will reimburse each Purchaser
for any legal or other expenses reasonably incurred by such Purchaser in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Offering Circular or the
Offering Circular or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Offering Circular or the Offering Circular
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Purchaser through Goldman,
Sachs & Co. expressly for use therein; and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled
<PAGE>
15
to participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. The indemnifying party shall not be required to
indemnify any indemnified party for any amount paid or payable by such
indemnified party in the settlement of any action, proceeding or investigation
without the written consent of the indemnifying party, which consent shall not
be unreasonably withheld. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchasers on the other from the offering
of the Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Purchasers on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Purchasers, in
each case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Purchasers on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
<PAGE>
16
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection
(d), no Purchaser shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities purchased by it and
resold to investors were offered to investors exceeds the amount of any damages
which such Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Purchaser
within the meaning of the Act; and the obligations of the Purchasers under this
Section 8 shall be in addition to any liability which the respective Purchasers
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by
any Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the
<PAGE>
17
aggregate principal amount of Securities which remains unpurchased exceeds one-
eleventh of the aggregate principal amount of all the Securities, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Purchasers to purchase Securities of a defaulting
Purchaser or Purchasers, then this Agreement shall thereupon terminate, without
liability on the part of any non-defaulting Purchaser or the Company, except for
the expenses to be borne by the Company and the Purchasers as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Purchaser from liability
for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Purchasers, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Purchasers through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Purchasers in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall then be
under no further liability to any Purchaser except as provided in Sections 6 and
8 hereof.
12. In all dealings hereunder, Goldman, Sachs & Co. shall act on behalf of
each of the Purchasers, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Purchaser made
or given by you jointly or by Goldman, Sachs & Co. on behalf of the Purchasers.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Offering Circular, Attention:
Secretary; provided, however, that any notice to a Purchaser pursuant to Section
8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission
to such Purchaser at its address set forth in its Purchasers' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit of,
the Purchasers, the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person who controls
the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities
<PAGE>
18
from any Purchaser shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
<PAGE>
19
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
AFC Enterprises, Inc.
By: /s/ John M. Roth
-------------------------------------
Title: Director
Accepted as of the date hereof:
Goldman, Sachs & Co.
CIBC Wood Gundy Securities Corp.
Donaldson, Lufkin & Jenrette Securities Corporation
By: /s/ Goldman Sachs & Co.
Name: Christopher Turner
Title: Vice President
<PAGE>
20
<TABLE>
<CAPTION>
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- ------------
<S> <C>
Goldman, Sachs & Co. .................................... $ 87,500,000
CIBC Wood Gundy Securities Corp.......................... 43,750,000
Donaldson, Lufkin and Jenrette Securities Corporation.... 43,750,000
------------
Total......................................... $175,000,000
============
</TABLE>
<PAGE>
1
ANNEX I
(1) The Securities have not been and will not be registered under the Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. Each Purchaser represents that it has offered and sold the Securities, and
will offer and sell the Securities (i) as part of their distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Time of Delivery, only in accordance with Rule 903 of
Regulation S or, Rule 144A or pursuant to Paragraph 2 of this Annex I under the
Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any directed
selling efforts with respect to the Securities, and it and they have complied
and will comply with the offering restrictions requirement of Regulation S.
Each Purchaser agrees that, at or prior to confirmation of sale of Securities
(other than a sale pursuant to Rule 144A) or pursuant to Paragraph 2 of this
Annex I, it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered and sold
within the United States or to, or for the account or benefit of, U.S. persons
(i) as part of their distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering and the closing date,
except in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the meaning given
to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities, except with its affiliates or with the prior written consent of
the Company.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their business or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995, (b) it has
complied, and will comply, with all applicable provisions of the Financial
<PAGE>
2
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action in required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
<PAGE>
ANNEX II
Pursuant to Section 7(e) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries under rule 101 of the American Institute
of Certified Public Accountants' Code of Professional Conduct, and its
interpretations and rulings;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the Offering
Circular comply as to form in all material respects with the applicable
requirements of the Exchange Act and the related published rules and
regulations;
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Offering
Circular agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such
five fiscal years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Offering Circular, inquiries
of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures
as may be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Offering Circular are not in conformity with generally accepted
accounting principles applied on the basis substantially consistent with
the basis for the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Offering Circular;
(B) any other unaudited income statement data and balance sheet items
included in the Offering Circular do not agree with the corresponding
items in the unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and items were
not determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Offering Circular;
(C) the unaudited financial statements which were not included in the
Offering Circular but from which were derived any unaudited condensed
financial statements
<PAGE>
2
referred to in Clause (A) and any unaudited income statement
data and balance sheet items included in the Offering Circular and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial
statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Offering Circular do not comply as to form in
all material respects with the applicable accounting requirements or the
pro forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in
the Offering Circular) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the
latest balance sheet included in the Offering Circular except in each
case for changes, increases or decreases which the Offering Circular
discloses have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest financial statements
included in the Offering Circular to the specified date referred to in
Clause (E) there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as compared
with the comparable period of the preceding year and with any other
period of corresponding length specified by the Representatives, except
in each case for decreases or increases which the Offering Circular
discloses have occurred or may occur or which are described in such
letter; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures, inspection
of minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out certain specified procedures,
not constituting an audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Offering Circular, and have compared certain of such
amounts, percentages and financial information with the accounting
records of the Company and its subsidiaries and have found them to be in
agreement.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
AFC Enterprises, Inc.
By: /s/ John M. Roth
-------------------------------
Title: Director
Accepted as of the date hereof:
Goldman, Sachs & Co.
CIBC Wood Gundy Securities Corp.
Donaldson, Lufkin & Jenrette Securities Corporation
By: /s/ Goldman Sachs & Co.
-----------------------
Name: Christopher Turner
Title: Vice President
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of May 21, 1997, among
AFC Enterprises, Inc., a Minnesota corporation (the "Company"), Goldman, Sachs &
Co., CIBC Wood Gundy Securities Corp., and Donaldson, Lufkin & Jenrette
Securities Corporation (together, the "Purchasers"), identified on Schedule I to
the Purchase Agreement (as defined herein), of the 10 1/4% Senior Subordinated
Notes due 2007 of the Company.
The Company proposes to issue and sell to the Purchasers upon the terms set
forth in the Purchase Agreement the Securities (as defined herein). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to the obligations of the Purchasers thereunder, the
Company agrees with the Purchasers for the benefit of holders (as defined
herein) from time to time of the Registrable Securities (as defined herein) as
follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the following
terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue on the
Securities under the terms thereof and the Indenture, without giving effect to
the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered with
the Commission under the Exchange Act.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Effective Time," in the case of (i) an Exchange Registration, shall mean
the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section 2(a)
hereof.
<PAGE>
"Exchange Registration" shall have the meaning assigned thereto in Section
3(d) hereof.
"Exchange Registration Statement" shall have the meaning assigned thereto
in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in Section
2(a) hereof.
The term "holder" shall mean each of the Purchasers and other persons who
acquire Registrable Securities from time to time (including any successors or
assigns), in each case for so long as such person owns any Registrable
Securities.
"Indenture" shall mean the Indenture, dated as of May 21, 1997, between the
Company and United States Trust Company of New York, as Trustee, as the same
shall be amended from time to time.
"Issue Date" shall mean May 21, 1997.
The term "person" shall mean a corporation, association, partnership,
organization, business, limited liability company, individual, government or
political subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of May 16,
1997, between the Purchasers and the Company relating to the Securities.
"Registrable Securities" shall mean the Securities; provided, however, that
a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) (provided that any Exchange Security received by a broker-dealer
in an Exchange Offer in exchange for a Registrable Security that was not
acquired by the broker-dealer directly from the Company will also be a
Registrable Security through and including the earlier of the 90th day after
the Exchange Offer is completed or such time as such broker-dealer no longer
owns such Security); (ii) in the circumstances contemplated by Section 2(b)
hereof, a Shelf Registration Statement registering such Security under the
Securities Act has been declared or becomes effective and such Security has
been sold or otherwise transferred by the holder thereof pursuant to and in a
manner contemplated by such effective Shelf Registration Statement; (iii) such
Security is sold pursuant to Rule 144 (or any successor provision) under
circumstances in which any legend borne by such Security relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the
-2-
<PAGE>
Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k)
of Rule 144; or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in Section
2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in Section
4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to participate
in the Exchange Offer for the purpose of a distribution (within the meaning of
the Securities Act) of the Exchange Securities and (iv) a holder that is a
broker-dealer, but only with respect to Exchange Securities received by such
broker-dealer pursuant to an Exchange Offer in exchange for Registrable
Securities acquired by the broker-dealer directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule
promulgated under the Securities Act (or any successor provision), as the same
shall be amended from time to time.
"Securities" shall mean the 10 1/4% Senior Subordinated Notes due 2007 of
the Company to be issued and sold to the Purchasers, and securities issued in
exchange therefor or in lieu thereof pursuant to the Indenture.
"Securities Act" shall mean the Securities Act of 1933, or any successor
thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in Section
2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section 2(c)
hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
-3-
<PAGE>
Unless the context otherwise requires, any reference herein to a "Section" or
"clause" refers to a Section or clause, as the case may be, of this Exchange and
Registration Rights Agreement, and the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Exchange and Registration Rights
Agreement as a whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
under the Securities Act, as soon as practicable, but no later than 60 days
after the Issue Date, a registration statement relating to an offer to exchange
(such registration statement, the "Exchange Registration Statement", and such
offer, the "Exchange Offer") any and all of the Securities for a like aggregate
principal amount of debt securities issued by the Company, which debt securities
are substantially identical to the Securities (and are entitled to the benefits
of a trust indenture which is substantially identical to the Indenture or is the
Indenture and which has been qualified under the Trust Indenture Act), except
that they have been registered pursuant to an effective registration statement
under the Securities Act and do not contain registration rights, transfer
restrictions and provisions for the additional interest contemplated in Section
2(c) below (such new debt securities hereinafter called "Exchange Securities").
The Company agrees to use its best efforts to cause the Exchange Registration
Statement to become effective under the Securities Act as soon as practicable,
but no later than 180 days after the Issue Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form required by the
Commission and will comply with all applicable tender offer rules and
regulations under the Exchange Act and all applicable federal and state
securities laws. The Company further agrees to use its best efforts to commence
and complete the Exchange Offer promptly, but no later than 45 days after such
Registration Statement has become effective, hold the Exchange Offer open for at
least 30 days and issue Exchange Securities for all Registrable Securities that
have been properly tendered and not withdrawn on or prior to the expiration of
the Exchange Offer. The Exchange Offer will be deemed to have been "completed"
only if the debt securities received by holders other than Restricted Holders in
the Exchange Offer for Registrable Securities are, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act, and without material restrictions under the blue sky or
securities laws of a substantial majority of the States of the United States of
America. The Exchange Offer shall be deemed to have been completed upon the
earlier to occur of (i) the Company having exchanged the Exchange Securities for
all outstanding Registrable Securities pursuant to the Exchange Offer and (ii)
the Company having exchanged, pursuant to the Exchange Offer, Exchange
Securities for all Registrable Securities that have been properly tendered and
not withdrawn before the expiration of the Exchange Offer, which shall be on a
date that is at least 30 days following the com mencement of the Exchange Offer.
The Company agrees (x) to include in the Exchange Registration Statement a
prospectus for use in connection with any resales of Exchange
-4-
<PAGE>
Securities by a broker-dealer, other than resales of Exchange Securities
received by a broker-dealer pursuant to an Exchange Offer in exchange for
Registrable Securities acquired by the broker-dealer directly from the Company,
and (y) to keep such Exchange Registration Statement effective for a period (the
"Resale Period") beginning when Exchange Securities are first issued in the
Exchange Offer and ending upon the earlier of (x) the expiration of the 90th day
after the Exchange Offer has been completed or (y) such time as such broker-
dealers no longer own any Registrable Securities. With respect to such Exchange
Registration Statement, each broker-dealer that holds Exchange Securities
received in an Exchange Offer in exchange for Registerable Securities not
acquired by it directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e)
hereof.
(b) If prior to the time the Exchange Offer is completed existing Commission
interpretations are changed such that the Securities received by holders other
than Restricted Holders in the Exchange Offer for Registrable Securities are not
or would not be, upon receipt, transferable by each such holder without need for
further compliance with Section 5 of the Securities Act, in lieu of conducting
the Exchange Offer contemplated by Section 2(a), the Company shall use its best
efforts to file under the Securities Act as soon as practicable, but no later
than the later of (x) 30 days after the time such obligation to file arises and
(y) 60 days after the Issue Date, a "shelf" registration statement providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). In addition, in the event that the Purchasers shall not have resold
all of the Securities initially purchased by them from the Company pursuant to
the Purchase Agreement, prior to the consummation of the Exchange Offer, the
Company shall file under the Securities Act as soon as practicable a Shelf
Registration Statement. The Company agrees to use its best efforts to cause the
Shelf Registration Statement to become or be declared effective no later than
120 days after such Shelf Registration Statement is filed and to keep such Shelf
Registration Statement continuously effective for a period ending on the earlier
of (x) the second anniversary of the Effective Time or (y) such time as there
are no longer any Registrable Securities outstanding. The Company further agrees
to supplement or make amendments to the Shelf Registration Statement, as and
when required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or rules and regulations promulgated thereunder for a
shelf registration, and the Company agrees to furnish to the holders of the
Registrable Securities copies of any such supplement or amendment to such
registration statement prior to its being used or promptly following its filing
with the Commission.
(c) In the event that (i) the Company has not filed the Exchange Registration
Statement or Shelf Registration Statement on or before the date on which such
-5-
<PAGE>
registration statement is required to be filed pursuant to Section 2(a) or 2(b),
respectively, or (ii) such Exchange Registration Statement or Shelf Registration
Statement has not become effective or been declared effective by the Commission
on or before the date on which such registration statement is required to become
or be declared effective pursuant to Section 2(a) or 2(b), respectively, or
(iii) the Exchange Offer has not been completed within 45 days after the initial
effective date of the Exchange Registration Statement relating to the Exchange
Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange
Registration Statement or Shelf Registration Statement required by Section 2(a)
or 2(b) hereof is filed and declared effective but shall thereafter either be
withdrawn by the Company or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the
first 90 days of the Registration Default Period, at a per annum rate of 0.50%
for the second 90 days of the Registration Default Period, at a per annum rate
of 0.75% for the third 90 days of the Registration Default Period and at a per
annum rate of 1.0% thereafter for the remaining portion of the Registration
Default Period. The Special Interest shall be payable in cash semi-annually in
arrears on each May 15 and November 15. Special Interest, if any, shall be
computed on the basis of a 360 day year of twelve 30-day months and the number
of days actually elapsed.
(d) The Company shall take all actions necessary or advisable to be taken by
it to ensure that the transactions contemplated herein are effected as so
contemplated.
(e) Any reference herein to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any post-
effective amendment to a registration statement as of any time shall be deemed
to include any document incorporated, or deemed to be incorporated, therein by
reference as of such time.
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<PAGE>
3. Registration Procedures.
(a) (i) In connection with the Exchange Offer, the Company shall comply
with all of the provisions of Section 3(d) and Section 3(e) below, shall use its
best efforts to effect such exchange to permit the sale of Registrable
Securities being sold in accordance with the intended method or methods of
distribution thereof, and, prior to effectiveness of the Exchange Offer
Registration Statement, shall, if required by the Commission, provide a
supplemental letter to the Commission (A) stating that the Company is
registering the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988),
----------------------------------
Morgan Stanley and Co., Inc. (available June 5, 1991) and (B) including a
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representation that the Company has not entered into any arrangement or
understanding with any person to distribute the Exchange Securities to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each holder participating in the Exchange Offer is
acquiring the Exchange Securities in its ordinary course of business and has no
arrangement or understanding with any person to participate in the distribution
of the Exchange Securities received in the Exchange Offer.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each holder of Registrable Securities shall
furnish, upon the request of the Company, prior to the consummation thereof, a
written representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Exchange Securities to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in
its ordinary course of business. In addition, all such holders of Registrable
Securities shall otherwise cooperate in the Company's preparations for the
Exchange Offer. Each holder hereby acknowledges and agrees that any Broker-
Dealer and any such holder, in either case, using the Exchange Offer (1) could
not under Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co., Inc.
----------------------------
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
----------------------------------
13, 1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters, and (2) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement containing
the selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Exchange Securities obtained
by such holder in exchange for Exchange Securities acquired by such holder
directly from the Company.
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<PAGE>
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(b) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(c) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(d) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
reasonably possible (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable, but no
later than 60 days after the Issue Date, an Exchange Registration Statement on
any form which may be utilized by the Company and which shall permit the
Exchange Offer and resales of Exchange Securities by broker-dealers during the
Resale Period to be effected as contemplated by Section 2(a), and use its best
efforts to cause such Exchange Registration Statement to become effective as
soon as practicable there after, but no later than 180 days after the Issue
Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Exchange Registration Statement for the periods and
purposes contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such Exchange Registration Statement, and promptly
provide each broker-dealer holding Exchange Securities with such number of
copies of the prospectus included therein (as then amended or supplemented),
in conformity in all material respects with the requirements of the Securities
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request prior to
the expiration of the Resale Period, for use in connection with resales of
Exchange Securities;
(iii) promptly notify the holders of Registrable Securities, the sales or
placement agent, if any, and the managing underwriter or underwriters, if any
and each broker-dealer that has requested or received copies of the prospectus
included in such registration statement, and confirm such advice in writing,
(A) when such Exchange Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective amendment
has been filed, and, with
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<PAGE>
respect to such Exchange Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments by the
Commission and by the Blue Sky or securities commissioner or regulator of any
state with respect thereto or any request by the Commission for amendments or
supplements to such Exchange Registration Statement or prospectus or for
additional information, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of such Exchange Registration Statement or
the initiation or threatening of any proceedings for that purpose, (D) if at
any time the representations and warranties of the Company contemplated by
Section 5 hereof cease to be true and correct in all material respects, (E) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of the Exchange Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose or (F) at
any time during the Resale Period when a prospectus is required to be
delivered under the Securities Act, that such Exchange Registration Statement,
prospectus, prospectus amendment or supplement or post-effective amendment
thereto does not conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder or contains an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(iv) in the event that the Company would be required, pursuant to Section
3(f)(iii)(f) above, to notify the selling holders of Registrable Securities,
the placement or sales agent, if any, or the managing underwriters, if any, as
applicable and any broker-dealers holding Exchange Securities, prepare and
furnish without delay to each such holder a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to
purchasers of such Exchange Securities during the Resale Period, such
prospectus shall conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order suspending
the effec tiveness of such Exchange Registration Statement or any post-
effective amendment thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions as
are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions until the
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<PAGE>
expiration of the Resale Period and (C) take any and all other actions as may
be reasonably necessary or advisable to enable each broker-dealer holding
Exchange Securities to consummate the disposition thereof in such
jurisdictions; provided, however, that the Company shall not be required for
any such purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the requirements
of this Section 3(d)(vi), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its certificate of incorporation
or by-laws or any agreement between it and its stockholders;
(vii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which may
be required to effect the Exchange Registration, the Exchange Offer and the
offering and sale of Exchange Securities by broker-dealers during the Resale
Period;
(viii) provide a CUSIP number for all Exchange Securities, not later than
the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders as soon as practicable
but no later than eighteen months after the effective date of such Exchange
Registration Statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder).
(e) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its best efforts to cause the
Shelf Registration to permit the disposition of the Registrable Securities by
the holders thereof in accordance with the intended method or methods of
disposition thereof provided for in the Shelf Registration Statement. In
connection therewith, the Company shall, as soon as reasonably possible (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable, a Shelf
Registration Statement on any form which may be utilized by the Company and
which shall permit the disposition of the Registrable Securities in accordance
with the intended method or methods thereof, as specified in writing by the
holders of the Registrable Securities, and use its best efforts to cause such
Shelf Registration Statement to become effective as soon as practicable
thereafter;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Shelf Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Shelf Registration Statement for the period specified in
Section 2(b) hereof and as may be
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<PAGE>
required by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Shelf Registration Statement, and
furnish to the holders of the Registrable Securities copies of any such
supplement or amendment simultaneously with or prior to its being used or
filed with the Commission;
(iii) comply with the provisions of the Securities Act with respect to the
disposition of all of the Registrable Securities covered by such Shelf
Registration Statement in accordance with the intended methods of disposition
by the holders thereof provided for in such Shelf Registration Statement;
(iv) provide (A) the holders of the Registrable Securities to be included
in such Shelf Registration Statement, (B) the underwriters (which term, for
purposes of this Exchange and Registration Rights Agreement, shall include a
person deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act), if any, thereof, (C) any sales or placement agent therefor,
(D) counsel for any such underwriter or agent and (E) not more than one
counsel for all the holders of such Registrable Securities the opportunity to
participate in the preparation of such Shelf Registration Statement, each
prospectus included therein or filed with the Commission and each amendment or
supplement thereto;
(v) for a reasonable period prior to the filing of such Shelf Registration
Statement, and throughout the period specified in Section 2(b), make available
at reasonable times at the Company's principal place of business or such other
reasonable place for inspection by the persons referred to in Section 3(e)(iv)
who shall certify to the Company that they have a current intention to sell
the Registrable Securities pursuant to the Shelf Registration such financial
and other information and books and records of the Company as reasonably
requested, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries, as
shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act; provided, however, that each such
party shall be required to maintain in confidence and not disclose to any
other person any information or records reasonably designated by the Company
as being confidential, until such time as (A) such information becomes a
matter of public record (whether by virtue of its inclusion in such
registration statement or otherwise), or (B) such person shall be required so
to disclose such information pursuant to a subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter (subject
to the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration Statement
or the prospectus included therein or in an amendment to such Shelf
Registration Statement or an amendment or supplement to such prospectus in
order that such Shelf
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<PAGE>
Registration Statement, prospectus, amendment or supplement thereto, as the
case may be, complies with applicable requirements of the Federal securities
laws and the rules and regulations of the Commission and does not contain an
untrue statement of a material fact or omit to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities, any
sales or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such advice
in writing, (A) when such Shelf Registration Statement or the prospectus
included therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Shelf Registration
Statement or any post-effective amendment, when the same has become effective,
(B) of any comments by the Commission and by the Blue Sky or securities
commissioner or regulator of any state with respect thereto or any request by
the Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of such Shelf
Registration Statement or the initiation or threatening of any proceedings for
that purpose, (D) if at any time the representations and warranties of the
Company contemplated by Section 3(e)(xv) or Section 5 hereof cease to be true
and correct in all material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) if at any time when a
prospectus is required to be delivered under the Securities Act, such Shelf
Registration Statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing;
(vii) use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of such registration statement or any post-effective
amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing
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<PAGE>
underwriter or underwriters, such agent or such holder specifies should be
included therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount of
Registrable Securities being sold by such holder or agent or to any
underwriters, the name and description of such holder, agent or underwriter,
the offering price of such Registrable Securities and any discount, commission
or other compensation payable in respect thereof, the purchase price being
paid therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold by such holder or agent or
to such underwriters; and make all required filings of such prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(ix) upon request, furnish to each holder of Registrable Securities, each
placement or sales agent, if any, therefor, each underwriter, if any, thereof
and the respective counsel referred to in Section 3(e)(iv) an executed copy
(or, in the case of a holder of Registrable Securities, a conformed copy) of
such Shelf Registration Statement, each such amendment and supplement thereto
(in each case including all exhibits thereto (in the case of a holder of
Registrable Securities, upon request) and documents incorporated by reference
therein) and such number of copies of such Shelf Registration Statement
(excluding exhibits thereto and documents incorporated by reference therein
unless specifically so requested by such holder, agent or underwriter, as the
case may be) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary prospectus),
in conformity in all material respects with the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder, and such other documents, as such holder, agent, if
any, and underwriter, if any, may reasonably request in order to facilitate
the offering and disposition of the Registrable Securities owned by such
holder, offered or sold by such agent or underwritten by such underwriter and
to permit such holder, agent and underwriter to satisfy the prospectus
delivery requirements of the Securities Act; and, subject to Sections 2(a) and
(b) and 3(e)(vi)(C), (E) and (F), the Company hereby consents to the use of
such prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such holder and by any such agent and
underwriter, in each case in the form most recently provided to such person by
the Company, in connection with the offering and sale of the Registrable
Securities covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto;
(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such Shelf Registration Statement under such
securities laws or blue sky laws of such jurisdictions as any holder of such
Registrable Securities and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall
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<PAGE>
reasonably request, (B) keep such registrations or qualifications in effect
and comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions during the period the Shelf
Registration is required to remain effective under Section 2(b) above and for
so long as may be necessary to enable any such holder, agent or underwriter to
complete its distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such holder, agent, if any, and
underwriter, if any, to consummate the disposition in such jurisdictions of
such Registrable Securities; provided, however, that the Company shall not be
required for any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(e)(x), (2) consent to general service of
process in any such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its stockholders;
(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether Federal, state or local, which may
be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer, or
to consummate the disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall be printed, lithographed or engraved, or produced by any
combination of such methods, and which shall not bear any restrictive legends;
and, in the case of an underwritten offering, enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to any sale
of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not later
than the applicable Effective Time;
(xiv) enter into one or more underwriting agreements, engagement letters,
agency agreements, "best efforts" underwriting agreements or similar
agreements, as appropriate, including customary provisions relating to
indemnification and contribution, and take such other actions in connection
therewith as any holders of Registrable Securities aggregating at least a
majority in aggregate principal amount of the Registrable Securities at the
time outstanding shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities; provided, that the Company
shall not be required to enter into any such agreement more than once with
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<PAGE>
respect to all of the Registrable Securities and may delay entering into such
agreement until the consummation of any underwritten public offering which the
Company shall have then engaged;
(xv) whether or not an agreement of the type referred to in Section
3(e)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering or
is made through a placement or sales agent or any other entity, (A) make such
representations and warranties to the holders of the Registrable Securities
covered by such Shelf Registration and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof in form, substance and scope as
are customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement filed on
the form applicable to the Shelf Registration; (B) obtain an opinion of
counsel to the Company in customary form and covering such matters, of the
type customarily covered by such an opinion, as the managing underwriters, if
any, or as any holders of at least a majority in aggregate principal amount of
the Registrable Securities at the time outstanding may reasonably request,
addressed to such holder or holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof and dated the effective date of
such Shelf Registration Statement (and if such Shelf Registration Statement
contemplates an underwritten offering of a part or all of the Registrable
Securities, dated the date of the closing under the underwriting agreement
relating thereto) (it being agreed that the matters to be covered by such
opinion shall include the due incorporation and good standing of the Company
and its subsidiaries; the qualification of the Company and its U.S.
subsidiaries, if any, to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(d)(xiv) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
Registrable Securities; the absence of material legal or govern mental
proceedings involving the Company; the absence of a breach by the Company or
any of its subsidiaries of, or a default under, material agreements binding
upon the Company or any subsidiary of the Company; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration,
the offering and sale of the Registrable Securities, this Exchange and
Registration Rights Agreement or any agreement of the type referred to in
Section 3(e)(xiv) hereof, except such approvals as may be required under state
securities or blue sky laws; the material compliance as to form of such Shelf
Registration Statement and any documents incorporated by reference therein and
of the Indenture with the requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder,
respectively; and, subject to reasonable and customary limitations and
exceptions; and, such counsel shall also state in such opinion that, as of the
date of the opinion and of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or
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<PAGE>
supplemented, and from the documents incorporated by reference therein (in
each case other than the financial statements and other financial information
contained therein) of an untrue statement of a material fact or the omission
to state therein a material fact necessary to make the statements therein not
misleading (in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the Commission under
the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to the
selling holders of Registrable Securities, the placement or sales agent, if
any, therefor or the underwriters, if any, thereof, dated (i) the effective
date of such Shelf Registration Statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such Shelf Registration
Statement or post-effective amendment to such Shelf Registration Statement
which includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus (and, if such Shelf Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective amendment to
such Shelf Registration Statement which includes unaudited or audited
financial statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus, dated the date of the
closing under the underwriting agreement relating thereto), such letter or
letters to be in customary form and covering such matters of the type
customarily covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably requested
by any holders of at least a majority in aggregate principal amount of the
Registrable Securities at the time outstanding or the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof to
evidence the accuracy of the representations and warranties made pursuant to
clause (A) above or those contained in Section 5(a) hereof and the compliance
with or satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company; and (E)
undertake such obligations relating to expense reimbursement, indemnification
and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Exchange and
Registration Rights Agreement pursuant to Section 9(h) hereof and of any
amendment or waiver effected pursuant thereto, each of which notices shall
contain the text of the amendment or waiver proposed or effected, as the case
may be;
(xvii) in the event that any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the By-Laws of the
National Association of Securities
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<PAGE>
Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including by (A) if such Rules or By-
Laws shall so require, engaging a "qualified independent underwriter" (as
defined in the schedules thereto (or any successor thereto)) to participate in
the preparation of the Shelf Registration Statement relating to such
Registrable Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such Shelf
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Registrable
Securities, (B) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 6 hereof,
and (C) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules of
Fair Practice of the NASD; and
(xviii) comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders as soon as practicable
but in any event not later than eighteen months after the effective date of
such Shelf Registration Statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including, at
the option of the Company, Rule 158 thereunder).
(f) In the event that the Company would be required, pursuant to Section
3(e)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, as applicable, the Company shall without delay prepare and furnish
to each such holder, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus supplemented
or amended so that, as thereafter delivered to purchasers of Registrable
Securities, such prospectus shall conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Registrable Securities
agrees that upon receipt of any notice from the Company pursuant to Section
3(e)(vi)(F) hereof, such holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Shelf Registration Statement applicable
to such Registrable Securities until such holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Company, such
holder shall deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such holder's possession
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<PAGE>
of the prospectus covering such Registrable Securities at the time of receipt of
such notice.
(g) The Company may require each holder of Registrable Securities as to which
any Shelf Registration pursuant to Section 2(b) is being effected to furnish to
the Company such information regarding such holder and such holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Securities Act. Each such
holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such holder to the Company or
of the occurrence of any event in either case as a result of which any
prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such holder or such holder's
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such holder or such holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such holder or the disposition of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly, upon
request, all expenses incident to the Company's performance of or compliance
with this Exchange and Registration Rights Agreement, including (a) all
Commission and any NASD registration, filing and review fees and expenses, (b)
all fees and expenses in connection with the qualification of the Securities for
offering and sale under the State securities and blue sky laws referred to in
Section 3(e)(x) hereof, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
expenses of preparing the Securities for delivery and the expenses of printing
or producing any underwriting agreements, agreements among underwriters, selling
agreements and "Blue Sky" or legal investment memoranda and all other documents
in connection with the offering, sale or delivery of Securities to be disposed
of (including certificates representing the Securities), (d) messenger,
telephone and delivery expenses relating to the offering, sale or delivery of
Securities and the preparation of documents referred in clause (c) above, (e)
fees and expenses of the Trustee under the Indenture, any agent of the Trustee
and any counsel for the Trustee and of any collateral agent or
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<PAGE>
custodian, (f) internal expenses (including all salaries and expenses of the
Company's officers and employees performing legal or accounting duties), (g)
fees, disbursements and expenses of counsel and independent certified public
accountants of the Company (including the expenses of any opinions or "cold
comfort" letters required by or incident to such performance and compliance),
(h) reasonable fees, disbursements and expenses of any "qualified independent
underwriter" engaged pursuant to Section 3(e)(xvii) hereof, (i) any fees charged
by securities rating services for rating the Securities and (j) fees, expenses
and disbursements of any other persons, including special experts, retained by
the Company in connection with such registration (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder of Registrable Securities or any
placement or sales agent therefor or underwriter thereof, the Company shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registrable Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly).
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and each
prospectus (including any preliminary or summary prospectus) contained therein
or furnished pursuant to Section 3(e) or Section 3(d) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may be,
and, in the case of an underwritten offering of Registrable Securities, at the
time of the closing under the underwriting agreement relating thereto, will
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and at all times
subsequent to the Effective Time when a prospectus would be required to be
delivered under the Securities Act, other than from (i) such time as a notice
has been given to holders of Registrable Securities pursuant to Section
3(e)(vi)(F) or Section 3(e)(iii)(F) hereof until (ii) such time as the Company
furnishes an amended or supplemented prospectus pursuant to Section 3(f) or
Section 3(d)(iv) hereof, each such registration statement, and each prospectus
(including any summary prospectus) contained therein or furnished pursuant to
Section 3(e) or Section 3(d) hereof, as then
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<PAGE>
amended or supplemented, will conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing to the Company by a holder of Registrable Securities expressly for
use therein.
(b) Any documents incorporated by reference in any prospectus referred to
in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in
all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company by
a holder of Registrable Securities expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any subsidiary of the Company is a party or
by which the Company or any subsidiary of the Company is bound or to which any
of the property or assets of the Company or any subsidiary of the Company is
subject, nor will such action result in any violation of the provisions of the
certificate of incorporation, as amended, or the by-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any subsidiary of the Company
or any of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Securities Act of the Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
State securities or blue sky laws in connection with the offering and
distribution of the Securities.
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<PAGE>
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each of the holders of Registrable Securities included in a
registration statement filed pursuant to Section 2(a) or 2(b) hereof, and each
person who participates as a placement or sales agent or as an underwriter in
any offering or sale of such Registrable Securities against any losses, claims,
damages or liabilities, joint or several, to which such holder, agent or
underwriter may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, or any
preliminary, final or summary prospectus contained therein or furnished by the
Company to any such holder, agent or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company shall, and it hereby
agrees to, reimburse such holder, such agent and such underwriter for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final or
summary prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by holders of
Registrable Securities expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to (i) indemnify and hold
harmless the Company, and in the case of a Shelf Registration Statement all
other holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Registrable Securities
may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such registration statement, or any preliminary,
final or summary prospectus contained therein
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<PAGE>
or furnished by the Company to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such holder
or underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such holder shall be required to undertake
liability to any person under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such holder from the sale of
such holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, and such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent (which consent shall not be unreasonably withheld) of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. The
indemnifying party shall not be required to indemnify any indemnified party for
any amount paid or payable by such indemnified party in the settlement of any
action, proceeding or investigation without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement
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<PAGE>
as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds the
amount of any damages which such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
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<PAGE>
(e) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each officer, director and partner of each holder,
agent and underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered by
the Shelf Registration are to be sold pursuant to an underwritten offering, the
managing underwriter or underwriters thereof shall be designated by the holders
of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Company.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the
Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time
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<PAGE>
to time, or any similar or successor rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would be
no adequate remedy at law if any party fails to perform any of their respective
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which they may be entitled at law or in equity, shall be entitled to compel
specific performance of the respective obligations of any other party under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 6 Concourse Parkway, Suite 1700, Atlanta, GA 30328-5352, Attention: Executive
Vice President-General Counsel, with a copy to Cohen Pollock Merlin Axelrod &
Tanenbaum, 2100 Riveredge Parkway, Suite 300, Atlanta, GA 30328, Attention: Alan
J. Tanenbaum, and if to a holder, to the address of such holder set forth in the
security register or other records of the Company, or to such other address as
the Company or any such holder may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Registrable Securities and the respective successors and assigns of
the parties hereto and such holders. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase,
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<PAGE>
operation of law or otherwise, such transferee shall, without any further
writing or action of any kind, be deemed a beneficiary hereof for all purposes
and such Registrable Securities shall be held subject to all of the terms of
this Exchange and Registration Rights Agreement, and by taking and holding such
Registrable Securities such transferee shall be entitled to receive the benefits
of, and be conclusively deemed to have agreed to be bound by all of the
applicable terms and provisions of this Exchange and Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable Securities
subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of the Purchasers or any holder of Registrable Securities, any
director, officer or partner of such holder, any agent or underwriter or any
director, officer or partner thereof, or any controlling person of any of the
foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and paragraphs
of this Exchange and Registration Rights Agreement are inserted for convenience
only, do not constitute a part of this Exchange and Registration Rights
Agreement and shall not affect in any way the meaning or interpretation of this
Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable Securities
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<PAGE>
at the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 9(h), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder. Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of holders whose Registrable Securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other holders whose Registrable Securities are not
being tendered pursuant to such Exchange Offer may be given by the holders of at
least a majority of the outstanding principal amount of Registrable Securities
being tendered or registered.
(i) Inspection. For so long as this Exchange and Registration Rights Agreement
shall be in effect, this Exchange and Registration Rights Agreement and a
complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof set forth in Section 9(c) above
and at the office of the Trustee under the Indenture.
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(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
Agreed to and accepted as of the date referred to above.
AFC ENTERPRISES, INC.
By:/s/ Samuel Frankel
-----------------------------------------------
Name: Samuel Frankel
Title: Executive Vice President, General
Counsel and Secretary
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
DONALDSON, LUFKIN AND JENRETTE
SECURITIES CORPORATION
On behalf of each of the Purchasers,
By:/s/ Goldman, Sachs & Co.
----------------------------------------
(Goldman, Sachs & Co.)
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Exhibit A
AFC ENTERPRISES, INC.
INSTRUCTION TO DTC PARTICIPANTS
-------------------------------
(Date of Mailing)
---------------
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]/*/
------------------------------
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in the AFC Enterprises, Inc. (the
"Company") 10 1/4% Senior Subordinated Notes due 2007 (the "Securities") are
held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of
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the enclosed materials as soon as possible as their rights to have the
- ------------------------------------------
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
---------------------
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact AFC Enterprises,
Inc., 6 Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-5352, Attention:
Executive Vice President-General Counsel, (770) 391-9500.
- ------------------------
/*/ Not less than 28 calendar days from date of mailing.
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<PAGE>
AFC Enterprises, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement
(the "Exchange and Registration Rights Agreement"), between AFC Enterprises,
Inc. (the "Company") and the Purchasers named therein. Pursuant to the Exchange
and Registration Rights Agreement, the Company has filed with the United States
Securities and Exchange Commission (the "Commission") a registration statement
on Form [___] (the "Shelf Registration Statement") for the registration and
resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities
Act"), of the Company's 10 1/4% Senior Subordinated Notes due 2007 (the
"Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire")
must be completed, executed and delivered to the Company's counsel at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE].
------------------------------------
Beneficial owners of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as
selling securityholders in the Shelf Registration Statement and (ii) may not use
the Prospectus forming a part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named
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<PAGE>
or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "Registrable Securities" is defined in the Exchange and
----------------------
Registration Rights Agreement.
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<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Exchange and Registration
Rights Agreement, including, without limitation, Section 6 of the Registration
Rights Agreement, as if the undersigned Selling Securityholder were an original
party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
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QUESTIONNAIRE
(a) Full Legal Name of Selling Securityholder:
(i) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in Item (3) below:
(ii) Full Legal Name of DTC Participant (if applicable and if not
the same as (b) above) Through Which Registrable Securities
Listed in Item (3) below are Held:
(b) Address for Notices to Selling Securityholder:
Telephone:
Fax:
Contact Person:
(c) Beneficial Ownership of Securities:
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<PAGE>
Except as set forth below in this Item (3), the undersigned does not
--------------------------------------------------------------------
beneficially own any Securities.
- --------------------------------
(i) Principal amount of Registrable Securities beneficially
owned:
CUSIP No(s). of such Registrable Securities:
(ii) Principal amount of Securities other than Registrable
Securities beneficially owned:
CUSIP No(s). of such other Securities:
-2-
<PAGE>
(iii) Principal amount of Registrable Securities which the
undersigned wishes to be included in the Shelf
Registration Statement:
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
(d) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
-------------------------------------------------------------------
Securityholder is not the beneficial or registered owner of any other securities
- --------------------------------------------------------------------------------
of the Company, other than the Securities listed above in Item (3).
- -------------------------------------------------------------------
State any exceptions here:
(e) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of its
----------------------------------------------------------------------------
affiliates, officers, directors or principal equity holders (5% or more) has
- ----------------------------------------------------------------------------
held any position or office or has had any other material relationship with the
- -------------------------------------------------------------------------------
Company (or its predecessors or affiliates) during the past three years.
- ------------------------------------------------------------------------
State any exceptions here:
(f) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
-------------------------------------------------------------------------
to distribute the Registrable Securities listed above in Item (3) only as
- -------------------------------------------------------------------------
follows (if at all): Such Registrable Securities may be sold from time to time
- -------------------------------------------------------------------------------
directly by the undersigned Selling Securityholder or, alternatively, through
- -----------------------------------------------------------------------------
underwriters, broker-
- ---------------------
-3-
<PAGE>
dealers or agents. Such Registrable Securities may be sold in one or more
- -------------------------------------------------------------------------
transactions at fixed prices, at prevailing market prices at the time of sale,
- ------------------------------------------------------------------------------
at varying prices determined at the time of sale, or at negotiated prices. Such
- -------------------------------------------------------------------------------
sales may be effected in transactions (which may involve crosses or block
- -------------------------------------------------------------------------
transactions) (i) on any national securities exchange or quotation service on
- -----------------------------------------------------------------------------
which the Registered Securities may be listed or quoted at the time of sale,
- ----------------------------------------------------------------------------
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
- ----------------------------------------------------------------------------
such exchanges or services or in the over-the-counter market, or (iv) through
- -----------------------------------------------------------------------------
the writing of options. In connection with sales of the Registrable Securities
- ------------------------------------------------------------------------------
or otherwise, the Selling Securityholder may enter into hedging transactions
- ----------------------------------------------------------------------------
with broker-dealers, which may in turn engage in short sales of the Registrable
- -------------------------------------------------------------------------------
Securities in the course of hedging the positions they assume. The Selling
- -------------------------------------------------------------------------
Securityholder may also sell Registrable Securities short and deliver
- ---------------------------------------------------------------------
Registrable Securities to close out such short positions, or loan or pledge
- ---------------------------------------------------------------------------
Registrable Securities to broker-dealers that in turn may sell such securities.
- -------------------------------------------------------------------------------
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly Rule
10b-6.
In the event that the Selling Securityholder transfers all or any portion of
the Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related
-4-
<PAGE>
Prospectus. The Selling Securityholder understands that such information will be
relied upon by the Company in connection with the preparation of the Shelf
Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section 3(d)
of the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
AFC Enterprises, Inc.
6 Concourse Parkway, Suite 1700
Atlanta, GA 30328-5352
Attention: Executive Vice President-General Counsel
(770) 391-9500.
(ii) With a copy to:
Cohen Pollock Merlin
Axelrod & Tanenbaum
2100 Riveredge Parkway
Suite 300
Atlanta, GA 30328
Attention: Allan J. Tanenbaum
(770) 858-1288
Once this Notice and Questionnaire is executed by the Selling Securityholder
and received by the Company's counsel, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs,
-5-
<PAGE>
personal representatives, and assigns of the Company and the Selling
Securityholder (with respect to the Registrable Securities beneficially owned by
such Selling Securityholder and listed in Item (3) above. This Agreement shall
be governed in all respects by the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: ________________
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Cohen Pollock Merlin
Axelrod & Tanenbaum
2100 Riveredge Parkway
Suite 300
Atlanta, GA 30328
Attention: Allan J. Tanenbaum
(770) 858-1288
-6-
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
AFC Enterprises, Inc.
c/o Trustee
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Trust Officer
Re: AFC Enterprises, Inc. (the "Company")
10 1/4% Senior Subordinated Notes due 2007
------------------------------------------
Dear Sirs:
Please be advised that _____________________ has transferred $___________
aggregate principal amount of the above-referenced Notes pursuant to an
effective Registration Statement on Form [___] (File No. 333-____) filed by the
Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated ___________, 199_ or in supplements thereto, and that the aggregate
principal
-1-
<PAGE>
(g) amount of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.
Dated:
Very truly yours,
________________________
(Name)
By: ________________________
(Authorized Signature)
-2-
<PAGE>
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
Agreed to and accepted as of the date referred to above.
AFC ENTERPRISES, INC.
By: /s/ Samuel Frankel
--------------------------------
Name: Samuel Frankel
Title: Executive Vice President,
General Counsel and Secretary
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
DONALDSON, LUFKIN AND JENRETTE
SECURITIES CORPORATION
On behalf of each of the Purchasers,
By: /s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
<PAGE>
EXHIBIT 4.4
AFC ENTERPRISES, INC.
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of May 21, 1997, and entered into by and
among AFC ENTERPRISES, INC., a Minnesota corporation ("COMPANY"), GOLDMAN
SACHS CREDIT PARTNERS L.P. ("GSCP"), as arranging agent (in such capacity,
"ARRANGING AGENT") and as syndication agent (in such capacity, "SYNDICATION
AGENT"), CANADIAN IMPERIAL BANK OF COMMERCE, acting through its New York Agency
("CIBC") as administrative agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT") and THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (each individually referred to herein as a "LENDER" and
collectively as "LENDERS").
R E C I T A L S
- - - - - - - -
WHEREAS, Company proposes to issue the Unsecured Subordinated Notes (this
and other terms used in these recitals without definition being used as defined
in subsection 1.1) to provide a portion of the financing necessary to consummate
the Refinancings;
WHEREAS, Company desires that Lenders extend certain credit facilities to
Company to provide the remainder of the financing necessary to consummate the
Refinancings and to provide financing for working capital, to finance Permitted
Acquisitions and for other general corporate purposes;
WHEREAS, Company desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a first priority Lien on substantially all of its real, personal and
mixed property of Company; and
WHEREAS, all of the Subsidiaries of Company have agreed to guarantee the
Obligations hereunder and under the other Loan Documents and to secure their
guaranties by granting to Administrative Agent, on behalf of Lenders, a first
priority Lien on substantially all of their respective real, personal and mixed
property.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree as
follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
---------------------
The following terms used in this Agreement shall have the following
meanings:
1
<PAGE>
"ACQUISITION FACILITY COMMITMENT" means the commitment of a Lender to
make Acquisition Loans to the Company pursuant to subsection 2.1A(i) and
"ACQUISITION FACILITY COMMITMENTS" means such commitments of all Lenders
in the aggregate.
"ACQUISITION LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the termination of the Acquisition
Facility Commitments, that Lender's Acquisition Facility Commitment and
(ii) after the termination of the Acquisition Facility Commitments, the sum
of the aggregate outstanding principal amount of the Acquisition Loans of
that Lender.
"ACQUISITION LOAN NOTES" means (i) the promissory notes of the
Company issued pursuant to subsection 2.1E(a) on the Closing Date and (ii)
any promissory notes issued by the Company pursuant to subsection 9.1B(i)
in connection with assignments of the Acquisition Facility Commitments or
Acquisition Loans, in each case substantially in the form of Exhibit IV-A
------------
annexed hereto, as they may be amended, restated, supplemented or otherwise
modified from time to time.
"ACQUISITION LOANS" means the Loans made by Lenders to the Company
pursuant to subsection 2.1A(i).
"ACQUISITION PROPERTIES" has the meaning assigned that term in
subsection 6.11.
"ADDITIONAL MORTGAGES" has the meaning assigned that term in
subsection 6.11.
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar Rate
Loan, the rate per annum obtained by dividing (i) the arithmetic mean of
--------
the offered rates for deposits in Dollars with a term comparable to such
Interest Period that appears on the Telerate British Bankers Assoc.
Interest Settlement Rates Page (as defined below) at approximately 11:00
A.M., London time, on the second full Business Day preceding the first day
of such Interest Period ("TELERATE BRITISH BANKERS ASSOC. INTEREST
SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on
the Telerate System Incorporated Service (or such other page as may replace
such page on such service for the purpose of displaying the rates at which
Dollar deposits are offered by leading banks in the London interbank
deposit market)) by (ii) a percentage equal to 100% minus the stated
-- -----
maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves)
applicable on such Interest Rate Determination Date to any member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D).
"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 9.5A.
2
<PAGE>
"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract
or otherwise.
"AGENT" means, individually, each of the Administrative Agent,
Arranging Agent, and Syndication Agent, and "AGENTS" means Administrative
Agent, Arranging Agent and Syndication Agent, collectively.
"AGREEMENT" means this Credit Agreement, dated as of May 21, 1997,
as it may be amended, supplemented or otherwise modified from time to time.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means, (i) from the Closing
Date until the delivery of financial statements for the second fiscal
quarter of 1998 as required pursuant to subsection 6.1(ii), .50% per annum
and (ii) thereafter, a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
==========================================
APPLICABLE
COMMITMENT
LEVERAGE RATIO FEE PERCENTAGE
==========================================
<S> <C>
greater than 3.00:1.00 1/2%
------------------------------------------
less than or equal to
3.00:1.00 but greater 3/8%
than 2.50:1.00
------------------------------------------
less than or equal to 1/4%%
2.50:1.00
==========================================
</TABLE>
The Commitment Fee Percentage shall be determined by reference to the
Leverage Ratio in effect from time to time; provided, however, that (x) no
-------- -------
change in the Applicable Commitment Fee Percentage shall be effective until
three Business Days after the date on which the Administrative Agent
receives the financial statements and a Compliance Certificate pursuant to
subsection 6.1(iv) calculating the Leverage Ratio, and (y) the Applicable
Commitment Fee Percentage shall be .50% per annum for so long as Company
has not submitted to the Administrative Agent the information described in
clause (x) of this proviso as and when required under subsection 6.1(ii).
3
<PAGE>
"APPLICABLE MARGIN" means, (i) from the Closing Date until the
delivery of financial statements for the second fiscal quarter of 1998 as
required pursuant to subsection 6.1(ii), 1.25% per annum for Base Rate
Loans and 2.25% per annum for Eurodollar Rate Loans, and (ii) thereafter, a
percentage per annum determined by reference to the Leverage Ratio as set
forth below
<TABLE>
<CAPTION>
==================================================================
APPLICABLE MARGIN APPLICABLE MARGIN
FOR BASE FOR EURODOLLAR
LEVERAGE RATIO RATE LOANS RATE LOANS
==================================================================
<S> <C> <C>
greater than 3.50:1.0 1-1/4% 2-1/4%
------------------------------------------------------------------
less than or equal to
3.50:1.00 but greater 7/8% 1-7/8%
than 3.00:1.00
------------------------------------------------------------------
less than or equal to
3.00:1.00 but greater 5/8% 1-5/8%
than 2.50:1.00
------------------------------------------------------------------
less than or equal to
2.50:1.00 but greater 3/8% 1-3/8%
than 2.00:1.00
------------------------------------------------------------------
less than or equal to 1/8% 1-1/8%
2.00:1.00
==================================================================
</TABLE>
The Applicable Margin for each Base Rate Loan shall be determined by
reference to the Leverage Ratio in effect from time to time and the
Applicable Margin for each Eurodollar Rate Loan shall be determined by
reference to the ratio in effect on the first day of the Interest Period
for such Loan; provided, however, that (x) no change in the Applicable
-------- -------
Margin shall be effective until three Business Days after the date on which
the Administrative Agent receives the financial statements and a Compliance
Certificate pursuant to subsection 6.1(iv) calculating the Leverage Ratio,
and (y) the Applicable Margin shall be 1.25%, in the case of Base Rate
Loans, and 2.25%, in the case of Eurodollar Rate Loans, for so long as
Company has not submitted to the Administrative Agent the information
described in clause (x) of this proviso as and when required under
subsection 6.1(ii).
"ARRANGING AGENT" means GSCP in its capacity as arranging agent.
"ASSET SALE" means the sale by Company or any of its Subsidiaries to
any Person of (i) any of the stock of any of Company's Subsidiaries, (ii)
substantially all of the assets of any division or line of business of
Company or any of its Subsidiaries, or (iii) any other assets (whether
tangible or intangible) of Company or any of its Subsidiaries outside of
the ordinary course of business excluding tangible personal property that
---------
in the
4
<PAGE>
reasonable judgment of Company, 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.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit VIII annexed hereto.
------------
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate or
(ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
"BUSINESS DAY" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the States of Georgia or New York or is a
day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close, and
(ii) with respect to all notices, determinations, fundings, issuances and
payments in connection with the Adjusted Eurodollar Rate or any Eurodollar
Rate Loans, any day that is a Business Day described in clause (i) above
and that is also (a) a day for trading by and between banks in Dollar
deposits in the London interbank market and (b) a day on which banking
institutions are open for business in London.
"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.
"CASH" means money, currency or a credit balance in a Deposit
Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed
as to interest and principal by the United States Government or (b) issued
by any agency of the United States the obligations of which are backed by
the full faith and credit of the United States, in each case maturing
within one year after such date; (ii) marketable direct obligations issued
by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof, in each case
maturing within one year after such date and having, at the time of the
acquisition thereof, the highest rating obtainable from either Standard &
Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("MOODY'S"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and having, at the time of the acquisition
thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers'
5
<PAGE>
acceptances maturing within one year after such date and issued or accepted
by any Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia
or any foreign country that (a) is at least "adequately capitalized" (as
defined in the regulations of its primary Federal banking regulator) and
(b) has Tier 1 capital (as defined in such regulations) of not less than
$100,000,000 (a "CASH EQUIVALENT BANK"); (v) Eurodollar time deposits
having a maturity of less than one year purchased directly from any Lender
or Cash Equivalent Bank; and (vi) shares of any money market mutual fund
that (a) has at least 95% of its assets invested continuously in the types
of investments referred to in clauses (i) through (v) above, (b) has net
assets of not less than $500,000,000, and (c) has the highest rating
obtainable from either S&P or Moody's.
"CASH INTEREST COVERAGE RATIO" has the meaning assigned to that term
in subsection 7.6A.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially
in the form of Exhibit IX annexed hereto delivered by a Lender to
----------
Administrative Agent pursuant to subsection 2.7B(iii).
"CHESAPEAKE TRANSACTION" means the acquisition by the Company from
the American Bagel Company of all the intangible assets of the franchise
business of Chesapeake Bagel Bakery.
"CIBC" has the meaning assigned to that term in the introduction to
this Agreement.
"CLOSING DATE" means the date on or before June 30, 1997, on which
the conditions to the making of Initial Loans under subsection 4.1 are
satisfied.
"COLLATERAL" means, collectively, all real, personal and mixed
property collateral securing the Obligations pursuant to the Collateral
Documents.
"COLLATERAL ACCOUNT" has the meaning assigned to that term in the
Collateral Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account
Agreement executed by Company and Administrative Agent on the Closing Date,
substantially in the form of Exhibit X annexed hereto, pursuant to which
---------
Company may pledge cash to Administrative Agent to secure the obligations
of Company to reimburse Issuing Lender for payments made under one or more
Letters of Credit as provided in Section 8, as such
6
<PAGE>
Collateral Account Agreement may hereafter be amended, supplemented or
otherwise modified from time to time.
"COLLATERAL DOCUMENTS" means the Company Pledge Agreement, the
Company Security Agreement, the Company Trademark Security Agreement, the
Company Patent and Copyright Security Agreement, the Collateral Account
Agreement, the Subsidiary Pledge Agreements, the Subsidiary Security
Agreements, the Subsidiary Trademark Security Agreements, the Mortgages and
all other instruments or documents delivered by any Loan Party pursuant to
this Agreement or any of the other Loan Documents in order to grant to
Administrative Agent, on behalf of Lenders, a Lien on any real, personal or
mixed property of that Loan Party as security for the Obligations.
"COMMITMENTS" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"COMPANY" has the meaning assigned to that term in the introduction
to this Agreement.
"COMPANY COMMON STOCK" means the common stock of Company, par value
$0.01 per share.
"COMPANY PATENT AND COPYRIGHT SECURITY AGREEMENT" means the Patent
Collateral and Security Agreement executed by Company and Administrative
Agent, substantially in the form of Exhibit XIV annexed hereto, as such
-----------
Patent Collateral and Security Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
"COMPANY PLEDGE AGREEMENT" means, collectively, the Pledge Agreement
executed by Company and Administrative Agent, substantially in the form of
Exhibit XI annexed hereto, relating to the pledge of the shares of capital
----------
stock of its Subsidiary(ies) as such Pledge Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.
"COMPANY SECURITY AGREEMENT" means the Security Agreement executed
by Company and Administrative Agent, substantially in the form of Exhibit
-------
XII annexed hereto, as such Security Agreement may hereafter be amended,
---
supplemented or otherwise modified from time to time.
"COMPANY TRADEMARK SECURITY AGREEMENT" means the Trademark
Collateral Security Agreement executed by Company and Administrative Agent,
substantially in the form of Exhibit XIII annexed hereto, as such Trademark
------------
Collateral Security Agreement may hereafter be amended, supplemented or
otherwise modified from time to time.
7
<PAGE>
"COMPLIANCE CERTIFICATE" means an Officer's Certificate
substantially in the form of Exhibit V annexed hereto delivered to
---------
Administrative Agent and Lenders by Company pursuant to subsection 6.1(iv).
"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
Company and its Subsidiaries) by Company 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 Company and its Subsidiaries plus
----
(ii) to the extent not covered by clause (i) of this definition, the
aggregate of all expenditures by Company 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 Company 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).
"CONSOLIDATED CURRENT ASSETS" means, as at any date of
determination, the total assets of Company 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 Company 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
8
<PAGE>
as determined on a consolidated basis for Company 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
pursuant to subsection 2.4B.(iii)), (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 Company 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 in the case of Indebtedness hereunder), (ii)
Consolidated Cash Interest Expense, (iii) Maintenance Capital Expenditures
(net of related financings) and (iv) the portion of taxes based on income
actually paid in cash (excluding taxes on extraordinary gains) all as
determined for Company 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 financing 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
Company in connection with the refinancings of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of
Company and its Subsidiaries, and (c) any amounts referred to in subsection
2.3 payable to Arranging Agent, Syndication Agent, Administrative Agent or
Lenders on or before the Closing Date, minus (ii) total interest income of
-----
Company 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 Company and
9
<PAGE>
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 Company 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 Company) in which any other Person
(other than Company 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 Company 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 Company or is merged into or
consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income
of any Subsidiary of Company 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 this Agreement), (iv) any after-tax gains or
losses attributable to Asset Sales or returned surplus assets of any
Pension 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 Company
and its Subsidiaries, less an amount equal to the Cash balances of Company
----
and its Subsidiaries (net of any overdraft balances), determined on a
consolidated basis in accordance with GAAP.
"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.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another
if the primary purpose, intent or result thereof by the Person incurring
the Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) with respect to any letter of
credit issued for the account of that Person or as
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<PAGE>
to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of another, (b) the
obligation to make take-or-pay or similar payments if required regardless
of non-performance by any other party or parties to an agreement, and (c)
any liability of such Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise) or
(Y) to maintain the solvency or any balance sheet item, level of income or
financial condi tion of another if, in the case of any agreement described
under subclauses (X) or (Y) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect Company or any of its
Subsidiaries against fluctuations in currency values.
"CUT-OFF DATE" has the meaning assigned such term in subsection 6.9.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.
"ELIGIBLE ASSIGNEE" means (i) (a) a commercial bank organized under
the laws of the United States or any state thereof; (b) a savings and loan
association or savings bank organized under the laws of the United States
or any state thereof; (c) a commercial bank organized under the laws of any
other country or a political subdivision thereof, provided that (1) such
--------
bank is acting through a branch or agency located in the United States or
(2) such bank is organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (d) any other entity which is an
"accredited investor" (as defined in
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<PAGE>
Regulation D under the Securities Act) or which extends credit or buys
loans as one of its businesses including, but not limited to, insurance
companies, mutual funds and lease financing companies, in each case (under
clauses (a) through (d) above) that is reasonably acceptable to
Administrative Agent; and (ii) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Company shall be an Eligible Assignee.
--------
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA (i) currently maintained or contributed to
by Company or any of its ERISA Affiliates, (ii) which was at any time since
November 5, 1992 maintained or contributed to by Company or any of its
ERISA Affiliates or (iii) with respect to which there is any potential or
outstanding liability of Company.
"EMPLOYEE TAX LOAN NOTES" mean the promissory notes evidencing the
loans made to employees of the Company to cover their tax liabilities in
connection with grants made to such employees under the Company's 1996
Stock Bonus Plans.
"ENVIRONMENTAL CLAIM" means any written accusation, allegation,
notice of violation, claim, demand, abatement order or other order or
direction (conditional or otherwise) by any governmental authority or any
Person for any damage, including, without limitation, personal injury
(including sickness, disease or death), tangible or intangible property
damage, contribution, indemnity, indirect or consequential damages, damage
to the environment, nuisance, pollution, contamina tion or other adverse
effects on the environment, or for fines, penalties or restrictions, in
each case relating to, resulting from or in connection with Hazardous
Materials and relating to Company, any of its Subsidiaries, any of their
respective Affiliates or any Facility.
"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders, rules,
regulations, or any published plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials, (ii) the generation, use,
storage, transportation or disposal of Hazardous Materials, or (iii)
occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner
applicable to Company or any of its Subsidiaries or any of their respective
properties, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.), the
-- ---
Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.), the
-- ---
Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the
-- ---
Federal Water Pollution Control Act ( 33 U.S.C. (S) 1251 et seq.), the
-- ---
Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control
-- ---
Act (15 U.S.C. (S) 2601 et seq.), the Federal Insecticide, Fungicide and
-- ---
Rodenticide Act (7 U.S.C. (S)136 et seq.), the Occupational Safety and
-- ---
Health Act (29 U.S.C. (S) 651 et seq.) and the Emergency Planning and
-- ---
Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), each as amended
-- ---
or supplemented, and any future or present local, state and federal
statutes and regulations promulgated pursuant thereto.
12
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA AFFILIATE", as applied to any Person, means (i) any
corporation which is a member of a controlled group of corporations within
the meaning of Sec tion 414(b) of the Internal Revenue Code of which that
Person is a member; (ii) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue
Code of which that Person is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is
a member. Any former ERISA Affiliate of Company shall continue to be
considered an ERISA Affiliate within the meaning of this definition with
respect to the period such entity was an ERISA Affiliate of Company and
with respect to liabilities arising after such period for which Company
could be liable under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice
to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the failure to make by its
due date a required installment under Section 412(m) of the Internal
Revenue Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA
of a notice of intent to terminate such plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the withdrawal by Company or
any of its ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan resulting
in liability pursuant to Section 4062(e) or 4063 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition which might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on Company
or any of its ERISA Affiliates pursuant to Section 4064 or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by Company or any of its ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)
from any Multiemployer Plan if there is any potential liability therefor,
or the receipt by Company or any of its ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of
an act or omission which could give rise to the imposition on Company or
any of its ERISA Affiliates of fines, penalties, taxes or related charges
under Chapter 43 of the Internal Revenue Code or under Section 409 or
502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the assertion
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<PAGE>
of a material claim (other than routine claims for benefits or for a
qualified domestic relations order) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against Company or any
of its ERISA Affiliates in connection with any such Employee Benefit Plan;
(x) receipt from the Internal Revenue Service of notice of a final
determination of the failure of any Pension Plan (or any other Employee
Benefit Plan intended to be qualified under Section 401(a) of the Internal
Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code,
or the failure of any trust forming part of any Pension Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.
"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXISTING FACILITY" means the loan agreement dated November 5, 1992
(as amended and restated) made between Company, the Lenders party to the
agreement and CIBC, as Agent.
"EXISTING LETTERS OF CREDIT" means letters of credit described in
Schedule 1.1B, issued under the Existing Facility and outstanding on the
-------------
Closing Date.
"EXISTING MORTGAGES" means any mortgage, deed of trust or deed to
secure debt securing the Specified Indebtedness including any amendments,
modifications, restatements or assignments thereof.
"FACILITIES" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or heretofore owned, leased or operated by Company or any of
its Subsidiaries or any of their respective predecessors or Affiliates.
"FAR WEST DIVISION" means the cooking and restaurant kitchen
equipment manufacturing division of the Company.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
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<PAGE>
quotations for such day on such transactions received by Administrative
Agent from three Federal funds brokers of recognized standing selected by
Administrative Agent.
"FISCAL QUARTER" means the periods described in Schedule 1.1C.
-------------
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries
ending on the last Sunday of December of each calendar year.
"FUNDING AND PAYMENT OFFICE" means the office of the New York Agency
of CIBC located at (i) 425 Lexington Avenue, New York, New York 10017 as
long as CIBC is Administrative Agent and Swing Line Lender or (ii) the
address specified in a written notice to Company and Lenders by any
successor Administrative Agent and Swing Line Lender.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, in each case as the same are applicable to
the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from
any federal, state or local governmental authority, agency or court.
"GSCP" has the meaning assigned to that term in the introduction to
this Agreement.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance
at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "restricted hazardous waste", "infectious waste",
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws pursuant thereto;
(ii) any oil, petroleum, petroleum fraction or petroleum derived substance;
(iii) any drilling fluids, produced waters and other wastes associated with
the exploration, development or production of crude oil, natural gas or
geothermal resources; (iv) any flammable substances or explosives; (v) any
radioactive materials; (vi) asbestos in any form; (vii) urea formaldehyde
foam insulation; (viii) polychlorinated biphenyls; (ix) pesticides; and (x)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or which may or could
15
<PAGE>
pose a hazard to the health and safety of the owners, occupants or any
Persons in the vicinity of the Facilities.
"INDEBTEDNESS", as applied to any Person, means, without
duplication, (i) all indebtedness for borrowed money, (ii) that portion of
obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP, (iii) notes payable
and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, and (iv) any obligation owed
for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA and obligations under
Permitted Earnout Agreements), which purchase price is (a) due more than
twelve months from the date of incurrence of the obligation in respect
thereof or (b) evidenced by a note or similar written instrument.
Obligations under Interest Rate Agreements and Currency Agreements
constitute Contingent Obligations and not Indebtedness.
"INDEMNIFIED ENVIRONMENTAL CLAIM" has the meaning assigned to that
term in subsection 6.9.
"INDEMNITEE" has the meaning assigned to that term in subsection
10.3.
"INITIAL PERIOD" means the earlier of (i) the 30th day following the
Closing Date or (ii) the Commitments date on which the Syndication Agent
(using its reasonable discretion) notifies Company that syndication of the
Loans has been completed.
"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Company and its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise),
business or operations of Company and its Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate
Loan, each March 15, June 15, September 15 and December 15 of each year,
commencing on the first such date to occur after the Closing Date, and (ii)
with respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each Interest
--------
Period of six months "Interest Payment Date" shall also include the date
that is three months after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.
"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 Company or any of its
Subsidiaries against fluc tuations in interest rates.
16
<PAGE>
"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or
indirect redemption, retirement, purchase or other acquisition for value,
by any Subsidiary of Company from any Person other than Company or any of
its Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any
direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expendi tures in the ordinary course of business) or capital contribution
by Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not
current assets or did not arise either from sales to that other Person in
the ordinary course of business or from obligations arising in connection
with development projects funded by customers of Company. The amount of any
Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases
in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"ISSUING LENDER" means, with respect to any Letter of Credit, the
Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
--------
considered to be a Joint Venture to which such Person is a party.
"LENDER" and "LENDERS" means the persons identified as "Lenders"
and listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1 and the term
"Lenders" shall include the Swing Line Lender unless the context
otherwise requires; provided that the term "Lenders", when used in the
--------
context of a particular Commitment, shall mean Lenders having that
Commitment.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means letters of credit
issued or to be issued by Issuing Lender for the account of Company
pursuant to subsection 3.1.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding plus (ii) the aggregate amount of all drawings under Letters of
----
Credit honored by Issuing Lender and not theretofore
17
<PAGE>
reimbursed by Company (including any such reimbursement out of the proceeds
of Revolving Loans pursuant to subsection 3.3B).
"LEVERAGE RATIO" has the meaning assigned to that term in subsection
7.6B.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, any
Uniform Commercial Code financing statement and any agreement to give any
security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Acquisition Loans, Term
Loans, Revolving Loans or Swing Line Loans or any combination thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of Issuing Lender
relating to, the Letters of Credit), the Collateral Documents, Currency
Agreements, or Interest Rate Agreements entered into between Company and a
Lender and/or its Affiliates and any document executed and delivered by
Company or a Subsidiary pursuant to subsection 6.10, 6.11 or 6.12.
"LOAN PARTY" means each of Company and any of Company's Subsidiaries
from time to time executing a Loan Document, and "LOAN PARTIES" means all
such Persons, collectively.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon
the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company and its Subsidiaries, taken as a whole
or (ii) the impairment of the ability of Company to perform, or of
Administrative Agent or Lenders to enforce, the Obligations.
"MATERIAL SUBSIDIARY" shall mean a Subsidiary that, as of the end of
the most recent fiscal quarter accounted for 5% or more of the Company's
consolidated (i) total assets, (ii) shareholders' equity or (iii) operating
income (calculated for the four most recent fiscal quarters), determined in
each case in accordance with GAAP.
"MORTGAGE" means an instrument (whether designated as a deed of
trust, a trust deed or a mortgage or by any similar title) executed and
delivered by Company and Administrative Agent in substantially in the form
of Exhibit XV annexed hereto encumbering a fee or leasehold interest in
----------
Real Property Assets, as such instrument may be amended, supplemented or
otherwise modified from time to time, and "Mortgages" means all such
instruments, including the Closing Date Mortgages (as defined in subsection
4.1B) and any Additional Mortgages, collectively.
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<PAGE>
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, (i) to which Company or any of its ERISA Affiliates
is contributing or has an obligation to contribute, (ii) to which Company
or any of its then ERISA Affiliates or its current ERISA Affiliates has
contributed or had an obligation to contribute and with respect to which
Company or any of its current ERISA Affiliates has any potential or
outstanding liability, or (iii) to which neither Company nor any of its
ERISA Affiliates has directly contributed or had an obligation to
contribute, but with respect to which Company or any of its ERISA
Affiliates has any potential or outstanding liability solely as a result of
the application of Section 4001(b)(1) of ERISA and the regulations
thereunder.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs of sale including
(i) taxes reasonably estimated to be actually payable as a result of such
Asset Sale within two years of the date of such Asset Sale, (ii) payment of
the outstanding principal amount of, premium or penalty, if any, and
interest on any Indebtedness (other than the Loans) that is secured by a
Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale, (iii) reasonable
reserves taken by Company in accordance with GAAP against any liabilities
(actual or contingent) associated with the assets subject to the Asset Sale
retained by Company as determined (in the case of any such reserves in
excess of $1,000,000) by the Board of Directors of Company in its
reasonable good faith judgment and evidenced by a resolution of the Board
of Directors, and (iv) reasonable employee termination costs payable in
connection with such Asset Sale; provided, that any reduction in such
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reserve will be treated for all purposes of this Agreement as a new Asset
Sale at the time of such reduction with Net Cash Proceeds equal to the
amount of such reduction.
"NET INSURANCE/CONDEMNATION PROCEEDS" means any Cash payments or
proceeds received by Company or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered
loss thereunder or (ii) as a result of the taking of any assets of Company
or any of its Subsidiaries by any Person pursuant to the power of eminent
domain, condemnation or otherwise, or pursuant to a sale of any such assets
to a purchaser with such power under threat of such a taking, in each case
net of any actual and reasonable documented costs incurred by Company or
any of its Subsidiaries in connection with the adjustment or settlement of
any claims of Company or such Subsidiary in respect thereof.
"NOTES" means one or more of the Acquisition Loan Notes, Term Loan
Notes, Revolving Notes or Swing Line Note or any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent
---------
pursuant to subsection 2.1B with respect to a proposed borrowing.
19
<PAGE>
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to
----------
Administrative Agent pursuant to subsection 2.2D with respect to a proposed
conversion or continuation of the applicable basis for determining the
interest rate with respect to the Loans specified therein.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of Exhibit III annexed hereto delivered by
-----------
Company to Administrative Agent pursuant to subsection 3.1B(i) with respect
to the proposed issuance of a Letter of Credit.
"OBLIGATIONS" means all obligations of every nature of Company or
any Subsidiary from time to time owed to Administrative Agent, Syndication
Agent, Arranging Agent or Lenders or any of them under the Loan Documents,
whether for principal, interest, reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the
board (if an officer) or its president or one of its vice presidents and by
its chief financial officer or its treasurer; provided that every Officers'
--------
Certificate with respect to the compliance with a condition precedent to
the making of any Loans hereunder shall include (i) a statement that the
officer or officers making or giving such Officers' Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion
as to whether or not such condition has been complied with, and (iii) a
statement as to whether, in the opinion of the signers, such condition has
been complied with.
"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.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a Multi
employer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ACQUISITIONS" means the acquisition (whether by means of
equity or asset purchase acquisition) by Company 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 after
giving effect to such acquisition, Company and its Subsidiar ies shall be
in compliance, on a Pro Forma Basis, with the financial covenants as
required under
20
<PAGE>
subsection 7.6E of this 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 and (y) any other agreement by Company 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) 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.
"PERMITTED ENCUMBRANCES" means the following types of Liens or
defects in title (other than any such Lien imposed pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not, at the time, required by
subsection 6.3;
(ii) statutory Liens of landlords and Liens of carriers,
warehouse men, 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 workers' compensation, unemployment
insurance and other types 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 under subsection 8.8;
(v) leases or subleases granted to others not interfering in
any material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries;
(vi) easements, rights-of-way, licenses, covenants, conditions,
restrictions, zoning requirements, minor defects, encroachments or
irregulari ties in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries at the Real Property
Assets subject to such Lien;
21
<PAGE>
(vii) any (a) interest or title of a lessor or sublessor 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 UCC financing statements
relating solely to leases permitted by this Agreement;
(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 therefore and as long
as such Lien remains unperfected;
(x) Liens in favor of customs and revenue 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 Company's historical practices;
(xii) with respect to any Real Property Asset in which the
Company owns a leasehold estate, 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 in the county where
such Real Property Asset is located other than any defect or
encumbrance created or suffered by the Company; and
(xiii) the effect of any eminent domain or condemnation
proceedings.
"PERMITTED FOREIGN JOINT VENTURE INVESTMENT" means the Investment by
Company in the proposed Joint Venture in Asia; provided that, (i) the joint
--------
venture interest shall be at least 10%, (ii) the aggregate investment by
Company shall not exceed $30,000,000 and the Investment made by Company in
any Fiscal Year shall not exceed $10,000,000, and (iii) the businesses of
the Joint Venture shall consist of the development and operation of "quick
service restaurants" in Asia using Company's brands.
"PERSON" means and includes natural persons, corporations, limited
partner ships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"PREFERRED STOCK" means all issued and outstanding shares of
cumulative exchangeable, redeemable 10% Preferred Stock of Company.
22
<PAGE>
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"PRIME RATE" means the rate that CIBC announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. CIBC or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"PRO FORMA BASIS" has the meaning assigned that term in subsection
7.6D.
"PRO RATA SHARE" means (i) with respect to all payments,
computations and other matters relating to the Acquisition Facility
Commitment or the Acquisition Loans of any Lender, the percentage obtained
by dividing (a) the Acquisition Loan Exposure of that Lender by (b) the
-------- --
aggregate Acquisition Loan Exposure of all Lenders, (ii) with respect to
all payments, computations and other matters relating to the Term Loan
Commitment or the Term Loan of any Lender, the percentage obtained by
dividing (a) the Term Loan Exposure of that Lender by (b) the aggregate
-------- --
Term Loan Exposure of all Lenders, (iii) with respect to all payments,
computations and other matters relating to the Revolving Loan Commitment or
the Revolving Loans of any Lender or any Letters of Credit issued or
participations therein purchased by any Lender, or any participations in
any Swing Line Loan purchased by any Lender, the percentage obtained by
dividing (a) the Revolving Loan Exposure of that Lender by (b) the
-------- --
aggregate Revolving Loan Exposure of all Lenders, and (iv) for all other
purposes with respect to each Lender, the percentage obtained by dividing
--------
(a) the sum of the Acquisition Loan Exposure of that Lender plus the Term
----
Loan Exposure of that Lender plus the Revolving Loan Exposure of that
----
Lender by (b) the sum of the aggregate Acquisition Loan Exposure of all
--
Lenders plus the aggregate Term Loan Exposure of all Lenders plus the
---- ----
aggregate Revolving Loan Exposure of all Lenders, in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
subsection 10.1. The initial Pro Rata Share of each Lender for purposes of
each of clauses (i), (ii), (iii) and (iv) of the preceding sentence is set
forth opposite the name of that Lender in Schedule 2.1 annexed hereto.
------------
"REAL PROPERTY ASSETS" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation
thereof, in each case owned or leased (as lessee) by Company or any of its
Subsidiaries.
"REFINANCINGS" means, collectively, (i) the purchase by Company of
all of the outstanding Preferred Stock for an aggregate purchase price not
to exceed $63,000,000 and (ii) the refinancing by Company of all Specified
Indebtedness.
"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(iv).
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
23
<PAGE>
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"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 Persons other than Company
or a Wholly Owned Subsidiary of Company 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 Company to remit to Company
or waive any dividends or distributions paid or payable in respect of such
shares.
"REIMBURSEMENT DATE" has the meaning assigned to that term in subsec
tion 3.3B.
"RELATED PLANT" means any plant or facility that is or is intended
to be used by Company or any of its Subsidiaries in connection with the
businesses permitted under subsection 7.14.
"RELEASE" means any release or any threatened release, spill,
emission, leaking, pumping, pouring, injection, escaping, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Materials into the indoor or outdoor environment (including, without
limitation, the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or into or out of
any Facility, including the movement of any Hazardous Material through the
air, soil, surface water, groundwater or property.
"REQUISITE LENDERS" means, at any time, (i) Lenders having or
holding not less than 51% of the sum of (x) the aggregate Acquisition Loan
Exposure plus (y) the aggregate Term Loan Exposure plus (z) the aggregate
---- ----
Revolving Loan Exposure.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Company now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class, (ii)
any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class
of stock of Company now or hereafter outstanding, (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of Company now or
hereafter outstanding, and (iv) any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in-substance or legal defeasance), sinking fund or
similar payment with respect to, the Unsecured Subordinated Notes.
24
<PAGE>
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(iii), and
"REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means June 30, 2002.
"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the termination of the Revolving
Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after
the termination of the Revolving Loan Commitments, the sum of (a) the
aggregate outstanding principal amount of the Revolving Loans of that
Lender plus (b) in the event that Lender is an Issuing Lender, the
----
aggregate Letter of Credit Usage in respect of all Letters of Credit issued
by that Lender (in each case net of any participations purchased by other
Lenders in such Letters of Credit or any unreimbursed drawings thereunder)
plus (c) the aggregate amount of all participations purchased by that
----
Lender in any outstanding Letters of Credit or any unreimbursed drawings
under any Letters of Credit plus (d) in the case of Swing Line Lender, the
----
aggregate outstanding principal amount of all Swing Line Loans (net of any
participations therein purchased by other Lenders) plus (e) the aggregate
----
amount of all participations purchased by that Lender in any outstanding
Swing Line Loans.
"REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(iii).
"REVOLVING NOTES" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E(c) on the Closing Date and (ii) any promissory
notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the Revolving Loan Commitments
and Revolving Loans of any Lenders, in each case substantially in the form
of Exhibit IV-C annexed hereto, as they may be amended, supplemented or
------------
otherwise modified from time to time.
"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 inter
est, 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.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SOLVENT" means, with respect to any Person, that as of the date of
determina tion both (i) (a) the then fair saleable value of the property of
such Person is (1) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (2) not less than the amount
that will be required to pay the probable liabilities on such Person's
25
<PAGE>
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to
such Person; (b) such Person's capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction; and
(c) such Person does not intend to incur, or believe (nor should it
reasonably believe) that it will incur, debts beyond its ability to pay
such debts as they become due; and (ii) such Person is "solvent" within the
meaning given that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition, the
amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
"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 the Company's "turnkey" development
programs, (iii) sales, leases or transfers of franchises and related assets
and properties repossessed or reacquired by the Company 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 the Company'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 the Company 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 the Company in the case of transactions
having a fair market value in excess of $1,000,000) in the ordinary course
of business and (vi) the Far West Division and (vii) sales of restaurant
related properties in connection with a market relocation program.
"SPECIFIED INDEBTEDNESS" means (i) the Existing Facility and (ii)
other Indebtedness of Company and its Subsidiaries outstanding on the
Closing Date described in Schedule 1.1A.
-------------
"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.
"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that executes
and delivers a counterpart of the Subsidiary Guaranty on the Closing Date
or from time to time thereafter pursuant to subsection 6.10.
26
<PAGE>
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and
delivered by existing Subsidiaries of Company on the Closing Date and to be
executed and delivered by additional Subsidiaries of Company from time to
time thereafter in accordance with subsection 6.10, substantially in the
form of Exhibit XVIII annexed hereto, as such Subsidiary Guaranty may
-------------
hereafter be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing
Date or executed and delivered by any additional Subsidiary Guarantor from
time to time thereafter in accordance with subsection 6.10, in each case
substantially in the form of Exhibit XIX annexed hereto, as such Subsidiary
-----------
Pledge Agreement may be amended, supplemented or otherwise modified from
time to time, and "SUBSIDIARY PLEDGE AGREEMENTS" means all such
Subsidiary Pledge Agreements, collectively.
"SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary
Guarantor from time to time thereafter in accordance with subsection 6.10,
in each case substantially in the form of Exhibit XX annexed hereto, as
----------
such Subsidiary Security Agreement may be amended, supplemented or
otherwise modified from time to time, and "SUBSIDIARY SECURITY
AGREEMENTS" means all such Subsidiary Security Agreements, collectively.
"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means each Subsidiary
Trademark Security Agreement executed and delivered by an existing
Subsidiary Guarantor on the Closing Date or executed and delivered by any
additional Subsidiary Guarantor from time to time thereafter in accordance
with subsec tion 6.10, in each case substantially in the form of Exhibit
-------
XVII annexed hereto, as such Subsidiary Trademark Security Agreement may be
----
amended, supplemented or otherwise modified from time to time, and
"SUBSIDIARY TRADEMARK SECURITY AGREEMENTS" means all such Subsidiary
Trademark Security Agreements, collectively.
"SWING LINE LENDER" means CIBC or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender
hereunder.
"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line
Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(iv).
"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(iv).
"SWING LINE NOTE" means any promissory note of Company issued
pursuant to subsection 2.1E to evidence the Swing Line Loans of Swing Line
Lender, substantially in the form of Exhibit IV-D annexed hereto, as it may
------------
be amended, supplemented or otherwise modified from time to time.
27
<PAGE>
"SYNDICATION AGENT" means GSCP in its capacity as syndication agent.
"TAX" or "TAXES" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "TAX ON THE OVERALL NET
--------
INCOME" of a Person shall be construed as a reference to a tax imposed by
the jurisdiction in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person is
deemed to be doing business on all or part of the net income, profits or
gains of that Person (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise).
"TERM LOAN COMMITMENT" means the commitment of a Lender to make Term
Loans to the Company pursuant to subsection 2.1A(ii) and "TERM LOAN COMMIT
MENTS" means such commitments of all Lenders in the aggregate.
"TERM LOAN EXPOSURE" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Term Loan
Commitments, that Lender's Term Loan Commitment and (ii) after the
termination of the Term Loan Commitments, the sum of the aggregate
outstanding principal amount of the Term Loans of that Lender.
"TERM LOAN NOTES" means (i) the promissory notes of the Company
issued pursuant to subsection 2.1E(b) on the Closing Date and (ii) any
promissory notes issued by the Company pursuant to subsection 9.1B(i) in
connection with assignments of the Term Loan Commitments or Term Loans, in
each case substantially in the form of Exhibit IV-B annexed hereto, as they
------------
may be amended, restated, supplement ed or otherwise modified from time to
time.
"TERM LOANS" means the Loans made by Lenders to the Company pursuant
to subsection 2.1A(ii).
"TITLE COMPANY" means First American Title Insurance Company or such
other reputable title insurance company reasonably satisfactory to the
Administrative Agent.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the
purpose of repaying any Refunded Swing Line Loans or reimbursing the
applicable Issuing Lender for any amount drawn under any Letter of Credit
but not yet so applied) plus (ii) the aggregate principal amount of all
----
outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.
----
"TRANSACTION COSTS" means the call premiums, fees, costs and
expenses payable by Company pursuant hereto and other fees, costs and
expenses payable by Company in connection with (i) the Refinancings, (ii)
the issuance of the Unsecured Subordinated Notes and (iii) the execution
and delivery of this Agreement and related documents.
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"UNSECURED SUBORDINATED NOTE INDENTURE" means the indenture pursuant
to which the Unsecured Subordinated Notes will be issued, in the form
delivered as of the Closing Date pursuant to subsection 4.1E, as such
indenture may be amended from time to time to the extent permitted under
subsection 7.15.
"UNSECURED SUBORDINATED NOTES" means the $175,000,000 aggregate
principal amount of Company's 10-1/4% senior subordinated notes due 2007 to
be 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.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
------------------------------------------------------------------------
AGREEMENT.
---------
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Company to Lenders pursuant to clauses (i), (ii), (iii) and (xiii)
of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements provided for in subsection 6.1(v)). Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles in conformity with those used to prepare the financial
statements referred to in subsection 5.3.
1.3 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.
-------------------------------------------------
A. COMMITMENTS. Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Company herein set forth,
each Lender hereby severally agrees to make the Loans described in subsections
2.1A(i), 2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the
Loans described in subsection 2.1A(iv).
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(i) Acquisition Loans. Each Lender having an Acquisition Facility
-----------------
Commitment severally agrees to lend to Company from time to time during the
period from the Closing Date to the second anniversary of the Closing Date
an aggregate amount not exceeding its Pro Rata Share of the aggregate
amount of the Acquisition Facility Commitments to be used for the purposes
identified in subsec tion 2.5A. The amount of each Lender's Acquisition
Facility Commitment is set forth opposite its name on Schedule 2.1 annexed
------------
hereto and the aggregate amount of the Acquisition Facility Commitments is
$100,000,000; provided that the Acquisition Facility Commitments of Lenders
--------
shall be adjusted to give effect to any assignments of the Acquisition
Facility Commitments pursuant to subsection 10.1B; provided further that
-------- -------
the amount of the Acquisition Facility Commitment shall be reduced from
time to time by the amount of any reductions thereto made pursuant to
subsections 2.4B. Each Lender's Acquisition Facility Commitment shall
expire immediately and without further action on June 30, 1997 if the Term
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(i) may be repaid and reborrowed through the second
anniversary of the Closing Date.
(ii) Term Loans. Each Lender having a Term Loan Commitment severally
----------
agrees to lend to Company on the Closing Date an amount not exceeding its
Pro Rata Share of the aggregate amount of the Term Loan Commitments to be
used for the purposes identified in subsection 2.5B. The amount of each
Lender's Term Loan Commitment is set forth opposite its name on Schedule
--------
2.1 annexed hereto and the aggregate amount of the Term Loan Commitments is
---
$50,000,000; provided that the Commitments of Lenders shall be adjusted to
--------
give effect to any assignments of the Term Loan Commitments pursuant to
subsection 10.1B. Each Lender's Commit ment shall expire immediately and
without further action on June 30, 1997 if the Term Loans are not made on
or before that date. Company may make only one borrowing under the Term
Loan Commitment which must be in the full amount of the Term Loan
Commitment. Amounts borrowed under this subsection 2.1A(ii) and
subsequently repaid or prepaid may not be reborrowed.
(iii) Revolving Loans. Each Lender having a Revolving Loan Commitment
---------------
severally agrees, subject to the limitations set forth below with respect
to the maximum amount of Revolving Loans permitted to be outstanding from
time to time, to lend to Company from time to time during the period from
the Closing Date to but excluding June 30, 2002 an aggregate amount not
exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan
Commitments to be used for the pur poses identified in subsection 2.5C. The
original amount of each Lender's Revolving Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate original
------------
amount of the Revolving Loan Commitments is $25,000,000; provided that the
--------
Revolving Loan Commitments of Lenders shall be adjusted to give effect to
any assignments of the Revolving Loan Commitments pursuant to subsection
10.1B; and provided, further that the amount of the Revolving Loan
-------- -------
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsection 2.4B. Each Lender's
Revolving Loan Commitment shall expire on June 30, 2002 and all Revolving
Loans and
30
<PAGE>
all other amounts owed hereunder with respect to the Revolving Loans and
the Revolving Loan Commitments shall be paid in full no later than that
date; provided that each Lender's Revolving Loan Commitment shall expire
--------
immediately and without further action on June 30, 1997 if the Term Loans
are not made on or before that date. Amounts borrowed under this subsection
2.1A(iii) may be repaid and reborrowed to but excluding June 30, 2002.
Anything contained in this Agreement to the contrary notwithstanding
in no event shall the Total Utilization of Revolving Loan Commitments at
any time exceed the Revolving Loan Commitments then in effect;
(iv) Swing Line Loans. Swing Line Lender hereby agrees, subject to
----------------
the limitations set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Company from time to time
during the period from the Closing Date to but excluding June 30, 2002 by
making Swing Line Loans to Company in an aggregate amount not exceeding the
amount of the Swing Line Loan Commitment to be used for the purposes
identified in subsection 2.5C, notwithstanding the fact that such Swing
Line Loans, when aggregated with Swing Line Lender's outstanding Revolving
Loans and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage
then in effect, may exceed Swing Line Lender's Revolving Loan Commitment.
The original amount of the Swing Line Loan Commitment is $5,000,000;
provided that any reduction of the Revolving Loan Commitments made pursuant
--------
to subsection 2.4A(iii), 2.4B(ii) or 2.4B(iii) which reduces the aggregate
Revolving Loan Commitments to an amount less than the then current amount
of the Swing Line Loan Commitment shall result in an automatic
corresponding reduction of the Swing Line Loan Commitment to the amount of
the Revolving Loan Commitments, as so reduced, without any further action
on the part of Company, Agent or Swing Line Lender. The Swing Line Loan
Commitment shall expire on June 30, 2002 and all Swing Line Loans and all
other amounts owed hereunder with respect to the Swing Line Loans shall be
paid in full no later than that date; provided that the Swing Line Loan
--------
Commitment shall expire immediately and without further action on June 30,
1997 if the Term Loans are not made on or before that date. Amounts
borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to
but excluding June 30, 2002.
Anything contained in this Agreement to the contrary notwithstanding,
the Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Company), no later than 10:00 A.M. (New York time) on
the first Business Day in advance of the proposed Funding Date, a notice
(which shall be deemed to be a Notice of Borrowing
31
<PAGE>
given by Company) requesting Lenders to make Revolving Loans that are Base
Rate Loans on such Funding Date in an amount equal to the amount of such
Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date
such notice is given which Swing Line Lender requests Lenders to prepay.
Anything contained in this Agreement to the contrary notwithstanding, (i)
the proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing Line
Lender (and not to Company) and applied to repay a corresponding portion of
the Refunded Swing Line Loans and (ii) on the day such Revolving Loans are
made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans
shall be deemed to be paid with the proceeds of a Revolving Loan made by
Swing Line Lender, and such portion of the Swing Line Loans deemed to be so
paid shall no longer be outstanding as Swing Line Loans and shall no longer
be due under the Swing Line Note, if any, of Swing Line Lender but shall
instead constitute part of Swing Line Lender's outstanding Revolving Loans
and shall be due under the Revolving Note, if any, of Swing Line Lender.
Company hereby authorizes Administrative Agent and Swing Line Lender to
charge Company's accounts with Administrative Agent and Swing Line Lender
(up to the amount available in each such account) in order to immediately
pay Swing Line Lender the amount of the Refunded Swing Line Loans to the
extent the proceeds of such Revolving Loans made by Lenders, including the
Revolving Loan deemed to be made by Swing Line Lender, are not sufficient
to repay in full the Refunded Swing Line Loans. If any portion of any such
amount paid (or deemed to be paid) to Swing Line Lender should be recovered
by or on behalf of Company from Swing Line Lender in bankruptcy, by
assignment for the benefit of creditors or otherwise, the loss of the
amount so recovered shall be ratably shared among all Lenders in the manner
contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the request of
Swing Line Lender as provided in the immediately preceding paragraph in an
amount sufficient to repay any amounts owed to Swing Line Lender in respect
of any outstanding Swing Line Loans or (b) the Revolving Loan Commitments
are terminated at a time when any Swing Line Loans are outstanding, each
Lender shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans in an amount equal to
its Pro Rata Share (calculated, in the case of the foregoing clause (b),
immediately prior to such termination of the Revolving Loan Commitments) of
the unpaid amount of such Swing Line Loans together with accrued interest
thereon. Upon one Business Day's notice from Swing Line Lender, each Lender
shall deliver to Swing Line Lender an amount equal to its respective
participation in same day funds at the Funding and Payment Office. In order
to further evidence such participation (and without prejudice to the
effective ness of the participation provisions set forth above), each
Lender agrees to enter into a separate participation agreement at the
request of Swing Line Lender in form and substance reasonably satisfactory
to Swing Line Lender. In the event any Lender fails to make available to
Swing Line Lender the amount of such Lender's participation as provided in
this paragraph, Swing Line Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors among
banks for three Business Days
32
<PAGE>
and thereafter at the Base Rate. In the event Swing Line Lender receives a
payment of any amount in which other Lenders have purchased participations
as provided in this paragraph, Swing Line Lender shall promptly distribute
to each such other Lender its Pro Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including (a) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against Swing Line Lender, Company or any other
Person for any reason whatsoever; (b) the occurrence or continuation of an
Event of Default or a Potential Event of Default; (c) any adverse change in
the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company or any of its Subsidiaries; (d) any
breach of this Agreement or any other Loan Document by any party thereto;
or (e) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing; provided that such obligations of each
--------
Lender are subject to the condition that (X) Swing Line Lender believed in
good faith that all conditions under Section 4 to the making of the
applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as
the case may be, were satisfied at the time such Refunded Swing Line Loans
or unpaid Swing Line Loans were made or (Y) the satisfaction of any such
condition not satisfied had been waived in accordance with subsection 10.6
prior to or at the time such Refunded Swing Line Loans or other unpaid
Swing Line Loans were made.
B. BORROWING MECHANICS. Loans made on any Funding Date (other than
Revolving Loans made pursuant to a request by Swing Line Lender pursuant to
subsection 2.1A(iv) for the purpose of repaying any Refunded Swing Line Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
Issuing Lender for the amount of a drawing under a Letter of Credit issued by
it) shall be in an aggregate minimum amount of $5,000,000 and integral multiples
of $1,000,000 in excess of that amount. Swing Line Loans made on any Funding
Date shall be in an aggregate minimum amount of $500,000 and integral multiples
of $100,000 in excess of that amount. Whenever Company desires that Lenders make
Loans it shall deliver to Administrative Agent a Notice of Borrowing no later
than 12:00 Noon (New York time) at least three Business Days in advance of the
proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one
Business Day in advance of the proposed Funding Date (in the case of a Base Rate
Loan). Whenever Company desires that Swing Line Lender make a Swing Line Loan,
it shall deliver to Administrative Agent a Notice of Borrowing no later than
12:00 Noon (New York City time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing
Line Loans, that such Loans shall be Base Rate Loans, (iv) in the case of
Acquisition Loans, Term Loans and Revolving Loans, whether such Loans shall be
Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans
requested to be made as Eurodollar Rate Loans, the initial Interest Period
requested therefor;
33
<PAGE>
provided that in respect of any Loans made during the Initial Period, such Loans
- --------
shall be Base Rate Loans. Loans may be continued as or converted into Base Rate
Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In
lieu of delivering the above-described Notice of Borrowing, Company may give
Administrative Agent telephonic notice by the required time of any proposed
borrowing under this subsection 2.1B; provided that such notice shall be
--------
promptly confirmed in writing by delivery of a Notice of Borrowing to
Administrative Agent on or before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination Date,
and Company shall be bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. All Acquisition Loans, Term Loans and
Revolving Loans under this Agreement shall be made by Lenders simultaneously and
proportionately to their respective Pro Rata Shares, it being understood that no
Lender shall be responsible for any default by any other Lender in that other
Lender's obligation to make a Loan requested hereunder nor shall the Commitment
of any Lender to make the particular type of Loan requested be increased or
decreased as a result of a default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder. Promptly after receipt by
Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), Administrative Agent shall notify each
Lender, or Swing Line Lender, as the case may be, of the proposed borrowing.
Each Lender shall make the amount of its Loan available to Administrative Agent
not later than 12:00 Noon (New York City time) on the applicable Funding Date,
and Swing Line Lender shall make the amount of its Swing Line Loan available to
Administrative Agent not later than 2:00 p.m. (New York time) on the applicable
Funding Date, in each case in same day funds in Dollars, at the Funding and
Payment Office. Except as provided in subsection 2.1A(v) or subsection 3.3B
with respect to Revolving Loans used to repay refunded Swing Line Loans or to
reimburse Issuing Lender for the amount of a drawing under a Letter of Credit
issued by it, upon satisfaction or waiver of the conditions precedent specified
in subsections 4.1 (in the case of Loans made on the Closing Date) and 4.2 (in
the case of all
34
<PAGE>
Loans), Administrative Agent shall make the proceeds of such Loans available to
Company on the applicable Funding Date by causing an amount of same day funds in
Dollars equal to the proceeds of all such Loans received by Administrative Agent
from Lenders, or Swing Line Lender, as the case may be, to be credited to the
account of Company at the Funding and Payment Office.
Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.
D. THE REGISTER.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from time
to time (the "REGISTER"). The Register shall be available for inspection by
Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitments and Loans from time to time of each Lender, the Swing Line Loan
Commitment and the Swing Line Loans from time to time of Swing Line Lender,
and each repayment or prepayment in respect of the principal amount of the
Loans of each Lender or the Swing Line Loans of Swing Line Lender. Any such
recordation shall be conclusive and binding on Company and each Lender,
absent manifest error; provided that failure to make any such recordation,
--------
or any error in such recordation, shall not affect Company's Obligations in
respect of the applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, any Notes held by such Lender) the amount of each Loan
made by it and each
35
<PAGE>
payment in respect thereof. Any such recordation shall be conclusive and
binding on Company, absent manifest error; provided that failure to make
--------
any such recordation, or any error in such recordation, shall not affect
Company's Obligations in respect of the applicable Loans; and provided,
--------
further that in the event of any inconsistency between the Register and any
-------
Lender's records, the recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Commitment or Loan shall be owed to the Lender listed in the
Register as the owner thereof, and any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and
binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans.
(v) Company hereby designates Administrative Agent to serve as
Company's agent solely for purposes of maintaining the Register as provided
in this subsection 2.1D, and Company hereby agrees that, to the extent
Administrative Agent serves in such capacity, Administrative Agent and its
officers, directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 10.3.
E. NOTES. Company shall on the Closing Date execute to each Lender (or
to Administrative Agent for that Lender):
(a) an Acquisition Facility Note substantially in the form of
Exhibit IV-A annexed hereto to evidence that Lender's Acquisition
------------
Loans, in the principal amount of that Lender's Acquisition Facility
Commitment and with other appropriate insertions;
(b) a Term Loan Note substantially in the form of Exhibit IV-B
------------
annexed hereto to evidence that Lender's Term Loan, in the principal
amount of that Lender's Term Loan Commitment and with other
appropriate inser tions;
(c) a Revolving Note substantially in the form of Exhibit IV-C
------------
annexed hereto to evidence that Lender's Revolving Loans, in the
principal amount of that Lender's Revolving Loan Commitment and with
other appropriate insertions; and
(d) a Swing Line Note substantially in the form of Exhibit IV-D
------------
annexed hereto to evidence Swing Line Lender's Swing Line Loans, in
the principal amount of the Swing Line Loan Commitment and with other
appropriate insertions.
36
<PAGE>
Administrative Agent and Company may deem and treat the payee of any Note
as the owner thereof for all purposes hereof unless and until an Assignment
Agreement effecting the assignment or transfer thereof shall have been accepted
by Administrative Agent as provided in subsection 10.1B(ii). Any request,
authority or consent of any person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, assignee or transferee of that
Note or of any Note or Notes issued in exchange therefor.
2.2 INTEREST ON THE LOANS.
---------------------
A. RATE OF INTEREST. Subject to the provisions of subsections 2:1B, 2.6
and 2.7, each Loan, except for Swing Line Loans, shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
the Adjusted Eurodollar Rate. Subject to the provisions of subsection 2.7, each
Swing Line Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate. The applicable basis for determining
the rate of interest with respect to any Loan shall be selected by Company
initially at the time a Notice of Borrowing is given with respect to such Loan
pursuant to subsection 2.1B, and the basis for determining the interest rate
with respect to any Loan may be changed from time to time pursuant to subsection
2.2D. If on any day a Loan is outstanding with respect to which notice has not
been delivered to Administrative Agent in accordance with the terms of this
Agreement specifying the applicable basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by reference to the
Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Acquisition
Loans, the Term Loans and the Revolving Loans shall bear interest through
maturity as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
----
Applicable Margin; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Margin.
----
Subject to the provisions of subsections 2.2E and 2.7, the Swing Line
Loans shall bear interest through maturity at the sum of the Base Rate plus
----
the Applicable Margin.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
--------
that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a
37
<PAGE>
Eurodollar Rate Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Loan converted to a Eurodollar
Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any portion of the Loans
shall extend beyond June 30, 2002;
(vi) no Interest Period with respect to any portion of the Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal on such Loans unless the sum of (a) the aggregate
principal amount of such Loans that are Base Rate Loans plus (b) the
----
aggregate principal amount of such Loans that are Eurodollar Rate Loans
with Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on such Loan on such date;
(vii) there shall be no more than 10 Interest Periods outstanding at
any time; and
(viii) in the event Company fails to specify an Interest Period for
any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of
Conver sion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
--------
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).
38
<PAGE>
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Acquisition Loans or Term Loan or Revolving Loans equal to
$5,000,000 and integral multiples of $1,000,000 in excess of that amount from
Loans bearing interest at a rate determined by reference to one basis to Loans
bearing interest at a rate determined by reference to the alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate
Loan, to continue all or any portion of such Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate
Loan; provided, however, that (y) a Eurodollar Rate Loan may only be converted
--------- -------
into a Base Rate Loan on the expiration date of an Interest Period applicable
thereto and (z) no Loan may be converted from a Base Rate Loan to Eurodollar
Rate Loan during the Initial Period.
Company shall deliver a Notice of Conversion/Continuation to Administrative
Agent no later than 12:00 Noon (New York time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and type of the Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion to, or
a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and
(v) in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan, that no Potential Event of Default or Event of Default has occurred and is
continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic notice
by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to effect a conversion or continuation in accordance therewith.
E. POST-MATURITY INTEREST. Any principal payments on the Loans not paid
when due and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due, in
each case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest (including post-
39
<PAGE>
petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws whether or not allowed as a claim against Company
under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand
at a rate which is 2% per annum in excess of the interest rate otherwise payable
under this Agreement with respect to the applicable Loans (or, in the case of
any such fees and other amounts, at a rate which is 2% per annum in excess of
the interest rate otherwise payable under this Agreement for Base Rate Loans);
provided that, in the case of Eurodollar Rate Loans, upon the expiration of the
- --------
Interest Period in effect at the time any such increase in interest rate is
effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and
shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed on
the basis of a 360-day year, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan
to such Base Rate Loan, as the case may be, shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar
Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate
Loan, as the case may be, shall be excluded; provided that if a Loan is repaid
--------
on the same day on which it is made, one day's interest shall be paid on that
Loan.
2.3 FEES.
----
A. COMMITMENT FEES.
(i) Company agrees to pay to Administrative Agent, for distribution
to each Lender in proportion to that Lender's Pro Rata Share of the
Acquisition Facility Commitments, commitment fees for the period from and
including the Closing Date to and excluding the Second Anniversary of the
Closing Date equal to the average of the daily excess of the Acquisition
Facility Commitments, as then in effect, over the sum of the aggregate
principal amount of Acquisition Loans outstanding multiplied by the
-------------
Applicable Commitment Fee Percentage; and
(ii) Company agrees to pay to Administrative Agent, for distribution
to each Lender in proportion to that Lender's Pro Rata Share of the
Revolving Loan Commitments (other than Swing Line Loan Commitments),
commitment fees for the period from and including the Closing Date to and
excluding June 30, 2002 equal to the average of the daily excess of the
Revolving Loan Commitments over the aggregate principal amount
40
<PAGE>
of Revolving Loans outstanding (but not any Swing Line Loans outstanding)
multiplied by the Applicable Commitment Fee Percentage.
-------------
Such commitment fees to be calculated on the basis of a 360-day year and
the actual number of days elapsed and to be payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year, commencing on the
first such date to occur after the Closing Date and ending on June 30, 2002.
B. ADMINISTRATIVE AGENT FEE. Company agrees to pay to Administrative
Agent, an Administrative Agent's fee in the amount and at the times separately
agreed to by Administrative Agent and Company.
C. OTHER FEES. Company agrees to pay to Syndication Agent, Arranging
Agent and Administrative Agent such other fees in the amounts and at the times
separately agreed upon between Company, Syndication Agent, Arranging Agent and
Administrative Agent.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN COMMITMENTS; GENERAL PROVISIONS
-------------------------------------------------------------------------
REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS
----------------------------------------------------------------------
UNDER SUBSIDIARY GUARANTY.
-------------------------
A. SCHEDULED PAYMENTS OF ACQUISITION LOANS.
(i) Scheduled Payments of Acquisition Loans. Company shall make
---------------------------------------
principal payments on the Acquisition Loans in installments on the dates
and in amounts equal to the percentage of the aggregate amount of the
Acquisition Loans outstanding on the second anniversary of the Closing
Date, as set forth below:
<TABLE>
<CAPTION>
======================================
SCHEDULED
REPAYMENTS
OF ACQUISITION
DATE LOANS
======================================
<S> <C>
September 30, 1999 2.5%
--------------------------------------
December 31, 1999 2.5%
--------------------------------------
March 31, 2000 3.0%
--------------------------------------
June 30, 2000 3.0%
--------------------------------------
September 30, 2000 4.5%
--------------------------------------
December 31, 2000 4.5%
--------------------------------------
March 31, 2001 4.5%
--------------------------------------
June 30, 2001 4.5%
--------------------------------------
September 30, 2001 5.5%
--------------------------------------
December 31, 2001 5.5%
======================================
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
======================================
SCHEDULED
REPAYMENTS
OF ACQUISITION
DATE LOANS
======================================
<S> <C>
March 31, 2002 15.0%
--------------------------------------
June 30, 2002 45.0%
======================================
</TABLE>
; provided that the scheduled installments of principal of the Acquisition
--------
Loans provided for above shall be reduced in connection with any voluntary
or mandatory prepayments of the Acquisition Loans in accordance with
subsection 2.4B(iv); and provided further, that the Acquisition Loans and
-------- -------
all other amounts owed hereunder with respect to the Acquisition Loans
shall be paid in full no later than June 30, 2002 with respect thereto and
the final installment payable by Company in respect of the Acquisition
Loans on such date shall be in an amount, if such amount is different from
that provided for above, sufficient to repay all amounts owing by Company
under this Agreement with respect to the Acquisition Loans.
(ii) Scheduled Payments of Term Loan. Company shall make principal
-------------------------------
payments on the Term Loans in installments on the dates and in the amounts
set forth below:
<TABLE>
<CAPTION>
====================================
SCHEDULED
REPAYMENT OF
DATE TERM LOAN
====================================
<S> <C>
September 30, 1997 $1,000,000
------------------------------------
December 31, 1997 $1,000,000
------------------------------------
March 31, 1998 $1,250,000
------------------------------------
June 30, 1998 $1,250,000
------------------------------------
September 30, 1998 $1,250,000
------------------------------------
December 31, 1998 $1,250,000
------------------------------------
March 31, 1999 $2,000,000
------------------------------------
June 30, 1999 $2,000,000
------------------------------------
September 30, 1999 $2,000,000
------------------------------------
December 31, 1999 $2,000,000
------------------------------------
March 31, 2000 $2,500,000
====================================
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
====================================
SCHEDULED
REPAYMENT OF
DATE TERM LOAN
====================================
<S> <C>
June 30, 2000 $2,500,000
------------------------------------
September 30, 2000 $2,500,000
------------------------------------
December 31, 2000 $2,500,000
------------------------------------
March 31, 2001 $2,500,000
------------------------------------
June 30, 2001 $2,500,000
------------------------------------
September 30, 2001 $2,500,000
------------------------------------
December 31, 2001 $2,500,000
------------------------------------
March 31, 2002 $7,500,000
------------------------------------
June 30, 2002 $7,500,000
====================================
</TABLE>
; provided that the scheduled installments of principal of the Term Loans
--------
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with subsection
2.4B(iv); and provided, further that the Term Loans and all other amounts
-------- -------
owed hereunder with respect to the Term Loans shall be paid in full no
later than June 30, 2002, and the final installment payable by Company in
respect of the Term Loans on such date shall be in an amount, if such
amount is different from that specified above, sufficient to repay all
amounts owing by Company under this Agreement with respect to the Term
Loan.
B. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) Voluntary Prepayments. Company may, upon written or telephonic
---------------------
notice to Administrative Agent on or prior to 12:00 Noon (New York time) on
the date of prepayment, which notice, if telephonic, shall be promptly
confirmed in writing, at any time and from time to time prepay any Swing
Line Loan on any Busi ness Day in whole or in part in an aggregate minimum
amount of $500,000 and integral multiples of $100,000 in excess of that
amount. Company may, upon not less than one Business Day's prior written
or telephonic notice, in the case of Base Rate Loans, and three Business
Days' prior written or telephonic notice, in the case of Eurodollar Rate
Loans, in each case given to Administrative Agent by 12:00 Noon (New York
time) on the date required and, if given by telephone, promptly confirmed
in writing to Administrative Agent (which original written or telephonic
notice Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time prepay any
Acquisition Loans, Term Loans or Revolving Loans on any Business Day in
whole or in part in an aggregate minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount (or such lesser amount as
shall constitute the
43
<PAGE>
aggregate amount of all outstanding Loans, as the case may be); provided,
--------
however, that with respect to any Eurodollar Rate Loan not prepaid on the
-------
expiration of the Interest Period applicable thereto, Company shall pay any
amount payable pursuant to subsection 2.6D. Notice of prepayment having
been given as aforesaid, the principal amount of the Loans specified in
such notice shall become due and payable on the prepayment date specified
therein.
(ii) Voluntary Reductions of Commitments. Company may, upon not less
-----------------------------------
than three Business Days' prior written or telephonic notice confirmed in
writing to Administrative Agent (which original written or telephonic
notice Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate in
whole or permanently reduce in part, without premium or penalty, the
Acquisition Loan Commitments, or the Revolving Loan Commitments in each
case in an amount up to the amount by which the Acquisition Facility
Commitments, or the Revolving Loan Commitments exceed the aggregate amount
of all outstanding Acquisition Loans, or aggregate Revolving Loan Exposure,
respectively, at the time of such proposed termination or reduction;
provided that any such partial reduction of the Commitments shall be in an
--------
aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000
in excess of that amount. Company's notice to Administrative Agent shall
designate the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial reduction, and such termination or
reduction of the Commitments shall be effective on the date specified in
Company's notice and shall reduce the applicable Commitment of each Lender
proportionately to its Pro Rata Share of such Commitments.
(iii) Mandatory Prepayments and Mandatory Reductions of Commitments.
-------------------------------------------------------------
(a) Prepayments and Reductions from Asset Sales. No later than
-------------------------------------------
the first Business Day following the date of receipt by Company or any
of its Subsidiaries of Net Cash Proceeds of any Asset Sale, Company
shall prepay in an amount equal to such Net Cash Proceeds first the
-----
Term Loans to the full extent thereof and second after the second
------
anniversary of the Closing Date the Acquisition Loans, and third the
-----
Revolving Loans. Notwithstanding the foregoing, the Net Cash Proceeds
of Specified Asset Sales shall not be required to prepay Loans as set
forth above to the extent that and so long as such Net Cash Proceeds
are (x) within 180 days of receipt of such proceeds, reinvested in the
business of the Company and the Subsidiaries or, (y) within 180 days
of receipt of such proceeds committed for reinvestment and reinvested
within 300 days of receipt of such proceeds in the business of the
Company and the Subsidiaries, and (z) the aggregate principal amount
of all such proceeds not so reinvested at any time does not exceed
$10,000,000; provided that any such funds in excess of $10,000,000 not
--------
so committed or reinvested shall be used to make prepayments as
required pursuant to this subsection 2.4B(iii)(a). Concurrently with
any prepayment of the Loans and/or reduction of the applicable
Commitments pursuant to this subsection 2.4B(iii)(a), Company shall
deliver to Administrative Agent an Officers' Certificate demonstrating
the derivation of the Net Cash Proceeds of the correlative Asset Sale
from the gross sales price thereof. In the event that Company shall,
at any time after receipt of Cash Proceeds of any Asset Sale requiring
a prepayment or a reduction of the applicable Commitments pursuant to
this subsection 2.4B(iii)(a), determine that the prepayments and/or
reductions of the applicable Commitments previously made in respect of
such Asset Sale were in an aggregate amount less than that required by
the terms of this subsection 2.4B(iii)(a), Company shall promptly make
an additional prepayment of the Loans (and, if applicable, the
applicable Commitments shall be permanently reduced), in the manner
described above in an amount equal to the amount of any such deficit,
and Company shall concurrently therewith deliver to Administrative
Agent an Officers' Certifi-
44
<PAGE>
cate demonstrating the derivation of the additional Net Cash Proceeds
resulting in such deficit. Any mandatory prepayments pursuant to this
subsection 2.4B(iii)(a) shall be further applied as specified in
subsection 2.4B(iv).
(b) Prepayments and Reductions Due to Reversion of Surplus Assets
-------------------------------------------------------------
of Pension Plans. On the date of return to Company or any of its
----------------
Subsidiaries of any surplus assets of any pension plan of Company or
any of its Subsidiaries, Company shall prepay in an amount (the "NET
REVERSION AMOUNT") equal to 100% of such returned surplus assets, net
of transaction costs and expenses incurred in obtaining such return,
including incremental taxes payable as a result thereof, and Company
shall prepay in an amount equal thereto first the Term Loans to the
-----
full extent thereof, second after the second anniversary of the
------
Closing Date, the Acquisition Loans and third the Revolving Loans.
-----
Any such mandatory prepayments shall be further applied as specified
in subsection 2.4B(iv).
(c) Prepayments Due to Issuance of Equity Securities. No later
------------------------------------------------
than the first Business Day following the date of receipt by Company
or any of its Subsidiaries of the Cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated
therewith) from the issuance of any equity Securities of such Person
(including without limitation additional issuances of Company Common
Stock but excluding (x) issuances of Company Common Stock to officers
or employees of Company to the extent the proceeds from such issuances
do not exceed in the aggregate $1,000,000 during any fiscal year and
issuances of any Securities evidencing Indebtedness permitted to be
incurred pursuant to subsection 7.1 and (y) issuance of equity
Securities to the extent the proceeds of which are used to fund
Permitted Acquisitions), Company shall prepay in an amount equal to
the proceeds of such issuance first the Term Loans to the full extent
-----
thereof, second after the second anniversary of the Closing Date, the
------
Acquisition Loans and third the Revolving Loans; provided that on and
----- --------
after the date on which the Leverage Ratio (determined on a Pro Forma
Basis giving effect to the issuance and application of the equity
securities proceeds) is less than or equal to 2.50:1.0, 50% of the
proceeds otherwise required to be utilized to prepay Loans pursuant to
this subdivision (c) of subsection 2.4B(iii) may be applied to
45
<PAGE>
repurchase or prepay the Unsecured Subordinated Notes. Any such
mandatory prepayments shall be further applied as specified in
subsection 2.4B(iv).
(d) Prepayments Due to Issuance of Debt. On or prior to the
-----------------------------------
first Business Day after receipt by Company or any of its Subsidiaries
of any proceeds of any Indebtedness (other than the Loans, and any
other Indebted ness permitted by this Agreement), Company shall prepay
in an amount equal to the amount of such proceeds to first the Term
-----
Loans to the full extent thereof, second after the second anniversary
------
of the Closing Date, the Acquisi tion Loans and third the Revolving
-----
Loans; provided that payment or acceptance of the amounts provided for
--------
in this subsection 2.4B(iii)(d) shall not constitute a waiver of any
Event of Default resulting from the incurrence of such Indebtedness or
otherwise prejudice any rights or remedies of Agents or Lenders. Any
such mandatory prepayments shall be further applied as specified in
subsection 2.4(B)(iv).
(e) Prepayments and Reductions from Net Insurance/Condemna tion
-----------------------------------------------------------
Proceeds. No later than the first Business Day following the date of
--------
receipt by Agents or by Company or any of its Subsidiaries of any Net
Insur ance/Condemnation Proceeds that are required to be applied to
prepay the Loans pursuant to the provisions of subsection 6.4B,
Company shall prepay in an amount equal to such Net
Insurance/Condemnation Proceeds first the Term Loans to the full
-----
extent thereof, second after the second anniversary of the Closing
------
Date, the Acquisition Loans and third the Revolving Loans.
-----
Concurrently with any prepayment of the Loans and/or reduction of the
Revolving Loan Commitments pursuant to this subsection 2.4B(iii)(e),
Company shall deliver to Administrative Agent an Officers' Certificate
demonstrating the calculation of the amount (the "NET PROCEEDS
AMOUNT") of the Net Insurance/Condemnation Proceeds, that gave rise
to such prepayment and/or reduction. In the event that Company shall
subsequently determine that the actual Net Proceeds Amount was greater
than the amount set forth in such Officers' Certificate, Company shall
promptly make an additional prepayment of the Loans (and, if
applicable, the Acquisition Loan Commitments and the Revolving Loan
Commitments shall be permanently reduced) in an amount equal to the
amount of such excess, and Company shall concurrently therewith
deliver to Administrative Agent an Officers' Certificate demonstrating
the derivation of the additional Net Proceeds Amount resulting in such
excess. Any such mandatory prepayments shall be applied as specified
in subsection 2.4B(iv).
(f) Prepayments and Reductions from Consolidated Excess Cash
--------------------------------------------------------
Flow. In the event that there shall be Consolidated Excess Cash Flow
for any fiscal year commencing on or after December 29, 1997, within
100 days after the last day of such fiscal year Company shall prepay
in an amount equal to 50% of such Consolidated Excess Cash Flow first
-----
the Term Loans to the full extent thereof, second after the second
------
anniversary of the Closing Date, the Acquisition Loans and third the
-----
Revolving Loans; provided that so long as the Leverage Ratio as of
46
<PAGE>
the end of Fiscal Year immediately prior to the date of payment under
this subsection 2.4B(f) is less than or equal to 2.5:1.0 then only 25%
of such Consolidated Excess Cash Flow shall be required to be prepaid.
Any such mandatory prepayments shall be applied as specified in
subsection 2.4B(iv).
(g) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments. Company shall from time to time prepay first the
---------------- -----
Swing Line Loans and second the Revolving Loans to the extent
------
necessary so that the Total Utilization of Revolving Loan Commitments
shall not at any time exceed the Revolving Loan Commitments then in
effect.
(iv) Application of Prepayments.
--------------------------
(a) Application of Voluntary Prepayments by Type of Loans and
---------------------------------------------------------
Order of Maturity. Any voluntary prepayments pursuant to subsection
-----------------
2.4B(i) shall, with respect to the allocation of such prepayments
among Loans and scheduled amortization payments, if applicable, be
applied as specified by Company in the applicable notice of
prepayment; provided that in the event Company fails to specify the
--------
Loans to which any such prepayment shall be applied, such prepayment
shall be applied first to repay outstanding Term Loans to the full
-----
extent thereof, second to repay outstanding Acquisition Loans to the
------
full extent thereof, third to repay Swing Line Loans and fourth to
----- ------
repay outstanding Revolving Loans to the full extent thereof.
(b) Application of Mandatory Prepayments by Type of Loans and
---------------------------------------------------------
Order of Maturity. Any mandatory prepayments of the Loans pursuant to
-----------------
subsection 2.4B(iii) shall be applied first pro-rata to the scheduled
-----
install ments of principal of the applicable Loans set forth in
subsection 2.4A(i) and subsection 2.4A(ii), respectively, that are
unpaid at the time of such prepayment, second to prepay the Swing Line
------
Loans to the full extent thereof and third, to prepay the Revolving
-----
Loans to the full extent thereof.
(c) Application of Prepayments to Base Rate Loans and Eurodollar
------------------------------------------------------------
Rate Loans. Considering Acquisition Loans and Term Loan Loans being
----------
prepaid separately, any prepayment thereof shall be applied first to
Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Company pursuant to
subsection 2.6D.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) Manner and Time of Payment. All payments by Company of principal,
--------------------------
interest, fees and other Obligations hereunder and under the Notes shall be
made in Dollars in same day funds, without defense, setoff or counterclaim,
free of any restriction or condition, and delivered to Administrative Agent
not later than 12:00 Noon (New York
47
<PAGE>
time) on the date due at the Funding and Payment Office for the account of
Lenders; funds received by Administrative Agent after that time on such due
date shall be deemed to have been paid by Company on the next succeeding
Business Day. Company hereby authorizes Administrative Agent to charge its
accounts with Administrative Agent in order to cause timely payment to be
made to Administrative Agent of all principal, interest, fees and expenses
due hereunder (subject to sufficient funds being available in its accounts
for that purpose).
(ii) Application of Payments to Principal and Interest. Subject to
-------------------------------------------------
subsection 2.2C of this Agreement, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments shall be
applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments in respect of Acquisition Loans, Term Loans and Revolving Loans
shall be apportioned among all outstanding Loans to which such payments
relate, in each case proportionately to Lenders' respective Pro Rata
Shares. Administrative Agent shall promptly distribute to each Lender, at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request, its Pro
Rata Share of all such payments received by Administrative Agent and the
commitment fees of such Lender when received by Administrative Agent
pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give
effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing
-------------------
of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
--------
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect to any
Loan or any payments of principal or interest on such Note.
48
<PAGE>
D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER SUBSIDIARY
GUARANTY.
(i) Application of Proceeds of Collateral. Except as provided in
-------------------------------------
subsection 2.4B(iii)(a) with respect to prepayments from Asset Sales, all
proceeds received by Administrative Agent in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral pursuant to the exercise of rights and remedies under any
Collateral Document shall be applied in full or in part by Agent against,
the applicable Secured Obligations (as defined in such Collateral Document)
in the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Agent and its agents and counsel, and all other expenses, liabilities
and advances made or incurred by Agent in connection therewith, and
all amounts for which Agent is entitled to indemnification under such
Collateral Document and all advances made by Agent thereunder for the
account of the applicable Loan Party, and to the payment of all costs
and expenses paid or incurred by Agent in connection with the exercise
of any right or remedy under such Collateral Document, all in
accordance with the terms of this Agreement and such Collateral
Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Payments Under Subsidiary Guaranty. All payments
-------------------------------------------------
received by Agent under the Subsidiary Guaranty shall be applied promptly
from time to time by Administrative Agent in the following order of
priority:
(a) To the payment of the costs and expenses of any collection or
other realization under the Subsidiary Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and the Subsidiary Guaranty;
(b) thereafter, to the extent of any excess such payments, to the
payment of all other Guarantied Obligations (as defined in the
Subsidiary Guaranty) for the ratable benefit of the holders thereof;
and
49
<PAGE>
(c) thereafter, to the extent of any excess such payments, to the
payment to the applicable Subsidiary Guarantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
2.5 USE OF PROCEEDS.
---------------
A. ACQUISITION LOANS. The proceeds of the Acquisition Loans shall be
applied by Company to finance Permitted Acquisitions (which may include the
simultaneous repayment of debt assumed in connection with Permitted
Acquisitions) and to pay related costs and expenses.
B. TERM LOANS. The proceeds of the Term Loans shall be applied, together
with the proceeds from the issuance of the Unsecured Subordinated Notes, by
Company (i) to repurchase all of the outstanding Preferred Stock, (ii) to repay
outstanding principal and accrued interest and all other obligations with
respect to the Specified Indebtedness in accordance with Schedule 1.1A and (iii)
-------------
to pay Transaction Costs.
C. REVOLVING LOANS; SWING LINE LOANS. The proceeds of any Revolving
Loans and Swing Line Loans shall be applied by Company for working capital or
general corporate purposes.
D. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, in each case as in effect on the date or dates of
such borrowing and such use of proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administra tive Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such
50
<PAGE>
date give notice (by telefacsimile or by telephone confirmed in writing) to
Company and each Lender of such determination, whereupon (i) no Loans may be
made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice
of Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by Company.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the interbank Eurodollar market or the position
of such Lender in that market, then, and in any such event, such Lender shall be
an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or
by telephone confirmed in writing) to Company and Administrative Agent of such
determination (which notice Administrative Agent shall promptly transmit to each
other Lender). Thereafter (a) the obligation of the Affected Lender to make
Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until
such notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED
LOANS") shall be terminated at the earlier to occur of the expiration of the
Interest Period then in effect with respect to the Affected Loans or when
required by law, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the foregoing,
to the extent a determination by an Affected Lender as described above relates
to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, Company shall have the
option, subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by giving
notice (by telefacsimile or by telephone confirmed in writing) to Administrative
Agent of such rescission on the date on which the Affected Lender gives notice
of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities
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(including, without limitation, any interest paid by that Lender to lenders of
funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by that Lender in connection with the liquidation
or re-employment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of any Eurodollar Rate
Loan does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment or other principal payment or any conversion of any of
its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar
Rate Loans is not made on any date specified in a notice of prepayment given by
Company, or (iv) as a consequence of any other default by Company in the
repayment of its Eurodollar Rate Loans when required by the terms of this
Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
- -------- -------
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
----------------------------------------
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
govern-
52
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mental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
B. WITHHOLDING OF TAXES.
(i) Payments to Be Free and Clear. All sums payable by Company under
-----------------------------
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax determined on the
basis of the overall net income of any Lender) imposed, levied, collected,
withheld or assessed by or within the United States of America or any
political subdivision in or of the United States of America or any other
jurisdiction from or to which a payment is made by or on behalf of Company
or by any federation
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or organization of which the United States of America or any such
jurisdiction is a member at the time of payment.
(ii) Grossing-up of Payments. If Company or any other Person is
-----------------------
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Administrative Agent or any
Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any such
require ment or any change in any such requirement as soon as Company
becomes aware of it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on Administrative Agent or such Lender, as the case may be)
on behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, Company shall deliver to Administrative Agent
evidence satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
--------
Lender under clause (c) above except to the extent that any change after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "NON-US LENDER") shall deliver to
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Administrative Agent for transmission to Company, on or prior to the
Closing Date (in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Company or Administrative Agent (each in the
reasonable exercise of its discretion), (1) two original copies of
Internal Revenue Service Form 1001 or 4224 (or any successor forms),
properly completed and duly executed by such Lender, together with any
other certificate or statement of exemption required under the
Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of principal, interest, fees or other amounts payable
under any of the Loan Documents or (2) if such Lender is not a "bank"
or other Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Service Form 1001 or
4224 pursuant to clause (1) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service Form W-8
(or any successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations issued
thereunder to establish that such Lender is not subject to deduction
or withholding of United States federal income tax with respect to any
payments to such Lender of interest payable under any of the Loan
Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (1) deliver to Administrative Agent for
transmission to Company two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
payments to such Lender under the Loan Documents or (2) notify
Administrative Agent and Company of its inability to deliver any such
forms, certificates or other evidence.
(c) Company shall not be required to pay any additional amount to any Non-
US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall
have failed to satisfy the requirements of clause (a) or (b) of this
subsection 2.7B(iii); provided that if such Lender shall have
--------
satisfied the requirements of subsection 2.7B(iii)(a) on the Closing
Date (in the case of each Lender listed on the signature pages hereof)
or on the date of the Assignment Agreement pursuant to which it
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<PAGE>
became a Lender (in the case of each other Lender), nothing in this
subsection 2.7B(iii)(c) shall relieve Company of its obligation to pay
any additional amounts pursuant to clause (c) of subsection 2.7B(ii)
in the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in subsection 2.7B(iii)(a).
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commit ments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Administra tive Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDER TO MITIGATE.
----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise
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be required to be paid to such Lender or Issuing Lender pursuant to subsection
2.7 or subsection 3.6 would be reduced and if, as determined by such Lender or
Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters of Credit through such other
lending or letter of credit office or in accordance with such other measures, as
the case may be, would not otherwise materially adversely affect such
Commitments or Loans or Letters of Credit or the interests of such Lender or
Issuing Lender; provided that such Lender or Issuing Lender will not be
--------
obligated to utilize such other lending or letter of credit office pursuant to
this subsection 2.8 unless Company agrees to pay all incremental expenses
incurred by such Lender or Issuing Lender as a result of utilizing such other
lending or letter of credit office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Company pursuant to
this subsection 2.8 (setting forth in reasonable detail the basis for requesting
such amount) submitted by such Lender or Issuing Lender to Company (with a copy
to Administrative Agent) shall be conclusive absent manifest error.
SECTION 3.
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
---------------------------------------------------------------------
THEREIN.
-------
A. LETTERS OF CREDIT. In addition to Company requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(iii) and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(iv), Company may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding June 30, 2002, that Issuing
Lender issue Letters of Credit for the account of Company for general corporate
purposes. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, Issuing
Lender shall issue such Letters of Credit in accordance with the provisions of
this subsection 3.1; provided that Company shall not request that Issuing Lender
--------
issue (and Issuing Lender shall not issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect; or
(ii) any Letter of Credit having an expiration date later than the
earlier of (a) June 30, 2002 and (b) the date which is two years from the
date of issuance of such Letter of Credit; provided that the immediately
--------
preceding clause (b) shall not prevent Issuing Lender from agreeing that a
Letter of Credit will automatically be extended for one or more successive
periods not to exceed one year each upon 40 days prior written request of
Company and the beneficiary thereof, so long as Issuing Lender notifies
Company or such beneficiary, as the case may be, in writing not less than
20 days prior to the expiration date that it has agreed not to extend for
any such additional period; and provided, further that Issuing Lender shall
-------- -------
give notice that it will not extend such Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing (and
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has not been waived in accordance with subsection 10.6) at the time Issuing
Lender must elect whether or not to allow such extension.
B. MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance of a
------------------
Letter of Credit, it shall deliver to Administrative Agent a Notice of
Issuance of Letter of Credit substantially in the form of Exhibit III
-----------
annexed hereto no later than 1:00 P.M. (New York time) at least five
Business Days or such shorter period as may be agreed to by Issuing Lender
in any particular instance, in advance of the proposed date of issuance.
The Notice of Issuance of Letter of Credit shall specify (a) the proposed
date of issuance (which shall be a Business Day), (b) the face amount of
the Letter of Credit, (c) the expiration date of the Letter of Credit, (d)
the name and address of the beneficiary, and (e) the verbatim text of the
proposed Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents and the verbatim text of
any certificates to be presented by the beneficiary which, if presented by
the beneficiary prior to the expiration date of the Letter of Credit, would
require Issuing Lender to make payment under the Letter of Credit. Company
shall further execute and deliver any application and other customary form
documents required by Issuing Lender.
Company shall notify the applicable Issuing Lender (and Administrative
Agent, if Administrative Agent is not Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which
Company is required to certify in the applicable Notice of Issuance of
Letter of Credit is no longer true and correct as of the proposed date of
issuance of such Letter of Credit, and upon the issuance of any Letter of
Credit Company shall be deemed to have re-certified, as of the date of such
issuance, as to the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by a proposed
-------------------------------
Issuing Lender of a Notice of Issuance of Letter of Credit pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit, (a) in
the event Administrative Agent is the proposed Issuing Lender,
Administrative Agent shall be the Issuing Lender with respect to such
Letter of Credit, notwithstanding the fact that the Letter of Credit Usage
with respect to such Letter of Credit and with respect to all other Letters
of Credit issued by Administrative Agent, when aggregated with Administra
tive Agent's outstanding Revolving Loans and Swing Line Loans, may exceed
Administrative Agent's Revolving Loan Commitment then in effect; and (b) in
the event any other Lender is the proposed Issuing Lender, such Lender
shall promptly notify Company and Administrative Agent whether or not, in
its sole discretion, it has elected to issue such Letter of Credit, and (1)
if such Lender so elects to issue such Letter of Credit it shall be the
Issuing Lender with respect thereto and (2) if such Lender fails to so
promptly notify Company and Administrative Agent or declines to be the
Issuing Lender with respect to such Letter of Credit in accordance with the
provisions of this subsection 3.1B Company may request Administrative Agent
or another Lender to (and in the case of the Administrative Agent,
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Administrative Agent will) be the Issuing Lender with respect to such
Letter of Credit in accordance with the provisions of this subsection 3.1B.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver of
----------------------------
the conditions set forth in subsection 4.3, Issuing Lender shall issue the
requested Letter of Credit in accordance with Issuing Lender's standard
operating procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter of
-----------------------
Credit, Issuing Lender shall promptly notify Administrative Agent (if
Issuing Lender is not Administrative Agent) and each other Lender of such
issuance. Promptly after receipt of such notice, Administrative Agent
shall notify each Lender of the amount of such Lender's respective
participation in such Letter of Credit, determined in accordance with
subsection 3.1C.
(v) Reports to Lenders. At the request of any Lender, Issuing
------------------
Lender shall deliver to each other Lender a report setting forth the
average for the immediately preceding calendar quarter of the daily maximum
amount available to be drawn under the Letters of Credit issued by Issuing
Lender that were outstanding during such calendar quarter, if any.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased
from Issuing Lender a participation in such Letter of Credit and drawings
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
D. EXISTING LETTERS OF CREDIT. As of the Closing Date the Existing
Letters of Credit shall be deemed to have been issued under this Agreement and
from and after the Closing Date shall be deemed Letters of Credit for all
purposes hereunder.
3.2 LETTER OF CREDIT FEES.
---------------------
Company agrees to pay the following amounts to Issuing Lender with respect
to Letters of Credit issued by it:
(i) with respect to each Letter of Credit, a fronting fee equal to
.25% per annum of the daily maximum amount available to be drawn under such
Letter of Credit payable in arrears on and to (but excluding) each March
15, June 15, September 15 and December 15 of each year and computed on the
basis of a 360-day year for the actual number of days elapsed; provided
--------
that the fronting fee payable with respect to each Letter of Credit shall
not be less than $500 per annum; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges in accordance with Issuing
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Lender's standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or payment, as the case may be.
Company further agrees to pay to Administrative Agent, for distribution to
each Lender in proportion to that Lender's Pro Rate Share of the Revolving Loan
Commitments, a letter of credit fee equal to the product of (y) a percentage
equal to the Applicable Margin with respect to Eurodollar Loans and (z) daily
maximum amount available to be drawn under each Letter of Credit, payable in
arrears on and to (but excluding) each March 15, June 15, September 15 and
December 15 of each year and computed on the basis of a 360-day year for the
actual number of days elapsed.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
-------------------------------------------------------------------
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in substantial compliance with
the terms and conditions of such Letter of Credit.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In
the event Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse Issuing Lender on or before
the Business Day immediately following the date on which such drawing is honored
(the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal
to the amount of such drawing; provided that, anything contained in this
--------
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Administrative Agent (if Issuing Lender is not Administrative Agent)
and Issuing Lender prior to 11:00 A.M. (New York time) on the date of such
drawing that Company intends to reimburse Issuing Lender for the amount of such
drawing with funds other than the proceeds of Revolving Loans, Company shall be
deemed to have given a timely Notice of Borrowing to Administrative Agent
requesting Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars equal to the amount of such drawing
and (ii) subject to satisfaction or waiver of the conditions specified in
subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans
that are Base Rate Loans in the amount of such drawing, the proceeds of which
shall be applied directly by Administrative Agent to reimburse Issuing Lender
for the amount of such drawing; and provided, further that if for any reason
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proceeds of Revolving Loans are not received by Issuing Lender on the
Reimbursement Date in an amount equal to the amount of such drawing, Company
shall reimburse Issuing Lender, on demand, in an amount in same day funds equal
to the excess of the amount of such drawing over the aggregate amount of such
Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B
shall be deemed to relieve any Lender from its obligation to make Revolving
Loans on the terms and conditions set forth in this Agreement, and Company shall
retain any and all rights it may have against any Lender resulting from the
failure of such Lender to make such Revolving Loans under this subsection 3.3B.
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C. PAYMENT BY LENDERS OF UNREIMBURSED DRAWINGS UNDER LETTERS OF CREDIT.
(i) Payment by Lenders. In the event that Company shall fail for any
------------------
reason to reimburse Issuing Lender as provided in subsection 3.3B in an
amount equal to the amount of any drawing honored by Issuing Lender under a
Letter of Credit issued by it, Issuing Lender shall promptly notify each
other Lender having a Revolving Loan Commitment of the unreimbursed amount
of such drawing and of such other Lender's respective participation therein
based on such Lender's Pro Rata Share. Each Lender shall make available to
Issuing Lender an amount equal to its respective participation, in Dollars
and in same day funds, at the office of Issuing Lender specified in such
notice, not later than 1:00 P.M. (New York time) on the first business day
(under the laws of the jurisdiction in which such office of Issuing Lender
is located) after the date notified by Issuing Lender. In the event that
any Lender fails to make available to Issuing Lender on such business day
the amount of such Lender's participation in such Letter of Credit as
provided in this subsection 3.3C, Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by Issuing Lender for the correction
of errors among banks for three Business Days and thereafter at the Base
Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the
right of any Lender to recover from Issuing Lender any amounts made
available by such Lender to Issuing Lender pursuant to this subsection 3.3C
in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit
by Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of Issuing
Lender.
(ii) Distribution to Lenders of Reimbursements Received From Company.
---------------------------------------------------------------
In the event Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any drawing
honored by Issuing Lender under a Letter of Credit issued by it, Issuing
Lender shall distribute to each other Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such drawing such
other Lender's Pro Rata Share of all payments subsequently received by
Issuing Lender from Company in reimbursement of such drawing when such
payments are received. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate signature
page hereof or at such other address as such Lender may request.
D. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to pay to Issuing
------------------------------
Lender, with respect to drawings made under any Letters of Credit issued by
it, interest on the amount paid by Issuing Lender in respect of each such
drawing from the date of such drawing to but excluding the date such amount
is reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to
(a) for the period from the date of such drawing to but excluding the
Reimbursement Date, the rate then in effect under this Agreement with
respect to
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Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which
is 2% per annum in excess of the rate of interest otherwise payable under
this Agreement with respect to Revolving Loans that are Base Rate Loans.
Interest payable pursuant to this subsection 3.3D(i) shall be computed on
the basis of a 360-day year for the actual number of days elapsed in the
period during which it accrues and shall be payable on demand or, if no
demand is made, on the date on which the related drawing under a Letter of
Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
---------------------------------------------------
upon receipt by Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing under a Letter of Credit
issued by it, (a) Issuing Lender shall distribute to each other Lender
having a Revolving Loan Commitment, out of the interest received by Issuing
Lender in respect of the period from the date of such drawing to but
excluding the date on which Issuing Lender is reimbursed for the amount of
such drawing (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B), the amount that such other
Lender would have been entitled to receive in respect of the letter of
credit fee that would have been payable in respect of such Letter of Credit
for such period pursuant to subsection 3.2 if no drawing had been made
under such Letter of Credit, and (b) in the event Issuing Lender shall have
been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or
any portion of such drawing, Issuing Lender shall distribute to each other
Lender which has paid all amounts payable by it under subsection 3.3C(i)
with respect to such drawing such other Lender's Pro Rata Share of any
interest received by Issuing Lender in respect of that portion of such
drawing so reimbursed by other Lenders for the period from the date on
which Issuing Lender was so reimbursed by other Lenders to but excluding
the date on which such portion of such drawing is reimbursed by Company.
Any such distribution shall be made to a Lender at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request.
3.4 OBLIGATIONS ABSOLUTE.
--------------------
Subject to the provisions of subsection 3.3A, the obligation of Company to
reimburse Issuing Lender for drawings made under the Letters of Credit issued by
it and to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B
and the obligations of Lenders under subsection 3.3C(i) shall be unconditional
and irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which
Company or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Company, whether in connection
with this Agreement, the transactions contemplated herein or any
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unrelated transaction (including any underlying transaction between Company
or one of its Subsidiaries and the beneficiary for which any Letter of
Credit was procured);
(iii) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Issuing Lender under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto; or
(vii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by Issuing Lender under the applicable
- --------
Letter of Credit shall not have constituted gross negligence or willful
misconduct of Issuing Lender under the circumstances in question (as determined
by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
--------------------------------------------------
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by Issuing Lender of a proper demand for payment made under any Letter of Credit
issued by it or (ii) the failure of Issuing Lender to honor a drawing under any
such Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called "GOVERNMENTAL
ACTS").
B. NATURE OF ISSUING LENDER'S DUTIES. As between Company and Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by Issuing Lender by, the respective beneficiaries of
such Letters of Credit. In furtherance and not in limitation of the foregoing,
Issuing Lender shall not be responsible for: (i) the form,
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validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of Issuing Lender, including without limitation any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by Issuing Lender under or in connection with the Letters of
Credit issued by it or any documents and certificates delivered thereunder, if
taken or omitted in good faith, shall not put Issuing Lender under any resulting
liability to Company.
Notwithstanding anything to the contrary contained in this subsection 3.5
and without limiting the provisions of subsection 3.3A, Company shall retain any
and all rights it may have against Issuing Lender for any liability arising
solely out of the gross negligence or willful misconduct of Issuing Lender, as
determined by a final judgment of a court of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
-------------------------------------------------------
In the event that Issuing Lender or any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by Issuing Lender or any Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-govern mental authority (whether or not having the
force of law):
(i) subjects Issuing Lender or any Lender (or its applicable lending
or letter of credit office) to any additional Tax (other than any Tax on
the overall net income of Issuing Lender or any Lender) with respect to the
issuing or maintaining of any Letters of Credit or the purchasing or
maintaining of any participations therein or any other
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obligations under this Section 3, whether directly or by such being imposed
on or suffered by Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by Issuing Lender or
participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting Issuing Lender or any Lender (or its applicable
lending or letter of credit office) regarding this Section 3 or any Letter
of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to Issuing Lender
or any Lender of agreeing to issue, issuing or maintaining any Letter of Credit
or agreeing to purchase, purchasing or maintaining any participation therein or
to reduce any amount received or receivable by Issuing Lender or such Lender (or
its applicable lending or letter of credit office) with respect thereto; then,
in any case, Company shall promptly pay to Issuing Lender or such Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts as may be necessary to compensate Issuing Lender or such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Issuing Lender or such Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to Issuing Lender or such Lender under this
subsection 3.6, which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the Issuing Lender to issue
Letters of Credit hereunder are subject to the satisfaction of the following
conditions.
4.1 CONDITIONS TO INITIAL LOANS.
---------------------------
A. COMPANY DOCUMENTS. Company shall deliver or cause to be delivered
to Lenders (or to Administrative Agent for Lenders with sufficient
originally executed copies, where appropriate, for each Lender and its
counsel) the following, each, unless otherwise noted, dated the Closing
Date:
(i) Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State
of the State of Minnesota and each other state in which it is
qualified as a foreign corpora tion to do business and, to the extent
generally available, a certificate or other evidence of good standing
as to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such states, each dated a
recent date prior to the Closing Date;
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(ii) Copies of its Bylaws, certified as of the Closing Date by
its corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement
and the other Loan Documents, certified as of the Closing Date by its
corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment;
(iv) Signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents;
(v) Executed originals of this Agreement, the Acquisition Loan
Notes, the Term Loan Notes, the Revolving Notes and the Swing Line
Note (duly executed in accordance with subsection 2.1E, drawn to the
order of each Lender and the Swing Line Lender and with appropriate
insertions), the Collateral Account Agreement, the Company Security
Agreement, the Company Trademark Security Agreement, the Company
Pledge Agreement, the Company Patent and Copyright Security Agreement
and the other Loan Documents to which it is a party; and
(vi) Such other documents as Arranging Agent or Administrative
Agent may reasonably request.
B. DELIVERY OF CLOSING DATE MORTGAGES; CLOSING DATE MORTGAGE
POLICIES. Arranging Agent and Administrative Agent shall have received
from Company and each applicable Subsidiary Guarantor (i)(a) with respect
to each Real Property Asset set forth on Schedule 4.1B(i) hereto as being
----------------
not subject to an Existing Mortgage (collectively, the "NEW MORTGAGED
PROPERTIES"), which New Mortgaged Properties shall exclude those Real
Property Assets set forth on Schedule 4.1B(ii) attached hereto
-----------------
(collectively, the "EXCLUDED PROPERTIES"), a fully executed and notarized
mortgage, deed of trust or deed to secure debt in substantially the same
form as attached hereto as Exhibit XV (each a "CLOSING DATE MORTGAGE" and
----------
collectively, the "CLOSING DATE MORTGAGES") encumbering the fee or
leasehold interest of Company or applicable Subsidiary Guarantor in each
such New Mortgaged Property and (b) with respect to each Real Property
Asset presently subject to an Existing Mortgage as set forth on Schedule
4.1B(iii), a fully executed and notarized assignment and modification of
---------
such Existing Mortgage, which such assignment and modification shall be
substantially in the form attached hereto as Exhibit XVI (each Real
-----------
Property Asset to be encumbered by a Closing Date Mortgage or an Existing
Mortgage, as assigned and modified, a "CLOSING DATE MORTGAGED PROPERTY"
and collectively, the "CLOSING DATE MORTGAGED PROPERTIES"); and (ii) a
commitment to issue an ALTA mortgagee title insurance policy by Title
Company (the "CLOSING DATE MORTGAGE POLICIES"), with respect to those
Closing Date Mortgaged Properties (the "TITLE INSURANCE POLICY
PROPERTIES") and in the amounts designated in Schedule 4.1B(iv) annexed
-----------------
hereto, assuring Administrative Agent that each Closing Date
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Mortgage with respect to a Title Insurance Property creates a valid and
enforceable first priority mortgage lien on the respective Title Insurance
Property, free and clear of all defects and encumbrances except Permitted
Encumbrances and subject to a standard survey exception.
C. SECURITY INTERESTS. To the extent not otherwise satisfied
pursuant to subsection 4.1B, Company and Subsidiary Guarantors shall have
taken or caused to be taken (and Arranging Agent and Administrative Agent
shall have received satisfactory evidence thereof) such actions (other than
the filing or recording of items described in clauses (ii), (iii) and (iv)
below) in such a manner so that Administrative Agent, for the benefit of
Lenders, will have, a valid first priority security interest (subject to
Liens permitted under subsection 7.2) in the entire Collateral (except to
the extent any such security interest cannot be granted under applicable
laws). Such actions shall include, without limitation, (i) certificates
(which certificates shall be registered in the name of Administrative Agent
or properly endorsed in blank for transfer or accompanied by irrevocable
undated stock powers duly endorsed in blank, all in form and substance
satisfactory to Administrative Agent) representing the capital stock
pledged pursuant to the Company Pledge Agreement and delivery to
Administrative Agent of all other instruments (duly endorsed where
appropriate) evidencing the Collateral, (ii) delivery to Administrative
Agent of Uniform Commercial Code financing statements and fixture filings
as to the Collateral for all jurisdictions as may be necessary or desirable
to perfect the security interests in the Collateral, (iii) delivery to
Administrative Agent of the Company Trademark Security Agreement and the
Company Copyright and Patent Security Agreement together with cover sheets
required for filing with the United States Patent and Trademark Office and
(iv) delivery to Administrative Agent of such other documents and
instruments that Arranging Agent or Administrative Agent reasonably deems
necessary or advisable to establish, preserve and perfect as of the Closing
Date the first priority Liens granted to Administrative Agent on behalf of
Lenders under the Collateral Documents.
D. UNSECURED SUBORDINATED DEBT. On or prior to the Closing Date,
Company shall have issued and sold the Unsecured Subordinated Notes, the
aggregate gross cash proceeds (before deduction of fees) of which shall be
not be less than $175,000,000.
E. TERMS OF UNSECURED SUBORDINATED NOTES. On or prior to the Closing
Date, Arranging Agent, Administrative Agent and Lenders shall have received
executed or conformed copies of the Unsecured Subordinated Note Indenture
in substantially the form delivered to Arranging Agent, Administrative
Agent and Lenders on or prior to the date of execution of this Agreement by
Lenders (which form of Unsecured Subordinated Note Indenture shall have
been satisfactory in form and substance to Arranging Agent, Administrative
Agent and Requisite Lenders), with such changes thereto, if any, that have
been approved by Arranging Agent, Administrative Agent and Requisite
Lenders.
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F. REPAYMENT OF SPECIFIED INDEBTEDNESS. Except to the extent
otherwise indicated in Schedule 1.1.A, on the Closing Date, with the
proceeds of the Unsecured Subordinated Notes and a portion of the Term
Loans, Company shall have repaid all Specified Indebtedness, terminated all
commitments with respect thereto and have obtained a termination or
transfer to Administrative Agent of all Liens securing the Specified
Indebtedness, all in form and substance satisfactory to Arranging Agent and
Administrative Agent; provided, however, to the extent that all or a
-------- -------
portion of such Specified Indebtedness is secured by an Existing Mortgage,
such Specified Indebtedness shall be deemed to be assigned to
Administrative Agent and concurrently amended, restated and secured by a
Closing Date Mortgage to the extent set forth therein.
G. REPURCHASE OF PREFERRED STOCK. On the Closing Date with the
proceeds of the Unsecured Subordinated Notes and a portion of the Term
Loan, Company shall have repurchased (or dedicated to the repurchase of)
all of the outstanding Preferred Stock of Company, in each case pursuant to
arrangements, and in form and substance, satisfactory to Arranging Agent
and Administrative Agent.
H. ENVIRONMENTAL MATTERS. The Lenders have received, prior to the
date of execution of this Agreement, reports and other information
available to the Company with respect to environmental liabilities relevant
to the Company and its Subsidiaries and no material developments with
respect to such matters shall have occurred since the date of preparation
of such reports and other information.
I. SOLVENCY. On the Closing Date, Arranging Agent, Administrative
Agent and Lenders shall have received an opinion of Valuation Research
Corporation, and a certificate of the chief financial officer of Company
both in form and substance satisfactory to Arranging Agent, Administrative
Agent and Lenders, to the effect that, after giving effect to the
Refinancings and the contemplated borrowings of the full amounts which will
be available under the Commitments and the issuance of the Unsecured
Subordinated Notes, the Company will be Solvent, and Arranging Agent,
Administrative Agent and Lenders shall have received such other factual
information supporting the conclusions reached in such opinion
and/certificate as Arranging Agent, Administrative Agent or any Lender may
reasonably request, all in form and substance satisfactory to Arranging
Agent, Administrative Agent and Requisite Lenders.
J. OPINIONS OF COMPANY'S COUNSEL. Lenders and their respective
counsel shall have received (i) originally executed copies of one or more
favorable written opinions of Cohen Pollock Merlin Axelrod & Tannenbaum,
Riordan & McKinzie, Dorsey & Whitney, and Richards & O'Neil, L.L.P.,
counsel for Company, in form and substance reasonably satisfactory to
Arranging Agent and its counsel and Administrative Agent, dated as of the
Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit VI-A to VI-E annexed hereto and as to such other
------------ ----
matters as Arranging Agent and Administrative Agent acting on behalf of
Lenders may reasonably request, (ii) the opinions delivered by Cohen
Pollock Merlin Axelrod & Tannenbaum, Riordan & McKinzie, Dorsey & Whitney,
and Richards & O'Neil, L.L.P., counsel for
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Company, in connection with the issuance of the Unsecured Subordinated
Notes, (together with a reliance letter indicating that Lenders may rely on
such opinion), and (iii) evidence satisfactory to Arranging Agent and
Administrative Agent that Company has requested such counsel to deliver
such opinions to Lenders.
K. OPINIONS OF ARRANGING AGENT'S COUNSEL. Lenders shall have
received originally executed copies of one or more favorable written
opinions of O'Melveny & Myers, counsel to Arranging Agent, dated as of the
Closing Date, substantially in the form of Exhibit VI-F annexed hereto and
------------
as to such other matters as Arranging Agent acting on behalf of Lenders may
reasonably request.
L. FEES. Company shall have paid to Syndication Agent, Arranging
Agent and Administrative Agent, the fees payable on the Closing Date
referred to in subsection 2.3.
M. NO MATERIAL ADVERSE EFFECT. Since December 29, 1996, no Material
Adverse Effect (in the reasonable opinion of Arranging Agent and
Administrative Agent) shall have occurred.
N. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.
Company shall have delivered to Arranging Agent and Administrative Agent an
Officers' Certificate, in form and substance satisfactory to Arranging
Agent and Administrative Agent, to the effect that the representations and
warranties in Section 5 hereof are true, correct and complete in all
material respects on and as of the Closing Date to the same extent as
though made on and as of that date and that Company shall have performed in
all material respects all agreements and satisfied all conditions which
this Agreement provides shall be performed or satisfied by it on or before
the Closing Date except as otherwise disclosed to and agreed to in writing
by Arranging Agent, Administrative Agent and Requisite Lenders.
O. COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated
hereby and all documents incidental thereto not previously found acceptable
by Arranging Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Arranging Agent and such counsel, and
Arranging Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Arranging Agent or
Administrative Agent may reasonably request.
P. INSURANCE APPRAISAL; EVIDENCE OF INSURANCE. Administrative Agent
and Arranging Agent shall have received (i) a copy of the insurance report
prepared by Sedgwick James with respect to Company and such report shall be
in form and substance satisfactory to Administrative Agent and Arranging
Agent, and (ii) satisfactory certificates of insurance with respect to each
of the insurance policies required pursuant to subsection 6.4, and
Administrative Agent and Arranging Agent shall be satisfied with the nature
and scope of these insurance policies.
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For purposes of determining compliance with the conditions specified
in subsection 4.1, each Lender that has executed this Agreement or
subsequently becomes a party to this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with each document or
other matter either sent or made available by Administrative Agent to such
Lender for consent, approval, acceptance or satisfaction, or required
hereunder to be consented to or approved by or acceptable or satisfactory
to the Lender or Administrative Agent, unless Administrative Agent shall
have received written notice from such Lender prior to the Closing Date
specifying its objection thereto and either such objection shall not have
been withdrawn by written notice to Administrative Agent to that effect on
or prior to the Closing Date or, if any borrowing on the Closing Date has
been requested, the Lender shall not have made available to Administrative
Agent on or prior to the Closing date the Lender's Pro Rata Share of such
borrowing.
4.2 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date are subject
to the following conditions precedent:
A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an originally
executed Notice of Borrowing, in each case signed by the president, chief
executive officer, the chief financial officer or the treasurer of Company
or by any executive officer of Company designated by any of the above-
described officers on behalf of Company in a writing delivered to
Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representa tions and warranties shall have been
true, correct and complete in all material respects on and as of such
earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;
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(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall
not violate any law including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X of the Board of Governors
of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation
or arbitration against or affecting Company or any of its Subsidiaries
or any property of Company or any of its Subsidiaries that has not
been disclosed by Company in writing pursuant to subsection 5.6 or
6.1(x) prior to the making of the last preceding Loans and there shall
have occurred no development not so disclosed in any such action,
suit, proceeding, governmental investigation or arbitration so
disclosed, that, in either event, in the opinion of Arranging Agent,
Administrative Agent or of Requisite Lenders, would be expected to
have a Material Adverse Effect; and no injunction or other restraining
order shall have been issued and no hearing to cause an injunction or
other restraining order to be issued shall be pending or noticed with
respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consum mation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by this
Agreement or the making of Loans hereunder.
4.3 CONDITIONS TO ISSUANCE OF LETTERS OF CREDIT.
-------------------------------------------
The issuance of any Letter of Credit (other than the Existing Letters of
Credit) hereunder (whether or not Issuing Lender is obligated to issue such
Letter of Credit) is subject to the following conditions precedent:
A. On or before the date of issuance of such Letter of Credit,
Administra tive Agent shall have received, in accordance with the
provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the president, chief
executive officer, the chief financial officer or the treasurer of Company
or by any executive officer of Company designated by any of the above-
described officers on behalf of Company in a writing delivered to
Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as Issuing
Lender may reasonably require in connection with the issuance of such
Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same
extent as if the issuance of such Letter of Credit were the making of a
Loan and the date of issuance of such Letter of Credit were a Funding Date.
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SECTION 5.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lender to issue Letters of Credit and to induce other
Lenders to purchase participations therein, Company represents and warrants to
each Lender, on the date of this Agreement, on each Funding Date and on the date
of issuance of each Letter of Credit, that the following statements are true,
correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
----------------------------------------------------------------
SUBSIDIARIES.
------------
A. ORGANIZATION AND POWERS. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
Company has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and to carry out the transactions
contemplated thereby.
B. QUALIFICATION AND GOOD STANDING. Company is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in
Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time
- ------------ ------------
to time pursuant to the provisions of subsection 6.1(xvii). The capital stock
of each of the Subsidiaries of Company identified in Schedule 5.1 annexed hereto
------------
(as so supplemented) is duly authorized, validly issued, fully paid and
nonassessable and none of such capital stock constitutes Margin Stock. Each of
the Subsidiaries of Company identified in Schedule 5.1 annexed hereto (as so
------------
supplemented) is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and
authority, singly or in the aggregate, has not had and will not have a Material
Adverse Effect. Schedule 5.1 annexed hereto (as so supplemented) correctly sets
------------
forth the ownership interest of Company and each of its Subsidiaries in each of
the Subsidiaries of Company identified therein.
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5.2 AUTHORIZATION OF BORROWING, ETC.
--------------------------------
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of Company.
B. NO CONFLICT. The execution, delivery and performance by Company of
the Loan Documents and the consummation of the transactions contemplated by the
Loan Documents do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws or any
other organizational documents of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or consents which will be obtained on or
before the Closing Date and disclosed in writing to Lenders and except as
disclosed on Schedule 5.2.
------------
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Company of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other govern mental authority or regulatory body, other than
filings required in connection with the perfection of security interests granted
pursuant to the Collateral Documents.
D. BINDING OBLIGATION. This Agreement has, and each of the other Loan
Documents have been duly executed and delivered by Company and this Agreement
and each of the other Loan Documents is the legally valid and binding obligation
of Company, enforceable against Company in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
E. VALID ISSUANCE OF UNSECURED SUBORDINATED NOTES. Company has the
corporate power and authority to issue the Unsecured Subordinated Notes. The
Unsecured Subordinated Notes, when issued and paid for, will be the legally
valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Unsecured Subordinated
Notes will be enforceable against the holders thereof, and the Loans and all
other monetary Obligations hereunder are and will be within the definition of
"SENIOR DEBT" included in such provisions. The Unsecured Subordinated Notes,
when issued
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and sold, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
F. COLLATERAL DOCUMENTS. Except as set forth in Schedule 5.2F, the
-------------
security interests to be created in favor of Administrative Agent under the
Collateral Documents (to the extent purported to be created thereunder) will at
all times from and after the Closing Date constitute, as security for the
obligations purported to be secured thereby, a legal, valid and enforceable
security interest in and Lien on all of the Collateral referred to therein in
favor of Administrative Agent for the benefit of the Lenders and, from and after
the date of filing of the documents delivered on the Closing Date pursuant to
subsection 4.1B and 4.1C, perfected and prior to the rights of all third persons
(other than Permitted Encumbrances) in accordance with the requirements of all
applicable Collateral Documents. Each Loan Party has title to its Collateral as
set forth in clauses (i), (ii) and (iii) of subsection 5.5, as the case may be,
and all such Collateral is free and clear of all Liens except for Liens
permitted by subsection 7.2. No consents, filings or recordings are required in
order to perfect (or maintain the perfection or priority of) the security
interests purported to be created by any of the Collateral Documents, other than
such as will have been obtained and which remain in full force and effect and
uniform commercial code financing statements to be filed, or delivered to
Administrative Agent for filing, on the Closing Date and periodic uniform
commercial code continuation filings or as is specifically otherwise permitted
by the terms of any applicable Collateral Document.
5.3 FINANCIAL CONDITION.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at fiscal years, 1994, 1995 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows of Company and its Subsidiaries for the fiscal year then ended
together with auditors letters provided to Company in respect of such balance
sheets, (ii) the unaudited consolidated balance sheet of Company and its
Subsidiaries for the Company's last fiscal quarter ending prior to the Closing
Date and the related unaudited consolidated statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for the period from
December 30, 1996 to the fiscal quarter then ended and (iii) a pro-forma balance
sheet for Company and its Subsidiaries as of the last day of Company's third
fiscal period giving effect to the transaction to be consummated on the Closing
Date together with an income statement for Company and its Subsidiaries for the
three fiscal periods ending on such date. All such statements were prepared in
conformity with GAAP and fairly present, in all material respects, the financial
position (on a consolidated basis) of the entities described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows (on a consolidated basis) of the entities described therein for each
of the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments and
to the omission of footnotes. Company does not (and will not following the
funding of the initial Loans) have any Contingent Obligation, contingent
liability or liability for taxes, long-term lease or unusual forward or long-
term commitment that is not reflected in the foregoing financial statements or
the notes thereto or the most recent financial
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statements delivered by Company pursuant to subsection 6.1 and which singly or
in the aggregate would reasonably be expected to have a Material Adverse Effect.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
---------------------------------------------------------
Since December 31, 1996, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Neither Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5.
5.5 TITLE TO PROPERTIES; LIENS.
--------------------------
Company and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) leasehold interests in (in
the case of leasehold interests in real or personal property), or (iii) good
title to (in the case of all other personal property), all of their respective
properties and assets reflected in the financial statements referred to in
subsection 5.3 or in the most recent financial statements delivered pursuant to
subsection 6.1, in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7.7. Except as permitted by this Agreement or the
Collateral Documents, all such properties and assets are free and clear of
Liens.
5.6 LITIGATION; ADVERSE FACTS.
-------------------------
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect.
Neither Company nor any of its Subsidiaries is (i) in violation of any
applicable laws that, individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect or (ii) subject to or in default
with respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
----------------
Except to the extent permitted by subsection 6.3, all tax returns and
reports of Company and its Subsidiaries required to be filed by any of them have
been timely filed, and all material taxes, assessments, fees and other
governmental charges upon Company and its Subsidiaries and upon their respective
properties, assets, income, businesses and franchises which would be delinquent
if unpaid have been paid. Company knows of no proposed material tax assessment
75
<PAGE>
against Company or any of its Subsidiaries which is not being actively contested
by Company or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, as shall be
- --------
required in conformity with GAAP shall have been made or provided therefor.
5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
--------------------------------------------------------
A. Neither Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
-----------------------
Neither Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 SECURITIES ACTIVITIES.
---------------------
A. Neither Company nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than 25%
of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 EMPLOYEE BENEFIT PLANS.
----------------------
A. Company and each of its ERISA Affiliates are in compliance in all
material respects with all applicable provisions and requirements of ERISA and
the regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan in all material respects.
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<PAGE>
B. There has been no ERISA Event which is continuing or in respect of
which there is any outstanding liability of Company or any of its ERISA
Affiliates which would reasonably be expected to have a Material Adverse Effect.
No ERISA Event is reasonably expected to occur which would reasonably be
expected to have a Material Adverse Effect.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code or conversion rights under applicable state law or except as set
forth in Schedule 5.11 annexed hereto, no Employee Benefit Plan provides health
-------------
or welfare benefits (through the purchase of insurance or otherwise) for any
retired or former employees of Company or any of its ERISA Affiliates.
D. As of the most recent valuation date for any Pension Plan, the excess
of the actuarial present value (determined on the basis of reasonable
assumptions employed by the independent actuary for such Pension Plan) of the
benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the fair
market value of the assets of such Pension Plan, individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which there is no such excess), does not exceed
$1,000,000.
E. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Company or
any of its ERISA Affiliates for a complete withdrawal from such Multiemployer
Plan (within the meaning of Section 4203 of ERISA), when aggregated with such
potential liability for a complete withdrawal for all Multiemployer Plans, based
on information available pursuant to Section 4221(e) of ERISA, does not exceed
$1,000,000.
5.12 CERTAIN FEES.
------------
No broker's or finder's fee or commission will be payable with respect to
this Agreement or any of the transactions contemplated hereby, and Company
hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 ENVIRONMENTAL PROTECTION.
------------------------
A. The operations of Company and each of its Subsidiaries (including,
without limitation, all operations and conditions at or in the Facilities)
comply in all material respects with all Environmental Laws except to the extent
a failure to so comply would not have a Material Adverse Effect;
B. None of the operations of Company or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the violation of
or liability under any Environmental Laws which if adversely determined could
reasonably be expected to have a Material Adverse Effect;
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<PAGE>
C. Neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written order
or agreement with any governmental authority or private party relating to (a)
prior administrative or judicial proceedings relating to the violation by
Company or such Subsidiary of any Environmental Laws or (b) any Environmental
Claims; and
D. No Hazardous Materials exist on, under or about any Facility in a
manner that has a reasonable possibility of giving rise to an Environmental
Claim having a Material Adverse Effect, and neither Company nor any of its
Subsidiaries has filed any notice or report of a Release of any Hazardous
Materials that in any single case or in the aggregate has a reasonable
possibility of giving rise to an Environmental Claim having a Material Adverse
Effect.
5.14 EMPLOYEE MATTERS.
----------------
Neither Company nor any of its Subsidiaries as of the date hereof is party
to any collective bargaining agreement. Except as set forth on Schedule 5.14,
there is no strike, work stoppage, slow down, lock-out or other labor dispute
pending or, to the knowledge of Company, threatened involving Company or any of
its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.
5.15 SOLVENCY.
--------
Each of Company and each of its Subsidiaries, is and, upon the incurrence
of any Obligations by Company on any date on which this representation is made,
will be, Solvent except to the extent the failure of any such Subsidiaries to be
Solvent would not in the aggregate be reasonably expected to have a Material
Adverse Effect.
5.16 INTELLECTUAL PROPERTY.
---------------------
A. Company and its Subsidiaries own, or are licensed (to the extent
required to be so licensed) to use, the Intellectual Property and all such
Intellectual Property is, to the extent reasonably deemed necessary and
appropriate by Company for the conduct of its business, fully protected and duly
and properly registered, filed or issued in the appropriate office and
jurisdictions for such registrations, filing or issuances, and Company owns all
of the right, title and interest in and to the "Churchs Fried Chicken " and
"Popeyes Chicken and Biscuits" trademarks and the other Intellectual Property
listed on Schedule 5.16 under the applicable laws of the United States free and
-------------
clear of any Lien (other than Permitted Encumbrances and Liens created in favor
of Administrative Agent on behalf of Lenders pursuant to the Loan Documents).
B. Except as disclosed in Schedule 5.16, no material claim has been
-------------
asserted by any Person with respect to the use of any such Intellectual
Property, or challenging or questioning the validity or effectiveness of any
such Intellectual Property. Except as disclosed in Schedule 5.16, the use of
-------------
such Intellectual Property by Company or any of its Subsidiaries does not
infringe on the rights of any Person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liabilities on the part of Company
or any of its Subsidiaries that are material to
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<PAGE>
Company or any of its Subsidiaries. The consummation of the transactions
contemplated by this Agreement or the Refinancings will not in any material
manner or to any material extent impair the ownership of (or the license to use,
as the case may be) any of such Intellectual Property by Company or any of its
Subsidiaries.
5.17 APPLICABLE LAW.
--------------
Company and each of its Subsidiaries is in compliance with the requirements
of all applicable laws, rules, regulations, orders, applications, reporting and
licensing requirements of all governmental authorities except for violations
thereof which in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
5.18 REAL PROPERTY.
-------------
A. Neither Company nor any of its Subsidiaries owns any interest in real
property other than the Real Property Assets identified in Schedule 5.18A
--------------
annexed hereto (as supplemented from time to time pursuant to subsection
6.1(xvii)).
B. Except as set forth in Schedule 5.18B, with respect to each lease for
a Real Property Asset in which the Company or one of its Subsidiaries has a
leasehold interest, either (i) no consent is required from the lessor thereunder
in order for the Company or applicable Subsidiary to encumber its leasehold
interest or (ii) the Company or such Subsidiary has obtained from the lessor all
required consents to the Closing Date Mortgage or Existing Mortgage and
assignment and modification thereof, as applicable.
5.19 INSURANCE.
----------
Company and its Subsidiaries maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and business of its Subsidiaries, against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar business of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations, all
as determined by the officers of Company in their reasonable discretion.
5.20 DISCLOSURE.
----------
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or in any other document, certificate or written
statement furnished to Lenders by or on behalf of Company or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement (including, without limitation, the Confidential Information
Memorandum dated May 1, 1997, slides and other material distributed to Lenders
in syndication meetings and for due diligence purposes) contains as of its date
any untrue statement of a material fact or omits to state a material fact (known
to Company, in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. Any projections and pro
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forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by Company to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There are no facts known (or which should upon the reasonable exercise of
diligence be known) to Company (other than matters of a general economic nature)
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect and that have not been disclosed herein or in such
other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
SECTION 6.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent and Lenders:
(i) Four-week Financials: as soon as available and in any event
--------------------
within 30 days after the end of each four-week accounting period ending
after the Closing Date, a consolidated profit and loss statement for
Company and its Subsidiaries as at the end of such four-week period in the
form prepared for presentation to the Board of Directors of Company for
such period and for the period from the beginning of the then current
fiscal year to the end of such period;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within 45 days after the end of each of the first, second and third fiscal
quarter of each fiscal year, (a) the consolidated and consolidating balance
sheets of Company and its Subsidiaries as at the end of such fiscal quarter
and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Company and its Subsidiaries for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan for the current fiscal year delivered
pursuant to subsection 6.1(xiii), all in reasonable detail and certified by
the chief financial officer of Company that they fairly present, in all
material respects, the financial condition of
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Company and its Subsidiaries as at the dates indicated and the results
of their operations and their cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to the Board of Directors of Company
for such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within 90 days after the end of each fiscal year, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of Company and
its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan delivered pursuant to
subsection 6.1(xiii) for the fiscal year covered by such financial
statements, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present, in all material respects, the
financial condition of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, (b) a narrative report describing the operations of
Company and its Subsidiaries in the form prepared for presentation to the
Board of Directors of Company for such fiscal year, and (c) in the case of
such consolidated financial statements, a report thereon of Arthur Andersen
& Co. or other independent certi fied public accountants of recognized
national standing selected by Company and satisfactory to Administrative
Agent, which report shall be unqualified, shall express no doubts about the
ability of Company and its Subsidiaries to continue as a going concern, and
shall state that such consolidated financial statements fairly present, in
all material respects, the consolidated financial position of Company and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial state ments) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;
(iv) Officers' and Compliance Certificates: (a) together with each
-------------------------------------
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (ii) and (iii) above, an Officers' Certificate of Company
stating that the signers have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Company and its Subsidiaries
during the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any condition or
event that constitutes an Event of Default or Potential Event of Default,
or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action Company has taken,
is taking and proposes to take with respect thereto; and (b) together with
each delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above,
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a Compliance Certificate demonstrating in reasonable detail compliance
during and at the end of the applicable accounting periods with the
restrictions contained in Section 7 and the provisions of 2.4B(iii);
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles from those used in the preparation of the audited
financial statements referred to in subsection 5.3, the consolidated
financial statements of Company and its Subsidiaries delivered pursuant to
subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1 will differ
in any material respect from the consolidated financial statements that
would have been delivered pursuant to such subdivisions had no such change
in accounting principles been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (i), (ii), (iii)
or (xiii) of this subsection 6.1 following such change, consolidated
financial statements of Company and its Subsidiaries for (y) the current
fiscal year to the effective date of such change and (z) , if requested by
Administrative Agent, the one full fiscal year immediately preceding the
fiscal year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, a written statement of the chief accounting officer or chief
financial officer of Company setting forth the differences (including
without limitation any differences that would affect any calculations
relating to the financial covenants set forth in subsection 7.6) which
would have resulted if such financial statements had been prepared without
giving effect to such change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condi tion or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
--------
reason of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificates delivered therewith
pursuant to clause (b) of subdivision (iv) above for the applicable fiscal
year are not stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special
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audit of the financial statements of Company and its Subsidiaries made by
such accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their annual
audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
------------------------------
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders or by any Subsidiary of Company to its security holders
other than Company or another Subsidiary of Company, (b) all regular and
periodic reports and all registration statements (other than on Form S-8 or
a similar form) and prospectuses, if any, filed by Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally by
Company through its corporate office to the public concerning material
developments in the business of Company or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any executive officer
-----------------------
of Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender has given any notice (other than to Administrative
Agent) or taken any other action with respect to a claimed Event of Default
or Potential Event of Default, (b) that any Person has given any notice to
Company or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Company were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Event of Default, Potential Event of Default, default, event or
condition, and what action Company has taken, is taking and proposes to
take with respect thereto;
(x) Litigation or Other Proceedings: promptly upon any executive
-------------------------------
officer of Company obtaining knowledge of (1) the institution of, or non-
frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Company or any of its Subsidiaries or any property of Company
or any of its Subsidiaries (collectively, "PROCEEDINGS") not previously
disclosed in writing by Company to Lenders or (2) any material development
in any Proceeding that, in any case:
(x) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
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(y) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;
(xi) ERISA Events: promptly upon becoming aware of the occurrence
------------
of or forthcoming occurrence of any ERISA Event that could have a Material
Adverse Effect, a written notice specifying the nature thereof, what action
Company or any of its ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened
by the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) each
-------------
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by Company or any of its ERISA Affiliates with the Internal Revenue
Service with respect to each Pension Plan; (b) all notices received by
Company or any of its ERISA Affiliates concerning an ERISA Event with
respect to a Multiemployer Plan that could have a Material Adverse Effect;
and (c) such other documents or governmental reports or filings relating to
any Employee Benefit Plan as Administra tive Agent shall reasonably
request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 75 days after the beginning of each fiscal year, (a) a
consolidated and consolidating plan and financial budget for such fiscal
year, including without limitation budgeted consolidated and consolidating
balance sheets and budgeted consolidated and consolidating statements of
income and cash flows of Company and its Subsidiaries for such fiscal year,
and an explanation of the assumptions on which such budgets are based, and
(b) to the extent otherwise prepared by Company, projected consolidated and
consolidating statements of income and cash flows of Company and its
Subsidiaries for the period remaining through June 30, 2002 together with
an explanation of the assumptions on which such long term projections are
based;
(xiv) Insurance: as soon as practicable and in any event by April 1
---------
of each fiscal year, a report in form and substance satisfactory to
Administrative Agent outlining all material deviations in insurance
coverage maintained as of the date of such report by Company and its
Subsidiaries from that maintained during the immediately preceding period;
(xv) Environmental Audits and Reports: as soon as practicable
--------------------------------
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim which would
reasonably be expected to result in a Material Adverse Effect;
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(xvi) Board of Directors: with reasonable promptness, written
------------------
notice of any material change in the Board of Directors of Company or any
of its Subsidiaries;
(xvii) New Subsidiaries; New Real Property: (x) not less than ten
-----------------------------------
Business Days prior to any Person becoming a Subsidiary of Company, a
written notice setting forth with respect to such Person (a) the date on
which such Person will become a Subsidiary of Company and (b) all of the
data required to be set forth in Schedule 5.1 annexed hereto with respect
------------
to all Subsidiaries of Company (it being understood that such written
notice shall be deemed to supplement Schedule 5.1 annexed hereto for all
------------
purposes of this Agreement) and (y) no less than once during each six month
period, a list of real property acquired by Company and its Subsidiaries
since the date of the last list provided pursuant to this clause 6.1(xvii);
(xviii) Other Information: with reasonable promptness, such other
-----------------
informa tion and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by any Lender through
Administrative Agent.
6.2 CORPORATE EXISTENCE, ETC.
-------------------------
Except as permitted under subsection 7.7, Company will, and will cause each
of its Subsidiaries to, at all times preserve and keep in full force and effect
its corporate existence and all rights and franchises material to its business.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to, file
or consent to the filing of any consolidated income tax return with any Person
(other than Company or any of its Subsidiaries).
6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
------------------------------------
A. Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in the business
of Company and its Subsidiaries (including,
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without limitation, Intellectual Property) and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and businesses of its Subsidiaries against loss or damage of the
kinds customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses. Each such
policy of insurance (other than general liability policies) shall name
Administrative Agent for the benefit of Lenders as the loss payee thereunder and
shall provide for at least 30 days prior written notice to Administrative Agent
of any modification or cancellation of such policy.
B. APPLICATION OF NET INSURANCE/CONDEMNATION PROCEEDS. Upon receipt by
--------------------------------------------------
Company or any of its Subsidiaries of any proceeds constituting Net
Insurance/Condemnation Proceeds so long as no Event of Default or Potential
Event of Default shall have occurred or be continuing, Company or such
Subsidiary may retain and apply such Net Insurance/Condemnation Proceeds (i) in
the case of business interruption insurance for working capital and general
corporate purposes and (ii) in the case of any other insurance proceeds to
promptly and diligently apply such Net Insurance/Condemnation Proceeds to pay or
reimburse the cost of repairing or restoring or replacing the assets in respect
of which such Net Insurance/Condemnation Proceeds were received within 300 days
of receipt thereof, provided that any such Net Insurance/Condemnation Proceeds
not so applied shall be used to prepay the Loans as provided in subsection
2.4B(iii)(e).
6.5 INSPECTION; LENDER MEETING.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that Company
may, if it so chooses, be present at or participate in any such discussion), all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may be reasonably requested and provided that Lenders shall make
reasonable efforts to coordinate their visits and inspections with each other to
minimize the number of such visits and inspections. Without in any way limiting
the foregoing, Company will, upon the request of Administrative Agent or
Requisite Lenders, participate in a meeting of Administrative Agent and Lenders
once during each calendar year to be held at Company's corporate offices (or
such other location as may be agreed to by Company and Administrative Agent) at
such time as may be agreed to by Company and Administrative Agent.
6.6 COMPLIANCE WITH LAWS, ETC.
--------------------------
Company shall, and shall cause each of its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which would reasonably be expected to
cause a Material Adverse Effect.
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6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.
---------------------------------------
A. Company shall, and shall cause each of its Subsidiaries to, exercise
all due diligence in order to comply and cause (i) all tenants under any leases
or occupancy agreements affecting any portion of the Facilities currently owned
and leased and (ii) all other Persons on or occupying such property, to comply
with all Environmental Laws noncompliance with which would individually or in
the aggregate reasonably be expected to have a Material Adverse Effect.
B. Company agrees that Administrative Agent may, from time to time, (i)
upon reasonable belief based upon information obtained after the Closing Date of
the existence of a past or present Release or threatened Release of any
Hazardous Materials into, onto, beneath or from any Facility or (ii) upon the
occurrence and during the continuance of an Event of Default, retain, at
Company's expense, an independent professional consultant to review any report
relating to Hazardous Materials prepared by or for Company and to conduct its
own investigation of any Facility owned, leased or operated by Company or any of
its Subsidiaries, and Company agrees to use its commercially reasonable efforts
to obtain permission for Administrative Agent's professional consultant to
conduct its own investigation of any Facility previously owned, leased or
operated by Company or any of its Subsidiaries. Company hereby, grants to the
extent no consent of a landlord is required or, if landlord consent is required,
to use its reasonable efforts to obtain a landlord consent to grant, to
Administrative Agent and its agents, employees, consultants and contractors the
right to enter into or on to the Facilities currently owned, leased, operated by
Company or any of its Subsidiaries to perform such tests on such property as are
reasonably necessary to conduct such a review and/or investigation. Any such
investigation of any Facility shall be conducted, unless otherwise agreed to by
Company and Administrative Agent, during normal business hours and, to the
extent reasonably practicable, shall be conducted so as not to interfere with
the ongoing operations at any such Facility or to cause any damage or loss to
any property at such Facility. Company and Administrative Agent hereby
acknowledge and agree that any report of any investigation conducted at the
request of Administrative Agent pursuant to this subsection 6.7B will be
obtained and shall be used by Administrative Agent and Lenders for the purposes
of Lenders' internal credit decisions, to monitor and police the Loans and to
protect Lenders' security interests, if any, created by the Loan Documents.
Administrative Agent agrees to deliver a copy of any such report to Company with
the understanding that Company acknowledges and agrees that (i) it will
indemnify and hold harmless Administrative Agent and each Lender from any costs,
losses or liabilities relating to Company's use of or reliance on such report,
(ii) neither Administrative Agent nor any Lender makes any representation or
warranty with respect to such report, and (iii) by delivering such report to
Company, neither Administrative Agent nor any Lender is requiring or
recommending the implementation of any suggestions or recommendations contained
in such report. Company acknowledges that Administrative Agent's exercise of its
rights under this subsection 6.7B shall not be deemed generation, treatment,
storage, transportation, disposal or arrangement for disposal of Hazardous
Materials.
C. Company shall promptly advise Lenders in writing and in reasonable
detail of (i) any Release of any Hazardous Materials required to be reported to
any federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, (ii) any and all
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written communications with respect to any Environmental Claims that have a
reasonable possibility of giving rise to a Material Adverse Effect or with
respect to any Release of Hazardous Materials required to be reported to any
federal, state or local governmental or regulatory agency, (iii) any remedial
action taken by Company or any other Person in response to (a) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (b) any Environmental Claim that would reasonably be expected
to have a Material Adverse Effect, (iv) Company's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any Facility that
could cause such Facility or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use thereof under any
Environmental Laws, and (v) any request for information from any governmental
agency that suggests such agency is investigating whether Company or any of its
Subsidiaries may be potentially responsible for a Release of Hazardous
Materials.
D. Company shall promptly notify Lenders of (i) any proposed acquisition
of stock, assets, or property by Company or any of its Subsidiaries that could
reasonably be expected to expose Company or any of its Subsidiaries to, or
result in, Environmental Claims that would reasonably be expected to have a
Material Adverse Effect or that could reasonably be expected to have a material
adverse effect on any Governmental Authoriza tion then held by Company or any of
its Subsidiaries and (ii) any proposed action to be taken by Company or any of
its Subsidiaries to commence manufacturing, industrial or other operations that
would reasonably be expected to subject Company or any of its Subsidiaries to
additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses.
E. Company shall, at its own expense, provide copies of such documents or
information as Arranging Agent or Administrative Agent may reasonably request in
relation to any matters disclosed pursuant to this subsection 6.7.
6.8 COMPANY'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
--------------------------------------------------------
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary response action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations to the extent that the
failure to so comply could reasonably be expected to have a Material Adverse
Effect. In the event Company or any of its Subsidiaries undertakes any remedial
action with respect to any Hazardous Materials on, under or about any Facility,
Company or such Subsidiary shall conduct and complete such remedial action in
compliance in all material respects with all applicable Environmental Laws, and
in accordance in all material respects with the policies, orders and directives
of all federal, state and local governmental authorities except when, and only
to the extent that, Company's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials
is being contested in good faith by Company or such Subsidiary.
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6.9 ENVIRONMENTAL INDEMNITY.
-----------------------
Company shall fully and promptly pay, perform, discharge, defend (subject
to Indemnitee's reasonable approval of Company's selection of counsel),
indemnify and hold harmless each Indemnitee from and against any action, suit,
proceeding, claim or loss (an "INDEMNIFIED ENVIRONMENTAL CLAIM") suffered or
incurred by that Indemnitee under or on account of any Environmental Laws or any
Release of any Hazardous Materials relating to the Facilities or any Hazardous
Materials generated at or originating from the Facilities by or at the direction
of Company or its Subsidiaries) other than any liability to the extent that such
liability results solely from the gross negligence or willful misconduct of the
Indemnitee, all as evidenced by a final judgment of a court of competent
jurisdiction; provided, however, that if Indemnities acquire title to any
-------- -------
Facility and Company and its Subsidiaries are no longer in possession of the
Facility (the "CUT-OFF DATE") at the time of an Indemnified Environmental
Claim, such Indemnified Environmental Claim shall be covered by the indemnity
set forth in this subsection 6.9 only if it arises out of or as a result of:
(i) the occurrence, at any time prior to the Cut-off Date, of any use, storage,
holding, existence, or Release of any Hazardous Materials whether currently
known or unknown; (ii) any use, storage, holding, existence, or Release of any
Hazardous Materials that Company or any of its Subsidiaries caused or
contributed to directly or indirectly at any time whether currently known or
unknown; (iii) any violation, prior to the Cut-off Date, of any applicable
Environmental Laws relating to any Facility or to the ownership, use, occupancy
or operation thereof; (iv) any investigation, inquiry, order, hearing, action or
other proceeding by or before any governmental authority in connection with any
use, storage, holding, existence or Release of any Hazardous Materials prior to
the Cut-off Date whether currently known or unknown; or (v) the inaccuracy or
breach of any representation or warranty set forth in any Loan Document.
6.10 EXECUTION OF LOAN DOCUMENTS BY FUTURE SUBSIDIARIES.
--------------------------------------------------
In the event that any Person becomes a Subsidiary of Company which is
organized under the law of the United States or any state thereof after the date
hereof, Company will promptly notify Administrative Agent of that fact and cause
such Subsidiary to execute and deliver to Administrative Agent a counterpart of
the Subsidiary Guaranty and a Subsidiary Pledge Agreement, a Subsidiary Security
Agreement, a Subsidiary Trademark Security Agreement, and Additional Mortgages
on all fee interests and material leasehold interests as Administrative Agent or
Requisite Lenders may request and to take all such further action and execute
all such further documents and instruments as may be required to grant
creditors' rights and grant and perfect in favor of Administrative Agent, for
the benefit of Lenders, subject to a first-priority Lien in all of the Real
Property Assets and all of the personal property assets of such Subsidiary
Guarantor (provided that with respect to leased Real Property Assets, Company
--------
and its Subsidiaries shall not be required to grant any security interests
requested by Administrative Agent or Requisite Lenders which require a landlord
consent if Company has exercised commercially reasonable efforts to obtain such
consent and has been unable to do so), all in form and substance reasonably
satisfactory to Administrative Agent. Company shall deliver to Administrative
Agent, together with such Loan Documents, (i) certified copies of such
Subsidiary's Articles or Certificate of Incorporation or comparable
organizational documents, together with a good standing certificate
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from the Secretary of State of the jurisdiction of its incorporation or
organization, each to be dated a recent date prior to their delivery to
Administrative Agent, (ii) a copy of such Subsidiary's Bylaws, certified by its
corporate secretary or an assistant corporate secretary as of a recent date
prior to their delivery to Administrative Agent, (iii) a certificate executed by
the secretary or an assistant secretary of such Subsidiary as to (a) the
incumbency and signatures of the officers of such Subsidiary executing the
guaranty and the Collateral Documents to which such Subsidiary is a party and
(b) the fact that the attached resolutions of the Board of Directors of such
Subsidiary authorizing the execution, delivery and performance of such Loan
Documents are in full force and effect and have not been modified or rescinded,
and (iv) a favorable opinion of counsel to such Subsidiary, in form and
substance reasonably satisfactory to Administrative Agent and its counsel, as to
(a) the due organization and good standing of such Subsidiary, (b) the due
authorization, execution and delivery by such Subsidiary of such Loan Documents,
(c) the enforceability of the such Loan Documents against such Subsidiary, and
(d) such other matters as Administrative Agent may reasonably request, all of
the foregoing to be reasonably satisfactory in form and substance to
Administrative Agent and its counsel.
6.11 COVENANTS REGARDING ACQUISITION PROPERTIES.
-------------------------------------------
A. With respect to each Real Property Asset to be acquired by Company or
any of its Subsidiaries on or after the Closing Date that (x) is financed with
the proceeds of Loans or (y) has a fair market value of $500,000 or more (each
an "ACQUISITION PROPERTY" and collectively, the "ACQUISITION PROPERTIES")
Company shall, and shall cause its Subsidiaries to, (i) not less than ten (10)
days prior to the acquisition thereof, notify Administrative Agent and Arranging
Agent in writing of such pending acquisition; (ii) not later than the date on
which such property is acquired, deliver to Administrative Agent and Arranging
Agent a mortgage, deed of trust or deed to secure debt (each an "ADDITIONAL
MORTGAGE" and collectively the "ADDITIONAL MORTGAGES") substantially in the
form attached hereto as Exhibit XV to be executed by Company or applicable
----------
Subsidiary, encumbering each such Acquisition Property, the form and content of
such Additional Mortgage to be subject to the approval of Administrative Agent
and Arranging Agent in their sole discretion; (iii) not later than the date on
which such property is acquired, have delivered to Administrative Agent and
Arranging Agent a title report in respect of any such Acquisition Property to be
owned by Company or one of its Subsidiaries in fee and, if reasonably required
by Administrative Agent, a title report in respect of any such Acquisition
Property to consist of material leasehold interests; (iv) if such Acquisition
Property is to be held by Company or one of its Subsidiaries as a leasehold
interest, exercise commercially reasonable efforts to obtain and deliver to
Administrative Agent and Arranging Agent (x) the consent of the lessor thereof
to the encumbering by Company or the applicable Subsidiary of its leasehold
interest and (y) upon the request of Administrative Agent, deliver to
Administrative Agent and Arranging Agent an estoppel letter from the landlord,
in form and substance reasonably satisfactory to Administrative Agent; and (v)
not less than ten (10) days prior to the acquisition thereof, in the case of any
such Acquisition Property to be owned in fee, deliver to Administrative Agent
and Arranging Agent environmental audits prepared by nationally recognized
professional consultants or other consultants mutually acceptable to Company and
Administrative Agent, in form, scope and substance satisfactory to
Administrative Agent in its reasonable discretion.
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B. On or prior to the date on which any such Acquisition Property is
acquired by Company or one of its Subsidiaries, Company shall have, or have
caused such Subsidiary to have, with respect to each such Acquisition Property
(i) delivered to Administrative Agent fully executed counterparts of an
Additional Mortgage previously approved by Administrative Agent and Arranging
Agent, together with evidence that such Additional Mortgage has been recorded in
all places to the extent necessary or desirable, in the reasonable judgment of
Administrative Agent, so as to effectively create a valid and enforceable first
priority lien (or such other priority lien as may be specified in the applicable
Additional Mortgage), subject to Permitted Encumbrances, on such Acquisition
Property in favor of Administrative Agent (or such other trustee as may be
required or desired under local law) for the benefit of Lenders; (ii) if
required to order a title report pursuant to subsection 6.11(a)(iii) above,
deliver an ALTA mortgagee title insurance policy (each an "ADDITIONAL MORTGAGEE
POLICY" and collectively, the "ADDITIONAL MORTGAGEE POLICIES") issued by the
Title Company, in an amount reasonably satisfactory to Administrative Agent (but
not in excess of Agent's reasonable determination of the fair market value of
the Acquisition Property), assuring Administrative Agent that the Additional
Mortgage to be executed in connection with the acquisition thereof creates a
valid and enforceable first priority mortgage lien (or such other priority lien
as may be specified in the Additional Mortgage) on such Acquisition Property,
free and clear of all defects and encumbrances except Permitted Encumbrances,
and subject to a standard survey exception, and which Additional Mortgagee
Policy shall provide for affirmative insurance and such reinsurance as
Administrative Agent may reasonably request, all of the foregoing in form and
substance reasonably satisfactory to Administrative Agent; and (iii) if the
Acquisition Property is to be leased or subleased by the Company or applicable
Subsidiary to a non-Affiliate of Company a counterpart agreement of
subordination, non-disturbance and attornment substantially in the form attached
hereto as Exhibit VIII, subordinating the leasehold interest of such third party
------------
to the Additional Mortgage and the Lien created thereby, which agreement shall
be executed by Company or the applicable Subsidiary as lessor (or sublessor, as
the case may be) and the lessee (or sublessee, as the case may be).
Nothing stated in this Section 6.11 shall be interpreted so as to allow the
Company or any of its Subsidiaries to acquire fee or leasehold title to any Real
Property Asset on or after the Closing Date except in accordance with the terms
of Section 7.7 hereof.
6.12 FURTHER ASSURANCES.
------------------
A. At any time or from time to time upon the request of Administrative
Agent, the Company will, at its expense, promptly execute, acknowledge and
deliver such further documents and do such other acts and things as such
Administrative Agent may reasonably request in order to effect fully the
purposes of the Loan Documents and to provide for payment of the Obligations in
accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, the Company
shall take, and cause each of its Subsidiaries to take, such actions as
Administrative Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, pledge agreements, mortgages, deeds of trust, stock powers,
financing statements and other documents, the filing or recording of any of the
foregoing, and the delivery of stock certificates
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and other collateral with respect to which perfection is obtained by possession)
to ensure that the Obligations are guarantied by Subsidiary Guarantors and are
secured by such of the assets of the Company and its Subsidiaries as is provided
in the Loan Documents.
B. The Company shall promptly record and file or cause to be recorded and
filed, as soon as practicable after the Closing Date, the Closing Date
Mortgages, Uniform Commercial Code Financing Statements and Fixture Filings and
all other necessary documents, certificates and affidavits in the appropriate
real and personal property records or filing office in each jurisdiction where
the Collateral is located. In connection therewith, the Company shall cooperate
with the Administrative Agent and with the Title Company and shall pay all
recording and filing fees, taxes (including mortgage recording taxes) and all
other costs and expenses incurred with respect thereto.
SECTION 7.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company may become and remain liable with respect to the
Unsecured Subordinated Notes;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iv) Company and its Subsidiaries may become and remain liable with
respect to intercompany Indebtedness, provided that (a) all such
--------
intercompany Indebtedness shall be evidenced by intercompany notes; (b) the
obligations of each obligor on such Indebtedness shall be subordinated in
right of payment to the payment and performance of such obligor's
Obligations, if any, (whether as a borrower, guarantor or pledgor of
Collateral under the Loan Documents to which such obligor is a party)
pursuant to the
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terms of the intercompany notes; (c) such intercompany Indebtedness shall
be reduced pro tanto by the amount of any payments made by such obligor in
--- -----
respect of its Obligations under any guarantee of the Obligations; and (d)
the Intercompany Notes evidencing such indebtedness shall be pledged to
Lenders;
(v) Company may remain liable with respect to Indebtedness
described in Schedule 7.1 annexed hereto and any renewals or refinancings
------------
thereof;
(vi) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness under Capital Leases, to the extent permitted under
subsection 7.8;
(vii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness incurred in connection with the construction of
properties for its "turnkey" program in an aggregate principal amount not
to exceed $15,000,000 outstanding at any time; and
(viii) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $20,000,000 at any time outstanding; provided that not more than
--------
$10,000,000 of such Indebtedness may be secured pursuant to the provisions
of subsection 7.2A(iii).
7.2 LIENS AND RELATED MATTERS.
-------------------------
A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2 annexed hereto and Liens
------------
securing the refinancing of the Indebtedness secured by such Liens to the
extent permitted by subsection 7.1; and
(iii) Other Liens securing Indebtedness outstanding pursuant to
clause (vii) of subsection 7.1, provided that Liens securing Indebtedness
--------
permitted under subsection 7.1(vii) and (viii) shall not encumber any
assets other than the assets (and proceeds thereof) purchased or financed
with the proceeds of such Indebtedness;
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter
93
<PAGE>
acquired, other than Liens excepted by the provisions of subsection 7.2A, it
shall make or cause to be made effective provision whereby the Obligations will
be secured by such Lien equally and ratably with any and all other Indebtedness
secured thereby as long as any such Indebtedness shall be so secured; provided
--------
that, notwithstanding the foregoing, this covenant shall not be construed as a
consent by Requisite Lenders to the creation or assumption of any such Lien not
permitted by the provisions of subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except (i) with respect to specific
property encumbered to secure payment of particular Indebtedness in accordance
with this subsection 7.2 or to be sold pursuant to an executed agreement with
respect to an Asset Sale, (ii) with respect to assets in connection with the
incurrence of Indebtedness permitted under subsection 7.1(vi) or 7.1(vii), or
(iii) pursuant to the terms of Unsecured Note Indenture, neither Company nor any
of its Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Company will not, and will not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay or
prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to Company
or any other Subsidiary of Company, except (a) customary nonassignment
provisions in contracts or leases entered into in the ordinary course of
business, (b) encumbrances or restrictions contained in agreements relating to
Indebtedness incurred by Company or a Subsidiary of Company; provided (1) such
--------
Indebtedness is permitted to be incurred pursuant to subsection 7.1, (2) the
encumbrances or restrictions relate solely to the property or assets of such
Subsidiary, (3) are customary for the type of Indebtedness being incurred and
(4) are no more restrictive in any material respect than the existing
restrictions.
7.3 INVESTMENTS; JOINT VENTURES.
---------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash and Cash Equivalents;
(ii) Company may make and own Investments in Subsidiaries of Company;
(iii) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto;
------------
94
<PAGE>
(iv) Company may make and own Investments consisting of notes
received in connection with Asset Sales permitted under subsection 7.7;
(v) Company may make extensions of credit or otherwise provide
credit support to franchisees in respect of the deferral of royalty
payments, rental payments, taxes, equipment sales, financing of restaurant
properties, franchise agreements and development or territory agreements of
such franchisees, provided that the aggregate amount thereof created after
--------
the Closing Date shall at no time be outstanding in an amount greater than
$2,000,000 to any franchisee or $12,500,000 to all franchisees;
(vi) Company may make Investments in or loans to franchisees not
specified in subsection 7.4(vi) in an aggregate amount not to exceed
$1,500,000 at any one time outstanding;
(vii) Company may continue to own loans evidenced by the Employee Tax
Loan Notes in an aggregate principal amount not to exceed $5,000,000 at any
one time outstanding;
(viii) Company may make and own Investments consisting of notes
received from employees of Company and its Subsidiaries in connection with,
and in an amount not to exceed the purchase price of, their purchase of
Company Common Stock, provided such notes are secured by the Company Common
Stock being purchased with the proceeds thereof;
(ix) Company may make and own other Investments in an amount not to
exceed $5,000,000 in the aggregate;
(x) Company may make and own the Permitted Foreign Joint Venture
Investment; and
(xi) Company may make and own Investments permitted pursuant to
subsection 7.7.
7.4 CONTINGENT OBLIGATIONS.
----------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with respect
to Contingent Obligations in respect of the Subsidiary Guaranty;
(ii) Company may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit;
95
<PAGE>
(iii) Company may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements with respect to the Obligations;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
------------
hereto;
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $5,000,000;
(vii) Company may become and remain liable with respect to commodity
hedging arrangements entered into in the ordinary course of business;
(viii) Company may become and remain liable with respect to Permitted
Earnout Agreements;
(ix) To the extent constituting a Contingent Obligation, Company may
become and remain liable with respect to credit support obligations
relating to franchisees permitted under subsection 7.3(v) and 7.3(ix); and
(x) Guarantees of Unsecured Subordinated Notes to the extent
required under the terms of the Unsecured Subordinated Note Indenture.
7.5 RESTRICTED JUNIOR PAYMENTS.
--------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that Company may (i) make regularly
--------
scheduled payments of principal and interest in respect of the Unsecured
Subordinated Notes in accordance with the terms of, and only to the extent
required by, and subject to the subordination provisions contained in, the
Unsecured Subordinated Note Indenture, as the Unsecured Subordinated Note
Indenture may be amended from time to time to the extent permitted under
subsection 7.15 and repurchases or redemptions of Unsecured Subordinated Notes
with the proceeds of equity securities as contemplated by subsection
2.4B(iii)(c), and (ii) make, so long as no Potential Event of Default or Event
of Default shall have occurred and be continuing, payments to purchase Company
Common Stock or options, warrants or rights to purchase or acquire Company
Common Stock to officers or employees or former officers or employees (or their
estates or estate beneficiaries) upon death, disability, retirement or
termination of employment from Company or its Subsidiaries not to exceed
$1,500,000 during any fiscal year, plus the amount of any Cash proceeds received
----
by Company from the sale of Company Common Stock to officers or employees of
Company or its
96
<PAGE>
Subsidiaries within such fiscal year, (iii) other Restricted Junior Payments
described in Schedule 7.5.
------------
7.6 FINANCIAL COVENANTS.
-------------------
A. MINIMUM CASH INTEREST COVERAGE RATIO. Company 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>
06/15/97 2.25:1.00
----------------------------------------------
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
----------------------------------------------
12/30/01 3.00:1.00
==============================================
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
==============================================
FISCAL MINIMUM
QUARTER CASH INTEREST
ENDING COVERAGE RATIO
==============================================
<S> <C>
03/24/02 3.00:1.00
----------------------------------------------
06/16/02 3.00:1.00
==============================================
</TABLE>
B. MAXIMUM LEVERAGE RATIO. Company 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 MAXIMUM
QUARTER LEVERAGE
ENDING RATIO
==============================================
<S> <C>
06/15/97 4.00:1.00
----------------------------------------------
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
==============================================
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
==============================================
FISCAL MAXIMUM
QUARTER LEVERAGE
ENDING RATIO
==============================================
<S> <C>
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>
C. MINIMUM FIXED CHARGE COVERAGE RATIO. Company 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 shall not be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
==============================================
FISCAL MINIMUM
QUARTER FIXED CHARGE
ENDING COVERAGE
==============================================
<S> <C>
06/15/97 1.20:1.00
----------------------------------------------
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
----------------------------------------------
12/31/01 1.35:1.00
==============================================
</TABLE>
99
<PAGE>
<TABLE>
<CAPTION>
==============================================
FISCAL MAXIMUM
QUARTER FIXED CHARGE
ENDING RATIO
==============================================
<S> <C>
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. CERTAIN CALCULATIONS.
(i) With respect to any calculation of Consolidated Interest Expense
or Consolidated Cash Interest Expense for purposes of subsection 7.6 for a
four-fiscal quarter period including the initial Funding Date, Consolidated
Interest Expense and Consolidated Cash Interest Expense shall be calculated
on a pro forma basis assuming, in each case, that the initial Funding Date,
--- -----
and the Refinancings and the borrowings by the Company to fund the same
pursuant to this Agreement and the Unsecured Subordinated Notes, occurred
on the first day of the applicable four-fiscal quarter period and assuming
further, for purposes of calculation of the pro forma interest accrued on
--- -----
the Loans during such periods prior to the Closing Date that all Loans
outstanding were Eurodollar Loans and that the applicable reference
interest rates were the average effective Adjusted Eurodollar Rates plus
----
the Applicable Margin for Loans outstanding during the period from the
initial Funding Date through the date of determination.
(ii) With respect to any period during which a Permitted Acquisition
is made, for purposes of determining compliance with the financial
covenants set forth in this subsection 7.6, Consolidated EBITDA,
Consolidated Interest Expense and Consolidated Cash Interest Expense shall
be calculated with respect to such periods and such Permitted Acquisition
on a pro forma basis (a "PRO FORMA BASIS"), including any pro forma
expense and cost reductions calculated on a basis consistent with
Regulation S-X promulgated under the Securities Act), using the audited (if
available) historical financial statements of all entities or assets so
acquired or to be acquired and the consolidated financial statements of
Company and its Subsidiaries which shall be reformulated as if such
Permitted Acquisition, and any other Permitted Acquisitions which have been
consummated during such period, and any Indebtedness or other liabilities
incurred in connection therewith had been consummated or incurred at the
beginning of such period (and assuming that such Indebtedness bears
interest during any portion of the applicable measurement period prior to
the acquisition date at the average effective Adjusted Eurodollar Rates
plus the Applicable Margin applicable to outstanding Loans during such
----
100
<PAGE>
period), (ii) otherwise in conformity with certain procedures to be agreed
upon between Administrative Agent and Company, all such calculations to be
in form and substance satisfactory to Administrative Agent.
E. PRO FORMA COMPLIANCE FOR PERMITTED ACQUISITIONS.
On or prior to the consummation of a Permitted Acquisition financed in
whole or in part with the proceeds of an Acquisition Loan, Company shall deliver
to Administrative Agent an Officer's Certificate, demonstrating compliance, (y)
on a Pro Forma Basis, with the financial covenants set forth in Schedule 7.6 as
of the fiscal quarter most recently ended, after giving effect to such Permitted
Acquisition and (z) projected compliance, on a Pro Forma Basis, with the
financial covenants set forth in this subsection 7.6 as of the last day of the
next succeeding fiscal quarter.
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
----------------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, alter
the corporate, capital or legal structure of Company or any of its Subsidiaries,
or enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired (other than in the ordinary
course of business), or acquire by purchase or otherwise any portion of the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person
(other than in the ordinary course of business), except:
(i) any Subsidiary of Company may be merged with or into Company or
any other Subsidiary of Company, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Company or any other wholly owned Subsidiary of
Company; provided that, in the case of such a merger, Company or such
--------
wholly owned Subsidiary shall be the continuing or surviving corporation;
(ii) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(iii) Company and its Subsidiaries may lease stores owned or leased
by the Company or Subsidiaries to franchisees; provided that the rentals
--------
received under any such lease reflect the fair market value of such
property;
(iv) subject to subsection 7.13, Company and its Subsidiaries may
sell or dispose of (y) the Far West Division and (z) may make other Asset
Sales (other than Specified Asset Sales) having an aggregate fair market
value not in excess of $10,000,000; provided that (a) the consideration
--------
received for each such Asset Sale shall
101
<PAGE>
be in an amount at least equal to the fair market value thereof; (b) the
consideration for each such Asset Sale (other than the Far West Division)
is at least 75% Cash, and the balance is promissory notes payable to
Company or its Subsidiaries; and (c) the proceeds of such Asset Sales
shall be applied as required by subsection 2.4B(iii)(a);
(v) Company and its Subsidiaries may make Investments permitted
pursuant to subsection 7.3;
(vi) Company and its Subsidiaries may make Permitted Acquisitions;
and
(vii) Company and its Subsidiaries may make Specified Asset Sales.
7.8 CAPITAL EXPENDITURES.
--------------------
A. CONSOLIDATED CAPITAL EXPENDITURES. Except as set forth in subdivision
B of this subsection 7.8, Company shall not, and shall not permit its
Subsidiaries to, 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 Company'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) a portion (not to exceed 15%) of the amount
of Maximum Consolidated Capital Expenditures 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 Expenditures 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 Expenditures 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).
102
<PAGE>
<TABLE>
<CAPTION>
=============================================
MAXIMUM CONSOLIDATED
FISCAL CAPITAL EXPENDITURES
YEAR/PERIOD AMOUNT
=============================================
<S> <C>
Closing Date to end
of fiscal year 1997 $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.
B. In addition to the foregoing, Company may make Consolidated Capital
Expenditures (i) in connection with Permitted Acquisitions, (ii) in connection
with the Chesapeake Transaction, (iii) with the proceeds of Specified Asset
Sales and (iv) committed to be made prior to the Closing Date but made after the
Closing Date, and such Consolidated Capital Expenditures made pursuant to this
subsection 7.8B shall not be included for the purposes of calculating the
Maximum Consolidated Capital Expenditures set forth in subsection 7.8A.
7.9 FISCAL YEAR
-----------
Company shall not change the fiscal year-end of Company and its
Subsidiaries from the last Sunday in December of each calendar year.
7.10 SALES AND LEASE-BACKS.
---------------------
Company 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 Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company 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 Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease; provided that the foregoing shall not apply with respect to (i) any
--------
103
<PAGE>
sale leaseback transaction consummated prior to the Closing Date and (ii) any
property acquired after the Closing Date; provided that (y) the sale of such
--------
property constitutes a Specified Asset Sale and (z) the aggregate sale price
paid to the Company with respect to all sales or transfers of such property
shall not exceed $15,000,000.
7.11 SALE OR DISCOUNT OF RECEIVABLES.
-------------------------------
Company 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.
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
---------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
--------
shall not apply to (i) any transaction between Company and any of its Wholly
Owned Subsidiaries or between any of its Wholly Owned Subsidiaries, (ii)
reasonable and customary compensation or employee benefit arrangements with any
officer or member of the Board of Directors of Company or any of its
Subsidiaries entered into in the ordinary course of business and consistent with
past practice or (iii) any transactions permitted pursuant to clause (ii) or
(iii) of subsection 7.5 or clauses (vii) and (viii) of subsection 7.3.
7.13 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), Company 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 Company, another Subsidiary of Company, or to
qualify directors if required by applicable law.
7.14 CONDUCT OF BUSINESS.
-------------------
From and after the Closing Date, Company shall not, and shall not permit
any of its Subsidiaries to, engage in any business other than (i) the businesses
engaged in by Company and
104
<PAGE>
its Subsidiaries on the Closing Date and similar or related businesses or
businesses acquired pursuant to a Permitted Acquisition or otherwise commenced
by Company or its Subsidiaries; provided that any such business other than the
--------
food service business shall be entered into after reasonable notice to the
Lenders and after consultation with the Administrative Agent and (ii) such other
lines of business as may be consented to by Requisite Lenders; provided,
--------
however, that Company will not permit its Subsidiary, AFC Properties, Inc., a
- -------
Georgia corporation, to own, purchase, hold, acquire (including by lease or
sublease) any property other than such property it holds as at the Closing Date.
7.15 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
-------------------------------------------------------------
Company 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 (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 Company or Lenders.
Company shall not designate any Indebtedness as "Designated Senior Indebtedness"
under the terms of the Unsecured Subordinated Note Indenture without the prior
written consent of Administrative Agent and Requisite Lenders.
SECTION 8.
EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF DEFAULT") shall
occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
---------------------------------
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; failure by Company to pay when
due any amount payable to an Issuing Lender in reimbursement of any drawing
under a Letter of Credit; or failure by Company to pay any interest, any fee or
any other amount due under this Agreement within five days after the date due;
or
8.2 DEFAULT IN OTHER AGREEMENTS.
---------------------------
(i) Failure of Company or any of its Subsidiaries 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) owing
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in respect of on one or more items of Indebtedness (other than Indebtedness
referred to in subsection 8.1) or Contingent Obligations in an individual
principal amount of $750,000 or more or with an aggregate principal amount of
$3,000,000 or more, in each case beyond the end of any grace period provided
therefor; or (ii) breach or default by Company (which breach or default occurs
or continues after the Closing Date) or any of its Subsidiaries with respect to
any other material term of (a) one or more items of Indebtedness or Contingent
Obligations 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 or Contingent Obligation(s),
if the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) 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); or
8.3 BREACH OF CERTAIN COVENANTS.
---------------------------
Failure of Company to perform or comply with any term or condition
contained in subsection 2.4, 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 BREACH OF WARRANTY.
------------------
Any representation, warranty, certification or other statement made by
Company or any of its Subsidiaries in any Loan Document or in any statement or
certificate at any time given by Company or any of its Subsidiaries in writing
pursuant hereto or thereto or in connection herewith or therewith shall be false
in any material respect on the date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
-----------------------------------
Company shall default in the performance of or compliance with any term
contained in this Agreement or any of the other Loan Documents, other than any
such term referred to in any other subsection of this Section 8, and such
default shall not have been remedied or waived within 30 days after the earlier
of (i) an officer of Company becoming aware of such default or (ii) receipt by
Company of notice from Administrative Agent or any Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Company or any of its Material Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its Material Subsidiaries under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator,
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sequestrator, trustee, custodian or other officer having similar powers over
Company or any of its Material Subsidiaries, or over all or a substantial part
of its property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
Company or any of its Material Subsidiaries for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall have
been issued against any substantial part of the property of Company or any of
its Material Subsidiaries, and any such event described in this clause (ii)
shall continue for 60 days unless dismissed, bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
---------------------------------------------------
(i) Company or any of its Material Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Material Subsidiaries
shall make any assignment for the benefit of creditors; or (ii) Company or any
of its Material Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due; or
the Board of Directors of Company or any of its Material Subsidiaries (or any
committee thereof) shall adopt any resolution or otherwise authorize any action
to approve any of the actions referred to in clause (i) above or this clause
(ii); or
8.8 JUDGMENTS AND ATTACHMENTS.
-------------------------
Any final money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $750,000 or (ii) in
the aggregate at any time an amount in excess of $3,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) shall be entered or filed against Company or
any of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any
event later than five days prior to the date of any proposed sale thereunder);
or
8.9 DISSOLUTION.
-----------
Any order, judgment or decree shall be entered against Company or any of
its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
----------------------
There shall occur one or more ERISA Events which individually or in the
aggregate results in liability of Company or any of its ERISA Affiliates in
excess of $1,000,000 during the term of this Agreement; or there exists, as of
any valuation date for a Pension Plan, an excess
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of the actuarial present value (determined on the basis of reasonable
assumptions employed by the independent actuary for such Pension Plan) of
benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the fair
market value of the assets of such Pension Plan, individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans with respect to which there is no such excess) which exceeds
$1,000,000; or
8.11 CHANGE IN CONTROL.
-----------------
There shall occur any of (i) (a) prior to an initial public offering of the
Company Common Stock, Freeman Spogli & Co. Incorporated and its Affiliates,
PENMAN Private Equity Fund L.P. and senior management of the Company shall cease
to beneficially own and control in the aggregate at least (1) a majority of the
issued and outstanding shares of capital stock of Company entitled (without
regard to the occurrence of any contingency) to vote for the election of members
of the Board of Directors of Company and (2) more than 50% of the economic
interest in all outstanding capital stock of Company or (b) prior to an initial
public offering of Company Common Stock, Freeman Spogli & Co. Incorporated and
its Affiliates shall cease to own and control 40% of the economic interest in
all the outstanding capital stock of the Company, or (ii) following an initial
public offering of the Company Common Stock, (1) Freeman Spogli & Co.
Incorporated and its Affiliates, PENMAN Private Equity Fund L.P. and senior
management of Company, in the aggregate shall cease to beneficially own and
control at least 35% of the issued and outstanding shares of capital stock of
Company entitled (without regard to the occurrence of any contingency) to vote
for the election of members of the Board of Directors of Company and (2) any
other Person or Persons acting together that would constitute a group (for
purposes of Section 13(d) of the Security Exchange Act of 1934, or any successor
provision thereto), together with any Affiliates thereof, shall beneficially own
35% or more of the aggregate voting power of all classes of capital stock of
Company entitled to vote generally in the election of directors; or (iii) either
(a) any Person or Persons acting together that would constitute a group (for
purposes of Section 13(d) of the Security Exchange Act of 1934, or any successor
provision thereto), together with any Affiliates thereof, shall beneficially own
30% or more of the aggregate voting power of all classes of stock of Company
entitled to vote generally in the election of directors and Freeman Spogli & Co.
Incorporated and its Affiliates, PENMAN Private Equity Fund L.P. and senior
management of Company, in the aggregate at such time shall not own and control
more than 30% of the issued and outstanding shares of capital stock of Company
entitled (without regard to the incurrence of any contingency) to vote for the
election of members of the Board of Directors of Company or (b) prior to an
initial public offering, principals or employees of Freeman Spogli & Co.
Incorporated or its Affiliates shall cease to comprise at least 40% of the Board
of Directors of Company; or (iv) the occurrence of any "Change of Control"
under the Unsecured Subordinated Note Indenture; or
8.12 FAILURE OF SECURITY.
-------------------
Upon or after execution and delivery thereof, any Collateral Document
shall, at any time, cease to be in full force and effect in any material respect
(other than by reason of a release of Collateral thereunder in accordance with
the terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with the
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terms hereof or thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested in writing by any Loan Party, or the
Administrative Agent shall not have or shall cease to have a valid and perfected
first priority security interest (subject to Permitted Encumbrances) in any
Collateral purported to be covered thereby (other than Collateral the aggregate
fair market value of which does not exceed $750,000), in each case for any
reason other than the failure of Administrative Agent or any Lender to take any
action within its control; or
8.13 INVALIDITY OF SUBSIDIARY GUARANTY.
---------------------------------
Any Subsidiary Guaranty of a Material Subsidiary for any reason other than
the satisfaction in full of all Obligations, ceases to be in full force and
effect or is declared to be null and void, or any Guarantor denies that it has
any further liability, including, without limitation, with respect to future
advances by Lenders, under any such Subsidiary Guaranty or other guarantee or
gives notice to such effect; or
8.14 SUBORDINATION PROVISIONS.
------------------------
Company shall fail to comply with the subordination provisions contained in
the Unsecured Subordinated Note Indenture or the subordination provisions
contained in the Unsecured Subordinated Note Indenture shall be declared null
and void;
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Issuing Lender to issue any Letter of Credit shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any other
Event of Default, Administrative Agent shall, upon the written request or with
the written consent of Requisite Lenders, by written notice to Company, declare
all or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Issuing Lender to
issue any Letter of Credit shall thereupon terminate; provided that the
--------
foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iv).
Any amounts described in clause (b) above, when received by Administrative
Agent shall be delivered to Administrative Agent and shall be held by
Administrative Agent pursuant to the terms of the Collateral Account Agreement
and shall be applied as therein provided.
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Notwithstanding anything contained in the second preceding paragraph, if at
any time within 60 days after an acceleration of the Loans pursuant to such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due otherwise than as a result of such
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Potential Events of Default (other than non-payment of the principal
of and accrued interest on the Loans, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder or preclude Lenders from exercising any of their rights and remedies
under the Loan Documents, even if the conditions set forth herein are met.
SECTION 9.
AGENTS
9.1 APPOINTMENT.
-----------
GSCP is hereby appointed Arranging Agent and Syndication Agent hereunder
and each Lender hereby authorizes Arranging Agent and Syndication Agent to act
as its agent in accordance with the terms of this Agreement and the other Loan
Documents. CIBC is hereby appointed Administrative Agent hereunder and under
the other Loan Documents and each Lender hereby authorizes Administrative Agent
to act as its agent in accordance with the terms of this Agreement and the other
Loan Documents and the Collateral Documents. Agents agree to act upon the
express conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of
Agents and Lenders and Company shall have no rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties under
this Agreement, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Company or any of its Subsidiaries.
As of the Closing Date, all obligations of Syndication Agent and Arranging Agent
hereunder shall terminate.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
-----------------------------------
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each of
the Agents to take such action on such Lender's behalf and to exercise such
powers, rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Agents shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Agents may
each exercise
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such powers, rights and remedies and perform such duties by or through their
agents or employees. Agents shall not have, by reason of this Agreement or any
of the other Loan Documents, a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon Agents any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agents shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Agents to Lenders or by or on behalf of
Company to Agents or any Lender in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Company or any other Person liable for the payment of any
Obligations, nor shall Agents be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding,
Administrative Agent shall not have any liability arising from confirmations of
the amount of outstanding Loans or the Letter of Credit Usage or the component
amounts thereof.
C. EXCULPATORY PROVISIONS. None of Agents nor any of their respective
officers, directors, partners, employees or agents shall be liable to Lenders
for any action taken or omitted by Agents under or in connection with any of the
Loan Documents except to the extent caused by their respective gross negligence
or willful misconduct. If Agents shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, Agents shall
be entitled to refrain from such act or taking such action unless and until
Agents shall have received instructions from Requisite Lenders. Without
prejudice to the generality of the foregoing, (i) shall be entitled to rely, and
shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Company and its Subsidiaries), accountants, experts and other
professional advisors selected by it; and (ii) no Lender shall have any right of
action whatsoever against any Agent as a result of such Agent acting or (where
so instructed) refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of Requisite Lenders. Each
Agent shall be entitled to refrain from exercising any power, discretion or
authority vested in it under this Agreement or any of the other Loan Documents
unless and until it has obtained the instructions of Requisite Lenders.
D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the
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Loans and the Letters of Credit, each Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include each Agent in its individual capacity. Each Agent
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of banking, trust, financial advisory or other business with Company
or any of its Affiliates as if it were not performing the duties specified
herein, and may accept fees and other consideration from Company for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
------------------------------------------------------------------
CREDITWORTHINESS.
----------------
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 RIGHT TO INDEMNITY.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent (and its respective affiliates and partners), to the extent
that such Agent shall not have been reimbursed by Company, for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against such Agent in exercising its
powers, rights and remedies or performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as Agent, in any way relating
to or arising out of this Agreement or the other Loan Documents; provided that
--------
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from any Agent's gross negligence or willful misconduct.
If the amount of any indemnity furnished to any Agent for any purpose shall, in
the opinion of such Agent, be insufficient or become impaired, such Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished.
9.5 COLLATERAL DOCUMENTS.
--------------------
Without limiting the generality of subsection 9.1, each Lender hereby
further authorizes Administrative Agent to enter into the Collateral Documents
as secured party on behalf of and
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for the benefit of Lenders and agrees to be bound by the terms of each of the
Collateral Documents and the Subsidiary Guaranty; provided that, except as
--------
otherwise provided below, Administrative Agent shall not enter into or consent
to any amendment, modification, termination or waiver of any provision contained
in any Collateral Document and the Subsidiary Guaranty without the prior consent
of Requisite Lenders. Anything contained in any of the Loan Documents to the
contrary notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the collateral under any Collateral Document
and the Subsidiary Guaranty, it being understood and agreed that all powers,
rights and remedies under the Collateral Documents and the Subsidiary Guaranty
may be exercised solely by Administrative Agent for the benefit of Lenders in
accordance with the terms thereof. Each Lender hereby authorizes Administrative
Agent (i) to release or subordinate Collateral as permitted or required under
this Agreement or the Collateral Documents and the Subsidiary Guaranty, and
agrees that a certificate executed by Administrative Agent evidencing such
release of Collateral shall be conclusive evidence of such release as to any
third party and (ii) to enter into any amendments of the Collateral Documents
and the Subsidiary Guaranty to cure any ambiguity, defect or inconsistency or to
amend provisions relating to ministerial or administrative matters which do not
materially adversely affect the rights of the Lenders thereunder. In the event
Company receives a notice regarding any Subject Lease (as such term is defined
in the Closing Date Mortgages) pursuant to clause (b) of item (i) of Schedule
--------
5.2F, Administrative Agent shall release the Subject Lease of record from the
- ----
offending Closing Date Mortgage; provided that the Administrative Agent shall be
--------
satisfied that such landlord or lessor claim specified in such notice is in good
faith.
9.6 SUCCESSOR ADMINISTRATIVE AGENT AND SWING LINE LENDER.
----------------------------------------------------
A. SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at
any time by giving 30 days' prior written notice thereof to Lenders and Company,
and Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Company and
Administrative Agent, and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
consultation with Company, to appoint a successor Administrative Agent. Upon
the acceptance of any appointment Administrative Agent hereunder by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent and the retiring or removed
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of
Administrative Agent pursuant to subsection 9.6A shall also constitute the
resignation or removal of CIBC or its successor as Swing Line Lender, and any
successor Agent appointed pursuant to subsection 9.6A shall, upon its acceptance
of such appointment, become the successor Swing Line Lender for all purposes
hereunder. In such event (i) Company shall prepay any outstanding Swing Line
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Loans made by the retiring or removed Administrative Agent in its capacity as
Swing Line Lender, (ii) upon such prepayment, the retiring or removed
Administrative Agent and Swing Line Lender shall surrender the Swing Line Note
held by it to Company for cancellation, and (iii) Company shall issue a new
Swing Line Note to the successor Agent and Swing Line Lender substantially in
the form of Exhibit IV-D annexed hereto, in the principal amount of the Swing
------------
Line Loan Commitment then in effect and with other appropriate insertions.
9.7 AGENT AUTHORIZED TO RELEASE SECURITY INTERESTS.
----------------------------------------------
Each Lender hereby further authorizes Administrative Agent to enter into
each Collateral Document as secured party on behalf of and for the benefit of
Lenders and agrees to be bound by the terms of each Collateral Document;
provided that Administrative Agent shall not enter into or consent to any
- --------
amendment, modification, termination or waiver of any provision contained in any
Collateral Document without the prior consent of Requisite Lenders; provided
--------
further, however, that, without further written consent or authorization from
- ------- -------
Requisite Lenders, Administrative Agent may execute any documents or instruments
necessary to effect the release of any asset constituting Collateral from the
Lien of the applicable Collateral Document in the event that such asset is sold
or otherwise disposed of in a transaction effected in accordance with subsection
7.7 (and shall, at the reasonable request of Company execute such documents and
instruments). Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
(including without limitation through the exercise of a right of set-off against
call deposits of such Lender in which any funds on deposit in the Collateral
Account may from time to time be invested), it being understood and agreed that
all rights and remedies under the Collateral Documents may be exercised solely
by Administrative Agent for the benefit of Lenders in accordance with the terms
thereof.
SECTION 10.
MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
-------------------------------------------------------------
A. GENERAL. Each Lender shall have the right at any time to (i) subject
to Section 10.1B, sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any Person in, all or any part of its Commitments or any
Loan or Loans made by it or its Letters of Credit or participations therein or
any other interest herein or in any other Obligations owed to it; provided that
--------
no such sale, assignment, transfer or participation shall, without the consent
of Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; provided, further that no
-------- -------
such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii); provided, further
-------- -------
that no such sale, assignment, transfer or participation of any Letter of Credit
or any participation therein may be made
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separately from a sale, assignment, transfer or participation of a corresponding
interest in the Revolving Loan Commitment and the Revolving Loans of the Lender
effecting such sale, assignment, transfer or participation and provided, further
-------- -------
that, anything contained herein to the contrary notwithstanding, the Swing Line
Loan Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Agent and Swing Line Lender to the extent contemplated by
subsection 9.6. Except as otherwise provided in this subsection 10.1, no Lender
shall, as between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment or transfer of, or any granting of
participations in, all or any part of its Commitments or the Loans, the Letters
of Credit or participations therein, or the other Obligations owed to such
Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit or participation therein, or other Obligation may (a) be assigned
in any amount to another Lender, or to an Affiliate of the assigning Lender
(provided such Affiliate can reasonably be expected to be able to perform
its obligations hereunder) or another Lender, with the giving of notice to
Company and Administrative Agent or (b) be assigned in an aggregate amount
of not less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, Letters of Credit and
participations therein, and other Obligations of the assigning Lender) to
any other Eligible Assignee with the giving of notice to Company and with
the consent of Company and Administrative Agent (which consent of Company
and Administrative Agent shall not be unreasonably withheld). To the
extent of any such assignment in accordance with either clause (a) or (b)
above, the assigning Lender shall be relieved of its obligations with
respect to its Commitments, Loans, Letters of Credit or participations
therein, or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance and recording in the Register, an Assignment
Agreement, together with an assignment processing and recordation fee of
$3,000 and such forms, certificates or other evidence, if any, with respect
to United States federal income tax withholding matters as the assignee
under such Assignment Agreement may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a); provided,
--------
however, that such assignment processing and recordation fee shall not be
-------
required where the assignee is an Affiliate of the assignor. Upon such
execution, delivery, and acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (1) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(2) the assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto; provided
--------
that, anything contained in any of the Loan Documents to the contrary
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notwithstanding, (x) the assigning Lender shall continue to be entitled to
the benefits of subsection 2.7, 3.5A, 3.6, 6.9 and 10.3 hereof subsequent
to the effectiveness of such assignment and (y) if such Lender is the
Issuing Lender with respect to any outstanding Letters of Credit such
Lender shall continue to have all rights and obligations of an Issuing
Lender with respect to such Letters of Credit until the cancellation or
expiration of such Letters of Credit and the reimbursement of any amounts
drawn thereunder). The Commitments hereunder shall be modified to reflect
the Commitment of such assignee and any remaining Commitment of such
assigning Lender and, if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall, upon the effectiveness of
such assignment or as promptly thereafter as practicable, surrender its
applicable Notes to Administrative Agent for cancellation, and thereupon
new Notes shall be issued to the assignee and or to the assigning Lender,
substantially in the form of Exhibit IV-A, Exhibit IV-B or Exhibit IV-C
------------ ------------ ------------
annexed hereto, as the case may be, with appropriate insertions, to reflect
the new Commitments and/or outstanding Loans as the case may be, of the
assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
-----------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the assignment processing and recordation fee referred to in subsection
10.1B(i) and any forms, certificates or other evidence with respect to
United States federal income tax withholding matters that such assignee may
be required to deliver to Administrative Agent pursuant to subsection
2.7B(iii)(a), Administrative Agent shall, if Administrative Agent and
Company have consented to the assignment evidenced thereby (in each case to
the extent such consent is required pursuant to subsection 10.1B(i)), (a)
accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof to
Company. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
10.1B(ii).
(iii) Representation of Lenders. Each Lender initially party to this
-------------------------
Agreement hereby represents, and each Person that becomes a Lender pursuant
to an assignment permitted by this subsection 10.1B upon its becoming a
Lender under this Agreement shall be deemed to represent, that it is a
commercial lender, other financial institution or other "accredited
investor" (as defined in Regulation D under the Securities Act) which
makes loans in the ordinary course of its business and is acquiring the
Loans without a view to distribution of the Loans within the meaning of the
federal securities laws, and that it will make or acquire Loans for its own
account in the ordinary course of such business; provided that, subject to
--------
the provisions of this subsection 10.1, the disposition of any promissory
notes or other evidences of or interests in Indebtedness held by such
Lender shall at all times be within its exclusive control.
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit
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to take any action hereunder except action directly affecting (i) the extension
of the final maturity of the principal amount of any Loan or Commitment or
interest on any Loan allocated to such participation or (ii) a reduction of the
principal amount of or the rate of interest payable on any Loan allocated to
such participation or (iii) or the release of all or substantially all of the
Collateral other than in accordance with the terms of the Loan Documents, and
all amounts payable by Company hereunder (including without limitation amounts
payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be
determined as if such Lender had not sold such participation. Company and each
Lender hereby acknowledge and agree that, solely for purposes of subsections
10.4 and 10.5, (a) any participation will give rise to a direct obligation of
Company to the participant and (b) the participant shall be considered to be a
"Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between Company and such Lender, be
--------
relieved of any of its obligations hereunder as a result of any such assignment
and pledge and (ii) in no event shall such Federal Reserve Bank be considered to
be a "Lender" or be entitled to require the assigning Lender to take or omit
to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
10.2 EXPENSES.
--------
Whether or not the transactions contemplated hereby shall be consummated,
Company agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents and any consents, amendments,
waivers or other modifications thereto; (ii) all the costs of furnishing all
opinions by counsel for Company (including without limitation any opinions
requested by Lenders as to any legal matters arising hereunder) and of Company's
performance of and compliance with all agreements and conditions on its part to
be performed or complied with under this Agreement and the other Loan Documents
including, without limitation, with respect to confirming compliance with
environmental and insurance requirements; (iii) the reasonable fees, expenses
and disbursements of counsel to Agents (including allocated costs of internal
counsel) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and any consents, amendments, waivers or
other modifications thereto and any other documents or matters requested by
Company; (iv) all other actual and reasonable costs and expenses (including
reasonable fees and expenses of counsel) incurred by Syndication Agent and
Administrative Agent in connection with the syndication of the Commitments and
the negotiation, preparation and execution of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and the
transactions contemplated thereby; (v) the reasonable costs of customary audits
conducted by Administrative Agent; and (vi) after the occurrence of an Event of
Default, all costs and expenses, including reasonable
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attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Administrative Agent and Lenders in enforcing any
Obligations of or in collecting any payments due from Company hereunder or under
the other Loan Documents by reason of such Event of Default (including, without
limitation, in connection with the sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Subsidiary
Guaranty) or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 INDEMNITY.
---------
In addition to the payment of expenses pursuant to subsection 10.2, whether
or not the transactions contemplated hereby shall be consummated, Company agrees
to defend (subject to Indemnitee's selection of counsel), indemnify, pay and
hold harmless Syndication Agent, Arranging Agent, Administrative Agent and
Lenders, and the officers, directors, partners, employees, agents and affiliates
of Syndication Agent, Administrative Agent, Arranging Agent and Lenders
(collectively called the "INDEMNITEES") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans or the issuance of
Letters of Credit hereunder or the use or intended use of any of the Letters of
Credit hereunder or the use or intended use thereof, or any enforcement of any
of the Loan Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Subsidiary
Guaranty)) (collectively called the "INDEMNIFIED LIABILITIES"); provided that
--------
Company shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction; and
provided, further, that if any Indemnified Environmental Claim arising after the
- -------- -------
Cut-off Date shall be covered by the indemnity set forth in this subsection 10.3
only if it arises out of or as a result of: (i) the occurrence, at any time
prior to the Cut-off Date, of any use, storage, holding, existence, or Release
of any Hazardous Materials whether currently known or unknown; (ii) any use,
storage, holding, existence of Release of any Hazardous Materials that Company
or any of its Subsidiaries caused or contributed to directly or indirectly at
any time whether currently known or unknown; (iii) any violation, prior to the
Cut-off Date, of any applicable Environmental Laws relating to any Facility or
to the ownership, use, occupancy or operation thereof; (iv) any investigation,
inquiry, order, hearing, action or other
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proceeding by or before any governmental authority in connection with any use,
storage, holding, existence, or Release of any Hazardous Materials prior to the
Cut-off Date whether currently known or unknown; or (v) the inaccuracy or breach
of any representation or warranty set forth in any loan document. To the extent
that the undertaking to defend, indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and satis
faction of all Indemnified Liabilities incurred by the Indemnitees or any of
them.
10.4 SET-OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, upon the occurrence of any Event of
Default each Lender is hereby authorized by Company at any time or from time to
time subject to the consent of Administrative Agent, without notice to Company
or to any other Person (other than Administrative Agent), any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender to or for the credit or the account of Company against and on
account of the obligations and liabilities of Company to that Lender under this
Agreement, the Letters of Credit and participations therein and the other Loan
Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further assigns,
pledges and grants to Administrative Agent and each Lender a security interest
in all deposits and accounts maintained with Administrative Agent or such Lender
as security for the Obligations.
10.5 RATABLE SHARING.
---------------
Lenders hereby agree among themselves that if any of them shall, whether by
voluntary payment (excluding voluntary payments made and applied in accordance
with this Agreement), by realization upon security, through the exercise of any
right of set-off or banker's lien, by counterclaim or cross action or by the
enforcement of any right under the Loan Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, amounts payable in respect of Letters of Credit, fees and
other amounts then due and owing to that Lender hereunder or under the other
Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender)
which is greater than the proportion received by any other Lender in respect of
the Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify Administrative Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations
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or other interests (which it shall be deemed to have purchased from each seller
of a participation or other interests simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by
all Lenders in proportion to the Aggregate Amounts Due to them; provided that if
--------
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of Company or otherwise, those purchases shall be rescinded and
the purchase prices paid for such participations or other interests shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Company expressly consents to the foregoing arrangement and
agrees that any holder of a participation or other interests so purchased may
exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation or
other interests held by that holder.
10.6 AMENDMENTS AND WAIVERS.
----------------------
No amendment, modification, termination or waiver of any provision of this
Agreement, the Notes or the Collateral Documents, and no consent to any
departure by Company therefrom, shall in any event be effective without the
written concurrence of Requisite Lenders; provided that any such amendment,
--------
modification, termination, waiver or consent which: increases the amount of any
of the Commitments or reduces the principal amount of any of the Loans; changes
any Lender's Pro Rata Share; changes in any manner the definition of "Requisite
Lenders"; changes in any manner any provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of all Lenders; postpones
the scheduled final maturity date of any of the Loans; postpones the date on
which any interest or any fees are payable; decreases the interest rate borne by
any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2I) or the amount of any
fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; releases the Liens granted in
favor of Administrative Agent with respect to any material portion of the
Collateral other than in accordance with the terms of the Loan Documents;
releases any guaranty of the Obligations; or changes in any manner the
provisions contained in subsection 8.1 or this subsection 10.6 shall be
effective only if evidenced by a writing signed by or on behalf of all Lenders.
In addition, (i) any amendment, modification, termination or waiver of any of
the provisions contained in Section 4 shall be effective only if evidenced by a
writing signed by or on behalf of Administrative Agent and Requisite Lenders,
(ii) no amendment, modification, termination or waiver of any provision of any
Note shall be effective without the written concurrence of the Lender which is
the holder of that Note, (iii) no amendment, modification, termination or waiver
of any provision of Section 3 shall be effective without the written concurrence
of Issuing Lender, (iv) no amendment, modification, termination or waiver of any
provision of subsection 2.1A (iv) or of any other provision of this Agreement
relating to the Swing Line Loan Commitment or the Swing Line Loans shall be
effective without the written concurrence of Swing Line Lender, and (v) no
amendment, modification, termination or waiver of any provision of Section 9 or
of any other
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provision of this Agreement which, by its terms, expressly requires the approval
or concurrence of Arranging Agent or Administrative Agent shall be effective
without the written concurrence of Arranging Agent or Administrative Agent
respectively. Administrative Agent may, but shall have no obligation to, with
the concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on Company in any case shall entitle Company to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 10.6 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Company, on Company.
10.7 INDEPENDENCE OF COVENANTS.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 NOTICES.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Administrative Agent shall not
--------
be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Company and Administrative Agent, such other address as
shall be designated by such Person in a written notice delivered to the other
parties hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 6.9, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
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10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Administrative Agent or any Lender in
the exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.11 MARSHALLING; PAYMENTS SET ASIDE.
-------------------------------
Neither Administrative Agent nor any Lender shall be under any obligation
to marshal any assets in favor of Company or any other party or against or in
payment of any or all of the Obligations. To the extent that Company makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or Administrative Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
10.12 SEVERABILITY.
------------
In case any provision in or obligation under this Agreement or the Notes
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
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10.14 HEADINGS.
--------
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
10.15 APPLICABLE LAW.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.16 SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Neither
Company's rights or obligations hereunder nor any interest therein may be
assigned or delegated by Company without the prior written consent of all
Lenders.
10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION. Company hereby agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail, return
receipt requested, to Company at its address provided in subsection 10.8, such
service being hereby acknowledged by Company to be sufficient for personal
jurisdiction in any action against Company in any such court and to be otherwise
effective and binding service in every respect. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of any Lender to bring proceedings against Company in the courts of any
other jurisdiction.
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10.18 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each party hereto acknowledges that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on this waiver in entering into this Agreement, and that each
will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION
10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
10.19 CONFIDENTIALITY.
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature, it being understood and agreed by
Company that in any event a Lender may make disclosures to their examiners,
outside auditors, counsel and other professional advisors, Affiliates of such
Lender or, provided it agrees to the confidentiality obligations set forth
herein, disclosures reasonably required by any bona fide assignee, transferee or
participant in connection with the contemplated assignment or transfer by such
Lender of any Loans or any sale of participations therein or disclosures
required or requested by any governmental agency or representative thereof or
pursuant to legal process; provided that, unless specifically prohibited by
--------
applicable law or court order, each Lender shall notify Company of any request
by any governmental agency or representative thereof (other than any such
request in connection with any examination of the financial condition of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
-------- -------
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
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10.20 MAXIMUM AMOUNT.
--------------
A. It is the intention of Company and Lenders to conform strictly to the
usury and similar laws relating to interest from time to time in force, and all
agreements between Company, Administrative Agent and Lenders, whether now
existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid in
the aggregate to Lenders or to Administrative Agent on behalf of Lenders as
interest hereunder or under the other Loan Documents or in any other security
agreement given to secure the Obligations, or in any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby or thereby, exceed
the maximum amount permissible under applicable usury or such other laws (the
"MAXIMUM AMOUNT"). If under any circumstances whatsoever fulfillment of any
provision hereof, or of any of the other Loan Documents, at the time performance
of such provision shall be due, shall involve exceeding the Maximum Amount,
then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum
---- -----
Amount. For the purposes of calculating the actual amount of interest paid
and/or payable hereunder in respect of laws pertaining to usury or such other
laws, all sums paid or agreed to be paid to the holder hereof for the use,
forbearance or detention of the indebtedness of Company evidenced hereby,
outstanding from time to time shall, to the extent permitted by applicable law,
be amortized, pro rated, allocated and spread from the date of disbursement of
the proceeds of the Loans until payment in full of all of such indebtedness, so
that the actual rate of interest on account of such indebtedness is uniform
throughout the term hereof. The terms and provisions of this subsection shall
control and supersede every other provision of all agreements between Company,
the Administrative Agent and the Lenders.
B. If under any circumstances Lenders shall receive an amount which would
exceed the Maximum Amount, such amount shall be deemed a payment in reduction of
the principal amount of the Loans and shall be treated as a voluntary prepayment
under subsection 2.4B(i), and shall be so applied in accordance with subsection
2.4B(iv) hereof, or if such amount exceeds the unpaid balance of the Loans and
any other indebtedness of Company in favor of Lenders, the excess shall be
deemed to have been a payment made by mistake and shall be refunded to Company.
10.21 COUNTERPARTS; EFFECTIVENESS.
---------------------------
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This
125
<PAGE>
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto and receipt by Company and Administrative Agent of
written or telephonic notification of such execution and authorization of
delivery thereof.
[Remainder of page intentionally left blank]
126
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
AFC ENTERPRISES, INC.
By: Gerald Wilkins
--------------------------------
Gerald Wilkins
Chief Financial Officer
Notice Address:
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
Tel: (770) 353-9500
Fax: (770) 353-3074
Attention: Gerald Wilkins
Chief Financial Officer
with copies to:
Samuel N. Frankel, Esq.
General Counsel
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
S-1
<PAGE>
SYNDICATION AGENT: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually as a Lender and as Syndication Agent
and Arranging Agent
By: /s/
______________________________________________
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
Attention: Steven King
S-2
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
By: /s/ Marybeth Ross
---------------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
Tel: 212 856-3691
Fax: 212 856-3763
S-3
<PAGE>
CIBC INC.
as a Lender
By: /s/ Marybeth Ross
_____________________________
Marybeth Ross
Authorized Signatory
Notice Address:
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Roger Colden
Director
<PAGE>
EXHIBIT 4.5
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of May 21,
1997 and entered into by and between AFC ENTERPRISES, INC., a Minnesota
corporation ("GRANTOR"), and CANADIAN IMPERIAL BANK OF COMMERCE, as
administrative agent for and representative of (in such capacity herein called
"SECURED PARTY") the financial institutions ("LENDERS") party to the Credit
Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, as administrative agent, Lenders and Goldman Sachs
Credit Partners L.P., as syndication agent and arranging agent, have entered
into a Credit Agreement dated as of May 21, 1997 (said Credit Agreement, as it
may hereafter be amended, supplemented or otherwise modified from time to time,
being the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Grantor pursuant to
which Lenders have made certain commitments, subject to the terms and conditions
set forth in the Credit Agreement, to extend certain credit facilities to
Grantor.
B. Grantor may enter into one or more Interest Rate Agreements
(collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or more Lenders
and/or one of their Affiliates (in such capacity, collectively, "INTEREST RATE
EXCHANGERS"), and it is desired that the obligations of Grantor under the
Lender Interest Rate Agreements, including without limitation the obligation of
Grantor to make payments thereunder in the event of early termination thereof,
together with all obligations of Grantor under the Credit Agreement and the
other Loan Documents, be secured hereunder.
C. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Lender
Interest Rate Agreements, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby agrees
with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
-----------------
Secured Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be domestically (continental
United States) located (the "COLLATERAL"):
1
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(a) all equipment in all of its forms (including, but not limited to,
all machinery, kitchen equipment and machinery, all manufacturing, distribution,
selling, data processing and office equipment, all furniture, all tools,
tooling, molds and dies, and all trucks and other vehicles, vessels and
aircraft) all parts thereof and all accessions thereto (any and all such
equipment, parts and accessions being the "EQUIPMENT");
(b) all inventory in all of its forms (including, but not limited to,
(i) all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in Grantor's business, (iii) all
goods in which Grantor has an interest in mass or a joint or other interest or
right of any kind, and (iv) all goods which are returned to or repossessed by
Grantor) and all accessions thereto and products thereof (all such inventory,
accessions and products being the "INVENTORY") and all negotiable and non-
negotiable documents of title (including without limitation warehouse receipts,
dock receipts and bills of lading) issued by any Person covering any Inventory
(any such negotiable document of title being a "NEGOTIABLE DOCUMENT OF
TITLE");
(c) all accounts, contract rights, chattel paper, documents,
instruments (other than any Pledged Collateral and Pledged Debt (as such term is
defined in the Company Pledge Agreement) pledged as collateral under the Company
Pledge Agreement), general intangibles and other rights and obligations of any
kind and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations
(any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "ACCOUNTS",
and any and all such security agreements, leases and other contracts being the
"RELATED CONTRACTS");
(d) all agreements to which Grantor is a party, as each such agreement
may be amended, supplemented or otherwise modified from time to time (said
agreements, as so amended, supplemented or otherwise modified, being referred to
herein individually as an "ASSIGNED AGREEMENT" and collectively as the
"ASSIGNED AGREEMENTS"), including without limitation (i) all rights of Grantor
to receive moneys due or to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
all claims of Grantor for damages arising out of any breach of or default under
the Assigned Agreements, and (iv) all rights of Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
(e) all cash, money, currency and all deposit accounts, including
demand, time, savings, passbooks or similar accounts maintained with Lenders or
other banks, savings and loan associations, or other financial institutions;
2
<PAGE>
(f) all trademarks, tradenames, tradesecrets, formulations,
manufacturing procedures, quality control procedures, product specifications,
business names, patents, patent applications, licenses, copyrights,
registrations and franchise rights, and all goodwill associated with any of the
foregoing;
(g) to the extent not included in any other paragraph of this Section
1, all other general intangibles (including without limitation tax refunds,
rights to payment or performance, choses in action and judgments taken on any
rights or claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and Grantor shall not be deemed to have granted a security
interest in, any of Grantor's rights or interests in any lease, license,
contract or agreement to which Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such lease, license, contract or agreement or
otherwise, result in a breach of the terms of, or constitute a default under any
lease, license, contract or agreement to which Grantor is a party (other than to
the extent that any such term would be rendered ineffective pursuant to Section
9-318(4) of the Uniform Commercial Code of any relevant jurisdiction or any
other applicable law (including the Bankruptcy Code) or principles of equity) or
is otherwise excluded in the Credit Agreement; provided, that immediately upon
--------
the ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and such Grantor shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been
in effect. Notwithstanding the foregoing, nothing in this Agreement shall
create a Lien or any obligations with respect to the Employee Tax Loan Notes.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise
3
<PAGE>
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Grantor now or
hereafter existing under or arising out of or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate Agreements
and all extensions or renewals thereof, whether for principal, interest
(including without limitation interest that, but for the filing of a petition in
bankruptcy with respect to Grantor, would accrue on such obligations),
reimbursement of amounts drawn under Letters of Credit, payments for early
termination of Lender Interest Rate Agreements, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party, any Lender or
any Interest Rate Exchanger as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) except as provided in Section 14, Secured Party shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Secured Party be obligated to
perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Ownership of Collateral. Except as permitted under the Credit
-----------------------
Agreement and except for the security interest created by this Agreement,
Grantor owns the Collateral free and clear of any Lien.
(b) Location of Equipment and Inventory. Substantially all of the
-----------------------------------
Equipment and Inventory is, as of the date hereof, located at the places
specified in Schedule A annexed hereto.
----------
(c) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Accounts is, and has been for the six-month period preceding the date
hereof, located at Suite 1700, Two Concourse Parkway, Atlanta, Georgia 30328.
Grantor has not domestically in the past four years done, and does not now do,
business under any other name (including any trade-name or fictitious
4
<PAGE>
business name) except America's Favorite Chicken Company, AFC International, Far
West Products, Churchs Chicken, Popeyes Famous Chicken Biscuits, Popeyes Chicken
& Biscuits, Chesapeake Bagel Bakery, Texas Chicken and Muchos.
(d) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Grantor, or (iii) the perfection of or the exercise by Secured
Party of its rights and remedies hereunder (except as may have been taken by or
at the direction of Grantor and except for (1) the filing of financing
statements describing the Collateral, with the filing offices indicated on
Schedule B annexed hereto (2) filings with any registrar of motor vehicles or
- ----------
other authority requesting the notation or other indication of the security
interest created hereunder on any certificates of title with respect to
Equipment, and (3) the recording of the Company Patent and Copyright Security
Agreement and the Company Trademark Security Agreement with the United States
Patent and Trademark Office).
(e) Perfection. This Agreement, together with the appropriate filing
----------
of financing statements describing the Collateral with the filing offices
indicated on Schedule B annexed hereto, creates a valid, perfected and, except
----------
for the Permitted Encumbrances and Liens permitted pursuant to the Credit
Agreement and any Accounts or Related Contracts or chattel paper arising out of
a contract or contracts with the United States of America or any department,
agency or instrumentality thereof to the extent invalid or unperfected under the
Federal Assignment of Claims Act or other applicable law, first priority
security interest in all Collateral in which a security interest may be
perfected by the filing of a financing statement, securing the payment of the
Secured Obligations.
(f) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES.
------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, as requested by
Secured Party, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) at the
request of Secured Party, mark conspicuously each specified item of chattel
paper included in the Accounts, each specified Related Contract and, at the
request of Secured Party, each of its records pertaining to the Collateral, with
a legend, in form and substance satisfactory to Secured Party, indicating that
such Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party but subject to clause (b) below of this Section 5, if
any Account shall be evidenced by a promissory note or other instrument
(excluding checks) or chattel paper, deliver and pledge to
5
<PAGE>
Secured Party hereunder such note or instrument or the original counterpart of
such chattel paper, duly endorsed and accompanied by duly executed instruments
of transfer or assignment, all in form and substance satisfactory to Secured
Party, (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, as requested by Secured Party, in order to perfect and preserve
the security interests granted or purported to be granted hereby, (iv) upon
request of Secured Party, promptly after the acquisition by Grantor of any item
of Equipment which is covered by a certificate of title under a statute of any
jurisdiction under the law of which indication of a security interest on such
certificate is required as a condition of perfection thereof, execute and file
with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other
indication of the security interest created hereunder on such certificate of
title, (v) within 45 days after the end of each calendar quarter, deliver to
Secured Party copies of all such applications or other documents filed during
such calendar quarter and copies of all such certificates of title issued during
such calendar quarter indicating the security interest created hereunder in the
items of Equipment covered thereby, (vi) at any reasonable time, upon reasonable
prior notice from Secured Party, exhibit the Collateral to and allow inspection
of the Collateral by Secured Party, or persons designated by Secured Party, and
(vii) at Secured Party's request, appear in and defend any action or proceeding
that may affect Grantor's title to or Secured Party's security interest in all
or any part of the Collateral.
(b) Notwithstanding the foregoing, with respect to the obligations set
forth in clause 5(a)(ii) above, Grantor shall (A) only be obligated to deliver
promissory notes or other instruments evidencing Accounts as follows: (i)
Company shall deliver all promissory notes owned by Grantor as of the Closing
Date with an individual principal amount outstanding thereunder of greater than
or equal to $100,000 and (ii) within five days of each six month anniversary of
the Closing Date, Grantor shall deliver (y) such other promissory notes with an
individual principal amount outstanding thereunder of greater than or equal to
$100,000 and (z) such other promissory notes not included in the immediately
preceding clause (y) to the extent the aggregate outstanding principal of all
such promissory notes thereof exceeds $4,000,000 (the "WATERFALL AMOUNT"), so
that after delivery of such additional promissory notes Grantor will not be in
possession of promissory notes whose aggregate principal balance exceeds the
Waterfall Amount. Grantor may deliver any combination of promissory notes to
effect the foregoing, and (B) shall only be obligated to deliver other
instruments to the extent the aggregate fair market value thereof exceeds
$25,000.
(c) To the fullest extent permitted by law, Grantor hereby authorizes
Secured Party to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of Grantor. To the fullest extent permitted by law, Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
6
<PAGE>
(d) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(e) All certificates or instruments representing or evidencing the
Collateral required to be delivered to Secured Party under this Section 5 shall
be delivered to and held by or on behalf of Secured Party pursuant hereto and
shall be in suitable form for transfer by delivery or, as applicable, shall be
accompanied by Grantor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party. Upon the occurrence and during the continuation
of an Event of Default, Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Collateral
delivered under this Section 5. In addition, Secured Party shall have the right
at any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any material and applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts and all originals
of all chattel paper that evidence Accounts;
(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Collateral, in accordance with the Credit Agreement.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
---------------------------------------------------------
Grantor shall:
(a) keep the Equipment and Inventory at the places therefor specified
on Schedule [B] annexed hereto or, upon 30 days' prior written notice to Secured
------------
Party, at such other places in jurisdictions where all action that may be
necessary or desirable, as requested by Secured Party, in order to perfect and
protect any security interest granted or purported to be
7
<PAGE>
granted hereby, or to enable Secured Party to exercise and enforce its rights
and remedies hereunder, with respect to such Equipment and Inventory shall have
been taken; provided, however, no such notice need to be given to Secured Party
--------
(i) for relocation of Equipment and Inventory among existing locations, (ii) for
relocation of Collateral to new locations which are in jurisdictions where no
action need be taken by Secured Party to continue its perfection or (iii) if
such Equipment and Inventory is transferred as part of a Specified Asset Sale or
other permitted disposition under the Credit Agreement.
(b) cause the Equipment to be maintained and preserved in good
condition, repair and working order, ordinary wear and tear excepted, and in
accordance with Grantor's past practices, and shall forthwith, or, in the case
of any loss or damage to any of the Equipment when subsection (c) of Section 8
is not applicable, as quickly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith that are necessary or desirable to such end. Grantor shall
promptly furnish to Secured Party a statement respecting any material loss or
damage to any of the Equipment in excess of $100,000 in the aggregate;
(c) keep correct and accurate records of the Inventory in accordance
with good business practice; and
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors, then upon the occurrence of an Event of Default, instruct
such agent or processor to hold all such Inventory for the account of Secured
Party and subject to the instructions of Secured Party.
SECTION 8. INSURANCE.
---------
(a) Grantor shall, at its own expense, maintain insurance with respect
to the Equipment and Inventory in accordance with the terms of the Credit
Agreement. Such insurance shall include, without limitation, property damage
insurance and liability insurance. Each policy for property damage insurance
shall name Grantor and Secured Party as insured parties thereunder (without any
representation or warranty by or obligation upon Secured Party) as their
interests may appear and have attached thereto a loss payable clause acceptable
to Secured Party that shall (i) contain an agreement by the insurer that any
loss thereunder shall be payable to Grantor notwithstanding any action, inaction
or breach of representation or warranty by Grantor, (ii) provide that there
shall be no recourse against Secured Party for payment of premiums or other
amounts with respect thereto, and (iii) provide that at least 30 days' prior
written notice of cancellation, material amendment, reduction in scope or limits
of coverage or of lapse shall be given to Secured Party by the insurer. Grantor
shall, if so requested by Secured Party, deliver to Secured Party an ACORD form
Certificate of Insurance of such insurance and, as often as Secured Party may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. Further, Grantor shall, at the request of Secured Party, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 5(a) and cause the respective insurers
to acknowledge notice of such assignment.
8
<PAGE>
(b) Reimbursement under any liability insurance maintained by Grantor
pursuant to this Section 8 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 8 is not
applicable, Grantor shall make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by Grantor pursuant to this Section 8 shall be paid to Grantor in
advance for the costs of such repairs or replacements and as a condition of
Grantor's repair and replacement obligations hereunder.
(c) Upon the occurrence and during the continuation of any Event of
Default, all insurance payments in respect of Equipment or Inventory shall be
paid to and applied by Secured Party as specified in the Credit Agreement.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
------------------------------------------------------
CONTRACTS.
- ---------
(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts at the location therefor specified in Section 4 or, upon 30
days' prior written notice to Secured Party, at such other location in a
jurisdiction where all action that may be necessary or desirable, as requested
by Secured Party, in order to perfect and protect any security interest granted
or purported to be granted hereby, or to enable Secured Party to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Grantor will hold and preserve such
records and will permit representatives of Secured Party at any time during
normal business hours and upon reasonable notice to inspect and make abstracts
from such records, and Grantor agrees to render to Secured Party, at Grantor's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto. Promptly upon the request of Secured Party,
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract in excess of $100,000.
(b) Grantor shall maintain (i) complete records of each Account,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts or proceeds of any other
Collateral Secured hereby. In connection with such collections, Grantor may
take (and, at Secured Party's direction, upon the occurrence and during the
continuation of an Event of Default shall take) such action as Grantor or
Secured Party may deem necessary or advisable to enforce collection of amounts
due or to become due under the Accounts; provided, however, that Secured Party
-------- -------
shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default and upon written notice to Grantor of its
intention to do so, to notify the account debtors or obligors under any Accounts
of the assignment of such Accounts to Secured Party and to direct such account
debtors or obligors to
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<PAGE>
make payment of all amounts due or to become due to Grantor thereunder directly
to Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which account debtors or obligors under any Accounts have been
directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantor, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done. After receipt by Grantor of
the notice from Secured Party referred to in the proviso to the preceding
-------
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided in the Credit
Agreement and (ii) Grantor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, except as provided in
the Credit Agreement.
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
----------------
continuation of an Event of Default beyond any applicable grace, notice or cure
period, Secured Party may exercise dominion and control over, and refuse to
permit further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Secured Party constituting
part of the Collateral.
SECTION 11. TRANSFERS AND OTHER LIENS. Grantor shall not:
-------------------------
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
or
(b) except for the Permitted Encumbrances and Liens permitted under
the Credit Agreement and except for the security interest created by this
Agreement, create or suffer to exist any Lien upon or with respect to any of the
Collateral to secure the indebtedness or other obligations of any Person in
excess of $100,000 in the aggregate,
provided, however, that until an Event of Default shall occur and be
--------
continuing beyond any applicable grace, notice, or cure period, Grantor may use
or consume in the ordinary course of its business any collections of proceeds in
any lawful manner not prohibited by the Credit Agreement.
In the event any Collateral is sold in an Asset Sale or other
transaction permitted by the Credit Agreement, Secured Party shall release the
Collateral that is the subject of such Asset Sale free and clear of the Lien and
security interest under this Agreement concurrently with the consummation of
such Asset Sale or other transaction; provided, that as a condition precedent to
--------
such release, Secured Party shall have received evidence satisfactory to it that
arrangements have been made for the delivery to Secured Party of all Net Cash
Proceeds of such Asset Sale
10
<PAGE>
or other transaction required to be applied to prepay the Secured Obligations
under the Credit Agreement;
In the event Grantor finances the purchase of any assets through the
incurrence of Indebtedness secured by such assets in accordance with the Credit
Agreement, Secured Party, upon written request of Grantor, shall either (i)
subordinate its Lien and security interest under this Agreement in such assets
to the Lien granted in such assets to the holder of such Indebtedness or (ii) if
required by the holder of such Indebtedness, release its Lien in such assets;
provided, that as a condition precedent to such subordination or release,
- --------
Secured Party shall have received an Officer's Certificate setting forth (a) the
amount of Indebtedness incurred, (b) the name of the holder of such
Indebtedness, (c) a detailed list of the assets securing such Indebtedness, (d)
calculations indicating compliance with Sections 7.1 and 7.2 of the Credit
Agreement, and (e) in the case of a release, a statement to the effect that
Grantor used its reasonable efforts to obtain the agreement of the holder of
such Indebtedness to permit the Secured Party to subordinate rather than release
its security interest in such assets and was unable to obtain such agreement,
without the necessity of paying additional funds or altering the credit
agreement with any such holder. Secured Party, at Grantor's expense, will
execute and deliver such documents or instruments as may be reasonably requested
to evidence any subordination or release of its security interests in the
Collateral pursuant to this Section 11.
SECTION 12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained by
Grantor and paid to Secured Party pursuant to Section 8;
(b) upon the occurrence and during the continuation of an Event of
Default beyond any applicable grace, notice or cure periods, to ask for, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;
(c) upon the occurrence and during the continuation of an Event of
Default beyond any applicable grace, notice or cure periods, to receive, endorse
and collect any drafts or other instruments, documents and chattel paper in
connection with clauses (a) and (b) above;
(d) upon the occurrence and during the continuation of an Event of
Default beyond any applicable grace, notice or cure periods, to file any claims
or take any action or institute any proceedings that Secured Party may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Secured Party with respect to any of the Collateral;
11
<PAGE>
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
provided, however, that unless an Event of Default shall have occurred and be
- -------- -------
continuing, Secured Party may not pay or discharge any such tax or Lien which is
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made;
(f) upon the occurrence and during the continuation of an Event of
Default, to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.
SECTION 13. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein within the time provided for performance
hereunder, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Grantor under Section 17.
SECTION 14. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 15. REMEDIES. If any Event of Default shall have occurred
--------
and be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
12
<PAGE>
may (a) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (b) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (c) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) take possession of Grantor's
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any of Grantor's equipment for the purpose of
completing any work in process, taking any actions described in the preceding
clause (c) and collecting any Secured Obligation, and (e) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. To the fullest extent permitted by law, Secured Party
or any Lender may be the purchaser of any or all of the Collateral at any such
sale and Secured Party, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Secured Party at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the fullest extent permitted by law, Grantor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Secured Obligations, Grantor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
SECTION 16. APPLICATION OF PROCEEDS. All proceeds received by
-----------------------
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied as set forth in the
Credit Agreement.
13
<PAGE>
SECTION 17. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of the Credit Agreement,
any Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise. Upon the
payment in full of all Secured Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen), the cancellation or termination of the Commitments and the cancellation
or expiration of all outstanding Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Grantor. Upon any such termination Secured Party will, at Grantor's expense,
execute and deliver to Grantor such documents as Grantor shall reasonably
request to evidence such termination.
SECTION 19. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders pursuant to the Credit Agreement. Secured Party shall be obligated,
and shall have the right hereunder, to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Collateral), solely in accordance with this Agreement and the Credit Agreement.
14
<PAGE>
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.6 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.6 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.6
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.6 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, all at Secured Party's sole cost and expense, whereupon such retiring
or removed Secured Party shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Collateral Agent's
resignation or removal hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.
SECTION 20. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 21. NOTICES. Any notice or other communication herein
-------
required or permitted to be given as set forth in the Credit Agreement.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and
15
<PAGE>
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 24. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 25. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 26. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 27. CONFLICTS. In the event of a conflict between the terms
---------
hereof and the terms of the Company Pledge Agreement, the Company Trademark
Security Agreement; the Company Patent and Copyright Security Agreement or the
Collateral Account Agreement, then the Company Pledge Agreement, the Company
Trademark Security Agreement, the Company Patent and Copyrights Security
Agreement or the Collateral Account Agreement, as the case may be, shall govern
and control for all purposes. Further, in the event of a conflict between the
terms of the Credit Agreement and any of the foregoing agreements, the Credit
Agreement shall govern and control for all purposes. Grantor shall be entitled
to the notice, grace and cure periods set forth in the Credit Agreement as if
fully set forth herein.
[Remainder of page intentionally left blank]
16
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AFC ENTERPRISES, INC.
By: /s/ Samuel N. Frankel
---------------------------
Samuel N. Frankel
Chief Financial Officer
Notice Address:
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
Tel: (770) 353-9500
Fax: (770) 353-3074
Attention: Gerald Wilkins
Chief Financial Officer
with copies to:
Samuel N. Frankel, Esq.
AFC Enterprises, Inc.
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE,
as Secured Party
By: /s/ Marybeth Ross
----------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
Tel: 212 856-3691
Fax: 212 856-3763
S-2
<PAGE>
SCHEDULE A
TO SECURITY AGREEMENT
LOCATIONS OF EQUIPMENT AND INVENTORY
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1282 400 Memorial Drive Prattville Autauga AL
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830 2129 Quintard Ave. Anniston Calhoun AL
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1595 226 West Push Mataha Butler Choctaw AL
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1285 130 East Andrews Ozark Dale AL
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523 1208 Broad Street Selma Dallas AL
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122 300 N. 12th Street Gasden Etowah AL
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1598 119 Greensboro Street Entaw Greene AL
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1671 1505 State St. Greensboro Hale AL
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1284 507 North Oates Dothan Houston AL
- -----------------------------------------------------------------------------------------------------------------------------------
142 3052 Jefferson Avenue Birmingham Jefferson AL
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160 1136 25th St. N. Birmingham Jefferson AL
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173 2324 N. 29th Avenue Birmingham Jefferson AL
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215 7700 First Avenue North Birmingham Jefferson AL
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217 2501 Ave. E Ensley Jefferson AL
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221 100 Graymont Avenue, W. Birmingham Jefferson AL
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233 9929 Parkway East Birmingham Jefferson AL
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237 1801 Carolina Bessemer Jefferson AL
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801 144 6th Avenue S.W. Birmingham Jefferson AL
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938 4201 10th Avenue Birmingham Jefferson AL
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1042 5410 Bessemer Super Midfield Jefferson AL
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1136 1145 3rd Ave., West Birmingham Jefferson AL
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1209 4000 Vanderbilt Birmingham Jefferson AL
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1345 1159 Bankhead Hwy. Birmingham Jefferson AL
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213 2201 University Drive, N.W. Huntsville Madison AL
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1600 313 S. Main St. Linden Marengo AL
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319 1250 Michigan Ave. Mobile Mobile AL
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327 2325 St. Stephens Rd. Mobile Mobile AL
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348 2212 Halls Mill Rd. Mobile Mobile AL
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358 1262 Springhill Ave. Mobile Mobile AL
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458 3171 Moffat Rd. Mobile Mobile AL
- -----------------------------------------------------------------------------------------------------------------------------------
722 300 S. Craft Hwy. Chickasaw Mobile AL
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</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-1
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
993 2010 St. Stephens Rd. Prichard Mobile AL
- -----------------------------------------------------------------------------------------------------------------------------------
1067 465 Broad St. Mobile Mobile AL
- -----------------------------------------------------------------------------------------------------------------------------------
1592 5017 Cottage Hill Road Mobile Mobile AL
- -----------------------------------------------------------------------------------------------------------------------------------
1593 105 Shelton Beach Rd. Saraland Mobile AL
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1620 7370 Old Pascagoula Theodore Mobile AL
- -----------------------------------------------------------------------------------------------------------------------------------
1669 7751 Moffett Mobile Mobile AL
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59 1144 Adams Avenue Montgomery Montgomery AL
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496 311 W. Fairview Ave. Montgomery Montgomery AL
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1281 2915 Lower Wetumpka Montgomery Montgomery AL
- -----------------------------------------------------------------------------------------------------------------------------------
1283 1035 E. By-Pass Montgomery Montgomery AL
- -----------------------------------------------------------------------------------------------------------------------------------
908 1304 US 280 By-Pass Phenix City Russell AL
- -----------------------------------------------------------------------------------------------------------------------------------
1597 617 4th Avenue York Sumter AL
- -----------------------------------------------------------------------------------------------------------------------------------
1390 26 Broadway Sylacauga Talledega AL
- -----------------------------------------------------------------------------------------------------------------------------------
384 1503 E. Broadway W. Memphis Crittenden AR
- -----------------------------------------------------------------------------------------------------------------------------------
286 1601 Cherry Street Pine Bluff Jefferson AR
- -----------------------------------------------------------------------------------------------------------------------------------
91 1700 State Line Avenue Texarkana Miller AR
- -----------------------------------------------------------------------------------------------------------------------------------
254 1401 High Street Little Rock Pulaski AR
- -----------------------------------------------------------------------------------------------------------------------------------
283 5423 W. 12th Street Little Rock Pulaski AR
- -----------------------------------------------------------------------------------------------------------------------------------
655 7621 Geyer Springs Little Rock Pulaski AR
- -----------------------------------------------------------------------------------------------------------------------------------
501 700 N. West Ave. El Dorado Union AR
- -----------------------------------------------------------------------------------------------------------------------------------
671 1750 10th Street Douglas Cochise AZ
- -----------------------------------------------------------------------------------------------------------------------------------
847 901 Fry Blvd Sierra Vista Cochise AZ
- -----------------------------------------------------------------------------------------------------------------------------------
3263 94 - 5th Street Douglas Cochise AZ
- -----------------------------------------------------------------------------------------------------------------------------------
955 U.S. Hwy., 60 Wild Wes Clay Pool Gila AZ
- -----------------------------------------------------------------------------------------------------------------------------------
Reg Ofs 2231 East Camelback Rd. Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
373 1151 S. Country Club Mesa Maricopa AZ
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670 4296 W. Thomas Road Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
675 4245 S. Central Avenue Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
679 12040 N. 35th Ave. Phoenix Maricopa AZ
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679 12040 N. 35th Ave. Phoenix Maricopa AZ
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681 1546 E. Roosevelt Phoenix Maricopa AZ
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683 3350 West Van Buren Phoenix Maricopa AZ
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685 7538 E. McDowell Road Scottsdale Maricopa AZ
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686 3150 E. Thomas Road Phoenix Maricopa AZ
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690 7451 W. Indian School Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
840 1906 W. Camelback Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-2
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
841 7444 South Central Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
846 1102 Baseline Rd. Tempe Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
862 12045 N. 32nd St. Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
950 5901 W. Camelback Road Phoenix Maricopa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
1047 714 Grand Avenue Phoenix Maricopa AZ
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56 7848 N. Oracle Road Tucson Pima AZ
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145 402 W. Valencia Road Tucson Pima AZ
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677 3802 6th Ave. Tucson Pima AZ
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689 489 N. Grande Ave. Tucson Pima AZ
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778 7090 Golf Links Road E. Tucson Pima AZ
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1167 3869 E. Grand Road Tucson Pima AZ
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848 1233 E. Florence Blvd. Casa Grande Pinal AZ
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688 737 Grand Avenue Nogales Santa Cruz AZ
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691 2420 South 4th Avenue Yuma Yuma AZ
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181 4155 Telegraph Ave. Oakland Alameda CA
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182 7301 Bancroft Ave. Oakland Alameda CA
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184 1200 San Pablo Ave. Berkeley Alameda CA
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186 1455 High St. Oakland Alameda CA
- -----------------------------------------------------------------------------------------------------------------------------------
188 345 E. 18th Oakland Alameda CA
- -----------------------------------------------------------------------------------------------------------------------------------
1064 10800 MacArthur Blvd. Oakland Alameda CA
- -----------------------------------------------------------------------------------------------------------------------------------
185 11575 San Pablo Av. El Cerrito Contra Costa CA
- -----------------------------------------------------------------------------------------------------------------------------------
3118 3701 MacDonald St. Richmond Contra Costa CA
- -----------------------------------------------------------------------------------------------------------------------------------
698 480 N. Imperial Ave. El Centro Imperial CA
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739 344 Imperial Ave. Calexico Imperial CA
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114 217 N. Central Ave. Compton Los Angeles CA
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128 261 E. VernonLos Angeles Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
147 1811 Jefferson Blvd. Los Angeles Los Angeles CA
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171 1199 E. Anaheim St. Long Beach Los Angeles CA
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177 877 W. Century Blvd. Los Angeles Los Angeles CA
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466 1105 W. Mission Blvd. Pomona Los Angeles CA
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621 15816 Pioneer Norwalk Los Angeles CA
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663 7205 S. Vermont Los Angeles Los Angeles CA
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738 11251 S. Western Ave. Los Angeles Los Angeles CA
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741 710 N. Fair Oaks Pasadena Los Angeles CA
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779 1030 E. Manchester Los Angeles Los Angeles CA
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781 10967 Garvey Ave. El Monte Los Angeles CA
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</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
786 1180 N. Hacienda, Blvd. La Puente Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
787 14155 Ramona Blvd. Baldwin Park Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
843 3950 W. Century Blvd. Inglewood Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
945 1415 E. Rosecrans Compton Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
949 2206 W. Rosecrans Gardena Los Angeles CA
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957 5801 Cherry Avenue Long Beach Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
958 701 E. Huntington Monrovia Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
959 5325 S. Figueroa Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
965 8531 S. Figueroa Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1000 1604 S. Central Ave. Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1004 1500 N. La Brea Ave. Ingelwood Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1021 4720 Crenshaw Blvd. Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1069 500 E. Holt Ave. Pomona Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1073 1203 Redondo Beach Gardena Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1170 4044 Peck Road El Monte Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1191 6210 Broadway Los Angeles Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
1618 2533 Long Beach Long Beach Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
3104 5101 East Imperial Hwy. Lynnwood Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
3204 5101 Imperial Hwy. Lynwood Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
622 8522 Western Ave. Los Angeles Los Angles CA
- -----------------------------------------------------------------------------------------------------------------------------------
187 1390 Fremont Seaside Monterey CA
- -----------------------------------------------------------------------------------------------------------------------------------
1214 3215 Jefferson Ave. Newport News Newport News CA
- -----------------------------------------------------------------------------------------------------------------------------------
902 1886 University Ave. Riverside Riverside CA
- -----------------------------------------------------------------------------------------------------------------------------------
948 2901 Florin Rd. Sacramento Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
956 4840 Watt Ave. N. Highlands Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
1072 3801 Stockton Blvd. Sacramento Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
850 912 E. Foothill Rialto San Bernardino CA
- -----------------------------------------------------------------------------------------------------------------------------------
853 299 E. Baseline San Bernardino San Bernardino CA
- -----------------------------------------------------------------------------------------------------------------------------------
1260 700 E. Holt Ontario San Bernardino CA
- -----------------------------------------------------------------------------------------------------------------------------------
1944 8909 Sierra Avenue Fontanan San Bernardino CA
- -----------------------------------------------------------------------------------------------------------------------------------
780 423 San Ysidro San Ysidro San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1159 3726 Del Sol Blvd. San Diego San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1162 504 Euclid Avenue San Diego San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1164 3040 E. 8th St. National City San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1212 3495 El Cajon Blvd. San Diego San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1255 3146-3180 Main St. San Diego San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1321 1005 Third Avenue Chula Vista San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1324 10631 Camino Ruiz Mira Mesa San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
1858 510 Oceanside Blvd. Oceanside San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
947 110 E. Charter Way Stockton San Joaquin CA
- -----------------------------------------------------------------------------------------------------------------------------------
241 1694 Santa Clara San Jose Santa Clara CA
- -----------------------------------------------------------------------------------------------------------------------------------
242 1712 Tully Road San Jose Santa Clara CA
- -----------------------------------------------------------------------------------------------------------------------------------
1876 1920 Solando Avenue Vallejo Solano CA
- -----------------------------------------------------------------------------------------------------------------------------------
798 7200 Federal Blvd. Westminister Adams CO
- -----------------------------------------------------------------------------------------------------------------------------------
1011 15199 E. Colfax Avenue Aurora Adams CO
- -----------------------------------------------------------------------------------------------------------------------------------
790 3401 Colorado Blvd. Denver Denver CO
- -----------------------------------------------------------------------------------------------------------------------------------
999 3715 Peoria Denver Denver CO
- -----------------------------------------------------------------------------------------------------------------------------------
1082 4400 Federal Blvd. Denver Denver CO
- -----------------------------------------------------------------------------------------------------------------------------------
1233 274 Dixwell Avenue New Haven New Haven CT
- -----------------------------------------------------------------------------------------------------------------------------------
755 104 S. Tyndall Pkwy. Panama City Bay FL
- -----------------------------------------------------------------------------------------------------------------------------------
389 590 N.W. 7th Ave. Fort Lauderdale Broward FL
- -----------------------------------------------------------------------------------------------------------------------------------
1137 2401 W. Sunrise Blvd. Ft. Lauderdale Broward FL
- -----------------------------------------------------------------------------------------------------------------------------------
288 2701 N.W. 54th Street Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
343 2899 N.W. 7th Ave. Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
344 2101 N.W. 79th St. Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
411 1155 N.W. 54th Street Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
536 17331 S. Dixie Hwy. Perrine Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1101 13200 N.W. 27th Ave. Opa Locka Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1109 17495 N.W. 27th Ave. Carol City Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1193 1105 N.W. 7th Ave. Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1377 141 S. Federal Hwy. Dania Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1542 21595 S. Dixie Hwy. Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
1563 6700 Northwest 7th Ave. Miami Dade FL
- -----------------------------------------------------------------------------------------------------------------------------------
359 1055 W. Cervantes Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
366 1655 North 9th Ave. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
377 4110 Barrancas Ave. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
394 3204 Pace Blvd. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
724 8967 Pensacola Blvd. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
759 4504 Mobile Hwy. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
1050 3898 N. Davis Hwy. Pensacola Escambia FL
- -----------------------------------------------------------------------------------------------------------------------------------
14 1701 N. Nebraska Ave. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
324 8501 Nebraska Ave., N. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
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<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
330 3201 E. Hillsborough Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
340 3815 Armenia Ave., N. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
406 4001 North 22nd Street Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
462 1817 W. Sligh Ave. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
832 703 S. Collins St. Plant City Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
857 2301 North 50th St. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
1008 8650 N. 56th Street Temple Terrace Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
1025 7501 N. Waters Ave. Tampa Hillsborough FL
- -----------------------------------------------------------------------------------------------------------------------------------
13 240 Mary Ester Cutof Mary Ester Okaloosa FL
- -----------------------------------------------------------------------------------------------------------------------------------
415 2401 Old Dixie Hwy. Riviera Beach Palm Beach FL
- -----------------------------------------------------------------------------------------------------------------------------------
390 1401 16th Street South St. Petersburg Pinellas FL
- -----------------------------------------------------------------------------------------------------------------------------------
399 3510 Central Avenue St. Petersburg Pinellas FL
- -----------------------------------------------------------------------------------------------------------------------------------
464 1575 Gulf-to-Bay Blvd. Clearwater Pinellas FL
- -----------------------------------------------------------------------------------------------------------------------------------
1372 2195 34th Street South St. Petersburg Pinellas FL
- -----------------------------------------------------------------------------------------------------------------------------------
413 215 W. Memorial Blvd. Lakeland Polk FL
- -----------------------------------------------------------------------------------------------------------------------------------
791 1050 6th Street, N.W. Winterhaven Polk FL
- -----------------------------------------------------------------------------------------------------------------------------------
874 2561 French Ave. Sanford Seminole FL
- -----------------------------------------------------------------------------------------------------------------------------------
375 3860 Houston Ave. Macon Bibb GA
- -----------------------------------------------------------------------------------------------------------------------------------
751 777 Shurling Dr. Macon Bibb GA
- -----------------------------------------------------------------------------------------------------------------------------------
871 1425 Georgia Ave. Macon Bibb GA
- -----------------------------------------------------------------------------------------------------------------------------------
1182 2138 Pio Nono Ave. Macon Bibb GA
- -----------------------------------------------------------------------------------------------------------------------------------
434 4119 Montgomery St. Savannah Chatham GA
- -----------------------------------------------------------------------------------------------------------------------------------
435 1503 Montgomery St. Savannah Chatham GA
- -----------------------------------------------------------------------------------------------------------------------------------
733 4476 Jonesboro Forest Park Clayton GA
- -----------------------------------------------------------------------------------------------------------------------------------
2107 6717 Highway 85 Riverdale Clayton GA
- -----------------------------------------------------------------------------------------------------------------------------------
732 75 S. Marietta Pkwy. Marietta Cobb GA
- -----------------------------------------------------------------------------------------------------------------------------------
754 3720 Austell Rd. Marietta Cobb GA
- -----------------------------------------------------------------------------------------------------------------------------------
789 1130 Roswell Rd. Marietta Cobb GA
- -----------------------------------------------------------------------------------------------------------------------------------
3121 Windy Hill Road Marietta Cobb GA
- -----------------------------------------------------------------------------------------------------------------------------------
3259 5120 South Cobb Dr. Syyrna Cobb GA
- -----------------------------------------------------------------------------------------------------------------------------------
1023 104 E. 16th Avenue. Cordele Crisp GA
- -----------------------------------------------------------------------------------------------------------------------------------
137 30 Moreland Ave., SE Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
153 4001 Glenwood Decatur DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
192 2767 Clairmont Rd. Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
424 2473 Wesley Chapel Rd. Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
599 2700 Candler Rd. Decatur DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593
EXECUTION
COMPANY SECURITY AGREEMENT
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<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
625 4680 Memorial Dr. Decatur DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
808 2626 N. Decatur Rd., NE Decatur DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
814 2595 Gresham Rd. Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
939 1805 Candler Rd. Decatur DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
1165 4949 Peachtree Ind Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
2587 3506 Memorial Dr. Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
2676 3189 Tucker-Norcorss Tucker DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
3878 4995 Bufford Hwy. Chamblee DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
3920 3389 Buford Hwy Atlanta DeKalb GA
- -----------------------------------------------------------------------------------------------------------------------------------
906 401 W. Oglethorpe Albany Dougherty GA
- -----------------------------------------------------------------------------------------------------------------------------------
1022 1926 M.L. King Jr. Dr. Albany Dougherty GA
- -----------------------------------------------------------------------------------------------------------------------------------
920 6135 Fairborn Rd. Douglasville Douglas GA
- -----------------------------------------------------------------------------------------------------------------------------------
3695 3651 Peachtree Parkway Suwanee Forsyth GA
- -----------------------------------------------------------------------------------------------------------------------------------
Reg Ofs 41 Perimeter Center East Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
Corp Ofs Six Concourse Pkwy. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
Test 2241 Perimeter Park Drive Atlanta Fulton GA
Kitchen
- -----------------------------------------------------------------------------------------------------------------------------------
87 200 Cleveland Ave. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
98 860 Bankhead Hwy. N.W. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
113 840 Simpson N.W. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
168 1405 Moreland S.E. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
169 333 Auburn Ave., N.E. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
198 1407 Stewart Ave., S. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
626 5148 Old National Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
725 3561 M.L. King Jr. SW. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
727 3667 Campbellton, S.W. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
742 2558 M.L. King, Jr. S.W Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
743 6224 Roswell Rd. Sandy Springs Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
745 629 Cascade Rd. SW Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
747 1796 Delowe Dr. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
760 538 Lee Street Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
761 682 Boulevard N.E. & Ponce de Leon Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
818 911 E. Cleveland Ave. East Point Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
1044 2418 Bolton Rd. NW Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
1261 1617 Jonesboro Road Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
2070 683 Boulevard, N.E. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
2108 515 Lee Street S.E. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
2113 610 Cascades Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
3079 2650 Bankhead Hwy. Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
3243 Piedmont Road Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
3761 10779 Alpharetta Hwy. Roswell Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
3816 1715 Howell Mill Road Atlanta Fulton GA
- -----------------------------------------------------------------------------------------------------------------------------------
3287 1635 Pleasant Hill Rd. Duluth Gwinnett GA
- -----------------------------------------------------------------------------------------------------------------------------------
3535 2330 Ronald Regan Pkwy. Snellville Gwinnett GA
- -----------------------------------------------------------------------------------------------------------------------------------
3683 400 Peachtree Ind Blvd. Suwanee Gwinnett GA
- -----------------------------------------------------------------------------------------------------------------------------------
3762 6050 Peachtree Parkway Norcross Gwinnett GA
- -----------------------------------------------------------------------------------------------------------------------------------
749 1801 Watson Blvd. Warner Robbins Houston GA
- -----------------------------------------------------------------------------------------------------------------------------------
1670 501 N. Davis St. Warner Robbins Houston GA
- -----------------------------------------------------------------------------------------------------------------------------------
355 528 Brown Ave. Columbus Muscogee GA
- -----------------------------------------------------------------------------------------------------------------------------------
357 1805 Hamilton Rd. Columbus Muscogee GA
- -----------------------------------------------------------------------------------------------------------------------------------
907 1821 Lumpkin Rd. Columbus Muscogee GA
- -----------------------------------------------------------------------------------------------------------------------------------
911 4256 Buena Vista Rd. Columbus Muscogee GA
- -----------------------------------------------------------------------------------------------------------------------------------
1174 1122 Fort Benning Rd. Columbus Muscogee GA
- -----------------------------------------------------------------------------------------------------------------------------------
1427 100 Vineland St. Fort Valley Peach GA
- -----------------------------------------------------------------------------------------------------------------------------------
926 2823 Washington Rd. Augusta Richmond GA
- -----------------------------------------------------------------------------------------------------------------------------------
919 526 W. Taylor Griffin Spalding GA
- -----------------------------------------------------------------------------------------------------------------------------------
915 1322 E. Lamar St. Americus Sumter GA
- -----------------------------------------------------------------------------------------------------------------------------------
916 213 Franklin Rd. La Grange Troup GA
- -----------------------------------------------------------------------------------------------------------------------------------
291 8694 79th Street Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
483 1755 West Jackson Heights Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
576 4005 Butterfield Rd. Hillside Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
610 400 East 67th Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
870 6841 Halstead Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
889 1245 N. Roselle Road Schaumberg Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
970 2 South Polaski Road Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
982 50 West 79th St. Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
992 1956 West 79th St. Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
1053 1157 S. Independence Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
1142 6th West 69th St. Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
1315 6849 S. Western Avenue Chicago Cook IL
- -----------------------------------------------------------------------------------------------------------------------------------
665 500 South Western Peoria Peoria IL
- -----------------------------------------------------------------------------------------------------------------------------------
613 5001 State Street East St. Louis St. Clair IL
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
617 4525 North Belt W. Belleville St. Clair IL
- -----------------------------------------------------------------------------------------------------------------------------------
238 2501 N. Keystone Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
247 240 E. 22nd Street Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
260 1404 E. Prospect Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
262 2502 Northwestern Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
266 5129 E. Washington Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
274 2964 South Shelby Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
632 5170 W. Washington Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
633 2910 Westlane Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
861 8961 S US 31 Indianapolis Marion IN
- -----------------------------------------------------------------------------------------------------------------------------------
516 1105 Washington Junction City Geary KS
- -----------------------------------------------------------------------------------------------------------------------------------
510 329 East 4th Street Hutchinson Reno KS
- -----------------------------------------------------------------------------------------------------------------------------------
432 1302 N. Broadway Wichita Sedgwick KS
- -----------------------------------------------------------------------------------------------------------------------------------
433 3808 East Harry St. Wichita Sedgwick KS
- -----------------------------------------------------------------------------------------------------------------------------------
454 1305 N. Hillside Wichita Sedgwick KS
- -----------------------------------------------------------------------------------------------------------------------------------
657 201 E. 29th Street Topeka Shawnee KS
- -----------------------------------------------------------------------------------------------------------------------------------
191 3012 N. 27th Street Kansas City Wyandotte KS
- -----------------------------------------------------------------------------------------------------------------------------------
236 1222 Central Kansas City Wyandotte KS
- -----------------------------------------------------------------------------------------------------------------------------------
1256 4900 W. Poplar Level Louisville Jefferson KY
- ------------------------------------------------------------------------------------------------------------------------------------
75 1450 Milam Street Shreveport Caddo Parish LA
- ------------------------------------------------------------------------------------------------------------------------------------
1627 925 South Pine Vivian Caddo Parish LA
- ------------------------------------------------------------------------------------------------------------------------------------
381 1635 E. Broad St. Lake Charles Calcasieu Parish LA
- ------------------------------------------------------------------------------------------------------------------------------------
6 345 N. Acadian Thruway Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
72 2321 Highland Road Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
155 8212 Scenic Hwy. Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
600 1104 Main Street Baker East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
719 10785 Florida Blvd. Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
720 5460 Airline Hwy. Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
721 5728 Government St. Baton Rouge East Baton Rouge LA
Parish
- ------------------------------------------------------------------------------------------------------------------------------------
753 4395 Perkins Road Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1120 2029 N. Acadian Thrw. Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
1172 5415 Plank Road Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
1205 7941 Airline Hwy. Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
1614 1960 Staring Land Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
1678 3332 N. Foster Baton Rouge East Baton Rouge LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
519 601 W. St. Peters New Iberia Iberia Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
CFC Reg Ofs 2424 Edenborn Avenue Metairie Jefferson LA
- -----------------------------------------------------------------------------------------------------------------------------------
124 8901 Airline Hwy. Metairie Jefferson Parrish LA
- -----------------------------------------------------------------------------------------------------------------------------------
563 3740 Airline Hwy. Metairie Jefferson Parrish LA
- -----------------------------------------------------------------------------------------------------------------------------------
Fulton Street 1412-1414 Fulton St. Kenner Jefferson Parish LA
Warehouse
- -----------------------------------------------------------------------------------------------------------------------------------
312 3344 Williams Blvd. Kenner Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
816 601 Terry Parkway Terrytown Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
882 6820 Veterans Memorial Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1141 3111 Loyola Drive Kenner Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2003 1301 Veterans Memorial Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2009 4905 Westbank Exp. Marrero Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2017 4701 Veterans Memorial Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2018 4433 Jefferson Hwy. New Orleans Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2022 445 Terry Parkway Gretna Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2023 3444 Williams Blvd. Kenner Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2040 2912 Highway 90 W. Avondale Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2068 2148 Belle Chasse Gretna Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2069 6625 Jefferson Hwy. Harahan Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2094 4605 Airline Hwy. Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2100 7212 Veterans Memorial Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2249 1401 Lafayette St. Gretna Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2301 3301 Veterans Memorial Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2464 4305 Transcontinental Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2474 3016 Loyola Dr. Kenner Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2483 3850 Veternas Metairie Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2601 5410 Lapalco Marrero Jefferson Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
70 212 S. Evangeline TH Lafayette Lafayette Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
316 3142 Johnston St. Lafayette Lafayette Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1259 400 S. Range Ave. Denham Springs Livingston Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
520 204 W. Madison Bastrop Morehouse Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
Vacant Land Tract 8, Area 11 New Orleans East Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
95 1738 Louisiana Avenue New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
96 2506 St. Bernard New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
99 8635 Earhart New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
109 1624 Newton Street New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
111 2638 Elysian Fields New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
815 9708 Chef Menteur HW New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
852 7100 Downman Road New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1049 1553 Mirabeau Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1081 4030 Chef Menteur Hwy. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1139 4301 Saint Claude Avenue New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1153 1600 S. Claiborne Avenue New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1248 230 N. Broad St. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2004 9120 Chef Menteur New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2005 1501 Elysian Fields New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2007 2201 St. Bernard New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2011 301 N. Broad Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2020 1243 St. Charles Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2021 3008 Napoleon Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2024 2900 S. Claiborne New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2025 7118 Downman Rd. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2026 2500 St. Claude Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2027 4041 Magazine St. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2028 1414 Carrollton Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2030 621 Canal St. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2079 3825 Gen DeGaulle New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2239 3100 Carrollton Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2245 4480 Chef Menteur New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2383 2000 Gentilly Blvd. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2407 5600 St. Claude Ave. New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2485 5711 Read Road New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2511 1101 Canal Street New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
3059 6232 Elysian Fields New Orleans Orleans Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
337 605 Cypress Street West Monroe Ouachita Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
339 2410 De Saird Street Monroe Ouachita Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
363 1401 South 2nd Monroe Ouachita Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
328 3016 Lee St. Alexandria Rapides Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
702 1275 MacArthur Drive Alexandria Rapides Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
813 1112 W. Judge Perez Chalmette St. Bernard Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2019 620 W. Jedge Perez Dr. Chalmette St. Bernard Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
2244 1920 E. Judge Perez Chalmette St. Bernard Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
718 1601 W. Airline Hwy. LaPlace St. John the Baptist LA
Parish
- -----------------------------------------------------------------------------------------------------------------------------------
582 1055 N. Main Opelousas St. Landry Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
585 630 Brashear Avenue Morgan City St. Mary Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
502 195 Gause Blvd. Slidell St. Tammany Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
493 410 W. Thomas Hammond Tangipaloa Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1634 1012 N. 5th St. Leesville Vernon Parish LA
- -----------------------------------------------------------------------------------------------------------------------------------
1647 6401 Annapolis Road Hyattsville Prince George MD
- -----------------------------------------------------------------------------------------------------------------------------------
1573 3215 W. 13 Mile Rd. Royal Oak Oakland MI
- -----------------------------------------------------------------------------------------------------------------------------------
302 7060 Michigan Avenue Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
345 6931 E. Jefferson Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
456 19741 W. McNichols Rd. Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
784 10038 W. 7 Mile Rd. Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
863 2757 W. Davison Avenue Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
864 Woodward & Forest Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
865 27360 Michigan Avenue Inkster Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
991 18138 W. 7 Mile Road Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
1015 6060 W. Vernor Hwy Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
1016 19835 W. Warren Detroit Wayne MI
- -----------------------------------------------------------------------------------------------------------------------------------
451 3420 N. Kings Hwy. St. Louis City of St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
467 4640 Morganford Rd. St. Louis City of St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
524 5804 Page Blvd. St. Louis City of St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
553 5400 Partridge Avenue St. Louis City of St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
829 6190 Delmar Blvd. St. Louis City of St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
225 4601 N.E. Vivian Rd. Kansas City Clay MO
- -----------------------------------------------------------------------------------------------------------------------------------
161 2615 N. Florissant Rd. St. Louis East St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
614 711 W. Kearney Street Springfield Greene MO
- -----------------------------------------------------------------------------------------------------------------------------------
57 11500 Blue Ridge Blvd. Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
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<PAGE>
<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
129 2515 E. 12th Street Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
131 3900 Indiana Street Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
136 5500 Prospect Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
152 2401 Van Brunt Blvd. Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
212 701 S. Noland Independence Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
1231 2600 E. Gregory Kansas City Jackson MO
- -----------------------------------------------------------------------------------------------------------------------------------
616 40 Hwy. 67 Florissant St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
662 5702 S. Lindbergh Blvd. St. Louis St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
1060 1200 Lemay Ferry Rd. St. Louis St. Louis MO
- -----------------------------------------------------------------------------------------------------------------------------------
453 104 N. Pine Street Natchez Adams MS
- -----------------------------------------------------------------------------------------------------------------------------------
1058 611 N. State Street Clarksdale Coahoma MS
- -----------------------------------------------------------------------------------------------------------------------------------
773 SE/C U.S. HWY 51 & Whitworth Southover DeSoto MS
- -----------------------------------------------------------------------------------------------------------------------------------
403 1300 Main St. Hattiesburg Forrest MS
- -----------------------------------------------------------------------------------------------------------------------------------
1601 316 Main Street Lucedale George MS
- -----------------------------------------------------------------------------------------------------------------------------------
400 294 Caillavet St. Biloxi Harrison MS
- -----------------------------------------------------------------------------------------------------------------------------------
401 2321 25th Street Gulfport Harrison MS
- -----------------------------------------------------------------------------------------------------------------------------------
360 1009 Robinson Rd. Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
378 3280 Medgar Evers Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
819 238 W. Woodrow Wilson Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
824 1264 Ellis Avenue Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
928 3847 Northbrook Drive Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
1052 1022 North State St. Jackson Hinds MS
- -----------------------------------------------------------------------------------------------------------------------------------
810 926 Denny Avenue Pascagoula Jackson MS
- -----------------------------------------------------------------------------------------------------------------------------------
1375 3831 Main Street Moss Point Jackson MS
- -----------------------------------------------------------------------------------------------------------------------------------
404 215 Beacon Street Laurel Jones MS
- -----------------------------------------------------------------------------------------------------------------------------------
361 3325 8th St. Meridian Lauredale MS
- -----------------------------------------------------------------------------------------------------------------------------------
1546 1100 West Main Street Tupelo Lee MS
- -----------------------------------------------------------------------------------------------------------------------------------
490 310 Walthal Street Greenwood Leflore MS
- -----------------------------------------------------------------------------------------------------------------------------------
130 1406 Main St. Columbus Lowndes MS
- -----------------------------------------------------------------------------------------------------------------------------------
726 3056 US Hwy. 80 Pearl Rankin MS
- -----------------------------------------------------------------------------------------------------------------------------------
1356 1101 Hwy. 82 E Indianola Sunflower MS
- -----------------------------------------------------------------------------------------------------------------------------------
428 1320 Clay Street Vicksburg Warren MS
- -----------------------------------------------------------------------------------------------------------------------------------
383 102 Mississippi Hwy. Greenville Washington MS
- -----------------------------------------------------------------------------------------------------------------------------------
418 2401 Murchison Rd. Fayetteville Cumberland NC
- -----------------------------------------------------------------------------------------------------------------------------------
143 3400 Roxboro Rd. Durham Durham NC
- -----------------------------------------------------------------------------------------------------------------------------------
912 922 Miami Blvd. Durham Durham NC
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
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<TABLE>
<CAPTION>
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STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
913 2540 Fayetteville St. Durham Durham NC
- -----------------------------------------------------------------------------------------------------------------------------------
500 1301 Patterson Ave. Winston Salem Forsyth NC
- -----------------------------------------------------------------------------------------------------------------------------------
627 907 Waughtown Winston Salem Forsyth NC
- -----------------------------------------------------------------------------------------------------------------------------------
482 611 Asheboro Street Greensboro Guilford NC
- -----------------------------------------------------------------------------------------------------------------------------------
628 4139 Spring Garden Greensboro Guilford NC
- -----------------------------------------------------------------------------------------------------------------------------------
598 3443 Wilkinson Blvd. Charlotte Mecklenburg NC
- -----------------------------------------------------------------------------------------------------------------------------------
601 4421 N. Tryon Charlotte Mecklenburg NC
- -----------------------------------------------------------------------------------------------------------------------------------
624 1735 W. Trade Charlotte Mecklenburg NC
- -----------------------------------------------------------------------------------------------------------------------------------
419 2003 Lejuene Blvd. Jacksonville Onslow NC
- -----------------------------------------------------------------------------------------------------------------------------------
077 401 Marine Blvd. Jacksonville Onslow NC
- -----------------------------------------------------------------------------------------------------------------------------------
549 1401 New Bern Avenue Raleigh Wake NC
- -----------------------------------------------------------------------------------------------------------------------------------
873 210 White Horse Pike Lawnside Camden NJ
- -----------------------------------------------------------------------------------------------------------------------------------
1168 278 Parkway Ave. Trenton Mercer NJ
- -----------------------------------------------------------------------------------------------------------------------------------
457 2100 Broadway S.E. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
574 3335 Isleta Blvd. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
694 5112 4th Street N.W. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
695 5407 Central Ave. N.W. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
701 2937 NE San Mateo Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
706 7717 Menaul Blvd. N.E. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
707 2307 Juan Tabo Rd. NE Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
711 6108 Lomas Blvd. N.E. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
768 5800 S.E. Gibson Blvd. Albuquerque Bernalillo NM
- -----------------------------------------------------------------------------------------------------------------------------------
595 1141 S. Main Roswell Chaves NM
- -----------------------------------------------------------------------------------------------------------------------------------
590 702 Dal Paso (North) Hobbs Lea NM
- -----------------------------------------------------------------------------------------------------------------------------------
946 1203 E. 66th St. Gallup McKinley NM
- -----------------------------------------------------------------------------------------------------------------------------------
1040 2711 E. 20th Street Farmington San Juan NM
- -----------------------------------------------------------------------------------------------------------------------------------
284 4880 W. Spring Mt. Rd. Las Vegas Clark NV
- -----------------------------------------------------------------------------------------------------------------------------------
331 2839 N. Las Vegas BL Las Vegas Clark NV
- -----------------------------------------------------------------------------------------------------------------------------------
362 1404 N. Eastern Ave. Las Vegas Clark NV
- -----------------------------------------------------------------------------------------------------------------------------------
371 601 N. Rancho Las Vegas Clark NV
- -----------------------------------------------------------------------------------------------------------------------------------
901 12202 Buckeye Road Cleveland Cuyahoga OH
- -----------------------------------------------------------------------------------------------------------------------------------
1161 1530 Hayden Avenue East Cleveland Cuyahoga OH
- -----------------------------------------------------------------------------------------------------------------------------------
634 1100 Cleveland Columbus Franklin OH
- -----------------------------------------------------------------------------------------------------------------------------------
1145 5001 Kenwood Rd. Cincinnati Hamilton OH
- -----------------------------------------------------------------------------------------------------------------------------------
1147 5800 Hamilton Ave. Cincinnati Hamilton OH
- -----------------------------------------------------------------------------------------------------------------------------------
121 529 North Broadway Dayton Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-14
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
158 2443 N. Gettysburg Dayton Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
174 1113 N. Gettysburg Dayton Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
175 2131 W. Third Street Dayton Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
176 4508 South Dixie Moraine Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
412 5711 N. Dixie Drive Dayton Montgomery OH
- -----------------------------------------------------------------------------------------------------------------------------------
290 713 North Main Akron Stark OH
- -----------------------------------------------------------------------------------------------------------------------------------
269 1261 Copley Road Akron Summit OH
- -----------------------------------------------------------------------------------------------------------------------------------
444 1235 N. Santa Fe Moore Cleveland OK
- -----------------------------------------------------------------------------------------------------------------------------------
396 1925 N.W. Sheridan Lawton Comanche OK
- -----------------------------------------------------------------------------------------------------------------------------------
397 902 S.W. 11th Street Lawton Comanche OK
- -----------------------------------------------------------------------------------------------------------------------------------
1035 820 N. Main Street Altus Jackson OK
- -----------------------------------------------------------------------------------------------------------------------------------
409 419 E. Okmulgee Muskogee Muskogee OK
- -----------------------------------------------------------------------------------------------------------------------------------
318 3610 N.W. 23rd Street Oklahoma City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
323 3829 N. Lincoln Oklahoma City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
334 543 S.W. 29th Street Oklahoma City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
341 3920 S.E. 15th Street Del City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
349 1424 N.E. 23rd Oklahoma City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
931 9253 N. Pennsylvania Village Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
1057 701 N.W. 23rd Street Oklahoma City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
1435 9010 N.E. 23rd Street Midwest City Oklahoma OK
- -----------------------------------------------------------------------------------------------------------------------------------
376 2555 East Pine Tulsa Tulsa OK
- -----------------------------------------------------------------------------------------------------------------------------------
408 1601 N. Peoria Avenue Tulsa Tulsa OK
- -----------------------------------------------------------------------------------------------------------------------------------
619 3036 S. Garnett Road Tulsa Tulsa OK
- -----------------------------------------------------------------------------------------------------------------------------------
775 5034 N. Peoria Tulsa Tulsa OK
- -----------------------------------------------------------------------------------------------------------------------------------
827 4970 S. Peoria Tulsa Tulsa OK
- -----------------------------------------------------------------------------------------------------------------------------------
16 800 S. Broad St. Philadelphia Philadelphia PA
- -----------------------------------------------------------------------------------------------------------------------------------
534 314 W. Lehigh Ave. Philadelphia Philadelphia PA
- -----------------------------------------------------------------------------------------------------------------------------------
730 1213 Savannah Hwy. Charleston Charleston SC
- -----------------------------------------------------------------------------------------------------------------------------------
757 5241 Dorchester Rd. Charleston Charleston SC
- -----------------------------------------------------------------------------------------------------------------------------------
903 1209 Charleston Hwy. W. Charleston Lexington SC
- -----------------------------------------------------------------------------------------------------------------------------------
1446 2390 PR Orange Mall Orangeberg Orangeburg SC
- -----------------------------------------------------------------------------------------------------------------------------------
909 4720 Devine Columbia Richland SC
- -----------------------------------------------------------------------------------------------------------------------------------
910 880 N. Church St. Spartanberg Spartanberg SC
- -----------------------------------------------------------------------------------------------------------------------------------
1084 1420 Dodson Ave. Chattanooga Hamilton TN
- -----------------------------------------------------------------------------------------------------------------------------------
199 2442 Summer Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
301 830 Jackson Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-15
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
309 2304 Chelsea Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
313 583 E. H. Crump Blvd. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
350 2963 Park Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
364 925 Poplar Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
365 3728 S. Third St. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
395 1155 S. Bellevue Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
771 2405 Airways, Blvd. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
774 3149 Perkins Rd. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
826 4462 Elvis Presley Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
934 1868 S. 3rd St. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
996 2275 Elvis Preseley Blvd. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
1012 2139 Lamar Ave. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
1020 2237 Frayser Blvd. Memphis Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
1337 4687 Navy Rd. Millington Shelby TN
- -----------------------------------------------------------------------------------------------------------------------------------
1526 419 W. Palestine Palestine Anderson TX
- -----------------------------------------------------------------------------------------------------------------------------------
1527 2114 Crockett Rd Palestine Anderson TX
- -----------------------------------------------------------------------------------------------------------------------------------
503 101 S. Timberland Street Lufkin Angelina TX
- -----------------------------------------------------------------------------------------------------------------------------------
1499 107 N. Temple Diboll Angelina TX
- -----------------------------------------------------------------------------------------------------------------------------------
1352 1018 2nd Street Pleasanton Atascosa TX
- -----------------------------------------------------------------------------------------------------------------------------------
481 611 N. Washington Beeville Bee TX
- -----------------------------------------------------------------------------------------------------------------------------------
66 410 Fort Hood Killeen Bell TX
- -----------------------------------------------------------------------------------------------------------------------------------
700 2616 E. Hwy 190 Killeen Bell TX
- -----------------------------------------------------------------------------------------------------------------------------------
1169 1710 South 31st St Temple Bell TX
- -----------------------------------------------------------------------------------------------------------------------------------
Accounting 6300 1H 10 W San Antonio Bexar TX
Bldg.
- -----------------------------------------------------------------------------------------------------------------------------------
San Antonio Warehouse Bexar County Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
MIS Bldg. Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
Far West Facility 302 Spencer Lane San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
2 415 Valley-Hi Drive San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
3 250 S. New Braunfels San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
8 1923 Goliad Road San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
9 3119 S.W. Military San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
10 1431 E. Durango Blvd. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
11 319 S. Zarzamora San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
40 2026 Pleasant Rd. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
73 1318 S.W. W. White San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-16
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
94 2856 Culebra Road San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
97 3116 Nogalitos San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
100 1710 McCullough Ave. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
132 1302 Castroville Rd San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
170 134 W. Rector San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
193 1822 S. Zarzamora St San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
299 2431 Basse Road San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
300 4620 S. Flores St. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
342 5903 San Pedro San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
372 1839 W. Hildebrand San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
393 2501 Nacogdoches San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
470 618 Hwy 90 W San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
480 3020 Broadway San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
564 11910 Perrin Beitel San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
565 11623 West Avenue San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
568 9331 Wurzbach San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
606 110 E. Houston San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
696 4925 Walzem Rd San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
712 1615 Bandera Rd. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
796 365 E. Hwy 77 San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
892 7003 Bandera Rd San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
893 7919 Marbach San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
900 2026 S. Alamo St. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1187 1850 S. General McMull San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1246 8757 Huebner San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1258 4747 Rittiman San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1263 FN78 Converse Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1268 917 Pat Booker Universal City Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1278 8459 Five Palms San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1289 1889 Rigsby San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1291 1700 S. St. Marys San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1330 4414 Callaghan San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1363 5096 Farm Rd 78 Kirby Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1367 96 Crossroads San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1572 1001 Rittiman Rd San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1588 7307 N.FM 1604 West San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-17
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1615 2423 Commercial San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1682 2502 Palo Alto San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1694 7101 New Hwy 90 W San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1695 849 E. Commerce St. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
3280 151 W. Bitters San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
3404 1003 SE Military Dr. San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
8000 Office Building B, 355 Spencer Lane San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
8417 8003 Marbach Road San Antonio Bexar TX
A/K/A 40017
A/K/A GW17
- -----------------------------------------------------------------------------------------------------------------------------------
8450 2920 Nogalitos San Antonio Bexar TX
A/K/A
40050
A/K/A
GW50
- -----------------------------------------------------------------------------------------------------------------------------------
9007 352 Spencer San Antonio Bexar TX
- -----------------------------------------------------------------------------------------------------------------------------------
1313 1001 Brazoa Port Blvd Freeport Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
1460 1341 Mulberry Angleton Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
1493 806 S. Columbia Drive W. Columbia Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
1519 1701 Fairway Alvin Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
2008 260 Hwy, 35 Bypass Alvin Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
2945 3416 E. Broadway Pearland Brazoria TX
- -----------------------------------------------------------------------------------------------------------------------------------
295 3207 Texas Ave. Bryan Brazos TX
- -----------------------------------------------------------------------------------------------------------------------------------
468 507 Texas Avenue Bryan Brazos TX
- -----------------------------------------------------------------------------------------------------------------------------------
1496 705 N. Texas Avenue Bryan Brazos TX
- -----------------------------------------------------------------------------------------------------------------------------------
1463 419 N. Hwy, 35 Bypass Port Lavaca Calhoun TX
- -----------------------------------------------------------------------------------------------------------------------------------
46 702 13th Street Harlingen Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
448 2121 International Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
557 921 W. Tyler Harlingen Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
794 2395 Boca Chica Blvd. Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1349 1714 S. 77th Sunshine Harlingen Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1359 1703 W. Hwy 100 Port Isabel Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1388 400 North Hwy 506 La Feria Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1442 1104 Farm Road 802 Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1536 535 W. Elizabeth Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
3101 Sam Perl Blvd. Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
3219 1264 E. Washington Brownsville Cameron TX
- -----------------------------------------------------------------------------------------------------------------------------------
1523 1011 South Jackson Jacksonville Cherokee TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-18
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1517 2528 14th Street Plano Collin TX
- -----------------------------------------------------------------------------------------------------------------------------------
518 824 W. San Antonio New Braunfels Comal TX
- -----------------------------------------------------------------------------------------------------------------------------------
579 501 E. Hwy 190 Copperas Cove Coryell TX
- -----------------------------------------------------------------------------------------------------------------------------------
REG OFS 1231 Greenway Drive Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
15 8131 Forest Lane Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
31 501 N. O'Connor Rd. Irving Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
34 2019 Singleton Blvd Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
35 4645 Scyene Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
36 9116 Bruton Rd. Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
39 606 N. Hampton Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
80 3605 S. Lancaster Road Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
82 10105 NW Hwy. E. Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
83 2509 S. Westmoreland Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
84 14350 Josey Lane Farmers Branch Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
115 2530 N. Storey Road Irving Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
116 3234 Forest Lane Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
118 2207 E. Ledbetter Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
119 5503 East Grand Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
201 10295 Ferguson Road Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
202 3012 N. Henderson Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
204 609 Gallaway Mesquite Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
207 421 N. Shiloh Rd. Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
222 4410 W. Mockingbird Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
223 13302 Preston Road Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
224 2410 S. Zang Blvd. Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
347 1025 W. Camp Wisdom Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
586 212 Continental Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
763 201 E. Camp Wisdom Rd. Duncanville Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1009 1035 W. Mockingbird Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1037 12435 Plano Road Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1043 401 W. Hwy 303 Grand Prairie Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1051 10545 Harry Hines Blvd. Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1213 4744 Maple Avenue Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1300 3502 Simpson Stuart Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1384 1220 S. Buckner Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1385 3028 S. First Street Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-19
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1386 4210 Gaston Avenue Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1401 901 East Main Grand Prairie Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1407 129 N. Jim Miller Road Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1409 3308 West Davis Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1439 2317 W. Ledbetter Drive Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1449 1436 Beltline Road Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1515 6502 Lemmon Avenue Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1564 5602 Broadway Blvd. Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1619 NE/c Lake June Road Balch Springs Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1686 3130 W. Northwest Hwy Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
1687 8080 Ferguson Rd. Dallas Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
3058 808 W. Centerville Rd. Garland Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
8436 1007 W. Camp Wisdom Dallas Dallas TX
40036
A/K/A
GW36
- -----------------------------------------------------------------------------------------------------------------------------------
708 1298 Hwy 121 Lewisville Denton TX
- -----------------------------------------------------------------------------------------------------------------------------------
4091 1394 Main St. Lewisville Denton TX
- -----------------------------------------------------------------------------------------------------------------------------------
1370 100 U.S. Hwy 183 Cuero Dewitt TX
- -----------------------------------------------------------------------------------------------------------------------------------
50 620 N. Dixie Odessa Ector TX
- -----------------------------------------------------------------------------------------------------------------------------------
455 3800 Andrews Hwy Odessa Ector TX
- -----------------------------------------------------------------------------------------------------------------------------------
803 1336 W. County Rd Odessa Ector TX
- -----------------------------------------------------------------------------------------------------------------------------------
1630 704 Ferris Street Waxanachie Ellis TX
- -----------------------------------------------------------------------------------------------------------------------------------
1501 358 Live Oak Marlin Falls TX
- -----------------------------------------------------------------------------------------------------------------------------------
1451 4823 Avenue H Rosenberg Fort Bend TX
- -----------------------------------------------------------------------------------------------------------------------------------
1454 3200 S. Main Stafford Fort Bend TX
- -----------------------------------------------------------------------------------------------------------------------------------
2662 1737 FM 2234 Missouri City Fort Bend TX
- -----------------------------------------------------------------------------------------------------------------------------------
1465 13530 Highway 6 Santa Fe Galveston TX
- -----------------------------------------------------------------------------------------------------------------------------------
1477 2401 Main Street Dickinson Galveston TX
- -----------------------------------------------------------------------------------------------------------------------------------
1479 4825 Broadway Galveston Galveston TX
- -----------------------------------------------------------------------------------------------------------------------------------
1490 Loop 197 & 23rd St. Texas City Galveston TX
- -----------------------------------------------------------------------------------------------------------------------------------
2129 3027 Broadway Galveston Galveston TX
- -----------------------------------------------------------------------------------------------------------------------------------
321 200 East Houston Sherman Grayson TX
- -----------------------------------------------------------------------------------------------------------------------------------
1342 806 North Hwy. 259 Kilgore Gregg TX
- -----------------------------------------------------------------------------------------------------------------------------------
1394 2000 Toler Rd Longview Gregg TX
- -----------------------------------------------------------------------------------------------------------------------------------
1308 1620 Washington Navasota Grimes TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-20
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
471 404 W. Court Seguin Guadalupe TX
- -----------------------------------------------------------------------------------------------------------------------------------
1364 304 Farm Rd. 78 Kirby Guadalupe TX
- -----------------------------------------------------------------------------------------------------------------------------------
1445 1010 W. 5th St. Plainview Hale TX
- -----------------------------------------------------------------------------------------------------------------------------------
5 14618 N. Eldridge Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1059 1533 N. Wayside Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1065 1213 College Street South Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1083 8926 Jensen Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1089 6405 Telephone Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1090 3501 Jensen Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1092 6850 M.L. King Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1102 7445 Harrisburg Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1104 1931 Garth Rd Baytown Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1105 2401 S. Shaver Pasadena Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1107 2702 Yale Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1117 9403 Homestead St. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1119 202 W. Littleyork Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1143 309 Lockwood Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1154 4575 Griggs Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1163 2706 Fulton St. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1181 5725 Lockwood Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1254 2305 Fry Road Katy Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1293 8841 Cullen Blvd. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1312 3502 Dowling Street Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1318 12436 Bissonnet Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1424 9287 Richmond Avenue Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1450 8015 Beechnut St. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1452 14450 South Post Oak Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1466 3334 Mangum Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1470 10810 Winchester Pl. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1471 410 South Richey Pasadena Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1473 6003 Chimney Rock Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1475 11091 Fondren Rd. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1476 11334 Hughes Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1478 425 Cross Timbers Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1481 1201 Bay Area Blvd. Clear Lake City Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1482 6000 Gessner Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-21
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1486 10803 Bissonnet Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1488 8331 N. Broadway Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1489 21131 Aldine-Westfield Humble Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1491 7020 Woodridge Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1492 4701 Irvington Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1495 925 E. Tidwell Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1520 102 E. San Augustine Deer Park Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1524 17430 N.W. Freeway Jersey Village Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1528 929 E. Southmore Pasadena Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1529 9599 South Main Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1547 601 Heights Blvd. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1548 3207 Old Spanish Tr. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1553 354 Uvalde Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1555 F.M. 2100/Kenning Road Crosby Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1556 9122 Mesa Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1557 12512 Hwy 90 Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1558 10397 Market St. Jacinto City Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1559 601 Sheldon Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1607 1302 Federal Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1608 10088 Long Point Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
1624 6800 Res. A. Hwy 6S Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2010 18565 Kuykendal Spring Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2016 3103 FM 1960 West Humble Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2031 8515 Jensen Dr. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2032 5817 Lockwood Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2033 9222 Cullen Street Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2034 7685 Martin Luther Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2036 1101 N. Shepherd Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2037 9830 Homestead Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2042 3409 Jensen Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2056 14467 Memorial Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2080 1110 Edgebrook Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2117 3705 Little York Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2126 4400 Fannin Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2128 2120 N. Alexander Dr. Baytown Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2140 EXC 3019 Ella Blvd. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-22
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
2146 5026 Antoine Drive Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2164 7139 Scott Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2166 6819 Lyons Street Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2167 3432 Scott Street Holman Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2168 995 Federal Road E. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2171 06 Sheldon Road Channelview Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2211 10903 Market St. Jacinto City Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2364 7500 Lawndale Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2754 8519 W. Bellfort Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2787 4862 Willow Bend Road Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2797 8618 Stella Link Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2946 4502 W. Fuqua Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2947 9120 S. Main Street Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
2948 5625 Richmond Ave. Houston Harris TX
- -----------------------------------------------------------------------------------------------------------------------------------
149 604 Bugg Lane San Marcos Hays TX
- ----------------------------------------------------------------------------------------------------------------------------------
196 1819 N. 10th Street MCallen Hidalgo TX
- ----------------------------------------------------------------------------------------------------------------------------------
197 205 W. Hwy 83 Weslaco Hidalgo TX
- ----------------------------------------------------------------------------------------------------------------------------------
423 905 E. U.S. Bus #83 Mission Hidalgo TX
- ----------------------------------------------------------------------------------------------------------------------------------
465 1201 S. Closner Blvd. Edinburg Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1061 515 W. 2nd Street Mercedes Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1271 719 Hooks Donna Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1275 1281/2-130 East Edinburgh Elsa Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1319 Box 8015 US 83/Alamo Alamo Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1391 2205 Nolana MCallen Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1423 825 University Drive Edinburg Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
1431 620 S. 10th St. MCallen Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
3060 1308 Texas FM 88 Weslaco Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
3082 100 S. Cage Pharr Hidalgo TX
- -----------------------------------------------------------------------------------------------------------------------------------
8448 1410 S. Closner Edinburg Hidalgo TX
A/K/A
40048
- -----------------------------------------------------------------------------------------------------------------------------------
8449 215 Hwy 83 Weslaco Hidalgo TX
A/K/A
40049
- -----------------------------------------------------------------------------------------------------------------------------------
1571 1310 Mockingbird Sulphur Springs Hopkins TX
- -----------------------------------------------------------------------------------------------------------------------------------
443 3403 Wesley Greenville Hunt TX
- -----------------------------------------------------------------------------------------------------------------------------------
1412 110 E. Houston Hwy Edna Jackson TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-23
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1640 849 South Wheeler Street Jasper Jasper TX
- -----------------------------------------------------------------------------------------------------------------------------------
30 2200 Gulfway Port Arthur Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
41 2999 Magnolia Beaumont Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
43 615 Wasington Blvd. Beaumount Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
228 2780 Washington Beaumont Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
235 3095 Calder Beaumont Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
705 003 Nederland Dr. Nederland Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
891 1849 Jefferson Drive Port Arthur Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
1674 229 Dowlen Beaumont Jefferson TX
- -----------------------------------------------------------------------------------------------------------------------------------
307 1104 East Main Alice Jim Wells TX
- -----------------------------------------------------------------------------------------------------------------------------------
556 616 North Main Cleburne Johnson TX
- -----------------------------------------------------------------------------------------------------------------------------------
767 1600 S. Braham Blvd. Kingsville Kleberg TX
- -----------------------------------------------------------------------------------------------------------------------------------
1504 206 W. Houston Cleveland Liberty TX
- -----------------------------------------------------------------------------------------------------------------------------------
588 4401 34th St. Lubbock Lubbock TX
- -----------------------------------------------------------------------------------------------------------------------------------
589 1702 South 50th St. Lubbock Lubbock TX
- -----------------------------------------------------------------------------------------------------------------------------------
605 1624 4th St. Lubbock Lubbock TX
- -----------------------------------------------------------------------------------------------------------------------------------
1675 1702 E. Broadway Lubbock Lubbock TX
- -----------------------------------------------------------------------------------------------------------------------------------
1453 2514 7th St. Bay City Matagorda TX
- -----------------------------------------------------------------------------------------------------------------------------------
795 1430 Main Street Eagle Pass Maverick TX
- -----------------------------------------------------------------------------------------------------------------------------------
78 1105 W. Waco Drive Mclennan McLennan TX
- -----------------------------------------------------------------------------------------------------------------------------------
92 1500 N. Valley Mills Waco McLennan TX
- -----------------------------------------------------------------------------------------------------------------------------------
112 1325 E. Waco Drive Waco McLennan TX
- -----------------------------------------------------------------------------------------------------------------------------------
127 1515 S. Valley Mills Waco McLennan TX
- -----------------------------------------------------------------------------------------------------------------------------------
1683 3903 North 19th Waco McLennan TX
- -----------------------------------------------------------------------------------------------------------------------------------
450 202 Midkiff Ave. S. Midland Midland TX
- -----------------------------------------------------------------------------------------------------------------------------------
896 1400 N. Big Spring Midland Midland TX
- -----------------------------------------------------------------------------------------------------------------------------------
1505 402 East Davis Conroe Montgomery TX
- -----------------------------------------------------------------------------------------------------------------------------------
1507 905 1/2 West Davis Conroe Montgomery TX
- -----------------------------------------------------------------------------------------------------------------------------------
581 1400 W. 7th St. Corsicana Navarro TX
- -----------------------------------------------------------------------------------------------------------------------------------
218 1322 16th ST. Orange Orange TX
- -----------------------------------------------------------------------------------------------------------------------------------
1440 1105 N. Main Street Vidor Orange TX
- -----------------------------------------------------------------------------------------------------------------------------------
1639 425 W. Panola Carthage Panola TX
- -----------------------------------------------------------------------------------------------------------------------------------
1511 210 N. Washington Livingston Polk TX
- -----------------------------------------------------------------------------------------------------------------------------------
591 200 Amarillo Blvd. E. Amarillo Potter TX
- -----------------------------------------------------------------------------------------------------------------------------------
592 2002 S. Georgia Amarillo Potter TX
- -----------------------------------------------------------------------------------------------------------------------------------
1354 3600 E. Amarillo Blvd. Amarillo Potter TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-24
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1343 1901 W. Wheeler Arkansas Pass San Patricio TX
- -----------------------------------------------------------------------------------------------------------------------------------
1637 209 Shelbyville Center Shelby TX
- -----------------------------------------------------------------------------------------------------------------------------------
714 822 W. Gentry Parkway Tyler Smith TX
- -----------------------------------------------------------------------------------------------------------------------------------
762 535 S. Beckman Tyler Smith TX
- -----------------------------------------------------------------------------------------------------------------------------------
1533 127 WSW Loop 323 Tyler Smith TX
===================================================================================================================================
1329 Star Plaza Rio Grande City Starr TX
- -----------------------------------------------------------------------------------------------------------------------------------
1562 207 Grant St. Roma Starr TX
- -----------------------------------------------------------------------------------------------------------------------------------
17 6430 McCart Fort Worth Tarrant TX
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51 1301 N.W. 28th Street Fort Worth Tarrant TX
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53 3800 E. Rosedale Fort Worth Tarrant TX
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55 2120 W. Seminary Fort Worth Tarrant TX
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62 1201 East Berry Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
68 1000 E. Abram Arlington Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
190 3344 Lackland Road Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
239 3900 N.E. 28th St. Haltom City Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
370 1601 West Division Arlington Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
460 6500 Meadowbrook Drive Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
461 5660 E. Lancaster Ft. Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
491 2302 S. Collins Arlington Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
492 501 W. Rosedale Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
587 200 W. Pipeline Hurst Tarrant TX
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764 6036 Lakeworth Blvd Fort Worth Tarrant TX
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899 3221 Mansfield Hwy. Fort Worth Tarrant TX
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1211 4224 Miller Street Fort Worth Tarrant TX
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1304 6324 Rufe Snow N. Richmond Hills Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
1338 5181 River Oaks Blvd Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
1579 1701 Sycamore School Road Fort Worth Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
1685 1421 Cherry Lane White Settlement Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
1689 1923 E. Park Row Arlington Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
1693 306 N. Main Street Euless Tarrant TX
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9060 1801 W. Pioneer Pkwy. Arlington Tarrant TX
- -----------------------------------------------------------------------------------------------------------------------------------
69 4026 N. First St. Abilene Taylor TX
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709 3234 South 14th Abilene Taylor TX
- -----------------------------------------------------------------------------------------------------------------------------------
897 1309 Grape St. Abilene Taylor TX
- -----------------------------------------------------------------------------------------------------------------------------------
24 510 West Oltrof Austin Travis TX
- -----------------------------------------------------------------------------------------------------------------------------------
25 1150 Airport Blvd. Austin Travis TX
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-25
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STORE STREET ADDRESS CITY COUNTY ST.
NO.
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
134 1623 E. 7th St. Austin Travis TX
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231 6425 Burnet Rd. Austin Travis TX
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713 5339 Cameron Road Austin Travis TX
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765 8545 Research Blvd Austin Travis TX
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1570 1801 E. Riverside Austin Travis TX
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8438 1945 William Connon Austin Travis TX
A/K/A
40038
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512 123 W. Main Uvalde Uvalde TX
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3105 1900 Avenue F Del Rio Val Verde TX
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1444 301 East Highway 243 Canton Van Zandt TX
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67 2601 N. Laurent Victoria Victoria TX
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1303 4305 Ben Jordon Victoria Victoria TX
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1331 206 W. Rio Grande Victoria Victoria TX
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1510 2711 11th St. Huntsville Walker TX
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1334 1401 South Market Brenham Washington TX
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22 1702 Guadalupe St. Laredo Webb TX
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48 3420 San Bernardo Laredo Webb TX
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1070 2201 Saunders St. Laredo Webb TX
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1456 606 N. Mechanic El. Campo Wharton TX
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1458 2400 N. Richmond Rd. Wharton Wharton TX
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1296 694 E. Hidalgo Raymondville Willacy TX
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1362 1317 10th St. Floresville Wilson TX
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797 3704 Sheppard Rd. Wichita Falls Witchita TX
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1219 1900 Mechanicsville Richmond Chesterfield VA
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1220 550 E. Laburnum Ave. Richmond Chesterfield VA
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1224 9 Jeff Davis Hwy. Richmond Chesterfield VA
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1227 108 S. Sycamore Petersburg Dinwiddle VA
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1267 2308 E. Princess Ann Norfolk Norfolk VA
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1295 7600 Hampton Blvd. Norfolk Norfolk VA
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1305 350 Effingham St. Portsmouth Norfolk VA
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1373 10702 Jefferson Avenue Newport News Warwick VA
===================================================================================================================================
</TABLE>
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-A-26
<PAGE>
SCHEDULE B
TO SECURITY AGREEMENT
Offices and Locations for Filing UCC Financing Statements
Secretary of States Office and/or County Clerk's Offices
in the following States:
Secretary of State, Alabama
Secretary of State, Arizona
Secretary of State, Arkansas
Secretary of State, California
Secretary of State, Colorado
Secretary of State, Connecticut
Department of State, Florida
Clerk of Superior Court Fulton County, Georgia
Secretary of State, Illinois
Secretary of State, Indiana
Secretary of State, Kansas
Secretary of State, Kentucky
Jefferson County, Kentucky
Clerk of Court Jefferson Parish, Louisiana
Dept. of Assessments and Taxation, Maryland
Secretary of State, Michigan
Secretary of State, Mississippi
Secretary of State, Missouri
Secretary of State, Nevada
Secretary of State, New Jersey
Secretary of State, New Mexico
Secretary of State, New York
New York County, New York
Secretary of State, North Carolina
Secretary of State, Ohio
Oklahoma County, Oklahoma
Secretary of State, Pennsylvania
Prothonotary of Philadelphia County, Pennsylvania
Secretary of State, South Carolina
Secretary of State, Tennessee
Secretary of State, Texas
State Corporation Commission, Virginia
NY1-500593 EXECUTION
COMPANY SECURITY AGREEMENT
S-B-1
<PAGE>
EXHIBIT 4.6
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "AGREEMENT") is dated as of May 21, 1997
and entered into by and between AFC ENTERPRISES, INC., a Minnesota corporation
("PLEDGOR"), and CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent
for and representative of (in such capacity herein called "SECURED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement (as
hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
----------
and issued by the corporations named therein and (ii) the indebtedness of any
Subsidiary of Pledgor or any future Subsidiary of Pledgor (the "PLEDGED DEBT")
described in Part B of said Schedule I and issued by the obligors named therein.
----------
B. Secured Party as administrative agent for Lenders, Lenders and
Goldman Sachs Credit Partners L.P., have entered into a Credit Agreement dated
as of May 21, 1997 (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Pledgor pursuant to which Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Pledgor.
C. Pledgor may enter into one or more Interest Rate Agreements
(collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or more Lenders
and/or their Affiliates (in such capacity, collectively, "INTEREST RATE
EXCHANGERS"), and it is desired that the obligations of Pledgor under the
Lender Interest Rate Agreements, including without limitation the obligation of
Pledgor to make payments thereunder in the event of early termination thereof,
together with all obligations of Pledgor under the Credit Agreement and the
other Loan Documents, be secured hereunder.
D. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce
<PAGE>
Interest Rate Exchangers to enter into the Lender Interest Rate Agreements, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgor hereby pledges and assigns to
------------------
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares; provided, however, that to the extent that the
-------- -------
issuer of any of the Pledged Shares is a controlled foreign corporation (used
hereinafter as such term is defined in Section 957(a) (or a successor provision)
of the Internal Revenue Code), Pledgor shall only be required to pledge Pledged
Shares of, certificates representing Pledged Shares of, and such interests
pertaining to Pledged Shares of such issuer possessing up to but not exceeding
66% of the voting power of all classes of capital stock entitled to vote of such
issuer, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged Debt,
and all interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares of a Subsidiary of Pledgor (all such shares, securities, warrants,
options, rights, certificates, instruments and interests collectively being
"ADDITIONAL PLEDGED SHARES"), and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such Additional Pledged Shares; provided, however, that to the extent that
-------- -------
the issuer of any Additional Pledged Shares is a controlled foreign corporation,
Pledgor shall only be required to pledge Additional Pledged Shares of such
issuer possessing up to but not exceeding 66% of the voting power of all classes
of capital stock entitled to vote of such issuer, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such Additional Pledged Shares;
<PAGE>
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares
(all such shares, securities, warrants, options, rights, certificates,
instruments and interests collectively being "NEW PLEDGED SHARES"), and all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such New Pledged Shares; provided, however, that
-------- -------
in the event that any such direct Subsidiary is a controlled foreign
corporation, Pledgor shall only be required to pledge New Pledged Shares of such
Subsidiary possessing up to but not exceeding 66% of the voting power of all
classes of capital stock entitled to vote of such Subsidiary, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such New Pledged Shares;
(f) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, proceeds of any indemnity or guaranty payable to
Pledgor or Secured Party from time to time with respect to any of the Pledged
Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Credit Agreement and the other Loan
Documents and the Lender Interest Rate Agreements and all extensions or renewals
thereof, whether for principal, interest (including without limitation interest
that, but for the filing of a petition in bankruptcy with
3
<PAGE>
respect to Pledgor, would accrue on such obligations), reimbursement of amounts
drawn under Letters of Credit, payments for early termination of Lender Interest
Rate Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party, any Lender or any Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "UNDERLYING DEBT"), and all obligations of every nature
of Pledgor now or hereafter existing under this Agreement (all such obligations
of Pledgor, together with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to Secured Party. Upon the occurrence and during the continuation
of an Event of Default which shall not have been cured within any applicable
notice or cure period set forth in the Credit Agreement, Secured Party shall
have the right, at any time in its discretion and without notice to Pledgor, to
transfer to or to register in the name of Secured Party or any of its nominees
any or all of the Pledged Collateral, subject only to the revocable rights
specified in Section 7(a) and any provision to the contrary in the Credit
Agreement. In addition, Secured Party shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the
---------------------------------------------
Pledged Shares of any subsidiary of Pledgor have been duly authorized and
validly issued and are fully paid and non-assessable (except that, with respect
to Foreign Subsidiaries which are issuers of Pledged Shares, this representation
is limited to the extent such concepts are not recognized under the laws or
regulations of their respective jurisdictions of incorporation). All of the
Pledged Debt has been duly authorized, authenticated or issued, and delivered,
and are the legal, valid and binding obligation of the issuers thereof and are
not in default to the extent that the result thereof would have a Material
Adverse Effect.
(b) Description of Pledged Collateral. The Pledged Shares
---------------------------------
constitute all of the issued and outstanding shares of stock of each issuer
thereof, except as otherwise set forth in Schedule II annexed hereto, and
-----------
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
The Pledged Debt
4
<PAGE>
constitutes all of the issued and outstanding intercompany indebtedness
evidenced by a promissory note of the respective issuers thereof owing to
Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record
-------------------------------
and beneficial owner of the Pledged Collateral. The Pledged Collateral is free
and clear of any Lien except for the security interest created by this
Agreement, the Permitted Encumbrances, and other Liens permitted by the Credit
Agreement.
(d) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the exercise by Secured Party of the voting or
other rights, or the remedies in respect of the Pledged Collateral, provided for
in this Agreement (except as may be required in connection with a disposition of
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) Perfection. Subject to the Permitted Encumbrances, the pledge
----------
of the Pledged Collateral pursuant to this Agreement and delivery of the
certificates, if any, representing the Pledged Shares and the Pledged Debt
create a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Secured Obligations, except for the
Specified Pledged Collateral.
(f) Margin Regulations. The pledge of the Pledged Collateral
------------------
pursuant to this Agreement does not violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Pledged Collateral is accurate and complete in all material respects.
SECTION 5. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
---------------------------------------------------------
ETC.
---
Subject to Pledgor's rights under the Credit Agreement, Pledgor shall:
(a) not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral, (ii) create or suffer to exist any Lien upon or with respect to any
of the Pledged Collateral, except for the security interest under this
Agreement, or (iii) permit any subsidiary of Pledgor which is the issuer of
Pledged Shares to merge or consolidate unless all the outstanding capital stock
of the surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation; provided
--------
that if the surviving or resulting corporation upon any such merger or
consolidation involving an issuer of Pledged Shares which is a controlled
foreign corporation is a controlled foreign corporation, then Pledgor shall only
be required to pledge
5
<PAGE>
outstanding capital stock of such surviving or resulting corporation possessing
up to but not exceeding 66% of the voting power of all classes of capital stock
of such issuer entitled to vote; provided, further that in the event Pledgor
-------- -------
makes an Asset Sale permitted by the Credit Agreement and the assets subject to
such Asset Sale are Pledged Shares, Secured Party shall release the Pledged
Shares that are the subject of such Asset Sale to Pledgor free and clear of the
lien and security interest under this Agreement concurrently with the
consummation of such Asset Sale; provided, further that, as a condition
-------- -------
precedent to such release, Secured Party shall have received evidence
satisfactory to it that arrangements satisfactory to it have been made for
delivery to Secured Party of the Net Cash Proceeds of such Asset Sale;
(b) (i) cause each subsidiary of Pledgor which is the issuer of
Pledged Shares not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to Pledgor,
(ii) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of each
issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all shares of stock of any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of Pledgor; provided that notwithstanding
--------
anything contained in this subdivision (b), Pledgor shall only be required to
pledge the outstanding capital stock of a controlled foreign corporation
possessing up to but not exceeding 66% of the voting power of all classes of
capital stock of such controlled foreign corporation entitled to vote;
(c) (i) subject to the provisions of Section 3 pledge hereunder,
immediately upon their issuance, any and all instruments or other evidences of
additional indebtedness from time to time owed to Pledgor by any obligor on the
Pledged Debt, and (ii) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of indebtedness from time to time owed to
Pledgor by any Person that after the date of this Agreement becomes, as a result
of any occurrence, a direct or indirect Subsidiary of Pledgor.
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing loss of the Pledged Collateral in excess of $500,000 in
the aggregate;
(e) promptly deliver to Secured Party all written default, conversion
or other material notices received by it with respect to the Pledged Collateral
might reasonably be expected to have a Material Adverse Effect; and
(f) pay all taxes, assessments and governmental charges or levies
imposed upon, and all claims against, the Pledged Collateral, except to the
extent the validity thereof is being contested in good faith in accordance with
the Credit Agreement.
6
<PAGE>
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
Subject to the terms of the Credit Agreement and except as otherwise
provided herein,
(a) Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, as requested by
Secured Party, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will:
(i) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, as requested by Secured Party, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Pledgor's title to or Secured Party's security interest in all or any part of
the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
Pledgor, in substantially the form of Schedule III annexed hereto (a "PLEDGE
------------
AMENDMENT"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Pledgor hereby authorizes Secured Party to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Secured Party
shall for all purposes hereunder be considered Pledged Collateral; provided that
--------
the failure of Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Secured Party therein or otherwise
adversely affect the rights and remedies of Secured Party hereunder with respect
thereto.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing beyond any applicable notice, grace or cure period:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement; provided, however, that Pledgor shall not exercise
-------- -------
or refrain from exercising any such right if Secured Party shall have
notified Pledgor that, in Secured Party's judgment, such action would have
a material adverse effect on the value of the Pledged Collateral or any
part thereof; and provided, further, that Pledgor shall give Secured
-------- -------
Party at least five Business Days' prior written notice of the manner in
which it intends to exercise, or the reasons for refraining from
exercising, any such right. It is understood, however, that neither
7
<PAGE>
(1) the voting by Pledgor of any Pledged Shares for or Pledgor's consent to
the election of directors at a regularly scheduled annual or other meeting
of stockholders or with respect to incidental matters at any such meeting
nor (2) Pledgor's consent to or approval of any action otherwise permitted
under this Agreement and the Credit Agreement shall be deemed inconsistent
with the terms of this Agreement or the Credit Agreement within the meaning
of this Section 7(a)(i), and no notice of any such voting or consent need
be given to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all proceeds,
dividends and interest paid in respect of the Pledged Collateral; provided,
--------
however, that after an Event of Default beyond any notice, grace or cure
-------
period, any and all dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, shall be, and shall forthwith be delivered to Secured Party to
hold as, Pledged Collateral and shall, if received by Pledgor, be received
in trust for the benefit of Secured Party, be segregated from the other
property or funds of Pledgor and be forthwith delivered to Secured Party as
Pledged Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend payment
orders and other instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the voting and
other consensual rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends, principal or interest
payments which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default beyond any applicable notice, grace or cure period:
(i) upon written notice from Secured Party to Pledgor, all rights
of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall
cease, and all such rights shall thereupon become vested in Secured Party
who shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends and interest
payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 7(b) shall be received
8
<PAGE>
in trust for the benefit of Secured Party, shall be segregated from other
funds of Pledgor and shall forthwith be paid over to Secured Party as
Pledged Collateral in the same form as so received (with any necessary
indorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence and continuation of an Event of Default and which
proxy shall only terminate upon cure of the Event of Default or Defaults
triggering such proxy the payment in full of the Secured Obligations.
SECTION 8. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, upon the occurrence and during the continuation of an Event
of Default, from time to time in Secured Party's discretion to take any action
and to execute any instrument that Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including without limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
9
<PAGE>
SECTION 9. SECURED PARTY MAY PERFORM. If Pledgor fails to perform
-------------------------
any agreement contained herein within the time provided for performance
hereunder or under the Credit Agreement, Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of Secured Party incurred
in connection therewith shall be payable by Pledgor under Section 13(b).
SECTION 10. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Secured Party shall have no duty as to any Pledged Collateral, it being
understood that Secured Party shall have no responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Pledged Collateral, whether or not
Secured Party has or is deemed to have knowledge of such matters, (b) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Pledged Collateral) to preserve
rights against any parties with respect to any Pledged Collateral, (c) taking
any necessary steps to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral, or
(d) initiating any action to protect the Pledged Collateral against the
possibility of a decline in market value. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equal to that which Secured Party accords its own property consisting of
negotiable securities.
SECTION 11. REMEDIES.
--------
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "CODE")
(whether or not the Code applies to the affected Pledged Collateral), and
Secured Party may also in its sole discretion, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or at any
of Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral. To the
fullest extent permitted by law, Secured Party or any Lender may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of Lenders (but not any Lender or Lenders
in its or their respective individual capacities unless Requisite Lenders shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the
10
<PAGE>
property sold absolutely free from any claim or right on the part of Pledgor,
and Pledgor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the fullest extent
permitted by law, Pledgor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Pledged Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such sales
may be at prices and on terms less favorable than those obtainable through a
public sale without such restrictions (including, without limitation, a public
offering made pursuant to a registration statement under the Securities Act)
and, notwithstanding such circumstances, Pledgor agrees (i) that no such sale
shall be deemed not to have been made in a commercially reasonable manner by
reason of being conducted in such manner and under such circumstances, and (ii)
that Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securi ties Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may reasonably
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Secured Party in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.
11
<PAGE>
SECTION 12. APPLICATION OF PROCEEDS. All proceeds received by
-----------------------
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral shall be applied as set forth in
the Credit Agreement.
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of the Credit Agreement,
any Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise. Upon the
payment in full of all Secured Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen), the cancellation or termination of the Commitments and the cancellation
or expiration of all outstanding Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to Pledgor. Upon any such termination Secured Party will, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination and Pledgor shall be entitled to
the return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
12
<PAGE>
SECTION 15. SECURED PARTY AS COLLATERAL AGENT.
---------------------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders pursuant to the Credit Agreement. Secured Party shall be
obligated, and shall have the right hereunder, to make demands, to give notices,
to exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Pledged Collateral), solely in accordance with this Agreement and the Credit
Agreement.
(b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Credit Agreement. Written notice of resignation by
Collateral Agent pursuant to subsection 9.6 of the Credit Agreement shall also
constitute notice of resignation as Secured Party under this Agreement; removal
of Collateral Agent pursuant to subsection 9.6 of the Credit Agreement shall
also constitute removal as Secured Party under this Agreement; and appointment
of a successor Collateral Agent pursuant to subsection 9.6 of the Credit
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement. Upon the acceptance of any appointment as Collateral Agent
under subsection 9.6 of the Credit Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, all at Secured Party's sole cost and
expense, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Collateral Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be as set forth in the Credit Agreement.
SECTION 18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege
13
<PAGE>
hereunder shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 19. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 20. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in the
State of New York are used herein as therein defined.
SECTION 22. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 23. CONFLICTS. In the event of a conflict between the terms
---------
hereof and the terms of the Credit Agreement which cannot be read or interpreted
consistently therewith, the terms of the Credit Agreement shall govern and
control for any and all purposes. Pledgor shall be entitled to the benefits of
the Credit Agreement as if fully set forth herein.
[Remainder of page intentionally left blank]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AFC ENTERPRISES, INC.
By: /s/ Samuel N. Frankel
----------------------------------
Samuel N. Frankel
Executive Vice President
Notice Address:
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, GA 30328-5352
Tel: (770) 353-9500
Fax: (770) 353-3074
Attention: Gerald Wilkins
Chief Financial Officer
with copies to:
Samuel N. Frankel
General Counsel
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, GA 30328-5352
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Secured Party
By: /s/ Marybeth Ross
------------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, NY 10017
Attention: Marybeth Ross
Telephone: 212 856-3691
Facsimile: 212 856-3763
S-2
<PAGE>
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of May
__, 1997 between AFC Enterprises, Inc., as Pledgor, and Canadian Imperial Bank
of Commerce, as Secured Party.
PART A
------
<TABLE>
<CAPTION>
STOCK NUMBER OF
CLASS OF CERTIFICATE SHARES OR
STOCK ISSUER STOCK NOS. PAR VALUE VALUE OF CAPITAL
- ------------------- -------- ------------- --------- ----------------
<S> <C> <C> <C> <C>
AFC Properties, Inc. Common 1 none 500
</TABLE>
PART B
------
AMOUNT OF INDEBTEDNESS
DEBT ISSUER AS OF 4/29/97
----------- ----------------------
none
I-1
<PAGE>
SCHEDULE II
Attached to and forming a part of the Pledge Agreement dated as of May
21, 1997 between AFC Enterprises, Inc., as Pledgor, and Canadian Imperial Bank
of Commerce, as Secured Party.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF REPRESENTED HOLDERS
SHARES ISSUED BY PLEDGED OF SHARES
STOCK ISSUER AND OUTSTANDING SHARES NOT PLEDGED
- -------------------- --------------- ------------ -----------
<S> <C> <C> <C>
AFC Properties, Inc. 500 100% N/A
</TABLE>
II-1
<PAGE>
SCHEDULE III
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, _______, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated as of May __, 1997, between the undersigned and Canadian
Imperial Bank of Commerce, as Secured Party (the "PLEDGE AGREEMENT",
capitalized terms defined therein being used herein as therein defined), and
that the [Pledged Shares] [Pledged Debt] listed on this Pledge Amendment shall
be deemed to be part of the [Pledged Shares] [Pledged Debt] and shall become
part of the Pledged Collateral and shall secure all Secured Obligations.
AFC ENTERPRISES, INC.
By: ___________________________
Title:
Class of Stock Certi- Par Number of
Stock Issuer Stock ficate Nos. Value Shares
- ------------ -------- ------------ ----- ---------
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
III-1
<PAGE>
EXHIBIT 4.7
TRADEMARK COLLATERAL SECURITY AGREEMENT
This TRADEMARK COLLATERAL SECURITY AGREEMENT (this "AGREEMENT") is
dated as of May 21, 1997 and entered into by and between AFC ENTERPRISES, INC.,
(formerly known as Americas Favorite Chicken Company, Inc.) a Minnesota
corporation ("GRANTOR"), and CANADIAN IMPERIAL BANK OF COMMERCE, as
administrative agent for and representative of (in such capacity herein called
"SECURED PARTY") the financial institutions ("LENDERS") party to the Credit
Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, Lenders and Goldman Sachs Credit Partners L.P., as
syndication agent and arranging agent, have entered into a Credit Agreement
dated as of May 21, 1997 (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with Grantor pursuant to which Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Grantor.
B. Grantor may enter into one or more Interest Rate Agreements
(collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or more Lenders
(in such capacity, collectively, "INTEREST RATE EXCHANGERS"), and it is
desired that the obligations of Grantor under the Lender Interest Rate
Agreements, including without limitation the obligation of Grantor to make
payments thereunder in the event of early termination thereof, together with all
obligations of Grantor under the Credit Agreement and the other Loan Documents,
be secured hereunder.
C. Grantor owns and uses in its business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "TRADEMARKS").
D. Secured Party desires to become a secured creditor with respect to
all of the existing and future material Trademarks, all registrations that have
been or may hereafter be issued or applied for thereon in the United States
(except where the assignment of an intent to use application would result in an
abandonment of such right) and any state thereof (the "REGISTRATIONS"), all
common law and other rights in and to the Trademarks in the United States and
any state thereof and in foreign countries (the "TRADEMARK RIGHTS"), all
goodwill of Grantor's business symbolized by the Trademarks and associated
therewith, including without limitation the documents and things described in
Section 1(b) (the "ASSOCIATED GOODWILL"), and all proceeds, except as
otherwise provided in the Credit Agreement, of the Trademarks, the
1
<PAGE>
Registrations, the Trademark Rights and the Associated Goodwill, and Grantor
agrees to create a secured and protected interest in the Trademarks, the
Registrations, the Trademark Rights, the Associated Goodwill and all the
proceeds thereof as provided herein.
E. Pursuant to the Company Security Agreement, Grantor has granted to
Secured Party a lien on and security interest in, among other assets, the
machinery, equipment, formulations, manufacturing procedures, quality control
procedures and product specifications relating to the products and services sold
or delivered under or in connection with the Trademarks such that, upon the
occurrence and during the continuation of an Event of Default, Secured Party
would be able to exercise its remedies consistent with the Company Security
Agreement, this Agreement and applicable law to foreclose upon Grantor's
business and use the Trademarks, the Registrations and the Trademark Rights in
conjunction with the continued operation of such business, maintaining
substantially the same product and service specifications and quality as
maintained by Grantor, and benefit from the Associated Goodwill.
F. To permit Secured Party to operate Grantor's business without
interruption and to use the Trademarks, Registrations, Trademark Rights and
Associated Goodwill in conjunction therewith only upon the occurrence and during
the continuation of an Event of Default, Grantor is willing to appoint Secured
Party as Grantor's attorney-in-law and attorney-in-fact to execute documents and
take actions to assign Grantor's right, title and interest in the Collateral (as
hereinafter defined) to Secured Party.
G. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Lender
Interest Rate Agreements, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby agrees
with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured
-----------------
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) each of the Trademarks and rights and interests in Trademarks
which are presently, or in the future may be, owned, held (whether pursuant to a
license or otherwise) or used by Grantor, in whole or in part (including,
without limitation, the Trademarks specifically identified in Schedule A annexed
----------
hereto, as the same may be amended pursuant hereto from time to time), and
including all Trademark Rights with respect thereto and all foreign, federal and
state Registrations therefor heretofore or hereafter granted or applied for, the
right (but not the
2
<PAGE>
obligation) to register claims under any state or federal trademark law or
regulation or any trademark law or regulation of any foreign country and to
apply for, renew and extend the Trademarks, Registrations and Trademark Rights,
the right (but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of Grantor or in the name of Secured Party or otherwise
for past, present and future infringements of the Trademarks, Registrations or
Trademark Rights and all rights (but not obligations) corresponding thereto in
the United States and any foreign country, and the Associated Goodwill; it being
understood that the rights and interests included herein shall include, without
limitation, all rights and interests pursuant to licensing or other contracts in
favor of Grantor pertaining to the Trademarks, Registrations or Trademark Rights
presently or in the future owned or used by third parties but, in the case of
third parties which are not Affiliates of Grantor, only to the extent permitted
by such licensing or other contracts and, if not so permitted, only with the
consent of such third parties;
(b) the following documents and things in Grantor's possession, or
subject to Grantor's right to possession, related to (Y) the production, sale
and delivery by Grantor, or by any Affiliate, licensee or subcontractor of
Grantor, of products or services sold or delivered by or under the authority of
Grantor in connection with the Trademarks, Registrations or Trademark Rights
(which products and services shall, for purposes of this Agreement, be deemed to
include, without limitation, products and services sold or delivered pursuant to
merchandising operations utilizing any Trademarks, Registrations or Trademark
Rights); or (Z) any retail or other merchandising operations conducted under the
name of or in connection with the Trademarks, Registrations or Trademark Rights
by Grantor or any Affiliate, licensee or subcontractor of Grantor:
(i) all lists and ancillary documents that identify and
describe any of Grantor's customers, or those of its Affiliates, licensees
or subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including without
limitation any lists and ancillary documents that contain a customer's name
and address, the name and address of any of its warehouses, branches or
other places of business, the identity of the Person or Persons having the
principal responsibility on a customer's behalf for ordering products or
services of the kind supplied by Grantor, or the credit, payment, discount,
delivery or other sale terms applicable to such customer, together with
information setting forth the total purchases, by brand, product, service,
style, size or other criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or delivery
of products and services sold or delivered under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any and all
materials, components and services used in the production of products and
services sold or delivered under or in connection with the Trademarks or
Trademark Rights; and
3
<PAGE>
(iv) all documents constituting or concerning the then current
or proposed advertising and promotion by Grantor or its Affiliates,
licensees or subcontractors of products and services sold or delivered
under or in connection with the Trademarks or Trademark Rights including,
without limitation, all documents which reveal the media used or to be used
and the cost for all such advertising conducted within the described period
or planned for such products and services;
(c) all general intangibles relating to the Collateral;
(d) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party, any Lender or
any Interest Rate Exchanger as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
4
<PAGE>
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) except as provided in Section 13, Secured Party shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Secured Party be obligated to
perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Description of Collateral. A true and complete list of all
-------------------------
Registrations held (whether pursuant to a license or otherwise) or used by
Grantor, in whole or in part, as of the date of this Agreement is set forth in
Schedule A annexed hereto.
- ----------
(b) Validity and Enforceability of Collateral. Each of the
-----------------------------------------
Registrations is valid and subsisting and, to the best of Grantor's knowledge,
enforceable; each of the Trademarks and Trademark Rights is, to the best of
Grantor's knowledge, valid, subsisting and enforceable; and except as set forth
in Schedule 5.16 to the Credit Agreement Grantor is not aware of any pending or
threatened claim by any third party that any of the Trademarks, Registrations or
Trademark Rights is invalid or unenforceable or that the use of any of the
Trademarks, Registrations or Trademark Rights violates the rights of any third
person or of any basis for any such claim.
(c) Ownership of Collateral. Except as permitted under the Credit
-----------------------
Agreement and except for the security interest created by this Agreement,
Grantor owns the Collateral free and clear of any Lien. Except as disclosed in
the Credit Agreement and except such as may have been filed in favor of Secured
Party relating to this Agreement, (i) no effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any filing or recording office and (ii) no effective filing covering all
or any part of the Collateral is on file in the United States Patent and
Trademark Office.
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Collateral is, and has been for the six-month period preceding the date
hereof, located at Suite 1700, Six Concourse Parkway, Atlanta, Georgia 30328.
Grantor has not in the past four years done, and does not now do, business in
the United States under any other name (including any trade-name or fictitious
business name) except America's Favorite Chicken Company, Churchs Chicken,
Popeyes Chicken & Biscuits, Popeyes Famous Fried Chicken & Biscuits, AFC
International, Far West Products, Muchos, Chesapeake Bagel Bakery and Texas
Chicken.
5
<PAGE>
(e) Governmental Authorizations. To the best of the Grantor's
---------------------------
knowledge no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body in the United States
is required for either (i) the grant by Grantor of the security interest granted
hereby, (ii) the execution, delivery or performance of this Agreement by
Grantor, or (iii) the perfection of or the exercise by Secured Party of its
rights and remedies hereunder with respect to United States Trademarks,
Registrations and Trademark Rights (except as may have been taken by or at the
direction of Grantor and except for the filing of a financing statement
describing the Collateral with the Superior Court of any County within the State
of Georgia and the recording of this Agreement with the United States Patent and
Trademark Office).
(f) Perfection. This Agreement, together with the filing of a
----------
financing statement describing the Collateral with the Secretary of State of the
State of Georgia and the recording of this Agreement with the United States
Patent and Trademark Office, creates in the United States a valid, perfected and
first priority security interest in the Collateral, securing the payment of the
Secured Obligations.
(g) Previous Name. The Grantor owns and has full and valid
-------------
entitlement to each of the Registrations, Trademarks and Trademark Rights that
are or may be in the name of Americas Favorite Chicken Company, Inc., rather
than in the name of Grantor, and Grantor shall in the ordinary course of
business amend and correct such Registrations, Trademarks and Trademark Rights
so that they are in the correct and sole name of Grantor.
(h) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND
-----------------------------------------------------
TRADEMARK RIGHTS.
- ----------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may reasonably necessary, as requested by
Secured Party, in order to perfect and protect any security interest or
assignment granted or purported to be granted hereby or to enable Secured Party
to exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will:
(i) execute and file in the United States, or any state thereof, such financing
or continuation statements, amendments thereto, and such other instruments or
notices, as may be reasonably necessary, as requested by Secured Party, in order
to perfect and preserve the security interests granted or purported to be
granted hereby, (ii) use its reasonable best efforts (which shall not be deemed
in any case to involve expenditures by Grantor in excess of $1,000) to obtain
any necessary consents of third parties to the grant and perfection of a
security interest and assignment to Secured Party with respect to any
Collateral, (iv) at any reasonable time, upon reasonable prior notice from
Secured
6
<PAGE>
Party, exhibit the Collateral to and allow inspection of the Collateral by
Secured Party, or persons designated by Secured Party, and (v) at Secured
Party's request, appear in and defend any action or proceeding that may
materially affect Grantor's title to or Secured Party's security interest in all
or any part of the Collateral which is, individually or in the aggregate,
material to the business or operations of Grantor or any Subsidiary of Grantor
which licenses or uses such Collateral.
(b) To the fullest extent permitted by law, Grantor hereby authorizes
Secured Party to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of Grantor. To the fullest extent permitted by law, Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining Grantor's approval of or signature to such modification by
amending Schedule A annexed hereto to include reference to any right, title or
----------
interest in any existing Registration or any Registration acquired or developed
by Grantor after the execution hereof or to delete any reference to any right,
title or interest in any Registration in which Grantor no longer has or claims
any right, title or interest; provided Secured Party provides Grantor with five
--------
business days prior notice in writing of such modification during which period
Grantor shall inform Secured Party of any errors and inconsistencies.
(d) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(e) If Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, the provisions of this Agreement shall
automatically apply thereto. Grantor shall, promptly at the end of June and
December each year, notify Secured Party in writing of any rights to any new
Trademarks or Trademark Rights acquired by Grantor after the date hereof or
during the most recent calendar quarter, as applicable, and of any Registrations
issued or applications for Registration made after the date hereof or during the
most recent calendar quarter, as applicable. Concurrently with the filing of an
application for Registration for any United States Trademark, Grantor shall
execute, deliver and record in all places where this Agreement is recorded an
appropriate Trademark Collateral Security Agreement, substantially in the form
hereof, with appropriate insertions, or an amendment to this Agreement, in form
and substance satisfactory to Secured Party, pursuant to which Grantor shall
grant a security interest to the extent of its interest in such Registration as
provided herein to Secured Party unless so doing would, in the reasonable
judgment of Grantor, after due inquiry, result in the grant of a Registration in
the name of Secured Party, in which event Grantor shall give written notice to
Secured Party as soon as reasonably practicable and the filing shall instead be
undertaken as soon as practicable but in any case promptly following the grant
of the Registration.
7
<PAGE>
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any material and applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business or chief executive office or the office where
Grantor keeps its records regarding the Collateral;
(d) pay promptly before any penalty accrues thereon all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that Grantor shall in any event pay such taxes, assessments,
--------
charges, levies or claims not later than five days prior to the date of any
proposed and unstayed sale under any judgement, writ or warrant of attachment
entered or filed against Grantor or any of the Collateral as a result of the
failure to make such payment;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by subsection 8(a) of this
Agreement and the Credit Agreement; provided that Grantor may license Trademarks
--------
or Trademark Rights to its franchisees, manufacturers and suppliers in the
ordinary course of its business;
(f) except for Liens permitted under the Credit Agreement and except
for the security interest created by this Agreement, not create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral and
at all times keep at least one complete set of its records concerning
substantially all of the Trademarks, Registrations and Trademark Rights at its
chief executive office or principal place of business;
(h) not, without the prior written consent of Secured Party, which
shall not be unreasonably withheld, permit the inclusion in any contract to
which it becomes a party of any provision that could or might in any way impair
or prevent the creation of a security interest in, or the assignment of,
Grantor's rights and interests in any property included within the definitions
of any Trademarks, Registrations, Trademark Rights and Associated Goodwill
acquired under such contracts;
(i) take all reasonable steps necessary to protect the secrecy of all
trade secrets relating to the products and services sold or delivered under or
in connection with the Trademarks
8
<PAGE>
and Trademark Rights, including without limitation entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents;
(j) use proper statutory notice in connection with its use of each of
the Trademarks, Registrations and Trademark Rights;
(k) use consistent standards of high quality (consistent with
Grantor's past practices) in the manufacture, sale and delivery of products and
services sold or delivered under or in connection with the Trademarks,
Registrations and Trademark Rights, including, to the extent applicable, in the
operation and maintenance of its retail stores and other merchandising
operations; and
(l) upon any officer of Grantor obtaining knowledge thereof, promptly
notify Secured Party in writing of any event that may materially and adversely
affect the value of the Collateral or any portion thereof (which portion is
material to the business or operations of Grantor or any Subsidiary of Grantor
which licenses or uses such Collateral), the ability of Grantor or Secured Party
to dispose of the Collateral or any portion thereof (which portion is material
to the business or operations of Grantor or any Subsidiary of Grantor which
licenses or uses such Collateral), or the rights and remedies of Secured Party
in relation thereto, including without limitation the levy of any legal process
against the Collateral or any portion thereof (which portion is material to the
business or operations of Grantor or any Subsidiary of Grantor which licenses or
uses such Collateral).
SECTION 7. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
--------------------------------------------
otherwise provided in this Section 7, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor in respect of the
Collateral or any portion thereof. In connection with such collections, Grantor
may take (and, at Secured Party's direction, shall take) such action as Grantor
or Secured Party may deem necessary or advisable to obtain collection of such
amounts; provided, however, that Secured Party shall have the right at any time,
-------- -------
upon the occurrence and during the continuation of an Event of Default and upon
written notice to Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest created
hereby, and to direct such obligors to make payment of all such amounts directly
to Secured Party, and, upon such notification and at the expense of Grantor, to
enforce collection of any such amounts and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as Grantor
might have done. After receipt by Grantor of the notice from Secured Party
referred to in the proviso to the preceding sentence, (i) all amounts and
-------
proceeds (including checks and other instruments) received by Grantor in respect
of amounts due to Grantor in respect of the Collateral or any portion thereof
shall be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section
15, and (ii) Grantor shall not adjust, settle or compromise the amount or
9
<PAGE>
payment of any such amount or release wholly or partly any obligor with respect
thereto or allow any credit or discount thereon.
SECTION 8. TRADEMARK APPLICATIONS, LITIGATION AND DISPOSALS.
------------------------------------------------
(a) Grantor shall have the duty diligently, through counsel reasonably
acceptable to Secured Party, to prosecute any trademark application relating to
any of the Trademarks specifically identified in Schedule A annexed hereto that
----------
is pending as of the date of this Agreement, to make federal application on any
existing or future registerable but unregistered Trademarks, and to file and
prosecute opposition and cancellation proceedings, renew Registrations and do
any and all acts which are necessary or desirable to preserve and maintain all
rights in all Trademarks, Registrations and Trademark Rights. Any expenses
incurred in connection therewith shall be borne solely by Grantor. Grantor shall
not abandon any Trademark, Registration or Trademark Right. Notwithstanding
anything contained in this subsection 8(a), Grantor need not make federal
application with respect to or take other action to preserve or maintain, and
may abandon, sell, assign (by operation of law or otherwise), any Trademark,
Registration or Trademark Right which is not, individually or in the aggregate,
material to the business or operations of Grantor or any Subsidiary of Grantor
which licenses or uses such Collateral or to the extent consistent with past
practices and good business judgment.
(b) Except as provided in Section 8(d), Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at Grantor's expense, all reasonable and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(c) Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any material adverse
determination in, any proceeding (whether in the United States Patent and
Trademark Office or any federal, state, local or foreign court) described in
Section 8(a) or 8(b) or regarding Grantor's claim of ownership in or right to
use any of the Trademarks, Registrations or Trademark Rights, its right to
register the same, or its right to keep and maintain such Registration. Grantor
shall provide to Secured Party any information with respect thereto reasonably
requested by Secured Party.
(d) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Secured Party or otherwise, to enforce any Trademark, Registration,
Trademark Right, Associated Goodwill and any license thereunder, in which event
Grantor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party as provided in
10
<PAGE>
Section 16 in connection with the exercise of its rights under this Section 8.
To the extent that Secured Party shall elect not to bring suit to enforce any
Trademark, Registration, Trademark Right, Associated Goodwill or any license
thereunder as provided in this Section 8(d), Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement by others of any of the Trademarks, Registrations or
Trademark Rights which are, individually or in the aggregate, material to the
business or operations of Grantor or any Subsidiary of Grantor which licenses or
uses such Collateral, and for that purpose agrees to diligently maintain any
action, suit or proceeding against any Person so infringing necessary to prevent
such infringement.
SECTION 9. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent
--------------------------------
that Grantor is permitted to license the Collateral, Secured Party shall enter
into a non-disturbance agreement or other similar arrangement, at Grantor's
request and expense, with Grantor and any licensee of any Collateral permitted
hereunder in form and substance satisfactory to Secured Party pursuant to which
(a) Secured Party shall agree not to disturb or interfere with such licensee's
rights under its license agreement with Grantor so long as such licensee is not
in default thereunder and (b) such licensee shall acknowledge and agree that the
Collateral licensed to it is subject to the security interest created in favor
of Secured Party and the other terms of this Agreement.
SECTION 10. REASSIGNMENT OF COLLATERAL. If (a) an Event of Default
--------------------------
shall have occurred and, by reason of cure, waiver, modification, amendment or
otherwise, no longer be continuing, (b) no other Event of Default shall have
occurred and be continuing, (c) an assignment to Secured Party of any rights,
title and interests in and to the Collateral shall have been previously made and
shall have become absolute and effective pursuant to Section 11(f) or Section
14(b), and (d) the Secured Obligations shall not have become immediately due and
payable, upon the written request of Grantor and the written consent of Secured
Party, Secured Party shall promptly execute and deliver to Grantor such
assignments as may be necessary to reassign to Grantor any such rights, title
and interests as may have been assigned to Secured Party as aforesaid, subject
to any disposition thereof that may have been made by Secured Party pursuant
hereto; provided that, after giving effect to such reassignment, Secured Party's
--------
security interest granted pursuant to Section 1, as well as all other rights and
remedies of Secured Party granted hereunder, shall continue to be in full force
and effect; and provided, further that the rights, title and interests so
-------- -------
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Liens.
SECTION 11. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem reasonably
necessary to accomplish the purposes of this Agreement, including without
limitation:
11
<PAGE>
(a) upon the occurrence and during the continuation of an Event of
Default, to endorse Grantor's name on all applications, documents, papers and
instruments reasonably necessary for Secured Party in the use or maintenance of
the Collateral;
(b) upon the occurrence and during the continuation of an Event of
Default, to ask for, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) upon the occurrence and during the continuation of an Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above;
(d) upon the occurrence and during the continuation of an Event of
Default, to file any claims or take any action or institute any proceedings that
Secured Party may deem reasonably necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
provided, however, that unless an Event of Default shall have occurred and be
- -------- -------
continuing, Secured Party may not pay or discharge any such tax or Lien which is
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made; and
(f) upon the occurrence and during the continuation of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 14(b), (ii) subject to existing
grants or licenses, to grant or issue an exclusive or non-exclusive license to
the Collateral or any portion thereof to any Person, and (iii) subject to
existing grants or licenses, otherwise generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though Secured Party were the absolute owner thereof for
all purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
reasonably necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
SECTION 12. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein within the time provided for performance
hereunder, Secured Party
12
<PAGE>
may itself perform, or cause performance of, such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Grantor under
Section 16.
SECTION 13. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 14. REMEDIES. If any Event of Default shall have occurred
--------
and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iv) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same for the
purpose of taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) exercise any and all rights and remedies
of Grantor under or in connection with the contracts related to the Collateral
or otherwise in respect of the Collateral, including without limitation any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, such contracts, and (vi) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. To the fullest extent permitted by law, Secured Party
or any Lender may be the purchaser of any or all of the Collateral at any such
sale and Secured Party, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by
13
<PAGE>
Secured Party at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the fullest extent permitted
by law, Grantor hereby waives any claims against Secured Party arising by reason
of the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not offer
such Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Upon written demand from Secured Party, Grantor shall execute and
deliver to Secured Party an assignment or assignments of the Trademarks,
Registrations, Trademark Rights and the Associated Goodwill and such other
documents as are necessary or appropriate to carry out the intent and purposes
of this Agreement. Grantor agrees that such an assignment and/or recording
shall be applied to reduce the Secured Obligations outstanding only to the
extent that Secured Party (or any Lender) receives cash proceeds in respect of
the sale of, or other realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured Party,
Grantor shall make available to Secured Party, to the extent within Grantor's
power and authority, such personnel in Grantor's employ on the date of such
Event of Default as Secured Party may reasonably designate, by name, title or
job responsibility, to permit Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by
Grantor under or in connection with the Trademarks, Registrations and Trademark
Rights, such persons to be available to perform their prior functions on Secured
Party's behalf and to be compensated by Secured Party at Grantor's expense on a
per diem, pro-rata basis consistent with the salary and benefit structure
applicable to each as of the date of such Event of Default.
SECTION 15. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
14
<PAGE>
FIRST: To the payment of all costs and reasonable expenses of such
sale, collection or other realization, including all expenses, liabilities
and advances made or incurred by Secured Party in connection therewith,
including reasonable fees and expenses of its agents and counsel, and all
amounts for which Secured Party is entitled to indemnification hereunder
and all advances made by Secured Party hereunder for the account of
Grantor, and to the payment of all costs and expenses paid or incurred by
Secured Party in connection with the exercise of any right or remedy
hereunder, all in accordance with Section 16;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) in such order as Secured Party
shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 16. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or
15
<PAGE>
otherwise. Upon the payment in full of all Secured Obligations (other than
inchoate indemnification obligations with respect to claims, losses or
liabilities which have not yet arisen), the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, the security interest granted hereby shall terminate and all rights to
the Collateral shall revert to Grantor. Upon any such termination Secured Party
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 18. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders pursuant to the Credit Agreement. Secured Party shall be obligated,
and shall have the right hereunder, to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Collateral), solely in accordance with this Agreement and the Credit Agreement;
provided that Secured Party shall exercise, or refrain from exercising, any
- --------
remedies provided for in Section 14 in accordance with the instructions of (i)
Requisite Lenders or (ii) after payment in full of all Obligations under the
Loan Documents other than any Lender Interest Rate Agreements, the holders of a
majority in notional amount of all Lender Interest Rate Agreements (or, if a
Lender Interest Rate Agreement has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreements).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.6 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.6 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.6
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.6 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the
16
<PAGE>
provisions of this Agreement shall inure to its benefit as to any actions taken
or omitted to be taken by it under this Agreement while it was Secured Party
hereunder.
SECTION 19. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 20. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 21. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 22. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 23. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 24. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE
17
<PAGE>
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AFC ENTERPRISES, INC.
By: /s/ Samuel N. Frankel
---------------------------
Samuel N. Frankel
Chief Financial Officer
Notice Address:
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
Tel: (770) 353-9500
Fax: (770) 353-3074
Attention: Gerald Wilkins
Chief Financial Officer
with copies to:
Samuel N. Frankel, Esq.
Genral Counsel
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE,
as Secured Party
By: /s/ Marybeth Ross
---------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
Tel: 212 856-3691
Fax: 212 856-3763
S-2
<PAGE>
SCHEDULE A
TO
TRADEMARK COLLATERAL
SECURITY AGREEMENT
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
REGISTRATION
UNITED STATES TRADEMARK DESCRIPTION NUMBER STATUS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CHURCH'S (script) 815,076 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S (script) 815,614 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCHIE and design 924,852 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S FRIED CHICKEN & rainbow "C" design 1,052,133 Registered
- ----------------------------------------------------------------------------------------------------------
THE PEOPLE'S CHOICE 1,120,756 Registered
- ----------------------------------------------------------------------------------------------------------
MASTER MERCHANT & design 1,148,341 Registered
- ----------------------------------------------------------------------------------------------------------
MASTER MERCHANT 1,148,342 Registered
- ----------------------------------------------------------------------------------------------------------
THE PEOPLE'S CHOICE 1,162,109 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCHS FRIED CHICKEN & rainbow "C" design 1,195,826 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S FRIED CHICKEN 1,208,752 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S PECAN PIE & design 1,296,650 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S CHICKEN & BISCUITS w/design 1,311,632 Registered
- ----------------------------------------------------------------------------------------------------------
CRISPY NUGGETS 1,375,297 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S CHICKEN & design 1,471,070 Registered
- ----------------------------------------------------------------------------------------------------------
SPICY SPRINKLE 1,517,337 Registered
- ----------------------------------------------------------------------------------------------------------
G. W. JR'S (stylized) 1,124,771 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S G.W. JR'S & design 1,141,000 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S G.W. JR'S & design 1,143,746 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCH'S G.W. JR'S & design 1,110,150 Registered
- ----------------------------------------------------------------------------------------------------------
RON'S 1,138,992 Registered
- ----------------------------------------------------------------------------------------------------------
RON'S KRISPY FRIED CHICKEN 1,337,289 Registered
- ----------------------------------------------------------------------------------------------------------
JUST THE WAY YOU LIKE IT & design 1,716,123 Registered
- ----------------------------------------------------------------------------------------------------------
CENTSIBLES 1,722,829 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) 1,021,254 Registered
- ----------------------------------------------------------------------------------------------------------
</TABLE>
XIV-A-1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
REGISTRATION
UNITED STATES TRADEMARK DESCRIPTION NUMBER STATUS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
POPEYES (word mark) 1,030,944 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) 1,121,096 Registered
- ----------------------------------------------------------------------------------------------------------
CAJUN SPARKLE 1.371.596 Registered
- ----------------------------------------------------------------------------------------------------------
IT'S A GREAT NEW TASTE 1,530,215 Registered
- ----------------------------------------------------------------------------------------------------------
IT'S A GREAT NEW TASTE 1,146,772 Registered
- ----------------------------------------------------------------------------------------------------------
LOVE THAT CHICKEN 1,116,753 Registered
- ----------------------------------------------------------------------------------------------------------
LOVE THAT CHICKEN FROM POPEYES 1,257,959 Registered
- ----------------------------------------------------------------------------------------------------------
ORIGINAL NEW ORLEANS FLAVOR 1,481,990 Registered
- ----------------------------------------------------------------------------------------------------------
POP Advertising 1,118,920 Registered
- ----------------------------------------------------------------------------------------------------------
PAL-PAK 1,622,427 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (dancing letters) 1,267,567 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) 1,552,225 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN (word mark) 1,257,702 Registered
- ----------------------------------------------------------------------------------------------------------
CELEBRATE THE SEASONINGS (word mark) 1,820,292 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN & BISCUITS (old sign) 1,257,958 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN & BISCUITS (word mark) 1,378,568 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (dancing letters) 1,551,239 Registered
- ----------------------------------------------------------------------------------------------------------
RAGIN' CAJUN RICE 1,253,123 Registered
- ----------------------------------------------------------------------------------------------------------
SIGN DESIGN (w/o Color) 1,112,389 Registered
- ----------------------------------------------------------------------------------------------------------
SIGN DESIGN (w/o Color) 1,112,390 Registered
- ----------------------------------------------------------------------------------------------------------
SPECIALIZED FOOD EQUIPMENT CO. 1,150,679 Registered
- ----------------------------------------------------------------------------------------------------------
SIGN DESIGN (w/o Color) 1,107,576 Registered
- ----------------------------------------------------------------------------------------------------------
SIGN DESIGN (w/o Color) 1,107,575 Registered
- ----------------------------------------------------------------------------------------------------------
SUPER POPEYES 1,583,074 Registered
- ----------------------------------------------------------------------------------------------------------
LOVIN' THAT CHICKEN42 1,735,535 Registered
- ----------------------------------------------------------------------------------------------------------
STARS & SPICE 1,895,411 Registered
- ----------------------------------------------------------------------------------------------------------
(Popeyes) SUPER BOX 1,729,637 Registered
- ----------------------------------------------------------------------------------------------------------
CAJUN TAILGATORS 1,734,169 Registered
- ----------------------------------------------------------------------------------------------------------
JUST THE WAY YOU LIKE IT 1,716,123 Registered
- ----------------------------------------------------------------------------------------------------------
TENDER STRIPS 1,747,962 Registered
- ----------------------------------------------------------------------------------------------------------
SEAFOOD CELEBRAION 1,823,416 Registered
- ----------------------------------------------------------------------------------------------------------
</TABLE>
XIV-A-2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
REGISTRATION
UNITED STATES TRADEMARK DESCRIPTION NUMBER STATUS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
AFC (word mark) 2,010,357 Registered
- ----------------------------------------------------------------------------------------------------------
NEW ORLEANS SHRIMP SHOP 1,981,765 Registered
- ----------------------------------------------------------------------------------------------------------
VALUE LOVERS MENU 1,906,145 Registered
- ----------------------------------------------------------------------------------------------------------
DAY OF DREAMS (word mark) 75/213852* Pending
- ----------------------------------------------------------------------------------------------------------
GOTTA LOVE IT 75/213651* Pending
- ----------------------------------------------------------------------------------------------------------
CHURCHS CHICKEN (logo & doorway design) 1,918,270 Registered
- ----------------------------------------------------------------------------------------------------------
FAR WEST (word mark) 74/605,423* Pending
- ----------------------------------------------------------------------------------------------------------
VALUE LOVERS MENU & design 1,944,736 Registered
- ----------------------------------------------------------------------------------------------------------
TEXAS CHICKEN (word mark) 1,992,427 Registered
- ----------------------------------------------------------------------------------------------------------
TEXAS CHICKEN Logo 1,966,275 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES CHICKEN & BISCUITS (banner design) 74/551,044* Pending
- ----------------------------------------------------------------------------------------------------------
POPEYES CHICKEN & BISCUITS (banner design) 2,000,593 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES CHICKEN & BISCUITS (doorway design) 74/551,043* Pending
- ----------------------------------------------------------------------------------------------------------
POPEYES CHICKEN & BISCUITS (doorway design) 2,000,592 Registered
- ----------------------------------------------------------------------------------------------------------
THIS PLACE COOKS. 1,903,216 Registered
- ----------------------------------------------------------------------------------------------------------
AFC Logo 1,973,182 Registered
- ----------------------------------------------------------------------------------------------------------
CHURCHS CHICKEN Logo 1,915,306 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES Building Design 1,107,609 Registered
- ----------------------------------------------------------------------------------------------------------
PFC logo (design for manuals) 1,087,882 Registered
- ----------------------------------------------------------------------------------------------------------
ULTRAFRYER (word mark) 2,002,020 Registered
- ----------------------------------------------------------------------------------------------------------
MUCHO'S 1,981,047 Registered
- ----------------------------------------------------------------------------------------------------------
MUCHO'S Logo 1,982,487 Registered
- ----------------------------------------------------------------------------------------------------------
JALAPENO CHEESE BOMBERS 75/037,580* Pending
- ----------------------------------------------------------------------------------------------------------
POPEYES Building Design 1,210,081 Registered
- ----------------------------------------------------------------------------------------------------------
FRANCHISOR OF CHOICE 74/725,852* Pending
- ----------------------------------------------------------------------------------------------------------
NEW AGE OF OPPORTUNITY 2,017,585 Registered
- ----------------------------------------------------------------------------------------------------------
SWEET HEAT 1,563,625 Registered
- ----------------------------------------------------------------------------------------------------------
NEW AGE OF OPPORTUNITY logo 2,017,586 Registered
- ----------------------------------------------------------------------------------------------------------
JAM SLAMMER (word mark) 75/129,887* Pending
- ----------------------------------------------------------------------------------------------------------
AFC ENTERPRISES & Design 75/160,522* Pending
- ----------------------------------------------------------------------------------------------------------
</TABLE>
XIV-A-3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
REGISTRATION
UNITED STATES TRADEMARK DESCRIPTION NUMBER STATUS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
AFC ENTERPRISES (word mark) 75/167,395* Pending
- ----------------------------------------------------------------------------------------------------------
StreetsMart Pending
- ----------------------------------------------------------------------------------------------------------
POPEYE'S FAMOUS FRIED CHICKEN & BISCUITS 137,714 Registered (NH)
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN 22 Registered (NJ)
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN & BISCUITS 19,483 Registered (PA)
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN Registered
(TN)
- ----------------------------------------------------------------------------------------------------------
POPEYE'S FAMOUS FRIED CHICKEN & BISCUITS 74,554 Registered
(VT)
- ----------------------------------------------------------------------------------------------------------
POPEYES FAMOUS FRIED CHICKEN 247,219 Registered
(WV)
- ----------------------------------------------------------------------------------------------------------
POPEYE'S FAMOUS FRIED CHICKEN 26,055 Registered
(WI)
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) 76/3266 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) 76/3300 Registered
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) Pending
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) Pending
- ----------------------------------------------------------------------------------------------------------
POPEYES (word mark) Pending
- ----------------------------------------------------------------------------------------------------------
CHESAPEAKE BAGEL BAKERY 1,386,980 Registered
- ----------------------------------------------------------------------------------------------------------
Miscellaneous Design 1,427,545 Registered
- ----------------------------------------------------------------------------------------------------------
ULTIMATE BAGEL KNOT Pending
- ----------------------------------------------------------------------------------------------------------
CHESAPEAKE BAGEL BAKERY Pending
- ----------------------------------------------------------------------------------------------------------
CHESAPEAKE BAGEL BAKERY & design Pending
- ----------------------------------------------------------------------------------------------------------
CHESAPEAKE BAGEL BREW & design Pending
==========================================================================================================
*Application Number
</TABLE>
XIV-A-4
<PAGE>
TRADEMARK APPLICATIONS
TRADEMARK
DESCRIPTION APPLICATION NO. STATUS
- ----------- --------------- ------
XIV-A-5
<PAGE>
EXHIBIT 4.8
PATENT AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
This PATENT AND COPYRIGHT COLLATERAL SECURITY AGREEMENT (this
-------------------------------------------------------
"AGREEMENT") is dated as of May 21, 1997 and entered into by and between AFC
ENTERPRISES, INC., a Minnesota corporation ("GRANTOR"), and CANADIAN IMPERIAL
BANK OF COMMERCE, as administrative agent for and representative of (in such
capacity herein called "SECURED PARTY") the financial institutions
("LENDERS") party to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, as administrative agent for Lenders, Lenders and
Goldman Sachs Credit Partners L.P., as syndication agent and arranging agent,
have entered into a Credit Agreement dated as of May 21, 1997 (said Credit
Agreement, as it may hereafter be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT", the terms defined therein and
not otherwise defined herein being used herein as therein defined) with Grantor
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Grantor.
B. Grantor may enter into one or more Interest Rate Agreements
(collectively, the "LENDER INTEREST RATE AGREEMENTS") with one or more Lenders
and/or its Affiliates (in such capacity, collectively, "INTEREST RATE
EXCHANGERS"), and it is desired that the obligations of Grantor under the
Lender Interest Rate Agreements, including without limitation the obligation of
Grantor to make payments thereunder in the event of early termination thereof,
together with all obligations of Grantor under the Credit Agreement and the
other Loan Documents, be secured hereunder.
C. Grantor has and may in the future have rights, title and
interests in and to various Patents and owns and uses in its business and will
in the future, adopt and so use various published and unpublished works of
authorship including, without limitation, computer programs, computer data bases
and other computer software (collectively, the "COPYRIGHTS")and other related
Collateral (as such terms are hereinafter defined).
D. Secured Party, for its benefit and the ratable benefit of
Lenders, desires to become a secured creditor with respect to and, under the
circumstances described herein, an assignee of all of the existing and future
Patents, Copyrights, all copyright registrations issued to Grantor and
applications for copyright registration which have heretofore been or may
hereafter be issued to Grantor thereon or applied for with the United States
Copyright Office and throughout the world (the "REGISTRATIONS"), all common
law and other rights in and to the Copyrights throughout the world, including
all copyright licenses (but with respect to such copyright licenses, only to the
extent permitted by such licensing arrangements) (the "COPYRIGHT RIGHTS") and
all proceeds of the Copyrights, the Registrations and the Copyright Rights, and
1
<PAGE>
Grantor agrees to create a secured and protected interest in the Copyrights, the
Registrations, the Copyright Rights and all the proceeds thereof as provided
herein.
E. Grantor is willing to grant to Secured Party a security interest
in all such Collateral for the purpose of securing the complete and timely
satisfaction of all of the Secured Obligations (as hereinafter defined) and,
effective upon the occurrence and during the continuation of an Event of
Default, to appoint Secured Party as Grantor's attorney-in-law and attorney-in-
fact to execute documents and take actions to assign Grantor's right, title and
interest in all such Collateral to Secured Party.
F. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Lender
Interest Rate Agreements, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby agrees
with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured
-----------------
Party, and hereby grants to Secured Party a first priority security interest in,
all of Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) all patents and patent applications and rights and interests in
patents and patent applications under any domestic law that are presently, or in
the future may be, owned by Grantor and all patents and patent applications and
rights and interests in patents and patent applications under any domestic law
that are presently, or in the future may be, held or used by Grantor in whole or
in part (including, without limitation, the patents and patent applications
listed in Schedule A annexed hereto, as the same may be amended pursuant hereto
----------
from time to time), all rights (but not obligations) corresponding thereto
(including without limitation the right (but not the obligation) to sue for
past, present and future infringements in the name of Grantor or in the name of
Secured Party or otherwise), and all re-issues, divisions, continuations,
renewals, extensions and continuations-in-part thereof (all of the foregoing
being collectively referred to as the "PATENTS"); it being understood that the
rights and interest assigned hereby shall include, without limitation, all
rights and interests pursuant to licensing or other contracts, including without
limitation those licensing agreements listed on Schedule B annexed hereto, in
----------
favor of Grantor pertaining to patent applications and patents presently or in
the future owned or used by third parties but, in the case of third parties
which are not Affiliates of Grantor, only to the extent permitted by such
licensing or other contracts and, if not so permitted, only with the consent of
such third parties;
2
<PAGE>
(b) each of the Copyrights, rights, titles and interests in and to the
Copyrights and works protectable by copyright, which are presently, or in the
future may be, owned, created, authored (as a work for hire), acquired or used
(whether pursuant to a license or otherwise) by Grantor, in whole or in part,
and all Copyright Rights with respect thereto and all Registrations therefor,
heretofore or hereafter granted or applied for, and all renewals and extensions
thereof, throughout the world, including all proceeds thereof (such as, by way
of example and not by limitation, license royalties and proceeds of infringement
suits), the right (but not the obligation) to renew and extend such Copyrights,
Registrations and Copyright Rights and to register works protectable by
copyright and the right (but not the obligation) to sue or bring opposition or
cancellation proceedings in the name of Grantor or in the name of Secured Party
or Lenders for past, present and future infringements of the Copyrights and
Copyright Rights, including, without limitation:
(i) all of Grantor's right, title and interest, to the extent that it
has the same, in and to all copyrights or rights or interests in copyrights
registered or recorded in the United States Copyright Office, including,
without limitation, the Registrations listed on Schedule C attached hereto,
----------
as the same may be amended pursuant hereto from time to time;
(ii) all of Grantor's right, title and interest, to the extent that it
has the same, in and to all renewals and extensions of any such copyrights
that may be secured under the law now or hereafter in force and effect; and
(iii) all of Grantor's right, title and interest, to the extent
that it has the same, to make and exploit all derivative works based on or
adopted from all works covered by the copyrights referred to herein;
it being understood and agreed that the Collateral assigned hereby shall
include, without limita tion, rights and interests pursuant to licensing or
other contracts in favor of Grantor pertaining to copyrights and works
protectable by copyright presently or in the future owned or used by third-
parties, but in the case of third-parties which are not Affiliates of Grantor
only to the extent permitted by such licensing or other contracts and, if not so
permitted, only with the consent of such third-parties;
(c) all general intangibles relating to the Patents and Copyrights;
(d) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured
3
<PAGE>
Party or any Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral. For purposes of this Agreement, the term
"PROCEEDS" includes whatever is receivable or received when Collateral or
proceeds are sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party, any Lender or
any Interest Rate Exchanger as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) except as provided in Section 13, Secured Party shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Secured Party be obligated to
perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Description of Collateral. A true and complete list of all
-------------------------
Patents owned, held (whether pursuant to a license or otherwise) or used by
Grantor, in whole or in part, as of the date of this Agreement is set forth in
Schedule A annexed hereto and a true and complete list
- ----------
4
<PAGE>
of all Registrations and applications for Registrations owned, held (whether
pursuant to a license or otherwise), or used by Grantor, in whole or in part, as
of the date of this Agreement is set forth in Schedule C annexed hereto.
----------
(b) Validity and Enforceability of Collateral. Each of the Patents,
-----------------------------------------
the Copyrights and Copyright Rights are subsisting and, to the best of Grantor's
knowledge, valid and enforceable, and except as set forth in Schedule 5.16 of
the Credit Agreement, Grantor is not aware of any pending or threatened claim by
any third party that any of the Patents or Registrations are invalid or
unenforceable or that the use of any of the Patents, the Copyrights and
Copyright Rights violates the rights of any third person or of any basis for any
such claim.
(c) Subsistence of Copyrights. Each of the Copyrights and Copyright
-------------------------
Rights are subsisting and none of the Copyrights, Registrations or Copyright
Rights have been adjudged invalid or unenforceable.
(d) Ownership of Collateral. Except as permitted under the Credit
-----------------------
Agreement and except for the security interest created by this Agreement,
Grantor owns the Collateral free and clear of any Lien. Except as disclosed in
the Credit Agreement and except such as may have been filed in favor of Secured
Party relating to this Agreement, (i) no effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any filing or recording office and (ii) no effective filing covering all
or any part of the Collateral is on file in the United States Patent and
Trademark Office or in the United States Copyright Office.
(e) No Adverse Claim. Except as set forth in Schedule 5.16 of the
----------------
Credit Agreement, no claim known to Grantor has been made that the works of any
of the Copyrights, Registrations or Copyright Rights does or may violate the
rights of any third person.
(f) Further Assurance. Grantor has taken and will continue to take
-----------------
all reasonable steps to protect the secrecy of all trade secrets relating to
unpublished Collateral.
(g) No Conflict. The execution, delivery and performance of this
-----------
Agreement by Grantor does not conflict with, result in a breach of, constitute
(with due notice or lapse of time or both) a default under, or require the
limitation of or consent under, any Contractual Obligation of Grantor,
including, without limitation, any agreement pursuant to which Grantor licenses
or has the right to use any Collateral.
(h) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Collateral is, and has been for the six-month period preceding the date
hereof, located at Suite 1700, Six Concourse Parkway, Atlanta, Georgia, 30328.
Grantor has not in the past four years done, and does not now do, business in
the United States under any other name (including any trade-name or fictitious
business name) except America's Favorite Chicken Company, Popeyes Chicken &
Biscuits,
5
<PAGE>
Popeyes Famous Fried Chicken & Biscuits, AFC International, Far West Products,
Muchos, Chesapeake Bagel Bakery and Texas Chicken.
(i) Governmental Authorizations. To the best of the Grantor's
---------------------------
knowledge no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for
either (i) the grant by Grantor of the security interest granted hereby, (ii)
the execution, delivery or performance of this Agreement by Grantor, or (iii)
the perfection of or the exercise by Secured Party of its rights and remedies
hereunder (except as may have been taken by or at the direction of Grantor and
except for the filing of a financing statement describing the Collateral with
the Superior Court of any County within the State of Georgia and the recording
of this Agreement with the United States Patent and Trademark Office and the
United States Copyright Office).
(j) Perfection. This Agreement, together with the filing of a
----------
financing statement describing the Collateral with the Secretary of State of the
State of Georgia and the recording of this Agreement with the United States
Patent and Trademark Office, and the United States Copyright Office creates a
valid, perfected and first priority security interest in the Collateral,
securing the payment of the Secured Obligations.
(k) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. INSPECTION RIGHTS. Grantor hereby grants to Secured Party
-----------------
on behalf of Lenders and any and all of its employees, representatives and
agents the right to visit Grantor's and any of its Affiliate's or
subcontractor's places of business during ordinary business hours that are used
in connection with the production, sale or delivery of products or services
utilizing any of the Copyrights, Registrations or Copyright Rights (or which
were so utilized during the prior six month period), and to inspect the records
relating thereto upon reasonable notice to Grantor and as often as may be
reasonably requested.
SECTION 6. FURTHER ASSURANCES; NEW PATENTS, COPYRIGHT AND
----------------------------------------------
APPLICATIONS.
- ------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be reasonably necessary, as requested by
Secured Party, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, as requested by
Secured Party, in order to perfect and preserve the security interests granted
or purported to be granted hereby, (ii) use its reasonable best efforts (which
shall not be deemed in any case to involve expenditures by Grantor in excess of
$1,000) to obtain any necessary consents of third parties to the grant and
perfection of a security interest
6
<PAGE>
and assignment to Secured Party with respect to any Collateral, (iii) at any
reasonable time, upon reasonable prior notice by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (v) at Secured Party's request, appear
in and defend any action or proceeding that may affect Grantor's title to or
Secured Party's security interest in all or any part of the Collateral which is,
individually or in the aggregate, material to the business or operations of
Grantor or any Subsidiary of Grantor which licenses or uses such Collateral.
(b) To the fullest extent permitted by law, Grantor hereby authorizes
Secured Party to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of Grantor. To the fullest extent permitted by law, Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining Grantor's approval of or signature to such modification by
amending Schedule A or Schedule C, as the case may be, annexed hereto to include
---------- ----------
reference to any right, title or interest in (x) any existing Patent, Copyright,
Registration or Copyright Rights or (y) any Patent, Copyright, Registration or
Copyright Rights acquired or developed by Grantor after the execution hereof or
to delete any reference to any right, title or interest in any Patent,
Copyright, Registration or Copyright Rights in which Grantor no longer has or
claims any right, title or interest; provided Secured Party provides Grantor
--------
with five business days prior notice in writing of such modification during
which period Grantor shall inform Secured Party of any errors or
inconsistencies.
(d) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(e) If Grantor shall hereafter obtain rights to any patentable
inventions, or become entitled to the benefit of any patent application or
patent or any reissue, division, continuation, renewal, extension, or
continuation-in-part of any Patent or any improvement on any Patent, or any new
works protectable by copyright, or become entitled to the benefit of any
Registration, application for Registration or renewals or extension of any
Copyright, the provisions of this Agreement shall automatically apply thereto.
Grantor shall, promptly at the end of June and December each year, notify
Secured Party in writing of any of the foregoing rights or benefits acquired by
Grantor after the date hereof or during the most recent calendar quarter, as
applicable. Concurrently with the filing of an application for any Patent or
Registration for any Copyright, Grantor shall execute, deliver and record in all
places where this Agreement is recorded an appropriate Patent and Copyright
Collateral Security Agreement, substantially in the form hereof, with
appropriate insertions, or an amendment to this Agreement, in form and substance
satisfactory to Secured Party, pursuant to which Grantor shall grant a security
interest to the extent of its interest in such Patent or Registration as
provided herein to
7
<PAGE>
Secured Party unless so doing would, in the reasonable judgment of Grantor,
after due inquiry, result in the grant of a patent in the name of Secured Party,
in which event Grantor shall give written notice to Secured Party as soon as
reasonably practicable and the filing shall instead be undertaken as soon as
practicable but in any case promptly following the grant of the Patent or
Registration.
SECTION 7. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any material and applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business or chief executive office or the office where
Grantor keeps its records regarding the Collateral;
(d) pay promptly before any penalty accrues thereon all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being contested in good
faith; provided that Grantor shall in any event pay such taxes, assessments,
--------
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against Grantor or any of the Collateral as a result of the failure to
make such payment;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
provided that Grantor may license Copyrights and Patents to is franchisees,
- --------
manufacturers and suppliers in the ordinary course of its business;
(f) except for Liens permitted under the Credit Agreement and except
for the security interest created by this Agreement, not create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral and
at all times keep at least one complete set of its records concerning
substantially all of the Patents, Copyrights, Copyright Rights and Registrations
at its chief executive office or principal place of business;
(h) not, without the prior written consent of Secured Party, which
shall not be unreasonably withheld, permit the inclusion in any contract to
which it becomes a party of any provision that could or might in any way impair
or prevent the creation of a security interest in,
8
<PAGE>
or the assignment of, Grantor's rights and interests in any property included
within the definition of any Patents, Copyrights, Copyright Rights and
Registrations acquired under such contracts;
(i) take all reasonable steps necessary to protect the secrecy of all
trade secrets relating to the products and services sold or delivered under or
in connection with the Patents, Copyrights, Copyright Rights and Registrations,
including without limitation entering into confidentiality agreements with
employees and labeling and restricting access to secret information and
documents;
(j) use proper statutory notice in connection with its use of each of
the Patents, Copyrights, Copy Rights and Registrations or copies of phonorecords
of any of the works which are the subject of the Collateral;
(k) use consistent standards of high quality (consistent with
Grantor's past practices) in the manufacture, sale and delivery of products and
services sold or delivered under or in connection with any of the Patents,
Copyrights, Copyright Rights and Registrations including, to the extent
applicable, in the operation and maintenance of its retail stores and other
merchandising operations; and
(l) upon any officer of Grantor obtaining knowledge thereof, promptly
notify Secured Party in writing of any event that may materially and adversely
affect the value of the Collateral or any portion thereof (which portion is
material to the business or operations of Grantor or any Subsidiary of Grantor
which licenses or uses such Collateral), the ability of Grantor or Secured Party
to dispose of the Collateral or any portion thereof (which portion is material
to the business or operations of Grantor or any Subsidiary of Grantor which
licenses or uses such Collateral), or the rights and remedies of Secured Party
in relation thereto, including without limitation the levy of any legal process
against the Collateral or any portion thereof (which portion is material to the
business or operations of Grantor or any Subsidiary of Grantor which licenses or
uses such Collateral).
SECTION 8. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
--------------------------------------------
otherwise provided in this Section 8, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor in respect of the
Collateral or any portion thereof. In connection with such collections, Grantor
may take (and, at Secured Party's direction, shall take) such action as Grantor
or Secured Party may deem necessary or advisable to obtain collection of such
amounts; provided, however, that Secured Party shall have the right at any time,
-------- -------
upon the occurrence and during the continuation of an Event of Default and upon
written notice to Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest created
hereby, and to direct such obligors to make payment of all such amounts directly
to Secured Party, and, upon such notification and at the expense of Grantor, to
enforce collection of any such amounts and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as Grantor
might have done. After receipt by Grantor of the notice from Secured Party
referred to in the proviso to the preceding sentence, (i) all amounts and
-------
proceeds (including checks and other instruments) received by
9
<PAGE>
Grantor in respect of amounts due to Grantor in respect of the Collateral or any
portion thereof shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over or delivered to Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section 18, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any such amount or release wholly or partly
any obligor with respect thereto or allow any credit or discount thereon.
SECTION 9. PATENT APPLICATIONS, COPYRIGHT REGISTRATION, RENEWAL AND
--------------------------------------------------------
LITIGATION AND DISPOSAL.
-----------------------
(a) Grantor shall have the duty diligently, through counsel reasonably
acceptable to Secured Party, to (x) prosecute any patent application relating to
any of the Patents specifically identified in Schedule A annexed hereto that is
----------
pending as of the date of this Agreement, and to make application on any
existing or future unpatented but patentable invention, and (y) to make any
application for Registration on an existing or future unregistered but
copyrightable works (except for works of nominal commercial value) and (z) to do
any and all acts which are necessary or desirable to preserve and maintain all
rights in all Patents and Registration. Any expenses incurred in connection
therewith shall be borne solely by Grantor. Grantor shall not abandon any right
to file a patent application or any pending patent or registration application
or any Patent or Copyright without the prior written consent of Secured Party.
Notwithstanding anything contained in this subsection 9(a), Grantor need not
make federal application with respect to or take other action to preserve or
maintain, and may abandon, sell, assign (by operation of law or otherwise), any
right to file a patent or registration application, any pending patent or
registration applications or any Patents or Copyrights which are not,
individually or in the aggregate, material to the business or operations of
Grantor or any Subsidiary of Grantor which licenses or uses such Patents or
Copyrights or to the extent consistent with past practices and good business
judgment.
(b) Except as provided in Section 9(d), Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, or other damage or reexamination or reissue
proceedings as are in its reasonable business judgment necessary to protect the
Collateral. Secured Party shall provide, at Grantor's expense, all reason able
and necessary cooperation in connection with any such suit, proceeding or action
including, without limitation, joining as a necessary party.
(c) Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any adverse determination in,
any proceeding (whether in the United States Patent and Trademark Office or in
the United States Copyright Office or any federal, state or local court)
described in Section 9(a) or 9(b) or regarding Grantor's interests in any
Collateral. Grantor shall provide to Secured Party any information with respect
thereto reasonably requested by Secured Party.
10
<PAGE>
(d) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Secured Party or otherwise, to enforce any Patent, Registration,
Copyright or Copyright Rights and any license thereunder, in which event Grantor
shall, at the request of Secured Party, do any and all lawful acts and execute
any and all documents required by Secured Party in aid of such enforcement and
Grantor shall promptly, upon demand, reimburse and indemnify Secured Party as
provided in Section 17 in connection with the exercise of its rights under this
Section 8. To the extent that Secured Party shall elect not to bring suit to
enforce any Patent, Registration, Copyright or Copyright Rights or any license
thereunder as provided in this Section 9(d), Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement by others of any of the Patents, Registrations,
Copyrights or Copyright Rights which are, individually or in the aggregate,
material to the business or operations of Grantor or any Subsidiary of Grantor
which licenses or uses such Patents, Registrations, Copyrights or Copyright
Rights, and for that purpose agrees to diligently maintain any action, suit or
proceeding against any Person so infringing necessary to prevent such
infringement.
SECTION 10. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent
--------------------------------
that Grantor is permitted to license the Collateral, Secured Party shall enter
into a non-disturbance agreement or other similar arrangement, at Grantor's
request and expense, with Grantor and any licensee of any Collateral permitted
hereunder in form and substance satisfactory to Secured Party pursuant to which
(a) Secured Party shall agree not to disturb or interfere with such licensee's
rights under its license agreement with Grantor so long as such licensee is not
in default thereunder and (b) such licensee shall acknowledge and agree that the
Collateral licensed to it is subject to the security interest created in favor
of Secured Party and the other terms of this Agreement.
SECTION 11. REASSIGNMENT OF COLLATERAL. If (a) an Event of Default
--------------------------
shall have occurred and, by reason of cure, waiver, modification, amendment or
otherwise, no longer be continuing, (b) no other Event of Default shall have
occurred and be continuing, (c) an assignment to Secured Party of any rights,
title and interests in and to the Collateral shall have been previously made and
shall have become absolute and effective pursuant to Section 12(f) or Section
16(b), and (d) the Secured Obligations shall not have become immediately due and
payable, upon the written request of Grantor and the written consent of Secured
Party, Secured Party shall promptly execute and deliver to Grantor such
assignments as may be necessary to reassign to Grantor any such rights, title
and interests as may have been assigned to Secured Party as aforesaid, subject
to any disposition thereof that may have been made by Secured Party pursuant
hereto; provided that, after giving effect to such reassignment, Secured Party's
--------
security interest granted pursuant to Section 1, as well as all other rights and
remedies of Secured Party granted hereunder, shall continue to be in full force
and effect; and provided, further that the rights, title and interests so
-------- -------
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Liens.
11
<PAGE>
SECTION 12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) upon the occurrence and during the continuation of an Event of
Default, to endorse Grantor's name on all applications, documents, papers and
instruments necessary for Secured Party in the use or maintenance of the
Collateral;
(b) upon the occurrence and during the continuation of an Event of
Default,to ask for, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) upon the occurrence and during the continuation of an Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above;
(d) upon the occurrence and during the continuation of an Event of
Default, to file any claims or take any action or institute any proceedings that
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
provided, however, that unless an Event of Default shall have occurred and be
- -------- -------
continuing, Secured Party may not pay or discharge any such tax or Lien which is
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made; and
(f) upon the occurrence and during the continuation of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 16(b), (ii) to grant or issue an
exclusive or non-exclusive license to the Collateral or any portion thereof to
any Person, and (iii) otherwise generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral
12
<PAGE>
and Secured Party's security interest therein in order to effect the intent of
this Agreement, all as fully and effectively as Grantor might do.
SECTION 13. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein within the time provided for performance
hereunder, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Grantor under Section 16.
SECTION 14. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 15. COPYRIGHT LITIGATION AFTER DEFAULT. Upon the occurrence
----------------------------------
and during the continuance of an Event of Default, Secured Party shall have the
right but shall in no way be obligated to bring suit in the name of Grantor,
Secured Party or Lenders to enforce any Copyright, Registration, Copyright Right
and any license thereunder, in which event Grantor shall, at the request of
Secured Party, do any and all lawful acts and execute any and all documents
required by Secured Party in aid of such enforcement and Grantor shall promptly,
upon demand, reimburse and indemnify Secured Party and any other Indemnitee as
provided in Section 18 in connection with the exercise of their rights under
this Section 15. To the extent that Grantor shall elect not to bring suit to
enforce any Copyright, Registration, Copyright Rights or any license thereunder,
Grantor agrees to use all reasonable measures, whether by action, suit,
proceeding or otherwise, to prevent the infringement of any of the Copyrights,
Registrations or Copyright Rights by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
SECTION 16. REMEDIES. If any Event of Default shall have occurred
--------
and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to the
disposition
13
<PAGE>
of the Collateral, store the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent Secured Party deems appropriate, (iv)
take possession of Grantor's premises or place custodians in exclusive control
thereof, remain on such premises and use the same for the purpose of taking any
actions described in the preceding clause (iii) and collecting any Secured
Obligation, (v) exercise any and all rights and remedies of Grantor under or in
connection with the contracts related to the Collateral or otherwise in respect
of the Collateral, including without limitation any and all rights of Grantor to
demand or otherwise require payment of any amount under, or performance of any
provision of, such contracts, and (vi) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable. To
the fullest extent permitted by law, Secured Party or any Lender may be the
purchaser of any or all of the Collateral at any such sale and Secured Party, as
agent for and representative of Lenders (but not any Lender or Lenders in its or
their respective individual capacities unless Requisite Lenders shall otherwise
agree in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Grantor, and Grantor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the fullest extent permitted by law, Grantor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Secured Obligations, Grantor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(b) Upon written demand from Secured Party, Grantor shall execute and
deliver to Secured Party an assignment or assignments of the Patents,
Copyrights, Registrations and Copyright Rights and such other documents as are
necessary or appropriate to carry out the intent and purposes of this Agreement.
Grantor agrees that such an assignment and/or recording shall be applied to
reduce the Secured Obligations outstanding only to the extent that Secured Party
(or any Lender) receives cash proceeds in respect of the sale of, or other
realization upon, the Collateral.
14
<PAGE>
(c) Within five Business Days of written notice from Secured Party,
Grantor shall make available to Secured Party, to the extent within Grantor's
power and authority, such personnel in Grantor's employ on the date of the Event
of Default as Secured Party may reasonably designate, by name, title or job
responsibility, to permit Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by
Grantor under or in connection with the Copyrights, Registrations and
Copyrights, such persons to be available to perform their prior functions on
Secured Party's behalf and to be compensated by Secured Party at Grantor's
expense on a per diem, pro-rata basis consistent with the salary and benefit
structure applicable to each as of the date of such Event of Default.
SECTION 17. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including all expenses, liabilities and
advances made or incurred by Secured Party in connection therewith,
including reasonable fees and expenses of its agents and counsel, and all
amounts for which Secured Party is entitled to indemnification hereunder
and all advances made by Secured Party hereunder for the account of
Grantor, and to the payment of all costs and expenses paid or incurred by
Secured Party in connection with the exercise of any right or remedy
hereunder, all in accordance with Section 16;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) in such order as Secured Party
shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 18. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this
15
<PAGE>
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or (iv)
the failure by Grantor to perform or observe any of the provisions hereof.
SECTION 19. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations (other than inchoate
indemnification obligations with respect to claims, losses or liabilities which
have not yet arisen), the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Grantor. Upon any such termination Secured Party will, at Grantor's
expense, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination.
SECTION 20. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders pursuant to the Credit Agreement. Secured Party shall be obligated,
and shall have the right hereunder, to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Collateral), solely in accordance with this Agreement and the Credit Agreement;
provided that Secured Party shall exercise, or refrain from exercising, any
- --------
remedies provided for in Section 18 in accordance with the instructions of (i)
Requisite Lenders or (ii) after payment in full of all Obligations under the
Loan Documents other than any Lender Interest Rate Agreements, the holders of a
majority in notional amount of all Lender Interest Rate Agreements (or, if a
Lender Interest Rate Agreement has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreements).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.6 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.6 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.6
of the Credit
16
<PAGE>
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement. Upon the acceptance of any appointment as Administrative Agent
under subsection 9.6 of the Credit Agreement by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Secured Party under this Agreement, and the retiring or removed Secured
Party under this Agreement shall promptly (i) transfer to such successor Secured
Party all sums, securities and other items of Collateral held hereunder,
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Secured Party
under this Agreement, and (ii) execute and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 21. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 22. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 23. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 24. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and
17
<PAGE>
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 25. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 26. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 27. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
AFC ENTERPRISES, INC.
By: /s/ Samuel N. Frankel
---------------------------
Samuel N. Frankel
Chief Financial Officer
Notice Address:
Suite 1700, Six Concourse Parkway
Atlanta, Georgia 30328
Attention: Gerald Wilkins
Chief Financial Officer
Tel: (770) 353-9500
Fax: (770) 353-3074
with copies to:
Samuel N. Frankel, Esq.
General Counsel
AFC Enterprises, Inc.
Suite 1700, Six Concourse Parkway
Atlanta, Georgia 30328
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Secured Party
By: /s/ Marybeth Ross
----------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
Telephone: 212 856-3691
Facsimile: 212 856-3763
S-2
<PAGE>
SCHEDULE A
TO PATENT AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
PATENTS ISSUED
<TABLE>
<CAPTION>
====================================================================
File No. Country Mark Patent No.
- --------------------------------------------------------------------
<S> <C> <C> <C>
PA-US-0001.00 U.S. Gas Fryer Heat 5,417,202
Exchanger (Ultrafryer)
- --------------------------------------------------------------------
PA-Cana-0002.00 Canada Flour & Batter Table 1064765
- --------------------------------------------------------------------
PA-US-0003.00 U.S. Parallel Thrust 4,875,430
Propulsion System
- --------------------------------------------------------------------
PA-US-0005.00 U.S. Method & apparatus for 4,153,736
basting & displaying
food (corn carousel)
- --------------------------------------------------------------------
PA-US-0006.00 U.S. Method & apparatus for 4,230,066
basting & displaying
food
- --------------------------------------------------------------------
PA-US-0008.00 U.S. Flour & Batter Table 3,597,035
- --------------------------------------------------------------------
PA-US-0009.00 U.S. Current Limiting 4,335,345
Circuit for Switching
Regulator
- --------------------------------------------------------------------
PA-US-0011.00 U.S. Fast service restaurant 250,842
building.
====================================================================
</TABLE>
Schedule A-1
<PAGE>
PATENTS PENDING
APPLICATION NO. FILING DATE
- --------------- -----------
Schedule A-2
<PAGE>
SCHEDULE B
TO PATENT AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
UNITED STATES LICENSE AGREEMENTS
Schedule B-1
<PAGE>
SCHEDULE C
TO PATENT AND COPYRIGHT COLLATERAL SECURITY AGREEMENT
U.S. COPYRIGHTS
Copyright Reg. No. Date of Issue
- --------- -------- -------------
CP-US-0001.00 TXU 651-768 10/21/94
PERFECT FOODCOST
(VERSION 3.05)
FOREIGN COPYRIGHT REGISTRATIONS
Copyright Reg. No. Date of Issue
- --------- -------- -------------
PENDING U.S. COPYRIGHTS
Copyright Reg. No. Date of Application
- --------- -------- -------------------
C-1
<PAGE>
EXHIBIT 4.9
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "AGREEMENT") is dated as of
May 21, 1997 and entered into by and between AFC ENTERPRISES, INC., a Minnesota
corporation ("PLEDGOR"), and CANADIAN IMPERIAL BANK OF COMMERCE, as
administrative agent for and representative of (in such capacity herein called
"SECURED PARTY") the financial institutions ("LENDERS") party to the Credit
Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, as administrative agent for Lenders and Goldman
Sachs Credit Partners L.P., as syndication agent and arranging agent, have
entered into a Credit Agreement dated as of May 21, 1997 (said Credit Agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined) with Pledgor
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Pledgor.
B. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit, and Issuing Lender
to issue Letters of Credit, under the Credit Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms used in this
-------------------
Agreement shall have the following meanings:
"COLLATERAL" means (i) the Collateral Account, (ii) all amounts on
deposit from time to time in the Collateral Account, (iii) all interest, cash,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Collateral, and (iv) to the extent not covered by clauses (i) through
(iii) above, all proceeds of any or all of the foregoing Collateral.
"COLLATERAL ACCOUNT" means the restricted deposit account
established and maintained by Secured Party pursuant to Section 2(a).
<PAGE>
"SECURED OBLIGATIONS" means all obligations and liabilities of every
nature of Pledgor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Pledgor, would accrue on such obligations), reimbursement of
amounts drawn under Letters of Credit, fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Secured Party or any Lender as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of Pledgor
now or hereafter existing under this Agreement.
SECTION 2. ESTABLISHMENT AND OPERATION OF COLLATERAL ACCOUNT.
-------------------------------------------------
(a) Secured Party is hereby authorized to establish and maintain at
its office at 425 Lexington Avenue, New York, New York, as a blocked account in
the name of Secured Party and under the sole dominion and control of Secured
Party, a restricted deposit account designated as "AFC Enterprises, Inc.
Collateral Account".
(b) The Collateral Account shall be operated in accordance with the
terms of this Agreement.
(c) All amounts at any time held in the Collateral Account shall be
legally and beneficially owned by Pledgor but shall be held in the name of
Secured Party hereunder, for the benefit of Lenders, as collateral security for
the Secured Obligations upon the terms and conditions set forth herein. Pledgor
shall have no right to withdraw, transfer or, except as expressly set forth
herein or in the Credit Agreement, otherwise receive any funds deposited into
the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
SECTION 3. DEPOSITS OF CASH COLLATERAL.
---------------------------
(a) All deposits of funds in the Collateral Account shall be made by
wire transfer (or, if applicable, by intra-bank transfer from another account of
Pledgor) of immediately available funds in accordance with written wire transfer
instructions provided to Pledgor by Secured Party. Pledgor shall, promptly after
initiating a transfer of funds to the Collateral Account, give notice to Secured
Party by telefacsimile of the date, amount and method of delivery of such
deposit.
2
<PAGE>
(b) If an Event of Default has occurred and is continuing beyond any
applicable notice, grace or cure period, and, in accordance with Section 8 of
the Credit Agreement, Pledgor is required to pay to Secured Party an amount (the
"AGGREGATE AVAILABLE AMOUNT") equal to the maximum amount that may at any time
be drawn under all Letters of Credit then outstanding under the Credit
Agreement, Pledgor shall deliver funds in such an amount for deposit in the
Collateral Account in accordance with Section 3(a). If for any reason the
aggregate amount delivered by Pledgor for deposit in the Collateral Account as
aforesaid is less than the Aggregate Available Amount, the aggregate amount so
delivered by Pledgor shall be apportioned among all outstanding Letters of
Credit for purposes of this Section 3(b) in accordance with the ratio of the
maximum amount available for drawing under each such Letter of Credit (as to
such Letter of Credit, the "MAXIMUM AVAILABLE AMOUNT") to the Aggregate
Available Amount. Upon any drawing under any outstanding Letter of Credit in
respect of which Pledgor has deposited in the Collateral Account any amounts
described above, Secured Party shall apply such amounts to reimburse the Issuing
Lender for the amount of such drawing. In the event of cancellation or
expiration of any Letter of Credit in respect of which Pledgor has deposited in
the Collateral Account any amounts described above, or in the event of any
reduction in the Maximum Available Amount under such Letter of Credit, Secured
Party shall apply the amount then on deposit in the Collateral Account in
respect of such Letter of Credit (less, in the case of such a reduction, the
----
Maximum Available Amount under such Letter of Credit immediately after such
reduction) first, to the payment of any amounts payable to Secured Party
-----
pursuant to Section 13, second, to the extent of any excess, to the cash
------
collateralization pursuant to the terms of this Agreement of any outstanding
Letters of Credit in respect of which Pledgor has failed to pay all or a portion
of the amounts described above (such cash collateralization to be apportioned
among all such Letters of Credit in the manner described above), third, to the
-----
extent of any further excess, to the payment of any other outstanding Secured
Obligations in such order as Secured Party shall elect, and fourth, to the
------
extent of any further excess, to the payment to whomsoever shall be lawfully
entitled to receive such funds.
SECTION 4. PLEDGE OF SECURITY FOR SECURED OBLIGATIONS. Pledgor
------------------------------------------
hereby pledges and assigns to Secured Party, and hereby grants to Secured Party
a security interest in, all of Pledgor's right, title and interest in and to the
Collateral as collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all Secured Obligations.
SECTION 5. NO INVESTMENT OF AMOUNTS IN THE COLLATERAL ACCOUNT;
---------------------------------------------------
INTEREST ON AMOUNTS IN THE COLLATERAL ACCOUNT.
- ---------------------------------------------
(a) Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral Account pending application thereof as elsewhere provided in this
Agreement.
3
<PAGE>
(b) To the extent permitted under Regulation Q of the Board of
Governors of the Federal Reserve System, any cash held in the Collateral Account
shall bear interest at the standard rate paid by Secured Party to its customers
for deposits of like amounts and terms.
(c) Subject to Secured Party's rights under Section 12, any interest
earned on deposits of cash in the Collateral Account in accordance with Section
5(b) shall be deposited directly in, and held in the Collateral Account.
SECTION 6. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
------------------------------
warrants as follows:
(a) Ownership of Collateral. Pledgor is (or at the time of transfer
-----------------------
thereof to Secured Party will be) the legal and beneficial owner of the
Collateral from time to time transferred by Pledgor to Secured Party, free and
clear of any Lien except for the security interest created by this Agreement or
any other Loan Document.
(b) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by Pledgor, or (iii) the perfection of or the exercise by Secured
Party of its rights and remedies hereunder (except as may have been taken by or
at the direction of Pledgor).
(c) Perfection. The pledge and assignment of the Collateral pursuant
----------
to this Agreement creates or will create, as of the date hereof, a valid and
perfected first priority security interest in the Collateral, securing the
payment of the Secured Obligations.
(d) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Collateral is accurate and complete in all respects.
SECTION 7. FURTHER ASSURANCES. Pledgor agrees that from time to
------------------
time, at the expense of Pledgor, Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, as requested by Secured Party, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, Pledgor will: (a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, as requested by Secured Party, in order to perfect
and preserve the security interests granted or purported to be granted hereby
and (b) at Secured Party's request, appear in and defend any action or
proceeding that may affect Pledgor's beneficial title to or Secured Party's
security interest in all or any part of the Collateral.
4
<PAGE>
SECTION 8. TRANSFERS AND OTHER LIENS. Pledgor agrees that it will
-------------------------
not (a) sell, assign (by operation of law or otherwise) or otherwise dispose of
any of the Collateral or (b) create or suffer to exist any Lien upon or with
respect to any of the Collateral, except for the security interest under this
Agreement.
SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
----------------------------------------
irrev ocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Collateral without the
signature of Pledgor.
SECTION 10. SECURED PARTY MAY PERFORM. If Pledgor fails to perform
-------------------------
any agreement contained herein within the time provided for performance
hereunder, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Pledgor under Section 13.
SECTION 11. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral, it being understood that Secured Party shall
have no responsibility for (a) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Collateral) to preserve rights against any parties with
respect to any Collateral or (b) taking any necessary steps to collect or
realize upon the Secured Obligations or any guarantee therefor, or any part
thereof, or any of the Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Secured Party accords its own property of like kind.
SECTION 12. REMEDIES. Subject to the provisions of Section 3(b),
--------
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies otherwise available to it, all the rights and remedies
of a secured party on default under the Uniform Commercial Code as in effect in
any relevant jurisdiction (the "CODE") (whether or not the Code applies to the
affected Collateral).
SECTION 13. INDEMNITY AND EXPENSES.
----------------------
(a) Pledgor agrees to indemnify Secured Party and each Lender from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities
5
<PAGE>
result solely from Secured Party's or such Lender's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Pledgor to
perform or observe any of the provisions hereof.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of the Credit Agreement,
any Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise. Upon the
payment in full of all Secured Obligations (other than inchoate indemnification
obligations with respect to claims, losses or liabilities which have not yet
arisen), the cancellation or termination of the Commitments and the cancellation
or expiration of all outstanding Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Pledgor. Upon any such termination Secured Party shall, at Pledgor's expense,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination and Pledgor shall be entitled to the
return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been
otherwise applied pursuant to the terms hereof.
SECTION 15. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders pursuant to the Credit Agreement. Secured Party shall be obligated,
and shall have the right hereunder, to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Collateral), solely in accordance with this Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.6 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.6 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and
6
<PAGE>
appointment of a successor Administrative Agent pursuant to subsection 9.6 of
the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.6 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums held by Secured Party hereunder (which
shall be deposited in a new Administrative Account established and maintained by
such successor Secured Party), together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Secured Party under this Agreement, and (ii) execute and deliver to
such successor Secured Party such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, all at Secured Party's sole cost and expense, whereupon such retiring
or removed Secured Party shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.
SECTION 16. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor herefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. NOTICES. Unless otherwise specifically provided herein,
-------
any notice or other communication herein required or permitted to be given shall
be given as set forth in the Credit Agreement.
SECTION 18. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
-----------------------------------------------------
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
7
<PAGE>
SECTION 20. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 22. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 23. CONFLICTS. In the event of a conflict between the terms
---------
hereof and the terms of the Company Pledge Agreement, the Company Trademark
Security Agreement; the Company Patent and Copyright Security Agreement or the
Collateral Account Agreement, then this Agreement shall govern and control for
all purposes. Further, in the event of a conflict between the terms of the
Credit Agreement and any of the foregoing agreements, the Credit Agreement shall
govern and control for all purposes. Grantor shall be entitled to the notice,
grace and cure periods set forth in the Credit Agreement as if fully set forth
herein.
[Remainder of page intentionally left blank]
8
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AFC ENTERPRISES, INC.
By: /s/ Samuel N. Frankel
----------------------------------
Samuel N. Frankel
Executive Vice President
Notice Address:
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
Tel: (770) 353-9500
Fax: (770) 353-3074
Attention: Gerald Wilkins
Chief Financial Officer
with copies to:
Samuel N. Frankel, Esq.
General Counsel
AFC Enterprises, Inc.
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328
S-1
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE, as Secured
Party
By: /s/ Marybeth Ross
-----------------------------------
Marybeth Ross
Authorized Signatory
Notice Address:
Canadian Imperial Bank of Commerce
Agency Services
425 Lexington Avenue
New York, New York 10017
Attention: Marybeth Ross
Tel: 212 856-3691
Fax: 212 856-3763
S-2
<PAGE>
EXHIBIT 4.10
EXHIBIT XV
[FORM OF CLOSING DATE MORTGAGE]
CLOSING DATE MORTGAGE
COUNTY, STATE
AFTER RECORDING RETURN TO:
First American Title Insurance Company
228 East 45th Street
New York, NY 10017
Attention: Robin Friedman
THE TOTAL AMOUNT OF THE INDEBTEDNESS, INCLUDING FUTURE ADVANCES, THAT MAY
BE SECURED BY THIS MORTGAGE MAY INCREASE OR DECREASE FROM TIME TO TIME BUT
SHALL NOT EXCEED THE MAXIMUM PRINCIPAL AMOUNT LISTED ON SCHEDULE 2 HERETO
----------
AT ANY ONE TIME PLUS INTEREST THEREON AND ANY DISBURSEMENT MADE BY
MORTGAGEE FOR THE PAYMENT OF TAXES, LEVIES, OR INSURANCE AND INTEREST ON
ANY SUCH DISBURSEMENT.
MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING
between
AFC ENTERPRISES, INC.
Mortgagor
and
CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent,
Mortgagee
Dated as of May ____, 1997
[**STORE #S**]
XV-1
<PAGE>
This MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING
is made as of May ___, 1997, by AFC ENTERPRISES, INC., a Minnesota corporation,
f/k/a America's Favorite Chicken Company, successor by merger to Al Copeland
Enterprises, successor by merger to Church's Fried Chicken, Inc. ("Mortgagor"),
---------
whose address is Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328, and
CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank acting through its
New York Agency ("CIBC"), as administrative agent for the several financial
----
institutions (the "Lenders") that are parties to the Credit Agreement (as
-------
defined below), whose address is 425 Lexington Avenue, Seventh Floor, New York,
New York 10017, Attention: Agency Administrative Services (CIBC in its capacity
as Agent for the Lenders, "Mortgagee").
---------
GRANTING CLAUSES
- ----------------
Pursuant to the terms of the Credit Agreement (as hereinafter defined) and
to secure the indebtedness and obligations hereinafter described, Mortgagor does
hereby GRANT, MORTGAGE, BARGAIN, SELL, ASSIGN, and CONVEY to Mortgagee, all of
Mortgagor's right, title, and interest in the real property listed on Schedule 1
----------
and described on Exhibit A attached hereto (such real property, together with
---------
all of Mortgagor's right, title and interest in and to the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements"), being collectively referred to as the "Real Estate"), together
------------ -----------
with all of Mortgagor's right, title and interest in and to the following:
(A) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(B) all right, title and interest of Mortgagor in, to and under
all easements, rights of way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements, hereditaments
and appurtenances belonging, relating or appertaining to the Real Estate,
and any reversions, remainders, rents, issues, profits and revenue thereof
and all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(C) all right, title, and interest of Mortgagor in and to the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and
nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or
subsequently acquired by Mortgagor and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation
or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and
XV-2
<PAGE>
furnishings, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, stoves, ranges,
fryers, ovens, laundry equipment, cleaning systems (including window
cleaning apparatus), communication systems (including satellite dishes and
antennae), cash registers, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures
of every kind and description (all of the foregoing in this paragraph (C)
being referred to as the "Equipment");
---------
(D) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Real Estate or offsite, and, in
each such case, without any further mortgage, conveyance, assignment or
other act by Mortgagor;
(E) all right, title and interest of Mortgagor (as lessor or
landlord) in, to and under all leases, subleases and underlettings and to
the extent assignable or encumberable, in and to all concession agreements,
management agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Mortgagor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any of
the foregoing may be amended, restated, extended, renewed or modified from
time to time, the "Leases"), and all rights of Mortgagor in respect of cash
------
and securities deposited thereunder and the right to receive and collect
the revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Mortgaged Property (collectively,
the "Rents");
-----
(F) as more particularly addressed in the Credit Agreement, all
unearned premiums under insurance policies now or subsequently obtained by
Mortgagor relating to the Real Estate or Equipment and Mortgagor's interest
in and to all proceeds of any such insurance policies (including title
insurance policies) including the right to collect and receive such
proceeds; and all awards and other compensation, including the interest
payable thereon and the right to collect and receive the same, made to the
present or any subsequent owner of the Real Estate or Equipment for the
taking by eminent domain, condemnation or otherwise, of all or any part of
the Real Estate or any easement or other right therein;
(G) to the extent assignable or encumberable, all right, title
and interest of Mortgagor in and to (i) all contracts from time to time
executed by Mortgagor or any
XV-3
<PAGE>
manager or agent on its behalf relating to the ownership, construction,
maintenance, repair, operation, occupancy, sale or financing of the Real
Estate or Equipment or any part thereof and all agreements relating to the
purchase or lease (as lessor or landlord) of any portion of on the Real
Estate or any property which is adjacent or peripheral to the Real Estate,
together with the right to exercise such options (collectively, the
"Contracts"), (ii) to the extent assignable, all consents, licenses,
---------
building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation
of the Real Estate or any part thereof (collectively, the "Permits") and
-------
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "Plans");
-----
(H) any and all monies now or subsequently on deposit with
Mortgagor for the payment of real estate taxes or special assessments
against the Real Estate of for the payment of premiums on insurance
policies covering the foregoing property or otherwise on deposit with or
held by Mortgagee as provided in this Mortgage; and
(I) all proceeds, both cash and noncash, of the foregoing.
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Mortgagor and described in the
foregoing clauses (A) through (D) are collectively referred to as the
"Premises", and those described in the foregoing clauses (A) through (I)
--------
are collectively referred to as the "Mortgaged Property").
------------------
TO HAVE AND TO HOLD the Mortgaged Property, together with the
rights, privileges and appurtenances thereto belonging, unto Mortgagee and
its successors and assigns.
ARTICLE 1
INDEBTEDNESS
This Mortgage is given to secure ratably and equally the payment
and performance of the following obligations (collectively referred to as the
"Obligations"):
-----------
(a) Payment of and performance of all of Mortgagor's obligations (i)
under, with respect to, arising in connection with and defined as the
"Obligations" in that certain Credit Agreement dated as of even date herewith by
and among Mortgagor, as borrower, the lenders listed on the signature pages
thereof (each individually referred to herein as a "Lender" and collectively as
------
"Lenders"), Mortgagee, as administrative agent for the Lenders, and Goldman
-------
Sachs Credit Partners L.P., ("Goldman"), as Syndication and Arranging Agent,
-------
(such Credit Agreement and any and all amendments, modifications, supplements,
restatements, extensions, renewals or replacements thereof are collectively
referred
XV-4
<PAGE>
to herein as the "Credit Agreement"), including, without limitation: the due
----------------
and punctual payment of the indebtedness, together with interest thereon, and
other amounts payable with respect thereto, evidenced by the Notes in the
maximum aggregate principal amount set forth in section 2.1 of the Credit
Agreement (the "Indebtedness"); and (ii) under, with respect to or arising in
------------
connection with this Mortgage, including, without limitation, all obligations to
Mortgagee for fees, costs and expenses (including attorneys' fees and
disbursements) as provided therein and herein;
(b) Payment and performance of all obligations of Mortgagor to the Lenders
and/or Mortgagee for fees, costs and expenses contemplated to be paid by
Mortgagor under the other Loan Documents including, without limitation fees,
costs and expenses (including attorneys' fees and disbursements);
(c) Payment of all sums advanced by the Lenders or Mortgagee to protect
the Mortgaged Property, with interest thereon at the rate specified in Section
2.2E of the Credit Agreement (the "Agreed Rate");
-----------
(d) Payment of all sums advanced and costs and expenses incurred by the
Lenders or Mortgagee in connection with the Obligations or any part thereof, any
renewal, extension or change of or substitution for the Obligations or any part
thereof, or the acquisition or perfection of the security therefor, whether such
advances, costs and expenses were made or incurred at the request of Mortgagor
or Mortgagee or any Lender;
(e) Payment of all other sums, with interest thereon, which may hereafter
be loaned to Mortgagor, or its successors or assigns, by the Lenders or
Mortgagee, or their respective successors or assigns, or by the holder of any of
the Notes, pursuant to an agreement that specifically recites that the repayment
of such sums and Mortgagor's other obligations under such agreement are secured
by this Mortgage;
(f) Payment of all sums with respect to the Obligations that would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. (S)362(a), including, without limitation, interest,
fees and other charges that, but for the filing of a petition in bankruptcy with
respect to Mortgagor, would accrue on the Obligations, whether or not a claim is
alleged against Mortgagor for such sums in any such bankruptcy proceeding;
(g) Due, prompt and complete performance of every obligation, covenant and
agreement of Mortgagor contained in any agreement now or hereafter executed by
Mortgagor which specifically recites that the obligations thereunder are secured
by this Mortgage from and after the date on which all
XV-5
<PAGE>
mortgage recording taxes, general intangible taxes or other taxes payable in
respect of such future obligations have been paid; and
(h) All renewals, extensions, amendments, modifications and changes and
supplements of, or substitutions or replacements for, all or any part of the
items described in Paragraphs (a) through (g) above.
FUTURE ADVANCES. In addition to all other indebtedness secured by this
Mortgage, this Mortgage shall also secure and constitute a first Lien on the
Mortgaged Property for:
1. all future advances (including all extensions, renewals and
modifications of such future advances) that relate directly or indirectly to the
Credit Agreement (including advances pursuant to Section 2.1A and 3.1 thereof)
or to this Mortgage and are made by the Lenders or Mortgagee to Mortgagor or
otherwise for any purpose so related after the date of this Mortgage; and
2. all sums advanced or paid by Mortgagee upon a default or Event of
Default under the terms of this Mortgage (i) for real estate taxes, charges and
assessments that may be imposed by law upon the Premises, (ii) for premiums on
insurance policies covering the Premises, (iii) for expenses incurred in
upholding the Lien of this Mortgage, including but not limited to the expenses
of any litigation to prosecute or defend the rights and Lien created by this
Mortgage, (iv) to which Mortgagee becomes subrogated, upon payment, under
recognized principles of law or equity, or under express statutory authority or
(v) for any other purpose, in each case, with interest thereon at the Agreed
Rate; and
3. all other sums expended by Mortgagee pursuant to the terms of this
Mortgage.
just as if such advances were made on the date of this Mortgage. Any future
advances may be made in accordance with the Credit Agreement or at the option of
Mortgagee.
THE TOTAL AMOUNT OF THE INDEBTEDNESS, INCLUDING FUTURE ADVANCES, THAT MAY
BE SECURED BY THIS MORTGAGE MAY INCREASE OR DECREASE FROM TIME TO TIME BUT
SHALL NOT EXCEED THE MAXIMUM PRINCIPAL AMOUNT LISTED ON SCHEDULE 2 HERETO
----------
AT ANY ONE TIME PLUS INTEREST THEREON AND ANY DISBURSEMENT MADE BY
MORTGAGEE FOR THE PAYMENT OF TAXES, LEVIES, OR INSURANCE AND INTEREST ON
ANY SUCH DISBURSEMENT.
XV-6
<PAGE>
ARTICLE 2
REMEDIES
2.1 Exercise of Specific Remedies. If an Event of Default (as defined in
-----------------------------
the Credit Agreement) shall occur, Mortgagee may exercise any one or more of the
following remedies, without notice (unless notice is required by applicable
statute):
(a) Acceleration. Mortgagee may declare the Indebtedness immediately due
------------
and payable, without notice, whereupon the same shall become immediately due and
payable.
(b) Possession. Mortgagee may take immediate possession of the Mortgaged
----------
Property or any part thereof (which Mortgagor agrees to surrender to Mortgagee)
and manage, control or lease the same to such person or persons and at such
rental as it may deem proper and collect all the rents, issues and profits
therefrom, including those past due as well as those thereafter accruing, with
the right in Mortgagee to cancel any lease or sublease for any cause which would
entitle Mortgagor to cancel the same; to make such expenditures for maintenance,
repairs and costs of operation as it may deem advisable; and after deducting the
cost thereof and a commission of five (5%) percent upon the gross amounts of
rents collected (if allowed by applicable law), to apply the residue to the
payment of any sums which are unpaid hereunder or under the notes. the taking of
possession under this paragraph shall not prevent concurrent or later
proceedings for the foreclosure sale of the Mortgaged Property as provided
elsewhere herein.
(c) Receiver. Mortgagee may apply to any court of competent jurisdiction
--------
for the appointment of a receiver or similar official to manage and operate the
mortgaged property, or any part thereof, and to apply the net rents and profits
therefrom to the payment of the interest and/or principal of the Note and/or any
other obligations of Mortgagor to Mortgagee hereunder. In event of such
application, Mortgagor agrees to consent to the appointment of such receiver or
on similar official and agrees that such receiver or similar official may be
appointed without notice to Mortgagor, without regard to the adequacy of any
security for the debt and without regard to the solvency of Mortgagor or any
other person, firm or corporation who or which may be liable for the on payment
of the indebtedness.
(d) Foreclosure. Mortgagee shall have the right to foreclose this Mortgage
-----------
and in case of sale in an action or proceeding to foreclose this Mortgage,
Mortgagee shall have the right to sell the Mortgaged Property covered hereby in
parts or as an entirety. it is intended hereby to give to Mortgagee the widest
possible discretion permitted by law with respect to all aspects of any such
sale or sales. without declaring the entire unpaid principal balance due,
Mortgagee may foreclose only as to the sum past due, without injury to this
Mortgage or the displacement or impairment of the remainder of the lien thereof,
and at such foreclosure sale the property sold shall be subject to all remaining
items of the Indebtedness; and Mortgagee may again foreclose, in the same
manner, as often as there may be any sum past due.
XV-7
<PAGE>
(e) Additional Provisions. Mortgagor expressly agrees, on behalf of
---------------------
itself, its successors and assigns and any future owner of the Mortgaged
Property, or any part thereof or interest therein, as follows:
(i) The obtaining of a judgment or decree on the Note, whether in the
State where the Premises are located or elsewhere, shall not in any manner
affect the lien of this Mortgage upon the Mortgaged Property covered hereby, and
any judgment or decree so obtained shall be secured hereby to the same extent as
the Notes are now secured.
(ii) In the event of any foreclosure sale hereunder, all net proceeds
shall be available for application to the Indebtedness whether or not such
proceeds may exceed the value of the Mortgaged Property for recordation tax,
mortgage tax, insurance or other purposes.
(iii) The only limitation upon the foregoing agreements as to the exercise
of Mortgagee's remedies is that there shall be but one full and complete
satisfaction of the Indebtedness.
(f) Lawsuits. Mortgagee may proceed by a suit or suits in equity or at
--------
law whether for the specific performance of any covenant or agreement herein
contained or in aid of the execution of any power herein granted, or for any
foreclosure hereunder or for the sale of the Mortgaged Property under the
judgment or decree of any court or courts of competent jurisdiction.
(g) Entry on Mortgaged Property. Upon occurrence of an event of default
---------------------------
Hereunder, Mortgagee may enter into and upon and take possession of all or any
part of the Mortgaged Property, and may exclude Mortgagor, and all persons
claiming under Mortgagor, and its or their agents or servants, wholly or partly
therefrom; and, holding the same, Mortgagee may use, administer, manage,
operate, and control the Mortgaged Property and may exercise all rights and
powers of Mortgagor in the name, place and stead of Mortgagor, or otherwise, as
the Mortgagee shall deem best; and in the exercise of any of the foregoing
rights and powers Mortgagee shall not be liable to Mortgagor for any loss or
damage thereby sustained unless due solely to the willful misconduct or gross
negligence of Mortgagee.
2.2 Tenancy at will. In the event of a foreclosure sale hereunder, if at
---------------
the time of such sale Mortgagor occupies the portion of the Mortgaged Property
so sold or any part thereof, Mortgagor shall immediately become the tenant of
the purchaser at such sale, which tenancy shall be a tenancy from day to day,
terminable at the will of either tenant or landlord, at a reasonable rental per
day based upon the value of the portion of the Mortgaged Property so occupied,
such rental to be due and payable daily to the purchaser. An action of forcible
detainer shall lie if the tenant holds over after a demand in writing for
possession of sucH Mortgaged Property.
XV-8
<PAGE>
2.3 Reimbursement of Expenditure. If Mortgagee shall expend any money or
----------------------------
incur any expense to perform Mortgagor's obligations hereunder, to cure any
default under any Subject Lease referred to in Section 3.3, to maintain,
preserve and protect the premises or preserve the lien hereof or otherwise
subject to reimbursement by Mortgagor under the terms of the loan documents,
then all such sums shall be secured hereby and Mortgagor will repay the same to
Mortgagee immediately at the place where the Notes are payable, together with
interest thereon at the highest rate permitted by applicable law from and after
the date of each such expenditure by Mortgagee.
2.4 Other. Mortgagee may exercise any and all other rights, remedies and
-----
recourses granted under the Loan Documents now or hereafter existing in equity
or at law for the protection and preservation of the Mortgaged Property.
2.5 Remedies Cumulative, Concurrent and Nonexclusive. Mortgagee shall have
------------------------------------------------
all rights, remedies and recourses granted in the Loan Documents and available
at law or equity (including, without limitation, those granted by the Code (as
defined below) and applicable to the Mortgaged Property, or any portion thereof)
and same (a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against mortgagor or others obligated for the
indebtedness, or any part thereof or against any one or more of them, or
against the Mortgaged Property, at the sole discretion of Mortgagee, (c) may be
exercised as often as occasion therefor shall arise, it being agreed by
Mortgagor that the exercise or failure to exercise any of same shall in no event
be construed as a waiver or release thereof or of any other right, remedy or
recourse, and (d) are intended to be, and shall be, nonexclusive.
ARTICLE 3
MISCELLANEOUS
3.1 Security Agreement under Uniform Commercial Code.
------------------------------------------------
(a) It is the intention of the parties hereto that this Mortgage shall
constitute a "security agreement" within the meaning of the Uniform Commercial
Code (the "Code") of the state in which the Mortgaged Property is located. If an
----
Event of Default shall occur under this Mortgage, then in addition to having any
other right or remedy available at law or in equity, Mortgagee shall have the
option/ of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Mortgaged Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Mortgaged Property in accordance
with Mortgagee's Rights, powers and remedies with respect to the real property
(in which event the default provisions of the Code shall not apply). If
Mortgagee shall elect to proceed under the Code, then the terms and conditions
of the Security Agreement (as
XV-9
<PAGE>
defined in the Credit Agreement) of even date herewith shall govern and control
all such personal property disposition.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law, that:
(i) all of the goods described within the definition of the word "Equipment" are
or are to become fixtures on the Real Estate; (ii) this Mortgage upon recording
or registration in the real estate records of the proper office shall constitute
a financing statement filed as a "fixture filing" within the meaning of Sections
9-313 and 9-402 of the Code; (iii) Mortgagor is the record owner of the Real
Estate and; (iv) the addresses of Mortgagor and Mortgagee are as set forth on
the first page of this Mortgage.
(c) The filing of any financing or continuation statements in the records
relating to personal property or chattels shall not be construed as in any way
impairing the right of Mortgagee to proceed against any personal property
encumbered by this Mortgage as real property, as set forth above.
(d) The provisions set forth in the Security Agreement are hereby
incorporated by reference into the Mortgage with the same effect as if set forth
in full herein. In the event of a conflict between the provisions of this
Section 3.1 and the Security Agreement, it is the intention of Mortgagor and
Mortgagee that both such documents shall be read together and construed to the
fullest extent possible to be in concert with each other. In the event of a
conflict that can not be resolved as aforesaid, the provisions of the Security
Agreement shall control and govern and Mortgagor shall comply therewith.
3.2 Assignment of Rents. Mortgagor hereby assigns to Mortgagee the rents
-------------------
as further security for the payment of the indebtedness and performance of the
Obligations, and Mortgagor grants to Mortgagee the right to enter the Mortgaged
Property for the purpose of collecting the same and to let the Mortgaged
Property or any part thereof, and to apply the rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents and Mortgagor shall be entitled to collect, receive, use
and retain the rents until the occurrence of an event of default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any event of default under
this Mortgage by giving not less than five days' written notice of such
revocation to Mortgagor. Mortgagor shall not accept prepayments of installments
of Rent to become due for a period of more than one month in advance (except for
security deposits and estimated payments or percentage rents, if any).
3.3 Leaseholds. In the event that all or any portion of the Premises
----------
is a leasehold estate, then the following provisions shall apply:
XV-10
<PAGE>
(a) The name and address of the landlord and a description of each lease
(each a "Subject Lease" and collectively, the "Subject Leases"), is set forth on
------------- --------------
Schedule 3 attached hereto;
- ----------
(b) If the provisions of any such Subject Lease shall not permit the
lessee thereunder to encumber its interest therein, then to the extent that such
encumbrance is not permitted, this Mortgage shall be deemed to not apply to such
lease and shall be of no further force and effect with respect thereto.
(c) Mortgagor represents and warrants that each Subject Lease is in full
force and effect and to the best of Mortgagor's knowledge, no default has
occurred and is continuing thereunder;
(d) Mortgagor shall comply with all the terms, covenants and conditions
under each Subject Lease;
(e) Mortgagor shall deliver to Mortgagee a copy of any notice of default
relating to any Subject Lease;
(f) Subject to the rights of the lessor under the Subject Lease, upon the
occurrence of an Event of Default, Mortgagee shall have the right, at its
option, to enter all or any portion of the Premises at such times and in such
manner as Mortgagee deems necessary, in order to prevent or to cure any such
default;
(g) In the event that Mortgagor acquires lessor's interest in any Subject
Lease, then this Mortgage shall automatically be a Lien on such acquired
interest; and
(h) The occurrence of any event or condition which gives the lessor under
any Subject Lease a right to terminate or cancel after expiration of any
applicable notice, cure or grace period under the Subject Lease or by applicable
statute, as against Mortgagor, such Subject Lease shall be an Event of Default
hereunder.
3.4 Successors and Assigns. All covenants of Mortgagor contained in this
----------------------
Mortgage are imposed solely and exclusively for the benefit of Mortgagee and its
successors and assigns, and no other person or entity shall have standing to
require compliance with such covenants or be deemed, under any circumstances, to
be a beneficiary of such covenants, any or all of which may be freely waived in
whole or in part by Mortgagee at any time if in its sole discretion it deems
such waiver advisable. all such covenants of Mortgagor shall run with the land
and bind Mortgagor, the successors and assigns of Mortgagor (and each of them)
and all subsequent owners, encumbrances and tenants of the Mortgaged Property,
and shall inure to the benefit of Mortgagee, its successors and assigns. the
word "Mortgagor" shall be construed as if it read "Mortgagors" whenever the
sense of this Mortgage so requires and if there shall be more than one
Mortgagor, the obligations of the Mortgagors shall be joint and several.
XV-11
<PAGE>
3.5 No Waivers. etc. Any failure by Mortgagee to insist upon the strict
---------------
performance by Mortgagor of any of the terms and provisions of this Mortgage
shall not be deemed to be a waiver of any of the terms and provisions hereof,
and Mortgagee, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by Mortgagor. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the security held for the obligations secured by this Mortgage without,
as to the remainder of the security, in anywise impairing or affecting the lien
of this Mortgage or the priority of such lien over any subordinate lien.
3.6 GOVERNING LAW ETC. THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED
-----------------
IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED,
EXCEPT THAT MORTGAGOR EXPRESSLY ACKNOWLEDGES THAT BY ITS TERMS THE OBLIGATIONS
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW, AND FOR PURPOSES OF
CONSISTENCY, MORTGAGOR AGREES THAT IN ANY IN PERSONAM PROCEEDING RELATED TO THIS
-----------
MORTGAGE THE RIGHTS OF THE PARTIES TO THIS MORTGAGE SHALL ALSO BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK GOVERNING
CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
3.7 Definitions. Capitalized terms not defined in this Mortgage shall have
-----------
the meanings given them in the Credit Agreement. unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Mortgage shall be used interchangeably in singular or plural
form and the word "Mortgagor" shall mean "each Mortgagor or any subsequent owner
or owners of the Mortgaged Property or any part thereof or interest therein,"
the word "Mortgagee" shall mean "Mortgagee or any subsequent holder of the
Notes," the word "Notes" shall mean "the Notes or any other evidence of
indebtedness secured by this Mortgage," the word "person" shall include any
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, or other entity, and the words "Mortgaged
Property" shall include any portion of the Mortgaged Property or 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. The captions
in this Mortgage are for convenience or reference only and in no way limit or
amplify the provisions hereof.
3.8 Notices. All notices, consents, approvals and requests required or
-------
permitted hereunder shall be given (i) with respect to Mortgagor, in accordance
with the Credit Agreement and (ii) with respect to Mortgagee, at the address
listed on page 1 hereof in the form and manner provided for in the Credit
Agreement.
XV-12
<PAGE>
3.9 Change in Applicable Law. If at any time Mortgagee reasonably
------------------------
determines, based on applicable law, that all applicable taxes (including
Mortgage recording taxes or similar charges) were not paid in connection with
the recordation of this Mortgage or the perfection of the liens granted pursuant
to any of the Security Documents, Mortgagor shall pay the same upon demand.
3.10 Severability. This Mortgage is intended to be performed in accordance
------------
with applicable law. If any provision of this Mortgage or the application
thereof to any person or circumstance shall, for any reason and to any extent,
be invalid or unenforceable, then neither the remainder of this Mortgage nor the
application of such provision to other persons or circumstances nor the other
instruments referred to hereinabove shall be affected thereby, but rather shall
be enforced to the greatest extent permitted by applicable law.
3.11 Amendments and Waivers. No amendment, modification, termination or
----------------------
waiver of any provision of this Mortgage or consent to any departure therefrom,
shall in any event be effective without the written concurrence of Mortgagee.
any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. no notice to or demand on
Mortgagor in any case shall entitle Mortgagor to any other or further notice or
demand in similar or other circumstances.
3.12 Legal Descriptions. In the event that the legal description attached
------------------
to this Mortgage is inaccurate or does not fully describe all of the real
property in which Mortgagor has an interest, Mortgagor hereby agrees to the
amendment of such legal description and the legal description contained in the
corresponding title insurance policy (if any) so that such error is corrected
and Mortgagor shall execute and cause to be recorded, if applicable, such
documentation as may be necessary for such purpose.
3.13 Incorporation of and Conflict with Credit Agreement. The terms and
---------------------------------------------------
conditions of the Credit Agreement are incorporated herein by reference. In the
event of any conflict or inconsistency between the terms of the Mortgage and
those of the Credit Agreement, it is the intention of Mortgagor and Mortgagee
that such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of a conflict or
inconsistency that cannot be resolved as aforesaid, the terms of the Credit
Agreement shall control.
[The Remainder of this Page is Intentionally Left Blank]
XV-13
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor as of
the day and year first above written.
MORTGAGOR:
AFC ENTERPRISES, INC.,
a Minnesota corporation
By: /s/ Harold M. Cohen
----------------------------
Harold M. Cohen
Vice President
S-1
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this the _____ day of May, 1997, before me,_____________________,
the undersigned officer, personally appeared _____________________,
who acknowledged himself to be the _____________________ of AFC
Enterprises, Inc., a Minnesota corporation, f/k/a America's Favorite Chicken
Company (successor by merger to Al Copeland Enterprises, Inc.) and that he, as
such officer being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself in his capacity as above stated.
In witness whereof, I hereunto set my hand and official seal.
----------------------------
Notary Public
[Seal]
N-2
<PAGE>
EXHIBIT A
---------
Legal Description
<PAGE>
SCHEDULE 2
<PAGE>
SCHEDULE 3
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
AMERICA'S FAVORITE CHICKEN COMPANY
FS EQUITY PARTNERS III, L.P.,
AND
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
- --------------------------------------------------------------------------------
Dated as of February 23, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
ARTICLE I PURCHASE AND SALE OF COMMON STOCK............... 1
1.1 Transfer of Stock............................... 1
1.2 Purchase Price.................................. 1
1.3 Closing Matters................................. 2
1.4 Time and Place of Closing....................... 2
1.5 Fees and Expenses............................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BUYERS.... 2
2.1 Organization.................................... 2
2.2 Authority....................................... 2
2.3 No Violation.................................... 3
2.4 Brokers......................................... 3
2.5 Funds Available................................. 3
2.6 Securities Act Representation................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY... 3
3.1 Corporate Organization.......................... 3
3.2 Subsidiaries and Investments.................... 4
3.3 Capital Stock................................... 4
3.4 Issuance of Shares.............................. 4
3.5 Authority....................................... 4
3.6 No Violation.................................... 5
3.7 Litigation...................................... 6
3.8 Financial Statements............................ 7
3.9 Absence of Certain Changes or Events............ 7
3.10 Insurance....................................... 9
3.11 Employee Benefits............................... 9
3.12 Material Contracts and Other Agreements......... 13
3.13 Suppliers....................................... 14
3.14 Fee Property.................................... 14
3.15 Leased Property................................. 14
3.16 Real Property................................... 15
3.17 Compliance with Laws............................ 15
3.18 Licenses and Permits; Franchise Matters......... 16
3.19 Title to Assets................................. 16
3.20 Inventory....................................... 17
3.21 Accounts and Notes Receivable................... 17
3.22 Taxes........................................... 17
3.23 Environmental Laws and Regulations.............. 19
3.24 Board of Directors Approval..................... 21
3.25 Brokers; Certain Expenses....................... 21
3.26 No Agreements to Sell the Company............... 22
3.27 Related-Party Transactions...................... 22
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
3.28 Labor Matters................................... 22
3.29 Proprietary Rights.............................. 22
3.30 Disclosure...................................... 23
ARTICLE IV COVENANTS AND AGREEMENTS........................ 23
4.1 Conduct of Business Prior to the Closing Date... 23
4.2 Access to Properties and Records;
Delivery of Financial Statements................ 26
4.3 Acquisition Proposals........................... 26
4.4 Best Efforts.................................... 26
4.5 Consents........................................ 27
4.6 Management Treatment............................ 27
4.7 Charter Amendment............................... 28
4.8 Amendment to Bank Documents..................... 29
4.9 Exchange........................................ 29
ARTICLE V CONDITIONS PRECEDENT............................ 29
5.1 Conditions to Each Party's Obligations.......... 29
5.2 Conditions to the Obligations of the Company.... 29
5.3 Conditions to the Obligations of the Buyers..... 30
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER............... 32
6.1 Termination..................................... 32
6.2 Effect of Termination........................... 32
6.3 Amendment....................................... 32
6.4 Waiver.......................................... 33
6.5 Survival........................................ 33
ARTICLE VII MISCELLANEOUS................................... 33
7.1 Notices......................................... 33
7.2 Headings; Agreement............................. 34
7.3 Publicity....................................... 34
7.4 Entire Agreement................................ 34
7.5 Conveyance Taxes................................ 34
7.6 Assignment...................................... 34
7.7 Counterparts.................................... 34
7.8 Governing Law................................... 34
7.9 Third Party Beneficiaries....................... 34
7.10 Limitation of Liability......................... 35
</TABLE>
<PAGE>
SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 Subsidiaries
Schedule 3.3 Capital Stock
Schedule 3.6 No Violation
Schedule 3.7 Litigation
Schedule 3.8 Financial Statements and SEC Reports
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.10 Insurance
Schedule 3.11 Employee Benefits
Schedule 3.12 Material Contracts and Other Agreements
Schedule 3.13 Suppliers
Schedule 3.14 Fee Property
Schedule 3.15 Leased Property
Schedule 3.16 Real Property
Schedule 3.18 Licenses and Permits; Franchise Matters
Schedule 3.21 Accounts and Notes Receivable
Schedule 3.23 Environmental Laws and Regulations
Schedule 3.27 Related Party Transactions
Schedule 3.29 Proprietary Rights
Schedule 4.1 Conduct of Business
<PAGE>
EXHIBITS
Exhibit A Preferred Stock Term Sheet
Exhibit B Credit Agreement Term Sheet
Exhibit C Intentionally Omitted
Exhibit D Stockholders Agreement
Exhibit E Form of Company Counsel Opinion
Exhibit F Capitalization
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 23, 1996
among America's Favorite Chicken Company, a Minnesota corporation (the
"Company"), FS Equity Partners III, L.P., a Delaware limited partnership ("FSEP
III")and FS Equity Partners International, L.P., a Delaware limited partnership
("FSEP International," FSEP III and FSEP International are sometimes
collectively referred to herein as the "Buyers" and individually as a "Buyer").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Buyers desire to purchase 21,103,407 shares of Common
Stock (as defined below) from the Company.
WHEREAS, the Board of Directors of the Company (the "Board") has
approved this Agreement and the transactions contemplated hereby, upon the terms
and subject to the conditions set forth herein.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the sufficiency of which is hereby acknowledged, and in order to set
forth the terms and conditions of the transactions described herein and the mode
of carrying the same into effect, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 Transfer of Stock. Subject to the terms and conditions of this
-----------------
Agreement, the Buyers agree to purchase from the Company and the Company agrees
to sell to the Buyers at the Closing (as defined in Section 1.4), 21,103,407
shares (the "Shares") of Common Stock, $.01 par value (the "Common Stock"), of
the Company. FSEP III shall purchase 20,290,690 of the Shares and FSEP
International shall purchase 812,717 of the Shares; provided that the actual
numbers of shares purchased by FSEP III and FSEP International shall be subject
to adjustment as requested by the Buyers.
1.2 Purchase Price. The purchase price for each Share shall be an
--------------
amount equal to $3.317, constituting an aggregate purchase price of
$70,000,001.02 (the "Purchase Price").
<PAGE>
1.3 Closing Matters. At the Closing, the Buyers shall, against
---------------
delivery of certificates or instruments evidencing Shares in the names of FSEP
III and FSEP International, deliver to the Company by wire transfer, an amount
equal to the Purchase Price.
1.4 Time and Place of Closing. The consummation of the transactions
-------------------------
contemplated in this Agreement (the "Closing") shall take place at 10:00 a.m.
Atlanta time, at the offices of the Company on April 11, 1996 or at such other
time, place or date as the parties hereto shall agree upon in writing (the
"Closing Date").
1.5 Fees and Expenses. The Company shall promptly after the Closing
-----------------
pay all reasonable out-of-pocket fees and expenses incurred by or on behalf of
the Buyers in connection with the transactions contemplated by this Agreement
and a transaction fee of $3.5 million; provided that the aggregate of such fee
and expenses and the fee set forth in Section 3.25 shall not exceed $6 million.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE BUYERS
Each Buyer represents and warrants to the Company as follows:
2.1 Organization. Such Buyer is a limited partnership duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
2.2 Authority. Such Buyer has full partnership power and authority
---------
to execute and deliver this Agreement and to consummate the transactions
contemplated on its part hereby. The execution, delivery and performance by
such Buyer of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action on the part of such Buyer. No other action on the part of either Buyer
is necessary to authorize the execution and delivery of this Agreement by such
Buyer or the performance by such Buyer of its obligations hereunder. This
Agreement has been duly executed and delivered by each Buyer and constitutes a
legal, valid and binding agreement of such Buyer, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights generally
and subject to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Each other
agreement to be executed by each Buyer in connection with this Agreement on or
prior to the Closing Date will be duly executed and delivered by such Buyer, and
(assuming due execution and delivery by the other party or parties thereto) will
constitute a legal, valid and binding obligation of such Buyer, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and subject to general
2
<PAGE>
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2.3 No Violation. The execution and delivery of this Agreement and
------------
each other agreement contemplated hereby by each Buyer, the performance by each
Buyer of its obligations hereunder and thereunder, and the consummation by it of
the transactions contemplated hereby and thereby, will not (a) violate any
provision of law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to such Buyer, (b) require the consent,
waiver, approval, license or authorization of or any filing by such Buyer with
any person or governmental authority except for the filing of a pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") or (c) violate, result (with or without notice
or the passage of time, or both) in a breach of or give rise to the right to
accelerate, terminate or cancel any obligation under or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of any partnership agreement, or material indenture,
mortgage, agreement or contract to which such Buyer is subject or by which such
Buyer is bound.
2.4 Brokers. The Buyers have not paid or become obligated to pay any
-------
fee or commission to any broker, finder, investment banker or other intermediary
in connection with this Agreement.
2.5 Funds Available. The Buyers have funds available, or commitments
---------------
of their respective partners to provide funds, sufficient to pay the Purchase
Price.
2.6 Securities Act Representation. The Buyers are "accredited
-----------------------------
investors" as defined under Regulation D of the Securities Act of 1933, as
amended. The Buyers are purchasing the Shares pursuant to this Agreement not
with a view to a distribution or resale of any of such securities in violation
of any applicable securities laws. The Buyers acknowledge that such securities
may bear appropriate legends.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Buyers as follows:
3.1 Corporate Organization. The Company is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Minnesota, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted,
and is qualified or licensed to do business and is in good standing in each
jurisdiction set forth on Schedule 3.1, which are all of the jurisdictions in
which
3
<PAGE>
the failure to be so qualified or licensed could reasonably be expected,
individually or in the aggregate, to have a material and adverse effect upon the
operations, financial condition, prospects or results of operations of the
Company (a "Material Adverse Effect"). True and complete copies of the
Certificate of Incorporation and the Bylaws of the Company have been delivered
to the Buyers.
3.2 Subsidiaries and Investments. Except as set forth on Schedule
----------------------------
3.2, the Company does not own, directly or indirectly, any stock, partnership
interest, joint venture interest or other security, investment or interest in
any other corporation, organization or entity.
3.3 Capital Stock. As of the date hereof, the authorized capital
-------------
stock of the Company consists in its entirety of (a) 27,500,000 shares of Common
Stock, 10,000,000 of which are issued and outstanding, 17,500,000 of which are
authorized but unissued and none of which are held by the Company as treasury
shares, and (b) 2,500,000 shares of Preferred Stock, 560,000 shares of which
have been designated as 8% Cumulative Redeemable Preferred Stock (the "8%
Preferred Stock"), of which 560,000 shares are issued and outstanding. No other
class or series of preferred stock has been authorized by the Company.
Dividends with respect to the 8% Preferred Stock have been paid in cash through
November 5, 1995 in compliance with all applicable laws. All of the outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and were issued in compliance with
all applicable securities laws and regulations. Except as set forth on Schedule
3.3, there are no voting trusts or other agreements, arrangements or
understandings with respect to the voting of the capital stock of the Company
(x) to which the Company is a party or (y) to the best of the Company's
knowledge, to which any other person is a party. Except as set forth on
Schedule 3.3, there are no preemptive rights, registration rights,
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of the Company and there are no outstanding
contractual or statutory obligations of the Company to repurchase, redeem or
otherwise acquire or sell, issue or otherwise transfer any shares of capital
stock. Schedule 3.3 sets forth the record ownership of Common Stock and
Preferred Stock. No person has any cumulative voting rights with respect to the
capital stock of the Company.
3.4 Issuance of Shares. Upon stockholder approval of a charter
------------------
amendment as contemplated by Section 4.7, the Shares will have been duly
authorized and, when issued as contemplated hereby at the Closing, will be
validly issued, fully paid and non-assessable and neither the Shares nor the
Buyers will be subject to any restrictions imposed by Minnesota law with respect
to voting under Section 302A.671 of the Minnesota Business Corporation Act and
transactions with the Company under Section 302A.673 of the Minnesota Business
Corporation Act.
3.5 Authority. The Company has full corporate power and authority to
---------
execute and deliver this Agreement and each other agreement contemplated hereby,
to carry out its
4
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obligations hereunder and thereunder and to consummate the transactions
contemplated on its part hereby and thereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board, and no other
corporate proceedings on the part of the Company or its stockholders (other than
in connection with the approval of a charter amendment as contemplated by
Section 4.7) are necessary to authorize the execution and delivery of this
Agreement by the Company or to consummate the transactions contemplated on its
part hereby. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Each other agreement to be executed by the
Company in connection with this Agreement on or prior to the Closing Date (the
"Ancillary Agreements"), will be duly executed and delivered by the Company, and
(assuming due execution and delivery by the other party or parties thereto) will
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Prior to the Closing, the Amendment (as
defined in Section 4.7) (i) will be duly authorized by the Board and the
Company's stockholders and will be duly executed by the Company and (ii) will be
properly filed with the Minnesota Secretary of State. Upon such filing, the
holders of the capital stock of the Company will have the rights, preferences
and privileges set forth in the Company's Articles of Incorporation, as modified
by the Amendment. No person will have any dissenters or appraisal rights with
respect to the Amendment. The adoption of the Amendment and the transactions
contemplated by Section 4.9 will comply with all applicable securities laws.
3.6 No Violation. The execution, delivery and performance of this
------------
Agreement and the Ancillary Agreements by the Company and the consummation of
the transactions contemplated hereby and thereby will not (a) violate any
provision of law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Company, (b) except as set forth on
Schedule 3.6 and except for the filing of a pre-merger notification report under
the HSR Act, require the consent, waiver, approval or authorization of or any
filing by the Company with any person or governmental authority, (c) except as
set forth on Schedule 3.6, violate, result (with or without notice or the
passage of time, or both) in a breach of, or give rise to the right to
terminate, accelerate or cancel any obligation under, or require the payment of
any fee, or constitute (with or without notice or the passage of time, or both)
a default under, any of the terms or provisions of the (i) articles of
Incorporation and Bylaws of the Company, or (ii) any indenture, mortgage, lien,
order, judgment, ordinance, regulation, decree, license, permit, franchise or
other agreement or instrument to which the Company is subject or bound which (in
the case of clause (ii)) could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect or to interfere in any material way
with the Company's ability to consummate the transactions contemplated by this
Agreement, (d)
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result in the creation of any lien, claim or encumbrance upon any property of
the Company which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or (e) except as set forth on Schedule 3.6
result in a termination, loss or adverse modification of any license, permit,
certificate, franchise or contract granted to or otherwise held by the Company
which could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Neither the Company nor, to the best of the Company's
knowledge, any other party, has, in connection with this Agreement, (x) obtained
any waiver, supplement, modification or amendment of the terms or provisions of
any indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, ordinance, regulation or decree to which the Company is subject or
bound, or (y) entered into any understanding or agreement, oral or written,
whether or not legally enforceable, with respect thereto except as specifically
contemplated herein.
3.7 Litigation. Except as set forth on Schedule 3.7, there are no
----------
actions, proceedings, complaints, grievances, investigations or unfair labor
practice complaints or grievances or investigations pending or, threatened,
against the Company or any of its assets or property before any court or
governmental or regulatory authority or body or arbitrator, which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, nor, to the best of the Company's knowledge, is there any basis
for any of the foregoing; provided that threatened litigation shall mean matters
with respect to which the Company has been notified of a possible claim and
reasonably expects the amount of such claim to exceed $50,000. There are no
such actions, proceedings or investigations pending or, to the best knowledge of
the Company, threatened against the Company or, to the best knowledge of the
Company, pending or threatened against any other party challenging the validity
or propriety of the transactions contemplated by this Agreement. Except as set
forth on Schedule 3.7, none of the Company or any of its assets or property is
subject to any order, judgment, injunction or decree, which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
On November 5, 1992, Al Copeland Enterprises, Inc. merged with and into the
Company with the Company continuing as the survivor pursuant to the terms of the
Fourth Amended Plan of Reorganization that was proposed by the Canadian Imperial
Bank, as Agent (the "Plan"), and which was confirmed on October 22, 1992 (the
"Confirmation Date") in the bankruptcy proceeding of Al Copeland Enterprises,
Inc. (the "Debtor"), Case No. 91-12575-FM-11, still pending in the United States
Bankruptcy Court, Western District of Texas, Austin Division (the "Bankruptcy
Court"). Except as set forth on Schedule 3.7, there are (i) no claims of any
creditor that arose prior to the Confirmation Date that are either still
outstanding or being asserted against the Company, as successor to the Debtor,
whether such claims are liquidated or unliquidated, contingent or matured,
disputed or undisputed, or otherwise, and whether or not such claims are covered
by insurance, or (ii) no undertakings in the Plan that are still outstanding
that may subject the Company to any obligations, monetary or otherwise, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and except as set forth on such schedule, all of such
claims or obligations have either been satisfied in full or fully discharged
against the Debtor and the Company, as successor. Schedule 3.7 lists
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all actions, whether pending in the Bankruptcy Court, or any other court,
tribunal or panel, with respect to any of such claims that have not yet been
fully resolved or adjudicated.
3.8 Financial Statements. The Buyers have been provided complete
--------------------
copies of the audited financial statements for the Company's three most recently
completed fiscal years and the Company's unaudited financial statements for the
53 week period ended December 31, 1995 (the "Financial Statements"). The
Financial Statements were and, upon delivery, the financial statements described
in Section 4.2 will be prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis and present or will present,
as the case may be, fairly the financial position, results of operations and
cash flows of the Company as of the dates and for the periods indicated. The
Financial Statements are and, the financial statements described in Section 4.2
will be prepared in accordance with the books and records of the Company. The
accounting and financial records of the Company have been prepared and
maintained in accordance with sound bookkeeping practices. At the respective
dates of the Financial Statements and the financial statements described in
Section 4.2, there were no material liabilities, commitments or obligations
(absolute, accrued, contingent or otherwise) of the Company, which in accordance
with GAAP, should have been shown or reflected in such financial statements or
the notes thereto.
3.9 Absence of Certain Changes or Events. Since January 1, 1995,
------------------------------------
except as set forth on Schedule 3.9, the Company has conducted its business in
the ordinary course consistent with past practice and there has not been any:
(a) material adverse change in the financial condition,
assets, liabilities, business, operations or results of operations of
the Company;
(b) addition to or modification of employee benefits plans,
arrangements or practices; provided that with respect to store level
employment arrangements or practices, such additions or modifications
shall have been material;
(c) sale, assignment or transfer of any of the material
assets of the Company, other than in the ordinary course of business,
consistent with past practice;
(d) cancellation of any indebtedness owed to the Company in
an aggregate amount greater than $50,000, or waiver of any rights of
similar value to the Company relating to any of its business
activities or properties, other than in the ordinary course of
business;
(e) amendment, cancellation or termination of any Contract
(as defined in Section 3.12), license or other instrument material to
the Company other than with respect to terminations of franchise
agreements with operators of
7
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fewer than five stores or area development agreements that involve
fewer than five stores;
(f) failure to repay any material obligation of the Company
when due;
(g) change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities, results of
operations or business;
(h) material revaluation by the Company of any of its
assets, including without limitation, any material write-offs,
material increases in any reserves or any write-up of the value of
inventory, property, plant, equipment or any other asset;
(i) material damage, destruction or loss (whether or not
covered by insurance) affecting any store, office, plant or warehouse
maintained by the Company or any other material asset of the Company
and resulting in a loss in excess of $200,000;
(j) mortgage, pledge or other encumbrance of any assets of
the Company, material singly or in the aggregate;
(k) declaration, setting aside or payment of any dividend or
other distribution or payment (whether in cash, stock or property)
with respect to the capital stock or other equity securities of the
Company or any redemption, purchase or other acquisition of any of the
securities of the Company, or any other payment to any stockholder of
the Company in its capacity as a stockholder other than dividends with
respect to the 8% Preferred Stock;
(l) issuance by the Company of, or commitment by it to
issue, any capital stock or other equity securities or obligations or
any securities convertible into or exchangeable or exercisable for
capital stock or other equity interests;
(m) indebtedness for borrowed money incurred by the Company
or any commitment to incur indebtedness for borrowed money entered
into by the Company, or any loans made or agreed to be made by the
Company other than pursuant to commitments or credit facilities
existing on October 1, 1995 and set forth on Schedule 3.12;
(n) incurrence of other liabilities involving $100,000 or
more, except in the ordinary course of business, or any increase or
change in any
8
<PAGE>
assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserves;
(o) payment, discharge or satisfaction of any liabilities
other than the payment, discharge or satisfaction (i) in the ordinary
course, consistent with past practice, of liabilities reserved against
in the Financial Statements or of liabilities incurred in the ordinary
course, consistent with past practice (ii) under the Credit Agreement
(as defined below) or (iii) of other liabilities involving $250,000 or
less individually and $1,000,000 or less in the aggregate;
(p) increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee
or any severance or termination pay, except for increases in the
ordinary course of business, consistent with past practice or as
required by law or any existing agreement and except for cost of
living adjustments and other increases consistent with past practice;
or
(q) granting of any bonus, incentive compensation, service,
award or other like benefit to any officer or employee except in
accordance with plans or arrangements disclosed on Schedule 3.11.
3.10 Insurance. Schedule 3.10 contains a list of all policies of
---------
insurance, surety bonds and letters of credit maintained by the Company (showing
as to each policy or binder, the carrier, coverage limits, expiration dates,
annual premiums and a general description of the type of coverage provided),
which list is true, complete and accurate in all material respects as of the
date hereof. To the best of the Company's knowledge, the Company is not in
default with respect to its obligations under any such policies. All of such
policies are sufficient for compliance with all requirements of law and all
contracts, leases and other agreements to which the Company is a party except
where any such insufficiencies would not have, individually or in the aggregate,
a Material Adverse Effect. The Company has not failed to give any notice or to
present any material claim under any such policy or binder in a due and timely
fashion except for such failure as would not have, individually or in the
aggregate, a Material Adverse Effect. To the best of the Company's knowledge,
such policies and binders are in full force and effect on the date hereof and
will continue to be kept in full force and effect on substantially equivalent
terms through the consummation of the transactions contemplated hereby except to
the extent policies expire and are replaced in the ordinary course of business
with policies and binders on substantially equivalent terms or such expirations
as would not have, individually or in the aggregate, a Material Adverse Effect.
3.11 Employee Benefits.
-----------------
(a) The term "Benefit Plans" means:
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<PAGE>
(i) all employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and
(ii) all other deferred compensation, profit-sharing, bonus,
stock option, stock purchase, stock bonus, excess benefit, vacation
pay, holiday pay, dependent care assistance, severance, incentive,
salary continuation or other compensation arrangements,
maintained or contributed to by the Company for the benefit of one or more of
its employees (or former employees) and/or their beneficiaries. All Benefit
Plans are listed on Schedule 3.11.
(b) The term "Pension Plan" means an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA maintained by the Company.
(c) The Company does not contribute to any "Multiemployer Plan," as
defined in Section 4001(a)(3) of ERISA and never contributed to any such plan in
the past.
(d) The Company has furnished to the Buyers:
(i) Each Benefit Plan and any related funding agreements
(e.g., trust agreements or insurance contracts), including all
amendments (and the schedule to this Section includes a description of
any such amendment that is not in writing);
(ii) The current draft of the Summary Plan Description of
each Benefit Plan (if applicable);
(iii) The most recent Internal Revenue Service
determination letter (if applicable) for each Pension Plan, which
determination letter reflects all amendments that have been made to
the plan; and
(iv) The two (2) most recent Form 5500s that were filed on
behalf of the Benefit Plan, including the actuarial report (if
applicable).
(e) With respect to each Pension Plan that is subject to Title IV
of ERISA:
(i) Schedule 3.11 provides a break-down of the aggregate
liability of such Pension Plans stated in the Company's financial
statements into separate statements as to the liability (or net asset
balance) of each such Pension Plan;
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<PAGE>
(ii) no event has occurred, and no condition or set of
circumstances exists as of the date hereof, which presents a material
risk of the termination of any Pension Plan by the Pension Benefit
Guaranty Corporation and no reportable event (within the meaning of
section 4043 of ERISA) which, in and of itself, could have an adverse
effect exceeding $50,000 has occurred;
(iii) No amount is due or owing from the Company to the
Pension Benefit Guaranty Corporation ("PBGC")(other than a liability
for premiums under Section 4007 of ERISA).
(f) Except as set forth on Schedule 3.11, all unpaid liabilities of
the Company with respect to, and all unfunded benefits (whether vested or not)
under each Benefit Plan have been calculated and are reflected in the Company's
financial statements in accordance with GAAP, and any such liabilities incurred
after the date of such financial statements will be incurred in the ordinary
course of business, determined in a manner substantially similar to that used in
such financial statements.
(g) In the case of each Pension Plan that is subject to Section 412 of
the Internal Revenue Code of 1986, as amended (the "Code"), there is no
accumulated funding deficiency (within the meaning of Section 4971 of the Code),
whether or not such deficiency has been waived.
(h) Each Benefit Plan complies currently, and since March 27, 1993 has
complied, both in form and in operation, in all material respects, with all
applicable law, such as ERISA and the Code (including Section 4980B thereof).
Furthermore, the Internal Revenue Service has issued a favorable determination
letter with respect to each Pension Plan that is intended to qualify under
Section 401(a) of the Code, and no event has occurred after March 27, 1993 that
would disqualify the plan.
(i) Since March 27, 1993, no nonexempt "prohibited transaction" (as
defined in Section 4975 of the Code and Section 406 of ERISA) has occurred with
respect to any Benefit Plan.
(j) Except as set forth on Schedule 3.11, there is no contract,
agreement or benefit arrangement with the Company which, individually or
collectively, could give rise to the payment of any amount which may constitute
an "excess parachute payment" under federal law.
(k) Except as related liabilities are reflected in the Company's
financial statement prepared in accordance with GAAP, and except as set forth on
Schedule 3.11, the Company does not maintain, or contribute to, any plan that
provides or will provide medical or death benefits to one or more former
employees (including retirees), other than benefits that are
11
<PAGE>
required to be provided pursuant to federal law or state law continuation
coverage or conversion rights.
(l) There are no lawsuits or other claims, pending or, to the best
knowledge of the Company, threatened (other than routine claims for benefits
under the plan) against (i) any Benefit Plan or (ii) any fiduciary of such plan
brought on behalf of any participant, beneficiary, or fiduciary thereunder, nor
is there any reasonable cause for any such claim.
(m) Except as set forth as Schedule 3.11, the Company has no intention
or commitment, whether legally binding or not, to create any additional Benefit
Plan or to modify or change any existing Benefit Plan, except as required to
conform to changes in the law. The benefits under all Benefit Plans are as
represented, and have not been, and, prior to the Closing will not be, increased
subsequent to the date Benefit Plan documents are provided to the Buyers, except
as required to conform to changes in the law.
(n) The Company has complied (to the extent applicable) in all
material respects with the provisions of the Worker Adjustment and Retraining
Notification Act and the Americans with Disabilities Act.
(o) None of the persons performing substantial services for the
Company have been improperly classified as independent contractors or as being
exempt from the payment of wages for overtime.
(p) Except as set forth on Schedule 3.11, the Company has not provided
any benefits under any Benefit Plan to individuals who are not current employees
of the Company and the Company is not obligated to provide any such benefits in
the future, except as expressly provided by the terms of the Benefit Plan.
(q) The Company has complied in all material respects with all
reporting and disclosure obligations imposed upon it under all applicable
federal and state securities laws by reason of the operation of the Benefit
Plans.
(r) No event or circumstances have occurred with respect to employee
benefit plans (as defined in section 3(3) of ERISA) of former subsidiaries of
the Company which might give rise to liability in excess of the amount already
reflected in the Company's financial statements in accordance with GAAP.
(s) Any trust that is intended to be tax-exempt as a voluntary
Employees' Beneficiary Association under Section 501(c)(9) of the Code has
received a favorable determination letter from the Internal Revenue Service
regarding its tax-exempt status that reflects the provisions of the Deficit
Reduction Act of 1984, all contributions to it were
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<PAGE>
properly and fully deducted in the year when paid, and it has not incurred any
tax on unrelated business taxable income under Code Sections 511 through 514.
(t) There are no investigations, proceedings, or lawsuits, either
currently in progress or expected to be instituted in the future, relating to
any Benefit Plan, by any administrative agency, whether local, state, or
federal.
(u) No Benefit Plan has any interest in any annuity contract or other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship, rehabilitation, or similar proceeding.
3.12 Material Contracts and Other Agreements. Schedule 3.12
---------------------------------------
discloses, as of the date hereof, whether written or oral, together with all
amendments and modifications thereto, of (a) all contracts and agreements
whether or not fully performed pursuant to which the Company has since January
1, 1995 acquired or disposed of a portion of its business or assets which
provided for an aggregate purchase price in excess of $100,000 (other than (i)
sales of product or inventory; (ii) acquisitions of assets consistent with the
Company's 1995 business plan; (iii) sales of individual parcels of surplus
properties; and (iv) sales of obsolete equipment, in each case, in the ordinary
course of business)(the "Disposed Businesses"); (b) all agreements containing
covenants not to compete on the part of the Company or otherwise restricting the
ability of the Company to engage in its business (other than pursuant to
agreements set forth in clause (g) below or pursuant to leases, reciprocal
easements and deeds provided that the restrictions contained in such agreements
or instruments do not materially impact the ability of the Company to operate
its business as currently conducted); (c) all notes, mortgages, indentures,
letters of credit, guarantees, performance bonds and other obligations and
agreements and other instruments for or relating to any lending or borrowing
(including assumed debt) entered into by the Company or pursuant to which any
properties or assets of the Company are pledged or mortgaged as collateral; (d)
any employment or consulting agreement with any present or former director,
officer or employee of the Company which calls for annual compensation in excess
of $85,000; (e) all joint venture or partnership agreements to which the Company
is a party or bound; (f) all agreements pursuant to which the Company pays
royalties; (g) all area development agreements, letters of commitment and
franchise agreements to which the Company is a party or bound; (h) all
purchasing co-operative agreements to which the Company is a party or bound; (i)
all agreements with Large Suppliers to which the Company is a party or bound (as
defined in Section 3.13); and (j) any other contracts and agreements which are
material to the Company. The foregoing are hereinafter referred to as the
"Contracts." Schedule 3.12 also discloses the aggregate number of surplus
properties and operating restaurants disposed of since January 1, 1995. With
respect to each Contract, (1) such Contract is valid, binding and enforceable
against the Company and, to the best of the Company's knowledge, each other
party thereto in accordance with its terms; (2) neither the Company nor, to the
best of Company's knowledge, any other party to such Contract is in material
breach thereof or material default thereunder; (3) there does not exist any
event that, with the giving of notice or the lapse of time or both, would
constitute a material breach of or
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<PAGE>
a material default under such Contract, and the Company has not received or
given notice of any such breach, default or event; and (4) there have been no
waivers or releases of any of the Company's material rights or remedies under
any of the Contracts. True and correct copies of the Contracts have been made
available to the Buyers. To the best knowledge of the Company, the Company
could not reasonably be expected to have any continuing liabilities or
obligations in connection with or arising in respect of the Disposed Businesses,
individually or in the aggregate, in excess of $200,000.
3.13 Suppliers. Schedule 3.13 sets forth (a) the twenty largest
---------
suppliers of the Company for the 1995 calendar year other than suppliers of (i)
utilities, (ii) professional services and (iii) advertising services (the "Large
Suppliers"), and (b) the amount of such payments to each Large Supplier for the
1995 calendar year. The Company has a good business relationship with each of
its Large Suppliers. None of the Large Suppliers have canceled or otherwise
terminated, or threatened in writing to cancel or otherwise terminate, its
relationship with the Company or, since January 1, 1995, decreased materially,
or threatened to decrease or limit materially, its services, supplies or
materials to the Company.
3.14 Fee Property. For purposes of this Agreement, "Real Property"
------------
shall mean Fee Property and Leased Property, as defined in this Section 3.14 and
in Section 3.15, respectively. The Real Property constitutes all of the real
property interests owned, leased, operated or occupied in whole or in part by
the Company or which are related to or used in connection with its business.
For purposes of this Agreement, the term "Permitted Real Property Liens" shall
mean (a) liens reflected in Schedule 3.14, (b) liens consisting of zoning or
planning restrictions, easements and other customary restrictions or limitations
on the use of real property or other liens of record, in each case which do not
materially (individually or in the aggregate) detract from the value of, or
impair the use of, such property by the Company in the operation of its
business, and (c) liens for current taxes, assessments or governmental charges
or levies on property not yet due and payable. For purposes of this Agreement,
"Fee Property" shall mean all real property owned in whole or in part by the
Company. Schedule 3.14 contains an accurate and complete list of all Fee
Property owned in whole or in part by the Company and includes the name of the
record title holder thereof and a list of all indebtedness secured by a lien,
mortgage or deed of trust thereon. The Company has good, valid, marketable and
insurable title in fee simple to all the Fee Property, free and clear of all
encumbrances, liens, charges or other restrictions of any kind or character,
except for Permitted Real Property Liens.
3.15 Leased Property. For purpose of this Agreement, "Leased
---------------
Property" shall mean all Real Property leased or otherwise operated or occupied
(other than as an owner) in whole or in part by the Company. Schedule 3.15 sets
forth a list, of (a) all leases and subleases under which the Company is the
lessor, lessee, operator or occupant of any real property, and (b) all material
options granted by the Company or contractual obligations on the part of the
Company to purchase, acquire, sell or dispose of any interest in real property.
The Company has made available to the Buyers copies of all Leases (as
hereinafter defined), together with all
14
<PAGE>
amendments and supplements pertaining thereto; material options, nondisturbance
agreements and other agreements held by the Company or contractual obligations
on the part of the Company to purchase or acquire any interest in real property.
The Company has good, valid, marketable and insurable leasehold title to all
Leased Property, free and clear of all encumbrances, liens, charges or other
restrictions of any kind or character, except for Permitted Real Property Liens.
Each lease, sublease or other agreement (collectively, the "Leases") set forth
on Schedule 3.15 (or required to be set forth on Schedule 3.15) is in full force
and effect; all rents and additional rents due to date on each such Lease have
been paid in full; in each case, the Company as lessee is not, and, to the
Company's best knowledge, except as set forth on Schedule 3.15, the Company's
lessees are not, in default thereunder in any material respect and no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor; and except as set forth on Schedule 3.15, there exists no
event of default or event, occurrence, condition or act (including the
acquisition and/or consolidation contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a material default under such Lease, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
The Company has not violated any of the terms or conditions under any such Lease
in any material respect, and, to the best knowledge of the Company, all of the
material covenants to be performed by any other party under any such Lease have
been fully performed.
3.16 Real Property. Except as set forth on Schedule 3.16, (a) all of
-------------
the buildings, structures and appurtenances (or any building systems therein)
situated in whole or in part on any of the Real Property are in good operating
condition and in a state of good maintenance and repair, are adequate and
suitable for the purposes for which they are presently being used and, with
respect to each, the Company has adequate rights of ingress and egress for
operation of the business in the ordinary course and consistent with past
practice, (b) none of such buildings, structures or appurtenances (or any
building systems therein) nor the operation or maintenance thereof, violates any
restrictive covenant or encroaches on any property owned by others in any way
which could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, or (c) no condemnation proceeding or other litigation
is pending or, to the best knowledge of the Company, threatened which would
preclude or materially impair the use of any Real Property by the Company for
the purposes for which it is currently used.
3.17 Compliance with Laws. Except as set forth on Schedule 3.17, the
--------------------
Company is in compliance with applicable federal, state or local statutes, laws
and regulations, including, without limitation, any applicable franchise,
building, zoning, health, environmental, sanitation, safety, labor relations or
other law, ordinance or regulation, other than violations, if any, which, could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
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3.18 Licenses and Permits; Franchise Matters.
---------------------------------------
(a) Except as set forth on Schedule 3.18, the Company has all
governmental or regulatory licenses, permits and authorizations (all of which
are in full force and effect) necessary to conduct its business as it is now
being conducted, except for such governmental or regulatory licenses, permits
and authorizations the absence of which would not have, individually or in the
aggregate, a Material Adverse Effect, and none of such governmental or
regulatory licenses, permits and authorizations will be impaired as a result of
the transactions contemplated by this Agreement, except in any case that would
not have, individually or in the aggregate, a Material Adverse Effect. The
Company has not received any notice to the effect that, or otherwise been
advised that, it is not in compliance with, or that it is in violation of, any
such governmental or regulatory licenses, permits and authorizations in a manner
that would have, individually or in the aggregate, a Material Adverse Effect,
and there are not currently existing circumstances that are likely to result in
a failure of the Company to comply with, or in a violation by the Company of,
any such governmental or regulatory licenses, permits or authorizations that
would have, individually or in the aggregate, a Material Adverse Effect.
(b) Schedule 3.18 sets forth a true and complete list of (1) all
states in which the Company has registered its franchises for sale; (2) all
states in which the Company has received an official notice from the appropriate
state officials that the Company's offer to sell and the sale of its franchises
are exempt from the registration provisions of such jurisdiction's franchise
registration law; and (3) all other states which have enacted franchise
registration laws in which, in the opinion of the Company, the offer to sell and
the sale of its franchises are exempt from the registration provisions thereof.
True and correct copies of all notices of registrations and all notices of
exemption, as described in clauses (1) and (2) above, have been made available
to Buyers, and such registration and exemption notices are in full force and
effect as of the date hereof. The Company has delivered to Buyers true and
correct copies of the Company's current forms of Uniform Franchise Offering
Circulars ("UFOCs"), which are currently being used in connection with the
offers to sell and the sales of its franchises. Schedule 3.18 sets forth the
jurisdictions and dates after which the UFOCs of the Company did comply in all
material respects with all applicable federal and state laws and regulations
pertaining to offers to sell and the sale of franchises, including, without
limitation the Federal Trade Commission's Disclosure Rule entitled, "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures", 16 C.F.R. (S)436. Schedule 3.18 sets forth the jurisdictions and
dates after which all offers to sell and all sales of the Company's franchises
have been made in material compliance with all applicable federal and state laws
and regulations.
3.19 Title to Assets. The Company owns or leases all tangible
---------------
personal property necessary for the conduct of its business as presently
conducted. Each such asset has been maintained in accordance with ordinary
industry practice, is in good operating condition and is usable in the ordinary
course of business, other than where any such failures individually
16
<PAGE>
or in the aggregate would not have a Material Adverse Effect. Except for liens
arising under documents set forth on Schedule 3.12 and for other imperfections
which individually or in the aggregate would not have a Material Adverse Effect
and except for leased or licensed assets, the Company has good and marketable
title to all of the owned tangible personal property used in the conduct of its
business, except for assets disposed of in the ordinary course of business. The
Company has good and valid leasehold title to all leased tangible personal
property leased by it from third parties, free and clear of all liens, security
interests and other encumbrances except for imperfections individually or in the
aggregate as would not cause a Material Adverse Effect and except for liens
arising under documents listed on Schedule 3.12(c).
3.20 Inventory. The value at which the inventory of the Company is
---------
carried on the Company's December 31, 1995 balance sheet (attached hereto as
part of Schedule 3.8) reflects the customary inventory valuation policy of the
Company and is in accordance with GAAP consistently applied. The Company's
current inventory consists of items of a quality which are saleable in the
ordinary course of business at prevailing prices except for amounts of inventory
that could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, and is in a quantity sufficient to service the
operations of the business of the Company at the Company's current level of
operations. Since December 31, 1995, the Company has continued to replenish its
inventory in the ordinary course of business consistent with past practice, and
has not made any change in its inventory policies or procedures.
3.21 Accounts and Notes Receivable. All accounts receivable of the
-----------------------------
Company acquired since January 1, 1995 are collectible at the aggregate recorded
amounts thereof, net of any applicable reserves for doubtful accounts, which
reserves are adequate and were calculated consistent with past practices. There
are no refunds, rebates, discounts or other adjustments payable with respect to
accounts receivables except in the ordinary course of business consistent with
past practices; provided that Schedule 3.21 sets forth all such arrangements or
adjustments with respect to any franchisee operating five or more locations.
Schedule 3.21 sets forth a true and complete list of all notes receivable held
by the Company, showing the payment history with respect to each note. Schedule
3.21 sets forth the accounts receivable of any franchisee operating five or more
locations (including notes receivable) that are not collectible in full.
3.22 Taxes.
-----
(a) Subject to subsection (b) hereof and except as set forth in
Schedule 3.22:
(i) The Company has paid all federal, state, local and
foreign income, alternative, add-on, gross receipts, franchise,
payroll, F.I.C.A., unemployment, withholding, real property, personal
property, admissions, gains, replacement, sales, use, excise, payroll,
disability and other taxes imposed on the Company or with respect to
any of its properties, or otherwise payable by it, including interest,
penalties and other additions, if any, in respect thereof
17
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(collectively, "Company Taxes"), for all taxable periods ended on or
prior to December 25, 1994 for which the Company, or any predecessor
entity, was in existence except to the extent discharged in
bankruptcy. After December 25, 1994, the Company has paid and/or
incurred only Company Taxes incurred in the ordinary course of
business determined in the same manner as in the applicable preceding
taxable period ending on or before December 25, 1994;
(ii) Without limiting the foregoing representations in any
way, (i) the Company has collected all sales, use and value added
taxes required to be collected, and has remitted, or will remit on a
timely basis, such amounts to the appropriate governmental authorities
and has furnished properly completed exemption certificates for all
exempt transactions and (ii) the Company has properly withheld income
and social security or other similar taxes and paid payroll taxes with
respect to all persons properly characterized as employees for
federal, state or local tax purposes.
(iii) The Company has timely filed all returns, reports and
other filings related to Company Taxes which it is required to file
and has paid all the amounts shown to be due thereon. All such
returns, reports and filings are true and correct and complete. The
Company has delivered to the Buyers complete copies of all such tax
returns, reports and filings for the last three taxable periods for
which such returns, reports and filings have been filed. The Company
is not required to file returns, reports or filings in any state or
local or foreign jurisdiction for any tax period except in those
states, local or foreign jurisdictions in which it has filed.
(iv) As of December 25, 1994, the Company has amounts of net
operating loss carryovers available for deduction in future taxable
years for Federal income tax purposes as set forth on Schedule 3.22,
subject to the limitations on the use of such carryovers as set forth
on such Schedule 3.22.
(v) No audit, examination, action or proceeding is pending
or threatened by any governmental authority with respect to the
possible assessment or collection from the Company of any Company
Taxes, no unresolved claim for assessment or collection of any Company
Taxes has been asserted against the Company, and all resolved
assessments of Company Taxes have been paid. The Company has
delivered to Buyers complete copies of all audit reports and other
governmental claims asserting Company Taxes in addition to those
Company Taxes set forth on the returns, reports and filings of the
Company.
(vi) There are no liens for Company Taxes (other than for
current Company Taxes not yet due and payable) upon the assets of the
Company.
18
<PAGE>
(vii) The Company is not a party to or bound by any tax
sharing, tax indemnity or tax allocation agreement or other similar
arrangement.
(viii) The Company has not taken any action that would
require an adjustment pursuant to Section 481 of the Internal Revenue
Code of 1986, as amended (the "Code"), by reason of a change in
accounting method or otherwise.
(ix) The Company has not filed a consent under Section
341(f)(1) of the Code or agreed to have the provisions of Section
341(f)(2) of the Code apply to any disposition of "subsection (f)
assets" as such term is defined in Section 341(f)(4) of the Code.
(x) The Company has not made any payments, is obligated to
make any payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that would not be
deductible under Section 280G of the Code.
(xi) The Company has not executed or entered into any
closing agreement pursuant to Section 7121 of the Code, or any
predecessor provisions thereof or any similar provision of state or
other law.
(xii) The Company has not agreed to any extension of any
applicable statute of limitations for the imposition of any Company
Tax.
(b) All representations in Section 3.22(a) hereof, with respect
to state and local Company Taxes will be true and correct if, in the aggregate,
any exceptions to such representations are immaterial.
3.23 Environmental Laws and Regulations.
----------------------------------
(a) For the purposes of this section, the following words and
phrases shall have the following meanings:
"Company" means America's Favorite Chicken Company, and/or any of
-------
its subsidiaries.
"Environmental Condition" means any condition relating to the
-----------------------
presence, release, threat of release, transportation, disposal, storage or
treatment of Hazardous Materials in, at on, under or about (i) the Real
Property, or (ii) the environment beyond the Real Property, which Hazardous
Materials migrated, emanated or originated from the Real Property.
"Environmental Law" means any environmental or health and safety-
-----------------
related law, policy, regulation, rule, requirement, statute, ordinance, common
law decision, order or
19
<PAGE>
determination of any governmental or judicial authority at the federal, state,
or local level, whether existing as of the date hereof, previously enforced or
subsequently enacted.
"Hazardous Material" means any pollutant, contaminant, toxic
------------------
substance, hazardous waste, hazardous material, hazardous substance, petroleum
or petroleum product, asbestos, polychlorinated biphenyls, underground storage
tanks and the contents thereof including, without limitation, any such materials
defined in or regulated pursuant to any Environmental Law.
"Real Property" means any real property or "facility" (as defined in
-------------
the Resource Conservation and Recovery Act, 42 U.S.C (S) 6901 et seq. ("RCRA"))
currently or formerly owned, operated, leased or occupied by the Company.
(b) Except as set forth on Schedule 3.23 or as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
the Company has no liability under, and is in compliance with, all Environmental
Laws applicable to the Company's business, the Real Property and any facilities
and operations thereon. Except as set forth on Schedule 3.23 or as could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (i) each Real Property is in compliance with all Environmental
Laws, and (ii) there are no Hazardous Materials located in, under or about any
Real Property.
(c) The Company possesses all permits and authorizations under
Environmental Laws required or necessary to conduct its business, except where
the failure to obtain any such permits or authorizations could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(the "Required Permits"). The Company is in compliance with all terms and
conditions of the Required Permits, except where the failure to comply could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Required Permits are in full force and effect and will not
be impaired as a result of the transactions contemplated hereby.
(d) (i) Since November 5, 1992, the Company has not: entered into or
been subject to any outstanding consent decree, compliance order, or
administrative order with respect to the Real Property or any facilities or
operations thereon the future compliance with which could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or (ii) as
of the date hereof the Company has not received any notice, complaint or claim
from any governmental authority with respect to any Environmental Condition.
With respect to each of these matters, the Company has taken all appropriate
action consistent with all applicable Environmental Laws, except where the
failure to take any such action could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(e) There are no Environmental Conditions that could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
20
<PAGE>
(f) No lien has been imposed or, to the Company's knowledge, is
threatened on any or all of the Real Property by any governmental agency at the
federal, state, or local level in connection with any Environmental Conditions.
(g) Between November 5, 1992 and the date hereof, the Company has not
received any notice, complaint or claim from nor has the Company given any
notice to, any governmental authority or other third party alleging that the
Company and/or any Real Property is not, or may not be, in compliance with any
applicable Environmental Laws relating to: (i) the maintenance of records of
Hazardous Material handled at each Real Property; (ii) reporting, monitoring,
inspections, and compliance with the manifest system for tracking the movement
of Hazardous Material; (iii) operating methods, techniques, and practices for
treating, storing, and disposing of Hazardous Material; (iv) the location,
design, and construction of the Real Property; (v) contingency plans for
minimizing unanticipated damage from Hazardous Material treatment, storage, or
disposal activities; (vi) maintenance and operation of each Real Property,
including qualifications with respect to ownership, continuity of operation,
personnel training, financial responsibility and closure; and (vii) any
Environmental Conditions.
(h) The costs of performing all remedial work necessary or advisable
to remediate Environmental Conditions existing at any and all Real Property (on
a "reasonable best case basis" as determined by the Buyers in their sole
discretion) shall not exceed $6,000,000. As of December 31, 1995, the Company
has reserved not less than $3,000,000 to pay Remediation Costs.
(i) The Company has delivered to the Buyers copies of all
environmental audits, studies and reports prepared to assess Environmental
Conditions.
3.24 Board of Directors Approval. The Board has unanimously approved
---------------------------
the transactions contemplated by this Agreement and has unanimously determined
that such transactions are fair to and in the best interests of the Company and
its stockholders. Such action of the Board remain in full force and effect.
3.25 Brokers; Certain Expenses. The Company has not paid or become
-------------------------
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with this Agreement, except for The Robinson
Humphrey Company, Inc. which has been retained as the Company's financial
advisor for the transactions contemplated hereby, for which the Company has
agreed to pay an investment banking fee of $1,250,000. The Company has
delivered to the Buyers true, correct and complete copies of all agreements and
understandings to which it is a party with The Robinson Humphrey Company, Inc.
The Company is not currently bound by any other agreement for the provision of
investment banking or financial advisory services with respect to any proposed
recapitalization, issuance of debt or equity securities or other transaction
involving the Company or the provision of any other investment banking or
financial advisory services to the Company.
21
<PAGE>
3.26 No Agreements to Sell the Company. Except as contemplated by
---------------------------------
this Agreement, the Company has no any legal obligation, absolute or contingent,
to any other person, firm or entity to sell capital stock, material assets or
business of the Company or to effect any merger, consolidation, liquidation,
dissolution, recapitalization or other reorganization of the Company or to enter
into any agreement with respect thereto.
3.27 Related-Party Transactions. Except as set forth on Schedule
--------------------------
3.27, since January 1, 1994, no stockholder, employee, officer, or director of
the Company or, to the knowledge of the Company, no affiliate (as such term is
defined in the Securities and Exchange Act of 1934, as amended) of any such
person, and no member of such persons' immediate families has engaged in any
transaction with, the Company.
3.28 Labor Matters.
-------------
(a) The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor unions. The Company has
not violated any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, equal opportunity employment, or
employees' health, safety, welfare, wages and hours, the default or violation of
which could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) Except as could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect: (i) there are no labor disputes
existing, or to the Company's best knowledge, threatened, involving strikes,
slow-downs, work stoppages, job actions or lockouts of any employees of the
Company (ii) there are no unfair labor practices or petitions for election
pending before the National Labor Relations Board or any other federal or state
Labor Commission relating to the employees of the Company, and (iii) no demand
for recognition heretofore made by any labor organization is pending with
respect to the Company.
3.29 Proprietary Rights. The Company owns or has the right to use
------------------
all: (i) the federal, state and foreign registrations of trademarks and of other
marks, trade names or other trade rights, and all pending applications for any
such registrations, in which the Company has any interest whatsoever, including
but not limited to, by means of ownership, license or otherwise; (ii) the
patents and copyrights, character names, likenesses, pictures, images, symbols,
caricatures, cartoons and signatures, and all pending applications therefor, in
which the Company has any interest whatsoever, including but not limited to, by
means of ownership, license or otherwise; (iii) other trademarks and other
marks, trade names and other trade rights in which the Company has any interest
whatsoever, including but not limited to, by means of ownership, license or
otherwise; and (iv) other trade secrets, designs, plans, specifications,
technical information and other proprietary rights, whether or not registered,
in which the Company has any interest whatsoever, including but not limited to,
by means of ownership, license or otherwise; in each case which, individually or
in the aggregate, are material to the conduct of the business of the Company
(collectively, "Proprietary Rights"). Schedule 3.29
22
<PAGE>
contains a list of all Proprietary Rights that are patents, trademarks,
tradenames, service marks and copyrights, and applications therefore in which
the Company has any interest whatsoever, including but not limited to, by means
of ownership, license or otherwise. No person has a right to receive from the
Company a royalty or similar payment in respect of any Proprietary Rights
whether or not pursuant to any contractual arrangements entered into by the
Company except as to licenses set forth on Schedule 3.29. Except as set forth
on Schedule 3.29, the Company has no knowledge of any infringement of the
Proprietary Rights by others. Except as set forth on Schedule 3.29, to the
Company's best knowledge the continued use of the Proprietary Rights as the
business has heretofore been conducted will not result in any infringement of
the rights of others. The Company has not received any written notice of
invalidity or infringement of any rights of others with respect to the
Proprietary Rights, similar types of rights of the Company, or of the third
party, since January 1, 1993 which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set
forth on Schedule 3.29, no proceedings have been instituted against or notices
received by the Company since January 1, 1993 alleging that the Company's use of
any Proprietary Rights infringes upon or otherwise violates any rights of a
third party, including but not limited to the third party's rights in or to the
Proprietary Rights of the Company, or similar types of rights of the third party
that are currently pending against the Company. All of the Proprietary Rights
are valid and enforceable rights of the Company. The Company has not
transferred any rights in the Proprietary Rights to any third party except as
contained in the Company's franchise agreements and except as set forth on
Schedule 3.29. None of the Proprietary Rights will cease to be valid and in
full force and effect by reason of the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated by this
Agreement.
3.30 Disclosure. No representation or warranty by the Company in this
----------
Agreement, any of the Schedules hereto or any other agreement delivered in
connection herewith contains any untrue statement of material fact or, omits to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein not misleading.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Conduct of Business Prior to the Closing Date. Except as
---------------------------------------------
described on Schedule 4.1 or as expressly permitted by this Agreement, the
Company agrees, from the date hereof, that prior to the Closing Date, except as
otherwise consented to or approved in writing by Buyers:
(a) the business of the Company shall be conducted only in the
ordinary course and consistent with past practice and the Company shall not take
any action inconsistent therewith or with the transactions contemplated hereby;
23
<PAGE>
(b) the Company shall not (i) amend its Articles of Incorporation or
Bylaws, (ii) change the number of issued or outstanding shares of its capital
stock, or issue any debt or equity securities, or any options, warrants or other
rights to acquire or subscribe for such securities, (iii) declare, set aside or
pay any dividend or other distribution or payment in cash, stock or property in
respect of shares of its capital stock other than with respect to the 8%
Preferred Stock, (iv) make any direct or indirect redemption, retirement,
purchase or other acquisition of any of its capital stock or (v) split, combine
or reclassify its outstanding shares of capital stock;
(c) the Company shall not, directly or indirectly, (i) other than in
the ordinary course of business and consistent with past practice, incur any
indebtedness for borrowed money, except indebtedness for borrowed money incurred
under credit facilities existing as of October 1, 1995 or which otherwise does
not exceed $100,000 in principal amount, (ii) waive, release, grant or transfer
any rights of material value, except in the ordinary course of business, (iii)
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any
asset of the Company with a value exceeding $50,000 individually, and $100,000
in the aggregate, other than the sale of surplus properties and other than
inventory disposed of in the ordinary course of business and consistent with
past practice, (iv) purchase or acquire any material interest in any business or
any securities or assets of a business, (v) enter into any joint venture or
partnership, (vi) settle any material litigation, or (vii) accelerate payments
on any indebtedness except as required in the Credit Agreement;
(d) the Company shall use its reasonable best efforts to preserve
intact the business organization of the Company, to keep available the services
of its operating personnel and to preserve the goodwill of those having business
relationships with it, including, without limitation, suppliers;
(e) the Company will not, directly or indirectly, (i) except with
respect to non-executive officer employees in the ordinary course of business
and consistent with past practice, increase the compensation payable or to
become payable by it to any of its employees, officers or directors (except in
accordance with employment agreements and welfare and benefit plans set forth on
Schedule 3.11); provided that with respect to non-executive officer employees,
in no case may compensation be increased by more than 6 1/2%, (ii) adopt
additional, or make any payment or provision, or otherwise amend, other than as
required by existing plans or agreements in the ordinary course of business and
consistent with prior practice, to any stock option, bonus, profit sharing,
pension, group insurance, severance pay, deferred compensation or other payment
or employee compensation plan for the benefit of employees of the Company, (iii)
grant any stock options or stock appreciation rights except as contemplated by
Section 4.6 of this Agreement, (iv) enter into any new, or alter or amend any
employment, severance, consulting or other compensation agreement with any
director, officer or affiliate of the Company (except to the extent permitted in
(i) above), (v) except as set forth on Schedule 4.1 make any loan or advance to,
or enter into any written contract, lease or commitment with, any
24
<PAGE>
officer, employee or director of the Company, or (vi) enter into any
transactions with any affiliate of the Company other than as contemplated by
this Agreement;
(f) the Company shall not, directly or indirectly, assume, guarantee,
endorse or otherwise become responsible for the obligations of any other
individual, firm or corporation, or make any loans or advances to any other
individual, firm or corporation other than with respect to arrangements with
franchisees operating less than five locations;
(g) capital expenditures (or commitments to make such expenditures
which are not terminable at the option of the Company) shall be incurred only in
accordance with the Company's 1996 business plan, a copy of which has been
provided to the Buyers, and the Company shall not make any other investment of a
capital nature either by purchase of stock or securities, contributions to
capital, property transfers or otherwise or by the purchase of any property or
assets of any other individual, firm or corporation;
(h) the Company shall not enter into, modify or amend in any material
respect or take any action to terminate their respective material contracts
(including those Contracts listed on Schedule 3.12 and any lease to which the
Company is a party), except in the ordinary course of business and except with
respect to contracts under which a third party has defaulted;
(i) the Company shall not alter any practice, with respect to
accounting policies or procedures or make any reclassification of assets or
liabilities, except for changes required by changes in GAAP;
(j) other than in the ordinary course of business, the Company shall
not close any store, office, plant, facility or warehouse, except as required by
applicable law or in the event of casualty or, as a result of the expiration of
any lease which, after reasonable efforts by the Company, is not renewed;
(k) other than in the ordinary course of business, enter into, with
respect to its stores, offices, plants, facilities and warehouses, any new
lease, lease termination agreement or amendment of any agreement to lease real
property (including, without limitation, any amendments to any such agreement
with respect to rent or additional rent, term assignment, subletting, "keep-
open" clauses, non-competition clauses and required trade name clauses);
(l) other than in the ordinary course of business, sell, assign or
sublease any store, office, plant, facility or warehouse except for the lease or
sale of surplus properties;
(m) the Company will promptly advise Buyers in writing of any Material
Adverse Effect or any breach of the Company's representations or warranties, or
any breach of a covenant contained herein of which the Company has knowledge;
and
25
<PAGE>
(n) the Company shall not enter into an agreement to do any of the
things described in clauses (a) through (l) other than as contemplated by this
Agreement.
4.2 Access to Properties and Records;Delivery of Financial
------------------------------------------------------
Statements. The Company shall afford to the Buyers and their accountants,
counsel and other representatives and consultants, on reasonable notice, full
access during normal business hours from the date hereof to the Closing Date to
all of its properties, books, accounts, agreements, personnel, facilities,
proprietary information, contracts, commitments and records, and shall allow
Buyers to conduct investigations with respect thereto. When consents of third
parties are required to conduct any investigation, the Company shall use its
best efforts to obtain the consent of such third parties. The Company shall
make reasonably available its officers and employees to answer fully and
promptly questions put to them. The Company will provide the Buyers audited
financial statements for the 1995 fiscal year on or before March 4, 1996. Such
audited financial statements shall not differ in any material respect from the
unaudited financial statements previously provided with respect to the 1995
fiscal year except with respect to downward adjustment of earnings of
approximately $14 million for items previously disclosed to the Buyers and shall
be accompanied by an unqualified auditors report. As soon as reasonably
practicable, the Company shall furnish the Buyers with its unaudited monthly and
quarterly financial statements and weekly sales reports for all periods
subsequent to December 31, 1995. No investigation pursuant to this Section 4.2
will affect or be deemed to modify any representation or warranty made by the
Company.
4.3 Acquisition Proposals. Following the execution of this Agreement
---------------------
and prior to the earliest to occur of (i) the termination of this Agreement
under 6.1(a) or (ii) April 30, 1996, the Company or any of its directors,
partners, officers, employees or other representatives or agents shall not,
directly or indirectly, communicate, solicit, initiate, encourage or participate
(including furnishing non-public information concerning the Company's business,
properties or assets) in any discussions or negotiations with regard to any
proposal to acquire, directly or indirectly, any shares of the capital stock of
the Company, to invest any funds in the Company, whether such proposal,
acquisition, investment or other transaction involves a stock sale, a tender
offer, exchange offer, merger or other business combination involving the
Company, or for the acquisition of a substantial portion of the assets of the
Company (an "Acquisition Proposal"). The Company will immediately communicate
to the Buyers the identity of such other party and the initial terms of any
proposal it may receive from any other party in respect of an Acquisition
Proposal.
4.4 Best Efforts. (a) Upon the terms and subject to the conditions
------------
herein provided, each of the Buyers and the Company agrees to use its reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement including (i) to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby and (ii) to fulfill
all conditions on its part to be fulfilled under this Agreement. In case at any
time after the Closing Date any
26
<PAGE>
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement, the proper partners, officers or directors of each party to this
Agreement shall take all such reasonably necessary action. The Company shall
take all action in accordance with applicable law and its Articles of
Incorporation and Bylaws to convene a meeting of the holders of its capital
stock as promptly as practicable, but in no event later than thirty days after
the date of this Agreement to consider and vote upon the Amendment. The Company
shall enforce the Standstill Agreement, dated of even date herewith, entered
into among the Company and certain of its stockholders and shall not amend such
agreement without the consent of the Buyers.
(b) No party hereto will take any action for the purpose of delaying,
impairing or impeding the receipt of any required consent, authorization, order
or approval or the making of any required filing. The Company shall give prompt
notice to the Buyers of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty of the Company contained in this Agreement to be untrue or inaccurate
in any material respect any time from the date hereof to the Closing Date and
(ii) any material failure of the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and the
Company shall use all reasonable efforts to remedy such failure. In addition,
the Company shall give prompt notice to the Buyers of any material developments
involving the operations or activities of the Company.
4.5 Consents. The Company will use its reasonable best efforts to
--------
obtain all waivers, consents and approvals of all third parties and governmental
authorities required by the Buyers for the consummation of the transactions
contemplated by this Agreement including stockholder approval of the amendments
to the Company's Articles of Incorporation contemplated by Section 4.7. In
connection therewith, and in connection with its negotiations for consents, the
Company may not offer or consent to any modification or amendment of any
contract without the Buyers' prior written consent. The Company agrees to
transmit the consents to the appropriate parties for approval promptly after the
execution hereof. The Buyers shall have the right to approve the form of
consent and the transmittal letter used to transmit such consents to each such
party, which approval will not be unreasonably withheld. The Company shall keep
the Buyers advised of its progress in obtaining such consents, and shall obtain
the Buyers' written consent prior to offering or consenting to any material
change or modification of the form of any such consent approved by the Buyers.
Promptly after the execution of this Agreement, the parties shall make
appropriate filings under the HSR Act with respect to the transaction
contemplated hereby and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act.
4.6 Management Treatment.
--------------------
(a) Existing Stock Options. At the Closing, all existing options to
-----------------------
purchase shares set forth on Schedule 3.3 shall remain outstanding and shall be
adjusted as provided herein. The Company's 1992 stock option plan, as amended,
shall be further amended
27
<PAGE>
immediately prior to Closing to increase the aggregate number of shares as
specified in Section 3 of such Plan from 1,397,727 shares to 1,808,864 shares
and the Company shall adjust the existing options set forth on Schedule 3.3 to
increase the number of shares to be purchased under such options by 411,137
shares, the number of shares under each option to be increased in the proportion
that the number of shares under each existing option bears to the total number
of shares under all such existing options. Prior to the Closing, all Company
stockholders shall have waived any preemptive rights with respect to the
issuance of such options (and, upon their exercise, the underlying shares of
Common Stock).
(b) Stock Bonus Awards. Immediately after the Closing, the Company
------------------
shall issue to the officers of the Company, in such proportion as may be
determined by the Company's Chief Executive Officer, a total of 3,014,772 shares
of the Common Stock of the Company pursuant to a Stock Bonus Agreement in form
and substance satisfactory to the Company, the Chief Executive Officer of the
Company ("CEO") and the Buyers, and the Company shall loan to each person
receiving such shares of common stock, an amount of money sufficient to pay the
net income tax, state and federal, required to be paid by such person as a
result of the receipt of such shares. The amount of this loan shall be advanced
by the Company approximately five days before the final due date(s) on which
such taxes (or estimates thereof) are payable without the imposition of
penalties or interest and shall be repayable to the Company no later than
December 31, 2003. The loan shall bear interest at a rate of 6% (the "Tax
Payment Loan"), and to be evidenced by a promissory note executed by each person
receiving such shares in form and substance satisfactory to the Company, the CEO
and the Buyers, (the "Tax Payment Loan Note"); provided, however, that each
person receiving such shares shall have the option of requiring the Company to
pay to such person the amount of his or her income tax in cash in lieu of the
Tax Payment Loan and reducing the number of shares of Common Stock by that
number of shares of Common Stock which when multiplied by $3.317 per share,
equals the amount of such tax payment. The Tax Payment Loan Note will be
secured by a pledge agreement in form and substance satisfactory to the Company,
the CEO and the Buyers.
(c) New Option Plans. Immediately prior to the Closing, the Company
----------------
shall adopt two stock option plans in the form and substance satisfactory to the
Company, the CEO and the Buyers, (the "Option Plans").
(d) Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 4.6 shall survive the Closing.
4.7 Charter Amendment. The Company's Articles of Incorporation shall
-----------------
be amended to (i) increase the authorized number of shares of Common Stock to
50,000,000, (ii) eliminate any preemptive rights, (iii) elect that the Company
not be subject to Section 302A.673 of the Minnesota Business Corporation Act,
(iv) permit the Board to act by written consent of less than all of the
Directors of the Company and (v) create a new series of 10% Cumulative
Exchangeable Redeemable Preferred Stock (the "10% Preferred") with the terms set
forth on
28
<PAGE>
Exhibit A hereto and the amendment shall otherwise be in form and substance
reasonably satisfactory to the Buyers (the "Amendment").
4.8 Amendment to Bank Documents. That certain Second Amended and
---------------------------
Restated Loan Agreement dated as of November 5, 1992 among the Company and the
lenders named therein (the "Credit Agreement"), together with all related
documents, shall be amended as set forth on Exhibit B hereto and shall otherwise
be in form and substance reasonably satisfactory to the Buyers.
4.9 Exchange. Prior to the Closing, each holder of 8% Preferred
--------
Stock will be offered the opportunity to exchange on a share for share basis
their shares of 8% Preferred Stock for shares of 10% Preferred Stock (the
"Exchange").
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to effect the transactions contemplated by the
Agreement shall be subject to the conditions that:
(a) No United States or state governmental authority or other agency
or commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary, or
permanent) which is in effect and has the effect of prohibiting consummation of
the transactions contemplated by this Agreement.
(b) Any waiting period applicable to the transactions contemplated by
this Agreement under the Hart-Scott-Rodino Act and any other applicable
antitrust law shall have expired or been terminated.
5.2 Conditions to the Obligations of the Company. The obligation of
--------------------------------------------
the Company to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) The Buyers shall have performed in all material respects their
obligations under this Agreement required to be performed by them on or prior to
the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of the Buyers contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of such date, except to the extent that any
such representation or warranty is
29
<PAGE>
made as of a specified date in which case such representation or warranty shall
have been true and correct as of such date. The Buyers shall have delivered a
certificate to the effect set forth in Sections 5.2(a) and (b).
(c) The Buyers and each of the stockholders of the Company and Messrs.
Belatti, Holbrook and Frankel shall have executed the stockholders agreement in
substantially the form attached hereto as Exhibit D hereto.
(d) The Company's stockholders shall have taken all actions necessary
to amend the Company's 1992 stock option plan as contemplated in Section 4.6(a),
approve the stock bonus awards as contemplated by Section 4.6(b) and adopt the
option plans as contemplated in Section 4.6(c).
5.3 Conditions to the Obligations of the Buyers. The obligations of
-------------------------------------------
the Buyers to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it on or prior to
the Closing Date pursuant to the terms hereof.
(b) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such date, except to the extent that
any such representation or warranty is made as of a specified date in which case
such representation or warranty shall have been true and correct as of such
date. The Company shall have delivered to the Buyers a certificate to the
effect set forth in Sections 5.3(a) and (b).
(c) Since December 31, 1995, there shall have been no material adverse
change in the operations, financial condition, prospects or results of
operations of the Company.
(d) The Buyers shall have received the favorable opinion of Frankel,
Hardwick, Tanenbaum & Fink, P.C., counsel to the Company, with respect to the
matters set forth on Exhibit E hereto and such opinion shall otherwise be
satisfactory in form and substance to the Buyers.
(e) The Buyers shall have received such other duly and validly
executed documents and instruments in connection with the Closing as are
reasonably requested by them.
(f) The parties to the Voting and Stockholder Agreement and the
Standstill Agreement, each of even date herewith, shall have performed in all
material respect
30
<PAGE>
their obligations under such agreements and the representations and warranties
contained therein shall be true and correct in all material respects.
(g) All necessary waivers, consents and approvals to or of the
transactions contemplated by this Agreement or necessary to prevent the
cancellation of any material contract, permit or license necessary for the
conduct of the Company's business of any third parties or governmental entities
shall have been obtained and delivered to the Buyers. The Company's
stockholders shall have taken all actions necessary to amend the Company's 1992
stock option plan as contemplated in Section 4.6(a), approve the stock bonus
awards as contemplated by Section 4.6(b) and adopt the option plans as
contemplated in Section 4.6(c). All third parties will have validly waived any
preemptive or comparable rights such parties hold with respect to the issuance
of the Shares, the issuance of the bonus stock described in Section 4.6(b) and
the amendment or adoption of option plans and the grants of options and issuance
of shares of Common Stock upon exercise thereof.
(h) The Buyers shall have received letters of resignation from each of
the members of the Company's board of directors, which resignations shall be
effective as of the Closing Date.
(i) The Credit Agreement has been amended as contemplated by Section
4.8.
(j) The Company's Articles of Incorporation have been amended as
contemplated by Section 4.7 and no person or entity shall be entitled to
exercise dissenters or appraisal or preemptive rights with respect to the
Amendment or the Exchange.
(k) The Company shall have (i) amended the 1992 Option Plan, (ii) made
the stock bonus awards and (iii) adopted the option plans and made the grants of
options in each case as contemplated by Section 4.6.
(l) Each of the parties to that certain Shareholders Agreement dated
November 5, 1992 (as amended) and that certain Registration Rights Agreement
dated November 5, 1992 (as amended) shall have agreed to terminate all their
respective rights and obligations under such agreements.
(m) Each of the stockholders of the Company and Messrs. Belatti,
Holbrook and Frankel shall have entered into a stockholders agreement
substantially in the form of Exhibit D hereto.
(n) Upon the consummation of the transactions contemplated by this
Agreement, the capitalization of the Company shall be as set forth on Exhibit F
hereto.
31
<PAGE>
(o) At least 535,152 shares of 8% Preferred Stock shall have been
exchanged for a like number of shares of 10% Preferred Stock.
The action of Pacific Corinthian Life Insurance Company with respect
to the matters set forth in clause (c) of Section 5.2 or clauses (g), (l) or (m)
of Section 5.3 shall not be a condition to the Closing.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing Date:
(a) by written consent of each of the Buyers and the Company;
(b) by any party, if by April 30, 1996 the Closing shall not have been
consummated (such period shall be extended by any cure period under clauses (c)
or (d) below); provided that no party may terminate under this Section 6.1(b) if
the failure has been caused by that party's breach of this Agreement;
(c) by the Buyers, if there is a material breach of any of the
representations and warranties of the Company or if the Company fails to comply
in any material respect with any of its respective covenants or agreements
contained herein and such failure has not been cured (if it is possible to cure)
within ten (10) business days of notice from the Buyer to the Company; or
(d) by the Company, if there is a material breach of any of the
representations and warranties of the Buyers, or if the Buyers fail to comply in
any material respect with any of its covenants or agreements contained herein
and such failure has not been cured (if it is possible to cure) within ten (10)
business days of notice from the Company to the Buyers.
6.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto. provided that this
Section 6.2 is not intended to limit any cause of action that any party may have
for any breach of this Agreement that results in a termination of this
Agreement.
6.3 Amendment. This Agreement may be amended by the parties hereto.
---------
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
32
<PAGE>
6.4 Waiver. At any time prior to the Closing Date, the parties
------
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions herein, provided that any such waiver of or failure to insist on
strict compliance with any such representation, warranty, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
6.5 Survival. All representations, warranties, covenants and
--------
agreements contained in this Agreement shall terminate (i) at the Closing except
with respect to Sections 4.4(a) and 4.6 or (ii) upon the termination of this
Agreement pursuant to Section 6.1.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally, sent by commercial carrier or
registered or certified mail (postage prepaid, return receipt requested) or
transmitted by facsimile to the parties at the following addresses and numbers:
(a) If to the Buyers to:
c/o Freeman Spogli & Co. Incorporated
11100 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Attention: Mr. William M. Wardlaw
Facsimile No.: (310) 444-1870
(b) If to the Company, to:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attention: Samuel N. Frankel
Facsimile No.: (770) 353-3028
33
<PAGE>
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date actually received.
7.2 Headings; Agreement. The headings contained in this Agreement
-------------------
are inserted for convenience only and do not constitute a part of this
Agreement. The term "Agreement" for purposes of representations and warranties
hereunder shall be deemed to include the Exhibits hereto to be executed and
delivered by a party.
7.3 Publicity. So long as this Agreement is in effect, the parties
---------
hereto shall not, and shall cause their affiliates not to, issue or cause the
publication of any press release or other announcement with respect to the
transactions contemplated by this Agreement or this Agreement without the
consent of the other parties, which consent shall not be unreasonably withheld
or delayed.
7.4 Entire Agreement. This Agreement (including all the Schedules
----------------
and Exhibits hereto), the Voting and Stockholder Agreement and the Standstill
Agreement constitute the entire agreement among the parties and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
7.5 Conveyance Taxes. The Company agrees to assume liability for and
----------------
to hold the Buyers harmless against any sales, use, transfer, stamp, stock
transfer, real property transfer or gains, and value added taxes, any transfer,
registration, recording or other fees, and any similar taxes incurred as a
result of the transactions contemplated hereby.
7.6 Assignment. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Except as otherwise provided in
the Ancillary Agreements or Exhibits to this Agreement, neither this Agreement
nor any of the rights, interests or obligations shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
7.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
7.8 Governing Law. The validity and interpretation of this Agreement
-------------
shall be governed by the laws of the State of Georgia without reference to the
conflict of laws principles thereof.
7.9 Third Party Beneficiaries. This Agreement is not intended to
-------------------------
confer upon any other person any rights or remedies hereunder.
34
<PAGE>
7.10 Limitation of Liability. In no event shall any partner or
-----------------------
representative of the Buyers or of any partnership which is a partner of the
Buyers or any partner of any such partnership, or any direct or indirect
stockholder, officer, director, partner or any other such person, be personally
liable for any such obligation of the Buyers under this Agreement. In no event
shall recourse with respect to the obligations under this Agreement of the
Buyers be had to the assets or business of any person other than the Buyers. In
no event shall any officer, director or shareholder (and their officers,
directors, representatives and agents )of the Company be personally liable for
any obligation of the Company under this Agreement.
35
<PAGE>
IN WITNESS WHEREOF, each of the Buyers and the Company have caused
this Agreement to be signed by an officer or partner thereunto duly authorized,
all as of the date first written above.
COMPANY: AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/ Frank Belatti
-------------------------------
Name: Frank Belatti
------------------------
Title: Chief Executive Officer
-----------------------
FSEP III: FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ John Roth
---------------------
Name: John Roth
--------------
Title: Vice President
--------------
FSEP INTERNATIONAL: FS EQUITY PARTNERS INTERNATIONAL, L.P.,
a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: /s/ John Roth
----------------------
Name: John Roth
---------------
Title: General Partner
---------------
36
<PAGE>
EXHIBIT 10.2
STOCKHOLDERS AGREEMENT
by and among
FS EQUITY PARTNERS III, L.P.
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
CANADIAN IMPERIAL BANK OF COMMERCE,
PILGRIM PRIME RATE TRUST,
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST,
SENIOR DEBT PORTFOLIO,
ML IBK POSITIONS, INC.
FRANK J. BELATTI
DICK R. HOLBROOK
SAMUEL N. FRANKEL
AND
AMERICA'S FAVORITE CHICKEN COMPANY
April 11, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions................................................. 1
2. Rights Upon Issuance of Additional Securities............... 4
2.1 Issuance Notice......................................... 4
2.2 Response Notice......................................... 4
2.3 Revised Issuance Notice................................. 5
2.4 Pro Rata Share.......................................... 5
2.5 Termination and Assignment.............................. 5
3. Transfer of Shares by FS Stockholder; Rights of
Inclusion................................................... 5
3.1 Right of Inclusion...................................... 5
3.2 Third-Party Offer....................................... 5
3.3 Allocation of Included Shares........................... 6
3.4 Consummation............................................ 7
3.5 Termination and Assignment.............................. 8
4. Obligation to Sell Securities............................... 8
4.1 Sale Obligation......................................... 8
4.2 Termination and Assignment.............................. 9
5. Restrictions on Transfers of Securities; Right of First
Offer....................................................... 9
5.1 Transfer Restrictions................................... 9
5.2 Right of First Offer.................................... 10
5.3 Termination and Assignment.............................. 11
6. Registration Rights......................................... 12
6.1 "Piggy-Back" and Demand Rights on Common Stock.......... 12
6.2 Registration Rights on Preferred Stock.................. 12
7. Representation on the Board of Directors.................... 12
7.1 The Board............................................... 12
7.2 Termination and Assignment.............................. 13
8. Other Agreements............................................ 13
9. Copy of Agreement........................................... 13
10. Governing Law............................................... 13
11. Representations and Warranties.............................. 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
12. Amendment and Waiver; Successors............................ 14
13. Interpretation.............................................. 14
14. Notices..................................................... 14
15. Legends..................................................... 14
16. Further Assurances.......................................... 15
17. Injunctive Relief; Disputes................................. 15
18. Severability................................................ 15
19. Entire Agreement............................................ 16
20. Counterparts................................................ 16
21. Opinions.................................................... 16
SCHEDULE 1 Ownership of Capital Stock by Stockholders Upon
Consummation of Transactions Contemplated by
Purchase Agreement................................... 19
</TABLE>
ii
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered
into as of April 11, 1996 by and among America's Favorite Chicken Company, a
Minnesota corporation (the "Company"), FS Equity Partners III, L.P., a Delaware
limited partnership ("FSEP III"), FS Equity Partners International, L.P., a
Delaware limited partnership ("FSEP International," and collectively with FSEP
III, the "FS Stockholder"), Canadian Imperial Bank of Commerce, Pilgrim Prime
Rate Trust, Van Kampen American Capital Prime Rate Income Trust, Senior Debt
Portfolio, ML IBK Positions, Inc., Frank J. Belatti, Dick R. Holbrook and Samuel
N. Frankel (collectively, the "Existing Stockholders" and individually, an
"Existing Stockholder").
RECITALS
A. Pursuant to a Stock Purchase Agreement dated as of February 23,
1996 among the Company and the FS Stockholder (the "Purchase Agreement"), FS
Stockholder is making a substantial investment in the Common Stock of the
Company.
B. To induce the FS Stockholder to consummate the transactions
contemplated by the Purchase Agreement, the Existing Stockholders desire to
execute this Agreement.
C. The FS Stockholder's obligation to consummate the transactions
contemplated by the Purchase Agreement is conditioned upon the execution of this
Agreement by the Existing Stockholders.
D. Upon consummation of the transactions contemplated by the
Purchase Agreement, FS Stockholder and the Existing Stockholders will own the
shares of capital stock of the Company set forth on Schedule 1 hereto.
E. The Existing Stockholders and the FS Stockholder wish to
establish through this Agreement certain rights, obligations and restrictions
with respect to the securities of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
1. Definitions. As used in this Agreement, the following
-----------
capitalized terms shall have the following meanings:
Additional Securities: All Securities which are issued and sold by
---------------------
the Company other than (i) the Initial Shares, (ii) any Securities issued or
issuable to all of the holders of
<PAGE>
Common Stock then outstanding on a proportionate basis, (iii) issuances of
additional shares of 10% Preferred Stock in payment of dividends on outstanding
shares of 10% Preferred Stock, (iv) any Securities issued or issuable to any
Employees pursuant to any equity incentive plan, individual agreement, bonus,
award, stock purchase plan, stock option plan or other stock agreement or
arrangement approved by the Company's Board of Directors (a "Benefit Plan");
provided however that with respect to any Benefit Plan approved by the Board
after the date hereof, such exclusion shall only apply with respect to the
issuance of Securities that do not exceed, on an aggregate basis, 3% of the
total outstanding shares of Common Stock, assuming full exercise of all
Securities granted to Employees; (v) any Securities issued in exchange for debt
securities of the Company or any Subsidiary or to any source of, or to any party
arranging, financing for the Company or any Subsidiary of the Company, (vi) any
Securities issued pursuant to a public offering registered under the Securities
Act, (vii) any Securities that are issued or issuable in connection with the
acquisition by the Company of any business, business assets or securities from
any Person; (viii) any Securities that are issued or issuable upon the exercise
of rights, options or warrants to purchase Securities, or upon the conversion or
exchange of Securities convertible into or exchangeable for Securities, where
the parties to this Agreement received (or were not required to receive) an
Issuance Notice pursuant to Section 2.1 of this Agreement; and (ix) any
Securities issued in connection with that certain Nonqualified Option Agreement
dated as of July 19, 1993 between the Company and Merrill Lynch & Co., Inc.
Affiliate or Associate: Such terms shall have the meanings given them
----------------------
pursuant to Rule 12b-2 of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934, as amended.
Board: The Board of Directors of the Company.
-----
Common Stock: The Common Stock, par value $.01 per share, of the
------------
Company.
Employee: Any employee, independent director or consultant of the
--------
Company or any Subsidiary of the Company.
Existing Stockholders: Canadian Imperial Bank of Commerce, Pilgrim
---------------------
Prime Rate Trust, Van Kampen American Capital Prime Rate Income Trust, Merrill
Lynch & Co., Inc., Pacific Corinthian Life Insurance Company, Senior Debt
Portfolio, ML IBK Positions, Inc., Frank J. Belatti, Dick R. Holbrook and Samuel
N. Frankel.
Initial Shares: Shall mean the 33,691,039 shares of Common Stock and
--------------
the 535,152 shares of 10% Preferred Stock issued and outstanding on the date
hereof and held beneficially and of record by the Stockholders as follows:
2
<PAGE>
<TABLE>
<CAPTION>
INITIAL SHARES
------------------------
10%
PREFERRED
STOCKHOLDER COMMON STOCK STOCK
- ------------------------------------------------ ------------ ---------
<S> <C> <C>
FS Equity Partners III, L.P. 20,288,340 ---
FS Equity Partners International, L.P. 815,067 ---
Canadian Imperial Bank of Commerce 6,312,724 360,545
Pilgrim Prime Rate Trust 413,980 24,848
Van Kampen American Capital Prime Rate Income 604,251 34,864
Trust
Senior Debt Portfolio 806,708 54,895
ML IBK Positions, Inc. 1,800,000 60,000
Frank J. Belatti 1,329,969 ---
Dick R. Holbrook 660,000 ---
Samuel N. Frankel 660,000 ---
</TABLE>
Permitted Transferee: Subject to Section 5.1, Permitted Transferee
--------------------
shall mean an Affiliate of a Stockholder or, with respect to any Stockholder who
is an individual, such Stockholder's spouse or issue or a trust for their or the
Stockholder's benefit.
Person: Any individual, corporation, entity, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
Public Offering: A public offering of shares of Voting Securities of
---------------
the Company registered under the Securities Act, but shall not include an
offering registered on Form S-4 or Form S-8 (or any substitute form that is
adopted by the SEC), or an offering of Voting Securities in connection with a
sale of debt securities of the Company. The term "Initial Public Offering"
shall mean an underwritten Public Offering of Voting Securities which results in
gross proceeds to the Company in excess of $25 million from the sale of Voting
Securities.
SEC: The Securities and Exchange Commission.
---
Securities: Shall mean (i) Voting Securities, (ii) all rights,
----------
options, warrants to purchase such Voting Securities or the securities described
in the following clause and (iii) all other securities or capital stock of any
type whatsoever, including, without limitation, (A) preferred stock, debt
securities and securities that are, or may become, convertible into or
exchangeable for, or that entitle the holder to purchase, Voting Securities, (B)
preferred stock and (C) debt securities; provided, however, that debt securities
shall not include the Company's debt under that certain Credit Agreement dated
as of November 5, 1992 as amended, among the company and the Lenders named
therein.
Securities Act: The Securities Act of 1933, as amended.
--------------
3
<PAGE>
Stockholders: The FS Stockholder and the Existing Stockholders.
------------
Subsidiary: With respect to any Person, a corporation or other entity
----------
of which shares of stock or other ownership interests having ordinary voting
power to elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or indirectly,
by such Person.
Voting Securities: All Securities of the Company which possess
-----------------
general voting power to elect members of the Board; provided that Voting
Securities shall not include the 10% Preferred Stock or any options or warrants
to purchase Voting Securities.
10% Preferred Stock: The Cumulative Exchangeable Redeemable Preferred
-------------------
Stock of the Company.
2. Rights Upon Issuance of Additional Securities. The Company hereby
---------------------------------------------
grants to each Stockholder the following rights with respect to any and all
proposed issuances or sales of Additional Securities by the Company:
2.1 Issuance Notice. The Company shall give each Stockholder written
---------------
notice of the Company's intention to issue and sell Additional Securities (the
"Issuance Notice"), describing the type of Additional Securities, the price at
which the Additional Securities will be issued and sold and the general terms
upon which the Company proposes to issue and sell the Additional Securities,
including the anticipated date of such issuance or sale.
2.2 Response Notice. Each Stockholder shall have 20 days from the
---------------
date the Issuance Notice is received to agree to purchase all or any portion of
its Pro Rata Share (as defined below in Subsection 2.4) of such Additional
Securities by giving written notice to the Company of its desire to purchase
Additional Securities (the "Response Notice") and stating therein the quantity
of Additional Securities to be purchased. Such Response Notice shall constitute
the irrevocable agreement of such Stockholder to purchase the quantity of
Additional Securities indicated in the Response Notice at the price and upon the
terms stated in the Issuance Notice. Any purchase by Stockholders of Additional
Securities shall be consummated on the later (i) the closing date specified in
the Issuance Notice or (ii) the closing date on which Additional Securities
described in the applicable Issuance Notice are first issued and sold if other
Persons are also purchasing Additional Securities. Each Stockholder that has
elected to purchase its Pro Rata Share of Additional Securities will have the
right to purchase all or any portion of the Additional Securities unsubscribed
for by the other Stockholders, up to its pro rata share of such unsubscribed
portion (determined by the number of Voting Securities owned by the party or
parties who elect to purchase such unsubscribed for portion) if oversubscribed.
2.3 Revised Issuance Notice. The Company shall have 90 days from the
-----------------------
date of the Issuance Notice to consummate the proposed issuance and sale of the
Additional Securities that are not being purchased by Stockholders at a price
and upon the terms that are not materially changed from those specified in the
Issuance Notice. If the Company proposes
4
<PAGE>
to issue Additional Securities after such 90-day period or at a price and upon
terms that are materially changed from those specified in the Issuance Notice it
must again comply with this Section 2.
2.4 Pro Rata Share. For purposes of this Section 2, the Pro Rata
--------------
Share of a Stockholder shall be a fraction, (i) the numerator of which shall be
the total number of shares of Voting Securities then held by the Stockholder and
(ii) the denominator of which shall be the total number of shares of Voting
Securities then issued and outstanding.
2.5 Termination and Assignment. The rights provided to each of the
--------------------------
Stockholders under this Section 2 shall terminate upon the consummation of an
Initial Public Offering. A Stockholder's rights under this Section 2 will
terminate after the Stockholder has transferred a number of Voting Securities
which represents 50% or more of the number of Voting Securities held by the
Stockholder on the date hereof (with FSEP III and FSEP International considered
collectively for this purpose). The rights granted under this Section 2 shall
not be assignable; provided, however that a Stockholder may assign its rights
with respect to the shares of Common Stock transferred to a Permitted Transferee
provided that the Permitted Transferee executes a written undertaking to be and
becomes bound by this Agreement in the same manner and to the same extent as the
Stockholder.
3. Transfer of Shares by FS Stockholder; Rights of Inclusion.
---------------------------------------------------------
3.1 Right of Inclusion. The FS Stockholder agrees not to sell all or
------------------
any portion of the shares of Common Stock it holds to any Person (individually,
a "Third Party" and, collectively, "Third Parties") unless each of the Existing
Stockholders is given an opportunity to sell to the Third Party such number of
shares of Common Stock owned by the Existing Stockholder as is determined in
accordance with Subsection 3.3 of this Section 3; provided, however, that the
-------- -------
Existing Stockholders shall have no rights pursuant to this Section 3 with
respect to sales or other transfers by the FS Stockholder of Common Stock to any
Permitted Transferee of the FS Stockholder.
3.2 Third-Party Offer. Prior to the consummation of any sale of all
-----------------
or any portion of the shares of Common Stock held by the FS Stockholder to a
Third Party, the FS Stockholder shall cause each bona fide offer from such Third
Party to purchase such shares from the FS Stockholder (a "Third-Party Offer") to
be reduced to writing and shall send written notice of such Third-Party Offer
(the "Initial Offer Notice") to each Existing Stockholder. Each Third-Party
Offer shall include an offer to purchase shares of Common Stock from the
Existing Stockholders in the amounts determined in accordance with Subsection
3.3 of this Section 3, at the same time, at the same price and on the same terms
as the sale by the FS Stockholder to the Third Party, and according to the terms
and conditions of this Agreement. The Initial Offer Notice shall be accompanied
by a true copy of the Third-Party Offer. If an Existing Stockholder desires to
accept the offer contained in the Initial Offer Notice, such Existing
Stockholder shall furnish written notice to the FS Stockholder, within 20 days
after its receipt of the Initial Offer Notice, indicating such Existing
Stockholder's irrevocable acceptance of the offer included in
5
<PAGE>
the Initial Offer Notice and setting forth the maximum number of shares of
Common Stock such Existing Stockholder agrees to sell to the Third Party (the
"Acceptance Notice"). If an Existing Stockholder does not furnish an Acceptance
Notice to the FS Stockholder in accordance with these provisions by the end of
such 20-day period, such Existing Stockholder shall be deemed to have
irrevocably rejected the offer contained in the Initial Offer Notice. All
shares of Common Stock set forth in the Acceptance Notices of the Existing
Stockholders together with the shares of Common Stock proposed to be sold by the
FS Stockholder to the Third Party are referred to collectively as "All Offered
Shares". Within three days after the date on which the Third Party informs the
FS Stockholder of the total number of shares of Common Stock which such Third
Party has agreed to purchase in accordance with the terms specified in the
Initial Offer Notice, the FS Stockholder shall send written notice (the "Final
Notice") to the participating Existing Stockholders setting forth the number of
shares of Common Stock each Existing Stockholder shall sell to the Third Party
as determined in accordance with Subsection 3.3 of this Section 3, which number
shall not exceed the maximum number specified by an Existing Stockholder in its
Acceptance Notice. Within five days after the date of the Final Notice (or such
shorter period as may reasonably be requested by the FS Stockholder to
facilitate the sale), each participating Existing Stockholder shall furnish to
the FS Stockholder (i) a written undertaking to deliver, upon the consummation
of the sale of Common Stock to the Third Party as indicated in the Final Notice,
the certificates representing the shares of Common Stock held by the Existing
Stockholder which will be transferred pursuant to such Third-Party Offer (such
shares shall be referred to herein as the "Included Shares") and (ii) a limited
power-of-attorney authorizing the FS Stockholder to transfer the Included Shares
pursuant to the terms of such Third-Party Offer. Each Stockholder shall be
required to make representations and warranties in connection with such transfer
only with respect to its own authority to transfer and its title to the shares
of Common Stock transferred. In any such transaction the Company will cooperate
with all Stockholders to facilitate the transaction.
3.3 Allocation of Included Shares. The maximum number of shares of
-----------------------------
Common Stock that may be sold by FSEP III, FSEP International and each Existing
Stockholder and all other holders of Common Stock who have rights to participate
in sales of Common Stock by the FS Stockholder pursuant to written agreements by
and between the FS Stockholder and any such holder (the "Other Tag-Along Rights
Holders") in any sale governed by this Section 3 shall be (i) All Offered Shares
in the event the Third Party has agreed to purchase All Offered Shares and all
shares of Common Stock that the Other Tag-Along Rights Holders who have elected
to participate in such sale seek to include in such sale or (ii) such number of
shares of Common Stock equal to the product of (a) the total number of shares of
Common Stock which the Third Party has agreed to purchase times (b) a fraction,
the numerator of which is the total number of shares of Common Stock owned by
FSEP III, FSEP International, an Existing Stockholder or each Other Tag-Along
Rights Holder who has elected to participate in such sale, as the case may be,
on the date of the Final Notice and the denominator of which is the total number
of shares of Common Stock owned on the date of the Final Notice by FSEP III,
FSEP International, the Existing Stockholders and the Other Tag-Along Rights
Holders who have elected to participate in such sale; provided, however, that,
-------- -------
in the event FSEP III, FSEP International, the Existing Stockholders or any
Other Tag-Along Rights Holder elects to sell a
6
<PAGE>
number of shares of Common Stock which is less than the number of shares such
holder could sell pursuant to clause (ii) above, the shares of Common Stock that
the others of such holders can sell in such transaction shall be increased by an
aggregate amount equal to the number of shares which any of FSEP III, FSEP
International, the Existing Stockholders or any Other Tag-Along Rights Holder
could have sold in such transaction but chose not to sell, and any such increase
shall be allocated among such other holders on a pro rata basis based upon the
total number of shares of Common Stock owned on the date of the Final Notice by
such other holders.
3.4 Consummation. The FS Stockholder shall have 180 days from the
------------
date of the Final Notice in which to sell to the Third Party the shares of
Common Stock owned by the FS Stockholder and the Included Shares of the Existing
Stockholders on terms which are not materially less favorable to the sellers of
shares of Common Stock than those specified in the applicable Initial Offer
Notice; provided, however, that in the event there is a decrease in the price to
-------- -------
be paid by the Third Party for the shares of Common Stock to be sold from the
price set forth in the Initial Offer Notice, which decrease is acceptable to the
FS Stockholder, or other material change in terms which are less favorable to
the FS Stockholder, but which are acceptable to the FS Stockholder, the FS
Stockholder shall notify the participating Existing Stockholders of such
decrease or change in terms, and each of the participating Existing Stockholders
shall have five business days from the date of receipt of the notice of such
decrease or change in terms to reduce the number of shares of Common Stock it
will sell to such Third Party as previously indicated in the applicable
Acceptance Notice and the number of shares that all other participating
stockholders (including Other Tag-Along Rights Holders) may transfer shall be
increased in accordance with the provisions of Section 3.3. The FS Stockholder
shall act as agent for the Existing Stockholders in connection with such sale
and shall cause to be remitted to an Existing Stockholder the total sales price
of the Included Shares of such Existing Stockholder sold pursuant thereto, which
consideration shall be in the same form as the consideration received by the FS
Stockholder and as specified in the applicable Initial Offer Notice, net of the
Existing Stockholder's respective pro rata portion (based on the number of
shares of Common Stock sold) of the reasonable, out-of-pocket expenses incurred
by the FS Stockholder in connection with such sale (not including, however, any
transaction fee charged by the FS Stockholder or its Affiliates). The FS
Stockholder shall furnish, or shall cause to be furnished, such other evidence
of the completion and time of completion of such sale and the terms thereof as
may be reasonably requested by the Existing Stockholder including, without
limitation, evidence of the expenses incurred by the FS Stockholder in
connection with such sale. If and to the extent that, at the end of 180 days
following the date of the Final Notice, the FS Stockholder has not completed the
sale contemplated thereby, the FS Stockholder shall return to each participating
Existing Stockholder all certificates representing the Included Shares and all
powers-of-attorney which an Existing Stockholder may have transmitted pursuant
to the terms hereof.
3.5 Termination and Assignment. The obligations of the FS
--------------------------
Stockholder pursuant to the provisions of this Section 3 shall terminate upon
the consummation of an Initial Public Offering. The rights granted to Existing
Stockholders under this Section 3 shall not be
7
<PAGE>
assignable except to a Permitted Transferee in accordance with Section 5.1,
provided that the Permitted Transferee executes a written undertaking to be and
become bound by this Agreement in the same manner and to the same extent as the
Existing Stockholder.
4. Obligation to Sell Securities.
-----------------------------
4.1 Sale Obligation. If the FS Stockholder finds a buyer for all of
---------------
the shares of Common Stock held by the FS Stockholder (whether such sale is by
way of purchase, merger or other form of transaction), upon the request of the
FS Stockholder, each of the Existing Stockholders shall sell all or any portion
of the Securities beneficially owned by such Existing Stockholder to such third-
party buyer pursuant to the terms and conditions negotiated by the FS
Stockholder. All holders of each class of Securities shall receive the same
form and amount of consideration for such Securities. Any Security that is
convertible into Common Stock shall be purchased on an "as converted" basis.
Any series of preferred stock that is not convertible into Common Stock shall be
purchased for its stated liquidation preference plus accrued and unpaid
dividends. Any debt Security which is not convertible into Common Stock shall
be purchased at its outstanding principal amount plus accrued and unpaid
interest, plus any prepayment or redemption premium set forth in the instruments
governing such Security. The exercise price (if any) of a Security shall be
deducted from the consideration to be received; provided however that if the
exercise price of such Security is greater than the consideration to be
received, such Security shall be cancelled without any payment to its holder.
Each of the Existing Stockholders agrees to such sale and to execute such
agreements, powers of attorney, voting proxies or other documents and
instruments as may be necessary to consummate such sale; provided that no
Stockholder shall be obligated to make any representations and warranties with
respect to such sale other than with respect to its own authority to transfer
and its title to the Securities transferred. Each of the Existing Stockholders
further agrees to timely take such other actions as the FS Stockholder may
reasonably request to enforce its obligation to sell its Securities, and
otherwise as necessary in connection with the approval of the consummation of
such sale, including voting all Securities in favor of such sale. Each
Stockholder shall pay its pro rata portion (based on the total value of the
consideration received by such Stockholder compared to the aggregate
consideration received by all Stockholders in the transaction) of the reasonable
out-of-pocket expenses incurred by the FS Stockholder in connection with a sale
consummated pursuant to this Section 4 (not including, however any transaction
fee charged by the FS Stockholder or its Affiliates). Notwithstanding the
forgoing provisions of this Section 4, no Stockholder shall have any obligation
to sell Securities in connection with any sale by the FS Stockholder of all of
its shares of Common Stock unless, prior to the consummation of such sale, (i)
the Board determines that the consideration to be received by the Stockholders
in such sale for their shares of Common Stock is not less than the aggregate
fair market value of the shares of Common Stock held by the Stockholders and
(ii) the Company shall have obtained a fairness opinion from an investment
banking firm that such a sale is fair, from a financial point of view, to the
holders of Common Stock.
4.2 Termination and Assignment. The obligations of the Existing
--------------------------
Stockholders pursuant to this Section 4 shall be binding on any transferee of
Securities held by
8
<PAGE>
an Existing Stockholder, and each Existing Stockholder shall obtain and deliver
to the FS Stockholder a written commitment to be bound by such provisions from
each such transferee prior to any transfer. The obligations of each Existing
Stockholder pursuant to this Section 4, and the obligations of any such
transferee, shall terminate upon the consummation of an Initial Public Offering.
The rights of FS Stockholder under this Section 4 shall not be assignable and
shall terminate in the event that the FS Stockholder holds a number of shares of
Common Stock which represents less than 33-1/3% of the total number of shares of
Common Stock outstanding at any time (with FSEP III and FSEP International
considered collectively for this purpose).
5. Restrictions on Transfers of Securities; Right of First Offer.
-------------------------------------------------------------
5.1 Transfer Restrictions. No Stockholder shall (i) pledge,
---------------------
hypothecate or encumber any Securities; (ii) sell, assign, transfer, or
otherwise dispose of or convey ("Transfer") any Securities, or any right, title
or interest therein, except in compliance with the Securities Act and all
applicable state securities laws or (iii) Transfer any Securities, or any right,
title or interest therein except for sales of Securities expressly permitted by
and in compliance with this Agreement, including (without limitation) Subsection
5.2. Any attempt to Transfer, pledge, hypothecate or encumber Securities, or
any right, title or interest therein, not in compliance with this Agreement
shall be null and void, and the Company shall not give effect to any such
attempted transaction or Transfer. Any Securities Transferred pursuant to the
terms and requirements of this Agreement shall be Transferred free and clear of
all mortgages, liens, pledges, charges and security interests or encumbrances,
or any obligations or liabilities in connection therewith. Each Stockholder, on
the execution and delivery of this Agreement, agrees that such Stockholder will
not Transfer any Securities prior to delivery to the Company of an opinion of
counsel in form and substance satisfactory to the Company with respect to
compliance with the Securities Act, or until a registration statement with
respect to such Securities under the Securities Act has become effective. All
transferees of Securities will be bound by this Agreement in the same manner and
to the same extent as the transferor and prior to any Transfer must deliver to
the Company and the Stockholders a written undertaking to be and become so
bound. Upon completion of any Transfer in compliance with this Agreement, the
transferee shall become a Stockholder and entitled to the rights hereunder which
may be duly and validly assigned to such transferee. An Existing Stockholder
may transfer Securities to a Permitted Transferee provided that such transferee
executes a written undertaking to be and becomes bound by this Agreement in the
same manner and to the same extent as the transferring Stockholder; and provided
further, that prior to the consummation of any transaction in which a Permitted
Transferee ceases to be an Affiliate of such Stockholder, such Permitted
Transferee shall reconvey all Securities to the transferring Stockholder and the
Securities will remain subject to this Agreement. A Permitted Transferee may
not subsequently transfer the Securities, except transfers of Securities back to
the transferring Stockholder.
5.2 Right of First Offer. Each of the Stockholders hereby agrees not
--------------------
to Transfer any of the Securities held by them to any Person (other than a
Permitted Transferee) unless each other Stockholder is given the right to
acquire such Securities pursuant to the provisions of this Subsection 5.2;
provided, however, that this Subsection 5.2 shall only apply
9
<PAGE>
to Transfers by the FS Stockholder of less than all of the shares of Common
Stock it then holds (with FSEP III and FSEP International considered
collectively for this purpose); provided further that Transfers by Belatti,
Holbrook or Frankel to the Company pursuant to any Company repurchase right on
termination of employment shall not be subject to this Section 5.2. If any of
the Stockholders receives an offer from any Person to acquire any Securities, or
decides to solicit or cause to be solicited a proposal or proposals to acquire
Securities, such Stockholder (the "Offering Stockholder") shall first give all
other Stockholders (each, an "Offeree," and together, the "Offerees") written
notice (the "Stockholder Notice") of such intention, which notice shall include
a term sheet stating, among other material terms, the minimum cash sales price
(the "Target Price") that the Offering Stockholder would entertain for the
Securities to be sold (the "Offered Securities"). Each of the Offerees shall
have the right for a period of 30 days following the delivery of the Stockholder
Notice (the "Acceptance Period") to accept the offer to purchase all but not
less than all of its respective Offeree Pro Rata Share (as defined below) of the
Offered Securities at the Target Price and upon the other terms provided with
the Stockholder Notice; provided that all and not less than all of the Offered
Securities are purchased. Each Offeree that has elected to purchase its Offeree
Pro Rata Share of the Offered Securities will have the right to purchase all or
any part of the unsubscribed portion of the Offered Securities up to its pro
rata share of such unsubscribed portion (determined in accordance with the
number of shares of Voting Securities owned by the parties that elect to
purchase such unsubscribed for portion). Each Offeree shall exercise its rights
under this Section 5.2 by delivering to the Offering Stockholder written notice
of its election prior to 5:00 p.m. Los Angeles time on the final day of the
Acceptance Period. On the first business day following the termination of the
Acceptance Period, the Company shall notify all Offerees that have exercised
their rights hereunder of the amount of any unsubscribed portion of the Offered
Securities, and such Offerees shall have two business days to purchase their pro
rata share of such unsubscribed portion. If an Offeree exercises its rights
under this Section 5.2, the sale of such Securities shall be consummated within
30 days of the final day of the Acceptance Period (the "Purchase Period"). If
the Offerees do not elect to purchase such Securities on such terms or fail to
consummate a purchase of such Securities within the Purchase Period, the
Offering Stockholder shall have the right to consummate the sale of such
Securities for a sales price equal to or greater than the Target Price and on
terms no more favorable to the purchaser than specified in the Stockholder
Notice for a period of 90 days (the "Consummation Period") after the expiration
of the Acceptance Period or, if applicable, the Purchase Period. If the
Offering Stockholder does not complete such sale, transfer or conveyance within
the Consummation Period, the Offering Stockholder shall not have the right to
sell, transfer or convey any of such Securities without again complying with
this Subsection 5.2. In the event the Offering Stockholder intends to sell
Securities for consideration other than cash, the Offering Stockholder shall
notify the Offerees of the terms of such non-cash consideration. The Offerees
may elect within ten days of such notice to have the fair market value of such
non-cash consideration determined, with the parties jointly selecting an
investment banking firm to resolve any dispute regarding the fair market value
of such non-cash consideration; in the absence of agreement on such firm,
Goldman, Sachs & Co. shall determine such fair market value. If the sum of the
fair market value of the non-cash consideration and the cash consideration (in
the case of a sale that is partially for cash) is less than the cash price
offered to the Offerees pursuant to this
10
<PAGE>
Subsection 5.2, the Offerees may, within 10 days of the determination of the
fair market value of the non-cash consideration, elect to purchase the
Securities proposed to be sold for an amount equal to the sum of (i) the fair
market value of the non-cash consideration and (ii) the cash consideration, if
any. Such purchase must be consummated within 20 days of the determination of
fair market value. For purposes of this Subsection 5.2, "Offeree Pro Rata
Share" shall mean a fraction (i) the numerator of which is the total number of
shares of Voting Securities then held by a Stockholder and (ii) the denominator
of which is the total number of shares of Voting Securities then held by all
Stockholders entitled to receive the right of first offer. If the Offering
Stockholder receives a written offer for such Securities at any time during the
Consummation Period which is acceptable to the Offering Stockholder but is less
than the Target Price or is upon terms less favorable to the Offering
Stockholder than the terms provided to the Offerees in the Stockholder Notice
(the "Below Target Price Offer"), the Offering Stockholder shall promptly
deliver a copy of such written offer to the Offerees. During the 15-day period
following delivery of such written offer, the Offerees shall have the right to
accept the offer to purchase the Securities offered on the terms reflected in
such written offer. Each Offeree shall, if it so desires, exercise such right
by delivery to the Offering Stockholder written notice of its election to
purchase all but not less than all of its Offeree Pro Rata Share of the Offered
Securities prior to 5:00 p.m. Los Angeles time on the final day of such
additional 15 day period and the sale of such Securities shall be consummated
within 30 days of the delivery of such written notice. Any unsubscribed portion
of the Offered Securities shall be allocated in the manner provided above. If
the Offerees do not elect to accept the offer to purchase the Offered Securities
on such terms or fail to consummate the purchase of the Offered Securities
within 30 days of the date of the Offerees' acceptance of the Below Target Price
Offer, the Offering Stockholder shall have 90 days to consummate the sale of the
Offered Securities at a price and upon terms that are not less favorable to the
Offering Stockholder than the price and terms specified in the written offer
delivered to the Offerees. In the event a Below Target Price Offer involves any
non-cash consideration, the procedures for valuing such non-cash consideration
set forth in Subsection 5.2 above shall be utilized to determine the fair market
value of such non-cash consideration.
5.3 Termination and Assignment. The obligations of a Stockholder
--------------------------
pursuant to this Section 5 shall terminate upon an Initial Public Offering. The
rights granted to Stockholders under Subsection 5.2 shall not be assignable
except to Permitted Transferees. Any transferee of Securities from a
Stockholder other than a purchaser of shares from a Stockholder after the
Stockholder has duly complied with its obligations under this Section 5 with
respect to such sale, shall be bound by the provisions of this Section 5 and
such Stockholder shall obtain and deliver to each other Stockholder a written
commitment to be bound by such provisions from each such transferee prior to any
transfer.
6. Registration Rights.
-------------------
6.1 "Piggy-Back" and Demand Rights on Common Stock. FSEP III, FSEP
----------------------------------------------
International and each Existing Stockholder shall be entitled to certain "piggy-
back" registration rights with respect to future public offerings of Common
Stock by Company and to certain demand registration rights (the "Registration
Rights"). The terms of the Registration Rights are
11
<PAGE>
set forth in Exhibit A attached hereto. The rights granted to Stockholders
under this Section 6.1 shall not be assignable except to a Permitted Transferee.
6.2 Registration Rights on Preferred Stock. Each Existing Stockholder
--------------------------------------
that owns 10% Preferred Stock shall be entitled to the registration rights set
forth on Exhibit B hereto. The rights granted to Stockholders under this
Section 6.2 shall not be assignable except to a Permitted Transferee.
7. Representation on the Board of Directors.
----------------------------------------
7.1 The Board. Subject to the terms and conditions of this Section
---------
7, at each annual or special meeting of stockholders of the Company, or in any
written consent executed in lieu of a stockholder meeting, at or pursuant to
which persons are being elected to fill positions on the Board, the FS
Stockholder and the Existing Stockholders agree to exercise, or cause to be
exercised, voting rights with respect to the shares of Voting Securities then
held of record or beneficially owned by them, in such a manner that five
candidates nominated by FS Stockholder and three candidates nominated by the
Chief Executive Officer of the Company (the "CEO") shall be elected to fill and
continue to hold positions on the Board. Pursuant to the terms of the 10%
Preferred Stock, holders of the 10% Preferred Stock are entitled to elect one
member of the Board. The parties shall use their reasonable best efforts to
ensure that the Board consists of not more than nine members. If necessary, the
Board shall elect such additional independent members, if any, as may be
required under applicable law or stock exchange requirements or by the National
Association of Securities Dealers or underwriters in connection with the Initial
Public Offering, and the FS Stockholder and the Existing Stockholders shall each
take all actions necessary in connection therewith.
If at any time from and after the date hereof, FS Stockholder or the
CEO shall give notice of their desire to remove any director previously
nominated by that party to serve on the Board, the FS Stockholder and the
Existing Stockholders agree to exercise or cause to be exercised voting rights
with respect to all shares of Voting Securities held of record or beneficially
owned by it or them so as to remove such director of the Company. If at any
time from and after the date hereof, any director previously nominated by FS
Stockholder or the CEO to serve on the Board ceases to be a director (whether by
reason of death, resignation, removal or otherwise), FS Stockholder or the CEO,
as the case may be, shall be entitled to nominate a successor director to fill
the vacancy created thereby, and the FS Stockholder and the Existing
Stockholders agree to exercise voting rights with respect to the shares of
Voting Securities held of record or beneficially owned by them so as to elect
such nominee as a director of the Company.
7.2 Termination and Assignment. The rights and obligations contained
--------------------------
in this Section 7 shall terminate upon the consummation of an Initial Public
Offering or upon the sale by the FS Stockholder of more than 50% of its Initial
Shares (with FSEP III and FSEP International considered collectively for this
purpose) and shall not be assignable other than to Permitted Transferees.
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<PAGE>
8. Other Agreements.
----------------
(a) Each of the Stockholders agrees that, at the request of any
Existing Stockholder, it shall vote all shares of Common Stock owned by it in
favor of an amendment to the Company's Articles of Incorporation to provide that
shares of Common Stock may, at any holder's request, be converted into shares of
a new series of non-voting common stock, provided that all such shares of non-
voting common stock shall be subject to the provisions of this Agreement to the
same extent as the shares of Common Stock converted.
(b) The Company shall not consummate any material transaction with a
Stockholder or any Affiliate of a Stockholder other than transactions on terms
that are no less favorable to the Company than could have been obtained with a
person that is not a stockholder (as determined in the good faith judgment of
the Board) and other than (i) indemnification of any of Company's officers or
directors whether pursuant to any indemnity agreement or applicable law, (ii)
payment of transaction fees in connection with the Purchase Agreement, and (iii)
any reimbursement by Company of normal and reasonable expenses incurred by the
FS Stockholder or any of its Affiliates after the date hereof.
(c) Each Stockholder shall be promptly provided with all financial
and other information provided to the members of the Board and shall be
permitted to have one representative attend all regularly scheduled Board
meetings.
9. Copy of Agreement. A copy of this Agreement and all amendments
-----------------
hereto shall be filed with the Secretary of Company and shall be kept at the
principal executive offices of Company.
10. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the State of Minnesota without
regard to the conflicts of laws rules thereof.
11. Representations and Warranties. Each Stockholder represents and
------------------------------
warrants (a) that such Stockholder has full power, capacity, right and
authority, and any requisite approvals or consents to enter into and perform
this Agreement; (b) that this Agreement and the performance of its obligations
hereunder have been duly authorized, executed and delivered by such Stockholder
and is a valid and binding agreement, enforceable against such Stockholder in
accordance with its terms; (c) that such Stockholder owns beneficially and of
record the shares of Common Stock and 10% Preferred Stock and the rights,
options or warrants to purchase any capital stock of the Company set forth
opposite its name on Schedule 1 hereto, free and clear of any lien, claim,
charge, option, security interest, restriction or encumbrance and (d) that such
Stockholder does not own beneficially or of record any other securities or
rights, options or warrants to purchase any securities of the Company.
12. Amendment and Waiver; Successors. This Agreement may be amended,
--------------------------------
modified or supplemented, and compliance with any provision hereof may be
waived, only with the written consent of FSEP III, FSEP International and those
Existing Stockholders then holding
13
<PAGE>
a majority of the shares of Voting Securities then held by the Existing
Stockholders, and any amendment, modification, supplement or waiver so consented
to in writing shall be binding upon the parties hereto and their successors and
permitted transferees and assigns; provided that any amendment that materially
and adversely affects the rights of any Existing Stockholder hereunder shall
require the consent of each Existing Stockholder so affected. This Agreement
shall be binding on the parties hereto and, their successors, transferees,
assigns, heirs and personal representatives; provided however, that unless
expressly permitted herein, this Agreement under the rights granted hereunder
shall not be assignable without the written consent of all of the parties
hereto, which consent may be withheld in each such party's sole discretion.
13. Interpretation. The headings of the Sections contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
14. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or delivered by telecopier (with receipt
confirmed), on the date of such delivery or transmission, or three (3) days
after deposit in the mail, by registered or certified mail (return receipt
requested) postage prepaid (i) if to Company, at the address or telecopier
number set forth in the Purchase Agreement, (ii) if to the FS Stockholder, at
Freeman Spogli & Co. Incorporated, 11100 Santa Monica Boulevard, Suite 1900, Los
Angeles, California 90025, Attention: William M. Wardlaw, telecopier: (310) 444-
1870, (iii) if to Canadian Imperial Bank of Commerce, at 425 Lexington Avenue,
New York, New York 10017, Attention: R. Bruce Layman and Marc Bilbao; if to ML
IBK Positions, Inc., at Merrill Lynch & Co., Inc., Corporate Credit Division,
World Financial Center, South Tower, 7th Floor, New York, New York 10080-6107,
Attention: Anthony Lafaire; if to Pilgrim Prime Rate Trust, at The Pilgrim
America Group, 12th Floor, 2 Renaissance Square, 40 N. Central Avenue, Phoenix,
Arizona 85004, Attention: Howard Tiffen; if to Senior Debt Portfolio, at Eaton
Vance Prime Rate Reserves, 24 Federal Street, Boston, Massachusetts 02110,
Attention: Jane Nelson; and if to Van Kampen American Capital Prime Rate Income
Trust, at One Oakview Plaza, Oakbrook Terrace, Illinois 60181, Attention: Jeff
Maillet (or at such other address or telecopier number for any party as shall be
specified by like notice provided that notices of a change of address or
telecopier number shall be effective only upon receipt thereof).
15. Legends. All certificates evidencing Securities which are issued
-------
to any of FSEP III, FSEP International and the Existing Stockholders shall be
legended as follows (in addition to any other legend required to be placed
thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE TRANSFER,
PLEDGE, HYPOTHECATION AND VOTING THEREOF AS SET FORTH IN THAT CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF APRIL 11, 1996, WHICH MAY BE
REVIEWED AT THE PRINCIPAL PLACE OF BUSINESS OF THE CORPORATION AND A
COPY OF WHICH MAY BE
14
<PAGE>
OBTAINED FROM THE CORPORATION WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFOR."
16. Further Assurances. The Stockholders shall exercise, or cause to
------------------
be exercised, voting rights with respect to Voting Securities held of record or
beneficially owned by them in a manner so that, and shall otherwise take any
necessary actions in order that, the covenants and understandings of the parties
set forth in this Agreement shall be implemented. Each party hereto agrees to
perform any further acts and execute and deliver any documents which may be
reasonably necessary to carry out the intent of this Agreement and to make
appropriate changes to the procedures set forth herein to implement such rights
to the extent necessary to conform to the Minnesota Business Corporation Act or
other applicable law. Each party hereto further agrees not to take any action
violating the intent and purpose of this Agreement. The Company covenants and
agrees that it will act in good faith to preserve for each of the Stockholders
the benefits of this Agreement and that it will take no voluntary action to
impair the benefit hereof or to avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder or to deny
to any of the Stockholders any of the benefits or protections contemplated
hereby.
17. Injunctive Relief; Disputes. It is acknowledged that it will be
---------------------------
impossible to measure in money the damages that would be suffered if the parties
hereto fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved party hereto will be
irreparably damaged and will not have an adequate remedy at law. Any such party
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
hereto shall raise the defense that there is an adequate remedy at law. In the
event of any dispute among the parties arising out of this Agreement, the
prevailing party shall be entitled to recover from the non-prevailing party the
reasonable expenses of the prevailing party, including, without limitation,
reasonable attorneys' fees.
18. Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any Rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect to the maximum extent permitted by applicable
law. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
this Agreement be enforced as originally contemplated to the greatest extent
possible.
19. Entire Agreement. This Agreement (and Exhibits hereto), together
----------------
with the Company's Articles of Incorporation and Bylaws as in effect on the date
hereof constitute the entire agreement and understanding among the parties
pertaining to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, relating hereto.
15
<PAGE>
20. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
21. Opinions. Upon the execution of this Agreement, FS Stockholder
--------
shall receive an opinion from Dorsey & Whitney, with respect to the
enforceability of this Agreement against the Existing Stockholders and the
Existing Stockholders shall receive an opinion from Faegre & Benson with
respect to the enforceability of this Agreement against FS Stockholder.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FS EQUITY PARTNERS III, L.P., AMERICA'S FAVORITE CHICKEN COMPANY
a Delaware limited partnership
By: FS Capital Partners, L.P. By: /s/ Frank Belatti
--------------------------------------
Its: General Partner Its: Chairman of the Board
By: FS Holdings, Inc.
Its: General Partner PILGRIM PRIME RATE TRUST
By: /s/ John M. Roth By: /s/
---------------------- -------------------------------
Its: Vice President Its: Senior Vice President
FS EQUITY PARTNERS VAN KAMPEN AMERICAN CAPITAL PRIME
INTERNATIONAL, L.P., a RATE INCOME TRUST
Delaware limited partnership
By: FS&Co. International, L.P. By: /s/ Jeffrey W. Maillet
-------------------------------------
Its: General Partner Its: Senior Vice-President -
Portfolio Manager
By: FS International
Holdings Limited
Its: General Partner
By: /s/ John M. Roth
---------------------------
Its: Vice President
17
<PAGE>
CANADIAN IMPERIAL BANK
OF COMMERCE
By: /s/
-------------------------------
Its:
ML IBK POSITIONS, INC. SENIOR DEBT PORTFOLIO
By: Boston Management and Research
By: /s/ Martin J. McInerney as Investment Advisor
-------------------------------
Its: Vice President
By: /s/
---------------------------------
Its: Vice President
FRANK J. BELATTI DICK R. HOLBROOK
/s/ Frank J. Belatti /s/ Dick R. Holbrook
- ----------------------------------- --------------------------------------
SAMUEL N. FRANKEL
/s/ Samuel N. Frankel
- -----------------------------------
18
<PAGE>
SCHEDULE 1
OWNERSHIP OF CAPITAL STOCK
BY STOCKHOLDERS UPON CONSUMMATION OF
TRANSACTIONS CONTEMPLATED BY PURCHASE AGREEMENT
<TABLE>
<CAPTION>
10%
PREFERRED
STOCKHOLDER COMMON STOCK STOCK
- ------------------------------------------------ ------------ ---------
<S> <C> <C>
FS Equity Partners III, L.P. 20,288,340 --
FS Equity Partners International, L.P. 815,067 --
Canadian Imperial Bank of Commerce 6,312,724 360,545
Pilgrim Prime Rate Trust 413,980 24,848
Van Kampen American Capital Prime Rate Income 604,251 34,864
Trust
Senior Debt Portfolio 806,708 54,895
ML IBK Positions, Inc. 1,800,000 60,000
Frank J. Belatti 1,329,969 --
Dick R. Holbrook 660,000 --
Samuel N. Frankel 660,000 --
</TABLE>
19
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT
THIS AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT (the "Amendment") is
made and entered into as of May 1, 1996 by and among (i) America's Favorite
Chicken Company, a Minnesota corporation (the "Company"), (ii) FS Equity
Partners III, L.P., a Delaware limited partnership ("FSEP III"), FS Equity
Partners International, L.P., a Delaware limited partnership ("FSEP
International," and collectively with FSEP III, the "FS Stockholder"), (iii)
PENMAN Private Equity and Mezzanine Fund, L.P. ("PENMAN"), and (iv) Canadian
Imperial Bank of Commerce, Pilgrim Prime Rate Trust, Van Kampen American Capital
Prime Rate Income Trust, Senior Debt Portfolio, ML IBK Positions, Inc., Frank J.
Belatti, Dick R. Holbrook and Samuel N. Frankel (collectively, the "Existing
Stockholders" and individually, an "Existing Stockholder").
RECITALS
A. Pursuant to a Stock Purchase Agreement dated as of February 23,
1996 among the Company and the FS Stockholder (the "Purchase Agreement"), FS
Stockholder made a substantial investment in the Common Stock of the Company.
B. To induce the FS Stockholder to consummate the transactions
contemplated by the Purchase Agreement, the Existing Stockholders executed the
Stockholders Agreement on April 11, 1996 (the "Agreement").
C. On May 1, 1996, PENMAN purchased 2,110,341 shares of Common Stock
of the Company from the FS Stockholder.
D. The parties hereto wish to add PENMAN as a party to the Agreement
with respect to certain rights, obligations and restrictions relating to the
securities of the Company.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
1. Unless the context otherwise requires, as used in this Amendment
capitalized terms shall have the meanings set forth in Section 1 of the
Agreement.
2. The following definitions as set forth in Section 1 of the
Agreement are hereby amended in their entirety as follows:
Existing Stockholders: Canadian Imperial Bank of Commerce,
---------------------
Pilgrim Prime Rate Trust, Van Kampen American Capital Prime Rate
Income Trust, Senior Debt Portfolio, ML IBK Positions, Inc., Frank J.
Belatti, Dick R. Holbrook and Samuel N. Frankel. PENMAN shall be an
"Existing Stockholder" solely for purposes of Section 3 and 4 of the
Agreement and shall be entitled to
<PAGE>
all of the rights and subject to all of the obligations of an
"Existing Stockholder" contained in such sections.
"Initial Shares": Shall mean the 33,691,039 shares of Common
--------------
Stock and the 535,152 shares of 10% Preferred Stock issued and
outstanding on May 1, 1996 and held beneficially and of record by the
Stockholders as follows:
<TABLE>
<CAPTION>
INITIAL SHARES
--------------------------------------
10%
PREFERRED
STOCKHOLDER COMMON STOCK STOCK
- ------------------------------------------------- ------------- ---------
<S> <C> <C>
FS Equity Partners III, L.P. 18,259,483 ---
FS Equity Partners International, L.P. 733,583 ---
PENMAN Private Equity and Mezzanine Fund, L.P. 2,110,341 ---
Canadian Imperial Bank of Commerce 6,312,724 360,545
Pilgrim Prime Rate Trust 413,980 24,848
Van Kampen American Capital Prime Rate Income
Trust 604,251 34,864
Senior Debt Portfolio 806,708 54,895
ML IBK Positions, Inc. 1,800,000 60,000
Frank J. Belatti 1,329,969 ---
Dick R. Holbrook 660,000 ---
Samuel N. Frankel 660,000 ---
</TABLE>
"Stockholders: The FS Stockholder, PENMAN and the Existing
------------
Stockholders."
3. The following definition is hereby added to Section 1 of the
Agreement:
"PENMAN: The PENMAN Private Equity and Mezzanine Fund, L.P."
4. The seventh sentence of Section 5.1 of the Agreement is
hereby amended in its entirety as follows:
"A Stockholder may transfer Securities to a Permitted Transferee
provided that such transferee executes a written undertaking to be and
becomes bound by this Agreement in the same manner and to the same
extent as the transferring Stockholder; and provided further, that
prior to the consummation of any transaction in which a Permitted
Transferee ceases to be an Affiliate of such Stockholder such
Permitted Transferee shall reconvey all Securities to the transferring
Stockholder and the Securities will remain subject to this Agreement."
2
<PAGE>
5. Section 6.1 of the Agreement is hereby amended in its
entirety as follows:
"6.1 "Piggy-Back" and Demand Rights on Common Stock. The
---------------------------------------------
Stockholders shall be entitled to certain "piggy-back" registration
rights with respect to future public offerings of Common Stock by
Company and to certain demand registration rights (the "Registration
Rights"). The terms of the Registration Rights are set forth in
Exhibit A attached hereto. The rights granted to the Stockholders
under this Section 6.1 shall not be assignable except to a Permitted
Transferee."
6. Section 7.1 of the Agreement is hereby amended in its
entirety as follows:
"7.1 The Board. Subject to the terms and conditions of this
---------
Section 7, at each annual or special meeting of stockholders of the
Company, or in any written consent executed in lieu of a stockholder
meeting, at or pursuant to which persons are being elected to fill
positions on the Board, the FS Stockholder, PENMAN and the Existing
Stockholders agree to exercise, or cause to be exercised, voting
rights with respect to the shares of Voting Securities then held of
record or beneficially owned by them, in such a manner that six
candidates nominated by the FS Stockholder, three candidates nominated
by the Chief Executive Officer of the Company (the "CEO") and one
candidate nominated by PENMAN shall be elected to fill and continue to
hold positions on the Board. Pursuant to the terms of the 10%
Preferred Stock, holders of the 10% Preferred Stock are entitled to
elect one member of the Board. The parties shall use their reasonable
best efforts to ensure that the Board consists of not more than eleven
members. If necessary, the Board shall elect such additional
independent members, if any, as may be required under applicable law
or stock exchange requirements or by the National Association of
Securities Dealers or underwriters in connection with the Initial
Public Offering, and the FS Stockholder, PENMAN and the Existing
Stockholders shall each take all actions necessary in connection
therewith. All directors will be reimbursed for reasonable out-of-
pocket expenses in connection with the performance of their duties.
If at any time from and after the date hereof, the FS
Stockholder, the CEO or PENMAN shall give notice of their desire to
remove any director previously nominated by that party to serve on the
Board, the FS Stockholder, PENMAN and the Existing Stockholders agree
to exercise or cause to be exercised voting rights with respect to all
shares of Voting Securities held of record or beneficially owned by it
or them so as to remove such director of the Company. If at any time
from and after the date hereof, any director previously nominated by
the FS Stockholder, the CEO or PENMAN to serve on the Board ceases to
be a director (whether by reason of death, resignation, removal or
otherwise), the FS Stockholder, the CEO or PENMAN, as the case may be,
shall be entitled to nominate a successor director to fill the vacancy
created thereby, and the FS Stockholder, PENMAN and the Existing
Stockholders agree to exercise voting rights with respect to the
shares of Voting Securities held of record or beneficially owned by
them so as to elect such nominee as a director of the Company."
3
<PAGE>
7. Section 8(b) of the Agreement is hereby amended in its
entirety as follows:
(b) The Company shall not consummate any material
transaction with a Stockholder or any Affiliate of a Stockholder other
than transactions on terms that are no less favorable to the Company
than could have been obtained with a person that is not a stockholder
(as determined in the good faith judgment of the Board) and other than
(i) indemnification of any of Company's officers or directors whether
pursuant to any indemnity agreement or applicable law and (ii) payment
of transaction fees in connection with the Purchase Agreement and fees
to directors.
8. Section 12 of the Agreement is hereby amended in its
entirety as follows:
"This Agreement may be amended, modified or supplemented, and
compliance with any provision hereof may be waived, only with the
written consent of the FS Stockholder and those other Stockholders
then holding a majority of the shares of Voting Securities then held
by such Stockholders, and any amendment, modification, supplement or
waiver so consented to in writing shall be binding upon the parties
hereto and their successors and permitted transferees and assigns;
provided that any amendment, modification, supplement or waiver that
materially and adversely affects the rights of any Existing
Stockholder or PENMAN hereunder shall require the consent of each
Existing Stockholder so affected or PENMAN, as the case may be. This
Agreement shall be binding on the parties hereto and, their
successors, transferees, assigns, heirs and personal representatives;
provided however, that unless expressly permitted herein, this
Agreement under the rights granted hereunder shall not be assignable
without the written consent of all of the parties hereto, which
consent may be withheld in each such party's sole discretion.
9. Section 14 of the Agreement is hereby amended by adding the
following clause to the end of clause (iii) of Section 14:
"and (iv) if to PENMAN to: 333 W. Wacker Drive, Suite 700, Chicago,
Illinois, 60606, Attention: Kelvin Pennington, telecopier: (312)
750-4676; with a copy to: Altheimer & Gray, 10 South Wacker Drive,
Chicago, Illinois, 60606, Attention: Mark T. Kindelin, telecopier:
(312) 715-4800."
10. Section 15 of the Agreement is hereby amended by deleting
the words "of FSEP III, FSEP International and the Existing" in the first
sentence and replacing such words with the word "the".
11. Exhibit A of the Agreement is hereby amended as follows:
(a) The definition of "Holder" in Section 1.1 of Exhibit A
is hereby amended in its entirety as follows:
"Holder" means the FS Stockholder, PENMAN or any Existing
Stockholder (or any Permitted Transferee thereof).
4
<PAGE>
(b) Section 2.1(a) of Exhibit A is hereby amended in its
entirety as follows:
SECTION 2.1 Demand Registration.
-------------------
(a) Request for Registration. At any time on or after the date
------------------------
which is six months following the closing of the Initial Public
Offering or at any time after April 11, 2001, any Holder or Holders
owning, individually or in the aggregate, at least the Requisite Share
Number may make a written request for registration under the
Securities Act of all or part of its or their Registrable Securities
(a "Demand Registration"); provided that the Holder or Holders making
--------
the request are together requesting that the Requisite Share Number be
registered, and provided further that the Company shall not be
----------------
obligated to effect (i) more than one Demand Registration in any 18-
month period or (ii) more than one Demand Registration for each of (A)
the FS Stockholder, PENMAN and their Permitted Transferees, as a
group, provided that only the FS Stockholder (or its Permitted
Transferees) may initiate a demand registration for the group
identified in this clause (A), and (B) the Existing Stockholders and
their Permitted Transferees as a group. Such request will specify the
number of shares of Registrable Securities proposed to be sold and
will also specify the intended method of disposition thereof. The
Company shall give written notice to such registration request within
10 days after the receipt thereof to all other Holders. Within 20
days after receipt of such notice by any Holder, such Holder may
request in writing that Registrable Securities be included in such
registration. Each such request by such other Holders (each, an
"Other Holder Notice") shall specify the number of shares of
Registrable Securities proposed to be sold and the intended method of
disposition thereof. With respect to a Demand Registration initiated
by Existing Stockholder (or Permitted Transferees) as described above,
the Company shall include in such Demand Registration the Registrable
Securities of any other Existing Stockholder (or Permitted Transferee)
requested to be so included and such Existing Stockholder shall be
deemed to be a Holder who initiated a Demand Registration for purposes
of this Exhibit A, including, without limitation, Section 2.1 and 2.3.
With respect to a Demand Registration initiated by the FS Stockholder
(or its Permitted Transferees) as described above, the Company shall
include in such Demand Registration the Registrable Securities of
PENMAN (or its Permitted Transferees) requested to be so included and
PENMAN shall be deemed for purposes of this Exhibit A, including
Section 2.3, to be a Holder who initiated the Demand Registration.
Unless the FS Stockholder shall consent in writing, no other party,
including the Company, shall be permitted to offer securities under
any Demand Registration initiated by the FS Stockholder. Unless a
majority in interest of the participating Existing Stockholders shall
consent in writing, no other party, including the Company, shall be
permitted to offer securities under any Demand Registration initiated
by the Existing Stockholders.
(c) The first sentence of Section 4.1 of the Exhibit A is
hereby amended in its entirety as follows:
"The Company agrees to indemnify and hold harmless each Selling
Holder of Registrable Securities, its officers, directors, partners
and agents, and each Person, if any, who controls such Selling Holder
within the meaning of Section
5
<PAGE>
15 of the Securities Act or Section 20 of the Exchange Act from and
against any loss, claim, damage or liability and any action in respect
thereof to which such Selling Holder, its officers, directors,
partners and agents, and any such controlling Person may become
subject under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or arises out of, or is based upon, any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Selling Holder, its officers,
directors, partners and agents, and each such controlling Person for
any legal and other expenses reasonably incurred by that Selling
Holder, its officers, directors, partners and agents, or any such
controlling Person in investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action."
12. Waiver. Each of the Existing Stockholders hereby waives any
------
and all rights such Stockholder may have under Sections 3 and 5 of the Agreement
in connection with the sale by the FS Stockholder of shares of Common Stock to
PENMAN.
13. Governing Law. This Amendment shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of Minnesota
without regard to the conflicts of laws rules thereof.
14. Representations and Warranties. Each Stockholder represents
------------------------------
and warrants (a) that such Stockholder has full power, capacity, right and
authority, and any requisite approvals or consents to enter into and perform the
Agreement and this Amendment; and (b) that the Agreement and this Amendment and
the performance of its obligations thereunder have been duly authorized,
executed and delivered by such Stockholder and are valid and binding agreements,
enforceable against such Stockholder in accordance with their respective terms.
15. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
FS EQUITY PARTNERS III, L.P., AMERICA'S FAVORITE CHICKEN COMPANY
a Delaware limited partnership
By: FS Capital Partners, L.P. By: /s/ Frank J. Belatti
--------------------------------
Its: General Partners Its: Chief Executive Officer
By: FS Holdings, Inc. PILGRIM PRIME RATE TRUST
By: /s/ William Wardlaw By:_______________________________
--------------------- Its:
Its: Vice President
FS EQUITY PARTNERS VAN KAMPEN AMERICAN CAPITAL
L.P., a PRIME INTERNATIONAL, RATE INCOME TRUST
Delaware limited partnership
By: FS&Co. International, L.P. By: /s/ Jeffrey W. Maillet
---------------------------
Its: General Partners Its: Senior Vice President -
Portfolio Manager
By: FS International
Holdings Limited PENMAN PRIVATE EQUITY AND MEZZANINE
Its: General Partner FUND, L.P., a Delaware limited partnership
By: /s/ William Wardlaw By: PENMAN Asset Management, L.P.
---------------------
Its: General Partner Its: General Partner
CANADIAN IMPERIAL BANK By: /s/ Kelvin Pennington
OF COMMERCE -------------------------
Its: General Partner
SENIOR DEBT PORTFOLIO
By: /s/ R. B. Layma
- ------------------------
Its: Managing Director By: Boston Management and Research as
Investment Advisor
FRANK J. BELATTI
By: /s/
------------------------
Its: Vice President
/s/ Frank J. Belatti
- ----------------------
DICK R. HOLBROOK
SAMUEL N. FRANKEL /s/ Dick R. Holbrook
-------------------------------
ML IBK POSITIONS, INC.
/s/ Samuel N. Frankel
- ----------------------
By: /s/ Martin J. McInerney
----------------------------
7
<PAGE>
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT, dated as of March 24, 1997, is entered into
by and between AFC ENTERPRISES, INC., a Minnesota corporation ("Seller" or
"AFC"), and ATLANTA FRANCHISE DEVELOPMENT COMPANY, LLC, a Delaware limited
liability company ("Purchaser").
WHEREAS, Seller is engaged, in part, in the business of franchising,
owning and operating Churchs Chicken Restaurants;
WHEREAS, Seller desires to sell and/or lease, and Purchaser desires to
purchase and/or lease, one hundred (100) Churchs Chicken Restaurants
(collectively, the "Restaurants" and singularly, a "Restaurant") currently owned
and operated by Seller and listed on Exhibit "A" hereto; and
-----------
WHEREAS, Seller desires to sell and/or lease, and Purchaser desires to
purchase and/or lease, the Assets, as defined herein;
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto do hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
1.1 AGREEMENT TO SELL. On the Closing Date (as defined in Section 2.1),
-----------------
upon and subject to the terms and conditions of this Agreement, Seller shall
either: (a) except as provided in Article 9, grant, sell, assign, transfer and
deliver to Purchaser, all right, title and interest of Seller in and to all of
the Assets, as defined below, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and encumbrances of any nature
whatsoever (except Permitted Liens as defined in Section 3.1.13), or (b) to the
extent provided in Article 9, lease to Purchaser certain of the Assets.
1.1.1 INCLUDED ASSETS. The "Assets" shall include the following
---------------
assets, properties and rights of Seller used in the operation of the
Restaurants:
(a) all assets listed on the asset ledger for each Restaurant,
as set forth on Schedule 1.1.1(a) to be provided by Seller at Closing;
-----------------
(b) all the land, structures, improvements and fixtures and
all rights of way, uses, licenses, easements, and appurtenances
appertaining thereto, including, but not limited to, eighty-six (86) owned
parcels of land and buildings associated with the Restaurants and fourteen
(14) leaseholds of land and buildings associated with the Restaurants, as
set forth on
<PAGE>
Schedule 1.1.1(b) attached hereto, but subject to the provisions of Article
-----------------
9 regarding LPUR, as defined therein;
(c) except to the extent included in the POS System Agreement (as
defined in Section 5.2.6), all machinery, restaurant equipment, appliances,
utensils, furniture, furnishings, fixtures, signage, uniforms, office,
advertising and other supplies, leasehold improvements, goods, equipment
and other tangible personal property, including, but not limited to, all
equipment leases (including menu-board and fountain equipment leases) used
at, in or on the Restaurants and located at the Restaurants on the Closing
Date, excluding motor vehicles;
(d) all cash on hand, held by or for the Restaurants as of the
Closing Date (the "Cash on Hand");
(e) all prepaid items, deposits, unbilled costs and fees, and
accounts, notes and other receivables as of the Closing Date, if any, which
items shall be prorated as set forth in Section 1.3.1;
(f) all unadulterated, edible and merchantable food and beverage
inventories located in the Restaurants as of the Closing Date
(collectively, the "Inventories");
(g) subject to Section 2.3 and to the extent permitted by
applicable law, all rights under the written or oral contracts identified
on Schedule 1.1.1(g) (collectively, the "Contracts");
-----------------
(h) subject to Section 2.3 and to the extent permitted by
applicable law and to the extent transferable, all rights under any
Authorization (as defined in Section 3.1.13) that constitutes or relates to
or affects exclusively the Restaurants or the Assets;
(i) all rights or choses in action arising out of occurrences
before or after the Closing excluding insurance claims or refunds,
including without limitation, all rights under express or implied
warranties relating to the Assets and any noncompetition agreements with
current or former employees relating to the Restaurants (which shall
exclude employees of Seller operating other than from the Restaurant
locations); and
(j) all Records, as hereinafter defined in Section 7.3;
1.2 AGREEMENT TO PURCHASE. On the Closing Date, Purchaser shall purchase
---------------------
and/or lease the Assets from Seller, upon and subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of Seller contained herein, in consideration of the Purchase Price
(hereinafter defined in Section 1.3 hereof). In addition, Purchaser shall assume
on the Closing Date and agree to pay, discharge or perform, as appropriate,
certain liabilities and obligations of Seller only to the extent and as provided
in Section 1.4 of this Agreement.
1.3 THE PURCHASE PRICE; FRANCHISE FEES; DEVELOPMENT FEES
----------------------------------------------------
2
<PAGE>
1.3.1 PURCHASE PRICE. The Purchase Price (as adjusted as provided by this
--------------
Agreement, the "Purchase Price") for the Assets shall be an amount equal to:
(a) SIXTEEN MILLION THREE HUNDRED THOUSAND DOLLARS
($16,300,000.00), plus
----
(b) Seller's actual cost of the Inventories; plus
----
(c) An amount equal to Cash on Hand; plus
----
(d) Amounts due pursuant to the POS System Agreement; plus
----
(e) The Warrant defined in Section 1.3.4(b); plus
----
(f) The Assumed Liabilities defined in Section 1.4.1.
The Purchase Price shall be subject to adjustment at Closing in accordance
with Article 9. All items of expense or income directly relating to the Assets
and the operations of the Restaurants shall be prorated between Seller and
Purchaser as of the Closing Date. Items to be prorated shall include, without
limitation, real and personal property taxes, rents (including percentage rents)
and other prepaid items (including deposits). Prorations will be on a dollar-
for-dollar basis. Any prorations not determinable as of the Closing Date shall
be prorated on the basis of the most current information available at Closing;
provided, however, Seller and Purchaser agree that, after the Closing Date, upon
presentation of confirmation of overpayment or underpayment based on such
estimate, the party that has received the benefit of such overpayment will
reimburse the other party as soon as possible. Each party hereto agrees to
furnish the other party with any documents or records in such party's
possession that may be needed for the other party to confirm the adjustment and
prorations in this Section 1.3.1. The component of the Purchase Price under
subparts (b) and (c) of this Section shall be determined from Seller's business
records and Seller shall not be obligated to participate in a physical
accounting of such items. If the parties are unable to have a complete list of
the Inventories and the Cash-on-Hand as of the Closing Date, any such amounts
unaccounted for shall be promptly counted and paid for by the Purchaser as soon
as possible (but in no event more than 30 days) after the Closing Date.
1.3.2 FRANCHISE FEES. At the Closing, Purchaser shall pay to Seller
--------------
for the franchise rights to operate the Restaurants, franchise fees ("Franchise
Fees") in the aggregate amount of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000), and Seller and Purchaser shall enter into Franchise Agreements in
the form attached hereto as Exhibit "B" (the "Franchise Agreements") with
-----------
respect to each Restaurant; provided, however, the Franchise Agreements shall
specify that the royalty rates to be paid by Purchaser thereunder shall be four
and one-half percent (4-1/2%) of gross sales for years of operation one (1) and
two (2), five and one-half percent (5-1/2%) for years of operation three (3) and
four (4), and five percent (5%) thereafter throughout the remainder of the
term, and that the initial term of the Franchise Agreements shall be twenty (20)
years with an option in the Purchaser to extend such initial term by an
additional term of ten (10) years, and the Franchise Agreements shall specify
(i) that, for so long as AFC has agreed that its fountain drink concessions
shall exclusively offer Coca Cola products (or other products from time to time
selected by AFC), Purchaser shall do the same; (ii) that royalty and related
payments shall be made by direct electronic payment; and (iii) that when it is
adopted the franchisee will benefit, as will all Churchs'
3
<PAGE>
franchisees, from the impact policy currently being negotiated by the Seller and
the Churchs' Independent Franchisee Association ("CIFA "). Any conflict between
the terms of this Agreement and of the Franchise Agreements shall be governed by
the Franchise Agreements.
1.3.3 DEVELOPMENT AGREEMENT AND DEVELOPMENT FEES. Purchaser and
------------------------------------------
Seller shall at the Closing enter into one or more Development Agreements in the
form attached hereto as Exhibit "C" (the "Development Agreements"), and
-----------
Purchaser shall pay to Seller development fees ("Development Fees") in the
aggregate amount of ONE MILLION DOLLARS ($1,000,000), for the rights to develop
one hundred (100) additional restaurants upon the terms set forth in the
Development Agreements.
1.3.4 PAYMENT OF PURCHASE PRICE AND FRANCHISE FEES. At the Closing,
--------------------------------------------
Purchaser shall deliver to Seller, in payment of the Purchase Price, Development
Fees and the Franchise Fees, the following (hereinafter, such payment of the
Purchase Price, Development Fees and the Franchise Fees, being referred to
collectively as the "Closing Payment"):
(a) NINETEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
($19,800,000.00), plus or minus any adjustments pursuant to Section 1.3.1,
---- -----
in immediately available funds to such account as Seller shall designate;
plus
----
(b) Purchaser shall deliver to Seller a warrant in the form
attached hereto as Exhibit "D" (the "Warrant") to purchase a five percent
-----------
(5%) interest in Purchaser on a fully-diluted basis at the time of
exercise, exercisable at any time and from time to time prior to the tenth
anniversary of the Closing Date. Such Warrant shall set forth mutually
acceptable provisions for registration of the equity underlying such
Warrant if Purchaser registers its equity in a public offering. Seller and
Purchaser shall enter into, or the Warrant or the Operating Agreement (as
defined in Section 3.2.1) shall contain, a Right of First Refusal Agreement
mutually acceptable to the parties hereto (the "Right of First Refusal
Agreement"), providing that Purchaser shall have a right of first refusal
if Seller wishes to transfer or assign any membership interest in
Purchaser.
1.3.5 ALLOCATION OF PURCHASE PRICE. The total consideration for the
----------------------------
Assets, consisting of the Purchase Price and the liabilities assumed by
Purchaser in accordance with Section 1.4 hereof and any non-recourse liabilities
to which any Assets are subject, shall be allocated among the Assets as set
forth on Schedule 1.3.5 hereto. Seller and Purchaser each hereby covenant and
--------------
agree that each will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the terms of said
schedule.
1.4 ASSUMPTION OF LIABILITIES. At the Closing and except as otherwise
-------------------------
specifically provided in this Section 1.4, Purchaser shall assume and agree to
pay, discharge or perform, as appropriate, the liabilities and obligations of
Seller set forth in Section 1.4.1 (hereinafter "Assumed Liabilities"):
1.4.1 ASSUMED LIABILITIES. The Assumed Liabilities shall be as
-------------------
follows:
4
<PAGE>
(a) all liabilities and obligations of Seller related to
owning or operating each Restaurant occurring after the Closing Date,
excluding, however, those set forth in Schedule 1.4.2 hereto;
--------------
(b) all liabilities and obligations of Seller under the
Contracts that arise or are attributable to events occurring after the
Closing Date.
1.4.2 EXCLUDED LIABILITIES. All claims against and liabilities
--------------------
and obligations of Seller not specifically assumed by Purchaser pursuant to
Section 1.4.1 (the "Excluded Liabilities"), including, without limitation, the
following claims and liabilities of Seller, are excluded, and shall not be
assumed or discharged by Purchaser:
(a) any liabilities or obligations relating to contracts
or discount coupons for food purchases which Purchaser elects to not
recognize and that are not specifically assumed at the Closing or prior to
the Closing Date;
(b) any liabilities or obligations arising out of and to
the extent attributable to any breach by Seller of any provision of any
Contract or other commitment of Seller of which Seller or the counterparty
to such contract has not advised Purchaser prior to Closing;
(c) any liabilities or obligations for which Purchaser is
indemnified by Seller under Article 9 or any of the FPUR Leases (as defined
in Article 9), or any liabilities or obligations arising solely from an
environmental condition existing at any of the Restaurants prior to the
Closing Date;
(d) any claim, whether or not asserted, for injury to
person or property existing prior to the Closing Date, except as provided
in Section 4.1.12;
(e) except as expressly set forth in Section 7.1 hereof
or the 401(k) Transfer Agreement (as defined in Section 7.2), any
liability or obligation of Seller arising prior to the Closing Date or as a
result of the Closing to any employees, agents or independent contractors
of Seller (except as may be set forth in the Contracts), whether or not
employed by Purchaser after the Closing, including, without limitation, any
liabilities for accrued and unpaid wages, salaries, bonuses, commissions,
sick leave, vacation time or compensated time off owing by Seller to its
employees or pursuant to any compensation, collective bargaining, pension,
retirement, severance, termination or other benefit plans (including,
without limitation, any Employee Plans (as defined in Section 3.1.22(b)
hereof)) or under any other similar arrangement or practice or any federal,
state or municipal law.
(f) except to the extent prorated under Section 1.3.1,
any liabilities or obligations of Seller for any taxes arising prior to the
Closing Date or attributable to the possession, ownership or operation of
the Restaurants prior to the Closing Date or arising from the sale of the
Assets under this Agreement (including, without limitation, any liability
or obligation for any federal, state or local income or other tax payable
with respect to the Seller or any of its affiliates or for real estate
taxes attributable to the Real Property prior to the Closing Date);
5
<PAGE>
(g) any liabilities or obligations for or related to
indebtedness of Seller to banks, financial institutions, or other person or
entities, except as provided in Section 1.4.1;
(h) any liabilities or obligations for retrospective or
similar insurance premium adjustments;
(i) any of the liabilities or obligations listed on
Schedule 1,4,2 attached hereto;
--------------
(j) except to the extent provided otherwise under this
Agreement, any other liabilities or obligations of Seller that are
attributable to or arise from facts, events, or conditions that occurred or
came into existence prior to the Closing Date; and
(k) any liability or obligation of Seller arising or
incurred in connection with the negotiation, preparation and execution of
this Agreement and the transactions contemplated hereby and fees and
expenses of counsel, accountants, other experts or anyone else employed by
Seller with respect to these transactions.
ARTICLE 2
CLOSING
2.1 CLOSING AND CLOSING DATE. The closing (the "Closing") of the sale and
------------------------
purchase of the Assets shall take place at 10:00 A.M., local time, on March
23,1997, or at such other time and at such place in the Atlanta, Georgia
metropolitan area as may be mutually agreed upon in writing by Purchaser and
Seller. The effective date of the Closing (the "Closing Date") shall be that
local time when each Restaurant regularly opens for business in the morning
hours of March 24, 1997, after it has closed out business from March 23, 1997.
2.2 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to the
--------------------------------
terms and conditions herein contained:
(a) Subject to Section 2.3, Seller shall deliver to Purchaser
the following:
(i) such special warranty deeds (which shall include
Seller's standard restrictive covenants which generally prohibit the
use of the property for the operation of a fast food restaurant where
20% or more of annual gross sales are generated from bone-in fried
chicken except for a fast food restaurant operated under a franchise
agreement with Seller) and bills of sale with special warranty and
other instruments of conveyance and transfer, in form reasonably
satisfactory to Purchaser and its counsel, as shall be necessary and
effective to transfer and assign to, and vest in, Purchaser all of
Seller's right, title and interest in and to the Assets; and
---
(ii) such assignments (or subleases on forms substantially
similar to those forms used for the FPUR Leases, as defined in Section
9.3.2) of Leases (as defined in Section 3.1.21(c) and equipment leases
and such other instruments of transfer or assignment, or evidence of
consent as may be necessary to evidence or
6
<PAGE>
perfect the transfer of the Assets, in each case free and clear of all
liens, security interests, claims, charges or encumbrances (except for
Permitted Liens);
and simultaneously with such delivery, all such steps will be taken as may be
required to put Purchaser in actual possession and operating control of the
Assets on the Closing Date.
(b) Purchaser shall deliver to Seller the following:
(i) the Closing Payment; and
(ii) an undertaking whereby Purchaser will assume and agree
to pay, discharge or perform, as appropriate, the Assumed Liabilities
in form reasonably satisfactory to Seller and its counsel; and
(c) Seller and Purchaser shall enter into the following
documents (the "Additional Documents"):
(i) the Franchise Agreements referred to in Section
1.3.2, together with the Re-Imaging Schedules (as defined in Section
5.2.8) to the Franchise Agreements;
(ii) the Development Agreement(s) referred to in Section
1.3.3;
(iii) the Warrant and the Right of First Refusal Agreement
(if any) referred to in Section 1.3.4(b);
(iv) the POS System Agreement referred to in Section 5.2.6;
(v) the FPUR Leases contemplated by Section 9.3.2;
(vi) the 401(k) Transfer Agreement referred to in Section
7.2; and
(vii) such other documents as are legally required,
necessary or customary and appropriate such as, by way of illustration
but not limitation, non-foreign certificates of Purchaser, seller's
affidavits of Seller, closing statements and similar documents.
(d) The parries hereto shall also deliver to each other the
agreements, opinions, certificates, documents, instruments and further
assurances referred to in Article 5 hereof.
2.3 THIRD PARTY CONSENTS. To the extent that Seller's rights under any
--------------------
agreement, contract, commitment, lease, Authorization or other Asset to be
assigned to Purchaser hereunder may not be assigned without the consent of
another person which has not been obtained, this Agreement shall not constitute
an agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller, at its expense, shall use its best
efforts to obtain any such required consent(s) as promptly as possible;
provided, however, (i) Seller shall not be required to make
7
<PAGE>
an additional payment or incur any obligation to any third party (other than as
provided in Section 8.3 hereof) in order to obtain such consent, and (ii) Seller
shall not make any agreement or reach any understanding not approved in writing
by Purchaser as a condition for obtaining any such consent. If any such consent
shall not be obtained or if any attempted assignment would be ineffective or
would impair Purchaser's rights under the Asset in question so that Purchaser
would not in effect acquire the benefit of all such rights, Seller, to the
maximum extent permitted by law, shall act after the Closing as Purchaser's
agent in order to obtain for it the benefits thereunder and shall cooperate, to
the maximum extent permitted by law, with Purchaser in any other reasonable
arrangement designed to provide such benefits to Purchaser subject, in any such
case, to the provisos contained in the preceding sentence. To the extent the
assignment by Seller of Seller's interest in any Real Property (as defined in
Section 3.1.21) being leased by Seller requires the consent of Seller's landlord
which Seller has not obtained, Seller may sublease such Real Property to
Purchaser in a manner so as to achieve the intent and purpose of this Section
2.3 where such sublease transaction does not similarly require such a consent
which has not been obtained (any such landlord's consent referred to in this
sentence is referred to in this Agreement as a "Landlord's Consent").
2.4 FURTHER ASSURANCES AND COOPERATION POST-CLOSING. Seller and Purchaser
-----------------------------------------------
from time to time after the Closing (but without obligation separate from the
obligations expressly provided by this Agreement), will execute, acknowledge and
deliver to the other such instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents, certifications
and further assurances as either party, such party's counsel or Purchaser's
title insurance company may reasonably request with respect to the assignment,
transfer and delivery of the Assets, the obtaining of any consents that are a
condition precedent to the obligations of the parties (unless expressly waived
in writing by the other party) in order to close the transaction contemplated
herein, and the consummation in full of the transactions provided for herein.
2.5 BULK SALES LAW. Purchaser waives compliance with any applicable "bulk
--------------
sales law" or similar law by Seller, and Seller shall indemnify and hold
Purchaser harmless against any liability under any such law and any losses
resulting from non-compliance therewith or Seller's application of the proceeds
of the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. As used in this Article
--------------------------------------------
3, "Knowledge" of Seller shall be deemed to be the actual knowledge of the
individuals listed on Schedule 3.1 attached hereto, without inquiry. The term
------------
"Knowledge" shall be deemed to encompass those matters expressly contained in
any written communication addressed to and personally received by any one or
more of the individuals listed on Schedule 3.1 between December 1, 1996 and the
date of Closing. In addition, Seller and Purchaser acknowledge that in the
months preceding the execution of this Agreement, the Purchaser has had ongoing
contact with a number of Seller's employees that work in the Restaurants, or who
supervise one or more of the Restaurants. In connection therewith, many of these
individuals may have been contacted by the Purchaser and provided information to
the Purchaser which has not been provided to the Seller. Notwithstanding
anything to the contrary herein, to the extent such communications have provided
the Purchaser with actual knowledge of a matter that would render any of the
following representations and warranties of Seller incorrect, then to the extent
of such
8
<PAGE>
knowledge, the Purchaser shall be deemed to be informed, and Seller's failure to
account for such matters herein shall not be deemed a default hereunder, or a
breach of the following representations and warranties. The Seller hereby
represents and warrants to Purchaser, and covenants and agrees with Purchaser
that:
3.1.1 CORPORATE EXISTENCE. Seller is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Seller is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where it is required to be so
qualified, except where the failure to be so qualified would not have a material
adverse effect on the conduct of the operation of the Restaurants by Purchaser
or the ownership of the Assets by Purchaser.
3.1.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
-------------------------------------------------------
Subject to Section 5.2.7, Seller has the corporate power, authority and legal
right to execute, deliver and perform this Agreement. Subject to Section 5.2.7,
the execution, delivery and performance of this Agreement by Seller has been
duly authorized by all necessary corporate action. This Agreement has been, and
the other agreements, documents and instruments required by this Agreement to be
delivered by Seller to which Seller is a party (the "Seller's Documents") will
be, duly executed and delivered on behalf of the Seller by duly authorized
officers of Seller, and this Agreement constitutes, and the Seller's Documents
when executed and delivered will constitute, the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting the rights
of creditors and general principles of equity.
3.1.3 NO INTEREST IN OTHER ENTITIES. No shares of any corporation or
-----------------------------
any ownership or other investment interest, either of record, beneficially or
equitably, in any association, partnership, joint venture or other legal entity
are included in the Assets.
3.1.4 VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. To Seller's
------------------------------------------
Knowledge, the execution, delivery and performance of this Agreement and any
other agreement contemplated herein by the Seller does not and will not violate
or result in the breach of any term, condition or provision of, or require the
consent of any other person under, (a) any existing law, ordinance, or
governmental rule or regulation to which the Seller is subject, (b) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
the Seller, (c) the articles of incorporation and bylaws of the Seller, or (d)
except as set forth in Schedule 3.1.4, any written mortgage, indenture,
--------------
agreement, contract, commitment, lease, plan, Authorization (hereinafter defined
in Section 3.1.13), or other written instrument, document or understanding to
which the Seller is a party, by which the Seller may have rights or by which any
of the Assets may be bound or affected, or give any party with rights thereunder
the right to terminate, accelerate or otherwise change the existing rights or
obligations of Seller thereunder except to the extent that any such violation or
breach or failure to obtain such consent would not have a material adverse
effect on the Restaurants or Assets. To Seller's Knowledge, except as set forth
in Schedule 3.1.4, no authorization, approval or consent of, and no registration
--------------
or filing with, any court, receiver, referee, panel, committee or governmental
or regulatory official, body or authority is required in connection with the
execution, delivery or performance of this Agreement by Seller.
9
<PAGE>
3.1.5 NO THIRD PARTY OPTIONS. There are no existing agreements,
----------------------
options, commitments or rights with, of or to any person (other than Purchaser)
to acquire any of Seller's interests in any of the Assets (i.e., those interests
in Assets which under this Agreement are to be conveyed by Seller to Purchaser).
3.1.6 OPERATING STATEMENTS. Attached as Schedule 3.1.6 hereto are
-------------------- --------------
operating statements for each of the Restaurants for the thirteen (13) periods
ending December 29, 1996 (collectively, the "Operating Statements"). Such
Operating Statements are prepared in accordance with Seller's standard practices
for preparing such statements for restaurants operated by the Seller.
3.1.7 ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of Seller,
----------------------------------
there are no liabilities relating to the Restaurants that would materially,
adversely affect Purchaser's operation of the Restaurants other than the Assumed
Liabilities and the Excluded Liabilities.
3.1.8 TAX AND OTHER RETURNS AND REPORTS. To Seller's Knowledge: (i)
---------------------------------
all federal, state, local and foreign tax returns, statements and other similar
filings required to have been filed by Seller (the "Tax Returns") with respect
to any federal, state or local taxes, assessments, interest, penalties,
deficiencies, fees and other governmental charges (including, without
limitation, all income tax, unemployment compensation, social security, payroll,
sales and use, excise, privilege, property, ad valorem, franchise, license, and
any other tax or similar governmental charge under laws of the United States or
any state or municipal or political subdivision thereof) (the "Taxes") have been
(or if not yet due, will be) filed with the appropriate governmental agencies in
all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns properly reflect the liabilities of Seller for Taxes for the
periods, property or events covered thereby, except to the extent failure to
file or properly reflect liabilities would not have a materially adverse effect
on the Restaurants or Assets; (ii) all Taxes, including, without limitation,
those which are called for by the Tax Returns, or heretofore claimed to be due
by any taxing authority from Seller, have been properly accrued or paid except
to the extent that failure to pay or accrue such Taxes would not have a material
adverse effect on the Restaurants or Assets; (iii) except as set forth on
Schedule 3.1.8, Seller has not received any written notice of assessment or
- --------------
proposed assessment and there are not pending tax examinations of or tax claims
asserted against the Seller with respect to the Restaurants or any of the
Assets; (iv) there are no valid tax liens (other than any lien for current taxes
not yet due and payable and Permitted Liens) on any of the Assets; and, (v)
there is no basis for any additional assessment of any Taxes with respect to the
Restaurants or Assets.
3.1.9 BOOKS OF ACCOUNT. The books, records and accounts of Seller
----------------
maintained with respect to the Restaurants accurately and fairly reflect, in
reasonable detail and in all respects material to the financial statements of
Seller, the transactions and the operations, assets and liabilities of Seller
with respect to the Restaurants, including, without limitation, employment
records.
3.1.10 EXISTING CONDITION. Except as otherwise set forth on Schedule
------------------ --------
3.1.10, since December 29, 1996 (the "Due Diligence Date") through the date
- ------
hereof, the Seller with respect to the operation of the Restaurants and Assets
has not, to Seller's Knowledge:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or
discharged or satisfied any lien or encumbrance, or paid any liabilities,
other than in the ordinary course of business consistent
10
<PAGE>
with past practice, or failed to pay or discharge when due any liabilities
of which the failure to pay or discharge has caused or will cause any
material damage or risk of material loss to it or any of its assets or
properties;
(b) sold, encumbered, assigned or transferred any of the
Assets that would have been included in the Assets if the Closing had been
held on the Due Diligence Date or on any date since then other than in the
ordinary course of business and except for assets replaced with similar
assets or otherwise not material to the Restaurant where such asset was
located;
(c) mortgaged, pledged or subjected any of its Assets to any
mortgage, lien, pledge, security interest, conditional sales contract or
other encumbrance of any nature whatsoever which will survive Closing,
except for Permitted Liens or purchase money security interests;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a
party or by which it is bound, or cancelled, modified or waived any
substantial debts or claims held by it or waived any rights of substantial
value, related directly to the Assets or the operation of the Restaurants,
whether or not in the ordinary course of business;
(e) suffered any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the operation of
the Restaurants or the Assets, or suffered any repeated, recurring or
prolonged shortage, cessation or interruption of supplies or utility or
other services required to operate the Restaurants;
(f) suffered any material adverse change (financial or
otherwise) affecting the operation of the Restaurants or the Assets;
(g) received written notice of any actual or threatened labor
dispute (including, without limitation, any charge, complaint or
investigation before any federal, state or municipal government entity)
that has had or might have a material adverse effect on operation of the
Restaurants or the Assets;
(h) made commitments or agreements for capital expenditures
relating directly to the Assets or the operation of the Restaurants and
exceeding Fifteen Thousand Dollars ($15,000.00) per Restaurant, except such
as may be involved in ordinary repair, maintenance or replacement of the
Assets; or
(i) otherwise entered into any material transaction with
respect to the Assets or operation of the Restaurants other than in the
ordinary course of business consistent with past practice.
3.1.11 TITLE TO PROPERTIES. To Seller's Knowledge, Seller has good,
-------------------
valid and marketable title to all of the Assets, free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
other encumbrances and defects of title of any nature whatsoever, except for (i)
liens for current real, personal or other property taxes not yet due and
payable, (ii) liens disclosed in Schedule 3.1.11, (iii) liens that are
------
immaterial in character, amount, and extent, and which
11
<PAGE>
do not materially affect the value, or do not materially interfere with the
present use, of the Assets, (iv) matters which would disclosed by a true and
accurate survey of the Assets which constitute real property or (v) liens that
will be satisfied or removed at Closing from the Closing Payment ("Permitted
Liens").
3.1.12 TANGIBLE ASSETS
---------------
(a) To Seller's Knowledge, Schedule 1.1.1(a) lists all major
-----------------
items of equipment, furniture and fixtures included in the Assets as of the
date specified therein.
(b) To Seller's Knowledge, all buildings, structures,
facilities, equipment and other material items of tangible property and
assets which would be included in the Assets if the Closing took place on
the date hereof are currently in operating condition and repair, subject to
normal wear and maintenance. No person other than Seller owns any of the
Assets, except for leased items of personal property disclosed in Schedule
--------
3,1,12, leased real property disclosed in Schedule 1.1.1 (b), and items
------- ------------------
which are immaterial to the Restaurants.
(c) Except for non-assignable governmental permits or
approvals required for the operation of the Restaurants by Purchaser, the
Assets (including, without limitation, the Contracts, the Leases, and the
equipment leases), together with the FPUR Leases, the POS System Agreement,
and the Franchise and Development Agreements, include all rights, property,
equipment, supplies, licenses, certificates, and other tangible and
intangible property necessary to operate the Restaurants as currently
conducted by Seller. Purchaser acknowledges that this provision does not
excuse any obligations of Purchaser set forth in the Franchise Agreements
or Development Agreements.
(d) The Assets have been physically maintained by Seller in
accordance with its standard business practices.
3.1.13 COMPLIANCE WITH LAW; AUTHORIZATIONS.
-----------------------------------
(a) To the Knowledge of Seller, (i) Seller has complied with,
and is not in violation of, any law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign, to
which the Restaurants, or the Assets are subject ("Regulations"), except to
the extent that any noncompliance would not have a material adverse effect
on the operation of the Restaurants or the ownership and use of the Assets
by Purchaser; (ii) Seller owns, holds, possesses or lawfully uses in the
operation of the Restaurants all approvals, licenses, permits, easements,
rights, applications, filings, registrations, certificates of need,
accreditation and other authorizations "Authorizations") which are in any
manner necessary for it to operate the Restaurants, or for the ownership
and use of the Assets, in compliance with all Regulations except to the
extent that any failure to comply with such regulations or to hold any such
Authorization would not have a material adverse effect on the operation of
the Restaurants or the ownership and use of the Assets by Purchaser; (iii)
each Restaurant is in substantial compliance with all requirements and
standards of the applicable health department; and (iv) Seller is not in
material default with respect to any such Authorization.
12
<PAGE>
(b) To Seller's Knowledge, Seller has not, directly or
indirectly, paid or delivered or agreed to pay or deliver any fee,
commission or other sum of money or item of property, however
characterized, to any person, government official or other party which is
in any manner related to the operation of the Restaurants and which the
Seller knows or has reason to believe to have been illegal under any
federal, state or local law.
3.1.14 TRANSACTIONS WITH AFFILIATES. No shareholder, director, officer
----------------------------
or employee of the Seller, or any of their affiliates (a) has been a party to
any material contract with Seller with respect to the Restaurants or the Assets
in the last year or (b) owns any property or right, tangible or intangible, or
any interest therein, used in the operation of the Restaurants in the last year.
3.1.15 LITIGATION. To Seller's Knowledge, except as set forth on
----------
Schedule 3.1.15 (i) no litigation, including any arbitration, investigation
- ---------------
(including, without limitation, any investigation initiated by any of Seller's
current or former employees working at the Restaurants which is being conducted
by the Equal Employment Opportunity Commission or similar state or municipal
authority) or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or threatened
by written communication against the Seller which relates to the operation of
the Restaurants or the Assets, or the transactions contemplated by this
Agreement, the result of which could materially adversely affect the operation
of any particular Restaurant or the Assets, or the transactions contemplated
hereby; and (ii) Seller is not a party to or subject to the provisions of any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority or any court supervision
or receivership which may materially adversely affect the operation of the
Restaurants or the Assets, or the transactions contemplated hereby. To Seller's
Knowledge, Schedule 3.1.15 discloses all pending claims, investigations,
---------------
charges, citations, hearings, consents, decrees or litigation before any court,
arbitrator or governmental or regulatory official, body or authority involving
Seller and which relate to the operation of the Restaurants or the Assets, or
the transactions contemplated by this Agreement, the result of which could
materially adversely affect the operation of any particular Restaurant or the
Assets or the transactions contemplated hereby, with respect to (A) wages,
compensation, bonuses, commissions or awards or payroll deductions; (B) equal
employment or human rights violations under any applicable equal employment laws
of any federal, state or municipal government entity prohibiting discrimination;
(C) representation petitions or unfair labor practices; (D) grievances or
arbitrations pursuant to current or expired collective bargaining agreements;
(E) occupational safety and health; (F) workers' compensation; (G) wrongful
termination, negligent hiring, invasion of privacy or defamation; or (H)
immigration.
3.1.16 INSURANCE. The Assets and the operation of the Restaurants by
---------
Seller are insured under various policies of general liability and other forms
of insurance, all of which are in full force and effect in accordance with
Seller's insurance program for substantially all of the Restaurants owned and
operated by Seller.
3.1.17 CONTRACTS AND COMMITMENTS. Except as set forth in Schedule
------------------------- --------
3.1.17, with respect to the Restaurants, and except as may be undertaken in
- ------
connection with the transactions contemplated by this Agreement, Seller is not,
to Seller's Knowledge, a party to any written:
13
<PAGE>
(a) agreement, contract or commitment with any present or
former employee or consultant or for the employment of any person,
including any consultant, who provides services in connection with the
operation of the Restaurants;
(b) agreement, contract or commitment for the future purchase
of, or payment for, supplies or products, or for the performance of
services by a third party, which supplies, products or services used in the
operation of the Restaurants that involves $1,000.00 per Restaurant per
month or more;
(c) agreement, contract or commitment relating to the
Restaurants continuing for a minimum, non-cancelable term with respect to
the Restaurants over a period of more than one (1) year;
(d) lease under which it is either lessor or lessee relating
to the Assets;
(e) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money relating to the Restaurants or agreement or
arrangement for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person relating to the Restaurants;
(f) agreement, contract or commitment for any charitable or
political contribution exclusively relating to the Restaurants;
(g) except as provided in Schedule 3.1.10, commitments or
---------------
agreements for any capital expenditure or leasehold improvement in excess
of Fifteen Thousand Dollars ($15,000.00) per Restaurant;
(h) no employee of Seller engaged in the operation of the
Restaurants is subject to any agreement, contract or commitment prohibiting
such employee's participation in the operation of the Restaurants; or
(i) except as disclosed herein, material agreement, contract
or commitment relating to the operation of the Restaurants not made in the
ordinary course of business.
To Seller's Knowledge, except as set forth in Schedule 3.1.17, no item
---------------
listed therein requires the consent of any party in connection with the
transactions contemplated hereby, and no default exists under such items that
would have a material adverse effect on the operation of the Restaurants or the
Assets.
3.1.18 ADDITIONAL INFORMATION. Schedule 3.1.18 contains accurate lists
---------------------- ---------------
and summary descriptions of the following:
(a) the names and titles of and annual base salary or hourly
rates (as of the dates set forth in such Schedules) for all managerial
employees of Seller engaged exclusively in the operation of the
Restaurants, together with a statement of the full amount and nature of any
other remuneration, whether in cash or kind, paid to each such person
during the past or
14
<PAGE>
current fiscal year or payable to each such person in the future and the
bonuses accrued for, the vacation, sick leave, commissions, retirement,
pension and severance benefits to which, each such person is entitled; and
(b) all names under which Seller has operated the Restaurants
in the past five years.
3.1.19 LABOR MATTERS. To Seller's Knowledge, Seller has not suffered
-------------
any strike, slowdown, picketing or work stoppage by any union or other group of
employees. As to the operation of the Restaurants, Seller is not a party to any
agreement, collective bargaining or otherwise, with any party regarding the
rates of pay or working conditions of any of Seller's employees nor is Seller
obligated under any agreement to recognize or bargain with any labor
organization or union. To Seller's Knowledge, no representation campaign or
election is now in progress with respect to any of the employees of the Seller.
3.1.20 EMPLOYEE BENEFIT MATTERS.
-------------------------
(a) Except as disclosed on Schedule 3.1.20, to Seller's
---------------
Knowledge, Seller has no employment contracts, severance contracts or other
contracts (whether oral or written) relating to the employment or
compensation of any person or entity employed exclusively in the operation
of the Restaurants, nor does Seller maintain, contribute to or have any
liability with respect to any "employee benefit plan" (within the meaning
of Section 3(3) of ERISA) or any other pension, profit sharing, retirement,
severance, bonus, stock option, deferred compensation, disability or other
employee benefit or welfare plans, agreements, arrangements or commitments
(collectively, "Employee Plans") for or with any of its present employees
who are employed in the operation of the Restaurants which will be assumed
by Purchaser.
(b) Each group health plan (within the meaning of either
Section 5000(b)(1) of the Internal Revenue Cede, as amended (the "Code")
or Section 607(1) of ERISA) maintained or contributed to, currently or in
the past, by Seller is and at all ftmes in all material respects has been
operated in compliance with the continuation coverage requirements of Part
6, Subtitle B of Title I of ERISA and Section 4980B of the Code.
(c) Except as disclosed on Schedule 3.1.20, Seller does not
---------------
maintain and has never maintained an "employee benefit pension plan",
within the meaning of ERISA Section 3(2), that is or was subject to Title
IV of ERISA.
(d) Except as disclosed on Schedule 3.1.20, Seller does not
---------------
have and has not ever had any past, present or future obligation or
liability to contribute to any "multiemployer plan", as defined in ERISA
Section 3(37).
For purposes of this Section 3.1.20, the term "Seller" shall be deemed to
include any other corporation, trade, business or other entity, other than
Seller, that, together with Seller, now or in the past, would constitute a
"single employer" within the meaning of Section 414 of the Code.
15
<PAGE>
3.1.21 REAL PROPERTY.
-------------
(a) Real Property Defined. All real property and improvements
---------------------
included in the Assets are listed on Schedule 1.1.1(b) (the "Real
-----------------
Property").
(b) Title to Owned Real Property. With respect to the Real
----------------------------
Property that is identified on Schedule 1.1.1(b) as being owned by Seller,
-----------------
title to such Real Property is, and at Closing shall be, good and
marketable, fee simple absolute, free and clear of all liens, adverse
claims and other matters affecting Seller's title to or possession of such
Real Property, excepting only such easements, restrictions and covenants
presently of record which have not materially interfered with or impaired
Seller's use of any of the Real Property as restaurants, and the Permitted
Liens. At Closing, title to the Real Property owned by Seller shall be
insurable by a national title insurance company, free of all exceptions
except as described in this subpart (b) and standard, pre-printed title
insurance exceptions, at no more than standard title insurance premium
rates for the local area in which each Restaurant is located.
(c) Leased Real Property. With respect to the Real Property
--------------------
that is identified on Schedule 1.1.l(b) as being leased by Seller, to
----------------
Seller' s Knowledge:
(i) Seller has provided to Purchaser or its contractors
a true and complete copy of every lease and sublease to which the
Seller is tenant or subtenant (the "Leases"), and shall list each
Lease on Schedule 3.1.21(c);
------------------
(ii) To Seller's Knowledge, each Lease is, and at Closing
shall be, in full force and effect and has not been assigned,
modified, supplemented or amended except as listed on Schedule
--------
3.1.21(c), and neither the Seller nor any of the landlords or
---------
sublandlords under any Lease is in default under any of the Leases,
and no circumstances or state of facts presently exists which, with
the giving of notice or passage of time, or both, would permit any
landlord or sublandlord under any Lease to terminate any Lease; and
(iii) Seller has not subleased any of the Real Property to
any other person or entity.
(d) Zoning. To Seller's Knowledge, the Real Property is in
------
compliance in all material respects with all applicable zoning and other
land use requirements.
(e) Utility Services. The water, electric, gas and sewer
----------------
utility services and the septic tank and storm drainage facilities
currently available to the Real Property are adequate for Seller to
operate the Restaurants, are being supplied to Seller by utility companies
or municipalities, and to Seller's Knowledge there is no current condition
which will give rise to a valid right to terminate the present access from
the Real Property to such utility services and other facilities.
(f) Access. Except for the Permitted Liens, there are no
------
restrictions on entrance to or exit from the Real Property to adjacent
public streets and to Seller's Knowledge
16
<PAGE>
no current conditions exist which will give rise to a valid right to
terminate the present access from the Real Property to existing highways
and roads.
(g) Eminent Domain. To Seller's Knowledge, except as set forth
--------------
on Schedule 3.1.21(g), it has not received any written notices, nor has
------------------
Seller any reason to believe, that any governmental body having the power
of eminent domain over the Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to all
or any part of the Real Property. If between the date of this Agreement and
Closing the Real Property or any portion thereof or interest therein shall
be taken or condemned as a result of the exercise of the power of eminent
domain, or if a governmental body having the power of eminent domain
informs Seller or the Purchaser that it intends to take or condemn all or
part of the Real Property then Seller may assign to Purchaser the sole
right, in the name of the Seller, to negotiate for, claim, contest and, if
the Closing occurs, receive all damages on account thereof, in which event
(i) Seller shall be relieved of its obligation to convey to the Purchaser
the Real Property taken or condemned, (ii) at Closing Seller shall assign
to the Purchaser all of Seller's rights to all damages payable for such
taking or injury of the Real Property and shall pay to the Purchaser all
damages theretofore paid to Seller by reason thereof, (iii) following
Closing, Seller shall give the Purchaser such further assurances of such
rights and assignment as the Purchaser may from time to time reasonably
request, and (iv) Seller shall not be in breach of this Subpart (g) and
Purchaser shall not be excused from the performance of its obligations
under this Agreement by reason of this subpart (g).
(h) Flood Plain. To Seller 's Knowledge, no material part of
-----------
the Real Property is located within a 100 year flood plain.
(i) Governments. To Seller's Knowledge, no material work for
-----------
municipal improvements has been commenced on or in connection with any
parcel of Real Property or any street adjacent thereto and no such
improvements are contemplated; no material assessment for public
improvements has been made against the sites covered by the Leases which
remains unpaid; and no notice from any county, township, or other
governmental body has been served upon the Real Property or received by
Seller, requiring or calling attention to the need for any material work,
repair, construction, alteration, or installation on or in connection with
the Real Property which has not been substantially complied with.
(j) Improvements. Each parcel of Real Property constituting a
------------
separate Restaurant site included in the Assets has a one-story Churchs
Restaurant located thereon, and to Seller's Knowledge no such parcel is
affected by encroachments of buildings or improvements from adjoining
properties which materially adversely affects the current use of such
parcel.
3.1.22 AVAILABILITY OF DOCUMENTS. Seller has made available to
-------------------------
Purchaser and its contractors its legal files and certain other documents and
materials, all of which Seller has kept in the ordinary course of business.
17
<PAGE>
3.1.23 CONDITIONS AFFECTING SELLER. Seller has used its commercially
---------------------------
reasonable best efforts to keep available to Purchaser the services of the
employees, agents, customers and suppliers of Seller active in the operation of
the Restaurants.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASE. Purchaser represents and
------------------------------------------
warrants to Seller, and covenants and agrees with Seller, as follows:
3.2.1 CORPORATE EXISTENCE. Purchaser is a limited liability company
-------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser is duly qualified to do business and as of the
Closing will be in good standing in each jurisdiction where the conduct of its
business requires it to be so qualified. Prior to Closing, Purchaser shall
deliver to Seller a final draft of its operating agreement (the "Operating
Agreement"), complete in all respects, for Seller's review, and the parties
agree to make such modifications to said operating agreement to make it comply
with the provisions of the Warrants. Attached as Schedule 3.2.1 is a list of all
--------------
members and managers of Purchaser, setting forth each member's ownership
interest therein, and role thereunder. Purchaser, together with its manager and
its manager's affiliates (other than C.V.B., L.L.C.), (i) does not have assets
of $10,000,000 or more, and (ii) has not had annual sales of $10,000,000 or
more.
3.2.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
-------------------------------------------------------
Purchaser has the power, authority and legal right to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Purchaser has been duly authorized by all necessary action. This
Agreement has been, and the other agreements, documents and instruments required
to be delivered by Purchaser to which Purchaser is a party (the "Purchaser's
Documents") will be, duly executed and delivered on behalf of Purchaser by duly
authorized officers of Purchaser, and this Agreement constitutes, and the
Purchaser's Documents when executed and delivered will constitute, the legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the rights of creditors and general principles of equity.
3.2.3 VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
------------------------------------------
delivery and performance of this Agreement by Purchaser does not and will not
violate, conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other person under, (a) any existing
law, ordinance, or governmental rule or regulation to which Purchaser is
subject, (b) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to Purchaser, (c) the Operating Agreement of Purchaser, or
(d) any material mortgage, indenture, agreement, contract, commitment, lease,
plan, authorization, or other instrument, document or understanding, oral or
written, to which Purchaser is a party. Except as set forth in Schedule 3.2.3,
--------------
no authorization, approval or consent of, and no registration or filing with,
any governmental or regulatory official, body or authority is required in
connection with the execution, delivery or performance of this Agreement by
Purchaser.
3.2.4 WARRANTS. The interests in Purchaser which shall be subject to
--------
the Warrants have been and shall have been at the Closing duly and validly
authorized.
3.2.5 NO PRIOR BUSINESS: FINANCIAL STATEMENTS. Purchaser has not
---------------------------------------
conducted any business operation prior to the Closing Date other than activity
to prepare for the within transactions. The balance sheet and other financial
statements of Purchaser included on Schedule 3.2.5 accurately
--------------
18
<PAGE>
set forth in all material respects the financial condition and the results of
operations of Purchaser as of the date and for the period set forth therein
(which date shall be not more than 30 days prior to the Closing Date). No
payment or other distribution has been made by Purchaser to any of its equity
owners or affiliates, and no third party has made any payment to Purchaser or
any of Purchaser's equity owners or affiliates in connection with the
transactions contemplated by this Agreement, except as disclosed on Schedule
--------
3.2.5.
- -----
3.2.6 ACTIONS PENDING. Except as set forth in Schedule 3.2.6 hereto,
--------------- --------------
there is no action, suit, investigation, proceeding or claim pending or, to the
best knowledge of Purchaser, threatened against or affecting (a) Purchaser or
any of its subsidiaries, (b) their respective properties or rights, (c) any
assets or business divested by Purchaser as to which Purchaser or any subsidiary
may have contingent liabilities, or (d) to the best knowledge of Purchaser, any
member, manager, director, officer, employee or agent of Purchaser, before any
court or by or before any governmental body or arbitration board or tribunal
(including, without limitation, claims made in respect of employment contracts
of such director, officer, employee or agent with third parties and improper
disclosure or use of trade secrets or proprietary information of third parties
by such affiliated persons), either alone or together with other similar
actions, the outcome of which might result in a material adverse effect on the
financial condition, operating results or business of Purchaser and its
subsidiaries taken as a whole.
3.2.7 COMPLIANCE WITH LAWS. Purchaser is not in default in any
--------------------
material respect under any order of any court, governmental authority or
arbitration board or tribunal or, to the best knowledge of Purchaser, under any
laws, ordinances, governmental rules or regulations to which Purchaser is
subject. Purchaser has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its properties
or to the conduct of its business, except where the failure to obtain such
license, permit, franchise or other governmental authorization would not result
in a material adverse effect on the financial condition, operating results or
business of Purchaser, taken as a whole.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
------------------------------------------
warranties made by the parties in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5,
3.1.13, 3.1.14, 3.1.15, 3.1.16, 3.1.19, 3.1.20 and in Section 3.2, of this
Agreement shall survive the Closing for a period of one year, and all other
representations and warranties contained in this Section 3 shall terminate at
Closing. Except as detailed in the Section 3.1 preamble, and notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations and warranties set forth herein, as such
representations and warranties may be updated or modified at or before the
Closing, except to the extent that such party shall have knowledge of any
inaccuracy of such representation and warranty at or before the Closing.
19
<PAGE>
ARTICLE 4
AGREEMENTS PENDING CLOSING
4.1 AGREEMENTS OF SELLER PENDING THE CLOSING. For purposes of this
----------------------------------------
Section 4.1, the term "commercially reasonable efforts" shall mean those
practices normally employed by Seller in the ordinary and usual course of
Seller's business and shall not require Seller to incur any extraordinary
expenses (for which purposes expenses of over $25,000 in the aggregate shall be
deemed extraordinary) nor incur any obligation to any third party which is not
entirely ordinary and customary to the conduct of Seller's business in the
usual course. Seller covenants and agrees that, pending the Closing and except
as otherwise agreed to in writing by Purchaser:
4.1.1 BUSINESS IN THE ORDINARY COURSE. Seller shall use commercially
-------------------------------
reasonable efforts to operate the Restaurants solely in the ordinary course
consistent with Seller's past practice.
4.1.2 EXISTING CONDITION. Seller shall use its commercially
------------------
reasonable efforts to not cause nor permit to occur any of the events or
occurrences described in Section 3.1.10 hereto.
4.1.3 MAINTENANCE OF PHYSICAL ASSETS. Seller shall use its
------------------------------
commercially reasonable efforts to continue to maintain and service the physical
assets used in the operation of the Restaurants which comprise the Assets in the
same manner and frequency as has been its consistent past practice at Churchs'
Restaurants that Seller owns and operates.
4.1.4 EMPLOYEES AND BUSINESS RELATIONS. Seller shall use its
--------------------------------
commercially reasonable efforts to keep available the services of the present
employees and agents of the Restaurants and to maintain the relations and
goodwill with suppliers and any others having business relations with the
Restaurants.
4.1.5 MAINTENANCE OF INSURANCE. Seller shall promptly notify
------------------------
Purchaser of any material changes in the terms of the insurance policies and
binders referred to in Section 3.1.16.
4.1.6 MAINTENANCE OF AUTHORIZATIONS. Seller shall use its
-----------------------------
commercially reasonable efforts to maintain in full force and effect all
material Authorizations currently in effect used in the operation of the
Restaurants.
4.1.7 COMPLIANCE WITH LAWS, ETC. Seller shall use its commercially
-------------------------
reasonable efforts to not breach Section 3.1.13 pending Closing.
4.1.8 UPDATE SCHEDULES. Seller shall promptly disclose to Purchaser
----------------
any material information provided to Purchaser if, to Seller's Knowledge, it
becomes incomplete or no longer correct in all material respects after the date
hereof until the Closing, except to the extent Seller would violate any court
order to maintain in confidence any claim or investigation initiated by any of
Seller's employees described in Section 3.1.15. Notwithstanding anything to the
contrary herein, this Agreement may be executed with one or more of the
schedules either incomplete or to be attached. The parties agree to cooperate in
completing or attaching these schedules, so that they will be complete
20
<PAGE>
at or before Closing. Notwithstanding anything to the contrary herein, no
liability of any kind shall attach to either party with respect to schedules
that are not attached, or are incomplete, as of the date hereof, so long as the
parties use reasonable efforts to provide complete and accurate schedules by the
Closing, or at such earlier time as is required hereunder.
4.1.9 CONDUCT OF BUSINESS. Seller shall use its commercially
-------------------
reasonable efforts to conduct its business in such a manner that on the Closing
Date the representations and warranties of Seller contained in this Agreement
shall be substantially true and correct in all material respects as though such
representations and warranties were made on and as of such date. Furthermore,
the Seller shall cooperate with Purchaser and use its commercially reasonable
efforts to cause all of the conditions to the obligations of Purchaser and
Seller under this Agreement to be satisfied on or prior to the Closing Date.
4.1.10 CONSENTS AND APPROVALS. Seller shall use its efforts, as set
----------------------
forth in Section 2.3, to obtain those consents and approvals listed on Schedule
--------
5.1.5.
- -----
4.1.11 SALE OF ASSETS; NEGOTIATIONS. Seller agrees to deal
----------------------------
exclusively with Purchaser with respect to the sale of the Restaurants and the
Assets unless and until this Agreement terminates or is terminated by the
parties.
4.1.12 ACCESS. Seller shall give to Purchaser's officers, employees,
------
counsel, accountants, consultants and other representatives full access to and
the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Restaurants and the Assets including, without limitation, information regarding
employees, and shall permit them to consult with the officers, employees,
accountants, counsel, consultants and agents of Seller for the purpose of making
such investigation of the Restaurants as Purchaser shall desire to make,
provided, however, that such investigation shall be reasonably related to the
Assets and the Restaurants to be acquired hereunder, shall not unreasonably
interfere with Seller's business operations and shall be coordinated
exclusively through the following individuals: Bob Thomason, Hala Moddelmog,
Carl Jakaitis, Mike Cortino, John Holly and Bill Mathieu. Furthermore, Seller,
for Purchaser, its lenders, and their agents, shall furnish, or make available
at its corporate office, all such documents and copies of documents and records
and information with respect to the affairs of the Restaurants and Real Property
and copies of any working papers relating thereto as Purchaser shall from time
to time reasonably request and shall permit Purchaser and its agent to make such
physical inventories and inspections of the Assets as Purchaser may reasonably
request from time to time. Purchaser agrees to indemnify and hold harmless
Seller from and against any and all claims, damage or loss to persons or
property whatsoever arising as a result of any interview, research, study,
survey, testing, or any other form of investigation (collectively, the
"Investigations") physically conducted at or on the Real Property, or on other
premises owned and/or operated by Seller, by or on behalf of Purchaser.
Purchaser further agrees not to permit any liens or claims of lien to attach to
the Real Property or the Assets as a result of any such Investigations.
Notwithstanding the foregoing, Purchaser shall have no liability under this
indemnity arising by the simple discovery by it, or its agents, of a condition
unfavorable to Seller, including, without limitation, the discovery of an
environmental condition on one of the Real Properties that could result in
liability to Seller. Notwithstanding the foregoing or anything to the contrary
herein, Purchaser shall perform no invasive or destructive testing of the
Assets, including, without
21
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limitation, the Real Property, without the prior written consent of the Seller,
which consent shall be given or withheld in Seller's sole discretion.
4.1.13 PERSONNEL LIST. Prior to Closing, Seller shall provide
--------------
Purchaser with a true and complete list of all employees of the Restaurants
(including, without limitation, all full-time, part-time and temporary employees
and any employee on a leave of absence or subject to recall after a layoff),
their salaries or wage rates, their location of employment and their status
(i.e., active, inactive, etc.), with such list reflecting such information as
---- ---
of a date no less current than the four-week standard accounting period
immediately preceding the four-week standard accounting period within which the
Closing occurs. Purchaser shall keep such information confidential, in
accordance with such practices and standards as would be applicable if such
employees were employees of Purchaser.
4.1.14 EMPLOYEE MATTERS. Seller shall be solely responsible for all
----------------
wages, salaries, bonuses and other direct and indirect compensation and benefits
earned by employees employed by the Restaurants through the Closing Date.
4.2 AGREEMENTS OF PURCHASER PENDING THE CLOSING. Purchaser covenants and
-------------------------------------------
agrees that, pending the Closing and except as otherwise agreed to in writing by
Seller:
4.2.1 CONSENTS AND APPROVALS. Purchaser shall obtain all approvals
----------------------
necessary for the due authorization by Purchaser of all matters contemplated by
this Agreement. Purchaser shall cooperate with Seller as may be reasonably
requested to obtain all consents and approvals required to effect Closing, and
shall use its best efforts to make all filings and registrations necessary or
required for the consummation of the transactions contemplated hereby.
4.2.2 INSURANCE. As of the Closing Date, Purchaser shall have
---------
obtained such insurance for the Assets and the operation by Purchaser of the
Restaurants under various policies of general liability and other forms of
insurance as Purchaser deems necessary for the operation of the Restaurants and
as required by the Purchaser's lender and the Franchise Agreements.
4.2.3 CONTACT WITH SELLER'S EMPLOYEES. From the date hereof until
-------------------------------
the Closing Date, neither Purchaser, nor anyone in connection with Purchaser,
shall have any contact with any of Seller's employees working in connection
with the operation of the Restaurants without the prior, express approval of one
of the persons listed in Section 4.1.12. Purchaser agrees not to request that
any repairs, maintenance, alteration or modification of the Restaurants or the
Assets be undertaken by any of Seller's employees prior to the Closing Date,
whether at Seller's expense, or at Purchaser's expense, except as may be
approved by prior, written consent by Bob Thomason, AFC's Vice President of
Assets Management.
4.3 PRESS RELEASE. Each of Seller and Purchaser covenants and agrees that,
-------------
except as required by applicable law, neither Seller nor Purchaser will give
notice to third parties or otherwise make any public statement or releases
concerning this Agreement or the transactions contemplated hereby except for
such written information as shall have been approved in writing as to form and
content by the other parties hereto, which approval shall not be reasonably
withheld.
22
<PAGE>
ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
-----------------------------------------------
Purchaser under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
5.1.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING. The
------------------------------------------------------
representations and warranties of Seller contained in this Agreement or in any
schedule, certificate or document delivered by Seller to Purchaser pursuant to
the provisions hereof shall have been true on the date hereof in all material
respects, and shall be true in all material respects as of the Closing as if
made at the Closing.
5.1.2 COMPLIANCE WITH THIS AGREEEMENT. Seller shall have performed
-------------------------------
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
5.1.3 OPINIONS OF COUNSEL FOR SELLER. Seller's in-house counsel shall
------------------------------
have delivered to Purchaser a written opinion, dated the date of Closing, in
form and substance reasonably satisfactory to the Purchaser's counsel, but
subject to customary assumptions and qualifications, to the effect that:
(a) Seller is duly incorporated, validly existing and in good
standing of the laws of the State of Minnesota. Seller is duly authorized
to conduct business and is in good standing under the laws of the states in
which any of the Restaurants are located.
(b) Seller has the requisite corporate power to carry on its
business as it is now being conducted and to perform its obligations under
the Agreement and the Seller's Documents.
(c) The execution and delivery by Seller of this Agreement and
the other Seller's Documents do not, and if Seller were now to perform its
obligations under this Agreement and such other Seller's Documents, such
performance would not result in any (i) violation of the Seller's articles
of incorporation or bylaws, (ii) violation of any existing federal or state
constitution, statute, regulation, rule, order or law to which Seller or
the Assets are subject (except the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, concerning which Purchaser shall rely exclusively
on the opinion of its counsel), (iii) breach of or default under any
material written agreements to which, to such counsel's knowledge, Seller
is a party or which, to such counsel's knowledge, Seller or the Assets are
bound, or (iv) violation of any judicial or administrative decree, writ,
judgment or order to which, to such counsel's knowledge, Seller or the
Assets are subject.
(d) To such counsel's knowledge, no legal action or
proceeding against Seller is pending or overly threatened by written
communication which, if successful, would prohibit the consummation or
require rescission of the transactions contemplated by the Agreement.
23
<PAGE>
(e) The Agreement and the other Seller's Documents have been
duly executed and delivered by Seller and they constitute the legal, valid
and binding obligation of Seller, enforceable against Seller in accordance
with their respective terms.
5.1.4 NO THREATENED OR PENDING LITIGATION. As of the Closing, no
-----------------------------------
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
5.1.5 CONSENTS AND APPROVALS. Each consent or approval listed on
----------------------
Schedule 5.1.5 required or necessary under contract or applicable law for the
- --------------
consummation of the transactions contemplated hereby shall have been obtained;
provided, however, that those certain consents or approvals identified on
Schedule 5.1.5 as being subject to deferral ("Deferrable Consents") need not
- --------------
have been obtained on or before the Closing, to the extent that Seller shall
have made appropriate arrangements to secure to Purchaser the practical and
economic benefits of the agreements, licenses, Authorizations or other
arrangements to which such consents or approvals relate. To the extent any
Landlord's Consent shall not have been obtained on or before the Closing, Seller
and Purchaser agree that they shall work together in good faith, subject to the
similar cooperation and commitment of Purchaser's lender, to consummate the
transactions contemplated by this Agreement, on terms satisfactory to Purchaser
and Seller in the respective exercise of their sole discretion, as to (i) the
balance of the Assets not affected by such Landlord's Consents at the Closing
and (ii) the Assets affected by such Landlord's Consent, within 6 months
thereafter.
5.1.6 CLOSING DOCUMENTS. The documents to be delivered by Seller at
-----------------
Closing pursuant to Section 2.2 (including, without limitation, the Additional
Documents) shall have been executed and delivered.
5.1.7 CLOSING CERTIFICATES. Purchaser shall have received a
--------------------
certificate from Seller dated the date of Closing certifying in such detail as
Purchaser may reasonably request that the conditions specified in Sections 5.1.1
and 5.1.2 hereof have been fulfilled.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations of
-------------------------------------------------
Seller under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
5.2.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
----------------------------------------------------------
representations and warranties of Purchaser contained in this Agreement or in
any list, certificate or documents delivered by Purchaser to Seller pursuant to
the provisions hereof shall have been true on the date hereof in all material
respects, and shall be true in all material respects as of the Closing as if
made at the Closing.
5.2.2 COMPLIANCE WITH THIS AGREEMENT. Purchaser shall have performed
------------------------------
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
24
<PAGE>
5.2.3 ACQUISITION AND OPERATIONS PLAN. Purchaser shall have completed
-------------------------------
and delivered to Seller prior to Closing its acquisition and operations plan
addressing its company organizational matters, including its business structure,
personnel policies, compensation and benefits, store level hiring practices,
business transition, management accounting and operational system, operational
procedures, facilities coordination, marketing and promotion, finance and
accounting policies; and the urban economic development aspects of Purchaser's
acquisition program. Seller shall either approve or disapprove of such plan
within three business days following Seller's receipt of such plan from
Purchaser. If Seller's disapproves such plan, Purchaser may (but need not)
revise same in any manner requested by Seller; otherwise Seller may, at Seller's
option, terminate this Agreement.
5.2.4 PURCHASER'S CAPITAL STRUCTURE. Purchaser shall have provided to
-----------------------------
Seller copies of its organizational documents (including, without limitation,
its limited liability company operating agreement), which shall be reasonably
satisfactory to Seller and its counsel, in accordance with this Section 5.2.4
and Section 3.2.1. Purchaser shall demonstrate to Seller that Purchaser's
existing equity and debt financing provide to Purchaser, after payment by
Purchaser of all its obligations accrued through the Closing Date, working
capital of not less than $750,000 in addition to the financing contemplated by
Section 5.2.8. Prior to Closing, Purchaser shall deliver to Seller a balance
sheet of Purchaser setting forth on a pro forma basis the assets and liabilities
of Purchaser as of the Closing Date, which Seller shall either approve or
disapprove within three business days following Seller's receipt thereof. If
Seller disapproves such pro forma balance sheet, Purchaser may (but need not)
revise same in any manner requested by Seller; otherwise Seller may, at Seller's
option, terminate this Agreement. Purchaser's financial condition at the
Closing and as of the Closing Date shall be no less favorable than as set forth
in such pro forma balance sheet as approved by Seller or revised by Purchaser to
incorporate Seller's requests.
5.2.5 RE-IMAGING SCHEDULES. Purchaser shall have entered into the
--------------------
Re-Imaging Schedules to the Franchise Agreements with Seller, containing
provisions mutually satisfactory to the parties and providing that Purchaser
shall renovate, in conformance with Seller's designs attached hereto as Exhibit
-------
"E" and made a part hereof, fifty (50) of the Restaurants within eighteen (18)
- ---
months after the Closing Date, and fifty (50) Restaurants within twelve (12)
months following the eighteen (18) month period, as detailed exactly in the
Franchise and Development Agreements (the "Re-Imaging Schedules").
Notwithstanding anything to the contrary herein, or in the Franchise Agreements,
or the Development Agreements, or Seller's operating manuals and documents with
respect to franchisee operations of Churchs Restaurants, Seller understands and
agrees that some of the Restaurants may have maintenance or image problems that
cause the Restaurants not to conform with applicable standards for Churchs
franchisees as of the Closing Date. So long as Purchaser is not in default
otherwise under this Agreement, or under any of the documents or instruments
delivered pursuant to the transactions contemplated by this Agreement, and so
long as Purchaser makes diligent efforts to correct such situations, Seller
agrees not to default Purchaser under this Agreement, or under any of the
documents or instruments delivered pursuant to the transactions contemplated by
this Agreement, solely because of a condition at the Restaurants that existed
prior to the Closing Date that does not comply with Seller's current standards
for franchisee restaurants.
5.2.6 POS SYSTEM. Purchaser shall have entered into the POS System
----------
Agreement with Seller in the form attached hereto as Exhibit "F" (the "POS
-----------
System Agreement") obligating Purchaser to pay for POS and accounting services
provided by Seller or its contractors pending
25
<PAGE>
installation of a new POS System, and to acquire a POS System approved by Seller
for the Restaurants (the "POS System") and complete the installation of such POS
System within two years from the Closing Date, complete with such hardware and
software as may be required for such POS System to be linked up to and online
with Seller's information technology system, with appropriate protection for
Purchaser's confidential information.
5.2.7 CONSENTS AND APPROVALS. Each consent or approval necessary or
----------------------
required to be obtained by Purchaser or Seller (including, without limitation,
the approval required of Seller's Board of Directors) for the consummation of
the transactions contemplated hereby shall have been obtained. To the extent any
Landlord's Consent shall not have been obtained on or before the Closing, Seller
and Purchaser agree that they shall work together in good faith, subject to the
similar cooperation and commitment of Purchaser's lender, to consummate the
transactions contemplated by this Agreement, on terms satisfactory to Purchaser
and Seller in the respective exercise of their sole discretion, as to (i) the
balance of the Assets not affected by such Landlord's Consents at the Closing
and (ii) the Assets affected by such Landlord's Consent, within 6 months
thereafter.
5.2.8 LOAN COMMITMENTS. Purchaser shall produce at the Closing the
----------------
following binding loan commitments to Purchaser or otherwise demonstrate to
Seller an assured source of funding as follows:
(a) SIX MILLION DOLLARS ($6,000,000.00) for Purchaser to meet
its re-imaging commitment to Seller under the Re-Imaging Schedule; and
(b) TWO MILLION DOLLARS ($2,000,000.00) for Purchaser to meet
its obligations under Section 5.2.6 to purchase and install the POS System
at each of the Restaurants.
5.2.9 CLOSING DOCUMENTS. The documents to be delivered by Purchaser
-----------------
at Closing pursuant to Section 2.2 (including, without limitation, the
Additional Documents) shall have been executed and delivered.
5.2.10 CLOSING CERTIFICATES. Seller shall have received a certificate
--------------------
from Purchaser dated the date of Closing certifying in such detail as Seller may
reasonably request that the conditions specified in Section 5.2.1, 5.2.2 and the
last sentence of Section 5.2.4 hereof have been fulfilled.
5.2.11 OPINION OF COUNSEL FOR PURCHASER. Powell, Goldstein, Frazer &
--------------------------------
Murphy, LLP, or other independent, counsel to Purchaser specially engaged with
respect to such matter, shall have delivered to Seller a written opinion, dated
the date of Closing, in form and substance reasonably satisfactory to Seller's
counsel, but subject to customary assumptions and qualifications, to the
following effect:
(a) Purchaser is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Purchaser is duly authorized to
26
<PAGE>
conduct business and is in good standing under the laws of the states in
which any of the Restaurants are located.
(b) Purchaser has the requisite power to carry on its business as
it is now being conducted and to perform its obligations under the
Agreement and the Purchaser's Documents.
(c) The execution and delivery by Purchaser of this Agreement and
the other Purchaser's Documents do not, and if Purchaser were now to
perform its obligations under this Agreement and such other Purchaser's
Documents, such performance would not result in any (i) violation of
Purchaser's organizational documents, (ii) violation of any existing
federal or state constitution, statute, regulation, rule, order or law to
which Purchaser is subject, (iii) breach of or default under any material
written agreements to which, to such counsel's knowledge, Purchaser is a
party or which, to such counsel's knowledge, Purchaser is bound, or (iv)
violation of any judicial or administrative decree, writ, judgment or order
to which, to such counsel's knowledge, Purchaser is subject.
(d) To such counsel's knowledge, no legal action or proceeding
against Purchaser is pending or overtly threatened by written communication
which, if successful, would prohibit the consummation or require the
rescission of the transactions contemplated by the Agreement.
(e) The Agreement and the other Purchaser's Documents have been duly
executed and delivered by Purchaser and they constitute the legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with their respective terms.
(f) The consummation of the transactions as contemplated by the
Agreement do not require the filing of any notification or report under or
in connection with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
(g) Assuming (i) that Purchaser hires, and does not within ninety
(90) days after the Closing Date cause an "employment loss" (as defined
under WARNA) of the Hired Employees other than those employees set forth on
Schedule 7.1 of the Agreement, (ii) that the information set forth on the
------------
list provided pursuant to Section 4.1.13 is true and correct as of the
Closing Date and (iii) that no other "employment loss" (as defined under
WARNA) caused by Seller would be required to be aggregated with the
transactions contemplated by the Agreement under applicable laws, the
consummation of the transactions contemplated by the Agreement will not
violate WARNA or any similar State laws which require advance notice to
employees affected by plant closings or mass layoffs ("State Plant Closing
Laws.")
(h) Upon payment of the exercise price as set forth in the Warrant,
the securities to be issued pursuant to the Warrant will have been duly
authorized and validly issued.
27
<PAGE>
5.2.12 NO THREATENED OR PENDING LITIGATION. As of the Closing, no
-----------------------------------
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
5.2.13 APPROVALS. All of the actions to be taken by the parties or
---------
Purchaser's lender in connection with the transactions contemplated by this
Agreement, and all other matters associated with this Agreement and such
transactions (excluding the capitalization of Purchaser which is addressed by
Sections 5.2.4 and 5.2.8) shall be satisfactory to Seller in its reasonable
discretion.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION OF PURCHASER. Subject to the limitations set forth in
----------------------------
Sections 6.3, 6.4 and 6.5, Seller shall indemnify and hold Purchaser harmless
from, against, for and in respect of (i) any and all damages, losses, settlement
payments, obligations, liabilities, claims, actions or causes of action
suffered, sustained, incurred or required to be paid by Purchaser, net of any
resulting income tax benefits (using an assumed tax rate equal to the current
highest federal income tax rate applicable to net income of corporations under
the Code) to Purchaser, because of the breach of any written representation,
warranty, agreement or covenant of Seller contained in this Agreement (as the
same shall have been modified at any time at or before Closing including,
without limitation, any modification contained in any certificate of Seller
concerning such matters delivered at the Closing) which is provided in this
Agreement to survive the Closing; (ii) any and all Excluded Liabilities (other
than under Section 1.4.2(a) or under Section 1.4.2(c) which shall be governed
exclusively by Article 9 and the FPUR Leases); (iii) any and all debts,
liabilities and obligations arising under or in connection with the Worker
Adjustment and Restraining Notification Act of 1988 ("WARNA"), or any State
Plant Closing Laws, as a result of Purchaser's reliance on any material
inaccuracy in the number of employees at each Restaurant as set forth in the
information contemplated to be provided by the Seller under Section 4.1.13; and
(iv) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by Purchaser in connection
with any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 6.1.
6.2 INDEMNIFICATION OF SELLER. Subject to the limitations set forth in
-------------------------
Sections 6.3, 6.4 and 6.5, Purchaser shall indemnify and hold Seller harmless
from, against, for and in respect of: (i) any and all damages, losses,
settlement payments, obligations, liabilities, claims, actions or causes of
action suffered, sustained, incurred or required to be paid by Seller, net of
any resulting income tax benefits (using an assumed tax rate equal to the
current highest federal income tax rate applicable to net income of corporations
under the Code) to Seller, because of the breach of any written representation,
warranty, agreement or covenant of Purchaser contained in this Agreement (as the
same shall have been modified at any time at or before Closing including,
without
28
<PAGE>
limitation, any modification contained in any certificate of Purchaser
concerning such matters delivered at the Closing) which is provided in this
Agreement to survive the Closing; (ii) any and all Assumed Liabilities and all
liabilities in connection with the operation of the Restaurants in respect of
periods on and after the Closing Date; (iii) any and all debts, liabilities and
obligations arising under or in connection with WARNA or any State Plant Closing
Laws, as a result of Purchaser's failure to re-hire employees working at the
Restaurants as provided in Section 7.1 of this Agreement, or any subsequent
termination of such employees on or after the Closing, except to the extent the
foregoing results from any material inaccuracy in the number of employees at
each Restaurant as set forth in the information contemplated to be provided by
Seller under Section 4.1.13; and (iv) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
incurred by Seller in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against in
this Section 6.2.
6.3 SURVIVAL OF INDEMNIFICATION OBLIGATIONS. Notice of any claim under the
---------------------------------------
indemnification provisions hereof must be given prior to the expiration of two
years (one (1) year in the case of the breach of the representations and
warranties referred to in Section 3.3) from the Closing Date, and any claims not
made within such period shall be of no force or effect.
6.4 GENERAL RULES REGARDING INDEMNIFICATION. The obligations and
---------------------------------------
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions:
(a) The indemnified party shall give prompt (so as not to materially
prejudice the position of the indemnifying party) written notice (which in
no event shall exceed 30 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in
Sections 6.1 or 6.2 hereof, stating the nature and basis of said claims and
the amounts thereof, to the extent known;
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Sections 6.1 or 6.2
hereof, the action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by
the indemnifying party. The indemnified party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense unless the
employment of such counsel and the payment of such fees and expenses both
shall have been specifically authorized in writing by the indemnifying
party in connection with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (A) if there are defenses available to the
indemnified party which are inconsistent with those available to the
indemnifying party to such extent as to create a conflict of interest
between the indemnifying party and the indemnified party, the indemnified
party shall have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent defenses, and the
indemnifying party
29
<PAGE>
shall be responsible for the reasonable fees and expenses of the
indemnified party's counsel insofar as they relate to such inconsistent
defenses, and (B) if such action, suit or proceeding involves or could have
an effect on matters beyond the scope of the indemnity agreements contained
in Sections 6.1 and 6.2 hereof, the indemnified party shall have the right
to direct (at its own expense) the defense of such action, suit or
proceeding insofar as it relates to such other matters. The indemnified
party shall be kept fully informed of such action, suit or proceeding at
all stages thereof whether or not it is represented by separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding. Whether or not the
indemnifying party chooses to defend or prosecute any claim involving a
third party, all parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in connection therewith.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party.
6.5 LIMITS ON INDEMNIFICATION OBLIGATION. Notwithstanding anything in
------------------------------------
Sections 6.1 and 6.2 to the contrary or in conflict:
(i) neither Seller nor Purchaser shall be liable under the
indemnity provisions of Section 6.1 or Section 6.2, as applicable, in
any instance until such time as the aggregate liability under such
section exceeds $25,000 (in which event Seller or Purchaser, as is
applicable, shall be liable only for all such amounts in excess of
$25,000); but excluding from this limitation, however, any actual
damages incurred by Purchaser for Seller's breach of Section 3.1.13.
(ii) in no event shall the total obligation of Seller under
Section 6.1 for all losses, costs, claims, damages, liabilities and
expenses of any type or description exceed, in the aggregate, the
Purchase Price less any payments by or expenses of Seller referred to
in Section 9.2.2;
(iii) in no event shall the total obligation of Purchaser under
Section 6.2 for all losses, costs, claims, damages, liabilities and
expenses of any type or description exceed the Purchase Price; and
(iv) any amount for which Seller is obligated to reimburse
Purchaser may, in Seller's sole discretion, be satisfied by reducing
amounts currently due to Seller under the Development Agreements by a
like amount.
30
<PAGE>
6.6 INSURANCE PROCEEDS.
------------------
(a) In determining the amount of any loss, liability or expense for
which any indemnified party is entitled to indemnification under this Agreement,
the gross amount thereof will be reduced by any insurance proceeds actually paid
to any indemnified party; provided, however, that if such party has been
-------- -------
indemnified hereunder but does not actually receive such insurance proceeds
until after being indemnified, such party shall reimburse the indemnifying party
for amounts paid to such party to the extent of the insurance proceeds so
received.
(b) Following the Closing Date, if Purchaser should suffer any loss,
liability or expense covered by any of Seller's insurance policies and wishes to
make a claim against the issuer of such policy, Seller shall use its best
efforts to assist Purchaser in ascertaining and establishing coverage, pursuing
such claim and collecting under such policy. In connection with the foregoing
sentence, Seller shall not be required to incur any costs (including attorneys'
fees or demonstrable increases in insurance premiums), other than normal
overhead expenses, or to forego any similar claim of their own with respect to
the same occurrence, in assisting Purchaser in these efforts, unless Seller
shall otherwise be obligated to indemnify Purchaser pursuant to Section 6.1.
(c) Following the Closing Date, if Seller should suffer any loss,
liability or expense covered by any of Purchaser's insurance policies and wish
to make a claim against the issuer of such policy, Purchaser shall use its best
efforts to assist Seller ascertaining and establishing coverage, pursuing such
claim and collecting under such policy. In connection with the foregoing
sentence, Purchaser shall not be required to incur any costs (including
attorneys' fees or demonstrable increases in insurance premiums), other than
normal overhead expenses, or to forego any similar claim of its own with respect
to the same occurrence, in assisting Seller in these efforts, unless Purchaser
shall otherwise be obligated to indemnify Seller pursuant to Section 6.2.
(d) If both an indemnifying party and an indemnified party have
insurance coverage respecting a particular claim for which indemnification is
provided pursuant to Sections 6.1 and 6.2, the parties agree that the insurance
coverage of the indemnifying party will be called upon before the insurance
coverage of the indemnified party is called upon.
ARTICLE 7
POST-CLOSING MATTERS
7.1 HIRED EMPLOYEES. On the Closing Date, Purchaser shall offer
---------------
employment, to commence from and after the Closing Date, to each employee of the
Restaurants who is actively at work immediately prior to the Closing Date (a
"Hired Employee"), other than those employees of the Restaurants identified in
Schedule 7.1. For purposes of this Section 7.1, the term "actively at work"
- ------------
shall not include any employee of the Restaurants on a leave of absence, paid or
unpaid,
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<PAGE>
for any reason other than an employee who is absent from work on paid vacation
or paid sick leave or whose leave was or would have been required to have been
granted under the provisions of the Family and Medical Leave Act of 1993.
Notwithstanding anything to the contrary contained in this Section or Schedule
--------
7.1, Purchaser shall not terminate the employment of, or fail to hire that
- ---
number of employees which would cause Seller to be required to incur any
liability or obligation under WARNA or State Plant Closing Laws. No later than
one day prior to the Closing Date, Seller shall notify all employees of the
Restaurants, other than Hired Employees, that their employment with Seller shall
terminate as of the Closing Date and Seller shall validly terminate such
employees as of the Closing Date.
7.2 EMPLOYEE MATTERS.
----------------
(a) Seller shall retain all liabilities and obligations in
respect of the past, present and future employees of Seller under the
Employee Plans or otherwise and all laws or regulations applicable to the
Employee Plans or the employment of such employees through the Closing
Date. Without limiting the generality of the foregoing, Purchaser shall
have no liability or obligation whatsoever under any Employee Plan, nor
shall Purchaser have any obligation to make any severance or termination
payments to any persons as a result of their termination by Seller.
(b) Seller has offered or shall offer to all employees who were
or will be terminated by Seller the right to continue their coverage under
Seller's group health plans, within the meaning of either Section
5000(b)(1) of the Code (as defined in Section 3.1.22) or Section 607(1) of
ERISA in accordance with and to the extent required by the continuation
coverage requirements of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. Purchaser shall keep Seller advised of the
employment status of all Hired Employees to facilitate Seller's compliance
with the requirements of this Section.
(c) Seller and Purchaser shall, at the Closing, enter into an
Asset Transfer Agreement in the form attached hereto as Exhibit "G" (the
-----------
"401(k) Transfer Agreement"), providing for the transfer of the assets of
the Hired Employees and related liabilities held in the America's Favorite
Chicken Company 401(k) Savings Plan to a new plan to be maintained by
Purchaser.
For purposes of this Section 7.2, the term "Seller" shall be deemed to
include any other corporation, trade, business or other entity, other than
Seller, that, together with Seller, now or in the past, would constitute a
"single employer" within the meaning of Section 414 of the Code.
7.3 MAINTENANCE OF BOOKS AND RECORDS. Seller shall preserve until the third
--------------------------------
(3rd) anniversary of the Closing Date all records possessed or to be possessed
by such party relating to any of the assets, liabilities or business of the
Restaurants prior to the Closing Date, except for the Records, which shall be
transferred to Purchaser, and are included in the Assets. Seller, after receipt
of a specific written request from Purchaser requesting access to certain
specified records, may, in its reasonable business judgment, permit Purchaser
such access during business hours in
32
<PAGE>
a manner deemed by Seller not to interfere with operation of its business. For
purposes of this Agreement the term "Records" shall mean those files, records,
data, plans, contracts, information and recorded knowledge held at the
Restaurants for use in the ordinary course of business, but specifically
excluding, however, any proprietary information of the Seller, including,
without limitation, any proprietary information that may be licensed to the
Purchaser pursuant to the Franchise Agreements.
7.4 PAYMENTS RECEIVED. Seller and Purchaser each agree that after the
-----------------
Closing they will hold and will promptly transfer and deliver to the other, from
time to time as and when received by them, any cash, checks with appropriate
endorsements (using their best efforts not to convert such checks into cash), or
other property that they may receive on or after the Closing which properly
belongs to the other party, including without limitation any insurance proceeds,
and will account to the other for all such receipts.
7.5 UCC MATTERS. From and after the Closing Date, Seller will promptly
-----------
refer all inquiries with respect to ownership of the Assets or the Restaurants
to Purchaser. In addition, Seller will execute such documents as Purchaser may
reasonably request from time to time to evidence transfer of the Assets to
Purchaser.
ARTICLE 8
MISCELLANEOUS
8.1 TERMINATION. This Agreement may be terminated and the transaction
-----------
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by mutual consent of Seller and Purchaser;
(b) by either Seller or Purchaser, if such terminating party is
not otherwise in default under this Agreement and if the transaction shall
not have been consummated on or before March 23, 1997 (the "Outside Closing
Date") or such other extended date, if any, arrived at by mutual written
agreement of the parties;
(c) by Purchaser if there has been
(A) a material breach of any covenant or agreement
herein on the part of Seller which has not been cured or adequate
assurance (acceptable to Purchaser in its reasonable discretion)
of cure given in either case within 15 business days following
receipt of notice of such breach, or
(B) a breach of a representation or warranty of Seller
herein which by its nature cannot be cured prior to the Outside
Closing Date, as such date may be extended, other than such
breach that has not had or would not reasonably be expected to
have a material adverse effect in the Restaurants or Assets; or
33
<PAGE>
(d) by Seller if there has been
(A) a material breach of any covenant or agreement
herein on the part of Purchaser which has not been cured or
adequate assurance (acceptable in Seller's reasonable
discretion) of cure given, in either case within 15 business days
following receipt of notice of such breach, or
(B) a breach of a representation or warranty of
Purchaser herein which by its nature cannot be cured prior to the
Outside Closing Date, as such date may be extended, other than
such breach that has not had or would not reasonably be expected
to have a material adverse effect on Seller.
In the event of termination of this Agreement by either Purchaser or Seller as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no further obligation on the part of either Purchaser or Seller (except
that the obligations in this Section 8.1 and Sections 4.1.12, 4.1.13, 4.3, 8.2,
8.4, 8.5, 8.15, 8.18, 8.20 and 8.21 shall survive such termination); provided,
however, that if this Agreement is terminated by a party because of a breach of
this Agreement by the other party or because one or more conditions to the
terminating party's obligations under this Agreement are not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the right of the terminated party to pursue all the remedies provided
for herein, separately or simultaneously, shall survive such termination
unimpaired.
8.2 BROKERS' AND FINDERS' FEES
--------------------------
(a) Seller represents and warrants to Purchaser that all
negotiations relative to this Agreement have been carried on by Seller
directly without the intervention of any person who may be entitled to any
brokerage or finder's fee or other commission in respect of this Agreement
or the consummation of the transactions contemplated hereby, and Seller
agrees to indemnify and hold harmless Purchaser against any and all claims,
losses, liabilities and expenses which may be asserted against or incurred
by it as a result of Seller's dealings, arrangements or agreement with any
such person.
(b) Purchaser represents and warrants that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any person who may be entitled to any brokerage or finder's
fee or other commission in respect of this Agreement or the consummation of
the transactions contemplated hereby, with the exception of the parties
identified in Schedule 8.2; and Purchaser agrees to indemnify and hold
------------
harmless Seller against any and all claims, losses, liabilities and
expenses which may be asserted against or incurred by it as a result of
Purchaser's dealings, arrangements or agreements with the parties
identified in Schedule 8.2 or any other such person.
------------
8.3 SALES, TRANSFER AND DOCUMENTARY TAXES, ETC. Seller shall pay all
-------------------------------------------
federal, state and local sales, documentary or other transfer taxes, if any, due
as a result of the purchase, sale or transfer of the Assets in accordance
herewith by Seller to Purchaser whether imposed by law on Seller or Purchaser
and Seller shall indemnify, reimburse and hold harmless Purchaser in respect of
the liability for payment of or failure to pay any such taxes or the filing of
or failure to file any reports required
34
<PAGE>
in connection therewith. Purchaser shall pay any and all recording costs (except
as payable by Seller under the preceding sentence) due as a result of recording
closing documents in connection with this transaction and federal, state and
local documentary and other taxes, if any, due as a result of or in connection
with any loan financing obtained by Purchaser, whether imposed by law on Seller
or Purchaser, and Purchaser shall indemnify, reimburse and hold harmless Seller
in respect of the liability for payment or failure to pay any such taxes or fees
or the filing or failure to file any reports required in connection therewith.
Seller and Purchaser agree to complete, execute and deliver such certificates,
returns, statements and other forms (including, without limitation, resale
exemption certificates and no-tax due statements under Missouri law) necessary
or convenient to the transfer of the Assets in accordance with this Agreement).
8.4 EXPENSE. Except as provided in Section 8.5 hereof, whether or not the
-------
transactions contemplated herein are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
8.5 ADDITIONAL EXPENSES. Whether the transactions contemplated hereby
-------------------
close or not, Purchaser shall pay for all fees, costs and expenses related to
title examinations, title commitments, title policies, surveys, VISTA or similar
database searches in connection with environmental matters, the cost of any
Phase I environmental reports, or any other due diligence matters requested by
the Purchaser or its lender.
8.6 CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This Agreement sets
-----------------------------------------------
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
8.7 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be assigned by
-----------------------------
either party hereto without the prior written consent of the other parties.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of Seller and Purchaser, but shall not be construed as
conferring any rights on any other person.
8.8 WAIVER. Any term or provision of this Agreement may be waived at any
------
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party .
8.9 NOTICES. Any notice, request, demand, waiver, consent, approval or
-------
other communication which is required or permitted hereunder shall be in writing
and shall be deemed
35
<PAGE>
given only if delivered personally or by national overnight courier, sent by
telegram or facsimile, or sent via registered or certified mail, postage
prepaid, as follows:
If to Purchaser, to:
Atlanta Franchise Development Company, LLC
c/o Sales, Goodloe & Golden
303 Peachtree Street, N.E.
Suite 4320
Atlanta, Georgia 30308
Attention: Mr. Dwayne E. Heard
----------
President and Chief Executive Officer
and
Raymond A. Sales, Esq.
Executive Vice President and General Counsel
With a required copy to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6600
Attention: David S. Baker, Esq.
-----------
If to Seller, to:
AFC Enterprises, Inc.
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attention: Samuel N. Frankel, Esq.
----------
Executive Vice President
and General Counsel
and William H. Mathieu, Esq.
Corporate Counsel
and Robert W. Thomason
Vice President--Assets Management
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other
36
<PAGE>
communication will be deemed to have been given as of the date actually
delivered, or two business days after it is mailed.
8.10 LAW TO GOVERN. This Agreement shall be governed by and interpreted
-------------
and enforced in accordance with the laws of the State of Georgia.
8.11 CONSTRUCTION. All headings contained in this Agreement are for
------------
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement. Words
used herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine, or neuter, as the context requires. Any
reference to a "person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association, unincorporated
organization or any other entity.
The parties hereto acknowledge and agree that: (i) each party and its
counsel reviewed and negotiated the terms and provisions of this Agreement and
have contributed to its revision; (ii) the rule of construction to the effect
that any ambiguities are resolved against the drafting party shall not be
employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
8.12 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
----------------------
herein are intended to be and hereby are specifically made a part of this
Agreement.
8.13 SEVERABILITY. Any provision of this Agreement which is invalid or
------------
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
8.14 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
8.15 CONFIDENTIALITY, PUBLICITY, PRESS RELEASES. Seller and Purchaser
------------------------------------------
agree that all information and documentation exchanged between them, except for
such information and documentation as they may receive from a third party other
than a representative, agent, employee, attorney, accountant, consultant or
investment banker of Seller or Purchaser, is and shall remain confidential and
shall not be disclosed to any other party without the prior written consent of
Seller or Purchaser, as applicable, or as otherwise required by law, unless (i)
such
37
<PAGE>
information is already known to such party and to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (ii) the use of such information is necessary in making any
filing or obtaining any consent or approval required for the consummation of the
transactions contemplated hereby or (iii) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. This confidentiality provision is in addition to and not in lieu of
any other confidentiality agreement between the parties. To the extent this
Section 8.15 conflicts with any similar provisions in the Franchise Agreements,
the provisions of the Franchise Agreements shall supersede and control to the
extent of such conflict.
8.16 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto and the
----------------
certificates, Schedules and other documents delivered pursuant hereto or
incorporated by reference herein contain the entire agreement between the
parties hereto concerning the transactions contemplated herein and supersede all
prior agreements or understandings between the parties hereto relating to the
subject matter hereof. No oral representation, agreement or understanding made
by any party hereto shall be valid or binding upon such party or any other party
hereto. Any amendment to or modification of this Agreement must be in writing
and signed by the party claimed to be bound.
8.17 ADDITIONAL DOCUMENTS. The parties hereto will at any time after the
--------------------
date hereof sign, execute, and deliver, or cause others so to do, all such
powers of attorney, deeds, assignments, documents and instruments and do or
cause to be done all such other acts and things as may be necessary or proper to
carry out the transactions contemplated by this Agreement.
8.18 ARBITRATION
-----------
(a) All disputes under this Agreement arising prior to (but
not after) Closing shall be settled by arbitration in Atlanta, Georgia,
before a single arbitrator pursuant to the rules of the American
Arbitration Association. Arbitration may be commenced at any time by either
Seller or Purchaser giving written notice to each other that such dispute
has been referred to arbitration under this Section 8.18. The arbitrator
shall be selected by the joint agreement of Seller and Purchaser, but if
they do not so agree within twenty (20) days after the date of the notice
referred to above, the selection shall be made pursuant to the rules from
the panels of arbitrators maintained by such Association. Any award
rendered by the arbitrator shall be conclusive and binding upon the parties
hereto; provided, however, that any such award shall be accompanied by a
written opinion of the arbitrator giving the reasons for the award. This
provision for arbitration shall be specifically enforceable by the parties
and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Each party
shall pay its own expenses of arbitration and the expenses of the
arbitrator shall be equally shared; provided, however, that if, in the
opinion of the arbitrator, a party has raised an unreasonable claim,
defense or objection, the arbitrator may assess, as part of his award, all
or any part of the arbitration expenses of the other party (including
reasonable attorneys' fees) and of the arbitrator against the party raising
such unreasonable claim, defense or objection.
38
<PAGE>
(b) To the extent that arbitration may not be legally permitted
hereunder and the parties to any dispute hereunder may not at the time of
such dispute mutually agree to submit such dispute to arbitration any party
may commence a civil action in a court of appropriate jurisdiction to solve
disputes hereunder. Nothing contained in this Section 8.18 shall prevent
the parties from settling any dispute by mutual agreement at any time.
8.19 SURVIVAL. The provisions of Sections 1.3.1, 2.4, 3.3 (including,
--------
without limitation, the Sections specified therein as surviving Closing),
4.1.12, 4.1.13, 4.1.14, 4.3, 7.1, 7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 8.3, 8.4, 8.5,
8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16 and 8.17, together
with the provisions of Articles 6 and (subject to the terms of Article 9) 9,
shall survive Closing of this Agreement, and all other provisions of this
Agreement shall not survive such Closing. The provisions of Sections 4.1.12,
4.1.13, 4.3, 8.1, 8.2, 8.4, 8.5, 8.15 and 8.18 shall survive the termination of
this Agreement.
8.20 SELLER'S REMEDIES. If this Agreement is terminated by Seller pursuant
-----------------
to Section 8.1(d), all conditions to the obligations of Purchaser under this
Agreement have been satisfied, and Seller is not in default hereunder, Seller
may, at its election, pursue any and all remedies available to Seller at law or
in equity (including, without limitation, the specific performance of
Purchaser's obligations under this Agreement).
8.21 PURCHASER'S REMEDIES. If this Agreement is terminated by Purchaser
--------------------
pursuant to Section 8.1(c), all conditions to the obligations of Seller under
this Agreement have been satisfied, and Purchaser is not in default hereunder,
then Purchaser shall be entitled to pursue, in the alternative and at
Purchaser's election, either (i) a decree of specific performance, or (ii) an
award of liquidated and agreed damages in the amount of $700,000. Purchaser and
Seller agree and acknowledge that it would be difficult or impossible to
ascertain the actual damages suffered by Purchaser under the circumstances
described in this Section, and that such liquidated damages are not and shall
not be deemed a penalty, but are a reasonable estimate of such damages under
applicable provisions of law. Purchaser agrees that the remedies set forth in
this Section shall be Purchaser's sole recourse in such event, the Purchaser
hereby waiving all other rights and remedies it may have hereunder, or at law or
in equity.
ARTICLE 9
ENVIRONMENTAL MATTERS
Notwithstanding anything to the contrary in this Agreement, or otherwise,
this Article shall constitute the sole and entire agreement of the parties with
respect to the transactions contemplated by this Agreement as to environmental
matters of any kind or nature whatsoever. The provisions of this Article are
expressly in lieu of any other rights and remedies available under Applicable
Environmental Laws or otherwise, Purchaser and Purchaser's lender ("Purchaser's
Lender") hereby waiving such other rights and remedies. This preamble shall
survive Closing.
9.1 DEFINITIONS AND CLARIFICATIONS.
------------------------------
39
<PAGE>
9.1.1 APPLICABLE ENVIRONMENTAL LAWS. As used in this Agreement, the
-----------------------------
term "Applicable Environmental Laws" or "Applicable Environmental Law" shall
mean collectively and singly (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, (b) the Resource Conservation and Recovery Act
of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of
1984, (c) Federal Water Pollution Control Act, (d) any and all amendments
thereto and regulations issued pursuant thereto, and (e) any and all other
federal, state, county, city, or municipal environmental laws, rules,
regulations, orders or ordinances at any time directly applicable to any of the
Restaurants.
9.1.2 HAZARDOUS MATERIALS. "Hazardous Materials" shall mean any
-------------------
substance, whether solid, liquid or gaseous, which is listed, defined or
regulated as a "hazardous substance", "hazardous waste" or "solid waste", or
otherwise classified as hazardous or toxic, pursuant to any Applicable
Environmental Law; or which contains any regulated amounts of polychlorinated
biphenyl, urea formaldehyde foam insulation, explosive or radioactive material,
or motor fuel or other petroleum hydrocarbons.
9.1.3 PRIOR USE RESTAURANTS. As used in this Agreement, the term
---------------------
"Prior Use Restaurants" or "Prior Use Restaurant" shall mean collectively and
singly those Restaurants listed in Exhibit "H", attached hereto and incorporated
----------
by reference herein, as to which Seller in the course of review of its legal
files, or from its operating experience on an ad hoc basis, or from testing at
the site, has determined (a) there is likelihood that such Restaurants were used
by a prior owner or prior lessee for an environmentally-sensitive purpose such
as a gas station or dry cleaner, or (b) such Restaurants are located adjacent to
and abutting another property and there is likelihood that such property
adjacent to and abutting such Restaurants was used for such an environmentally-
sensitive purpose. Prior Use Restaurants shall also include Restaurants that, as
a result of Purchaser's or Purchaser's Lender's due diligence, are determined to
be sites that meet the requirements of subparts (a) or (b) of this Section, in
the opinion of Seller. The Prior Use Restaurants shall be divided into two
categories: the Leased Prior Use Restaurants leased by Seller shall be the
"LPUR" sites, singly or collectively, as context requires, and the fee-owned
Prior Use Restaurants owned in fee by the Seller shall be the "FPUR" sites,
singly or collectively, as context requires.
9.1.4 [INTENTIONALLY OMITTED]
9.1.5 [INTENTIONALLY OMITTED]
9.1.6 PURCHASER'S LENDER. Provided that the Purchaser's Lender shall
------------------
execute appropriate documents as Seller may reasonably require to confirm the
Purchaser's Lender's agreement to the provisions of this Article 9, the
definitions, statements, representations, warranties, agreements, covenants and
indemnities herein shall be deemed to benefit the Purchaser's Lender, and the
Purchaser's Lender, by accepting such benefit, shall be bound by same.
40
<PAGE>
9.1.7 CAP PRICE. The "Cap Price" for each Excluded Restaurant is set
---------
forth in the attached Schedule 9.1.7.
--------------
9.1.8 DUE INQUIRY. For purposes hereof, the term "due inquiry", with
-----------
respect to Seller's inquiry into the environmental condition of the Restaurants,
means that the Corporate-Counsel Real Estate, and Vice President of Assets
Management, and their staffs, have reviewed the legal files held at the Seller's
corporate office, and have made verbal inquiry to the Church's Director of
Construction, regarding the matter as to which a "Due Inquiry" standard is
applied in this Article.
9.1.9 INTENTIONALLY DELETED.
---------------------
9.1.10 SURVIVAL. This Section 9.1 shall survive Closing.
--------
9.2 EXCLUDED RESTAURANTS.
--------------------
9.2.1 SELLER'S REPRESENTATION, WARRANTY, COVENANT AND AGREEMENT. As
---------------------------------------------------------
to any of the Restaurants that are not Prior Use Restaurants (the "Excluded
Restaurants"), Seller hereby represents and warrants to Purchaser that to the
best of actual knowledge of its Corporate Counsel-Real Estate, and its Vice
President of Assets Management, after Due Inquiry, as of the date hereof and as
of Closing, that (a) Seller has not discharged on, in, at or under the Excluded
Restaurants from its operations on the Excluded Restaurants any Hazardous
Materials so as to create any liability for Seller or Purchaser, (b) Seller has
not received from applicable governmental entities any written notice of any
potential liability or violation of Applicable Environmental Laws at any of the
Excluded Restaurants, and (c) none of the Excluded Restaurants are in violation
of any Applicable Environmental Laws. If Seller's Corporate Counsel-Real Estate
or its Vice President of Assets Management receives written actual notice of any
material exceptions to the representations and warranties of this section
between the date hereof and Closing, then it will give notice of same to
Purchaser.
9.2.2 INDEMNITY BY SELLER. Seller hereby agrees to indemnify
-------------------
Purchaser and defend and hold Purchaser harmless from and against any and all
causes of action, claims, damages, demands, liabilities, losses, obligations,
costs or expenses suffered or incurred by Purchaser as a result of any breach of
the representations, warranties, covenants and agreements set forth in Section
9.2.1 above (as the same may be updated or modified at any time before Closing)
and Seller shall have no liability under this Section 9.2 or otherwise for any
violation by any Excluded Restaurants of any Applicable Environmental Laws
absent a breach by Seller of Section 9.2.1. Seller's liability hereunder as to
any particular Excluded Restaurant, no matter how many indemnifiable matters may
arise concerning such Excluded Restaurant, shall in no event exceed the Cap
Price for such Excluded Restaurant. The foregoing indemnity shall include, but
not be limited to, (a) any closure, excavation or other remedial obligations
imposed under any Applicable Environmental Laws, and (b) any reasonable
attorneys' fees and court costs actually incurred by Purchaser in connection
with any of the foregoing. If any action or proceeding is brought against
Purchaser which is the subject of the indemnities set forth above, then such
party
41
<PAGE>
shall notify the Seller in writing and the Seller shall defend such action or
proceeding at its own expense by or through attorneys of its own choosing. If
Seller fails or refuses to defend Purchaser pursuant to this indemnity, then
Purchaser may defend itself with counsel of its own choosing, and, without
limiting its other remedies, seek reimbursement from Seller of the cost of such
defense.
9.2.3 SURVIVAL. Sections 9.2.1 and 9.2.2 shall survive Closing and
--------
shall apply only to claims arising and as to which demand is actually made
during the two years following Closing.
9.3 PRIOR USE RESTAURANTS.
---------------------
9.3.1 [INTENTIONALLY OMITTED]
9.3.2 LEASING OF FPUR: SUBLEASE OF LPUR. At Closing, Seller shall
---------------------------------
lease to Purchaser, and Purchaser shall lease from Seller, the land for each
FPUR pursuant to Seller's redevelopment form triple net lease (the "FPUR
Leases"), the form of which is attached hereto as Exhibit "I". The term of each
-----------
such lease shall be 15 years, with three, five year renewal options, and the
rental rate for each FPUR is included in a schedule forming part of Exhibit
-------
"I". At Closing, Seller shall convey by limited warranty deed the improvements
- ---
on the FPUR, with a reversionary interest upon expiration or termination of the
FPUR Lease. At Closing, Seller shall sublease any LPUR to Purchaser using a
sublease substantially similar to the form of FPUR Lease, the term and minimum
rental of which sublease shall "flow through" from the prime lease.
9.3.3 CLOSURE OF PRIOR USE RESTAURANTS. If a FPUR or LPUR must be
--------------------------------
closed for the environmental reasons detailed more fully in Section XXVII of the
Franchise Agreements, then the FPUR Lease or LPUR Lease (sublease) as to such
Prior Use Site may be terminated by the Purchaser, and the franchise relocated,
all as detailed more fully in said Section XXVII. Upon the opening for business
of such relocated Restaurant, Seller shall reimburse Purchaser for the
depreciated cost (using a 10 year level depreciation schedule) of the
improvements for such closed Restaurant (which cost as of the Closing Date is
set forth on the attached Schedule 9.3.3; LPUR [subleased] sites will have a
--------------
zero value because title to the improvements will not transfer to the
Purchaser), plus the cost of any capital improvements made by Purchaser to such
closed Restaurant subsequent to Closing which are not movable by Purchaser, with
such depreciated costs being determined at the time such Restaurant is closed.
9.3.4 [INTENTIONALLY OMITTED]
9.3.5 SURVIVAL. Section 9.3 shall survive Closing.
--------
9.4 LITIGATION AND ADMINISTRATIVE PROCEEDINGS AND THE INDEMNITY CAPS.
----------------------------------------------------------------
If Seller is defending Purchaser pursuant to the indemnities in Section 9.2.2
and Seller's liability cap as to such matter is reached, Seller will
nevertheless cooperate at its own expense, notwithstanding such cap amount, with
Purchaser and its counsel to endeavor to effect a smooth transition of the
defense of such matter and avoid prejudice to Purchaser's rights, and after such
transition, Seller agrees to cooperate reasonably in Purchaser's prosecution of
such defense so long as Seller is
42
<PAGE>
reimbursed by Purchaser for its reasonable out-of-pocket costs incurred as a
result of such cooperation. This Section shall survive Closing.
9.5 PRE-CONDITIONS TO SELLER'S OBLIGATIONS. Seller shall have no
---------------------------------------
obligation under any indemnity or otherwise under this Agreement for any claims
(how and by whomever brought), loss or damage arising from (a) Purchaser's
exacerbation, to the extent of such exacerbation, through negligence or willful
act, of a violation or alleged violation of Applicable Environmental Laws, or
the physical conditions giving rise to such matters existing at or prior to
Closing, (b) Purchaser's discovery of a violation or alleged violation of
Applicable Environmental Laws at any Restaurant and its failure to report it in
writing to Seller by that time period necessary to avoid prejudicing Seller's
ability to successfully defend such matter, (c) Purchaser's being served by a
written notice of a lawsuit, administrative proceeding, or similar matter, and
Purchaser's failure to give written notice of such matter to the Seller in
writing by the earlier of (i) 30 days after receipt of such notice, or (ii) that
time period necessary to avoid prejudicing the Seller's ability to successfully
defend such matter, and (d) any violation or alleged violation of Applicable
Environmental Laws, or the physical conditions giving rise to such matters,
whether latent or otherwise, occurring after Closing. Subpart (a) of this
section shall be deemed to include any invasive construction, or pre-
construction, activities performed by or on behalf of Purchaser, or with
Purchaser's consent, or by or on behalf of any public or quasi-public entity,
without first having performed a magnetic resonance or ground-penetrating radar
search of the applicable Prior Use Site to reduce the likelihood of contacting
any buried objects during such construction or pre-construction activities.
Throughout the term of the FPUR Lease or LPUR sublease with respect to each
Prior Use Restaurant, Purchaser shall neither perform nor allow to be performed
any invasive environmental site assessment activity of any such Restaurants
without the prior written consent of Seller, which Seller shall not unreasonably
withhold but which Seller may condition upon its review and approval of the
proposed site assessment activity and procedures. This Section shall survive
Closing.
9.6 DISCLOSURE. Seller, to the best knowledge of its Corporate Counsel-
----------
Real Estate and its Vice President of Assets Management, represents and warrants
that it has made available to Purchaser or its representatives its legal files
as they relate to environmental matters, which constitutes Seller's complete
record of any material information pertaining to such matters. This provision
shall not survive Closing.
9.7 TIME PERIODS. All time periods and deadlines in this Article 9 are
------------
absolute. No tolling, extensions, or other adjustment to such time periods or
deadlines may be made for any reason, including, without limitation, latency of
environmental conditions, professional incompetence or ineffectiveness, the
inability of existing technology to discover environmental conditions, or
subsequent change in Applicable Environmental Laws. This provision shall survive
Closing.
9.8 AGGREGATE INDEMNIFICATION LIMITATION. For purposes of Section 9.2.2,
------------------------------------
Seller shall have no obligation to make payments or incur third party out of
pocket expenses under such Sections to the extent such payments or expenses,
together with any payments or expenses of
43
<PAGE>
Seller under Article 6, would exceed in the aggregate the Purchase Price. This
provision shall survive Closing.
[SIGNATURES ON FOLLOWING PAGE]
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement under seal as of the date first above written.
ATTEST: AFC ENTERPRISES, INC. f/k/a
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/ By: /s/ (SEAL)
------------------------------- ----------------------------
Name: Name:
_____________________________ __________________________
As its As its
____________________________ _________________________
[CORPORATE SEAL] [CORPORATE SEAL]
ATTEST: ATLANTA FRANCHISE
DEVELOPMENT COMPANY, LLC
By: E E Urban Management, LLC
Manager
By: /s/ By: /s/ (SEAL)
------------------------------- ----------------------------
Name: Name:
_____________________________ __________________________
As its As its
____________________________ _________________________
45
<PAGE>
INDEX TO EXHIBITS AND SCHEDULES
-------------------------------
Exhibit "A" List of Restaurants
Exhibit "B" Form of Franchise Agreement
Exhibit "C" Form of Development Agreement
Exhibit "D" Form of Warrant
Exhibit "E" Designs For Reimaging
Exhibit "F" Form of POS System Agreement
Exhibit "G" 401(k) Transfer Agreement
Exhibit "H" Prior Use Restaurants
Exhibit "I" Form of FPUR Lease
Schedule # Schedule Topic
---------- --------------
1.1.1(a) Asset Ledger
1.1.l(b) Leased and Owned Restaurants
1.1.1(g) List of Contracts
1.3.5 Allocation of Purchase Price
1.4.2 Excluded Liabilities
3.1 Seller's Knowledge Parties
3.1.4 Conflicts and Consents
3.1.6 Operating Statements
3.1.8 Taxes
3.1.10 Existing Condition
3.1.11 Permitted Liens
3.1.12 Leased Personal Property
3.1.15 Litigation
3.1.17 Extraordinary Contracts or Commitment
3.1.18 Managerial Employees and Restaurant Names
3.1.20 Employee Benefit Matters
3.1.21(c) Identification of Leases
3.1.21(g) Eminent Domain
3.2.1 List of Purchasers, Members and Managers
3.2.3 Conflicts and Consents of Purchaser
3.2.5 Purchaser's Financials and Payments
3.2.6 Actions and Investigations Regarding Purchaser
5.1.5 Consents and Approvals Required for Closing
7.1 Non-Hired Employees (List by Restaurant)
8.2 Brokers
9.1.7 Cap Prices
9.3.3 Improvements Cost
46
<PAGE>
EXHIBIT 10.5
================================================================================
ASSET PURCHASE AGREEMENT
------------------------
AMONG
AFC ENTERPRISES, INC.
THE AMERICAN BAGEL COMPANY, D/B/A
CHESAPEAKE BAGEL BAKERY
MICHAEL ROBINSON
ALAN MANSTOF
DATED AS OF MAY 5, 1997
===============================================================================
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made and entered into this 5th day of May,
1997, by and among THE AMERICAN BAGEL COMPANY, a Maryland corporation
("Seller"); MICHAEL ROBINSON, a resident of the state of Maryland ("Robinson")
and ALAN MANSTOF, a resident of the state of Virginia ("Manstof")
(hereinafter, Manstof and Robinson are sometimes referred to, individually, as a
"Principal" and, collectively, as the "Principals"); and AFC ENTERPRISES, INC.,
a Minnesota corporation ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Seller is engaged in the business (the "Business") of operating in
the United States and internationally, a franchise system (the "Chesapeake
System") for opening and operating quick service restaurants ("Chesapeake
Restaurants") specializing in freshly baked bagels and other food and non-food
items from the premises located at 1451 Dolley Madison Boulevard, McLean,
Virginia (the "Premises"), which system is identified by various trade names,
trademarks and service marks, including without limitation the name "Chesapeake
Bagel Bakery."
WHEREAS, Manstof and Robinson are the sole owners of all of the issued and
outstanding stock of Seller; and
WHEREAS, Seller desires to sell substantially all of its assets used in the
Business or in connection with the Chesapeake System, as a going concern, to
Purchaser on certain terms and conditions, which terms and conditions are
acceptable to Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, and other good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, Seller, the
Principals and Purchaser hereby mutually agree as follows:
1. PURCHASE OF ASSETS. On the terms and conditions hereinafter set
------------------
forth, Seller shall sell and Purchaser shall purchase the following assets, free
and clear of any and all liens, claims, charges and encumbrances whatsoever:
a. all electronic data and computer files and the storage media upon
which such files are located including, but not limited to diskettes,
tapes, CD-ROMs or other storage media, together with all computer
hardware (except as set forth in Schedule 2) and software (subject to
----------
any restrictions contained in the license agreements with respect
thereto) determined by Purchaser to be necessary to utilize the
foregoing, including without limitation those items set forth on
Schedule 1(a) attached hereto and made a part hereof, together with
-------------
all service contracts, maintenance agreements and warranties
applicable thereto;
b. all inventory and supplies of Seller (both on hand and on order) which
incorporate or use in any manner any of Seller's Proprietary Rights
(hereinafter defined) located on the Premises or otherwise owned by
Seller (collectively, the "Proprietary Property"), including, but not
limited to, stationary, forms, labels, office supplies, production
supplies, advertising and promotional and sales materials, a list of
which Proprietary Property is set forth on Schedule
--------
1
<PAGE>
1(b) attached hereto and made a part hereof (which Schedule shall be
----
updated and supplemented as of the Closing);
c. all cash on hand as of the Closing, all prepaid items or expenses of
whatever nature related to the Purchased Assets, all accounts
receivable (including, but not limited to, all service fees due from
Franchisees on Franchisee's gross sales during the month of April,
1997 and thereafter and any service fees, including interest thereon,
for any preceding month which were not collected prior to Closing)
(the "Accounts Receivable") and all promissory notes reflecting unpaid
franchise fees (the "Franchise Fee Notes"), all as more particularly
described in Schedule 1(c) hereof, which Schedule shall be updated and
-------------
supplemented as of the Closing;
d. all rights and interests of Seller in, to and under all written
franchise agreements (including any modifications or amendments
thereto and including any rights to terminate such agreements or
declare defaults thereunder), pursuant to which Seller has franchised
to other parties ("Franchisees") the right to operate a Chesapeake
Restaurant or to use any component of the Chesapeake System, and all
applications to enter into franchise agreements, a complete list of
which franchise agreements and applications is set forth on Schedule
--------
1(d) attached hereto and made a part hereof (hereinafter collectively
----
referred to as the "Franchise Agreements");
e. all rights and interests of Seller in, to and under all written
development agreements (including any modifications or amendments
thereto and including any rights to terminate such agreements or
declare defaults thereunder), pursuant to which Seller has granted
other parties ("Developers") the right to develop one or more
Chesapeake Restaurants or any other business using any component of
the Chesapeake System, and all applications to enter into development
agreements, a complete list of which development agreements and
applications is set forth on Schedule 1(e) attached hereto and made a
-------------
part hereof (hereinafter collectively referred to as the "Development
Agreements");
f. all rights and interests of Seller in, to and under that certain
Marketing Agreement with Coca-Cola USA Fountain dated the 24th day of
February, 1997 and that certain Approved Coffee Supplier Agreement
with Superior Coffee and Foods, a division of Sara Lee Corporation
dated as of the 22nd day of December, 1994 and any other contracts
relating to Seller's Business or the Chesapeake System which Purchaser
elects to assume as set forth on Schedule 1(f) attached hereto and
-------------
made a part hereof (the "Assumed Agreements");
g. all of Seller's rights in and to (i) all U.S. and Foreign trade names,
trademarks, service marks, logos, slogans, and fictitious trade names
used in the conduct of the Business or the operation of the Chesapeake
System, including, but not limited to, the name "Chesapeake Bagel
Bakery" and any abbreviation or variation thereof (collectively the
"Marks"); (ii) all U.S. and foreign trademark and service mark
registrations and applications for registration (collectively, the
"Trademark Registration Rights"); (iii) all elements of the trade
dress used in the Chesapeake System (the "Trade Dress"); (iv) all U.S.
and foreign common law copyrights ("Copyrights"); (v) any existing
U.S. and foreign registrations and applications for registration of
any Copyright (collectively, the "Copyright Registration Rights");
(vi) any existing U.S. and foreign patents and patent applications,
technology, know-how, processes, training manuals, operations manuals,
proprietary information, trade secrets,
2
<PAGE>
formulae, recipes, technical information and data, research and
development data, confidential information, discoveries, inventions
and improvements (collectively the "Trade Secrets"); and (vii) other
similar intangible property and rights used in, or relating to the
Chesapeake System (hereinafter collectively referred to as the
"Intellectual Property") (hereinafter the Marks, the Trademark
Registration Rights, the Trade Dress, the Copyrights, the Copyright
Registration Rights, the Trade Secrets and the Intellectual Property
shall be collectively referred to as the "Proprietary Rights");
h. the right to sue and recover for any past infringement dilution or
unauthorized use of any of the Proprietary Rights;
i. all of Seller's rights to any goodwill associated with the Business,
the Chesapeake System and the Proprietary Rights;
j. all Franchisee, Developer and supplier and prospective Franchisee,
Developer and supplier lists, sales records and files (including
without limitation all original Franchise and Development Agreements,
UFOC receipts and other documents whether in the possession of Seller
or Seller's attorneys, brokers or other agents); records and files
regarding the Proprietary Rights and all other books and records
(including electronic records), specifications, designs, layouts,
renderings, equipment lists, manuals, training materials, videos,
brochures, photographs, negatives, and schedules and other materials
relating to the operation of the Business and the Chesapeake System;
k. all licenses, governmental authorizations, permits and all similar
rights and interests applied for, issued to or owned by Seller, or
used in the conduct of Seller's Business or the operation of the
Chesapeake System;
l. the right to receive rebates or marketing allowances payable to Seller
by vendors, suppliers or others;
m. such rights as Seller has to use all present telephone numbers from
and after the Closing (as defined in Paragraph 9 hereof);
n. all other tangible and intangible assets of Seller relating to and
used in connection with the Business or the Chesapeake System or the
performance of marketing services, development services, advertising,
publicity and training related thereto.
Hereinafter, all of the foregoing are referred to, in the aggregate, as the
"Purchased Assets." Possession of the Purchased Assets shall be delivered from
Seller to Purchaser at the Closing.
2. EXCLUDED ASSETS. Anything in this Agreement to the contrary
---------------
notwithstanding, Purchaser shall not purchase, and shall have no rights or
obligations with respect to any furniture, fixtures, equipment (other than the
computer hardware described in Paragraph 1.a. above), or other assets, if any,
listed on Schedule 2 attached hereto and made a part hereof (collectively, the
----------
"Excluded Assets").
3. CONSIDERATION. As payment in full for the Purchased Assets,
-------------
Purchaser agrees to deliver, subject to the terms of this Agreement and subject
to adjustment as provided for in Paragraph 4 below, for the
3
<PAGE>
account of Seller, an amount equal to Thirteen Million Seven Hundred Fifty
Thousand Dollars ($13,750,000) (hereinafter, referred to, as adjusted, as the
"Purchase Price"), payable as follows:
a. Earnest Money Deposit. Purchaser has received a refund of that certain
---------------------
earnest money deposit (the "Earnest Money Deposit") paid by Purchaser
to Wheat First Butcher Singer in the amount of One Hundred Thousand
Dollars ($100,000). Purchase shall retain the Earnest Money Deposit.
b. Escrow. The sum of Two Million Dollars ($2,000,000) shall be paid over
------
to the Escrow Agent (hereinafter defined) to be held in accordance with
the terms of the Escrow Agreement described in Paragraph 6 below.
c. Development Fee. The sum of One Hundred Five Thousand ($105,000) shall
---------------
be retained by Purchaser to be applied to the prepaid franchise fee
payable by Almike Enterprises, Inc., a corporation wholly-owned by the
Principals and their spouses ("Almike"), pursuant to the development
agreement attached hereto as Exhibit M.
---------
d. Wire Transfer. The sum of Nine Million Seven Hundred One Thousand
-------------
Dollars ($9,701,000), representing the balance of the Purchase Price
less the adjustment to the Purchase Price provided for in Paragraph
4.a. below, shall be remitted by wire transfer to the account of Seller
specified to Purchaser on or before the Closing.
4. PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be adjusted as
-------------------------
follows:
a. The Purchase Price shall be reduced by an amount equal to the sum of
One Million Nine-Hundred Forty-four Thousand Dollars ($1,944,000)],
representing the agreed adjustment associated with deferred franchise
fee revenue and deferred franchise costs.
b. The Purchase Price shall be increased by the sum of One Million Dollars
($1,000,000) in the event at least three hundred (300) new units are
opened pursuant to commitments specifically listed in Seller's existing
franchise commitment pool (as set forth on Schedule 4(b) attached
-------------
hereto and made a part hereof) (the "Existing Franchise Commitment
Pool") within five (5) years following the Closing Date (the
"Determination Date"). Purchaser shall pay such additional sum to
Seller within forty-five (45) days after the 300th unit has been
opened. The Purchase Price shall be increased by an additional Two
Million Five-Hundred Thousand Dollars ($2,500,000) in the event at
least four hundred (400) new units are opened pursuant to commitments
in the Existing Franchise Commitment Pool by the "Determination Date".
Purchaser shall pay such additional sum to Seller within forty-five
(45) days after the 400th unit has been opened. Any Units opened by
Almike pursuant to the Almike Agreements (as hereinafter described)
shall be excluded from the Existing Franchise Commitment Pool.
5. NO ASSUMPTION OF LIABILITIES. Except for (a) liabilities arising
----------------------------
after the Closing Date under the Assumed Agreements, the Franchise Agreements
and the Development Agreements; (b) obligations of Seller arising prior to the
date hereof solely with respect to providing Franchisees (who are not in
default) with site selection assistance and training (to the extent required by
provisions of Franchise Agreements substantially similar to those set forth in
Sections 3 and 6 of the form Franchise Agreement, designated 03060001.ST8
(RO:122696) and attached hereto as Exhibit "F-1") in consideration for prepaid
-------------
franchise fees; and (c) the Coupon Obligation (as defined, and to the extent
provided, in Paragraph 7.e. hereof), Purchaser does not, and shall not be deemed
to, assume any
4
<PAGE>
existing or future liabilities, debts, obligations, accounts payable, lease
obligations, contracts, warranties, or agreements of Seller that arise from,
relate to, or are based on occurrences, facts or circumstances prior to Closing,
regardless how such obligations may have arisen and regardless of disclosure of
such liabilities hereunder (hereinafter collectively referred to as the
"Retained Liabilities"), including without limitation (i) all obligations for
taxes (including taxes which are not due as of the Closing but are attributable
to any period prior to the Closing), (ii) indebtedness of Seller for borrowed
money, (iii) liabilities in connection with any litigation (including, but not
limited to, all claims of Franchisees arising out of circumstances existing
prior to the Closing or arising out of the operation of the National Advertising
Fund, as hereinafter described), (iv) liabilities for workers compensation,
product liability, environmental claims, tort liability or general liability,
personal injury or property damage; (v) liabilities regarding independent
contractors or employees of Seller, including, without limitation, liabilities
for vacation pay, sick pay, severance pay, profit-sharing or pension plans,
bonuses, or any other employee benefit or "fringe benefit" arrangement; and (vi)
liabilities under any contracts or agreements of Seller that are not Assumed
Agreements. Seller shall, contemporaneously with the consummation of the
transactions contemplated by this Agreement, absolutely and unconditionally pay,
or reserve for and pay when due, in full (or otherwise satisfy), all Retained
Liabilities (both current and contingent) and shall pay in full, and cause to be
released or satisfied prior to the Closing, all liens and encumbrances on the
Purchased Assets.
6. ESCROW. Purchaser and Seller, together with NationsBank, N.A. as
------
escrow agent (the "Escrow Agent"), shall execute and deliver an escrow agreement
substantially in the form of Exhibit A attached hereto and made a part hereof
---------
(the "Escrow Agreement"), pursuant to the terms of which Purchaser shall deliver
to the Escrow Agent, for the account of Seller, Two Million Dollars ($2,000,000)
in accordance with Paragraph 3.c. hereof (collectively, the "Escrow Funds"), to
be held in an interest-bearing account in accordance with the terms and
conditions of the Escrow Agreement. The Escrow Funds shall secure the
indemnification obligations of Seller and the Principals as set forth herein and
specifically including, but not limited to, to Paragraph 19 below. The Escrow
Agreement will further provide that (i) thirty-three and one-third percent (33-
1/3%) of the Escrow Funds held by the Escrow Agent at the expiration of twelve
(12) months following the Closing Date (the "First Release Date") will be
released to Seller on the First Release Date, to the extent they exceed any
outstanding claims (as defined in the Escrow Agreement) as of such First Release
Date; (ii) fifty percent (50%) of the Escrow Funds held by the Escrow Agent at
the expiration of twenty-four (24) months following the Closing Date (the
"Second Release Date") will be released to Seller on the Second Release Date, to
the extent they exceed any outstanding claims (as defined in the Escrow
Agreement) as of such Second Release Date; (iii) the balance of the Escrow Funds
held by the Escrow Agent at the expiration of thirty-six (36) months following
the Closing Date (the "Third Release Date") will be released to Seller on the
Third Release Date, to the extent they exceed any outstanding claims (as defined
in the Escrow Agreement) as of such Third Release Date; and (iv) any Escrow
Funds not released on the Third Release Date shall be released to Seller as soon
thereafter as there are no claims outstanding as more particularly described in
the Escrow Agreement. Purchaser and Seller will share all expenses of the Escrow
Agent equally.
7. ADDITIONAL AGREEMENTS. At Closing:
---------------------
a. Restrictive Covenants. Seller, each Principal and Almike shall enter
---------------------
into a Confidentiality and Non-Competition Agreement in the form of
Exhibit "B" attached hereto and made a part hereof (the
-------------
"Confidentiality and Non-Competition Agreement").
b. Consulting Agreements. Manstof, Robinson and David Lavine will enter
---------------------
into agreements with Purchaser (the "Consulting Agreements") to
provide such consulting services at such times and at such locations
as may be mutually agreed upon, in good faith, between such
5
<PAGE>
individual and Purchaser with respect to the Purchased Assets, the
Franchisees, the Chesapeake System and the Business for a per diem cost
of Five Hundred Dollars ($500) per day (pro rated, based upon an eight-
--- -----
hour day, for any period of less than a full day) plus reasonable out
of pocket expenses actually incurred by such individual for a period of
up to twelve (12) months following the Closing Date. Each such
Consulting Agreement shall be substantially in the form of Exhibit "C"
-----------
attached hereto and made a part hereof. In addition, each of said
individuals hereby agrees that he shall, at any time and from time to
time after the date of this Agreement, upon the reasonable request of
Purchaser, cooperate with Purchaser and, to the extent necessary,
provide to Purchase such additional materials as may be necessary to
assure that Purchaser's information and documentation related to the
Purchased Assets is complete and accurate in all material respects.
c. License to Use Office Facilities. Seller shall grant Purchaser the
--------------------------------
right to use the Premises, together with all furniture, fixtures,
equipment, telephone systems and supplies currently located thereat for
a period up to ninety (90) days following the Closing, at no cost to
Purchaser, pursuant to a License Agreement substantially in the form of
Exhibit "D" attached hereto and made a part hereof (the "License
-----------
Agreement").
d. National Advertising Fund. Seller shall cause CBB National Advertising
-------------------------
Fund, Inc. (the "National Advertising Fund") to pay all of its accounts
payable and other obligations (except the Coupon Obligation, as
hereinafter defined) with a view to exhausting the account balance
therein (except to the extent necessary to satisfy the Coupon
Obligation) by Closing. Should any funds remain in the National
Advertising Fund after the payment of such obligations, Seller shall
cause the assignment of such funds, together with an amount sufficient
to satisfy the Coupon Obligation, to an account to be established by
Purchaser for the benefit of the Franchisees (and for the benefit of
Purchaser to the extent of any operating units which may be owned by
Purchaser), together with all rights of Seller in and to any and all of
the assets of the National Advertising Fund held for the benefit of the
Franchisees or any other party having a beneficial interest therein,
including without limitation cash, accounts receivable, deposits,
advertising materials and rights to rebates, marketing and advertising
allowances, pursuant to an Assignment of National Advertising Fund
Assets in the form of Exhibit "E" attached hereto and made a part
-----------
hereof (the "Assignment of Fund Assets"). Such assignment shall be free
of any liens, claims or encumbrances whatsoever and Seller and
Principals shall indemnify and hold harmless Purchaser from and against
any and all losses, damages, expenses or claims of any nature made by
any party with respect to such assigned assets.
e. Coupon Obligation. Seller and the Principals hereby represent and
-----------------
warrant that (i) the National Advertising Fund currently maintains an
account at Crestar Bank (the "Coupon Obligation Account"), with a
balance of $18,623.00, as of April 30, 1997; (ii) the only funds
deposited in the Coupon Obligation Account are amounts paid by
Franchisees to purchase coupons (the "Distributed Coupons") for
distribution to customers for redemption at Chesapeake Restaurants;
(iii) upon a Franchisee's redemption of any Distributed Coupon, the
Franchisee may submit the redeemed Distributed Coupon to the National
Advertising Fund and the National Advertising Fund has the obligation
(the "Coupon Obligation") to pay to the Franchisee the face amount of
such Distributed Coupon; and (iv) there are (and will be as of the
Closing Date) sufficient funds in the Coupon Obligation Account to
satisfy the Coupon Obligation with respect to all Distributed Coupons.
Accordingly, at the Closing, (i) Seller and the Principals shall cause
the National Advertising Fund to assign the balance in the Coupon
6
<PAGE>
Obligation Account (the "Coupon Account Balance") to Purchaser free of
any liens, claims or encumbrances whatsoever other than the Coupon
Obligations; (ii) Purchaser shall assume the Coupon Obligations, but
only to the extent of the Coupon Account Balance transferred; and (iii)
Seller and Principals shall indemnify and hold harmless Purchaser from
and against any and all losses, damages, expenses or claims of any
nature made by any party with respect to any Coupon Obligations in
excess of the Coupon Account Balance.
f. Development Agreement in Peru. Seller and Principals shall terminate,
-----------------------------
at no cost, expense or liability to Purchaser, the existing Development
Agreement between Seller and Frederico Rojas and Fresia Vasquez, dated
December 30, 1996, granting development rights in the country of Peru
(the "Peru Development Agreement"). Such termination shall be a
condition precedent to Closing.
g. Ward-Hale Design Associates, Inc. Contract. Seller and Purchaser hereby
------------------------------------------
acknowledge, represent, warrant and agree that (i) Ward-Hale Design
Associates ("WD") has retained all rights to drawings, schedules,
specifications, and other materials (collectively the "Materials") in
connection with restaurant design services performed by WD pursuant to
that certain agreement executed May 3, 1996 (the "WD Contract"); (ii) a
true, correct and complete copy of the WD Contract has been furnished
by Seller to Purchaser prior to the Closing; (iii) Purchaser is not
assuming any obligations of Seller under the WD Contract; (iv)
Purchaser may avail itself of WD's services under the WD Contract for
any Chesapeake Restaurant provided that Purchaser pays (or causes the
applicable Franchisee to pay) to WD a fee in the amount of $333; and
(v) Seller shall pay the balance of the fees due to WD under the WD
Contract upon termination thereof, and simultaneously with such
payment, shall obtain from WD and assign to Purchaser all of WD's and
Seller's right, title and interest in and to the Materials.
8. ALLOCATION OF PURCHASE PRICE. The Purchase Price payable hereunder
----------------------------
shall be allocated among the Purchased Assets and the Non-Competition and
Confidentiality Agreement in accordance with Schedule 8 attached hereto and made
----------
a part hereof, which allocations shall be used by Purchaser and Seller for
accounting, financial reporting, tax and all other purposes. The parties agree
that the Purchased Assets are being purchased and sold at their respective fair
market values, which are the values set forth on Schedule 8. These prices were
----------
arrived at by arm's length negotiation and properly reflect the respective fair
market values of such Purchased Assets. It is further agreed that such values
are binding on Purchaser and Seller for federal and state income tax reporting
purposes, and that Purchaser and Seller will prepare and file a Form 8594 with
their respective returns for the period in which this sale occurred, reflecting
the values set forth in Schedule 8 to this Agreement.
----------
9. CLOSING. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place on May 5, 1997 (the "Closing Date").
The Closing shall be held at the offices of Cohen Pollock Merlin Axelrod &
Tanenbaum, P.C. in Atlanta, Georgia, at 10:00 a.m. on the Closing Date.
10. PROFESSIONAL FEES/BROKERS.
-------------------------
a. Fees. Each party shall be responsible for its or his attorneys' fees,
----
other professional fees and expenses incurred in connection with the
transactions contemplated by this Agreement.
7
<PAGE>
b. Brokers and Finders. Seller and the Principals, on the one hand, and
-------------------
Purchaser, on the other hand, shall be solely responsible for any and
all brokerage fees or finders' fees incurred by it or him which are
payable in connection with this transaction.
11. EXAMINATION.
-----------
a. Prior to Closing. Seller and each of the Principals represents and
----------------
agrees that Purchaser and Purchaser's representatives have been given,
prior to the date hereof, and will be given after the date hereof and
until Closing, full access to the books and records (including
electronic records) of Seller including, but not limited to, income tax
returns, sales and use tax returns, financial statements and related
materials, bank statements, invoices, accounts receivable, accounts
payable and Franchisee, Developer and supplier lists. In addition,
Seller shall permit Purchaser to copy, at Purchaser's expense, the
contents of all files maintained by Seller's attorneys, brokers or
other agents relating to the Franchisees, the Developers, the Purchased
Assets, the Chesapeake System, and the conduct of the Business prior to
the Closing.
b. After Closing. Seller and each of the Principals covenants and agrees
-------------
that Purchaser and Purchaser's representatives shall be given, upon the
request of Purchaser at any time within the one (1) year period
following the Closing, copies of such financial records of the National
Advertising Fund as have been maintained by Seller and/or the National
Advertising Fund through Closing.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND THE
-----------------------------------------------------------
PRINCIPALS. To induce Purchaser to enter into this Agreement and consummate the
- ----------
transactions contemplated hereunder, Seller, Robinson and Manstof, jointly and
severally, hereby represent, warrant and covenant as of the date hereof, as
follows, which representations, warranties and covenants set forth herein shall
be true and correct on the Closing Date and shall survive the consummation of
the transactions hereunder for the period described in Paragraph 19.e. below:
a. Organization and Good Standing. Seller (i) is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
State of Maryland; (ii) has all requisite corporate power and authority
to conduct its business and own, operate and lease its properties as
and in the places where such business is now conducted and such
properties are now owned, leased or operated; and (iii) is duly
qualified as a foreign corporation in all jurisdictions in which it
transacts business and in which failure to qualify would have a
material adverse effect on its business, financial condition or assets.
b. Seller-Corporate Power, Authority and Enforceability. Seller has full
----------------------------------------------------
right, title and authority to sell, transfer and assign the Purchased
Assets, and, except as specifically disclosed on Schedule 12.b.
attached hereto and made a part hereof, there are no liens, claims,
charges, obligations or encumbrances whatsoever (including, without
limitation, taxes) against the Purchased Assets. All corporate action
on the part of Seller, its directors and shareholders, necessary for
(i) the authorization, execution, delivery and performance of the
Transaction Documents (as defined in Paragraph 18 below) by Seller;
(ii) the sale of the Purchased Assets to Purchaser; and (iii) the
performance of all of the obligations of Seller under the Transaction
Documents, has been duly and validly taken. This Agreement and each of
the other Transaction Documents to which Seller is a party, when
executed and delivered on behalf of
8
<PAGE>
Seller, shall constitute a valid and binding obligation of Seller,
enforceable against it in accordance with its terms.
c. Principals - Authority and Enforceability. Each of the Transaction
-----------------------------------------
Documents constitutes the valid obligation of each Principal, to the
extent he is a party thereto, is legally binding upon each of them and
is enforceable against each of them in accordance with their terms.
d. Financial Statements. Attached hereto as Schedule 12.d are copies of
-------------------- -------------
(i) Seller's audited financial statements (including balance sheet,
statement of operations and statement of cash flows) for the periods
ending December 31, 1996, December 31, 1995 and December 31, 1994; and
(ii) Seller's unaudited financial statements for the period ending
March 31, 1997 (hereinafter, such financial statements are referred
to, collectively, as the "Financial Statements", and the Financial
Statements dated as of March 31, 1997 are referred to as the "Current
Financial Statements"). The Financial Statements have been prepared
in accordance with GAAP (except for the Current Financial Statements,
which are subject to year-end audit and other normal or recurring
year-end adjustments and do not include deferred revenue and deferred
expense amounts) and in accordance with the books and records of
Seller. The Financial Statements are complete and correct in all
material respects. The Financial Statements accurately present the
financial condition and operating results of Seller as of the dates,
and during the periods, indicated therein. Since March 31, 1997,
there has not been any change in the assets, liabilities, financial
condition or operations of Seller from that reflected in its Financial
Statements, except changes in the ordinary course of business that
have not been, individually or in the aggregate, materially adverse.
Except to the extent reflected or reserved against or noted in
Financial Statements (including the Current Financial Statements),
Seller had, as of such date, no material liabilities or obligations
that would be required under GAAP to be included in the Financial
Statements (including the Current Financial Statements), including
without limitation tax liabilities, whether incurred in respect to or
measured by Seller's income for any period prior to the date of such
Current Financial Statements, or arising out of transactions entered
into, or any set of facts existing prior thereto. To the best
knowledge of Seller, there exists no basis for the assertion against
Seller, the Business or the Chesapeake System, as of the date hereof
or as of the date of the Current Financial Statements, of any material
liability of any nature or in any amount not fully reflected or
reserved against or noted in the Current Financial Statements. Seller
acknowledges that Purchaser is relying on Seller's Current Financial
Statements in connection with its determination that the transactions
contemplated herein do not require a filing under the Hart-Scott-
Rodino Antitrust Improvements Act based upon Seller's total assets, as
reflected on the Current Financial Statements, totaling less than Ten
Million Dollars ($10,000,000).
e. Taxes. Seller has filed or obtained extensions for all required
-----
Federal, state and local tax returns. Each return or report is true and
correct and all taxes, fees and other governmental charges reflected
thereon have been paid or accrued. There is not and there will not be
any liability for Federal, state or local income, sales, use, excise or
other taxes arising out of, attributable to, or affecting the Purchased
Assets or the conduct of the Business or the operation of the
Chesapeake System through the Closing Date, or attributable to the
conduct of the operations of Seller at any time prior to the Closing
Date, which has not been fully paid or reserved for on the Current
Balance Sheet. Seller is not presently under, nor has Seller received
notice of any contemplated, investigation or audit by the Internal
Revenue Service
9
<PAGE>
or any state, local or other agency concerning any fiscal year or
period ended prior to the date hereof. Seller has never granted any
waiver of any statute of limitations with respect to, or any extension
of period for the assessment of, any taxes.
f. Proprietary Property. Schedule 1(b). is a true, correct and complete
-------------------- --------------
list of all Proprietary Property of Seller. All of such Proprietary
Property is (i) clean, merchantable and saleable or usable in the
normal course of business; (ii) located at the Premises; and (iii)
owned by Seller free and clear of any and all liens, claims, charges,
encumbrances or security interests in favor of others.
g. Franchise Fee Notes . Schedule 1(c) contains a true, correct and
-------------------- -------------
complete list of all Franchise Fee Notes, and except as set forth in
Schedule 12.q.v., such Franchise Fee Notes reflect all unpaid franchise
and license fees owed by franchisees as of the date hereof. All
Franchise Fee Notes are valid obligations of the respective debtors
without any claims, set-offs or defenses. Seller makes no warranty or
representation regarding the collectibility of the Franchise Fee Notes.
h. Accounts Receivable. Schedule 1(c) contains a true, substantially
------------------- -------------
correct and complete list of all Accounts Receivable of Seller. All
Accounts Receivable are valid obligations of the respective debtors.
Seller makes no warranty or representation regarding the collectibility
of the Accounts Receivable.
i. Purchased Assets. The Purchased Assets are the sole property of
----------------
Seller and in normal operating condition (ordinary wear and tear
excepted), free from any defects, damages or malfunction. If any of the
Purchased Assets are subject to a manufacturer's warranty or any
service agreement, Seller shall assign such warranty or service
agreement to Purchaser to the fullest extent permitted by the
manufacturer or service provider. Any prepayment of such contracts
shall be solely for the benefit of Purchaser.
j. No Violation. The execution, delivery and performance of this
------------
Agreement and the agreements contemplated in this Agreement do not and
will not violate the provisions of (i) the Articles of Incorporation or
Bylaws of Seller; (ii) any mortgage, indenture, security agreement,
contract, undertaking or other agreement to which Seller or either of
the Principals is a party or which is binding upon Seller or either of
the Principals or any of its or their property or assets; or (iii) any
law, regulation, judgment or order which is binding upon Seller or
either of the Principals, or any of its or their property or assets.
k. No Breach. Except as set forth on Schedule 12.p.ix and 12.q.viii.,
--------- -------------------------------
Seller is not is in breach of any, and has complied with and performed
all obligations under each, contract or agreement regarding the
Purchased Assets, in each case the breach of or noncompliance with
which would be likely to have a material adverse effect on the
Business. To Seller's knowledge, there is no basis for the assertion
against Seller or the Purchased Assets of any liens, claims, charges,
encumbrances, liabilities, debts or obligations, whether due or to
become due, including but not limited to liabilities or obligations on
account of taxes (including without limitation taxes arising out of
this transaction) or other governmental charges which would adversely
affect or cause a lien upon the Purchased Assets, or diminish the
rights to be acquired by Purchaser pursuant to this Agreement.
10
<PAGE>
l. Compliance with Laws. Seller is, and has been at all times in the
--------------------
past, in material compliance with all laws, rules, ordinances,
governmental regulations and orders of all governmental authorities
and/or jurisdictions relating to the offer and sale of franchises and
the servicing and operation of a franchise system. Seller is, and has
been at all times during the immediately preceding two years, in
material compliance with all other laws, rules, ordinances,
governmental regulations and orders of all governmental authorities
and/or jurisdictions applicable to the conduct of the Business. The
laws, rules, ordinances, governmental regulations and orders described
herein are hereinafter referred to, collectively, as the "Applicable
Laws."
m. Consents and Approvals. No consent or approval of any other party
----------------------
(including without limitation any lending institution or any
governmental authority, bureau or agency) is required in connection
with the execution, delivery, performance, validity or enforceability
of this Agreement or the agreements contemplated by this Agreement,
other than consents or approvals which have been obtained and delivered
to Purchaser.
n. Actions and Proceedings. Except as disclosed on Schedule 12.n., there
----------------------- --------------
is no action, suit or proceeding pending or, to the knowledge of Seller
and the Principals, threatened against or affecting Seller, the
Principals, the Business or the Chesapeake System which would relate to
or affect, directly or indirectly, the business of Seller or the
Purchased Assets, before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or which would have a material adverse effect on the Business,
the Purchased Assets, or the Chesapeake System or prevent the sale,
transfer and assignment of the Purchased Assets.
o. Proprietary Rights.
------------------
i. Attached hereto and made a part hereof as Schedule 12.o.i. is a
----------------
true, correct and complete list of all Marks and all Trademark
Registration Rights with respect thereto, including (a) the
jurisdictions, if any, by or in which such Marks are registered
or for which an application has been filed, (b) the registration
or application numbers, (c) the dates of any such registration or
application and (d) the dates that any affidavits of use or
renewals have been or are required to be filed. Except as
disclosed on Schedule 12.o.i, the Marks listed in Schedule
--------------- --------
12.o.i. constitute all of the trademarks, service marks, trade
-------
names, fictitious trade names, logos and slogans necessary for
the conduct of the Business as it is currently being conducted
and the operation of the Chesapeake System as it is currently
being operated. Nothing herein or in Schedule 12.0.i. shall be
----------------
construed to limit the transfer of unregistered common law Marks
and attendant goodwill, as provided in Paragraph 1.g. hereof,
which transfer shall be effective without an express inventory of
said common law Marks.
ii. Attached hereto and made a part hereof as Schedule 12.o.ii. is a
-----------------
true, correct and complete list of all materials in which Seller
claims Copyrights. None of such Copyrights are registered and no
application for registration has been filed with respect thereto.
The materials listed in Schedule 12.o.ii. constitute all of the
-----------------
Copyright materials necessary for the conduct of the Business as
it is currently
11
<PAGE>
being conducted and the operation of the Chesapeake System as it
is currently being operated.
iii. Attached hereto and made a part hereof as Schedule 12.o.iii. is
------------------
a true, correct and complete list, by name or other commonly-used
description, of all Trade Secrets, There are no patents included
within the Trade Secrets. The Trade Secrets listed on Schedule
--------
12.o.iii, constitute all of the Trade Secrets which are currently
--------
being used in the conduct of the Business as it is currently
being conducted and the operation of the Chesapeake System as it
is currently being operated.
iv. Seller is the sole and exclusive owner of the Proprietary Rights,
free and clear of all liens, claims and encumbrances. Except for
the rights granted to franchisees or developers in the Franchise
Agreements and Development Agreements, Seller has sole and
exclusive rights to use, execute, reproduce, display, perform,
modify, enhance, distribute, prepare derivative works of, license
and transfer the Proprietary Rights; has not granted any options
or licenses or entered into any agreements of any kind relating
to the Proprietary Rights or the marketing and distribution
thereof; and the transfer to Purchaser, as contemplated herein,
will not result in the loss or impairment of any Proprietary
Right. All registrations and applications relating to the
Proprietary Rights are standing in the name of Seller.
v. Seller has not, as of and since the date upon which Seller
acquired the Proprietary Rights, (i) filed or authorized the
filing with the Assignment Division of the United States Patent
and Trademark Office ("PTO") or similar foreign office of any
lien, security interest or encumbrance against any registration
or application identified in Schedules 12.o.i, ii or iii; (ii)
---------------------------
authorized or filed any lien relating to Proprietary Rights under
the UCC or any similar foreign statute; (iii) entered into any
license, franchise or other agreement with respect to any of the
Proprietary Rights with any third person (except for the
Franchise Agreements listed on Schedule 1(d) and the Development
-------------
Agreements listed in Schedule 1(e)); (iii) otherwise transferred,
-------------
conveyed, sold, assigned, pledged, mortgaged, granted a security
interest in or encumbered any of the Proprietary Rights, or (iv)
entered into any settlement, consent, covenant not to sue or
similar agreement with respect to any Proprietary Right.
vi. Seller has not received any notice to the effect that it is not
the sole owner of, or does not have the sole and exclusive right
to use, the Proprietary Rights.
vii. Except as disclosed on Schedules 12.o.i, ii. and iii, all
------------------------------
registrations and applications for the items on Schedules
---------
12.o.i., ii. and iii. are subsisting and in good standing, and
--------------------
the Proprietary Rights are valid and enforceable and no act or
omission has occurred which would adversely affect the validity
or enforceability of any Proprietary Rights. Except as disclosed
on Schedules 12.o.i, ii. and iii, Seller has taken all reasonable
-----------------------------
measures to maintain and enforce the Proprietary Rights and to
safeguard the secrecy of all Proprietary Rights which are
considered to be confidential information or trade secrets.
12
<PAGE>
viii. Neither the conduct of the Business nor the operation of the
Chesapeake System, nor the use of any of the Proprietary Rights
therein, infringes upon, dilutes or constitutes an unauthorized
use of any proprietary rights owned or controlled by any third
party. Except as set forth in Schedule 12.n.. attached hereto,
--------------
there is no claim, suit, action or proceeding (a "Proprietary
Right Claim") pending or, to the knowledge of Seller, threatened
against Seller or against any Franchisee alleging that use of the
Proprietary Rights by Seller or its Franchisees infringes upon,
dilutes or constitutes an unauthorized use of the proprietary
rights of any third person, or alleging that Seller does not have
the valid right to use any Proprietary Right.
ix. Except as set forth in Schedule 12.n., to Seller's and the
--------------
Principals' knowledge, there are no existing infringements,
dilutions or unauthorized uses by any third party of any of the
Proprietary Rights, and Seller has no claim outstanding with
respect to prior infringements, dilutions or unauthorized uses.
x. There are no agreements which are included in, or relate to, the
Proprietary Rights.
xi. To Seller's knowledge, Seller currently licenses, or otherwise
has the legal right to use, all computer software that is
material to the conduct of the Business and the operation of the
Chesapeake System and all such computer software is being so used
in compliance with any applicable licenses.
xii. No former or current officer, employee or agent has any claim
against Seller in connection with such person's involvement in
the conception and development of any Proprietary Rights and no
such claim has been threatened or asserted. None of the current
officers or employees of Seller have any patents issued or
applications pending for any device, process, design or invention
of any kind now used or needed by Seller in connection with the
conduct of the Business or the operation of the Chesapeake
System, which patents or applications have not been assigned to
Seller, with such assignments duly recorded in the "PTO".
xiii. The word Mark "Chesapeake Bagel Bakery" has (a) been in
continuous use in interstate commerce as a service mark for
restaurant services since as early as November 1, 1983; and (b)
to Seller's knowledge, is registerable by Seller (and upon
assignment of such Mark to Purchaser will be registerable by
Purchaser) with the PTO on the Principal Register as a service
mark in International Class 42 for restaurant and bakery
services.
xiv. All Franchise Agreements give Seller and its successors and
assigns the right to control the quality of products and services
sold under the Marks and Seller has diligently exercised such
rights.
p. Franchise Agreements.
--------------------
i. Schedule 1(d) hereto includes a correct and complete list of all
-------------
Franchise Agreements (including master Franchise Agreements, if
any) and amendments or modifications thereto (oral or written)
that are in effect and have not been terminated as of the date of
this Agreement, indicating with respect to each
13
<PAGE>
Franchise Agreement (a) the name of the Franchisee, (b) the
Chesapeake Restaurant number, (c) the Chesapeake Restaurant
address and (d) the commencement and termination dates of the
term of the Franchise Agreement.
ii. There are no outstanding applications to enter into Franchise
Agreements with Seller.
iii. Schedule 12.p.iii. hereto is a correct and complete list of (a)
-----------------
all addendums to Franchise Agreements or other agreements (verbal
or written) (collectively the "Express Agreements") entered into
between Seller and any Franchisee or other person or entity
authorizing such person or entity to develop and/or operate one
or more Express Chesapeake Restaurants ("Express Restaurants")
indicating with respect to each Express Agreement (x) the name of
the Franchisee, (y) the address and store number of the Express
Restaurant and (z) the Franchise Agreement and the store location
thereunder to which such Express Restaurant is associated; (b)
the term commencement and termination date of each such Express
Agreement and (c) all Express Restaurants opened as of the date
hereof whether pursuant to a written agreement or otherwise and
the locations thereof.
iv. Except as set forth on Schedule 12.p.iv., the forms of Franchise
----------------
Agreements attached hereto as Exhibits "F-1" through "F-9"
----------------------------
constitute all of the forms of franchise agreements used by
Seller in connection with the sale of franchises since January 1,
1994. The forms of Franchise Agreements attached hereto as
Exhibits "G -1" through "G-2" constitute all of the forms of
-----------------------------
express franchise agreements used by Seller in connection with
the sale of express Chesapeake Restaurant franchises.
v. Neither Seller nor either of the Principals has endeavored to
induce any applicant or potential applicant for a Franchise
Agreement to enter into a franchise agreement with any system
other than the Chesapeake System.
vi. Schedule 12.p.vi. specifies each Franchisee that is a party to
-----------------
any Franchise Agreement that (a) is in financial default under
such Franchise Agreement; (b) is the subject of a case under the
Bankruptcy Code or any other bankruptcy, insolvency, receivership
or similar case or proceeding under state or federal law, of
which Seller has been notified; or (c) to Seller's knowledge, is
otherwise in material violation of or default under any of the
terms of its Franchise Agreement. Schedule 12.q.v. further
----------------
specifies the date and contents of each default and/or
termination notice sent to any Franchisee since January 1, 1996
and the status of such default or termination notice.
vii. Seller has and had, at all relevant times and in all material
respects, the corporate power and authority and legal right to
(i) enter into and carry out the terms of each Franchise
Agreement; (ii) assign each Franchise Agreement to its successors
in interest; and (iii) assign to Purchaser each Franchise
Agreement without the consent of third parties (including without
limitation Franchisees), free and clear of all mortgages, liens,
security interests, pledges, guarantees, conditional sale
14
<PAGE>
agreements, claims, charges, restrictions, options, commitments,
third party rights and other encumbrances.
viii. Each Franchise Agreement, and all agreements, instruments and
documents furnished pursuant to a Franchise Agreement comply in
all material respects with all federal and state laws (and rules
or regulations thereunder) and all orders, consents or decrees
from any federal or state administrative or regulatory agency; to
Seller's knowledge, each Franchise Agreement represents the
legal, valid and binding obligation of the Franchisee thereunder,
subject to any Franchisees' rights in bankruptcy, and is
enforceable against such Franchisee in accordance with its terms.
ix. Except as set forth on Schedule 12.p.ix., no Franchise Agreement
-----------------
listed on Schedule 1(d) has been subordinated, assigned,
-------------
rescinded, or terminated prior to its stated expiration date
without being reinstated within 90 days of such subordination,
assignment, rescission or termination; no provision regarding the
calculation and payment of royalty fees in any Franchise
Agreement has been waived, altered or modified in any material
respect adverse to the franchisor thereunder; no right of
rescission, set-off, counterclaim or defense in excess of One
Thousand Dollars ($1,000.00) has been asserted or, to Seller's
knowledge, threatened with respect to any Franchise Agreement;
Seller is not in material violation of or in default under any
term of any Franchise Agreement; and Seller has not waived any
default by a Franchisee which would materially adversely affect
any Franchise Agreement.
x. No Franchise Agreement was originated in, or is subject to, the
laws of any jurisdiction which would make the transfer and
assignment of such Franchise Agreement unlawful. Within ten (10)
days after the Closing Date all filings (including, without
limitation, UCC filings) and notices that must be made by Seller
in any relevant jurisdiction to transfer all right, title and
interest of Seller in the Franchise Agreements to Purchaser will
have been made.
xi. Seller does not own, lease or operate any Chesapeake Restaurants.
xii. Franchisor currently requires all Franchisees to maintain
insurance polices (the "Required Policies") with the coverage
described on Schedule 12.p.xii. attached hereto and made a part
-----------------
hereof. Based solely on information previously obtained from
insurance brokers, the Franchisees listed on Schedule 12.p.xii
-----------------
currently have the Required Policies in full force and effect and
have named Seller as an additional insured thereunder.
xiii. Schedule 12.p.xiii attached hereto (and to be updated and
------------------
supplemented as of the Closing) sets forth a complete list of (i)
all rebates, marketing and advertising allowances received by
Seller from suppliers, vendors or other persons (collectively
"Suppliers") since January 1, 1996; and (ii) the last date
through which all rebates, marketing and advertising allowances
which are paid on a quarterly basis have been paid. Except as
set forth in Schedule 12.p.xiii, all rebates received by Seller
------------------
prior to the date hereof from Suppliers have been contributed by
Seller to the National
15
<PAGE>
Advertising Fund or have been paid directly from suppliers to
Franchisees. No claim of any nature has been made by any
Franchisee with respect to the application of such funds by
Seller.
xiv. Schedule 12.p.xiv. attached hereto sets forth a complete list of
------------------
all Franchise Agreements under which restaurants have been opened
and that have terminated by reason of the expiration of the term
thereof or otherwise. Except as set forth in Schedule 12.p.xiv,
-----------------
to Seller's knowledge, all Restaurants (the "Terminated
Restaurants") formerly governed by such terminated Franchise
Agreements are no longer operated as Chesapeake Restaurants; and
to the knowledge of Seller the operators of the Terminated
Restaurants (a) have ceased to use, by advertising or in any
manner whatsoever, any Proprietary Rights or other features of
the Chesapeake System, including, without limitation, recipes,
menus, equipment, methods, procedures, and techniques associated
with the Chesapeake System, in connection with the operation of
the Terminated Restaurants; and (b) have made all changes,
modifications or alterations to the Terminated Restaurant
premises necessary to eliminate any interior and exterior design
features, decor items, signage and other Trade Dress items
associated with the Chesapeake System. Except as set forth in
Schedule 12.p.xiv. all Chesapeake Restaurants are operating
------------------
pursuant to valid, binding and enforceable written Franchise
Agreements.
q. Development Agreements.
----------------------
i. Schedule 1(e) hereto is a correct and complete list of all
-------------
Development Agreements and amendments thereto in effect as of the
date of this Agreement, indicating with respect to each
Development Agreement (a) the name of the Developer; (b) the
territory in which the Developer is granted development rights
and whether that territory is exclusive; (c) the number of
Chesapeake Restaurants required to be developed pursuant to the
Development Agreement; and (d) the date of such Development
Agreement. Except as set forth on Schedule 1(e), all Development
-------------
Agreements and amendments thereto or modifications thereof are in
writing and there are no oral Development Agreements or oral
modifications or amendments to any Development Agreements.
ii. There are no outstanding applications to enter into Development
Agreements with Seller.
iii. Except as set forth on Schedule 12.q.iii, All of the form
-----------------
Development Agreements used by Seller in the Business are
attached to this Agreement as Exhibits "H-1" though "H-5".
---------------------------
iv. Neither Seller nor either of the Principals has endeavored to
induce any applicant or potential applicant for a Development
Agreement to enter into a development agreement with any system
other than the Chesapeake System.
v. Schedule 12.q.v. specifies each Developer that is a party to any
----------------
Development Agreement that (i) is not in material compliance with
the development schedule set
16
<PAGE>
forth in such Developer's Development Agreement; (ii) is
otherwise in material violation or default of any of the terms of
such Development Agreement; or (iii) is the subject of a case
under the Bankruptcy Code or any other bankruptcy, insolvency,
receivership or similar case or proceeding under state or federal
law, of which Seller has been notified. Schedule 12.q.v. further
specifies, with respect to each Developer that is in default
under a Development Agreement, the date and contents of each
default and/or termination notice, if any, sent to such Developer
since January 1, 1996, and the status of such default or
termination notice.
vi. Seller has and had, at all relevant times and in all material
respects, the corporate power and authority and legal right to
(i) enter into and carry out the terms of each Development
Agreement, (ii) assign each Development Agreement to its
successors in interest, and (iii) assign to Purchaser each
Development Agreement without the consent of third parties
(including without limitation the Developers), free and clear of
all mortgages, liens, security interests, pledges, guarantees,
conditional sale agreements, claims, charges, restrictions,
options, commitments, third party rights and other encumbrances.
vii. Each Development Agreement complies in all material respects with
all federal and state laws (and rules or regulations thereunder)
and all orders, consents or decrees from any federal or state
administrative or regulatory agency; to Seller's knowledge, each
Development Agreement represents the legal, valid and binding
obligation of the Developer thereunder, subject to any
Developer's rights in bankruptcy, and is enforceable against such
Developer in accordance with its terms.
viii. Except as set forth on Schedule 12.q.viii., no development
-------------------
schedule in any Development Agreement listed on Schedule 1(e) has
-------------
been waived, altered or modified in any respect; and Seller is
not in material violation of or in material default under any
term of a Development Agreement.
.
ix. No Development Agreement was originated in, or is subject to, the
laws of any jurisdiction which would make the transfer and
assignment of such Development Agreement unlawful. Within ten
(10) days of the Closing Date all filings (including, without
limitation, UCC filings) and notices that must be made by Seller
in any relevant jurisdiction to transfer all right, title and
interest of Seller in the Development Agreements to Purchaser
will have been made.
r. National Advertising Fund.
-------------------------
i. Schedule 12.r.i. attached hereto and made a part hereof, contains
----------------
a correct and complete list of all accounts (the "Ad Fund
Accounts") in which funds have been deposited as of the date of
this Agreement. All assets of the National Advertising Fund are,
as of the date of this Agreement, and shall be, as of the Closing
Date, deposited in the Ad Fund Accounts. No monies, other than
Franchisees' contributions to the National Advertising Fund and
supplier rebates, marketing and advertising allowances have been
deposited in the Ad Fund Accounts.
17
<PAGE>
ii. All contributions to the National Advertising Fund made by
Franchisees, Suppliers or any other person or entity have been
deposited in the Ad Fund Accounts and used solely for purposes of
marketing and advertising Chesapeake Restaurants on behalf, and
for the benefit, of all of the Franchisees.
iii. Seller has neither possession of nor control over any other
funds contributed by Franchisees, Suppliers or any other person
or entity for advertising purposes (national or regional), except
the funds in the Ad Fund Accounts. Seller has not collected and
is not currently holding any fees designated for use in any
advertising program whether related to the National Advertising
Fund or otherwise.
iv. Seller has operated and administered the National Advertising
Fund in material compliance with laws, rules and regulations
applicable thereto and in accordance with its fiduciary and legal
responsibilities established in any governing documents of the
National Advertising Fund and in any other agreements or
understandings entered into with franchisees, suppliers, vendors
or others in connection therewith. As of the date hereof the
National Advertising Fund has no material liabilities or
obligations (other than trade payables) of any nature, whether
accrued, absolute, contingent or otherwise, including without
limitation tax liabilities. To Seller's knowledge, there exists
no basis for the assertion against the National Advertising Fund,
as of the date hereof or as of the Closing Date, of any material
liability of any nature or in any amount.
s. Regional Cooperatives. Schedule 12.s. attached hereto contains a
--------------------- ---------------
complete and correct list of all regional advertising cooperatives
currently in existence and the addresses and owners of the Chesapeake
Restaurants that participate in each such cooperative.
t. Franchise Matters/UFOC.
----------------------
i. Schedule 12.t.i. sets forth a true and complete list of (a) all
----------------
states in which Seller is, as of the date of this Agreement,
registered to sell Chesapeake Bagel Bakery franchises; (b) all
states in which Seller has received an official notice from the
appropriate state officials that Seller's offer to sell and the
sale of its franchises are exempt from the registration
provisions of such jurisdiction's franchise registration law; and
(c) all other states in which Seller has offered to sell or has
sold its franchises based upon a claimed exemption from the
registration provisions of such state's applicable franchise
registration laws. True and correct copies of all notices of
registrations and all notices of exemption, as described in
clauses (a) and (b) above, have been furnished to Purchaser, and
such registration and exemption notices are in full force and
effect as of the date hereof except as set forth in Schedule
--------
12.t.i..
-------
ii. Seller has delivered to Purchaser true and correct copies of
Seller's Uniform Franchise Offering Circulars ("UFOCs"), which
are currently being used in connection with the offers to sell
and the sales of its franchises. The UFOCS, and all UFOC's
heretofore used by Seller (a) comply in all material respects
with all applicable federal and state laws and regulations
pertaining to offers to sell and the sale of franchises,
including, without limitation the Federal Trade Commission's
18
<PAGE>
Disclosure Rule entitled "Disclosure Requirements and
Prohibitions Concerning Franchising and Business Opportunity
Ventures", 16 C.F.R. (S)436; and (b) do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
u. Material Agreements. Except as disclosed in Schedule 12.u. attached
------------------- --------------
hereto, and except as set forth below, neither Seller nor the Business
is a party to (in its own name or as successor in interest), or bound
by, any written or oral (i) contract or commitment involving any profit
sharing, pension, bonus, percentage compensation, stock option or
warrants, sick pay, vacation pay, severance pay, health care or other
"fringe benefit" arrangement which shall be binding upon or assumed by
Purchaser after the Closing; (ii) lease or sublease with respect to any
property real, personal or mixed, in which Seller, the Business or the
Chesapeake System is involved as either lessor, lessee, sublessor or
sublessee; (iii) contract or commitment involving an obligation of
Seller, the Business or the Chesapeake System of more than Ten Thousand
Dollars ($10,000.00) during any twelve (12) month period; (iv) contract
or commitment under which Seller has assumed, guaranteed, endorsed or
otherwise become liable in connection with the obligation of any
person, firm or corporation; (v) contract or commitment involving any
loan or financing arrangement; (vi) barter or other trade or exchange
arrangement; (vii) contract or other arrangement or understanding not
included above which (1) was not made in the ordinary course of the
business; or (2) is material to the operation of the business; or
(viii) contract with any labor union.
Unless specifically assumed by Purchaser hereunder, no such obligations
shall be binding upon Purchaser nor shall they create any lien, claim
or encumbrance against the Purchased Assets as a result of the
consummation of the transactions described herein.
v. Records. At Closing, Seller will deliver to Purchaser (as part of the
-------
delivery of its computer systems and computers), a true, correct and
complete copy of all electronic and written records relating to its
Franchisees, Developers and Suppliers.
w. Licenses. Schedule 12.w. attached hereto and made a part hereof
-------- --------------
contains a complete listing of all governmental or regulatory licenses,
permits and authorizations held by Seller (collectively, the
"Licenses"). The Licenses are all in full force and effect and
constitute all of the Licenses necessary to conduct the Business as it
is now being conducted and operate the Chesapeake System as it is now
being operated, and none of such Licenses will be impaired as a result
of the transactions contemplated by this Agreement. Seller has not
received any notice to the effect that it is not in compliance with, or
that it is in violation of, any such Licenses and to Seller's knowledge
there are not currently existing circumstances that are likely to
result in a failure of Seller to comply with, or in a violation by
Seller of, any such Licenses.
x. Employees and Labor Matters. Schedule 12.x. attached hereto and made
--------------------------- --------------
a part hereof is a list of (i) all employees (part-time and full-time)
of Seller; (ii) the rate of compensation payable to each such employee;
and (iii) the accrued vacation pay and other severance benefits to be
paid by Seller to each employee listed on Schedule 12.x. Except as set
--------------
forth on Schedule 12.x., Seller has made no promise or commitment,
--------------
whether oral or in writing, to increase any employee's compensation or
grant any bonus to any employee.
19
<PAGE>
Seller is not a party to nor has any obligations under any agreement,
collective bargaining or otherwise, with any party regarding the rates
of pay or working conditions of any of its employees. Seller is not
obligated under any agreement to recognize or bargain with any labor
organization or union on behalf of its employees. There is not now any
formal organization activity among any of the employees of Seller, nor,
within the preceding two (2) years, has Seller been charged with, or
received notice of any threatened action with respect to, any unfair
labor practice.
Seller has reasonably satisfactory labor relations with its employees,
has not, within the preceding two (2) years, experienced a material
labor dispute and, in its reasonable opinion, employs or retains
sufficient qualified personnel for the efficient conduct of all
existing operations.
Seller has complied in all material respects with all applicable
federal and state laws and regulations concerning the employer/employee
relationship and with all of its respective agreements relating to the
employment of its employees, including without limitation provisions
thereof relating to wages, bonuses, hours of work and payment of Social
Security and other withholding taxes.
y. Interest in Franchisees, Developers, Suppliers, Chesapeake Restaurants
----------------------------------------------------------------------
and Competitors. Other than Almike, neither Seller nor any Principal
---------------
nor any Principal's spouse or immediate family members, nor to the best
knowledge and belief of Seller and each Principal, any officer,
director or employee of any Seller or any spouse or other relative of
any of them, has any direct or indirect interest in any franchisee,
developer, supplier or competitor of Seller or in any Chesapeake
Restaurant or any person from whom or to whom Seller leases any real or
personal property, or in any other person with whom Seller is doing
business, whether in existence as of the date hereof or proposed, other
than the ownership of stock of publicly traded corporations which does
not exceed one percent (1%) of the issued and outstanding stock of any
such corporation.
z. Benefit Plans. The employee benefit plans and agreements described on
-------------
Schedule 12.z. attached hereto and made a part hereof are the only
--------------
employee benefit plans and agreements maintained by Seller for the
benefit of its shareholders, officers, directors, employees or
independent contractors, including without limitation (i) any
affirmative action plans or programs; (ii) current and deferred
compensation, pension, profit sharing, severance, vacation, stock
purchase, stock option, bonus and incentive compensation benefits and
other employee benefit plans (as defined in Title I, Subtitle A,
Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")) for such shareholders, employees, directors, agents and
independent contractors; and (iii) the medical, hospital, life, health,
accident, disability, death and other fringe and welfare benefits for
such shareholders, employees, directors, agents and independent
contractors, including any split-dollar life insurance policies, all of
which plans, programs, practices, policies and other individual and
group arrangements and agreements, including any unwritten
compensation, fringe benefit, payroll or employment practices,
procedures or policies of any kind or description are hereinafter
referred to as "Benefit Programs and Employment Policies." Except as
disclosed on Schedule 12.z., there are no contributions or payments due
--------------
with respect to any of the Benefit Programs and Employment Policies.
Except as disclosed on Schedule 12.z., Seller and each Benefit Program
---------------
and Employment Policy are or will be, within the time permitted by law,
in
20
<PAGE>
compliance, in all material respects, with the provisions of ERISA and
the Internal Revenue Code of 1986, as amended (the "Code") applicable
to it. No Benefit Program or Employment Policy which is subject to the
minimum funding standards of ERISA or the Code, if any, has incurred
any material accumulated funding deficiency within the meaning of ERISA
or the Code. Seller has not incurred any liability to the Pension
Benefit Guaranty Corporation in connection with any Benefit Program or
Employment Policy which is subject to Title IV of ERISA, if any. Except
as disclosed on Schedule 12.z., the assets of each Benefit Program and
--------------
Employment Policy that are subject to Title IV of ERISA, if any, are
sufficient to provide the benefits under such Benefit Program or
Employment Policy which the Pension Benefit Guaranty Corporation would
guarantee the payment thereof if such Benefit Program or Employment
Policy terminated, and are also sufficient to provide all other
benefits due under the Benefit Program or Employment Policy. No event
which constitutes a "reportable event" as defined in Section 4043 of
ERISA has occurred and is continuing with respect to any Benefit
Program or Employment Policy covered by ERISA.
Seller has not failed at any time, within the past two (2) years, to
provide to the extent required by law, continuation coverage with
respect to group health coverage to any former employee under the
Consolidated Omnibus Budget Reconciliation Act of 1985, or any laws of
any state to which Seller is subject.
aa. Environmental Compliance.
------------------------
i. Seller is not in violation of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters,
including, without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"), the Federal Water Pollution Control Act,
the Toxic Substances Control Act or any state or local statute,
regulation, ordinance, order or decree relating to health, safety
or the environment (hereinafter "Environmental Laws"), which
violation would have a material adverse effect on the business,
assets or financial condition of Seller.
ii. Seller has not received notice that it has been identified by the
United States Environmental Protection Agency as a potentially
responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B
(1986); nor has Seller received any notification that any
hazardous waste, as defined by 42 U.S.C. (S)9601(14), any
"pollutant or contaminant" as defined by 42 U.S.C (S)9601(33) and
any toxic substance, hazardous materials, oil, or other chemicals
or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has disposed of has been found at any site
at which a federal or state agency is conducting a remedial
investigation or other action pursuant to any Environmental Law.
iii. Seller has not, in the conduct of the Business, handled,
processed, stored or disposed of Hazardous Substances; in the
course of its activities, Seller has not generated, nor is it
generating, any hazardous waste; there have been no releases
(i.e., any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying,
21
<PAGE>
discharging, injecting, escaping, leaching, disposing or dumping)
of Hazardous Substances by Seller on, upon, or into any property
used by it, which releases would have a material adverse effect
on the value of such property.
bb. Further Assurances. Seller shall, at any time and from time to time
------------------
after the date of this Agreement, upon the reasonable request of
Purchaser, and the Principals shall cause Seller to, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all such further documents as may be required to confirm (i)
the title of the Purchased Assets sold, transferred and assigned to
Purchaser; (ii) the possession by Purchaser of the property hereby
purchased by it; and (iii) the right of Purchaser to conduct the
Business.
cc. Brokers and Finders. Other than Wheat First Butcher Singer, who has
-------------------
been employed by Seller, neither Seller nor any Principal has employed
any investment banker, broker, agent or finder or incurred any
liability for any investment banking fees, brokerage fees, agent's
commissions or finder's fees concerning the transactions contemplated
hereby.
dd. Equipment Lessors. Purchaser shall have no liability to any lessor of
-----------------
equipment for acts or events, including without limitation any damage
to such items, occurring prior to the Closing Date or, except for
Assumed Agreements, after the Closing Date.
ee. No Material Adverse Changes. Except as set forth on Schedule 12.ee.
--------------------------- ---------------
attached hereto, since January 1, 1997, there has not been (i) any
transaction or transactions by Seller which, either individually or in
the aggregate, are materially adverse; (ii) any change in the
financial condition, operations, properties or assets of the Business
or the Chesapeake System, except changes in the ordinary course of
business, none of which have been, individually or in the aggregate,
materially adverse; (iii) any damage or destruction to, or loss of,
any material assets of Seller; (iv) any mortgage, pledge, grant of a
security interest or other encumbrance of any tangible assets of
Seller; (v) with respect to Seller, any material contract canceled or
any notice received with respect to any such contract terminating or
threatening termination of any such contract; or (vii) any material
adverse change in the gross sales or gross profits of Seller.
ff. Products Liability and Warranties. There are no product liability,
---------------------------------
warranty claims or other claims existing or, to the best knowledge and
belief of Seller and the Principals, threatened against Seller which
relate to the products sold or distributed by Seller or, to the best
knowledge of Seller and the Principals, any Franchisees.
gg. Suppliers. Schedule 12.gg. attached hereto and made a part hereof
--------- ----------------
sets forth a true, correct and complete list of each Supplier who has
furnished Proprietary Property or other merchandise to Seller or, to
the knowledge of Seller, the Franchisees at any time since January 1,
1996. Except as set forth on Schedule 12.gg., no Supplier is a sole
------
source of supply of any good or service used by Seller or, to Seller's
knowledge, the Franchisees. None of the Suppliers has canceled or
otherwise terminated, or threatened in writing to cancel or otherwise
terminate its relationship with Seller or, to Seller's knowledge, any
Franchisee, since January 1, 1996, decreased materially, or threatened
to decrease or limit materially, its services, supplies or materials to
Seller or, to Seller's knowledge any Franchisees. Except as set forth
on Schedule 12.gg., Seller has no list of approved suppliers (i.e.
---------------
suppliers endorsed by Seller for use by Franchisees) or designated
suppliers (i.e. suppliers required to be used by Franchisees for the
purchase of certain designated items).
22
<PAGE>
hh. Disclosure. No representation or warranty by Seller or by any of the
----------
Principals contained in this Agreement, nor any statement, certificate,
schedule or exhibit hereto furnished by or on behalf of Seller or such
Principal pursuant to this Agreement, contains or shall contain any
untrue statement of material fact or omits or shall omit a material
fact necessary to make the statement contained therein not misleading.
ii. Exhibits. All Exhibits prepared by or on behalf of Seller and the
--------
Principals are attached hereto and made a part hereof and are true,
correct and complete. Seller and the Principals have delivered to
Purchaser, prior to the date hereof, a true, correct and complete copy
of all Exhibits (and attachments thereto) required to be delivered by
them pursuant to this Agreement.
jj. Knowledge of Seller. Whenever used herein, the term "knowledge of
-------------------
Seller" or "Seller's knowledge" shall be deemed to include the
knowledge of each Principal, David Lavine, David Fox, and each employee
of Seller.
13. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
-------------------------------------------
represents and warrants as follows, which representations, warranties and
covenants set forth herein shall be true and correct on the Closing Date and
shall survive the consummation of the transactions hereunder for the period
described in Paragraph 20.e. below:
a. Organization and Good Standing. Purchaser is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
State of Minnesota.
b. Corporate Authority. Purchaser has taken all necessary corporate
-------------------
action to authorize the execution, delivery and performance of the
Transaction Documents to which Purchaser is a party, and Purchaser has
the power to make, deliver and perform Purchaser's obligations under
the Transaction Documents.
c. Enforceability. The Transaction Documents, when executed, will
--------------
constitute the valid obligation of Purchaser, legally binding upon it
and enforceable against it in accordance with their respective terms.
d. Consents. No consent or approval of any other party, including, but
--------
not limited to, any lending institution or any governmental authority,
bureau or agency, is required in connection with the execution,
delivery, performance, validity and enforceability of this Agreement
which has not been obtained.
e. Officer Authority. The undersigned officers of Purchaser are duly
-----------------
authorized and empowered to execute and attest the Transaction
Documents for and on behalf of the Corporation.
f. No Violation. The execution, delivery, and performance of the
------------
Transaction Documents will not violate the provisions of (i)
Purchaser's articles of incorporation or by-laws, (ii) any mortgage,
indenture, security agreement, contract, undertaking or other
agreement to which Purchaser is a party or which is binding upon
Purchaser or any of its property or assets; or (iii) any law,
regulation, judgment or order which is binding upon Purchaser or any
of its property or assets.
23
<PAGE>
g. Disclosure. No representation or warranty by Purchaser contained in
----------
this Agreement, nor any statement, certificate, schedule or exhibit
hereto furnished or to be furnished by or on behalf of Purchaser
pursuant to this Agreement, nor any document or certificate delivered
to Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statement contained therein not misleading.
h. Purchaser's Due Diligence. At the Closing, Purchaser shall have
-------------------------
delivered to Seller a certificate (the "Due Diligence Certificate") to
the effect that: (i) Purchaser and its employees, agents and accounting
and legal representatives have been afforded reasonable access to the
books, records, key personnel, facilities and other things reasonably
related to the Purchased Assets and the Business; (ii) Purchaser and
its employees, agents and accounting and legal representatives have
been given a reasonable opportunity to ask questions relating to the
Purchased Assets and the Business and to receive answers thereto; (iii)
Purchaser has completed its business, accounting and legal due
diligence review of the Purchased Assets and the Business; and (iv) in
completing the transactions contemplated in accordance with this
Agreement, Purchaser has not and is not relying on representations and
warranties of Seller which are not expressly stated in this Agreement;
provided, however, that notwithstanding the investigation conducted by
Purchaser and any knowledge of facts determined or determinable by the
Purchaser pursuant to such investigation, Purchaser has the right to
rely upon the representations, warranties, covenants and agreements of
Seller and Principals contained in this Agreement except to the extent
that (i) Purchaser had, prior to Closing, actual knowledge of Seller's
and the Principals' breach of any such representation or warranty; (ii)
neither Seller nor either of the Principals had knowledge of such
breach ; and (iii) Purchaser intentionally withheld such knowledge from
Seller and the Principals. For purposes of the foregoing, (i)
Purchaser's knowledge shall be deemed to include the knowledge of only
Kenneth S. Kaplan, Gregg Kaplan and Ed Odmark, and (ii) Seller's
knowledge shall be deemed to include the knowledge of the persons named
in Section 12.kk. hereof.
i. Nondisparagement. Purchaser will not make, and will use its reasonable
----------------
efforts to prevent its officers, directors, employees or agents from
making, any statement that disparages or reflects adversely upon or
impugns the Principals or Seller or any of Seller's officers, directors
or employees, except for factual disclosures made in connection with
any claims of third parties or legal proceedings. In addition,
Purchaser will not advise, and will use its reasonable efforts to
prevent its officers, directors, employees or agents from advising, any
franchisee or other third party to assert any claim against Seller of
the Principals or suggest that Seller or the Principals have assets
which may be available to satisfy the claims of franchisees or other
third parties, except for factual disclosures made in connection with
any claims of third parties or legal proceedings.
14. COMPLIANCE WITH THE BULK TRANSFER PROVISIONS OF THE UNIFORM
-----------------------------------------------------------
COMMERCIAL CODE. Seller and Purchaser hereby acknowledge and agree that, to
- ---------------
expedite the closing of the transactions pursuant to this Agreement, Purchaser
shall be under no obligation to comply with any applicable Bulk Transfer
provisions of the Uniform Commercial Code as adopted in the states of Maryland
and Virginia. Seller shall pay all of its accounts payable and Seller and
Principals shall, jointly and severally, indemnify and hold harmless Purchaser,
upon demand, from and against any and all liability incurred by Purchaser by
reason of Seller's failure to pay any accounts payable or by reason of the
failure of Purchaser to conform to the requirements of such Bulk
24
<PAGE>
Transfer provisions. Seller and the Principals acknowledge that the
representations and covenants made herein have been made with the express
purpose of inducing Purchaser to waive compliance with such Bulk Transfer
provisions.
15. PRE-CLOSING COVENANTS REGARDING SELLER. Seller and each Principal
--------------------------------------
covenant that between the date hereof and the Closing, Seller shall, and each
such Principal shall cause Seller to:
a. Conduct of Business/Operation of Chesapeake System. Carry on the
--------------------------------------------------
Business and operate the Chesapeake System in the ordinary course in
substantially the same manner as they were carried on and operated
prior to the execution of this Agreement (including, without
limitation, operating in accordance with current budgets, expansion
plans, capital expenditure plans and the like and retaining and
handling all cash and cash equivalents in a manner consistent with
prior practices) and, to the extent consistent therewith, use all
reasonable efforts, in good faith, to preserve its relationship with
franchisees, developers, suppliers and others having business dealings
with it to the end that such Business, as a going concern, and the
Chesapeake System shall be unimpaired at the Closing;
b. Obligations. Perform all of its obligations under all agreements,
-----------
contracts and instruments relating to or affecting the Purchased
Assets, Business or the Chesapeake System;
c. Compliance. Comply in all material respects with all Applicable Laws;
----------
d. Other Agreements. Not enter into or assume any agreement, contract
----------------
or commitment disposing of or altering any of the Purchased Assets or
the ability of Seller to convey same;
e. Maintain Property. Maintain, at its sole expense, all of its property
-----------------
in customary repair, order and condition, reasonable wear and use and
damage by fire or unavoidable casualty excepted;
f. No Contracts or Commitments. Not enter into any contract relating to
---------------------------
the Business or the Chesapeake System extending beyond the date of the
Closing without Purchaser's written approval, including without
limitation Franchise Agreements and Development Agreements;
g. No Borrowings. Not assume, guarantee, endorse or otherwise become
-------------
responsible, directly or indirectly, for the obligations of any other
individual, firm or corporation, except as may be approved in writing
by Purchaser;
h. Compensation and Bonuses. Not increase the formula in the
------------------------
compensation payable or to become payable to any officers, or make any
bonus payment or arrangement to or with any officer, except for the
formula as existed during Seller's last fiscal or calendar year;
i. Maintain Books. Continue to maintain its books of account and records
--------------
in the usual, regular and ordinary manner;
j. Distributions. Make no distributions of cash or other property (other
-------------
than to pay normal operating expenses or income tax liabilities of the
Principals attributable to the inclusion in their taxable income of the
taxable income of Seller ) to the Principals or any other party without
the prior written consent of Purchaser;
25
<PAGE>
k. Maintain Insurance. Maintain insurance upon all its properties and
------------------
with respect to the conduct of its business in at least such amounts
and of such kinds as were maintained as of the date of this Agreement;
l. No Sale of Assets. Not sell, dispose of or encumber, directly or
-----------------
indirectly, any of its assets or engage in any activity or transaction,
except in the ordinary course of business;
m. No Mortgages. Not subject any of its assets to any mortgage, pledge or
------------
lien;
n. No Modification of Contracts. Not modify, amend, cancel or terminate
----------------------------
any existing agreement or arrangement relating to its business, except
in the ordinary course of its business and not enter into any
transaction involving the exchange of ownership of any retail units
operated by Franchisees for retail units currently operated by any
other entity or under any other name;
o. Litigation, Etc. Promptly notify Purchaser in writing of any
----------------
judgments, orders or decrees entered or any suits, actions, claims,
administrative proceedings or labor negotiations instituted, threatened
or asserted by or against Seller, after the date of this Agreement and
before the Closing, which have or may reasonably be expected to have a
materially adverse effect on Seller or Purchased Assets; and
p. Notice of Changes. Promptly advise Purchaser in writing of any
-----------------
material adverse change in the financial condition, operation,
business, properties or prospects of Seller relative to the Purchased
Assets, the Business, the Chesapeake System.
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The following shall
------------------------------------------------
constitute conditions precedent to Purchaser's obligations to consummate the
transactions contemplated herein, and the failure of any such condition to be
satisfied within thirty (30) days of the date of this Agreement shall give
Purchaser the option of terminating this Agreement:
a. Representations and Warranties. The representations and warranties of
------------------------------
Seller and the Principals contained herein shall be true and correct in
all material respects as of Closing; Seller and the Principals shall
have complied with, performed or satisfied all agreements, covenants
and conditions required by this Agreement to be complied with,
performed or satisfied by them at or prior to Closing; and, Seller and
the Principals shall have delivered to Purchaser a certificate to such
effect.
b. Legal Opinion. Purchaser shall have received the favorable legal
-------------
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel for Seller
and the Principals, dated as of the Closing Date, in substantially the
form attached hereto as Exhibit "I".
-----------
c. Absence of Changes. Since the date of this Agreement there shall not
------------------
have occurred any material adverse change in the condition (financial
or otherwise), business, properties, assets or prospects of Seller.
d. Approvals. All actions, proceedings, instruments and documents required
---------
to carry out this Agreement, or incidental thereto, and all other
related legal matters, shall have been approved by counsel for
Purchaser, which approval shall not be unreasonably withheld.
26
<PAGE>
e. Actions. No action, suit or proceeding shall have been instituted
-------
before a court or governmental body, or instituted or threatened by any
governmental agency or body, to restrain or prevent the carrying out of
the transactions contemplated hereby, which shall not have been
disposed of to the satisfaction of Purchaser.
f. Agreements. Seller and each Principal shall have entered into the Non-
----------
Competition and Confidentiality Agreement.
g. Consents. Purchaser shall have received written consents to the
--------
transfer or assignment to Purchaser of the two agreements referred to
in Section 1(f).
h. Employees. Seller shall have terminated the employment of those of its
---------
employees designated by Purchaser at the Closing whom Purchaser intends
to hire following the Closing on a permanent or temporary basis;
provided, however, that nothing herein shall be construed to grant any
employee of Seller any right to employment by Purchaser.
i. Consulting Agreements. Each of Manstof, Robinson and David Lavine
---------------------
shall have executed and delivered a Consulting Agreement.
j. Release of Liens. All liens and encumbrances listed on Schedule 12.b.
---------------- --------------
shall have been satisfied in full and released (except for liens on
equipment which is not part of the Purchased Assets).
k. Franchise and Development Agreements. Seller and Almike and, where
------------------------------------
indicated, Purchaser shall have entered into the following Agreements
(the "Almike Agreements"):
i. Seller's standard franchise agreement for each of the eight (8)
Chesapeake Restaurants currently operated by the Principals, as
well as the Washington National Airport location contemplated to
be opened in July 1997 (collectively the "Existing Almike
Units"), in the form of Exhibit L attached hereto and made a part
---------
hereof granting to Almike the right to operate each of the
Existing Almike Units as Chesapeake Restaurants for a period of
ten (10) years from the Closing Date on the terms and conditions
set forth therein. Such franchise agreement shall be transferred
to Purchaser as part of the Purchased Assets simultaneously with
the closing of the transactions contemplated herein. Such
franchise agreement shall contain a provision requiring Almike to
enter into, within thirty (30) days of receipt of notice from
Purchaser, the standard franchise agreement to be developed by
Purchaser after the Closing for the Franchisees so long as the
term and the economic provisions thereof are not changed.
ii. Seller's standard development agreement granting to Almike the
right to develop ten (10) additional Chesapeake Restaurants in
the Washington, D.C. designated market area by December 15, 2002
in the form of Exhibit M attached hereto and made a part hereof.
---------
Such development agreement shall be transferred to Purchaser as
part of the Purchased Assets simultaneously with the closing of
the transactions contemplated herein. Such development agreement
shall contain a provision requiring Almike to enter into, within
thirty (30) days of the receipt of notice from Purchaser, the
standard development agreement to be prepared by Purchaser after
the
27
<PAGE>
Closing for development of Chesapeake Restaurants so long as
the term and the economic provisions thereof are not changed.
iii. An agreement acknowledging that the Principals and Almike have no
rights in or to the Proprietary Rights and quitclaiming to
Purchaser any rights therein that they may have acquired. Such
agreement shall be transferred to Purchase as part of the
Purchased Assets simultaneously with the closing of the
transactions contemplated herein.
iv. An agreement between Almike, Principals and Purchaser permitting
Purchaser to use, at no cost to Purchaser, up to three (3) of the
Existing Almike Units designated by Purchaser in its sole
discretion, for the purposes of training new Franchisees for a
period of six (6) months following the Closing.
l. Peru Development Agreement. Seller shall have terminated the Peru
--------------------------
Development Agreement as provided in Paragraph 7.e. and shall have
received a consent to such termination and a release from the developer
thereunder.
17. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The following shall
----------------------------------------------
constitute conditions precedent to each Seller's obligations to consummate the
transactions contemplated herein, and the failure of any such condition to be
satisfied within thirty (30) days of the date hereof shall give Seller the
option of terminating this Agreement (which shall result in termination of this
Agreement in full):
a. Representations and Warranties. The representations and warranties of
------------------------------
Purchaser contained herein shall be true and correct in all material
respects as of Closing; Purchaser shall have complied with, performed
or satisfied all agreements, covenants and conditions required by this
Agreement to be complied with, performed or satisfied by it; and,
Purchaser shall have delivered to Seller a certificate to such effect.
b. Legal Opinion. Seller shall have received the favorable legal opinion
-------------
of Cohen Pollock Merlin Axelrod & Tanenbaum, P.C., counsel for
Purchaser, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit "J".
-----------
c. Approvals. All actions, proceedings, instruments and documents required
---------
to carry out this Agreement, or incidental thereto, and all other
related legal matters, shall have been approved by counsel for Seller,
which approval shall not be unreasonably withheld.
d. Actions. No action, suit or proceeding shall have been instituted
-------
before a court or governmental body, or instituted or threatened by any
governmental agency or body, to restrain or prevent the carrying out of
the transactions contemplated hereby, which shall not have been
disposed of to the satisfaction of Seller.
e. Almike Agreements. Purchaser, Seller, Principals (where required) and
-----------------
Almike shall have entered into the Almike Agreements.
f. Due Diligence Certificate. Purchaser shall have delivered the Due
-------------------------
Diligence Certificate described in Paragraph 13.h.
28
<PAGE>
18. DOCUMENTS DELIVERED AT CLOSING. Execution and delivery of the
------------------------------
following documents shall also be conditions precedent to Closing:
a. a Bill of Sale and Assignment substantially in the form of Exhibit "K"
-----------
attached hereto and made a part hereof (the "Bill of Sale and
Assignment");
b. an assignment of each of the Marks, Trademark Registration Rights,
Copyrights, Copyright Registration Rights and any other Proprietary
Rights for which Purchaser shall request a separate assignment,
together with the good will associated therewith (the "Proprietary
Right Assignments");
c. the Non-Competition and Confidentiality Agreements and the Consulting
Agreements;
d. the License Agreement;
e. the Escrow Agreement;
f. the Almike Agreements;
g. the Due Diligence Certificate;
h. an Assignment and Assumption Agreement with respect to each of the
Franchise Agreements, Development Agreements, Assumed Contracts and
with respect to any other material contract or liability being assumed
by Purchaser hereunder (the "Contract Assignments");
i. the Certificate of the Secretary of Purchaser and the Secretary of
Seller, respectively, certifying as true and correct a copy of the
Articles of Incorporation, By-Laws (and all amendments thereto) and of
resolutions approving the transactions contemplated by this Agreement
dated as of the Closing Date ;
j. a certificate of good standing as to Purchaser and Seller issued not
more than fifteen (15) days prior to the Closing Date by the Secretary
of State of the state of its incorporation;
k. the "bring down" certificates described in Paragraphs 16.a and 17.a.
hereof;
l. the legal opinions described in Paragraphs 16.b. and 17.b. hereof;
m. the Assignment of Fund Assets described in Paragraph 7.d. hereof.
n. such other documents as shall be necessary to evidence compliance by
Seller, the Principals and Purchaser with the terms and conditions set
forth in this Agreement.
As used in this Agreement, "Transaction Documents" means, collectively, this
Agreement, the Bill of Sale and Assignment, the Non-Competition and
Confidentiality Agreements, the Consulting Agreements, the License Agreement,
the Escrow Agreement, the Proprietary Right Assignments, the Almike Agreements
and the Contract Assignments.
29
<PAGE>
19. INDEMNIFICATION BY SELLER AND PRINCIPALS.
----------------------------------------
a. General. Subject to the limitations set forth herein, Seller and each
-------
of the Principals hereby, jointly and severally, agree to indemnify,
defend and hold harmless Purchaser, on demand, from and against any and
all Losses (as hereinafter defined) arising out of or due to:
i. a breach of, or material inaccuracy in, any representation or
warranty made by them, or any of them, and contained in this
Agreement or in any certificate, document or instrument delivered
to Purchaser pursuant hereto, or any nonfulfillment of any
covenant made by them, or any of them, contained herein
(including, but not limited to, the covenants and indemnities in
Paragraph 7.d. relating to the National Advertising Fund) or any
certificate, document, or instrument delivered to Purchaser
pursuant hereto;
ii. any and all taxes (local, State or Federal) owed by Seller
relative to the Purchased Assets, the Business, or the Chesapeake
System for any period prior to the Closing Date;
iii. any liability, debt, obligation, account payable, contract or
agreement of Seller not specifically assumed by Purchaser
pursuant to Paragraph 5 or 7.e. hereof;
v. any act, claim, omission, transaction, circumstance, state of
facts or other condition which existed, occurred or arises out of
Seller's conduct of the Business prior to the Closing Date,
whether or not then known, due or payable and whether or not
covered by any warranty, representation or covenant contained
herein except to the extent expressly assumed by Purchaser
pursuant to the terms of this Agreement;
vi. any claim for severance or vacation pay accruing by employees of
Seller or any claims relating to any employee benefits
attributable to service performed prior to the Closing; and
vii. any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses including, without
limitation, legal fees and expenses, incident to any of the
foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this
indemnity.
b. Claims Basket. Subject to subparagraph d. below, Seller and Principals
-------------
shall not be responsible for any Losses arising under this Paragraph
for which Purchaser would otherwise be entitled to indemnification
hereunder unless and until the aggregate of such Losses exceeds
$50,000, and then only to the extent of such excess.
c. Limitation on Personal Liability. Subject to subparagraph d. below, in
--------------------------------
no event shall the aggregate liability of each Principal to Purchaser
for indemnification hereunder or for any other matter arising under
this Agreement exceed the sum of (i) Four Million Seven Hundred Fifty
Thousand Dollars ($4,750,000), plus (ii) fifty percent (50%) of any
amounts paid by Purchaser pursuant to the Purchase Price adjustment
provisions of Section 4.b. hereof, plus (iii) fifty percent (50%) of
any amounts distributed to Seller or the Principals pursuant to the
Escrow Agreement. In addition, Purchaser shall not seek indemnification
for any Loss unless
30
<PAGE>
or until the Escrow Funds shall be inadequate to cover such claim or if
the Escrow shall be terminated.
d. Exclusions from Claims Basket. Nothing contained in this Agreement
-----------------------------
shall relieve Seller or Principals of any liability or limit any
liability they may have on account of (i) common law fraud or
purposeful misrepresentation in connection with the making of any
representation or warranty contained in this Agreement, if such
representation or warranty is untrue in any material respect; (ii) any
pending litigation and any other claim or litigation arising out of
Seller's relationship with a Franchisee; (iii) any claims of suppliers
or vendors; (iv) any claims relating to personal injuries suffered by
employees or others on the premises of a Franchisee; and (v) any tax
related liabilities.
e. Offset. In the event that any Loss shall arise for which Purchaser
------
shall be entitled to indemnification and if the Escrow shall, in
Purchaser's reasonable judgment, be inadequate to cover such claim or
if the Escrow shall be terminated, then Purchaser, after compliance
with the notification provisions set forth below and the failure of
Sellers or Principals to make indemnification within such time period,
may offset such amounts against amounts due and payable pursuant to any
other obligations due to Sellers or Principals.
f. Survival. The obligation to indemnify contained herein shall survive
--------
the Closing for a period of five (5) years. Thereafter, the
representations and warranties of Seller and Principals contained in
Paragraph 12 herein and in any certificate executed by them in
connection with this Agreement shall terminate and expire.
g. Losses. The term "Loss" or Losses" shall mean any and all damages,
------
losses, liabilities, deficiencies, judgments, penalties, fines, costs
and expenses, including but not limited to, reasonable attorneys' fees.
For purposes of determining the amount of Loss and whether a Loss or
Losses individually or in the aggregate exceed the limitation amounts
set forth in subparagraphs b. and c. of this Paragraph 19, Losses shall
be determined after giving effect to (i) any net federal or state tax
benefit obtained or received by Purchaser as a result of Purchaser's
incurring the Loss and (ii) any other third party reimbursements or
other payments actually received with respect to such Losses.
20. INDEMNIFICATION BY PURCHASER.
----------------------------
a. General. Purchaser hereby agrees to indemnify, defend and hold
-------
harmless Seller and the Principals from and against any and all Losses
(as hereinafter defined)arising out of or due to:
i. A breach of, or inaccuracy in, any representation, warranty or
covenant made by Purchaser contained in this Agreement;
ii. any failure by Purchaser to perform or satisfy (x) its
obligations arising after the Closing pursuant to any Assumed
Contracts, Franchise Agreements or Development Agreements, or (y)
any other obligations of Seller specifically assumed, in writing,
by Purchaser herein; and
31
<PAGE>
iii. any act, claim, omission, transaction, circumstance, state of
facts or other condition which arises out of Purchaser's conduct
of the Business after the Closing Date, whether or not covered by
any warranty, representation or covenant contained herein.
b. Claims Basket. Subject to subparagraph d. below, Purchaser shall not
-------------
be responsible for any Losses arising under this Paragraph for which
Seller and Principals would otherwise be entitled to indemnification
hereunder unless and until the aggregate of such Losses exceed $50,000,
and then only to the extent of such excess.
c. Limitation on Liability. Subject to subparagraph d. below, in no event
-----------------------
shall the aggregate liability of Purchaser to Seller and Principals for
indemnification hereunder or for any other matter arising under this
Agreement (other than pursuant to Paragraph 4.b.) exceed the sum of
Eleven Million Five Hundred Thousand Dollars ($11,500,000).
d. Exclusions from Claims Basket. Nothing contained in this Agreement
-----------------------------
shall relieve Purchaser of any liability or limit any liability they
may have on account of (i) common law fraud or purposeful
misrepresentation in connection with the making of any representation
or warranty contained in this Agreement, if such representation or
warranty is untrue in any material respect; (ii) any pending litigation
and any other claim or litigation arising out of Purchaser's
relationship with a Franchisee; (iii) any claims of suppliers or
vendors arising in connection with the conduct of the Business by
Purchaser after the Closing; (iv) any claims relating to personal
injuries suffered, after the Closing, by employees or others on the
premises of a Franchisee; and (v) any tax related liabilities arising
in connection with the conduct of the Business by Purchaser after the
Closing.
e. Survival. The obligation to indemnify contained herein shall survive
--------
the Closing for a period of five (5) years. Thereafter, the
representations and warranties of Purchaser contained in Paragraph 13
herein and in any certificate executed by it in connection with this
Agreement shall terminate and expire.
f. Losses. The term "Loss" or Losses" shall mean any and all damages,
------
losses, liabilities, deficiencies, judgments, penalties, fines, costs
and expenses, including but no limited to, reasonable attorneys' fees.
For purposes of determining the amount of Loss and whether a Loss or
Losses individually or in the aggregate exceed the limitation amounts
set forth in subparagraphs b. and c. of this Paragraph 20, Losses shall
be determined after giving effect to (i) any net federal or state tax
benefit obtained or received by Seller or Principals as a result of
Seller's or Principals' incurring the Loss, and (ii) any other third
party reimbursements or other payments actually received with respect
to such Losses.
21. NOTICE OF CLAIMS.
----------------
a. Notification Procedures. In the event that any party to this Agreement
-----------------------
proposes to make any claim for indemnification pursuant to Paragraph 19
or 20, the party making the claim (or with such right) shall promptly
deliver on or prior to the date upon which the applicable
representations and warranties or covenants expire, pursuant to the
terms of Paragraph 19.f. or 20.e. of this Agreement, and within a
reasonable time of discovery of the matter giving rise to such claim, a
certificate signed by the party making the claim ("Claim Certificate")
to the other party, and if to Seller or Principals, to the Escrow
Agent, which Claim Certificate shall
32
<PAGE>
(i) state the occurrence giving rise to the claim; (ii) specify the
Paragraph(s) of this Agreement under which such claim is made; and
(iii) specify in reasonable detail each individual item of Loss or
other claim, including the reasonable amount thereof, if reasonably
ascertainable, the date such Loss or liability was incurred, properly
accrued or is anticipated, the basis for any anticipated Loss or
liability and the nature of the misrepresentation, breach of warranty
or the claim to which such Loss or liability is related.
b. Third Party Claims. Each party entitled to indemnification under
------------------
Paragraph 19 or Paragraph 20 above (the "Indemnified Party") shall give
notice, in accordance with the provisions of Paragraph 21, to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any third party
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Paragraph 21 unless the failure to give such
notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is a
conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
22. DISPUTE RESOLUTION.
------------------
a. Mediation. No party hereto shall commence an arbitration proceeding
---------
pursuant to the provisions of subparagraph b. below unless such party
shall first give a written notice (a "Dispute Notice") to the other
party or parties setting forth the nature of the dispute. The parties
shall attempt in good faith to resolve the dispute by mediation under
the Commercial Mediation Rules of the American Arbitration Association
in effect on the date of this Agreement. If the parties cannot agree on
the selection of a mediator within twenty (20) days after delivery of
the Dispute Notice, the mediator will be selected by the President of
the North Carolina Bar Association. If the dispute has not been
resolved by mediation as provided above within sixty (60) days after
the delivery of the Dispute Notice, then the dispute shall be
determined by arbitration in accordance with the provisions of
subparagraph b. hereof.
b. Arbitration. Any controversy, claim or dispute of whatever nature
-----------
arising between the parties, including but not limited to those arising
out of or relating to this Agreement or the construction,
interpretation, performance, breach, termination, enforceability or
validity of this Agreement, whether such claim existed prior to or
arises on or after the date of this Agreement, including the
determination of the scope of this agreement to arbitrate (which is not
settled through mediation as provided in Paragraph a. above) shall be
determined by arbitration in Charlotte, North Carolina by one
arbitrator in accordance with the Commercial
33
<PAGE>
Arbitration Rules of the American Arbitration Association and its
Supplementary Procedures for Large, Complex Disputes, except that (a)
every person named on all lists of potential arbitrators shall be a
neutral and impartial lawyer with excellent academic and professional
credentials (i) who is or has been practicing law as a partner in a
highly respected law firm for at least fifteen (15) years, specializing
in either general commercial litigation or general corporate and
commercial matters, with experience in the field of franchise law and
(ii) who has had experience, and is generally available to serve, as an
arbitrator, and (b) each party shall be entitled to strike on a
peremptory basis, for any reason or no reason, any or all of the names
of potential arbitrators on any list submitted to the parties by the
AAA and any person selected by the AAA to serve as an arbitrator by
administrative appointment. In the event the parties cannot agree on a
mutually acceptable arbitrator from the one or more lists submitted by
the AAA within thirty (30) days after the AAA transmits to the parties
its first list of potential arbitrators, the President of the North
Carolina Bar Association shall designate three persons who, in his or
her opinion, meet the criteria set forth herein, which designees may
include persons named on any list submitted by the AAA. Each party
shall be entitled to strike one of such three (3) designees on a
peremptory basis within ten (10) after its receipt of such list of
designees, indicating its order of preference with respect to the
remaining designees. If two (2) of such designees have been stricken by
the parties, the unstricken designee shall be the arbitrator.
Otherwise, the selection of the arbitrator shall be made by the AAA
from the remaining designees in accordance with their mutual order of
preference, or by random selection in the absence of a mutual order of
preference. The arbitrator shall base his or her award on applicable
law and judicial precedent and, unless all parties agree otherwise,
shall include in such award the findings of fact and conclusions of law
upon which the award is based. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
c. Limited Judicial Review of Arbitration Award Notwithstanding the
--------------------------------------------
foregoing, upon the application by any party to a court for an order
confirming, modifying or vacating the award, the court shall have the
power to review whether, as a matter of law based on the findings of
fact determined by the arbitrator, the award should be confirmed,
modified or vacated in order to correct any errors of law made by the
arbitrator. In order to effectuate such judicial review limited to
issues of law, the parties agree (and shall so stipulate to the court)
that the findings of fact made by the arbitrator shall be binding on
the parties and shall serve as the facts to be submitted to and relied
on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
d. Costs and Attorneys Fees. If any party fails to proceed with mediation
------------------------
or arbitration as provided herein or unsuccessfully seeks to stay such
mediation or arbitration, or fails to comply with any arbitration
award, or is unsuccessfully in vacating or modifying the award pursuant
to a petition or application for judicial review, the other party shall
be entitled to be awarded costs, including reasonable attorneys' fees,
paid or incurred by such other party in successfully compelling such
mediation or arbitration or defending against the attempt to stay,
vacate or modify such mediation or arbitration award and/or
successfully defending or enforcing the award.
23. BENEFIT. This Agreement shall be binding upon and inure to the
-------
benefit of Seller, Purchaser and the Principals, and their respective heirs,
administrators, executors, assigns and successors. Purchaser
34
<PAGE>
acknowledges and agrees that any obligations of Purchaser to Seller created
hereunder may, in the event of the liquidation of Seller, be assigned to the
Principals in accordance with such liquidation and in proportion to their
ownership percentage in such Seller. Seller and Principals acknowledge and agree
that Purchaser may assign its rights and obligations hereunder to a wholly-owned
subsidiary of Purchaser, provided that Purchaser shall remain liable for its
obligations under Paragraph 4.b. Except as otherwise provided herein, the rights
and obligations of the parties hereunder may not be assigned by any party hereto
without the express written consent of the other parties.
24. NOTICES. All notices given by any party to any other party shall be
-------
deemed adequate if given by certified mail, postage prepaid, and addressed as
follows or to such other address as either party may designate by certified
mail:
In the case of Seller and the Principals:
The American Bagel Company
1451 Dolley Madison Boulevard
McLean, Virginia 23101
Attn: David H. Lavine
with copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street N.W.
Washington, D.C. 20037
Attn: Neil Lefkowitz, Esq.
or in the case of Purchaser:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attn: Kenneth S. Kaplan, Esq.
with a copy to:
Cohen Pollock Merlin Axelrod & Tanenbaum, P.C.
2100 RiverEdge Parkway
Suite 300
Atlanta, Georgia 30328
Attn: H. Stephen Merlin, Esq.
25. GOVERNING LAW. Each party hereto expressly submits for himself and
-------------
itself, and any legal action or proceeding relating to this Agreement (to the
extent not prohibited by Paragraph 22 hereof) or for recognition and enforcement
of any judgment in respect hereof, to the exclusive jurisdiction of the courts
of the State of North Carolina, the courts of the United States of America for
the Western District of North Carolina; and appellate courts from any thereof;
consents that any action or proceeding shall be brought in such courts and
waives any objection that it or he may now or hereafter have to the venue of any
such action or
35
<PAGE>
proceeding in any such court; and agrees that service of process of any such
action may be made, in addition to any method provided by law, in the same
manner as notices are to be given under this Agreement. This Agreement and all
rights, obligations and liabilities arising hereunder shall be construed and
governed by the substantive law of the State of North Carolina, without giving
effect to the principles of conflicts of law thereof.
26. CONSTRUCTION. In the event any parts of this Agreement are found to
------------
be void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
27. EXECUTION OF AGREEMENT. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall constitute an original, but all together
of which shall constitute but a single document.
28. ENTIRE AGREEMENT. This Agreement, together with the written
----------------
agreements executed contemporaneously herewith, contain the entire Agreement of
the parties hereto, and no representations, warranties, covenants or agreements,
not embodied or incorporated herein, oral or otherwise, shall be of any force of
effect.
29. HEADINGS. The headings or titles of the paragraphs of this
--------
Agreement are for convenience only, are not a part of this Agreement and shall
not be used as an aid in the construction of any provision hereof.
30. WAIVER. A waiver of any breach hereunder by any party hereto shall
------
not constitute a waiver by such party of any other breach or a waiver by such
party of the same breach on any other occasion; and, to be effective, any waiver
hereunder must be in writing.
31. NO THIRD PARTY BENEFICIARY. This Agreement is intended and agreed to
--------------------------
be solely for the benefit of the parties hereto, and no third party shall accrue
any benefit, claim or right of any kind whatsoever pursuant to, under, by or
through this Agreement.
32. CONFIDENTIALITY. Each party shall hold this Agreement confidential
---------------
and shall not disclose its terms to any third party, including without
limitation any franchisee.
33. EXHIBITS AND SCHEDULES. All exhibits, schedules, certificates,
----------------------
recitals and other instruments or documents referred to herein are specifically
made a part of this Agreement. Any reference in this Agreement to an Exhibit or
Schedule shall be deemed to be a reference to an Exhibit or Schedule to this
Agreement unless the context expressly indicates otherwise. Any item disclosed
in a Schedule hereto in response to one Paragraph of this Agreement shall be
deemed disclosed in response to any other applicable or appropriate Paragraph
hereof.
34. ACCESS TO BOOKS AND RECORDS. For a period of five (5) years from the
---------------------------
Closing Date or until the expiration of the applicable statute of limitations
for a tax audit, to the extent reasonably required by Seller in connection with
any matter relating to Seller's ownership of the Purchased Assets or conduct of
the Business prior to the Closing Date, Purchaser shall allow Seller access to
and to copy, at Seller's expense, all business records of Seller which relate to
the operation of the Business prior to the Closing Date, upon reasonable advance
notice during normal working hours.
36
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed and delivered by its duly authorized officers, and the Principals have
set their hands and seals, all as of the day and year first above written.
ATTEST: THE AMERICAN BAGEL COMPANY
By: /s/ By: /s/
-------------------------------------- ----------------------------------
David H. Lavine, Assistant Secretary Alan Manstof, President
/s/ /s/
- ------------------------------------------ ---------------------------(SEAL)
WITNESS MICHAEL ROBINSON
/s/ /s/
- ------------------------------------------ ---------------------------(SEAL)
WITNESS ALAN MANSTOF
ATTEST: AFC ENTERPRISES, INC.
By: /s/ By: /s/
-------------------------------------- ----------------------------------
Kenneth S. Kaplan, Vice President Gregg Kaplan, Vice President
Assistant General Counsel Strategic Development
Almike Enterprises, Inc. has caused this Agreement to be executed by its
duly authorized officers solely to indicate its agreement to be bound by the
terms and conditions set forth in Paragraph 16.k.
ATTEST: ALMIKE ENTERPRISES, INC.
By: /s/ By: /s/
-------------------------------------- ----------------------------------
Its ________ Secretary Its ____________ President
37
<PAGE>
EXHIBIT LIST
------------
A Escrow Agreement (refer to Paragraph 6.)
B Confidentiality and Non-Competition Agreement (refer to
Paragraph 7.a.)
C Consulting Agreements (refer to Paragraph 7.b.)
D License Agreement (refer to Paragraph 7.c.)
E Assignment of Fund Assets (refer to Paragraph 7.d.)
F-1 -- F-9 Form Franchise Agreements (refer to Paragraph 12.p.iv)
G-1 -- G-2 Form Express Agreements (refer to Paragraph 12.p.iv)
H-1 -- H-5 Form Development Agreements (refer to Paragraph 12.q.iii)
I Legal Opinion of Seller's Counsel (refer to Paragraph 16.b.)
J Legal Opinion of Purchaser's Counsel (refer to Paragraph 17.b.)
K Bill of Sale and Assignment (refer to Paragraph 18.a.)
L Almike Franchise Agreement
M Almike Area Development Agreement
SCHEDULE LIST
-------------
1(a) Computer Software and Data
1(b) Proprietary Property
1(c) Franchise Fee Notes and Accounts Receivable
1(d) Franchise Agreements
1(e) Development Agreements
1(f) Assumed Contracts
2 Excluded Assets
4(b) Existing Franchise Commitment Pool
8 Purchase Price Allocation
12.b. Liens and Encumbrances
12.d. Financial Statements
12.n. Actions and Proceedings
12.o.i Marks
12.o.ii Copyrights
12.o.iii. Trade Secrets
12.p.iii. Express Agreements
12.p.iv. Exceptions to Form Franchise Agreements
12.p.vi. Franchise Agreement Defaults
12.p.ix Subordinated, Terminated and Rescinded Franchise Agreements
12.p.xii. Required Policies
12.p.xiii. Application of Rebates
12.p.xiv. Terminated Restaurants >12.q.iii. Exceptions to Form
Development
12.q.v. Development Agreement Defaults Agreement
12.q.viii. Waived, Altered or Modified Development Schedules
12.r.i. Ad Fund Assets
12.s. Regional Cooperatives
38
<PAGE>
12.t.i. State Franchise Registrations
12.u. Material Agreements
12.w. Licenses
12.x. Employees and Labor Matters
12.z. Benefit Plans
12.ee. Material Adverse Changes
12.gg. Suppliers
39
<PAGE>
EXHIBIT 10.6
POPEYES CHICKEN & BISCUITS
DEVELOPMENT AGREEMENT
(EXCLUSIVE)
BETWEEN
AFC ENTERPRISES, INC.
AND
_________________________________
Dev. Agr. No.:________
No. Options:__________
Date:_________________
<PAGE>
AFC ENTERPRISES, INC.
POPEYES CHICKEN & BISCUITS
DEVELOPMENT AGREEMENT
(Exclusive)
TABLE OF CONTENTS
-----------------
I. GRANT.................................................... 2
II. DEVELOPMENT FEE.......................................... 3
III. DEVELOPMENT SCHEDULE..................................... 3
IV. FRANCHISED UNIT OPENINGS................................. 3
V. DEFAULT AND TERMINATION.................................. 5
VI. TRANSFERABILITY OF INTEREST.............................. 7
VII. CONFIDENTIAL INFORMATION................................. 10
VIII. COVENANTS................................................ 11
IX. NOTICES.................................................. 12
X. NON-WAIVER............................................... 13
XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION............... 13
XII. APPROVALS................................................ 14
XIII. ACKNOWLEDGMENT........................................... 14
XIV. SEVERABILITY AND CONSTRUCTION............................ 15
XV. ENTIRE AGREEMENT AND APPLICABLE LAW...................... 16
i
<PAGE>
EXHIBIT A - DEVELOPMENT SCHEDULE.................................... 18
EXHIBIT B - TERRITORY............................................... 19
EXHIBIT C - FRANCHISE AGREEMENT..................................... 20
ii
<PAGE>
AFC ENTERPRISES, INC.
POPEYES CHICKEN & BISCUITS
DEVELOPMENT AGREEMENT
(Exclusive)
THIS AGREEMENT (the "Agreement"), made this ______ day of
__________________________, 19___, by and between AFC ENTERPRISES, INC. (f/k/a
AMERICA'S FAVORITE CHICKEN COMPANY), a Minnesota corporation, with its principal
place of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-
5352, U.S.A. ("Franchisor") and
____________________________________________________________________
("Developer").
WITNESSETH:
WHEREAS, Franchisor owns a unique system for opening and operating
restaurants ("Popeyes Restaurant(s)") specializing in the preparation,
merchandising, advertising and sale of Popeyes uniquely seasoned fried chicken
and other quick-service menu items developed and owned by Franchisor (the
"Popeyes System" or the "System");
WHEREAS, the distinguishing characteristics of the Popeyes System
include, without limitation, the names "Popeyes" and "Popeyes Chicken &
Biscuits"; the distinguishing characteristics of which include, without
limitation, uniform and distinctive building designs, interior and exterior
layouts, trade dress, equipment layout standards and specifications, development
and maintenance of sources of supply, operating procedures for sanitation and
maintenance, food and beverage storage procedures, service procedures, and
secret food preparation recipes and batter mixes, standards and specifications
for equipment, equipment layouts, products, operating procedures and management
programs, all of which may be changed, improved and further developed by
Franchisor from time to time;
WHEREAS, Franchisor identifies the Popeyes System by means of certain
trade names, service marks, trademarks, logos, emblems, and indicia of origin,
including, but not limited to, the marks "Popeyes" and "Popeyes Chicken &
Biscuits" and such other trade names, service marks, and trademarks as are now,
or may hereafter, be designated by Franchisor for use in connection with the
System ("Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of
such Proprietary Marks in order to identify for the public the source of
services and products marketed thereunder in the Popeyes System and to represent
the Popeyes System's high standards of quality, appearance, and service;
1
<PAGE>
WHEREAS, Developer wishes to be assisted, trained and licensed by
Franchisor as a Popeyes developer and franchisee and licensed to use, in
connection therewith, the Popeyes System;
WHEREAS, Developer understands the importance of the Popeyes System
and Popeyes high and uniform standards of quality, cleanliness, appearance, and
service, and the necessity of opening and operating Developer's Popeyes
Restaurants in conformity with the Popeyes System; and
WHEREAS, Developer wishes to obtain the right to develop Popeyes
Restaurants ("Franchised Units") in the area described in this Agreement and to
use the Popeyes System in connection with those Franchised Units;
NOW, THEREFORE, the parties hereto agree as follows:
I. GRANT
1.01. Franchisor hereby grants the Developer, subject to the terms and
conditions of this Development Agreement and as long as Developer shall not be
in default of this Agreement or any other development, franchise or other
agreement between Developer and Franchisor, development rights to obtain
franchises to establish and operate ________ Franchised Units, and to use the
Popeyes System solely in connection therewith, at specific locations to be
designated in separate franchise agreements ("Franchise Agreements"), executed
as provided in Section 3.01. hereof, and pursuant to the schedule set forth in
Exhibit A to this Agreement ("Development Schedule"). Each Franchised Unit
developed pursuant hereto shall be located in the area described in Exhibit B
hereto "(Development Area").
1.02. Subject to the terms and conditions herein, Franchisor shall neither
establish nor license anyone other than Developer to establish a Franchised Unit
in the Development Area until sixty (60) days after the commencement of
operations of the final Franchised Unit under this Agreement, without
Developer's prior written consent.
1.03. Each Franchised Unit for which a development right is granted
hereunder shall be established and operated pursuant to a Franchise Agreement to
be entered into between Developer and Franchisor in accordance with Section
3.01. hereof.
1.04. This Agreement is not a franchise agreement, and does not grant the
Developer any right to use Franchisor's Proprietary Marks or the Popeyes System,
but merely sets forth the terms and conditions under which Developer will be
entitled to obtain a franchise agreement.
1.05. Developer shall have no right under this Agreement to license others
under the Proprietary Marks or to use the Popeyes System.
2
<PAGE>
II. DEVELOPMENT FEE
In consideration of the development rights granted herein, Developer has
paid to the Franchisor upon execution of this Agreement a non-refundable
development fee of __________________________________ Dollars ($_____________)
which development fee has been fully earned by Franchisor for administrative and
other expenses incurred by Franchisor and for the development opportunities lost
or deferred as a result of the rights granted Developer herein.
III. DEVELOPMENT SCHEDULE
3.01. Developer shall exercise each development right granted herein only
by executing a Franchise Agreement for each Franchised Unit for a site accepted
by the Franchisor in the Development Area as hereinafter provided. Developer's
right to execute such a Franchise Agreement shall be contingent upon Developer's
continuous performance of all of the terms and conditions of this Agreement and
any other development, franchise or other agreements between Developer and
Franchisor. The Franchise Agreement for each Franchised Unit developed pursuant
to this Agreement shall be in the form of the Franchise Agreement attached
hereto as Exhibit C.
3.02. Recognizing that time is of the essence in this Agreement, Developer
agrees to exercise the development rights granted hereunder in the manner
specified in Section IV hereof and to satisfy the Development Schedule. Failure
by Developer to adhere to the Development Schedule shall constitute a default
under this Agreement, as provided in Section 5.03. hereof.
3.03. In addition to the development fee required by Section II hereof,
Developer shall pay (i) an initial franchise fee for each Restaurant developed
hereunder in the amount of Fifteen Thousand Dollars ($15,000) upon execution of
a Franchise Agreement for each such Franchised Unit, all of which amount shall
be non-refundable and fully earned by Franchisor upon execution of the Franchise
Agreement for a Franchised Unit.
IV. FRANCHISED UNIT OPENINGS
4.01. Developer shall submit a proposed site for each Franchised Unit for
acceptance by Franchisor. Franchisor shall, provided there exists no default by
Developer under this Agreement or any other development, franchise or other
agreement between Developer and Franchisor, evaluate each site proposed and
shall promptly, but not more than 30 days after receipt of Developer's proposal,
send to Developer written notice of acceptance or non-acceptance of the site.
Site approval does not assure that a Franchise Agreement will be executed.
Execution of the Franchise Agreement is contingent upon Developer purchasing or
leasing the proposed site and securing acceptance the final plans and
specifications as provided below.
4.02. Within ninety (90) days after notice of Franchisor's site
acceptance, Developer shall:
3
<PAGE>
A. Submit, in writing to Franchisor, satisfactory proof to
Franchisor that Developer:
(i) owns the accepted site;
(ii) has leased the accepted site for a term which, with
renewal options, is not less than the initial term of the Franchise
Agreement; or
(iii) has entered into a written agreement to purchase or to
lease the accepted site on terms provided herein, subject only to
obtaining necessary governmental permits. If Developer leases the
accepted site, the lease must provide: (a) that, in the event Developer
defaults under or otherwise ceases operating the Franchised Unit at the
accepted site during the term of the lease, Franchisor shall have the
right, at its option, to assume Developer's position under the lease;
(b) that, in the event Developer defaults under the lease, notice of
the default shall immediately be forwarded to Franchisor; and (c) that
Franchisor shall have the right, upon default under the lease or other
cessation of operation at the accepted site, to make the modifications
and alterations to the Franchised Unit set forth in Section 16.01.D. of
the Franchise Agreement. The proof required by this Section includes,
but is not limited to, submission of executed copies of all leases and
deeds, as well as all governmental approvals if effectiveness of the
leases or deeds is conditioned thereon.
B. Submit to Franchisor, and obtain Franchisor's written approval
of, the final and complete plans and specifications for the construction
(or renovation) and decoration of the Franchised Unit, which must be in
conformity with Franchisor's standards and specifications for Franchised
Units, as set out in the current Confidential Operating Standards Manual
(as defined in the Franchise Agreement) or otherwise in writing
(hereinafter, the "Construction Plans"). The final Construction Plans shall
include, but are not limited to, floor plans, equipment layouts, decor, and
interior and exterior elevations.
C. Execute the Franchise Agreement and pay all fees required
thereunder. If Developer is a partnership, each general partner shall, and
if Developer is a corporation, each stockholder holding a beneficial
interest of five percent (5%) or more of the securities with voting rights
of Developer or any corporation directly or indirectly controlling
Developer shall, guarantee the performance of the Franchise Agreement by
executing the Franchisor's Franchise Agreement Guarantee form. Franchisor
shall not approve the final construction plans until the Franchise
Agreement is executed and all fees are paid by Franchisee.
4
<PAGE>
4.03. Developer shall procure the insurance coverage provided for in
Section XI of the Franchise Agreement, prior to commencement of construction of
a Franchised Unit, and shall maintain such insurance coverage throughout the
term of the Franchise Agreement.
4.04. No more than thirty (30) days after the Franchisor approves
Developer's Construction Plans, Developer shall commence construction or
renovation of the Franchised Unit. If commencement of construction or
renovation is delayed by a cause beyond the reasonable control of Developer, the
date upon which commencement of construction or renovation is to begin may be
extended by obtaining written approval of Franchisor.
4.05. Upon commencement of construction or renovation of the Franchised
Unit, Developer shall notify Franchisor on such form as Franchisor may
prescribe.
4.06. Developer shall have completed construction or renovation and
commenced operation of the Franchised Unit within one-hundred eighty (180) days
from execution of the Franchise Agreement as provided in Section 4.02.C. hereof.
Franchisor may, in its sole discretion, extend this period to address unforeseen
construction delays, not within the control of Developer. Nothing herein shall
be deemed to relieve Developer of the obligation of complying with the
Development Schedule.
4.07. At least ten (10) days prior to the proposed commencement of
operation of each Franchised Unit, Developer shall notify Franchisor of such
proposed opening. If the Franchised Unit is Developer's first Franchised Unit
opened hereunder, Franchisor shall provide a representative to be present at the
opening. The Franchised Unit shall not be opened unless such representative is
present. Should commencement of operation of the Franchised Unit be delayed by
the failure of Franchisor to provide such a representative, the date upon which
commencement of operation of the Franchised Unit is required pursuant to Exhibit
A of this Agreement, shall be extended until such time as such assistance is
provided by Franchisor.
V. DEFAULT AND TERMINATION
5.01. The rights granted to Developer in this Agreement have been granted
based upon Developer's representations and assurances, among others, that the
conditions set forth in Sections III and IV of this Development Agreement will
be met by Developer in a timely manner.
5.02. Developer shall be deemed to be in default under this Agreement, and
all rights granted herein shall automatically terminate without notice to
Developer, if Developer shall become insolvent or make a general assignment for
the benefit of creditors; if a petition in bankruptcy is filed by Developer or
such a petition is filed against Developer and not opposed by Developer; or if
Developer is adjudicated bankrupt or insolvent; or if a receiver or other
custodian (permanent or temporary) of Developer's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under the applicable law of any
jurisdiction should be instituted by or against Developer;
5
<PAGE>
or if a final judgment remains unsatisfied or of record for thirty (30) days or
longer (unless a supersedeas bond is filed); or if Developer is dissolved; or if
execution is levied against Developer's property or business; or if suit to
foreclose any lien or mortgage against the premises or equipment of any
Franchised Unit developed hereunder is instituted against the Developer and not
dismissed within thirty (30) days; or if the real or personal property of any
Franchised Unit developed hereunder shall be sold after levy thereupon by any
sheriff, marshall, or constable.
5.03. If Developer fails to comply with the Development Schedule or any
other terms of this Agreement, or fails to obtain Franchisor's approval of a
site or construction plans and specifications prior to commencement of
construction, or fails to comply with any terms or conditions of any franchise
agreement covering a Franchised Unit established hereunder, or any other
agreement between Developer or any affiliate of Developer and Franchisor or any
affiliate of Franchisor, such action shall constitute a default under this
Development Agreement. Upon such default, Franchisor, in its discretion, may,
effective immediately upon the mailing of written notice by Franchisor to
Developer, do any one or more of the following:
A. Terminate this Agreement and all rights granted hereunder
without affording the Developer any opportunity to cure the default;
B. Reduce the number of Franchised Units which Developer may
establish pursuant to Section 1.01. of this Agreement;
C. Terminate the territorial exclusivity granted Developer in
Section 1.01. hereof or reduce the area of territorial exclusivity
granted Developer hereunder;
D. Withhold evaluation or approval of site proposal packages and
refuse to permit the opening of any Franchised Unit then under
construction or otherwise not ready to commence operations; or
E. Accelerate the Development Schedule set forth in Exhibit A
hereto.
In addition to the foregoing, Franchisor shall be entitled to pursue any
other remedies available hereunder or at law or in equity.
5.04. Upon termination of this Agreement, Developer shall have no right to
establish or operate any Franchised Unit for which a Franchise Agreement has not
been executed by Franchisor and delivered to Developer at the time of
termination; and Franchisor shall be entitled to establish, and to license
others to establish, Franchised Units in the Development Area, except as may be
provided under any other agreement which is then in effect between Franchisor
and Developer.
5.05. A default in the Development Schedule under this Development
Agreement shall not constitute a default under any existing Franchise Agreement
between the parties hereto.
6
<PAGE>
VI. TRANSFERABILITY OF INTEREST
6.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right to
transfer or assign its interest in this Agreement to any person, persons,
partnership, association, or corporation. If Franchisor's assignee assumes all
the obligations of Franchisor hereunder and sends written notice of the
assignment so attesting, Developer agrees promptly to execute a general release
of Franchisor, and any affiliates of Franchisor, from claims or liabilities of
Franchisor under this Agreement.
6.02. Transfer by Developer. Developer understands and acknowledges that
---------------------
the rights and duties set forth in this Agreement are personal to Developer, and
that Franchisor has granted this Agreement in reliance on Developer's business
skill and financial capacity. Accordingly, neither (i) Developer, nor (ii) any
immediate or remote successor to Developer, nor (iii) any individual,
partnership, corporation or other legal entity which directly or indirectly owns
any interest in the Developer or in this Development Agreement, shall sell,
assign, transfer, convey, donate, pledge, mortgage, or otherwise encumber any
direct or indirect interest in this Agreement or in Developer without the prior
written consent of Franchisor. Any purported assignment or transfer, by
operation of law or otherwise, not having the written consent of Franchisor,
shall be null and void, and shall constitute a material breach of this
Agreement, for which Franchisor may then terminate without opportunity to cure
pursuant to Section 5.03. of this Agreement. Notwithstanding anything in this
Agreement to the contrary, Developer understands and acknowledges that
individual development rights to obtain franchises to establish and operate
Franchised Units may not be transferred except in connection with a transfer of
this Development Agreement, together with all remaining development options due
to be developed under this Agreement, in accordance with the conditions set
forth herein.
6.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in this Section hereof for the remainder
of the term hereof, when requested; provided, however, that prior to the time of
transfer:
A. Developer shall not be in default of the Development Schedule;
B. The transfer must be in conjunction with a simultaneous transfer to the
same transferee of all Franchised Units operated by Developer under the
Popeyes System within the same DMA('s) as the remaining development
options;
C. All of Developer's accrued monetary obligations to Franchisor and its
subsidiaries and affiliates shall have been satisfied;
D. Developer shall have agreed to remain obligated under the covenants
contained in Sections VII and VIII hereof as if this Agreement had been
terminated on the date of the transfer;
7
<PAGE>
E. The transferee must be of good moral character and reputation, in the
reasonable judgment of the Franchisor;
F. The transferee shall have demonstrated to the Franchisor's
satisfaction, by meeting with the Franchisor or otherwise at Franchisor's
option, that the transferee's qualifications meet the Franchisor's then
current criteria for new developers;
G. The parties must execute a written assignment, in a form satisfactory
to Franchisor, pursuant to which the transferee shall assume all of the
obligations of the individual or entity which is the transferor under this
Agreement and pursuant to which Developer shall generally release any and
all claims it might have against Franchisor as of the date of the
assignment;
H. The transferee must, at Franchisor's option, execute the then-current
form of Development Agreement and such other then-current ancillary
agreements as Franchisor may reasonably require. The then-current form of
Development Agreement may have significantly different provisions,
provided, however, that Exhibits A and B hereto shall be Exhibits A and B
to such development agreement;
I. If the transferee is a partnership, the partnership agreement shall
provide that further assignments or transfers of any interest in the
partnership are subject to all restrictions imposed upon assignments and
transfers in this Agreement;
J. Developer shall, at Franchisor's option and request, execute a written
guarantee of the transferee's obligations under the Agreement, which such
guarantee shall not exceed a period of three (3) years from the date of
transfer; and
K. The Developer or the transferee shall have paid to Franchisor a
transfer fee of Five Thousand Dollars ($5,000), to cover Franchisor's
administrative expenses in connection with the transfer, but no development
fees shall be charged by Franchisor for a transfer. If the transferee is a
corporation formed by Developer for the convenience of ownership and in
which the Developer is the sole shareholder, no transfer fee shall be
required.
6.04. Grant of Security Interest. Developer shall grant no security
--------------------------
interest in this Agreement unless the secured party agrees that, in the event of
any default by Developer under any documents related to the security interest,
(i) Franchisor shall be provided with notice of default and be given a
reasonable time within which to cure said default, (ii) Franchisor shall have
the right and option to be substituted as obligor to the secured party and to
cure any default of Developer or to purchase the rights of the secured party
upon payment of all sums then due to such secured party, except such amounts
which may have become due as a result of any
8
<PAGE>
acceleration of the payment dates based upon the Developer's default, and (iii)
such other requirements as Franchisor, in its sole discretion, deems reasonable
and necessary to protect the integrity of the Proprietary Marks and the Popeyes
System.
6.05. Death or Mental Incapacity. Upon the death or mental incapacity of
--------------------------
any person with an interest in this Agreement or in Developer, the executor,
administrator, or personal representative of such person shall transfer his
interest to a third party approved by Franchisor within twelve (12) months after
such death or mental incapacity. Such transfer, including, without limitation,
transfer by devise or inheritance, shall be subject to the same conditions as
any inter vivos transfer. However, in the case of transfer by devise or
----- -----
inheritance, if the heirs or beneficiaries of any such person are unable to meet
the conditions in this Section VI, the personal representative of the deceased
Developer shall have a reasonable time, but no more than eighteen (18) months
after the death of the Developer, to dispose of the deceased's interest in this
Agreement and the business conducted pursuant hereto, which disposition shall be
subject to all the terms and conditions for assignments and transfers contained
in this Agreement. If the interest is not disposed of within twelve (12) or
eighteen (18) months, whichever is applicable, Franchisor may terminate this
Agreement pursuant to Section 5.03. hereof.
6.06. Right of First Refusal. Any party holding any interest in this
----------------------
Agreement or in Developer, and who desires to accept any bona fide offer from a
---- ----
third party to purchase such interest, shall notify Franchisor in writing of
such offer within ten (10) days of receipt of such offer, and shall provide such
information and documentation relating to the offer as Franchisor may require.
Franchisor shall have the right and option, exercisable within thirty (30) days
after receipt of such written notification, to send written notice to the seller
that Franchisor intends to purchase the seller's interest on the same terms and
conditions offered by the third party. In the event that Franchisor elects to
purchase the seller's interest, closing on such purchase must occur within sixty
(60) days from the date of notice to the seller of the election to purchase by
Franchisor. Any material change in the terms of any offer prior to closing
shall constitute a new offer subject to the same rights of first refusal by
Franchisor as in the case of an initial offer. Failure of Franchisor to
exercise the option afforded by this Section 6.06. shall not constitute a waiver
of any other provisions of this Agreement, including all of the requirements of
this Section VI, with respect to a proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Developer, or Developer's business proposed to be
sold for the reasonable equivalent in cash. If the parties cannot agree within
a reasonable time as to the reasonable equivalent in cash of the consideration,
terms, and/or conditions offered by the third party, an independent appraiser
shall be designated by Franchisor, and his determination shall be binding upon
the parties.
6.07. Offerings by Developer. Securities or partnership interests in
----------------------
Developer may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such
9
<PAGE>
offering by federal or state law shall be submitted to Franchisor for review
prior to their being filed with any governmental agency; and any materials to be
used in any exempt offering shall be submitted to Franchisor for review prior to
their use. No offering of such securities shall imply (by use of the Proprietary
Marks or otherwise) that Franchisor is participating in the underwriting,
issuance, or offering of securities by Developer or Franchisor; and Franchisor's
review of any offering shall be limited solely to the subject of the
relationship between Developer and Franchisor. Developer and the other
participants in the offering must fully indemnify Franchisor in connection with
the offering. For each proposed offering, Developer shall pay to Franchisor a
non-refundable fee of Five Thousand Dollars ($5,000), or such greater amount as
is necessary to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering, including, without limitation,
legal and accounting fees. Developer shall give Franchisor written notice at
least thirty (30) days prior to the date of commencement any offering or other
transaction covered by this Section 6.07.
VII. CONFIDENTIAL INFORMATION
7.01. Developer shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, or corporation, any confidential information,
knowledge, or know-how concerning the construction and methods of operation of
any Franchised Unit which may be communicated to Developer, or of which
Developer may be apprised, by virtue of Developer's operation under the terms of
this Agreement. Developer shall divulge such confidential information only to
such employees of Developer as must have access to it in order to exercise the
development rights granted hereunder and to establish and operate the Franchised
Units pursuant to the Franchise Agreement and as Developer may be required by
law, provided, Developer shall give Franchisor prior written notice of any such
required disclosure immediately upon receipt of notice by Developer in order for
Franchisor to have the opportunity to seek a protective order or take such other
actions as it deems appropriate under the circumstances.
7.02. Any and all information, knowledge, and know-how, including, without
limitation, drawings, materials, equipment, recipes, prepared mixtures or blends
of spices or other food products, and other data, which Franchisor designates as
confidential, and any information, knowledge, or know-how which may be derived
by analysis thereof, shall be deemed confidential for purposes of this
Development Agreement, except information which Developer can demonstrate came
to Developer's attention prior to disclosure thereof by Franchisor or which, at
the time of disclosure thereof by Franchisor to Developer, had become a part of
the public domain, through publication or communication by others or which,
after disclosure to Developer by Franchisor, becomes a part of the public
domain, through publication or communication by others.
7.03. Developer shall require all of Developer's employees, as a condition
of their employment, to execute a confidentiality agreement, as provided in
writing by Franchisor, prohibiting them during the term of their employment, or
thereafter, from communicating,
10
<PAGE>
divulging, or using for the benefit of any person, persons, partnership,
association, or corporation any confidential information, knowledge, or know-how
concerning the methods of operation of the franchised business which may be
acquired during the term of their employment with Developer. A duplicate
original of each such agreement shall be provided to Franchisor upon execution.
VIII. COVENANTS
8.01. Developer specifically acknowledges that, pursuant to this
Agreement, Developer will receive valuable specialized training and confidential
information, including, without limitation, information regarding the
operational, sales, promotional, and marketing methods and techniques of
Franchisor and the System. Developer covenants that, during the term of this
Agreement, except as otherwise approved in writing by Franchisor, Developer
(who, unless otherwise specified, shall include for purposes of this Section
VIII, collectively and individually, all officers, directors and holders of a
beneficial interest of five percent (5%) or more of the securities with voting
rights of Developer, and of any corporation directly or indirectly controlling
Developer, if Developer is a corporation, and the general partners and any
limited partners, including any corporation and the officers, directors and
holders of beneficial interests of five percent (5%) or more of the securities
with voting rights, of a corporation which controls, directly or indirectly, any
general or limited partner, if Developer is a partnership) shall not, either
directly or indirectly, for Developer or through or on behalf of, or in
conjunction with, any person, persons, partnership, or corporation:
A. Divert or attempt to divert any business or customer of the
Franchised Units to be developed hereunder to any competitor by direct or
indirect inducements or otherwise, or to do or perform, directly or
indirectly, any other act injurious or prejudicial to the goodwill
associated with Franchisor's Proprietary Marks and the System;
B. Employ or seek to employ any person who is at the time employed
by Franchisor or by any other Popeyes franchisees or otherwise, or directly
or indirectly induce such person to leave his or her employment; or
C. Own, maintain, operate, engage in, or have an interest in any
fast food (either takeout, on premises consumption, or a combination
thereof) restaurant that specializes in the sale of chicken ("Chicken
Restaurant"); provided, however, that the term "Chicken Restaurant" shall
not apply to any business operated by Developer under a franchise agreement
with Franchisor or an affiliate of Franchisor.
8.02. Developer covenants that, except as otherwise approved in writing by
the Franchisor, Developer shall not, either directly or indirectly, for itself
or through or on behalf of, or in conjunction with, any person, persons,
partnership or corporation, during the term hereof or for two (2) years
following expiration or termination of this Agreement, regardless of the cause
for
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termination, own, maintain, engage in, or have an interest in any Chicken
Restaurant which is located within a radius of ten (10) miles of the location of
any restaurant under the Popeyes System which is in existence as of the date of
expiration or termination of this Agreement.
8.03. At Franchisor's request, Developer shall require and obtain
execution of covenants similar to those set forth in this Section VIII
(including covenants applicable upon the termination of a person's relationship
with Developer) from all officers, directors, and holders of a direct or
indirect beneficial ownership interest of five percent (5%) or more in
Developer. Every covenant required by this Section 8.03. shall be in a form
satisfactory to Franchisor, including, without limitation, specific
identification of Franchisor as a third party beneficiary of such covenants with
the independent right to enforce them. Failure by Developer to obtain execution
of a covenant required by this Section 8.03. shall constitute a material breach
of this Agreement.
IX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be delivered by any means which will provide evidence of the
date received to the respective parties at the following addresses unless and
until a different address has been designated by written notice to the other
party:
Notices to Franchisor: Franchise Department
AFC Enterprises, Inc.
Six Concourse Parkway, Suite 1700
Atlanta, Georgia 30328-5352
cc: Legal Department
Notices to Developer: _________________________________
_________________________________
_________________________________
Attention: ______________________
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement shall be addressed to the party to be notified
at its most current principal business address of which the notifying party has
been notified and shall be deemed so delivered (i) at the time delivered by
hand; (ii) one (1) business day after sending by telegraph, facsimile or
comparable electronic system; or (iii) if sent by registered or certified mail
or by other means which affords the sender evidence of delivery, on the date and
time of receipt or attempted delivery if delivery has been refused or rendered
impossible by the party being notified.
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X. NON-WAIVER
No failure of Franchisor to exercise any power reserved to it in this
Agreement, or to insist upon compliance by Developer with any obligation or
condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with the terms of this Agreement. Waiver by
Franchisor of any particular default shall not affect or impair Franchisor's
right with respect to any subsequent default of the same or of a different
nature, nor shall any delay, forbearance, or omission of Franchisor to exercise
any power or rights arising out of any breach or default by Developer of any of
the terms, provisions, or covenants of this Agreement, affect or impair
Franchisor's rights, nor shall such constitute a waiver by Franchisor of any
rights hereunder or right to declare any subsequent breach or default.
Subsequent acceptance by Franchisor of any payments due to it shall not be
deemed to be a waiver by Franchisor of any preceding breach by Developer of any
terms, covenants, or conditions of this Agreement.
XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
11.01. It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that Developer
is an independent contractor, and that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose whatsoever.
11.02. Developer shall hold itself out to the public to be an independent
contractor operating pursuant to this Agreement. Developer agrees to take such
actions as shall be necessary to that end.
11.03. Developer understands and agrees that nothing in this Agreement
authorizes the Developer to make any contract, agreement, warranty, or
representation on Franchisor's behalf, or to incur any debt or any other
obligation in Franchisor's name, and that Franchisor shall in no event assume
liability for, or be deemed liable hereunder as a result of, any such action or
by reason of any act or omission of Developer, or any claim or judgement arising
therefrom. Developer shall indemnify and hold Franchisor and Franchisor's
officers, directors, shareholders, and employees, harmless against any and all
such claims arising directly or indirectly from, as a result of, or in
connection with Developer's activities, as well as the cost, including
attorney's fees, of defending against such claims.
11.04. Developer shall indemnify and hold Franchisor harmless for all
costs, expenses, or losses incurred by Franchisor in enforcing the provisions
hereof or in upholding the propriety of any action or determination by
Franchisor pursuant to this Agreement, or arising in any manner from Developer's
breach of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable attorney's fees incurred by Franchisor in
connection with any litigation relating to any aspect of this Agreement, unless
Developer shall be found, after due legal proceedings, to have complied with all
of the terms, provisions, conditions and covenants hereof.
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XII. APPROVALS
12.01. Whenever this Agreement requires the prior approval of Franchisor,
Developer shall make a timely written request to Franchisor therefor, and,
except as may otherwise be expressly provided herein, any approval or consent
granted shall be in writing.
12.02. Franchisor makes no warranties or guaranties upon which Developer
may rely, and assumes no liability or obligation to Developer or any third party
to which Franchisor would not otherwise be subject, by providing any waiver,
approval, advice, consent, or services to Developer in connection with this
Agreement, or by reason of any neglect, delay, or denial of any request
therefor.
XIII. ACKNOWLEDGMENT
13.01. Developer acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and will be
largely dependent upon the ability of Developer as an independent businessman.
Franchisor expressly disclaims the making of, and Developer acknowledges not
having received, any warranty or guaranty, expressed or implied, as to the
potential volume, profits, or success of the business venture contemplated by
this Agreement.
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13.02. Developer acknowledges that Developer has received, read, and
understands this Agreement, the exhibits hereto, and agreements relating hereto,
if any; and the Franchisor has accorded Developer ample time and opportunity to
consult with advisors of Developer's own choosing about the potential benefits
and risks of entering into this Agreement.
13.03. Developer acknowledges that Developer has received a complete copy
of this Agreement, the exhibits hereto, and agreements relating hereto, if any,
at least five (5) business days prior to the date upon which this Agreement was
executed. Developer further acknowledges that Developer has received the
Uniform Franchise Offering Circular required by the Trade Regulation Rule of the
Federal Trade Commission entitled "Disclosure Requirements and Prohibitions
concerning Franchising and Business Opportunity Ventures" at least ten (10)
business days prior to the date on which this Agreement was executed.
XIV. SEVERABILITY AND CONSTRUCTION
14.01. Except as expressly provided to the contrary herein, each portion,
section, part, term, and/or provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties; and said invalid portions,
sections, parts, terms, and/or provisions shall be deemed not to be part of this
Agreement.
14.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Developer, Franchisor, Franchisor's officers,
directors, and employees, and Developer's and Franchisor's respective successors
and assigns as may be contemplated (and, as to Developer, permitted) by Section
VI hereof, any rights or remedies under or by reason of this Agreement.
14.03. Developer expressly agrees to be bound by any covenant or promise
imposing the maximum duty permitted by law which is subsumed within the terms of
any provision hereof, as though it were separately articulated in and made a
part of this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court will hold to be unreasonable and
unenforceable in a final decision to which Franchisor is a party, or from
reducing the scope of any promise or covenant to the extent required to comply
with such court order.
14.04. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of the provisions hereof.
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14.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
14.06. This Agreement may be executed in multiple originals and each copy
so executed deemed an original.
XV. ENTIRE AGREEMENT AND APPLICABLE LAW
15.01. This Agreement, the documents referred to herein, and the exhibits
hereto, constitute the entire, full, and complete agreement between Franchisor
and Developer concerning the subject matter hereof and supersede any and all
prior agreements. Except for those permitted to be made unilaterally by
Franchisor hereunder, no amendment, change, or variance from this Agreement
shall be binding on either party unless mutually agreed to by the parties and
executed by their authorized officers or agents in writing.
15.02. APPLICABLE LAW. This Agreement takes effect upon its acceptance
and execution by Franchisor and shall be interpreted and construed under the
laws of the State of Georgia which laws shall prevail in the event of any
conflict of law (without regard to, and without giving effect to, the
application of Georgia choice of law or conflict of law rules) provided,
however, that if the covenants in Article VIII of this Agreement would not be
enforceable under the laws of Georgia, then such covenants shall be interpreted
and construed under the laws of the State in which the Developer operates the
Franchised Units developed hereunder, or in the State where Developer is
domiciled if Developer, at such time, is not operating any Franchised Units.
Nothing in this Section XV is intended by the parties to subject this Agreement
to any franchise or similar law, rule, or regulation of the State of Georgia to
which this Agreement would not otherwise be subject.
15.03. The parties agree that any action brought by Developer against
Franchisor in any court, whether federal or state, shall be brought within such
state and in the judicial district in which Franchisor has its principal place
of business. Any action brought by Franchisor against Developer in any court,
whether federal or state, may be brought within the state and in the judicial
district in which Franchisor has its principal place of business. Developer
hereby consents to personal jurisdiction and venue in the state and judicial
district in which the Franchisor has its principal place of business.
15.04. No right or remedy herein conferred upon or reserved to Franchisor
is exclusive of any other right or remedy herein, or by law or equity provided
or permitted; but each shall be cumulative of any other right or remedy provided
in this Agreement.
15.05. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in multiple
originals as of the day and year first above-written.
AFC ENTERPRISES, INC. DEVELOPER:
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- --------------------------------
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EXHIBIT A
DEVELOPMENT SCHEDULE
CUMULATIVE
NUMBER OF NUMBER OF
FRANCHISED FRANCHISED
RESTAURANTS RESTAURANTS
TO BE OPENED AND TO BE OPEN AND IN
IN OPERATION DATE OPENED OPERATION
- ------------ ----------- ---------
TO BE INITIALED BY BOTH PARTIES:
FRANCHISOR: ________ DEVELOPER: _______
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EXHIBIT "B"
DESCRIPTION OF DEVELOPMENT AREA
(THE FOLLOWING ARE SPECIFICALLY EXCLUDED FROM THE DEVELOPMENT AREA: MILITARY
BASES, PUBLIC TRANSPORTATION FACILITIES, TOLL ROAD PLAZAS, UNIVERSITIES,
RECREATIONAL THEME PARKS AND THE INTERIOR-STRUCTURAL CONFINES OF SHOPPING
MALLS).
TO BE INITIALED BY BOTH PARTIES
19
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EXHIBIT "C"
FRANCHISE AGREEMENT
20
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EXHIBIT 10.7
CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(EXCLUSIVE)
BETWEEN
AFC ENTERPRISES, INC.
AND
------------------------------
Dev. Agr. No.:_______________
No. Options:_________________
Date:________________________
<PAGE>
AFC Enterprises, Inc.
CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(Exclusive)
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. GRANT..................................................... 2
II. DEVELOPMENT FEE........................................... 3
III. DEVELOPMENT SCHEDULE...................................... 3
IV. FRANCHISED UNIT OPENINGS.................................. 3
V. DEFAULT AND TERMINATION................................... 6
VI. TRANSFERABILITY OF INTEREST............................... 7
VII. CONFIDENTIAL INFORMATION.................................. 11
VIII. COVENANTS................................................. 11
IX. NOTICES................................................... 13
X. NON-WAIVER................................................ 13
XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION................ 14
XII. APPROVALS................................................. 14
XIII. ACKNOWLEDGMENT............................................ 15
XIV. SEVERABILITY AND CONSTRUCTION............................. 15
XV. ENTIRE AGREEMENT AND APPLICABLE LAW....................... 16
EXHIBIT A - DEVELOPMENT SCHEDULE..................................... 18
EXHIBIT B - TERRITORY................................................ 19
EXHIBIT C - FRANCHISE AGREEMENT...................................... 20
</TABLE>
<PAGE>
AFC ENTERPRISES, INC.
CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(Exclusive)
THIS AGREEMENT (the "Agreement"), made this ______ day of
__________________________, 19___, by and between AFC ENTERPRISES, INC. (f/k/a
America's Favorite Chicken Company), a Minnesota corporation, with its principal
place of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-
5352, U.S.A. ("Franchisor") and ______________________________________________
_____________ ("Developer").
WITNESSETH:
WHEREAS, Franchisor owns a unique system for opening and operating
restaurants ("CHURCHS Restaurant(s)") specializing in the preparation,
merchandising, advertising and sale of fried chicken and other quick-service
menu items developed and owned by Franchisor (the "CHURCHS System" or the
"System");
WHEREAS, the distinguishing characteristics of the CHURCHS System
include, without limitation, the names "CHURCHS" and "CHURCHS Chicken"; the
distinguishing characteristics of which include, without limitation, uniform and
distinctive building designs, interior and exterior layouts, trade dress,
equipment layout standards and specifications, development and maintenance of
sources of supply, operating procedures for sanitation and maintenance, food and
beverage storage procedures, service procedures, and secret food preparation
recipes and batter mixes, standards and specifications for equipment, equipment
layouts, products, operating procedures and management programs, all of which
may be changed, improved and further developed by Franchisor from time to time;
WHEREAS, Franchisor identifies the CHURCHS System by means of certain
trade names, service marks, trademarks, logos, emblems, and indicia of origin,
including, but not limited to, the marks "CHURCHS" and "CHURCHS Chicken" and
such other trade names, service marks, and trademarks as are now, or may
hereafter, be designated by Franchisor for use in connection with the System
("Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of
such Proprietary Marks in order to identify for the public the source of
services and products marketed thereunder in the CHURCHS System and to represent
the CHURCHS System's high standards of quality, appearance, and service;
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WHEREAS, Developer wishes to be assisted, trained and licensed by
Franchisor as a CHURCHS developer and franchisee and licensed to use, in
connection therewith, the CHURCHS System;
WHEREAS, Developer understands the importance of the CHURCHS System
and CHURCHS high and uniform standards of quality, cleanliness, appearance, and
service, and the necessity of opening and operating Developer's CHURCHS
Restaurants in conformity with the CHURCHS System; and
WHEREAS, Developer wishes to obtain the right to develop CHURCHS
Restaurants ("Franchised Units") in the area described in this Agreement and to
use the CHURCHS System in connection with those Franchised Units;
NOW, THEREFORE, the parties hereto agree as follows:
I. GRANT
1.01. Franchisor hereby grants the Developer, subject to the terms and
conditions of this Development Agreement and as long as Developer shall not be
in default of this Agreement or any other development, franchise or other
agreement between Developer and Franchisor, development rights to obtain
franchises to establish and operate ________ Franchised Units, and to use the
Church's System solely in connection therewith, at specific locations to be
designated in separate franchise agreements ("Franchise Agreements"), executed
as provided in Section 3.01. hereof, and pursuant to the schedule set forth in
Exhibit A to this Agreement ("Development Schedule"). Each Franchised Unit
- ---------
developed pursuant hereto shall be located in the area described in Exhibit B
---------
hereto "(Development Area").
1.02. Subject to the terms and conditions herein, Franchisor shall neither
establish nor license anyone other than Developer to establish a Franchised Unit
in the Development Area until sixty (60) days after the commencement of
operations of the final Franchised Unit under this Agreement, without
Developer's prior written consent.
1.03. Each Franchised Unit for which a development right is granted
hereunder shall be established and operated pursuant to a Franchise Agreement to
be entered into between Developer and Franchisor in accordance with Section
3.01. hereof.
1.04. This Agreement is not a franchise agreement, and does not grant the
Developer any right to use Franchisor's Proprietary Marks or the Church's
System, but merely sets forth the terms and conditions under which Developer
will be entitled to obtain a franchise agreement.
1.05. Developer shall have no right under this Agreement to license others
under the Proprietary Marks or to use the Church's System.
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II. DEVELOPMENT FEE
In consideration of the development rights granted herein, Developer has
paid to the Franchisor upon execution of this Agreement a non-refundable
development fee of __________________________________ Dollars ($_____________)
which development fee has been fully earned by Franchisor for administrative and
other expenses incurred by Franchisor and for the development opportunities lost
or deferred as a result of the rights granted Developer herein.
III. DEVELOPMENT SCHEDULE
3.01. Developer shall exercise each development right granted herein only
by executing a Franchise Agreement for each Franchised Unit for a site accepted
by the Franchisor in the Development Area as hereinafter provided. Developer's
right to execute such a Franchise Agreement shall be contingent upon Developer's
continuous performance of all of the terms and conditions of this Agreement and
any other development, franchise or other agreements between Developer and
Franchisor. The Franchise Agreement for each Franchised Unit developed pursuant
to this Agreement shall be in the form of the Franchise Agreement attached
hereto as Exhibit C.
3.02. Recognizing that time is of the essence in this Agreement, Developer
agrees to exercise the development rights granted hereunder in the manner
specified in Section IV hereof and to satisfy the Development Schedule. Failure
by Developer to adhere to the Development Schedule shall constitute a default
under this Agreement, as provided in Section 5.03. hereof.
3.03. In addition to the development fee required by Section II hereof,
Developer shall pay (i) an initial franchise fee for each Restaurant developed
hereunder in the amount of Fifteen Thousand Dollars ($15,000) upon execution of
a Franchise Agreement for each such Franchised Unit, all of which amount shall
be non-refundable and fully earned by Franchisor upon execution of the Franchise
Agreement for a Franchised Unit.
IV. FRANCHISED UNIT OPENINGS
4.01. Developer shall submit a proposed site for each Franchised Unit for
acceptance by Franchisor. Franchisor shall, provided there exists no default by
Developer under this Agreement or any other development, franchise or other
agreement between Developer and Franchisor, evaluate each site proposed and
shall promptly, but not more than thirty (30) days after receipt of Developer's
proposal, send to Developer written notice of acceptance or non-acceptance of
the site. Site acceptance does not assure that a Franchise Agreement will be
executed. Execution of the Franchise Agreement is contingent upon Developer
purchasing or leasing the proposed site and securing acceptance of the final
plans and specifications as provided below.
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4.02. Within ninety (90) days after notice of Franchisor's site
acceptance, Developer shall:
A. Submit, in writing to Franchisor, satisfactory proof to
Franchisor that Developer:
(i) owns the accepted site;
(ii) has leased the accepted site for a term which, with
renewal options, is not less than the initial term of the Franchise
Agreement; or
(iii) has entered into a written agreement to purchase or to
lease the accepted site on terms provided herein, subject only to
obtaining necessary governmental permits. If Developer leases the
accepted site, the lease must provide: (a) that, in the event Developer
defaults under or otherwise ceases operating the Franchised Unit at the
accepted site during the term of the lease, Franchisor shall have the
right, at its option, to assume Developer's position under the lease;
(b) that, in the event Developer defaults under the lease, notice of
the default shall immediately be forwarded to Franchisor; and (c) that
Franchisor shall have the right, upon default under the lease or other
cessation of operation at the accepted site, to make the modifications
and alterations to the Franchised Unit set forth in Section 16.01.D. of
the Franchise Agreement. The proof required by this Section includes,
but is not limited to, submission of executed copies of all leases and
deeds, as well as all governmental approvals if effectiveness of the
leases or deeds is conditioned thereon.
B. Submit to Franchisor, and obtain Franchisor's written approval
of, the final and complete plans and specifications for the
construction (or renovation) and decoration of the Franchised Unit,
which must be in conformity with Franchisor's standards and
specifications for Franchised Units, as set out in the current
Confidential Operating Standards Manual (as defined in the Franchise
Agreement) or otherwise in writing (hereinafter, the "Construction
Plans"). The final Construction Plans shall include, but are not
limited to, floor plans, equipment layouts, decor, and interior and
exterior elevations.
C. Execute the Franchise Agreement and pay all fees required
thereunder. If Developer is a partnership, each general partner
shall, and if Developer is a corporation, each stockholder holding a
beneficial interest of five percent (5%) or more of the securities
with voting rights of Developer or any corporation directly or
indirectly controlling Developer shall, guarantee the performance of
the Franchise Agreement by executing the Franchisor's Franchise
Agreement Guarantee form. Franchisor shall not approve the final
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<PAGE>
construction plans until the Franchise Agreement is executed and all
fees are paid by Franchisee.
4.03. Developer shall procure the insurance coverage provided for in
Section XI of the Franchise Agreement, prior to commencement of construction of
a Franchised Unit, and shall maintain such insurance coverage throughout the
term of the Franchise Agreement.
4.04. No more than thirty (30) days after the Franchisor approves
Developer's Construction Plans, Developer shall commence construction or
renovation of the Franchised Unit. If commencement of construction or
renovation is delayed by a cause beyond the reasonable control of Developer, the
date upon which commencement of construction or renovation is to begin may be
extended by obtaining written approval of Franchisor.
4.05. Upon commencement of construction or renovation of the Franchised
Unit, Developer shall notify Franchisor on such form as Franchisor may
prescribe.
4.06. Developer shall have completed construction or renovation and
commenced operation of the Franchised Unit within one-hundred eighty (180) days
from execution of the Franchise Agreement as provided in Section 4.02.C. hereof.
Franchisor may, in its sole discretion, extend this period to address unforeseen
construction delays, not within the control of Developer. Nothing herein shall
be deemed to relieve Developer of the obligation of complying with the
Development Schedule.
4.07. At least ten (10) days prior to the proposed commencement of
operation of each Franchised Unit, Developer shall notify Franchisor of such
proposed opening. If the Franchised Unit is Developer's first Franchised Unit
opened hereunder, Franchisor shall provide a representative to be present at the
opening. The Franchised Unit shall not be opened unless such representative is
present. Should commencement of operation of the Franchised Unit be delayed by
the failure of Franchisor to provide such a representative, the date upon which
commencement of operation of the Franchised Unit is required pursuant to Exhibit
A of this Agreement, shall be extended until such time as such assistance is
provided by Franchisor.
V. DEFAULT AND TERMINATION
5.01. The rights granted to Developer in this Agreement have been granted
based upon Developer's representations and assurances, among others, that the
conditions set forth in Sections III and IV of this Development Agreement will
be met by Developer in a timely manner.
5.02. Developer shall be deemed to be in default under this Agreement, and
all rights granted herein shall automatically terminate without notice to
Developer, if Developer shall become insolvent or make a general assignment for
the benefit of creditors; if a petition in bankruptcy is filed by Developer or
such a petition is filed against Developer and not opposed
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<PAGE>
by Developer; or if Developer is adjudicated bankrupt or insolvent; or if a
receiver or other custodian (permanent or temporary) of Developer's assets or
property, or any part thereof, is appointed by any court of competent
jurisdiction; or if proceedings for a composition with creditors under the
applicable law of any jurisdiction should be instituted by or against Developer;
or if a final judgment remains unsatisfied or of record for thirty (30) days or
longer (unless a supersedeas bond is filed); or if Developer is dissolved; or if
execution is levied against Developer's property or business; or if suit to
foreclose any lien or mortgage against the premises or equipment of any
Franchised Unit developed hereunder is instituted against the Developer and not
dismissed within thirty (30) days; or if the real or personal property of any
Franchised Unit developed hereunder shall be sold after levy thereupon by any
sheriff, marshall, or constable.
5.03. If Developer fails to comply with the Development Schedule or any
other terms of this Agreement, or fails to obtain Franchisor's approval of a
site or construction plans and specifications prior to commencement of
construction, or fails to comply with any terms or conditions of any franchise
agreement covering a Franchised Unit established hereunder, or any other
agreement between Developer or any affiliate of Developer and Franchisor or any
affiliate of Franchisor, such action shall constitute a default under this
Development Agreement. Upon such default, Franchisor, in its discretion, may,
effective immediately upon the mailing of written notice by Franchisor to
Developer, do any one or more of the following:
A. Terminate this Agreement and all rights granted hereunder
without affording the Developer any opportunity to cure the default;
B. Reduce the number of Franchised Units which Developer may
establish pursuant to Section 1.01 of this Agreement;
C. Terminate the territorial exclusivity granted Developer in
Section 1.01 hereof or reduce the area of territorial exclusivity
granted Developer hereunder;
D. Withhold evaluation or approval of site proposal packages and
refuse to permit the opening of any Franchised Unit then under
construction or otherwise not ready to commence operations; or
E. Accelerate the Development Schedule set forth in Exhibit A
hereto.
In addition to the foregoing, Franchisor shall be entitled to pursue any
other remedies available hereunder or at law or in equity.
5.04. Upon termination of this Agreement, Developer shall have no right to
establish or operate any Franchised Unit for which a Franchise Agreement has not
been executed by Franchisor and delivered to Developer at the time of
termination; and Franchisor shall be entitled to establish, and to license
others to establish, Franchised Units in the Development Area, except
6
<PAGE>
as may be provided under any other agreement which is then in effect between
Franchisor and Developer.
5.05. A default in the Development Schedule under this Development
Agreement shall not constitute a default under any existing Franchise Agreement
between the parties hereto.
VI. TRANSFERABILITY OF INTEREST
6.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right to
transfer or assign its interest in this Agreement to any person, persons,
partnership, association, or corporation. If Franchisor's assignee assumes all
the obligations of Franchisor hereunder and sends written notice of the
assignment so attesting, Developer agrees promptly to execute a general release
of Franchisor, and any affiliates of Franchisor, from claims or liabilities of
Franchisor under this Agreement.
6.02. Transfer by Developer. Developer understands and acknowledges that
---------------------
the rights and duties set forth in this Agreement are personal to Developer, and
that Franchisor has granted this Agreement in reliance on Developer's business
skill and financial capacity. Accordingly, neither (i) Developer, nor (ii) any
immediate or remote successor to Developer, nor (iii) any individual,
partnership, corporation or other legal entity which directly or indirectly owns
any interest in the Developer or in this Development Agreement, shall sell,
assign, transfer, convey, donate, pledge, mortgage, or otherwise encumber any
direct or indirect interest in this Agreement or in Developer without the prior
written consent of Franchisor. Any purported assignment or transfer, by
operation of law or otherwise, not having the written consent of Franchisor,
shall be null and void, and shall constitute a material breach of this
Agreement, for which Franchisor may then terminate without opportunity to cure
pursuant to Section 5.03. of this Agreement. Notwithstanding anything in this
Agreement to the contrary, Developer understands and acknowledges that
individual development rights to obtain franchises to establish and operate
Franchised Units may not be transferred except in connection with a transfer of
this Development Agreement, together with all remaining development options due
to be developed under this Agreement, in accordance with the conditions set
forth herein.
6.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in this Section hereof for the remainder
of the term hereof, when requested; provided, however, that prior to the time of
transfer:
A. Developer shall not be in default of the Development Schedule;
B. The transfer must be in conjunction with a simultaneous transfer to the
same transferee of all Franchised Units operated by Developer under the
Churchs System within the same DMA('s) as the remaining development
----------------------------
options;
-------
7
<PAGE>
C. All of Developer's accrued monetary obligations to Franchisor and its
subsidiaries and affiliates shall have been satisfied;
D. Developer shall have agreed to remain obligated under the covenants
contained in Sections VII and VIII hereof as if this Agreement had been
terminated on the date of the transfer;
E. The transferee must be of good moral character and reputation, in the
reasonable judgment of the Franchisor;
F. The transferee shall have demonstrated to the Franchisor's
satisfaction, by meeting with the Franchisor or otherwise at Franchisor's
option, that the transferee's qualifications meet the Franchisor's then
current criteria for new developers;
G. The parties must execute a written assignment, in a form satisfactory
to Franchisor, pursuant to which the transferee shall assume all of the
obligations of the individual or entity which is the transferor under this
Agreement and pursuant to which Developer shall generally release any and
all claims it might have against Franchisor as of the date of the
assignment;
H. The transferee must, at Franchisor's option, execute the then-current
form of Development Agreement and such other then-current ancillary
agreements as Franchisor may reasonably require. The then-current form of
Development Agreement may have significantly different provisions,
provided, however, that Exhibits A and B hereto shall be Exhibits A and B
to such development agreement;
I. If the transferee is a partnership, the partnership agreement shall
provide that further assignments or transfers of any interest in the
partnership are subject to all restrictions imposed upon assignments and
transfers in this Agreement;
J. Developer shall, at Franchisor's option and request, execute a written
guarantee of the transferee's obligations under the Agreement, which such
guarantee shall not exceed a period of three (3) years from the date of
transfer; and
K. The Developer or the transferee shall have paid to Franchisor a
transfer fee of Five Thousand Dollars ($5,000), to cover Franchisor's
administrative expenses in connection with the transfer, but no development
fees shall be charged by Franchisor for a transfer. If the transferee is a
corporation formed by Developer for the convenience of ownership and in
which the Developer is the sole shareholder, no transfer fee shall be
required.
8
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6.04. Grant of Security Interest. Developer shall grant no security
--------------------------
interest in this Agreement unless the secured party agrees that, in the event of
any default by Developer under any documents related to the security interest,
(i) Franchisor shall be provided with notice of default and be given a
reasonable time within which to cure said default, (ii) Franchisor shall have
the right and option to be substituted as obligor to the secured party and to
cure any default of Developer or to purchase the rights of the secured party
upon payment of all sums then due to such secured party, except such amounts
which may have become due as a result of any acceleration of the payment dates
based upon the Developer's default, and (iii) such other requirements as
Franchisor, in its sole discretion, deems reasonable and necessary to protect
the integrity of the Proprietary Marks and the Church's System.
6.05. Death or Mental Incapacity. Upon the death or mental incapacity of
--------------------------
any person with an interest in this Agreement or in Developer, the executor,
administrator, or personal representative of such person shall transfer his
interest to a third party approved by Franchisor within twelve (12) months after
such death or mental incapacity. Such transfer, including, without limitation,
transfer by devise or inheritance, shall be subject to the same conditions as
any inter vivos transfer. However, in the case of transfer by devise or
----- -----
inheritance, if the heirs or beneficiaries of any such person are unable to meet
the conditions in this Section VI, the personal representative of the deceased
Developer shall have a reasonable time, but no more than eighteen (18) months
after the death of the Developer, to dispose of the deceased's interest in this
Agreement and the business conducted pursuant hereto, which disposition shall be
subject to all the terms and conditions for assignments and transfers contained
in this Agreement. If the interest is not disposed of within twelve (12) or
eighteen (18) months, whichever is applicable, Franchisor may terminate this
Agreement pursuant to Section 5.03. hereof.
6.06. Right of First Refusal. Any party holding any interest in this
----------------------
Agreement or in Developer, and who desires to accept any bona fide offer from a
---- ----
third party to purchase such interest, shall notify Franchisor in writing of
such offer within ten (10) days of receipt of such offer, and shall provide such
information and documentation relating to the offer as Franchisor may require.
Franchisor shall have the right and option, exercisable within thirty (30) days
after receipt of such written notification, to send written notice to the seller
that Franchisor intends to purchase the seller's interest on the same terms and
conditions offered by the third party. In the event that Franchisor elects to
purchase the seller's interest, closing on such purchase must occur within sixty
(60) days from the date of notice to the seller of the election to purchase by
Franchisor. Any material change in the terms of any offer prior to closing
shall constitute a new offer subject to the same rights of first refusal by
Franchisor as in the case of an initial offer. Failure of Franchisor to
exercise the option afforded by this Section 6.06. shall not constitute a waiver
of any other provisions of this Agreement, including all of the requirements of
this Section VI, with respect to a proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Developer, or
9
<PAGE>
Developer's business proposed to be sold for the reasonable equivalent in cash.
If the parties cannot agree within a reasonable time as to the reasonable
equivalent in cash of the consideration, terms, and/or conditions offered by the
third party, an independent appraiser shall be designated by Franchisor, and his
determination shall be binding upon the parties.
6.07. Offerings by Developer. Securities or partnership interests in
----------------------
Developer may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be submitted to Franchisor for review prior to their being filed
with any governmental agency; and any materials to be used in any exempt
offering shall be submitted to Franchisor for review prior to their use. No
offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the underwriting, issuance, or
offering of securities by Developer or Franchisor; and Franchisor's review of
any offering shall be limited solely to the subject of the relationship between
Developer and Franchisor. Developer and the other participants in the offering
must fully indemnify Franchisor in connection with the offering. For each
proposed offering, Developer shall pay to Franchisor a non-refundable fee of
Five Thousand Dollars ($5,000), or such greater amount as is necessary to
reimburse Franchisor for its reasonable costs and expenses associated with
reviewing the proposed offering, including, without limitation, legal and
accounting fees. Developer shall give Franchisor written notice at least thirty
(30) days prior to the date of commencement any offering or other transaction
covered by this Section 6.07.
10
<PAGE>
VII. CONFIDENTIAL INFORMATION
7.01. Developer shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, or corporation, any confidential information,
knowledge, or know-how concerning the construction and methods of operation of
any Franchised Unit which may be communicated to Developer, or of which
Developer may be apprised, by virtue of Developer's operation under the terms of
this Agreement. Developer shall divulge such confidential information only to
such employees of Developer as must have access to it in order to exercise the
development rights granted hereunder and to establish and operate the Franchised
Units pursuant to the Franchise Agreement and as Developer may be required by
law, provided, Developer shall give Franchisor prior written notice of any such
required disclosure immediately upon receipt of notice by Developer in order for
Franchisor to have the opportunity to seek a protective order or take such other
actions as it deems appropriate under the circumstances.
7.02. Any and all information, knowledge, and know-how, including, without
limitation, drawings, materials, equipment, recipes, prepared mixtures or blends
of spices or other food products, and other data, which Franchisor designates as
confidential, and any information, knowledge, or know-how which may be derived
by analysis thereof, shall be deemed confidential for purposes of this
Development Agreement, except information which Developer can demonstrate came
to Developer's attention prior to disclosure thereof by Franchisor or which, at
the time of disclosure thereof by Franchisor to Developer, had become a part of
the public domain, through publication or communication by others or which,
after disclosure to Developer by Franchisor, becomes a part of the public
domain, through publication or communication by others.
7.03. Developer shall require all of Developer's employees, as a condition
of their employment, to execute an employment agreement, as provided in writing
by Franchisor, prohibiting them during the term of their employment, or
thereafter, from communicating, divulging, or using for the benefit of any
person, persons, partnership, association, or corporation any confidential
information, knowledge, or know-how concerning the methods of operation of the
franchised business which may be acquired during the term of their employment
with Developer. A duplicate original of each such agreement shall be provided
to Franchisor upon execution.
VIII. COVENANTS
8.01. Developer specifically acknowledges that, pursuant to this
Agreement, Developer will receive valuable specialized training and confidential
information, including, without limitation, information regarding the
operational, sales, promotional, and marketing methods and techniques of
Franchisor and the System. Developer covenants that, during the term of this
Agreement, except as otherwise approved in writing by Franchisor, Developer
(who, unless
11
<PAGE>
otherwise specified, shall include for purposes of this Section VIII,
collectively and individually, all officers, directors and holders of a
beneficial interest of five percent (5%) or more of the securities with voting
rights of Developer, and of any corporation directly or indirectly controlling
Developer, if Developer is a corporation, and the general partners and any
limited partners, including any corporation and the officers, directors and
holders of beneficial interests of five percent (5%) or more of the securities
with voting rights, of a corporation which controls, directly or indirectly, any
general or limited partner, if Developer is a partnership) shall not, either
directly or indirectly, for Developer or through or on behalf of, or in
conjunction with, any person, persons, partnership, or corporation:
A. Divert or attempt to divert any business or customer of the
Franchised Units to be developed hereunder to any competitor by
direct or indirect inducements or otherwise, or to do or perform,
directly or indirectly, any other act injurious or prejudicial to
the goodwill associated with Franchisor's Proprietary Marks and the
System;
B. Employ or seek to employ any person who is at the time employed
by Franchisor or by any other Church's franchisees or otherwise, or
directly or indirectly induce such person to leave his or her
employment; or
C. Own, maintain, operate, engage in, or have an interest in any
fast food (either takeout, on premises consumption, or a combination
thereof) restaurant that specializes in the sale of chicken
("Chicken Restaurant"); provided, however, that the term "Chicken
Restaurant" shall not apply to any business operated by Developer
under a franchise agreement with Franchisor or an affiliate of
Franchisor.
8.02. Developer covenants that, except as otherwise approved in writing by
the Franchisor, Developer shall not, either directly or indirectly, for itself
or through or on behalf of, or in conjunction with, any person, persons,
partnership or corporation, during the term hereof or for two (2) years
following expiration or termination of this Agreement, regardless of the cause
for termination, own, maintain, engage in, or have an interest in any Chicken
Restaurant which is located within a radius of ten (10) miles of the location of
any restaurant under the Church's System which is in existence as of the date of
expiration or termination of this Agreement.
8.03. At Franchisor's request, Developer shall require and obtain
execution of covenants similar to those set forth in this Section VIII
(including covenants applicable upon the termination of a person's relationship
with Developer) from all officers, directors, and holders of a direct or
indirect beneficial ownership interest of five percent (5%) or more in
Developer. Every covenant required by this Section 8.03. shall be in a form
satisfactory to Franchisor, including, without limitation, specific
identification of Franchisor as a third party beneficiary of such covenants with
the independent right to enforce them. Failure by Developer to obtain execution
of a covenant required by this Section 8.03. shall constitute a material breach
of this Agreement.
12
<PAGE>
IX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be delivered by any means which will provide evidence of the
date received to the respective parties at the following addresses unless and
until a different address has been designated by written notice to the other
party:
Notices to Franchisor: Franchise Department
AFC Enterprises, Inc.
Six Concourse Parkway, Suite 1700
Atlanta, Georgia 30328-5352
cc: Legal Department
Notices to Developer: _________________________________
_________________________________
_________________________________
Attention: ______________________
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement shall be addressed to the party to be notified
at its most current principal business address of which the notifying party has
been notified and shall be deemed so delivered (i) at the time delivered by
hand; (ii) one (1) business day after sending by telegraph, facsimile or
comparable electronic system; or (iii) if sent by registered or certified mail
or by other means which affords the sender evidence of delivery, on the date and
time of receipt or attempted delivery if delivery has been refused or rendered
impossible by the party being notified.
X. NON-WAIVER
No failure of Franchisor to exercise any power reserved to it in this
Agreement, or to insist upon compliance by Developer with any obligation or
condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with the terms of this Agreement. Waiver by
Franchisor of any particular default shall not affect or impair Franchisor's
right with respect to any subsequent default of the same or of a different
nature, nor shall any delay, forbearance, or omission of Franchisor to exercise
any power or rights arising out of any breach or default by Developer of any of
the terms, provisions, or covenants of this Agreement, affect or impair
Franchisor's rights, nor shall such constitute a waiver by Franchisor of any
rights hereunder or right to declare any subsequent breach or default.
Subsequent acceptance by Franchisor of any payments due to it shall not be
deemed to be a waiver by Franchisor of any preceding breach by Developer of any
terms, covenants, or conditions of this Agreement.
13
<PAGE>
XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
11.01. It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that Developer
is an independent contractor, and that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose whatsoever.
11.02. Developer shall hold itself out to the public to be an independent
contractor operating pursuant to this Agreement. Developer agrees to take such
actions as shall be necessary to that end.
11.03. Developer understands and agrees that nothing in this Agreement
authorizes the Developer to make any contract, agreement, warranty, or
representation on Franchisor's behalf, or to incur any debt or any other
obligation in Franchisor's name, and that Franchisor shall in no event assume
liability for, or be deemed liable hereunder as a result of, any such action or
by reason of any act or omission of Developer, or any claim or judgement arising
therefrom. Developer shall indemnify and hold Franchisor and Franchisor's
officers, directors, shareholders, and employees, harmless against any and all
such claims arising directly or indirectly from, as a result of, or in
connection with Developer's activities, as well as the cost, including
attorney's fees, of defending against such claims.
11.04. Developer shall indemnify and hold Franchisor harmless for all
costs, expenses, or losses incurred by Franchisor in enforcing the provisions
hereof or in upholding the propriety of any action or determination by
Franchisor pursuant to this Agreement, or arising in any manner from Developer's
breach of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable attorney's fees incurred by Franchisor in
connection with any litigation relating to any aspect of this Agreement, unless
Developer shall be found, after due legal proceedings, to have complied with all
of the terms, provisions, conditions and covenants hereof.
XII. APPROVALS
12.01. Whenever this Agreement requires the prior approval of Franchisor,
Developer shall make a timely written request to Franchisor therefor, and,
except as may otherwise be expressly provided herein, any approval or consent
granted shall be in writing.
12.02. Franchisor makes no warranties or guaranties upon which Developer
may rely, and assumes no liability or obligation to Developer or any third party
to which Franchisor would not otherwise be subject, by providing any waiver,
approval, advice, consent, or services to Developer in connection with this
Agreement, or by reason of any neglect, delay, or denial of any request
therefor.
14
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XIII. ACKNOWLEDGMENT
13.01. Developer acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and will be
largely dependent upon the ability of Developer as an independent businessman.
Franchisor expressly disclaims the making of, and Developer acknowledges not
having received, any warranty or guaranty, expressed or implied, as to the
potential volume, profits, or success of the business venture contemplated by
this Agreement.
13.02. Developer acknowledges that Developer has received, read, and
understands this Agreement, the exhibits hereto, and agreements relating hereto,
if any; and the Franchisor has accorded Developer ample time and opportunity to
consult with advisors of Developer's own choosing about the potential benefits
and risks of entering into this Agreement.
13.03. Developer acknowledges that Developer has received a complete copy
of this Agreement, the exhibits hereto, and agreements relating hereto, if any,
at least five (5) business days prior to the date upon which this Agreement was
executed. Developer further acknowledges that Developer has received the
Uniform Franchise Offering Circular required by the Trade Regulation Rule of the
Federal Trade Commission entitled "Disclosure Requirements and Prohibitions
concerning Franchising and Business Opportunity Ventures" at least ten (10)
business days prior to the date on which this Agreement was executed.
XIV. SEVERABILITY AND CONSTRUCTION
14.01. Except as expressly provided to the contrary herein, each portion,
section, part, term, and/or provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties; and said invalid portions,
sections, parts, terms, and/or provisions shall be deemed not to be part of this
Agreement.
14.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Developer, Franchisor, Franchisor's officers,
directors, and employees, and Developer's and Franchisor's respective successors
and assigns as may be contemplated (and, as to Developer, permitted) by Section
VI hereof, any rights or remedies under or by reason of this Agreement.
15
<PAGE>
14.03. Developer expressly agrees to be bound by any covenant or promise
imposing the maximum duty permitted by law which is subsumed within the terms of
any provision hereof, as though it were separately articulated in and made a
part of this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court will hold to be unreasonable and
unenforceable in a final decision to which Franchisor is a party, or from
reducing the scope of any promise or covenant to the extent required to comply
with such court order.
14.04. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of the provisions hereof.
14.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
14.06. This Agreement may be executed in multiple originals and each copy
so executed deemed an original.
XV. ENTIRE AGREEMENT AND APPLICABLE LAW
15.01. This Agreement, the documents referred to herein, and the exhibits
hereto, constitute the entire, full, and complete agreement between Franchisor
and Developer concerning the subject matter hereof and supersede any and all
prior agreements. Except for those permitted to be made unilaterally by
Franchisor hereunder, no amendment, change, or variance from this Agreement
shall be binding on either party unless mutually agreed to by the parties and
executed by their authorized officers or agents in writing.
15.02. APPLICABLE LAW. This Agreement takes effect upon its acceptance
and execution by Franchisor and shall be interpreted and construed under the
laws of the State of Georgia which laws shall prevail in the event of any
conflict of law (without regard to, and without giving effect to, the
application of Georgia choice of law or conflict of law rules); provided,
however, that if the covenants in Article VIII of this Agreement would not be
enforceable under the laws of Georgia, then such covenants shall be interpreted
and construed under the laws of the State in which the Developer operates the
Franchised Units developed hereunder, or in the State where Developer is
domiciled if Developer, at such time, is not operating any Franchised Units.
Nothing in this Section XV is intended by the parties to subject this Agreement
to any franchise or similar law, rule, or regulation of the State of Georgia to
which this Agreement would not otherwise be subject.
15.03. The parties agree that any action brought by Developer against
Franchisor in any court, whether federal or state, shall be brought within such
state and in the judicial district in which Franchisor has its principal place
of business. Any action brought by Franchisor against
16
<PAGE>
Developer in any court, whether federal or state, may be brought within the
state and in the judicial district in which Franchisor has its principal place
of business. Developer hereby waives all questions of personal jurisdiction or
venue for the purpose of carrying out this provision.
15.04. No right or remedy herein conferred upon or reserved to Franchisor
is exclusive of any other right or remedy herein, or by law or equity provided
or permitted; but each shall be cumulative of any other right or remedy provided
in this Agreement.
15.05. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in multiple
originals as of the day and year first above-written.
AFC ENTERPRISES, INC. DEVELOPER:
By:____________________________ By:____________________________
Title:_________________________ Title:_________________________
17
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EXHIBIT A
DEVELOPMENT SCHEDULE
CUMULATIVE
NUMBER OF NUMBER OF
FRANCHISED FRANCHISED
RESTAURANTS RESTAURANTS
TO BE OPENED AND TO BE OPEN AND IN
IN OPERATION DATE OPENED OPERATION
- ------------ ----------- ---------
TO BE INITIALED BY BOTH PARTIES:
FRANCHISOR: ________ DEVELOPER: _______
18
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EXHIBIT B
DESCRIPTION OF DEVELOPMENT AREA
-------------------------------
(THE FOLLOWING ARE SPECIFICALLY EXCLUDED FROM THE DEVELOPMENT AREA: MILITARY
BASES, PUBLIC TRANSPORTATION FACILITIES, TOLL ROAD PLAZAS, UNIVERSITIES,
RECREATIONAL THEME PARKS AND THE INTERIOR-STRUCTURAL CONFINES OF SHOPPING
MALLS).
TO BE INITIALED BY BOTH PARTIES
19
<PAGE>
EXHIBIT C
FRANCHISE AGREEMENT
-------------------
20
<PAGE>
EXHIBIT 10.8
POPEYES CHICKEN & BISCUITS
FRANCHISE AGREEMENT
BETWEEN
AFC ENTERPRISES, INC.
AND
___________________________________
Unit No.: ______
Dev. Agr. No.: ______
Dated: _____________
<PAGE>
AFC ENTERPRISES, INC.
POPEYES CHICKEN & BISCUITS
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
I. APPOINTMENT.......................................... 2
II. TERM................................................. 3
III. FEES................................................. 5
IV. ACCOUNTING AND RECORDS............................... 7
V. PROPRIETARY MARKS.................................... 9
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE... 11
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.............. 12
VIII. TRAINING............................................. 13
IX. DUTIES OF THE FRANCHISOR............................. 14
X. DUTIES OF THE FRANCHISEE............................. 15
XI. INSURANCE............................................ 21
XII. CONFIDENTIAL INFORMATION............................. 23
XIII. COVENANTS............................................ 24
XIV. TRANSFERABILITY OF INTEREST.......................... 26
XV. TERMINATION.......................................... 30
XVI. EFFECT OF TERMINATION OR EXPIRATION.................. 33
XVII. TAXES, PERMITS, AND INDEBTEDNESS..................... 35
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION........... 35
XIX. APPROVALS AND WAIVERS................................ 36
XX. NOTICES.............................................. 37
</TABLE>
<PAGE>
<TABLE>
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XXI. SEVERABILITY AND CONSTRUCTION........................ 38
XXII. ENTIRE AGREEMENT: SURVIVAL.......................... 38
XXIII. ACKNOWLEDGMENTS...................................... 39
XXIV. APPLICABLE LAW: VENUE............................... 40
XXV. CORPORATE FRANCHISEE................................. 41
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AFC ENTERPRISES, INC.
POPEYES CHICKEN & BISCUITS
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______________ day of
_________________, 19___, by and between AFC ENTERPRISES, INC.(F/K/A AMERICA'S
FAVORITE CHICKEN COMPANY), a Minnesota corporation, having its principal place
of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia, 30328-5352,
U.S.A. ("Franchisor" or "Popeyes") and
- - - - - - - - - - - - - - -
______________________________________________________________________________
______________________________________________________________________________,
[jointly and severally where more than one], ("Franchisee").
WITNESSETH:
WHEREAS, Franchisor has developed and owns a unique system for opening and
operating restaurants specializing in fried chicken and other menu items
developed and owned by Franchisor (the "Popeyes System" or "System");
WHEREAS, the distinguishing characteristics of Franchisor's Popeyes System
include, without limitation, the names "Popeyes" and "Popeyes Chicken &
Biscuits"; specially designed buildings, distinctive interior and exterior
layouts, decor, color schemes, and furnishings; confidential food formulae and
recipes used in the preparation of food products and, particularly, a unique
seasoning and batter formula for preparing Popeyes chicken; specialized menus;
standards and specifications for equipment, equipment layouts, products,
operating procedures, and management programs, all of which may be changed,
improved, and further developed by Franchisor from time to time;
WHEREAS, Franchisor identifies the Popeyes System by means of certain trade
names, service marks, trademarks, logos, emblems, and other indicia of origin,
including, but not limited to, the mark "Popeyes" and "Popeyes Chicken &
Biscuits" and such other trade names, service marks, trademarks and trade dress
as are now, or may hereafter, be designated by Franchisor for use in connection
with the Popeyes System (collectively referred to as the "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder in the Popeyes System and to represent the System's
high standards of quality, appearance, and service;
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WHEREAS, Franchisee wishes to be assisted, trained, and licensed by
Franchisor as a Popeyes franchisee and licensed to use, in connection therewith,
the Popeyes System;
WHEREAS, Franchisee understands the importance of the Popeyes System and
Popeyes high and uniform standards of quality, cleanliness, appearance, and
service, and the necessity of opening and operating Popeyes Restaurants in
conformity with the Popeyes System;
NOW, THEREFORE, the parties hereto agree as follows:
I. APPOINTMENT
1.01. Franchisor grants to Franchisee a franchise to open and operate a
Popeyes Chicken & Biscuits restaurant (the "Unit", "Franchised Unit",
"Franchised Business" or "Restaurant") at one location only, such location to be
described as:
STORE NUMBER: ______________________________________
ADDRESS: ______________________________________
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upon the terms and conditions herein contained and subject to the terms and
conditions contained in the development agreement between Franchisor and
Franchisee, dated __________________________, (the "Development Agreement"),
which is incorporated herein by reference; and a license to use in connection
therewith Franchisor's Proprietary Marks and the Popeyes System.
1.02. Protected Territory.
A. Subject to the terms and conditions of this Agreement and
provided Franchisee is not otherwise in default of this
Agreement and/or any other Agreement between Franchisor (or any
parent, subsidiary or affiliate of Franchisor) and Franchisee (or
any parent, subsidiary or affiliate of Franchisee), Franchisor
shall not establish, nor franchise another to establish a
restaurant under the Popeyes System , for the term of this
Agreement, within the area described in EXHIBIT "C" of this
Agreement (the "Protected Area"), without Franchisee's prior
written consent. Notwithstanding the foregoing, Franchisor may,
from time to time during the term hereof, reduce or modify the
Protected Area to encompass a geographic area immediately
surrounding the Franchised Unit which shall include a
population (residential and/or daytime business or commercial) of
no less than 50,000
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people, which modification shall become effective upon written
notice from Franchisor to Franchisee.
B. The provisions of Section 1.02 (A) hereof shall not apply with
respect to the following types of locations within the Protected
Area, at which Franchisor retains the right, in its sole
discretion, to franchise and/or operate Popeyes restaurants, and
to distribute by any means Popeyes products:
1. Existing Franchised Units and/or Franchised Units for
which Franchise Agreements were previously executed
2. Transportation facilities (including airports, train
stations, bus stations, etc.)
3. Toll roads and major thoroughfares
4. Educational facilities (including schools, colleges and
universities)
5. Institutional feeding facilities (including, but not
limited to, airports, hospitals, hotels, and corporate
or school cafeterias
6. Government institutions and facilities
7. Enclosed shopping malls
8. Military bases
9. Casinos
10. Amusement and/or theme parks
1.03. Except as otherwise set forth herein, (a) the franchise granted to
Franchisee under this Agreement is non-exclusive, and grants to Franchisee the
rights to establish and operate the Franchised Unit at only the specific
location set forth hereinabove, (b) no exclusive, protected or other territorial
rights in the contiguous area or market of such Franchised Unit or otherwise is
hereby granted or to be inferred and (c) Franchisor and/or its affiliates have
the right to operate and grant as many other franchises for the operation of
Popeyes restaurants, anywhere in the world, as they shall, in their sole
discretion, elect.
II. TERM
2.01. Except as otherwise provided in this Agreement, the initial term of
this Franchise Agreement (the "Term") shall expire on the twentieth (20th)
anniversary of the date of commencement of operation of the Franchised Unit.
For all purposes under this Agreement, the date of commencement of operation of
the Franchised Unit shall be the date verified in writing by Franchisor and
delivered to Franchisee in a form substantially similar to the "Notice" attached
hereto as Exhibit "A". Franchisee agrees and shall be obligated to operate the
Franchised Unit and perform hereunder for the full Term of this Agreement.
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2.02. Franchisee may, at its option, renew this franchise for one (1)
additional period of ten (10) years, provided that, at the time of renewal:
A. Franchisee gives Franchisor written notice of such election to
renew not less than six (6) months nor more than twelve (12)
months prior to the end of the initial term;
B. Franchisee executes Franchisor's then-current standard form of
franchise agreement, which may include, without limitation, a
higher royalty fee and a higher advertising contribution, if any,
than that contained in this Agreement; and the term of which
shall be the renewal term as specified in Section 2.02. hereof,
but shall contain no further renewal rights;
C. Franchisee executes a general release in a form prescribed by
Franchisor of any and all claims against Franchisor and its
subsidiaries, and affiliates, and their respective officers,
directors, agents, and employees;
D. Franchisee is not in default of any provision of this Agreement,
or any amendment hereof or successor hereto, or any other
agreement between Franchisee and Franchisor, or any subsidiary or
affiliate of Franchisor, and Franchisee has fully and faithfully
performed all of Franchisee's obligations throughout the term of
this Agreement;
E. Franchisee has paid or otherwise satisfied all monetary
obligations owed by Franchisee to Franchisor and its subsidiaries
and affiliates and any indebtedness of Franchisee which is
guaranteed by Franchisor, and Franchisee has timely paid or
otherwise satisfied these obligations throughout the term of this
Agreement;
F. Franchisee agrees, at its sole cost and expense, to reimage,
renovate, refurbish and modernize the Franchised Unit, within the
time frame required by Franchisor, including the building design,
parking lot, landscaping, equipment, signs, interior and exterior
decor items, fixtures, furnishings, trade dress, color scheme,
presentation of trademarks and service marks, supplies and other
products and materials to meet Franchisor's then-current
standards, specifications and design criteria for Popeyes
restaurants, as contained in the then-current franchise
agreement, Confidential Operating Standards Manual (as defined
herein), or otherwise in writing, including, without limitation,
such structural changes, remodeling and redecoration and such
modifications to existing improvement as may be necessary to do
so.
G. Franchisee shall pay to Franchisor a renewal fee equal to fifty
percent (50%) of Franchisor's standard initial franchise fee in
effect at the date of renewal.
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III. FEES
3.01. In consideration of the franchise granted to Franchisee herein,
Franchisee shall pay to the Franchisor the following:
A. A franchise fee of ________________________ Dollars ($XXX)
payable upon execution of this Agreement by Franchisee. Such
franchise fee shall be fully earned by Franchisor upon execution
of this Agreement by Franchisee and is in addition to any
development fees paid to Franchisor by Franchisee.
B. A recurring, non-refundable royalty fee of five percent (5%) of
Gross Sales (as defined herein) during the term of this
Agreement, payable weekly (or on such other basis as may be set
forth in the Confidential Operating Standards Manual (as defined
herein) or otherwise agreed to in writing by Franchisor) on the
Gross Sales of the preceding week.
3.02. In addition to the payments provided for in Section 3.01. hereof,
Franchisee, recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the goodwill and public image of
the System, agrees to pay to the Popeyes Advertising Fund ("Advertising Fund") a
recurring, non-refundable advertising fund contribution ("Advertising Fund
Contribution") in an amount to be determined by Franchisor, in its sole
discretion, not to exceed three percent (3%) of the Gross Sales for the
preceding week (or an Advertising Fund Contribution not to exceed one percent
(1%) of such Gross Sales if the Franchised Unit participates in an advertising
cooperative pursuant to Section 10.05.) payable weekly (or on such other basis
as may be set forth in the Confidential Operating Standards Manual or otherwise
agreed to in writing by Franchisor). The Advertising Fund Contribution shall be
expended by the Advertising Fund for national, regional, and/or local
advertising and promotional materials and market research for the Popeyes
System, under the following conditions and limitations:
A. The Advertising Fund, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all costs of
maintaining, administering, directing, producing and preparing
market research, advertising, marketing materials and/or
promotional activities for the Popeyes System. Franchisee shall
pay the Advertising Fund Contribution by separate check made
payable to the Advertising Fund. All sums paid by the Franchisee
to the Advertising Fund shall be maintained in an account
separate from other funds of Franchisor and shall not be used to
defray any of Franchisor's expenses except as provided herein,
and as Franchisor may incur in activities reasonably related to
the administration or direction of the Advertising Fund and
advertising and marketing programs for franchisees and the
Popeyes System. The Advertising Fund and its earnings shall not
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otherwise inure to the benefit of Franchisor. Franchisor shall
maintain a separate bookkeeping account for the Advertising Fund.
B. The selection of media and locale for media placement shall be at
the sole discretion of the Franchisor.
C. All reasonable costs incurred by Franchisor or charged to
Franchisor by third parties for market research and the
production and dissemination of advertising, marketing and
promotional materials may be charged to the Advertising Fund.
D. Franchisor, upon request, shall provide Franchisee with an annual
accounting of receipts and disbursements of the Advertising Fund.
E. It is anticipated that all contributions to and earnings of the
Advertising Fund will be expended for market research,
advertising, marketing and/or promotional purposes during the
taxable year in which contributions and earnings are received.
If, however, excess amounts remain in the Advertising Fund at the
end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from
previous years, next out of earnings in the current year, and
finally from contributions.
F. The Advertising Fund is not, and shall not be, an asset of
Franchisor. Although the Advertising Fund is intended to be of
perpetual duration, Franchisor maintains the right to terminate
the Advertising Fund; provided, however, that the Advertising
Fund shall not be terminated until all monies in the Advertising
Fund have been expended for the purposes stated herein.
G. Franchisee understands that such advertising and marketing is
intended to maximize the public's awareness of the Franchised
Units and the System, and that Franchisor accordingly undertakes
no obligation to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement, if any, of
such advertising or marketing in its local market. Franchisee
further acknowledges that its failure to derive any such benefit,
whether directly or indirectly, shall not be cause for
Franchisee's nonpayment or reduction of the required
contributions to the Advertising Fund.
3.03. If any monetary obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates are more than seven (7) days overdue, Franchisee
shall, in addition to such obligations, pay to Franchisor a sum equal to one and
one-half percent (1 1/2%) of the overdue balance per month, or the highest rate
permitted by law, whichever is less, from the date said payment is due.
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3.04. For the purposes of this Agreement, the term "Gross Sales" shall
mean all revenues generated by Franchisee's business conducted upon, from or
with respect to the Franchised Unit, whether such sales are evidenced by cash,
check, credit, charge, account, barter or exchange. Gross Sales shall include,
without limitation, monies or credit received from the sale of food and
merchandise, from tangible property of every kind and nature, promotional or
otherwise, and for services performed from or at the Franchised Unit, including
without limitation such off-premises services as catering and delivery. Gross
Sales shall not include the sale of food or merchandise for which refunds have
been made in good faith to customers, the sale of equipment used in the
operation of the Franchised Unit, nor shall it include sales, meals, use or
excise tax imposed by a governmental authority directly on sales and collected
from customers; provided that the amount for such tax is added to the selling
price or absorbed therein, and is actually paid by Franchisee to such
governmental authority.
IV. ACCOUNTING AND RECORDS
4.01. ACCURATE BOOKS AND RECORDS. During the Term of this Agreement,
Franchisee shall maintain and preserve, for at least three (3) years from the
dates of their preparation, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles and in the
form and the manner prescribed by Franchisor from time-to-time in the
Confidential Operating Standards Manual or otherwise in writing. These records
shall include, without limitation, cash register sales tape (including non-
resettable readings), meals, sales and other tax returns, duplicate deposit
slips and other evidence of Gross Sales and all other business transactions.
4.02. ROYALTY REPORTS. Franchisee shall submit to Franchisor, no later
than the date each weekly royalty payment is due during the Term of this
Agreement, a report on forms prescribed by Franchisor, accurately reflecting all
Gross Sales during the preceding week and such other forms, reports, records,
financial statements or information as Franchisor may reasonably require in the
Confidential Operating Standards Manual, or otherwise in writing.
4.03. QUARTERLY STATEMENT. Franchisee shall, at its expense, submit to
Franchisor quarterly, within thirty (30) days following the end of each quarter
during the Term hereof, an unaudited financial statement with such detail as
Franchisor may reasonably require (hereinafter, "Quarterly Statement") together
with a certificate executed by Franchisee stating that such financial statement
is true and accurate. Upon Franchisor's request, Franchisee shall submit to
Franchisor, with each Quarterly Statement, copies of any state or local sales
tax returns ("Sales Tax Returns") filed by Franchisee for the period included in
the Quarterly Statement. In the event Franchisee prepares financial statements
on the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly
Statements shall be submitted within thirty (30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.
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4.04. ANNUAL FINANCIAL STATEMENTS. Franchisee shall, at its expense,
submit to Franchisor within ninety (90) days following the end of each calendar
or fiscal year during the Term of this Agreement, an unaudited financial
statement for the preceding calendar or fiscal year, together with a certificate
executed by Franchisee certifying that such financial statement is true and
accurate (hereinafter, "Annual Financial Statements") and such other information
in such form as Franchisor may reasonably require. Upon written request from
Franchisor, the foregoing Annual Financial Statement shall include both a profit
and loss statement and a balance sheet, and shall be prepared in accordance with
generally accepted accounting principles. In the event Franchisee defaults
under this Agreement, Franchisor may require, upon written notice to Franchisee,
that all Annual Financial Statements submitted thereafter include a "Review
Report" prepared by an independent Certified Public Accountant.
4.05. OTHER REPORTS. Franchisee shall also submit to Franchisor, for
review or auditing, such other forms, financial statements, reports, records,
information and data as Franchisor may reasonably designate, in the form and at
the times and places reasonably required by Franchisor, upon request and as
specified from time-to-time in the Confidential Operating Standards Manual or
otherwise in writing. If Franchisee has combined or consolidated financial
information relating to the Franchised Unit with that of any other business or
businesses, including a business licensed by Franchisor, Franchisee shall
simultaneously submit to Franchisor, for review or auditing, the forms, reports,
records and financial statements (including, but not limited to the Quarterly
Statements and Annual Financial Statements) which contain the detailed financial
information relating to the Franchised Unit, separate and apart from the
financial information of such other businesses. Franchisee hereby authorizes
all of its suppliers and distributors to release to Franchisor, upon
Franchisor's request, any and all of its books, records, accounts or other
information relating to goods, products and supplies sold to Franchisee and/or
the Franchised Unit.
4.06. EQUIPMENT. Franchisee shall record all sales on cash registers or
other point-of-sale equipment approved, in writing, by Franchisor (hereinafter
"POS Equipment").
4.07. FRANCHISOR'S RIGHT OF AUDIT. Franchisor or its designated agents
or auditors shall have the right at all reasonable times to audit, review and
examine by any means, including electronically through the use of
telecommunications devices or otherwise, at its expense, the books, records,
accounts, and tax returns of Franchisee. If any such audit, review or
examination reveals that Gross Sales have been understated in any report to
Franchisor, Franchisee shall immediately pay to Franchisor the royalty fee and
Advertising Fund Contribution due with respect to the amount understated upon
demand, in addition to interest from the date such amount was due until paid, at
the rate of one and one-half percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of Gross Sales as set forth in the
report, Franchisee shall, in addition, upon demand, reimburse Franchisor for any
and all costs and expenses connected with such audit, review or examination
(including, without limitation, reasonable accounting and attorneys' fees).
The foregoing remedies shall be in addition to any other rights and remedies
Franchisor may have.
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V. PROPRIETARY MARKS
5.01. It is understood and agreed that the franchise granted herein to use
Franchisor's Proprietary Marks applies only to use in connection with the
operation of the Franchised Unit franchised in this Agreement at the location
designated in Section I hereof, and includes only such Proprietary Marks as are
now designated or which may hereafter be designated, in the Confidential
Operating Standards Manual or otherwise in writing as a part of the System
(which might or might not be all of the Proprietary Marks pertaining to the
System owned by the Franchisor), and does not include any other mark, name, or
indicia of origin of Franchisor now existing or which may hereafter be adopted
or acquired by Franchisor.
5.02. With respect to Franchisee's use of the Proprietary Marks pursuant
to this Agreement, Franchisee acknowledges and agrees that:
A. Franchisee shall not use the Proprietary Marks as part of
Franchisee's corporate or other business name;
B. Franchisee shall not hold out or otherwise use the Proprietary
Marks to perform any activity or incur any obligation or
indebtedness in such manner as might, in any way, make Franchisor
liable therefor, without Franchisor's prior written consent;
C. Franchisee shall execute any documents and provide such other
assistance deemed necessary by Franchisor or its counsel to
obtain protection for the Proprietary Marks or to maintain the
continued validity of such Proprietary Marks; and
D. Franchisor reserves the right to substitute different Proprietary
Marks for use in identifying the System and the franchised
businesses operating thereunder, and Franchisee agrees to
immediately substitute Proprietary Marks upon receipt of written
notice from Franchisor.
5.03. Franchisee expressly acknowledges Franchisor's exclusive right to
use the mark POPEYES for restaurant services, fried chicken, and other related
food products; the building configuration; and the other Proprietary Marks of
the System. Franchisee agrees not to represent in any manner that it has any
ownership in the Proprietary Marks or the right to use the Proprietary Marks
except as provided in this Agreement. Franchisee further agrees that its use of
the Proprietary Marks shall not create in its favor any right, title, or
interest in or to the Proprietary Marks, and that all of such use shall inure to
the benefit of Franchisor.
5.04. Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without Franchisor's prior written consent,
is an infringement of Franchisor's exclusive right to use the Proprietary Marks,
and during the term of this Agreement and after the expiration
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or termination hereof, Franchisee covenants not to, directly or indirectly,
commit an act of infringement or contest or aid in contesting the validity or
ownership of Franchisor's Proprietary Marks, or take any other action in
derogation thereof.
5.05. Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the validity of the ownership of, or
Franchisor's right to use, the Proprietary Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right to control any administrative
proceeding or litigation involving the Proprietary Marks. In the event
Franchisor undertakes the defense or prosecution of any litigation relating to
the Proprietary Marks, Franchisee agrees to execute any and all documents and to
do such acts and things as may, in the opinion of counsel for Franchisor, be
necessary to carry out such defense or prosecution. Except to the extent that
such litigation is the result of Franchisee's use of the Proprietary Marks in a
manner inconsistent with the terms of this Agreement, Franchisor agrees to
reimburse Franchisee for its out of pocket costs in doing such acts and things,
except that Franchisee shall bear the salary costs of its employees.
5.06. Franchisee understands and agrees that its license with respect to
the Proprietary Marks is non-exclusive to the extent that Franchisor has and
retains the right under this Agreement:
A. To grant other licenses for the Proprietary Marks, in addition to
those licenses already granted to existing franchisees;
B. To develop and establish other franchise systems for the same,
similar, or different products or services utilizing proprietary
marks not now or hereafter designated as part of the System
licensed by this Agreement, and to grant licenses thereto,
without providing Franchisee any right therein; and
C. To develop and establish other systems for the sale, at wholesale
or retail, of similar or different products utilizing the same or
similar Proprietary Marks, without providing Franchisee any right
therein.
5.07. Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and identified by the Proprietary Marks used
in connection therewith shall inure directly and exclusively to the benefit of
Franchisor and is the property of Franchisor, and that upon the expiration or
termination of this Agreement or any other agreement, no monetary amount shall
be assigned as attributable to any goodwill associated with any of Franchisee's
activities in the operation of the Franchised Unit granted herein, or
Franchisee's use of the Proprietary Marks.
5.08. Franchisee understands and acknowledges that each and every detail
of the Popeyes System is important to Franchisee, Franchisor, and other
franchisees in order to develop and maintain high and uniform standards of
quality and services, and hence to protect the reputation and goodwill of
Popeyes restaurants. Accordingly, Franchisee covenants:
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A. To operate and advertise the Franchised Unit, at Franchisee's own
expense, under the name "Popeyes Chicken & Biscuits," without
prefix or suffix;
B. To adopt and use the Proprietary Marks licensed hereunder solely
in the manner prescribed by Franchisor;
C. To observe such reasonable requirements with respect to trademark
registration notices as Franchisor may from time to time direct
in the Confidential Operating Standards Manual or otherwise in
writing.
5.09. In order to preserve the validity and integrity of the Proprietary
Marks licensed herein and to assure that Franchisee is properly employing the
same in the operation of the Franchised Unit, Franchisor or its agents shall at
all reasonable times have the right to inspect Franchisee's operations,
premises, and Franchised Unit and make periodic evaluations of the services
provided and the products sold and used therein. Franchisee shall cooperate
with Franchisor's representatives in such inspections and render such assistance
to the representatives as may reasonably be requested.
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If Franchisee, or any successor to or assignee of Franchisee, is a
corporation, or limited liability company:
A. Franchisee shall furnish to Franchisor, upon execution or any
subsequent transfer of this Agreement, a copy of the Franchisee's
Articles of Incorporation, Certificate of Incorporation, Bylaws
and a list of shareholders showing the percentage interest of
each, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto;
B. Franchisee shall promptly furnish Franchisor, on a regular basis,
with certified copies of such corporate records material to the
Franchised Business as Franchisor may require from time to time
in the Confidential Operating Standards Manual or otherwise in
writing; and
C. Franchisee shall maintain stop-transfer instructions against the
transfer, on its records, of any securities with voting rights,
subject to the restrictions of this Agreement, and each stock
certificate of the corporate Franchisee representing each share
of stock, shall have conspicuously endorsed upon it the following
legend:
"THE TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND
CONDITIONS OF A POPEYES CHICKEN & BISCUITS FRANCHISE
AGREEMENT WITH AFC ENTERPRISES, INC. DATED
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___________. REFERENCE IS MADE TO THE PROVISIONS OF SAID
FRANCHISE AGREEMENT AND TO THE ARTICLES AND BY-LAWS OF THIS
CORPORATION."
6.02. If the Franchisee, or any successor to or assignee of Franchisee, is
a partnership, limited partnership or limited liability partnership, Franchisee
shall furnish to Franchisor, upon execution or any subsequent transfer of this
Agreement, a copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto.
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.
7.01. In order to protect the reputation and goodwill of Franchisor and
the Popeyes System and to maintain uniform standards of operation under
Franchisor's Proprietary Marks, Franchisee shall conduct the Franchised Business
in accordance with Franchisor's Confidential Operating Standards Manual
(hereinafter, together with any other manuals created or approved for use in
the operation of the Franchised Business granted herein, and all amendments and
updates thereto, the "Manual").
7.02. Franchisee shall at all times treat the Manual, and the information
contained therein, as confidential, and shall use all reasonable efforts to keep
such information secret and confidential. Franchisee shall not, at any time,
without Franchisor's prior written consent, copy, duplicate, record, or
otherwise make the Manual available to any unauthorized person or entity.
7.03. The Manual shall at all times remain the sole property of
Franchisor.
7.04. In order for Franchisee to benefit from new knowledge information,
methods and technology adopted and used by Franchisor in the operation of the
System, Franchisor may from time-to-time revise the Manual and Franchisee agrees
to adhere to and abide by all such revisions.
7.05. Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of any dispute as to the contents of
Franchisee's Manual, the terms of the master copy of the Manual maintained by
Franchisor at Franchisor's home office, shall be controlling.
7.06. The Manual is intended to further the purposes of this Agreement,
and is specifically incorporated, by reference, into this Agreement. Except as
otherwise set forth in this Agreement, in the event of a conflict between the
terms of this Agreement and the terms of the Manual, the terms of this Agreement
shall control.
VIII. TRAINING
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8.01. Franchisee, a partner of Franchisee if Franchisee is a partnership,
or a principal shareholder of Franchisee if Franchisee is a corporation, must
complete, to Franchisor's satisfaction, the Popeyes New Franchisee Orientation
Program ("NFOP") prior to opening the first franchised Popeyes Chicken &
Biscuits unit operated by Franchisee. NFOP shall consist of a maximum two day
event conducted in Corporate Headquarters in Atlanta, Georgia.
8.02. In addition to completing the NFOP, Franchisee (or a partner or
principal shareholder of Franchisee), and up to four (4) designated management
employees of Franchisee, must attend and complete, to Franchisor's satisfaction,
the Popeyes Operations Management Training program ("OMT"), prior to opening the
Franchised Unit. The exact number of Franchisee's management employees required
to attend and complete OMT shall be determined by Franchisor in its sole
discretion, but in no event shall the number be less than three (3). OMT shall
consist of up to six (6) weeks of in-store restaurant operations training at a
facility designated by Franchisor (a "Certified Training Facility") and certain
self-directed study programs. A management employee of Franchisee that
successfully completes OMT, shall be certified by Franchisor as an "OMT
Certified Manager".
8.03. Franchisee shall maintain the number of OMT Certified Managers
designated by the Franchisor in the employ of the Franchised Unit throughout the
term of this Agreement, which in no event shall be less than three (3). In the
event that Franchisee or any OMT Certified Manager ceases active employment at
the Franchised Unit, Franchisee must enroll a qualified replacement in the OMT
program within thirty (30) days of cessation of such individual's employment.
The replacement employee shall attend and complete the next regularly scheduled
OMT program to Franchisor's satisfaction.
8.04. The cost of conducting the NFOP and OMT programs (instruction and
required materials) shall be borne by Franchisor. All other expenses during
NFOP and OMT, including meals and lodging, wages and travel, shall be borne by
Franchisee.
8.05. Franchisor may make available to Franchisee or Franchisee's
employees, from time to time, such additional training programs as Franchisor,
in its sole discretion, may choose to conduct. Attendance at said training
programs may be mandatory. The cost of conducting such additional training
programs (instruction and required materials) shall be borne by Franchisor. All
other expenses during the training period, including meals and lodging, wages
and travel, shall be borne by the Franchisee.
IX. DUTIES OF THE FRANCHISOR
9.01. Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the Franchised Business, in person or by
electronic or written bulletins made available from time to time, as Franchisor
may deem appropriate.
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9.02. Franchisor, in its sole discretion, may provide opening assistance
to Franchisee at the Franchised Unit.
9.03. Franchisor will make available to Franchisee standard plans and
specifications to be utilized only in the construction of the Franchised Unit.
No modification to or deviations from the standard plans and specifications may
be made without the written consent of Franchisor. Franchisee shall obtain, at
its expense, further qualified architectural and engineering services to prepare
surveys, site and foundation plans, and to adapt the standard plans and
specifications to applicable local or state laws, regulations or ordinances.
Franchisee shall bear the cost of preparing plans containing deviations or
modifications from the standard plans.
9.04. Franchisor will loan one (1) copy of the Manual to Franchisee for
the duration of this Agreement, which the Manual contains the standards,
specifications, procedures and techniques of the Popeyes System.
9.05. Franchisor will continue its efforts to maintain high and uniform
standards of quality, cleanliness, appearance and service at all Popeyes
restaurants, to protect and enhance the reputation of the Popeyes System and the
demand for the products and services of the System. Franchisor will establish
uniform criteria for approving suppliers; make every reasonable effort to
disseminate its standards and specifications to prospective suppliers of the
Franchisee upon the written request of the Franchisee, provided that Franchisor
may elect not to make available to prospective suppliers the standards and
specifications for such food formulae or equipment designs deemed by Franchisor
in its sole discretion to be confidential; and may conduct periodic inspections
of the premises and evaluations of the products used and sold at the Franchised
Unit and in all other Popeyes restaurants.
9.06. Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
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X. DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the System is
important to Franchisor, Franchisee and other franchisees in order to develop
and maintain high and uniform operating standards, to increase the demand for
Popeyes products and services, and to protect the reputation and goodwill of
Franchisor. Accordingly, Franchisee agrees that:
10.01. Franchisee shall maintain, at all times during the term of this
Agreement, at Franchisee's expense, the premises of the Franchised Unit and all
fixtures, furnishings, signs, systems and equipment (hereinafter "improvements")
thereon or therein, in conformity with Franchisor's high standards and public
image and to make such additions, alterations, repairs, and replacements thereto
(but no others, without Franchisor's prior written consent) as may be required
by Franchisor, including but not limited to the following:
A. To keep the Franchised Unit in the highest degree of sanitation
and repair, including, without limitation, such periodic
repainting, repairs or replacement of impaired equipment, and
replacement of obsolete signs, as Franchisor may reasonably
direct;
B. To meet and maintain the highest governmental standards and
ratings applicable to the operation of the Franchised Business;
C. At its sole cost and expense, to complete a full reimaging,
renovation, refurbishment and modernization of the Franchised
Unit, within the time frame required by Franchisor, but no more
often than once every seven (7) years, including the building
design, parking lot, landscaping, equipment, signs, interior and
exterior decor items, fixtures, furnishings, trade dress, color
scheme, presentation of trademarks and service marks, supplies
and other products and materials, to meet Franchisor's then-
current standards, specifications and design criteria for Popeyes
restaurants, including without limitation, such structural
changes, remodeling and redecoration and such modifications to
existing improvements as may be necessary to do so (hereinafter,
a "Franchised Unit Renovation"). Franchisee shall not be
required to perform a Franchised Unit Renovation if there are
less than five (5) years remaining on the term of this Agreement.
Nothing herein shall be deemed to limit Franchisee's other
obligations, during the term of this Agreement, to operate the
Franchised Unit in accordance with Franchisor's standards and
specifications for the Popeyes System, including, but not limited
to, the obligations set forth in this Section X.
10.02. Franchisee shall operate the Franchised Unit in conformity with
such uniform methods, standards, and specifications as Franchisor may from time
to time prescribe in the Manual or otherwise in writing, to insure that the
highest degree of quality, service and cleanliness is
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uniformly maintained and to refrain from any deviation therefrom and from
otherwise operating in any manner which reflects adversely on Franchisor's name
and goodwill or on the Proprietary Marks, and in connection therewith:
A. To maintain in sufficient supply, and use at all times, only such
ingredients, products, materials, supplies, and paper goods as
conform to Franchisor's standards and specifications, and to
refrain from deviating therefrom by using non-conforming items,
without Franchisor's prior written consent;
B. To sell or offer for sale only such products and menu items that
have been expressly approved for sale in writing by Franchisor,
meet Franchisor's uniform standards of quality and quantity and
as have been prepared in accordance with Franchisor's methods and
techniques for product preparation; to sell or offer for sale the
minimum menu items specified in the Manual or otherwise in
writing; to refrain from any deviation from Franchisor's
standards and specifications for serving or selling the menu
items, without Franchisor's prior written consent; upon thirty
(30) days written notice from Franchisor, to sell or offer for
sale only such beverages produced by Franchisor's Designated
Beverage Supplier (as defined in Section 10.03 below); and to
discontinue selling or offering for sale such items as Franchisor
may, in its discretion, disapprove in writing at any time;
C. To use the premises of the Franchised Unit solely for the purpose
of conducting the business franchised hereunder, and to conduct
no other business or activity thereon, whether for profit or
otherwise, without Franchisor's prior written consent;
D. To keep the Franchised Unit open and in normal operation during
such business hours as Franchisor may prescribe in the Manual or
otherwise in writing;
E. To permit Franchisor or its agents, at any time during ordinary
business hours, to remove from the Franchised Unit samples of any
ingredients, products, materials, supplies, and paper goods used
in the operation of the Franchised Unit, without payment
therefor, in amounts reasonably necessary for testing by
Franchisor or an independent laboratory, to determine whether
such samples meet Franchisor's then-current standards and
specifications. In addition to any other remedies it may have
under this Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient, products,
materials, supplier or paper goods have been obtained from a
supplier not approved by Franchisor, or if the sample fails to
conform to Franchisor's specifications;
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F. To purchase, install and construct, at Franchisee's expense, all
improvements furnishings, signs and equipment specified in the
approved standard plans and specifications, and such other
furnishings, signs or equipment as Franchisor may reasonably
direct from time to time in the Manual or otherwise in writing;
and to refrain from installing or permitting to be installed on
or about the premises of the Franchised Unit, without
Franchisor's written consent, any improvements, furnishings,
signs or equipment not first approved in writing as meeting
Franchisor's standards and specifications;
G. To comply with all applicable federal, state and local laws,
regulations and ordinances pertaining to the operation of the
Franchised Business; and
H. Franchisee shall grant Franchisor and its agents the right to
enter upon the premises of the Franchised Unit at any time during
ordinary business hours for the purpose of conducting
inspections; cooperate with Franchisor's representatives in such
inspections by rendering such assistance as they may reasonably
request; and, upon notice from Franchisor or its agents, and
without limiting Franchisor's other rights under this Agreement,
take such steps as may be necessary immediately to correct the
deficiencies detected during any such inspection, including,
without limitation, immediately desisting from the further use of
any equipment, promotional materials, products, or supplies that
do not conform with Franchisor's then-current specifications,
standards, or requirements.
10.03. Franchisee shall (i) purchase all ingredients, products, materials,
supplies, and other items required in the operation of the Franchised Business
which are or incorporate trade-secrets of Franchisor, as designated by
Franchisor ("Trade-Secret Products") only from Franchisor or suppliers
designated by Franchisor; and (ii) upon thirty (30) days prior written notice
that Franchisor has designated an exclusive beverage supplier for any or all
beverage products sold within the Popeyes System ("Designated Beverage
Products"), Franchisee shall purchase all such Designated Beverage Products only
from Franchisor's designated beverage supplier ("Designated Beverage Supplier").
10.04. Franchisee shall purchase all ingredients, products, materials,
supplies, paper goods, and other items required for the operation of the
Franchised Business, except Trade-Secret Products and Designated Beverage
Products, solely from suppliers who demonstrate, to the continuing reasonable
satisfaction of Franchisor, the ability to meet Franchisor's reasonable
standards and specifications for such items; who possess adequate quality
controls and capacity to supply Franchisee's needs promptly and reliably; and
who have been approved in writing by Franchisor and such approval has not
thereafter been revoked. If Franchisee desires to purchase any such items from
an unapproved supplier, Franchisee shall submit to Franchisor a written request
for approval, or shall request the supplier itself to seek approval. Franchisor
shall have the right to require, as a condition of its approval, that its
representatives be permitted to inspect the supplier's facilities, and that
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samples from the supplier be delivered, at Franchisor's option, either to
Franchisor or to an independent laboratory designated by Franchisor for testing
prior to granting approval. A charge not to exceed Franchisor's reasonable cost
of inspection and the actual cost of testing shall be paid by the supplier or
Franchisee. Franchisor reserves the right, at its option, to reinspect the
facilities and products of any such approved supplier from time to time and to
revoke its approval upon failure of such supplier to continue to meet any of the
foregoing criteria.
10.05. Franchisor shall have the right, in its sole discretion, to
establish an advertising cooperative ("Cooperative") in any dominant market
area ("DMA"). In addition, a Cooperative for the DMA in which the Franchised
Unit is located may be established upon the favorable vote of the owners of all
Popeyes restaurants (including non-franchised restaurants) within the same DMA.
Each owner will be entitled to cast one (1) vote for each restaurant owned and
operated by that owner within such DMA. If 80% of all votes entitled to be
cast vote in favor of establishing a Cooperative, then such Cooperative shall be
formed.
A. Once a Cooperative is established in the DMA in which the
Franchised Unit is located, Franchisee shall become a member of
such Cooperative upon commencement of operation of the Franchised
Unit if the Cooperative is in existence at that time, or no later
than thirty (30) days after the date on which the Cooperative
commences operation. In no event shall Franchisee be required to
be a member of more than one Cooperative with respect to the
Franchised Unit.
B. If a Cooperative has been established, Franchisee shall
contribute an amount, to be determined by the Cooperative, which
when added to the amount required by Franchisor to be contributed
to the Advertising Fund, shall not be less than three percent
(3%) of its weekly Gross Sales.
C. Each Cooperative shall be organized and governed in a form and
manner, and shall commence operations on a date, approved in
advance by Franchisor in writing.
(1) Each Cooperative shall be organized for the exclusive
purpose of administering regional advertising programs and
developing, subject to Franchisor's approval, standardized
promotional materials for use by its members in local
advertising.
(2) No advertising or promotional plans or materials may be used
by a Cooperative or furnished to its members without the
prior approval of the Franchisor, pursuant to the procedures
and terms set forth in Section 10.07 hereof.
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(3) Franchisee shall pay its required contribution to the
Cooperative weekly on Gross Sales for the preceding week,
together with such statements or reports as may be required
by Franchisor, or by the Cooperative with the Franchisor's
prior written approval.
D. Franchisor, in its sole discretion, may grant an exemption to any
franchisee for any length of time from the requirement of
membership in a Cooperative, and/or from the obligation to
contribute thereto (including a reduction, deferral or waiver of
such contribution), upon written request of such franchisee
stating reasons supporting such exemption. Franchisor's decision
concerning such request for exemption shall be final. If an
exemption is granted to a franchisee, such franchisee shall be
required to expend on local advertising, on a monthly basis, the
same amount as would otherwise be assessed by the Cooperative, as
set forth in Section 10.05.B hereof.
10.06. All local advertising by Franchisee shall be in such media, and of
such type and format as Franchisor may approve; shall be conducted in a
dignified manner; and shall conform to such standards and requirements as
Franchisor may specify. Franchisee shall not use any advertising or promotional
plans or materials unless and until Franchisee has received written approval
from Franchisor, pursuant to the procedures and terms set forth in Section 10.07
hereof.
10.07. All advertising and promotional plans proposed to be used by
Franchisee or the Cooperative, where applicable, except such plans and materials
that have been previously approved by Franchisor shall be submitted to
Franchisor for Franchisor's written approval (except with respect to prices to
be charged) prior to any use thereof. Franchisor shall use its best efforts to
complete its review of Franchisee's proposed advertising and promotional plans
within fifteen (15) days after Franchisor receives such plans. If written
approval is not received by Franchisee or the Cooperative from Franchisor within
fifteen (15) days after receipt by Franchisor of such plans, Franchisor shall be
deemed to have disapproved such plans.
10.08. Franchisee shall, at Franchisor's request, require all of its
supervisory employees, as a condition of their employment, to execute an
agreement prohibiting them, during the term of their employment or thereafter,
from communicating, divulging, or using for the benefit of any person, persons,
partnership, association, corporation or other entity any confidential
information, trade secrets, knowledge, or know-how concerning the Popeyes System
or methods of operation of the Franchised Unit which may be acquired as a result
of their employment with Franchisee or other franchisees. A duplicate original
of each such agreement shall be provided by Franchisee to Franchisor immediately
upon execution.
10.09. If Franchisee operates more than one (1) Franchised Unit,
Franchisee shall have a supervisor, which may be Franchisee, to supervise and
coordinate the operation of the Franchised Units (hereinafter, a "Supervisor").
In addition to the foregoing, Franchisee shall employ an additional Supervisor
upon the opening of Franchisee's eighth (8th) Franchised Unit and upon the
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opening of each successive seventh (7th) Franchised Unit thereafter. Each
Supervisor shall attend and successfully complete the OMT program set forth in
Section 8.02 hereof prior to assuming any supervisory responsibilities and shall
meet such other standards as Franchisor may reasonably impose. No Supervisor
may have supervisory responsibilities for more than seven (7) Franchised Units.
10.10. If at anytime the Franchised Unit is proposed to be operated by an
entity or individual other than the Franchisee, Franchisor reserves the right to
review and approve the operating entity or individual and to require and approve
an operating agreement prior to such party's assumption of operations.
Franchisor may, in its sole discretion, reject either the operating entity, the
individual operator or the operating agreement. If approved by Franchisor, the
operating entity shall agree in writing to comply with all of Franchisee's
obligations under the Franchise Agreement as though the operating entity were
the franchisee designated therein, on such form as may be designated by
Franchisor. The operation of the Franchised Unit by any party other than
Franchisee, without Franchisor's prior written consent, shall be deemed a
material default of this Agreement, for which Franchisee may terminate this
Agreement pursuant to the provisions of Section 15.02. hereof.
10.11. Franchisee shall, prior to opening the Franchised Unit, become a
member of the Popeyes Operators Purchasing Cooperative Association (hereinafter
"POPCA"), or any successor thereto, shall remain a member in good standing of
POPCA throughout the term of this Agreement, and shall pay all reasonable
membership fees assessed by POPCA.
10.12 Franchisee shall, within thirty (30) days from receipt of written
notice from Franchisor, purchase and install computer hardware and software
equipment at the Franchised Unit and/or at Franchisee's principal business
office, which computer hardware shall include telecommunications devices, and
which software may be a single program or set of programs, all of which must be
obtained in accordance with the Franchisor's standards and specifications (the
"Required Computer Equipment"). The Required Computer Equipment shall permit 24
hour per day electronic communications between Franchisor and Franchisee
including access to the internet and Franchisor's intranet,"AFC On-Line" or any
successor thereto. Franchisee shall only be required to purchase and install the
Required Computer Equipment at one, central location, which shall satisfy the
conditions of this section 10.02 (or its equivalent) for all Franchised Units
operated by Franchisee.
10.13. Franchisee shall comply with all other requirements set forth in
this Agreement.
XI. INSURANCE
11.01. INSURANCE PROGRAM. Franchisee shall procure, prior to commencement
of construction of the Franchised Unit, and shall maintain in full force and
effect during the Term of this Agreement at Franchisee's expense, an insurance
policy or policies protecting Franchisee and Franchisor, and their officers,
directors, agents and employees, against any loss, liability, or expense
whatsoever from personal injury, death or property damage or casualty,
including, fire, lightning,
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theft, vandalism, malicious mischief, and other perils normally included in an
extended coverage endorsement arising from, occurring upon or in connection with
the construction, operation or occupancy of the Franchised Unit, as Franchisor
may reasonably require for its own and Franchisee's protection.
11.02. INSURANCE REQUIREMENTS. Such policy or policies shall be written
by an insurance company satisfactory to Franchisor, and shall include, at a
minimum the following coverage:
A. Workers' Compensation Insurance, with statutory limits as
-------------------------------
required by the laws and regulations applicable to the employees
of Franchisee who are engaged in the performance of their duties
relating to the Franchised Unit, including any pre-opening
training programs, as well as such other insurance as may be
required by statute or regulation of the state in which the
Franchised Unit is located.
B. Employer's Liability Insurance, for employee bodily injuries and
------------------------------
deaths, with a limit of $500,000 each accident.
C. Comprehensive or Commercial General Liability Insurance, covering
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claims for bodily injury, death and property damage, including
Premises and Operations, Independent Contractors, Products and
Completed Operations, Personal Injury, Contractual, and Broadform
Property Damage liability coverages, with limits as follows:
Occurrence/Aggregate Limit of $1,000,000 for bodily injury, death
and property damage each occurrence and $2,000,000 for general
aggregate
OR
Split liability limits of:
$1,000,000 for bodily injury per person
$1,000,000 for bodily injury per occurrence
$ 500,000 for property damage
D. Comprehensive Automobile Liability Insurance, if applicable,
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covering owned, non-owned and hired vehicles, with limits as
follows:
Combined Single Limit of $500,000 for bodily injury, death and
property damage per occurrence
OR
Split liability limits of:
$500,000 for bodily injury per person
$500,000 for bodily injury per occurrence
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$250,000 for property damage
E. All Risk Property Insurance, on a replacement cost basis, with
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limits as appropriate, covering the real property of Franchisee
and any real property which the Franchisee may be obligated to
insure by contract. Such real property may including building,
machinery, equipment, furniture, fixtures and inventory.
11.03. All such policies of insurance shall provide that the same shall
not be cancelled, modified or changed without first giving thirty (30) days
prior written notice thereof to Franchisor. No such cancellation, modification
or change shall affect Franchisee's obligation to maintain the insurance
coverages required by this Agreement. Except for Workers' Compensation
Insurance, Franchisor shall be named as an Additional Insured on all such
required policies. All liability insurance policies shall be written on an
"occurrence" policy form. Franchisee shall be responsible for payment of any
and all deductibles from insured claims under its policies of insurance. The
coverage afforded under any insurance policy obtained by Franchisee pursuant to
this Agreement shall be primary coverage regardless of whether or not Franchisor
has similar coverage. Franchisee shall not satisfy the requirements of this
Article XI unless and until certificates of such insurance, including renewals
thereof, have been delivered to and approved by Franchisor. Franchisee shall
not self-insure any of the insurance coverages required by this Agreement, or
non-subscribe to any State's applicable workmen's compensation laws without the
prior written consent of Franchisor. The minimum limits of coverage required by
this Agreement may be satisfied by a combination of primary and excess or
umbrella insurance policies. Franchisor shall have the right, at any time
during the term of this Agreement to increase the minimum limits of insurance
coverage or otherwise modify the insurance requirements of this Agreement upon
written notice in the Manual or as otherwise prescribed by Franchisor in
writing. If Franchisee shall fail to comply with any of the insurance
requirements herein, upon written notice to Franchisee by Franchisor, Franchisor
may, without any obligation to do so, procure such insurance and Franchisee
shall pay Franchisor, upon demand, the cost thereof plus interest at the maximum
rate permitted by law, and a reasonable administrative fee designated by
Franchisor.
11.04. NO LIMITATION ON COVERAGE. Franchisee's obligation to obtain and
maintain the foregoing policy or policies of insurance in the amounts specified
shall not be limited in any way by reason of any insurance which may be
maintained by Franchisor, nor shall Franchisee's performance of that obligation
relieve it of liability under the indemnity provisions set forth in Section
XVIII of this Agreement.
11.05. ISSUANCE OF INSURANCE. Franchisee must obtain the insurance
required by this Agreement no later than fifteen (15) days before the date on
which any construction is commenced. The Franchised Unit shall not be opened
for business prior to Franchisor's receipt of satisfactory evidence that all
insurance required by this Agreement is in effect. Upon obtaining such
insurance, and on each policy renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of payment therefor to
Franchisor, together with, upon request, copies of all
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policies and policy amendments. The evidence of insurance shall include a
statement by the insurer that the policy or policies will not be canceled or
materially altered without at least thirty (30) days prior written notice to
Franchisor.
XII. CONFIDENTIAL INFORMATION
12.01. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, corporation or other entity, any confidential
information, knowledge or know-how concerning the construction and methods of
operation of the Franchised Business which may be communicated to Franchisee, or
of which Franchisee may be apprised, by virtue of Franchisee's operation under
the terms of this Agreement. Franchisee shall divulge such confidential
information only to such employees of Franchisee as must have access to it in
order to exercise the franchise rights granted hereunder and to establish and
operate the Franchised Unit pursuant hereto and as Franchisee may be required by
law, provided Franchisee shall give Franchisor prior written notice of any such
required disclosure immediately upon receipt of notice by Franchisee in order
for Franchisor to have the opportunity to seek a protective order or take such
other actions as it deems appropriate under the circumstances.
12.02. Any and all information, knowledge, and know-how, including,
without limitation, drawings, materials, equipment, recipes, prepared mixtures
or blends of spices or other food products, and other data, which Franchisor
designates as confidential, and any information, knowledge, or know-how which
may be derived by analysis thereof, shall be deemed confidential for purposes of
this Agreement, except information which Franchisee can demonstrate came to
Franchisee's attention prior to disclosure thereof by Franchisor; or which, at
the time of disclosure thereof by Franchisor to Franchisee, had become a part of
the public domain, through publication or communication by others; or which,
after disclosure to Franchisee by Franchisor, becomes a part of the public
domain, through publication or communication by others.
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XIII. COVENANTS
13.01. Franchisee covenants that, during the term of the Agreement, except
as otherwise approved in writing by Franchisor, Franchisee or, alternatively,
one designated management employee if that employee assumes primary
responsibility for the operation of the Franchised Unit, shall devote full time,
energy and best efforts to the management and operation of the Franchised
Business.
13.02. Franchisee acknowledges that, pursuant to this Agreement,
Franchisee will receive valuable specialized training and confidential
information, including without limitation, information regarding the
operational, sales, promotional, and marketing methods, procedures and
techniques of Franchisor and the System.
Franchisee covenants that, during the term of this Agreement, Franchisee
(who, unless otherwise specified, shall include, for purposes of this Section
XIII, collectively and individually, all officers, directors and holders of a
beneficial interest of five percent (5%) or more of the securities with voting
rights of Franchisee and of any corporation, directly or indirectly controlling
Franchisee, if Franchisee is a corporation, and the general partner and any
limited partners, including any corporation, and the officers, directors and
holders of a beneficial interest of five percent (5%) or more of securities with
voting rights of a corporation which controls, directly or indirectly, any
general or limited partner, if Franchisee is a partnership) shall not, either
directly or indirectly, for itself or on behalf of, or in conjunction with, any
person, persons, partnership, association or corporation or other entity:
A. Divert or attempt to divert any business or customer of the
business franchised hereunder to any competitor by direct or
indirect inducements or otherwise, or to do or perform, directly
or indirectly, any other act injurious or prejudicial to the
goodwill associated with Franchisor's Proprietary Marks and the
System;
B. Employ or seek to employ any person who is, at that time,
employed by Franchisor or by any other Popeyes franchisee, or
otherwise, directly or indirectly, induce such person to leave
his or her employment therewith; or
C. Own, maintain, operate, engage in, or have any interest in any
fast food (either takeout, on premises consumption, or a
combination thereof) restaurant that specializes in the sale of
chicken ("Chicken Restaurant"); provided, however, that the term
"Chicken Restaurant" shall not apply to any business operated by
Franchisee under a franchise agreement with Franchisor or an
affiliate of Franchisor.
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13.03. Franchisee covenants that Franchisee shall not, regardless of the
cause for termination, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, persons, partnership, association,
corporation or other entity:
A. For a period of two (2) years following the termination or
expiration of this Agreement, own, maintain, engage in, or have
any interest in any Chicken Restaurant which is located within a
radius of ten (10) miles of the location specified in Section I
hereof, or the location of any other Popeyes Chicken & Biscuits
restaurant under the System, whether owned by Franchisor or any
other Popeyes franchisee, which is in existence as of the date of
expiration or termination of this Agreement; or
B. For a period of one (1) year following the termination or
expiration of this Agreement, employ or seek to employ any person
who is, at the time, employed by Franchisor or by any other
Popeyes franchisee, or otherwise, directly or indirectly, induce
such person to leave his or her employment therewith.
13.04. At Franchisor's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XIII
(including covenants applicable upon the termination of a person's relationship
with Franchisee) in a form satisfactory to Franchisor, including, without
limitation, specific identification of Franchisor as a third party beneficiary
of such covenants with the independent right to enforce them, from any or all of
the following persons:
A. All managers and assistant managers of the Franchised Unit, and
any other personnel employed by Franchisee who have received or
will receive training from Franchisor;
B. All officers, directors, and holders of a direct or indirect
beneficial ownership interest of five percent (5%) or more in
Franchisee.
The failure of Franchisee to obtain execution of a covenant required by
this Section 13.04 shall constitute a material breach of this Agreement. A
duplicate original of each such covenant shall be provided by Franchisee to
Franchisor immediately upon execution.
13.05. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section XIII, is held unreasonable
or unenforceable by a court or agency having jurisdiction in a final decision,
Franchisee expressly agrees to be bound by any lesser covenant subsumed within
the terms of such covenant that imposes the maximum duty permitted by law, as if
the resulting covenant was separately stated in and made a part of this Section
XIII.
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A. RIGHT TO REDUCE COVENANTS. Franchisee understands and
-------------------------
acknowledges that Franchisor shall have the right, in its sole
discretion, to reduce the scope of any covenant set forth in
Sections 13.02. and 13.03. of this Agreement, or any portion
thereof, without Franchisee's consent, effective immediately upon
receipt by Franchisee of written notice thereof, and Franchisee
agrees that it shall comply with any covenant as so modified,
which shall be fully enforceable notwithstanding the provisions
of Section XXII hereof.
B. INJUNCTIVE RELIEF. The parties acknowledge that it will be
-----------------
difficult to ascertain with any degree of certainty the amount of
damages resulting from a breach by Franchisee of any of the
covenants contained in this Section XIII. It is further agreed
and acknowledged that any violation by Franchisee of any of said
covenants will cause irreparable harm to Franchisor.
Accordingly, Franchisee agrees that upon proof of the existence
of a violation of any of said covenants, Franchisor will be
entitled to injunctive relief against Franchisee in any court of
competent jurisdiction having authority to grant such relief,
together with all costs and reasonable attorney's fees incurred
by Franchisor in bringing such action.
XIV. TRANSFERABILITY OF INTEREST
14.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right to
transfer or assign its interest in this Agreement to any person, persons,
partnership, association, corporation, or other entity. If Franchisor's
assignee assumes all the obligations of Franchisor hereunder and sends
Franchisee written notice of the assignment so attesting, Franchisee agrees
promptly to execute a general release of Franchisor, and any affiliates of
Franchisor, from claims or liabilities of Franchisor under this Agreement.
14.02. Transfer by Franchisee. Franchisee understands and acknowledges
----------------------
that the rights and duties set forth in this Agreement are personal to
Franchisee, and that Franchisor has granted this Agreement in reliance on
Franchisee's business skill and financial capacity. Accordingly, neither (i)
Franchisee, nor (ii) any immediate or remote successor to Franchisee, nor (iii)
any individual, partnership, corporation or other legal entity which directly or
indirectly owns any interest in the Franchisee or in this Franchise Agreement,
shall sell, assign, transfer, convey, donate, pledge, mortgage, or otherwise
encumber any direct or indirect interest in this Agreement or in any legal
entity which owns the Franchised Business without the prior written consent of
Franchisor. Acceptance by Franchisor of any royalty fee, advertising fee or any
other amount accruing hereunder from any third party, including, but not limited
to any proposed transferee, shall not constitute Franchisor's approval of such
party as a transferee or the transfer of this Franchise Agreement to such party.
Any purported assignment or transfer, by operation of law or otherwise, not
having the written consent of Franchisor, shall be null and void, and shall
constitute a material breach of this
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Agreement, for which Franchisor may then terminate without opportunity to cure
pursuant to Section 15.02.E. of this Agreement.
14.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in Section 14.02., when requested;
provided, however, that prior to the time of transfer;
A. All of Franchisee's accrued monetary obligations to Franchisor
and its subsidiaries and affiliates shall have been satisfied;
B. Franchisee shall have agreed to remain obligated under the
covenants contained in Section XIII hereof as if this Agreement
had been terminated on the date of the transfer;
C. The transferee must be of good moral character and reputation, in
the reasonable judgment of the Franchisor;
D. The Franchisor shall have determined, to its satisfaction, that
the transferee's qualifications meet the Franchisor's then
current criteria for new franchisees;
E. Franchisee and transferee shall execute a written assignment, in
a form satisfactory to Franchisor, pursuant to which the
transferee shall assume all of the obligations of Franchisee
under this Agreement and Franchisee shall unconditionally
release any and all claims Franchisee might have against
Franchisor as of the date of the assignment;
F. The transferee shall execute the then-current form of Franchise
Agreement and such other then-current ancillary agreements as
Franchisor may reasonably require. The then-current form of
Franchise Agreement may have significantly different provisions
including, without limitation, a higher royalty fee and
advertising contribution than that contained in this Agreement.
The then-current form of Franchise Agreement will expire on the
expiration date of this Agreement and will contain the same
renewal rights, if any, as are available to Franchisee herein;
G. The transferee shall agree at its sole cost and expense, to (i)
complete a Franchised Unit Renovation, within the time frame
required by Franchisor, unless a Franchised Unit Renovation was
completed within seven (7) years prior to the date of the
transfer and (ii) perform such other scope of work as may be
determined by Franchisor.
H. The transferee and such other individuals as may be designated by
Franchisor in the Manual or otherwise in writing, must have
successfully completed the
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training course then in effect for new franchisees. If the
Franchised Unit is the transferee's first Popeyes restaurant, the
transferee shall pay to Franchisor the then-standard Training
Fee;
I. If the transferee is a partnership, the partnership agreement
shall provide that further assignments or transfers of any
interest in the partnership are subject to all restrictions
imposed upon assignments and transfers in this Agreement;
J. Franchisee shall, at Franchisor's option and request, execute a
written guarantee of the transferee's obligations under the
Agreement, which guarantee shall not exceed a period of three (3)
years from the date of transfer.
K. The Franchisee shall pay to Franchisor a transfer fee of Five
Thousand Dollars ($5,000), to cover Franchisor's administrative
expenses in connection with the transfer; however no additional
franchise fee shall be charged by Franchisor for a transfer. If
the transferee is (i) a corporation formed by Franchisee for the
convenience of ownership and in which the Franchisee is the sole
shareholder, or (ii) an existing Franchisee under this Agreement,
no transfer fee shall be required.
14.04. Grant of Security Interest. Franchisee shall grant no security
--------------------------
interest in this Agreement, the Franchised Business, or in any of its assets
unless the secured party agrees that, in the event of any default by Franchisee
under any documents related to the security interest (i) Franchisor shall be
provided with notice of default and given a reasonable time within which to cure
said default, (ii) Franchisor shall have the right and option to be substituted
as obligor to the secured party and to cure any default of Franchisee or to
purchase the rights of the secured party upon payment of all sums then due to
such secured party, except such amounts which may have become due as a result of
any acceleration of the payment dates based upon the Franchisee's default, and
(iii) the secured party shall agree to such other requirements as Franchisor, in
its sole discretion, deems reasonable and necessary to protect the integrity of
the Proprietary Marks and the Popeyes System.
14.05. Transfer on Death or Mental Incapacity. Upon the death or mental
--------------------------------------
incapacity of any person with an interest in this Agreement, the Franchised
Business or Franchisee, the executor, administrator, or personal representative
of such person shall transfer his interest to a third party approved by
Franchisor within 12 months after such death or mental incapacity. Such
transfer, including, without limitation, transfer by devise or inheritance,
shall be subject to the same conditions as any inter vivos transfer. However,
----- -----
in the case of transfer by devise or inheritance, if the heirs or beneficiaries
of any such person are unable to meet the conditions in this Section XIV, the
personal representative of the deceased Franchisee shall have a reasonable time,
but in no event more than eighteen (18) months from Franchisee's death, to
dispose of the deceased's interest in this Agreement and the business conducted
pursuant hereto, which disposition shall be subject to all the terms and
conditions for assignments and transfers contained in this Agreement. If the
interest is not
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disposed of within twelve (12) or eighteen (18) months, whichever is applicable,
Franchisor may terminate this Agreement.
14.06. Right of First Refusal. Any party holding an interest in this
----------------------
Agreement, the Franchised Business or in Franchisee, and who desires to accept a
bona fide offer from a third party to purchase such interest, shall notify
- ---- ----
Franchisor in writing of such offer within ten (10) days of receipt of such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require. Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor. Any material change in
the terms of any offer prior to closing shall constitute a new offer subject to
the same rights of first refusal by Franchisor as in the case of an initial
offer. Failure of Franchisor to exercise the option afforded by this Section
14.06. shall not constitute a waiver of any other provisions of this Agreement,
including all of the requirements of this Section XIV, with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Franchisee, or the Franchised Business proposed to
be sold for the reasonable equivalent in cash. If the parties cannot agree
within a reasonable time as to the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding upon the parties.
14.07. Offerings by Franchisee. Securities or partnership interests in
-----------------------
Franchisee may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be submitted to Franchisor for review prior to their being filed
with any governmental agency; and any materials to be used in any exempt
offering shall be submitted to Franchisor for review prior to their use. No
offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the underwriting, issuance, or
offering of securities by Franchisee; and Franchisor's review of any offering
shall be limited solely to the subject of the relationship between Franchisee
and Franchisor. Franchisee and the other participants in the offering shall
fully indemnify Franchisor in connection with the offering. For each proposed
offering, Franchisee shall pay to Franchisor a non-refundable fee of Five
Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse
Franchisor for its reasonable costs and expenses associated with reviewing the
proposed offering, including, without limitation, legal and accounting fees.
Franchisee shall give Franchisor written notice at least sixty (60) days prior
to the date of commencement any offering or other transaction covered by this
Section 14.07.
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XV. TERMINATION
15.01. Franchisee shall be deemed to be in default under this Agreement,
and all rights granted herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee
or such a petition is filed against Franchisee and not opposed by Franchisee; or
if Franchisee is adjudicated bankrupt or insolvent; or if a receiver or other
custodian (permanent or temporary) of Franchisee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under the applicable law of any
jurisdiction should be instituted by or against Franchisee; or if a final
judgment remains unsatisfied or of record for thirty (30) days or longer (unless
a supersedeas bond is filed); or if Franchisee is dissolved; or if execution is
levied against Franchisee's property or business; or if suit to foreclose any
lien or mortgage against the premises or equipment of any Franchised Unit
developed hereunder is instituted against the Franchisee and not dismissed
within thirty (30) days; or if the real or personal property of any Restaurant
developed hereunder shall be sold after levy thereon by any sheriff, marshal, or
constable.
15.02. Franchisee shall be deemed to be in default and Franchisor may, at
its option, terminate this Agreement and all rights granted hereunder without
affording Franchisee any opportunity to cure the default upon the occurrence of
any of the following events:
A. If Franchisee fails to complete construction of the Franchised
Unit and opens for business within one hundred eighty (180) days
of execution of this Agreement. Franchisor may, in its sole
discretion, extend this period to address unforeseen construction
delays, not within the control of Franchisee.
B. If Franchisee at any time ceases to operate the Franchised Unit
or otherwise abandons the Franchised Unit, or loses the right to
possession of the premises of the Franchised Unit, or otherwise
forfeits the right to do or transact business in the jurisdiction
where the Franchised Unit is located; provided, however, that if,
through no fault of Franchisee, the premises are damaged or
destroyed by an event not within the control of Franchisee such
that repairs or reconstruction cannot be completed within one-
hundred eighty (180) days thereafter, then Franchisee shall have
thirty (30) days after such event in which to apply for
Franchisor's approval to relocate and/or reconstruct the
premises, which approval shall not be unreasonably withheld, but
may be conditioned upon the payment of an agreed minimum royalty
to Franchisor during the period in which the Franchised Unit is
not in operation;
C. If Franchisee is convicted of or pleads guilty to a felony, a
crime involving moral turpitude, or any other crime or offense
that Franchisor believes is reasonably likely to have an adverse
effect on the System, the Proprietary Marks, the goodwill
associated therewith, or Franchisor's interest therein;
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D. If a threat or danger to public health or safety results from the
construction, maintenance, or operation of the Franchised Unit;
E. If Franchisee, or any partner or shareholder of Franchisee
purports to transfer any rights or obligations under this
Agreement or any interest in Franchisee to any third party
without Franchisor's prior written consent, contrary to the terms
of Section XIV hereof;
F. If Franchisee fails to comply with the in-term covenants in
Section 13.02. hereof or fails to obtain execution of the
covenants required under Sections 10.08. or 13.04. hereof;
G. If, contrary to the terms of Section VII hereof, Franchisee
discloses or divulges the contents of the Manual or any other
confidential information provided to Franchisee by Franchisor;
H. If an approved transfer is not effected as required by Section
14.05. hereof, following Franchisee's death or mental incapacity;
I. If Franchisee knowingly maintains false books or records, or
submits any false reports to Franchisor;
J. If Franchisee or any individual, group, association, limited or
general partnership, corporation or other business entity which
directly or indirectly controls, is controlled by, or is under
common control with Franchisee; or which directly or indirectly
owns, controls, or holds power to vote ten percent (10%) or more
of the outstanding voting securities of Franchisee; or which has
in common with Franchisee one or more partners, officers,
directors, trustees, branch managers, or other persons occupying
similar status or performing similar functions ("Affiliate")
commits any act of default under any other Franchise Agreement,
Development Agreement (except for failure to meet the development
schedule thereunder), asset purchase agreement, promissory note
or any other agreement entered into by Franchisee or an Affiliate
of Franchisee, and Franchisor, or any parent, subsidiary,
affiliate, predecessor or successor to Franchisor;
K. If Franchisee, after or during a default pursuant to Section
15.03. hereof, commits the same default again, whether or not
such default is cured after notice; or
L. If Franchisee defaults more than once in any twelve (12) month
period under Section 15.03. hereof for failure to substantially
comply with any of the requirements imposed by this Agreement,
whether or not cured after notice.
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M. If Franchisee refuses to permit Franchisor or its agents to enter
upon the premises of the Franchised Unit to conduct any periodic
inspection as set forth in Sections 5.09. and 10.02.H. hereof.
N. If Franchisee uses any of Franchisor's Proprietary Marks in any
unauthorized manner or is otherwise in default of the provisions
of Section V hereof.
15.03. Except as provided in Sections 15.01. and 15.02. of this Agreement,
upon any default by Franchisee which is susceptible of being cured, Franchisor
may terminate this Agreement only by giving written Notice of Termination
stating the nature of such default to Franchisee at least ten (10) days prior to
the effective date of termination if the default is for failure to pay
royalties, Advertising Fund contributions (including Cooperative contributions,
if any are due and/or any other financial obligations owed to Franchisor by
Franchisee), and thirty (30) days, prior to the effective date of termination
for any other default, provided, however, that Franchisee may avoid termination
by curing such default to Franchisor's satisfaction within the ten (10) day or
thirty (30) day period, as applicable. If any such default is not cured within
the specified time, this Agreement shall terminate without further notice to
Franchisee effective immediately upon the expiration of the ten (10) day or
thirty (30) day period, as applicable, or such longer period as applicable law
may require. Notwithstanding anything to the contrary set forth in this
Agreement, Franchisee hereby acknowledges that any agreement between Franchisee
and Franchisor relating to past due amounts accruing hereunder, (an "Arrearage
Agreement"), including, but not limited to any promissory note or amendment to
this agreement shall be deemed to be a material part of this agreement and shall
be incorporated herein by reference. A default under any Arrearage Agreement
shall be deemed a material default of this Franchise Agreement, regardless of
the reason Franchisee fails to pay the amount which is the subject of such
Arrearage Agreement.
15.04. Franchisee shall indemnify and hold Franchisor harmless for all
costs, expenses and any losses incurred by Franchisor in enforcing the
provisions hereof, or in upholding the propriety of any action or determination
by Franchisor pursuant to this Agreement, or in defending any claims made by
Franchisee against Franchisor, or arising in any manner from Franchisee's breach
of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable litigation expenses and attorney's fees incurred
by Franchisor in connection with any threatened or pending litigation relating
to any part of this Agreement, unless Franchisee shall be found, after due legal
proceedings, to have complied with all of the terms, provisions, conditions and
covenants hereof.
XVI. EFFECT OF TERMINATION OR EXPIRATION
16.01. Upon termination or expiration of this Agreement, all rights
granted herein shall forthwith terminate, and:
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A. Franchisee shall immediately cease to operate the Franchised Unit
as a Popeyes restaurant, and shall not thereafter, directly or
indirectly, represent to the public that the restaurant is a
Popeyes restaurant;
B. Franchisee shall immediately and permanently cease to use, by
advertising or in any manner whatsoever, any menus, recipes,
confidential food for formulae, equipment, methods, procedures,
and the techniques associated with the System, Franchisor's
Proprietary Marks, and Franchisor's other trade names, trademarks
and service marks associated with the Popeyes System. In
particular, and without limitation, Franchisee shall cease to use
all signs, furniture, fixtures, equipment, advertising materials,
stationery, forms, packaging, containers and any other articles
which display the Proprietary Marks;
C. Franchisee agrees, in the event Franchisee continues to operate
or subsequently begins to operate restaurants or other
businesses, not to use any reproduction, counterfeit, copy, or
colorable imitation of the Proprietary Marks in conjunction with
such other business which is likely to cause confusion or mistake
or to deceive, and further agrees not to utilize any trade dress,
designation of origin, description, or representation which
falsely suggests or represents an association or connection with
Franchisor;
D. Franchisee agrees, upon termination or expiration of this
Agreement or upon cessation of the Franchised Business at the
location specified in Section I hereof for any reason, whether or
not Franchisee continues to operate any business at such
location, and whether or not Franchisee owns or leases the
location, to make such modifications or alterations to the
Franchised Unit premises immediately upon termination or
expiration of this Agreement or cessation of operation of the
Franchised Business as may be necessary to prevent the operation
of any businesses thereon by Franchisee or others in derogation
of this Section XVI, and shall make such specified additional
changes thereto as Franchisor may reasonably request for that
purpose. The modifications and alterations required by this
Section XVI shall include, but are not limited to, removal of all
trade dress, proprietary marks and other indicia of the Popeyes
System;
E. Franchisee shall immediately pay all sums owing to Franchisor and
its subsidiaries and affiliates. In the event of termination for
any default by Franchisee, such sums shall include all damages,
costs and expenses, including reasonable attorneys' fees,
incurred by Franchisor as a result of the default; and
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F. Franchisee shall immediately turn over to Franchisor the Manual,
all other manuals, records, files, instructions, correspondence
and any and all other materials relating to the operation of the
Franchised Business in Franchisee's possession and all copies
thereof (all of which are acknowledged to be Franchisor's
property) and shall retain no copy or record of any of the
foregoing, with the exception of Franchisee's copy of this
Agreement, any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with
any provision of law.
16.02. Franchisor shall have the right (but not the duty) to be exercised
by notice of intent to do so within thirty (30) days after termination or
expiration of this Agreement, to purchase any and all improvements, equipment,
advertising and promotional materials, ingredients, products, materials,
supplies, paper goods and any items bearing Franchisor's Proprietary Marks at
current fair market value. If the parties cannot agree on a fair market value
within a reasonable time, an independent appraiser shall be designated by
Franchisor, and his determination of fair market value shall be binding. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set-off all amounts due from Franchisee under this Agreement
and the cost of the appraisal, if any, against any payment therefor.
16.03. In the event the premises are leased to Franchisee, Franchisee
shall, upon termination of this Agreement and upon request by Franchisor,
immediately assign, set over and transfer unto Franchisor, at Franchisor's sole
option and discretion, said lease and the premises, including improvements. Any
such lease entered into by Franchisee shall contain a clause specifying the
landlord's consent to assign such lease to Franchisor or its assignee in the
event this Agreement is terminated.
16.04. Franchisee shall pay to Franchisor all damages, costs, and
expenses, including reasonable attorneys' fees, incurred by Franchisor in
seeking recovery of damages caused by any action of Franchisee in violation of,
or in obtaining injunctive relief for the enforcement of, any portion of this
Section XVI. Further, Franchisee acknowledges and agrees that any failure to
comply with the provisions of this Section XVI, shall result in irreparable
injury to Franchisor.
16.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
16.06. Franchisee shall comply with the covenants contained in Section
XIII of this Agreement.
16.07. Franchisee shall execute such documents as Franchisor may
reasonably require to effectuate termination of the franchise and Franchisee's
rights to use the trademarks and systems of Franchisor.
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XVII. TAXES, PERMITS, AND INDEBTEDNESS
17.01. Franchisee shall promptly pay when due all taxes, accounts and
other indebtedness of every kind incurred by Franchisee in the conduct of the
Franchised Business under this Agreement.
17.02. Franchisee, in the conduct of the Franchised Business, shall comply
with all applicable laws and regulations, and shall timely obtain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
the businesses operated under this Agreement, including, without limitation,
licenses to do business, trade name registrations, sales tax permits and fire
clearances.
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
18.01. This Agreement does not constitute Franchisee an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever. It is understood and agreed that Franchisee shall be an
independent contractor and is in no way authorized to make any contract,
agreement, warranty, or representation on behalf of Franchisor. The parties
further agree that this Agreement does not create any fiduciary relationship
between them.
18.02. During the term of this Agreement and any extensions hereof,
Franchisee agrees to take such action as Franchisor deems reasonably necessary
for Franchisee to inform and hold itself out to the public as an independent
contractor operating the Franchised Business pursuant to a franchise from
Franchisor, including, without limitation, exhibiting a notice of that fact at
the Franchised Business in form and substance satisfactory to Franchisor.
18.03 Franchisee agrees to defend, indemnify and hold harmless Franchisor,
its parent, subsidiaries and affiliates, and their respective officers,
directors, employees, agents, successors and assigns from all claims, demands,
losses, damages, liabilities, cost and expenses (including attorney's fees and
expense of litigation) resulting from, or alleged to have resulted from, or in
connection with Franchisee's operation of the Franchised Business, including,
but not limited to, any claim or actions based on or arising out of any
injuries, including death to persons or damages to or destruction of property,
sustained or alleged to have been sustained in connection with or to have arisen
out of or incidental to the Franchised Business and/or the performance of this
contract by Franchisee, its agents, employees, and/or its subcontractors, their
agents and employees, or anyone for whose acts they may be liable, regardless of
whether or not such claim, demand, damage, loss, liability, cost or expense is
caused in whole or in part by the negligence of Franchisor, Franchisor's
representative, or the employees, agents, invitees, or licensees thereof.
18.04 Franchisor shall advise Franchisee in the event Franchisor receives
notice that a claim has been or may be filed with respect to a matter covered by
this Agreement, and Franchisee
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shall immediately assume the defense thereof at Franchisee's sole cost and
expense. In any event, Franchisor will have the right, through counsel of its
choice, to control any matter to the extent it could directly or indirectly
affect Franchisor and/or its parent, subsidiaries or affiliates or their
officers, directors, employees, agents, successors or assigns. If Franchisee
fails to assume such defense, Franchisor may defend, settle, and litigate such
action in the manner it deems appropriate and Franchisee shall, immediately upon
demand, pay to Franchisor all costs (including attorney's fees and cost of
litigation) incurred by Franchisor in affecting such defense, in addition to any
sum which Franchisor may pay by reason of any settlement or judgment against
Franchisor.
18.05 Franchisor's right to indemnity hereunder shall exist
notwithstanding that joint or several liability may be imposed upon Franchisor
by statute, ordinance, regulation or judicial decision.
18.06 Franchisee agrees to pay Franchisor all expenses including
attorney's fees and court costs, incurred by Franchisor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy any
defaults of or enforce any rights under this Agreement, effect termination of
this Agreement or collect any amounts due under this Agreement.
XIX. APPROVALS AND WAIVERS
19.01. Whenever this Agreement requires the prior approval of Franchisor,
Franchisee shall make a timely written request to Franchisor therefor, and such
approval or consent shall be in writing.
19.02. Franchisor makes no warranties or guarantees upon which Franchisee
may rely, and assumes no liability or obligation to Franchisee or any third
party to which Franchisor would not otherwise be subject, by providing any
waiver, approval, advice, consent, or suggestions to Franchisee in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
19.03. No failure of Franchisor to exercise any power reserved to it in
this Agreement, or to insist upon compliance by Franchisee with any obligation
or condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with the terms of this Agreement. Waiver by
Franchisor of any particular default shall not affect or impair Franchisor's
right in respect to any subsequent default of the same or of a different nature,
nor shall any delay, forbearance, or omission of Franchisor to exercise any
power or rights arising out of any breach or default by Franchisee of any of the
terms, provisions, or covenants of this Agreement, affect or impair Franchisor's
rights, nor shall such constitute a waiver by Franchisor of any rights,
hereunder or right to declare any subsequent breach or default. Subsequent
acceptance by Franchisor of any payments due to it shall not be deemed to be a
waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants, or conditions of this Agreement.
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<PAGE>
XX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered , sent by registered mail, or by other
means which will provide evidence of the date received to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:
Notices to Franchisor: Franchise Department
AFC ENTERPRISES, INC.
Six Concourse Pkwy., Suite 1700
Atlanta, Georgia 30328-5352
cc: Legal Department
Notices to Franchisee: ____________________________
____________________________
____________________________
[ATT:] ______________________
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement shall be addressed to the party to be notified
at its most current principal business address of which the notifying party has
been notified and shall be deemed so delivered (i) at the time delivered by
hand; (ii) one (1) business day after sending by telegraph, facsimile or
comparable electronic system; or (iii) if sent by registered or certified mail
or by other means which affords the sender evidence of delivery, on the date and
time of receipt or attempted delivery if delivery has been refused or rendered
impossible by the party being notified.
XXI. SEVERABILITY AND CONSTRUCTION
21.01. Except as expressly provided to the contrary herein, each section,
paragraph, part, term, and/or provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties hereto; and said invalid
portions, sections, parts, terms, and/or provisions shall be deemed not to be
part of this Agreement.
21.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Franchisee, Franchisor, Franchisor's officer,
directors, and employees, and Franchisee's permitted
37
<PAGE>
and Franchisor's respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
21.03. All captions in the Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
21.04. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgements, promises, covenants, agreements and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto on behalf of Franchisee.
21.05. This Agreement may be executed in counterparts, and each copy so
executed shall be deemed an original.
XXII. ENTIRE AGREEMENT: SURVIVAL
22.01. This Agreement, the documents referred to herein, the Development
Agreement, if any, and the exhibits hereto, constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof and supersede any and all prior agreements. Except for those
permitted to be made unilaterally by Franchisor hereunder, no amendment, change,
modification or variance of this Agreement shall be binding on either party
unless in writing and executed by Franchisor and Franchisee. Representations by
either party, whether oral, in writing, electronic or otherwise, that are not
set forth in this Agreement shall not be binding upon the party alleged to have
made such representations and shall be of no force or effect.
I have read this Section 22.01 and agree that I have not been
induced by and am not relying upon any representation not
contained in this Agreement.
_________________________________, Franchisee.
22.02. Notwithstanding anything herein to the contrary, upon the
termination of this Agreement for any reason whatsoever (including the execution
of a subsequent Franchise Agreement pursuant to the provisions of Sections
2.02.B. and 14.03.F.), or upon the expiration of the Term hereof, any provisions
of this Agreement which, by their nature, extend beyond the expiration or
termination of this Agreement, shall survive termination or expiration and be
fully binding and enforceable as though such termination or expiration had not
occurred.
38
<PAGE>
XXIII. ACKNOWLEDGMENTS
23.01. Franchisee acknowledges that Franchisee has conducted an
independent investigation of the Popeyes franchise and recognized
that the business venture contemplated by this Agreement involves
business risks and Franchisee's success will be largely dependent
upon the ability of the Franchisee as an independent business
entity.
FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE
___________ ACKNOWLEDGES THAT FRANCHISEE HAS NOT RECEIVED, ANY WARRANTY OR
Franchisee GUARANTY, EXPRESSED OR IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS
must initial OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT.
23.02. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED A
COMPLETED COPY OF THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND
THE AGREEMENTS RELATING THERETO, IF ANY, AT LEAST FIVE (5) BUSINESS
DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED.
FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED THE DISCLOSURE
DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE FEDERAL TRADE
___________ COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
Franchisee CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST
must initial TEN (10) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT
WAS EXECUTED.
23.03. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS READ AND
UNDERSTOOD THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND
AGREEMENTS RELATING THERETO, IF ANY, AND THAT FRANCHISOR HAS
ACCORDED FRANCHISEE AMPLE TIME AND OPPORTUNITY AND HAS ENCOURAGED
___________ FRANCHISEE TO CONSULT WITH ADVISORS OF FRANCHISEE'S OWN CHOOSING
Franchisee ABOUT THE POTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS
must initial AGREEMENT.
23.04. FRANCHISEE RECOGNIZES AND UNDERSTANDS THAT IT MAY INCUR
OTHER EXPENSES AND/OR OBLIGATIONS AS PART OF THE INITIAL INVESTMENT
IN THE FRANCHISED BUSINESS WHICH THE TERMS OF THIS AGREEMENT MAY
NOT ADDRESS, AND WHICH INCLUDE WITHOUT LIMITATION: OPENING
___________ ADVERTISING, EQUIPMENT, FIXTURES, OTHER FIXED ASSETS, CONSTRUCTION,
Franchisee LEASEHOLD IMPROVEMENTS AND DECORATING COSTS AS WELL AS WORKING
must initial CAPITAL NECESSARY TO COMMENCE OPERATIONS.
39
<PAGE>
XXIV. APPLICABLE LAW: VENUE
24.01. APPLICABLE LAW. This Agreement takes effect upon its acceptance
and execution by Franchisor and shall be interpreted and construed under the
laws of the State of Georgia which laws shall prevail in the event of any
conflict of law (without regard to, and without giving effect to, the
application of Georgia choice of law or conflict of law rules) except to the
extent governed by the U. S. Trademark Act of 1946, 15 U.S.C. (S) 1051, et seq.
-- ---
(the " Lanham Act") as amended; provided, however, that if the covenants in
Article XIII of this Agreement would not be enforceable under the laws of
Georgia, and the Franchised Unit is located outside of Georgia, then such
covenants shall be interpreted and construed under the laws of the state in
which the Franchised Unit is located. Nothing in this Section XXV is intended
by the parties to subject this Agreement to any franchise or similar law, rule,
or regulation of the State of Georgia to which this Agreement would not
otherwise be subject.
24.02. The parties agree that any action brought by Franchisee against
Franchisor in any court, whether federal or state, shall be brought within such
state and in the judicial district in which Franchisor has its principal place
of business. Any action brought by Franchisor against Franchisee in any court,
whether federal or state, may be brought within the state and in the judicial
district in which Franchisor has its principal place of business. Franchisee
hereby consents to personal jurisdiction and venue in the state and judicial
district in which Franchisor has its principal place of business.
24.03. No right or remedy herein conferred upon or reserved to Franchisor
is exclusive of any other right or remedy herein, or by law or equity provided
or permitted; but each shall be cumulative of any other right or remedy provided
in this Agreement
24.04. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
24.05. Any and all claims and actions arising out of or relating to this
Agreement (including, but not limited to, the offer and sale of this franchise),
the relationship of Franchisee and Franchisor, or Franchisee's operation of the
Franchised Unit, brought by Franchisee shall be commenced within eighteen (18)
months from the occurrence of the facts giving rise to such claim or action, or
such claim or action shall be barred.
24.06. Franchisor and Franchisee hereby waive to the fullest extent
permitted by law any right to or claim of any consequential, punitive, or
exemplary damages against the other, and agree that in the event of a dispute
between them each shall be limited to the recovery of any actual damages
sustained by it.
40
<PAGE>
XXV. CORPORATE FRANCHISEE
In the event the Franchisee named herein is a corporation at the time of
execution of this Agreement, it is warranted, covenanted and represented to
Franchisor that:
25.01. All of the issued and outstanding stock of Franchisee is owned,
legally and beneficially, by the person or persons: listed on Exhibit "B"
---------------------
attached hereto.
- ---------------
25.02. The above-named person or persons has (have) individually, and
jointly and severally, executed this Agreement, and such person, or one of such
persons, is and shall be the chief executive officer of the Franchisee
corporation, holding such corporate office or offices as may be necessary to
maintain and exercise the actual power and authority actively to direct the
affairs of the Franchisee.
25.03. Franchisee is validly incorporated and duly existing under the laws
of the State of ________________________, is duly qualified to conduct business
therein, and has its principal place of business at
________________________________________________________________________________
_______. Franchisee shall promptly notify Franchisor in writing of any change
thereto during the term of this Agreement.
{SIGNATURE PAGE TO FRANCHISE AGREEMENT FOLLOWS}
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in triplicate
on the day and year first above-written.
WITNESS: FRANCHISOR:
AFC ENTERPRISES, INC.
__________________________ BY: __________________________________
__________________________
WITNESS: FRANCHISEE:
__________________________ BY: __________________________________
__________________________
{SIGNATURE PAGE TO FRANCHISE AGREEMENT}
42
<PAGE>
EXHIBIT "A"
-----------
POPEYES CHICKEN
FRANCHISE AGREEMENT
NOTICE OF COMMENCEMENT DATE
---------------------------
Name of Franchisee:______________________________________________
Franchise Agreement Dated:_______________________________________
Franchise Premises Address:______________________________________
_________________________________________________________________
_________________________________________________________________
Store Number:____________________________________________________
NOTICE is hereby given to the abovementioned Franchisee pursuant to Section
2.01 of the Franchise Agreement that the Term of the abovementioned Franchise
Agreement commenced on ________________, 19___, and that the Term shall expire
on ________________, _____, unless the Franchise Agreement is terminated
earlier, pursuant to its terms and conditions.
AFC ENTERPRISES, INC.
BY: __________________________________
TITLE: ________________________________
DATE OF NOTICE: ________________________
43
<PAGE>
EXHIBIT "B"
-----------
SHAREHOLDERS OF FRANCHISEE
--------------------------
(For Corporate Franchisees)
Name of Number of % Ownership
Shareholders Shares of Franchisee Title
- ------------ ------ ------------- -----
44
<PAGE>
EXHIBIT "C"
-----------
PROTECTED AREA
--------------
45
<PAGE>
EXHIBIT 10.9
CHURCHS CHICKEN
FRANCHISE AGREEMENT
BETWEEN
AFC ENTERPRISES, INC.
AND
___________________________________
Unit No.: ______
Dev. Agr. No.: ______
Dated: _____________
<PAGE>
AFC ENTERPRISES, INC.
CHURCHS CHICKEN
FRANCHISE AGREEMENT
TABLE OF CONTENTS
I. APPOINTMENT..................................................... 2
II. TERM............................................................ 3
III. FEES............................................................ 5
IV. ACCOUNTING AND RECORDS.......................................... 7
V. PROPRIETARY MARKS............................................... 9
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE.............. 11
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL......................... 12
VIII. TRAINING........................................................ 13
IX. DUTIES OF THE FRANCHISOR........................................ 14
X. DUTIES OF THE FRANCHISEE........................................ 15
XI. INSURANCE....................................................... 21
XII. CONFIDENTIAL INFORMATION........................................ 23
XIII. COVENANTS....................................................... 24
XIV. TRANSFERABILITY OF INTEREST..................................... 26
XV. TERMINATION..................................................... 30
XVI. EFFECT OF TERMINATION OR EXPIRATION............................. 33
XVII. TAXES, PERMITS, AND INDEBTEDNESS................................ 35
i
<PAGE>
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION..................... 35
XIX. APPROVALS AND WAIVERS.......................................... 36
XX. NOTICES........................................................ 37
XXI. SEVERABILITY AND CONSTRUCTION.................................. 38
XXII. ENTIRE AGREEMENT: SURVIVAL.................................... 38
XXIII. ACKNOWLEDGMENTS................................................ 39
XXIV. APPLICABLE LAW: VENUE......................................... 40
XXV. CORPORATE FRANCHISEE........................................... 41
ii
<PAGE>
AFC ENTERPRISES, INC.
CHURCHS CHICKEN
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______ day of
_________________, 19___, by and between AFC ENTERPRISES, INC. (F/K/A AMERICA'S
FAVORITE CHICKEN COMPANY), a Minnesota corporation, having its principal place
of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia, 30328-5352,
U.S.A. ("Franchisor" or "Churchs") and _______________
________________________________________________________________________________
________________________________________________________________________________
[jointly and severally where more than one], ("Franchisee").
WITNESSETH:
WHEREAS, Franchisor has developed and owns a unique system for opening and
operating restaurants specializing in fried chicken and other menu items
developed and owned by Franchisor (the "Churchs System" or "System");
WHEREAS, the distinguishing characteristics of Franchisor's Churchs System
include, without limitation, the names "Churchs" and "Churchs Chicken";
specially designed buildings, distinctive interior and exterior layouts, decor,
color schemes, and furnishings; confidential food formulae and recipes used in
the preparation of food products and, particularly, a unique seasoning and
batter formula for preparing Churchs chicken; specialized menus; standards and
specifications for equipment, equipment layouts, products, operating procedures,
and management programs, all of which may be changed, improved, and further
developed by Franchisor from time to time;
WHEREAS, Franchisor identifies the Churchs System by means of certain trade
names, service marks, trademarks, logos, emblems, and other indicia of origin,
including, but not limited to, the mark "Churchs" and "Churchs Chicken" and such
other trade names, service marks, trademarks and trade dress as are now, or may
hereafter, be designated by Franchisor for use in connection with the Churchs
System (collectively referred to as the "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder in the Churchs System and to represent the System's
high standards of quality, appearance, and service;
WHEREAS, Franchisee wishes to be assisted, trained, and licensed by
Franchisor as a Churchs franchisee and licensed to use, in connection therewith,
the Churchs System;
<PAGE>
WHEREAS, Franchisee understands the importance of the Churchs System and
Churchs high and uniform standards of quality, cleanliness, appearance, and
service, and the necessity of opening and operating Churchs Restaurants in
conformity with the Churchs System;
NOW, THEREFORE, the parties hereto agree as follows:
I. APPOINTMENT
1.01. Franchisor grants to Franchisee a franchise to open and operate a
Churchs Chicken restaurant (the "Unit", "Franchised Unit", "Franchised
Business" or "Restaurant") at one location only, such location to be described
as:
STORE NUMBER:
------------------------------------
ADDRESS:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
upon the terms and conditions herein contained and subject to the terms and
conditions contained in the development agreement between Franchisor and
Franchisee, dated __________________________, (the "Development Agreement"),
which is incorporated herein by reference; and a license to use in connection
therewith Franchisor's Proprietary Marks and the Churchs System.
1.02. Protected Territory.
--------------------
Subject to the terms and conditions of this Agreement and
provided Franchisee is not otherwise in default of this
Agreement and/or any other Agreement between Franchisor (or any
parent, subsidiary or affiliate of Franchisor) and Franchisee (or
any parent, subsidiary or affiliate of Franchisee), Franchisor
shall not establish, nor franchise another to establish a
restaurant under the Churchs System, for the term of this
Agreement, within the area described in EXHIBIT "C" of this
Agreement (the "Protected Area"), without Franchisee's prior
written consent. Notwithstanding the foregoing, Franchisor may,
from time to time during the term hereof, reduce or modify the
Protected Area to encompass a geographic area immediately
surrounding the Franchised Unit which shall include a
population (residential and/or daytime business or commercial) of
no less than 50,000 people, which modification shall become
effective upon Franchisee's receipt of written notice from
Franchisor to Franchisee.
The provisions of Section 1.02 (A) hereof shall not apply with
respect to the following types of locations within the Protected
Area, at which
2
<PAGE>
Franchisor retains the right, in its sole discretion, to
franchise and/or operate Churchs Chicken restaurants, and to
distribute by any means Churchs Chicken products:
1. Existing Franchised Units and/or Franchised Units for
which Franchise Agreements were previously executed
2. Transportation facilities (including airports, train
stations, bus stations, etc.)
3. Toll roads and major thoroughfares
4. Educational facilities (including schools, colleges and
universities)
5. Institutional feeding facilities (including, but not
limited to, airports, hospitals, hotels, and corporate
or school cafeterias
6. Government institutions and facilities
7. Enclosed shopping malls
8. Military bases
9. Casinos
10. Amusement and/or theme parks
1.03. Except as otherwise set forth herein, (a) the franchise granted to
Franchisee under this Agreement is non-exclusive, and grants to Franchisee the
rights to establish and operate the Franchised Unit at only the specific
location set forth hereinabove, (b) no exclusive, protected or other territorial
rights in the contiguous area or market of such Franchised Unit or otherwise is
hereby granted or to be inferred and (c) Franchisor and/or its affiliates have
the right to operate and grant as many other franchises for the operation of
Churchs Chicken restaurants, anywhere in the world, as they shall, in their sole
discretion, elect.
II. TERM
2.01. Except as otherwise provided in this Agreement, the initial term of
this Franchise Agreement (the "Term") shall expire on the twentieth (20th)
anniversary of the date of commencement of operation of the Franchised Unit.
For all purposes under this Agreement, the date of commencement of operation of
the Franchised Unit shall be the date verified in writing by Franchisor and
delivered to Franchisee in a form substantially similar to the "Notice" attached
hereto as Exhibit "A". Franchisee agrees and shall be obligated to operate the
Franchised Unit and perform hereunder for the full Term of this Agreement.
2.02. Franchisee may, at its option, renew this franchise for one (1)
additional period of ten (10) years, provided that, at the time of renewal:
A. Franchisee gives Franchisor written notice of such election to
renew not less than six (6) months nor more than twelve (12)
months prior to the end of the initial term;
3
<PAGE>
B. Franchisee executes Franchisor's then-current standard form of
franchise agreement, which may include, without limitation, a
higher royalty fee and a higher advertising contribution, if any,
than that contained in this Agreement; and the term of which
shall be the renewal term as specified in Section 2.02. hereof,
but shall contain no further renewal rights;
C. Franchisee executes a general release in a form prescribed by
Franchisor of any and all claims against Franchisor and its
subsidiaries, and affiliates, and their respective officers,
directors, agents, and employees;
D. Franchisee is not in default of any provision of this Agreement,
or any amendment hereof or successor hereto, or any other
agreement between Franchisee and Franchisor, or any subsidiary or
affiliate of Franchisor, and Franchisee has fully and faithfully
performed all of Franchisee's obligations throughout the term of
this Agreement;
E. Franchisee has paid or otherwise satisfied all monetary
obligations owed by Franchisee to Franchisor and its subsidiaries
and affiliates and any indebtedness of Franchisee which is
guaranteed by Franchisor, and Franchisee has timely paid or
otherwise satisfied these obligations throughout the term of this
Agreement;
F. Franchisee agrees, at its sole cost and expense, to reimage,
renovate, refurbish and modernize the Franchised Unit, within the
time frame required by Franchisor, including the building design,
parking lot, landscaping, equipment, signs, interior and exterior
decor items, fixtures, furnishings, trade dress, color scheme,
presentation of trademarks and service marks, supplies and other
products and materials to meet Franchisor's then-current
standards, specifications and design criteria for Churchs
restaurants, as contained in the then-current franchise
agreement, Confidential Operating Standards Manual (as defined
herein), or otherwise in writing, including, without limitation,
such structural changes, remodeling and redecoration and such
modifications to existing improvement as may be necessary to do
so.
G. Franchisee shall pay to Franchisor a renewal fee equal to fifty
percent (50%) of Franchisor's standard initial franchise fee in
effect at the date of renewal.
III. FEES
3.01. In consideration of the franchise granted to Franchisee herein,
Franchisee shall pay to the Franchisor the following:
4
<PAGE>
A. A franchise fee of ________________________ Dollars ($XXX)
payable upon execution of this Agreement by Franchisee. Such
franchise fee shall be fully earned by Franchisor upon execution
of this Agreement by Franchisee and is in addition to any
development fees paid to Franchisor by Franchisee.
B. A recurring, non-refundable royalty fee of five percent (5%) of
Gross Sales (as defined herein) during the term of this
Agreement, payable weekly (or on such other basis as may be set
forth in the Confidential Operating Standards Manual (as defined
herein) or otherwise agreed to in writing by Franchisor) on the
Gross Sales of the preceding week.
3.02. In addition to the payments provided for in Section 3.01. hereof,
Franchisee, recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the goodwill and public image of
the System, agrees to pay to the Churchs Advertising Fund ("Advertising Fund") a
recurring, non-refundable advertising fund contribution ("Advertising Fund
Contribution") in an amount to be determined by Franchisor, in its sole
discretion, not to exceed four percent (4%) of the Gross Sales for the preceding
week (or an Advertising Fund Contribution not to exceed one percent (1%) of such
Gross Sales if the Franchised Unit participates in an advertising cooperative
pursuant to Section 10.05.) payable weekly (or on such other basis as may be set
forth in the Confidential Operating Standards Manual or otherwise agreed to in
writing by Franchisor). The Advertising Fund Contribution shall be expended by
the Advertising Fund for national, regional, and/or local advertising and
promotional materials and market research for the Churchs System, under the
following conditions and limitations:
A. The Advertising Fund, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all costs of
maintaining, administering, directing, producing and preparing
market research, advertising, marketing materials and/or
promotional activities for the Churchs System. Franchisee shall
pay the Advertising Fund Contribution by separate check made
payable to the Advertising Fund. All sums paid by the Franchisee
to the Advertising Fund shall be maintained in an account
separate from other funds of Franchisor and shall not be used to
defray any of Franchisor's expenses except as provided herein,
and as Franchisor may incur in activities reasonably related to
the administration or direction of the Advertising Fund and
advertising and marketing programs for franchisees and the
Churchs System. The Advertising Fund and its earnings shall not
otherwise inure to the benefit of Franchisor. Franchisor shall
maintain a separate bookkeeping account for the Advertising Fund.
B. The selection of media and locale for media placement shall be at
the sole discretion of the Franchisor.
5
<PAGE>
C. All reasonable costs incurred by Franchisor or charged to
Franchisor by third parties for market research and the
production and dissemination of advertising, marketing and
promotional materials may be charged to the Advertising Fund.
D. Franchisor, upon request, shall provide Franchisee with an annual
accounting of receipts and disbursements of the Advertising Fund.
E. It is anticipated that all contributions to and earnings of the
Advertising Fund will be expended for market research,
advertising, marketing and/or promotional purposes during the
taxable year in which contributions and earnings are received.
If, however, excess amounts remain in the Advertising Fund at the
end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from
previous years, next out of earnings in the current year, and
finally from contributions.
F. The Advertising Fund is not, and shall not be, an asset of
Franchisor. Although the Advertising Fund is intended to be of
perpetual duration, Franchisor maintains the right to terminate
the Advertising Fund; provided, however, that the Advertising
Fund shall not be terminated until all monies in the Advertising
Fund have been expended for the purposes stated herein.
G. Franchisee understands that such advertising and marketing is
intended to maximize the public's awareness of the Franchised
Units and the System, and that Franchisor accordingly undertakes
no obligation to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement, if any, of
such advertising or marketing in its local market. Franchisee
further acknowledges that its failure to derive any such benefit,
whether directly or indirectly, shall not be cause for
Franchisee's nonpayment or reduction of the required
contributions to the Advertising Fund.
3.03. If any monetary obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates are more than seven (7) days overdue, Franchisee
shall, in addition to such obligations, pay to Franchisor a sum equal to one and
one-half percent (1 1/2%) of the overdue balance per month, or the highest rate
permitted by law, whichever is less, from the date said payment is due.
3.04. For the purposes of this Agreement, the term "Gross Sales" shall
mean all revenues generated by Franchisee's business conducted upon, from or
with respect to the Franchised Unit, whether such sales are evidenced by cash,
check, credit, charge, account, barter or exchange. Gross Sales shall include,
without limitation, monies or credit received from the sale of food and
merchandise, from tangible property of every kind and nature, promotional or
otherwise, and for
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services performed from or at the Franchised Unit, including without limitation
such off-premises services as catering and delivery. Gross Sales shall not
include the sale of food or merchandise for which refunds have been made in good
faith to customers, the sale of equipment used in the operation of the
Franchised Unit, nor shall it include sales, meals, use or excise tax imposed by
a governmental authority directly on sales and collected from customers;
provided that the amount for such tax is added to the selling price or absorbed
therein, and is actually paid by Franchisee to such governmental authority.
IV. ACCOUNTING AND RECORDS
4.01. ACCURATE BOOKS AND RECORDS. During the Term of this Agreement,
Franchisee shall maintain and preserve, for at least three (3) years from the
dates of their preparation, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles and in the
form and the manner prescribed by Franchisor from time-to-time in the
Confidential Operating Standards Manual or otherwise in writing. These records
shall include, without limitation, cash register sales tape (including non-
resettable readings), meals, sales and other tax returns, duplicate deposit
slips and other evidence of Gross Sales and all other business transactions.
4.02. ROYALTY REPORTS. Franchisee shall submit to Franchisor, no later
than the date each weekly royalty payment is due during the Term of this
Agreement, a report on forms prescribed by Franchisor, accurately reflecting all
Gross Sales during the preceding week and such other forms, reports, records,
financial statements or information as Franchisor may reasonably require in the
Confidential Operating Standards Manual, or otherwise in writing.
4.03. QUARTERLY STATEMENT. Franchisee shall, at its expense, submit to
Franchisor quarterly, within thirty (30) days following the end of each quarter
during the Term hereof, an unaudited financial statement with such detail as
Franchisor may reasonably require (hereinafter, "Quarterly Statement") together
with a certificate executed by Franchisee stating that such financial statement
is true and accurate. Upon Franchisor's request, Franchisee shall submit to
Franchisor, with each Quarterly Statement, copies of any state or local sales
tax returns ("Sales Tax Returns") filed by Franchisee for the period included in
the Quarterly Statement. In the event Franchisee prepares financial statements
on the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly
Statements shall be submitted within thirty (30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.
4.04. ANNUAL FINANCIAL STATEMENTS. Franchisee shall, at its expense,
submit to Franchisor within ninety (90) days following the end of each calendar
or fiscal year during the Term of this Agreement, an unaudited financial
statement for the preceding calendar or fiscal year, together with a certificate
executed by Franchisee certifying that such financial statement is true and
accurate (hereinafter, "Annual Financial Statements") and such other information
in such form as Franchisor may reasonably require. Upon written request from
Franchisor, the foregoing Annual Financial Statement shall include both a profit
and loss statement and a balance
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sheet, and shall be prepared in accordance with generally accepted accounting
principles. In the event Franchisee defaults under this Agreement, Franchisor
may require, upon written notice to Franchisee, that all Annual Financial
Statements submitted thereafter include a "Review Report" prepared by an
independent Certified Public Accountant.
4.05. OTHER REPORTS. Franchisee shall also submit to Franchisor, for
review or auditing, such other forms, financial statements, reports, records,
information and data as Franchisor may reasonably designate, in the form and at
the times and places reasonably required by Franchisor, upon request and as
specified from time-to-time in the Confidential Operating Standards Manual or
otherwise in writing. If Franchisee has combined or consolidated financial
information relating to the Franchised Unit with that of any other business or
businesses, including a business licensed by Franchisor, Franchisee shall
simultaneously submit to Franchisor, for review or auditing, the forms, reports,
records and financial statements (including, but not limited to the Quarterly
Statements and Annual Financial Statements) which contain the detailed financial
information relating to the Franchised Unit, separate and apart from the
financial information of such other businesses. Franchisee hereby authorizes
all of its suppliers and distributors to release to Franchisor, upon
Franchisor's request, any and all of its books, records, accounts or other
information relating to goods, products and supplies sold to Franchisee and/or
the Franchised Unit.
4.06. EQUIPMENT. Franchisee shall record all sales on cash registers or
other point-of-sale equipment approved, in writing, by Franchisor (hereinafter
"POS Equipment").
4.07. FRANCHISOR'S RIGHT OF AUDIT. Franchisor or its designated agents
or auditors shall have the right at all reasonable times to audit, review and
examine by any means, including electronically through the use of
telecommunications devices or otherwise, at its expense, the books, records,
accounts, and tax returns of Franchisee. If any such audit, review or
examination reveals that Gross Sales have been understated in any report to
Franchisor, Franchisee shall immediately pay to Franchisor the royalty fee and
Advertising Fund Contribution due with respect to the amount understated upon
demand, in addition to interest from the date such amount was due until paid, at
the rate of one and one-half percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of Gross Sales as set forth in the
report, Franchisee shall, in addition, upon demand, reimburse Franchisor for any
and all costs and expenses connected with such audit, review or examination
(including, without limitation, reasonable accounting and attorneys' fees).
The foregoing remedies shall be in addition to any other rights and remedies
Franchisor may have.
V. PROPRIETARY MARKS
5.01. It is understood and agreed that the franchise granted herein to use
Franchisor's Proprietary Marks applies only to use in connection with the
operation of the Franchised Unit franchised in this Agreement at the location
designated in Section I hereof, and includes only such Proprietary Marks as are
now designated or which may hereafter be designated, in the
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Confidential Operating Standards Manual or otherwise in writing as a part of the
System (which might or might not be all of the Proprietary Marks pertaining to
the System owned by the Franchisor), and does not include any other mark, name,
or indicia of origin of Franchisor now existing or which may hereafter be
adopted or acquired by Franchisor.
5.02. With respect to Franchisee's use of the Proprietary Marks pursuant
to this Agreement, Franchisee acknowledges and agrees that:
A. Franchisee shall not use the Proprietary Marks as part of
Franchisee's corporate or other business name;
B. Franchisee shall not hold out or otherwise use the Proprietary
Marks to perform any activity or incur any obligation or
indebtedness in such manner as might, in any way, make Franchisor
liable therefor, without Franchisor's prior written consent;
C. Franchisee shall execute any documents and provide such other
assistance deemed necessary by Franchisor or its counsel to
obtain protection for the Proprietary Marks or to maintain the
continued validity of such Proprietary Marks; and
D. Franchisor reserves the right to substitute different Proprietary
Marks for use in identifying the System and the franchised
businesses operating thereunder, and Franchisee agrees to
immediately substitute Proprietary Marks upon receipt of written
notice from Franchisor.
5.03. Franchisee expressly acknowledges Franchisor's exclusive right to
use the mark Churchs for restaurant services, fried chicken, and other related
food products; the building configuration; and the other Proprietary Marks of
the System. Franchisee agrees not to represent in any manner that it has any
ownership in the Proprietary Marks or the right to use the Proprietary Marks
except as provided in this Agreement. Franchisee further agrees that its use of
the Proprietary Marks shall not create in its favor any right, title, or
interest in or to the Proprietary Marks, and that all of such use shall inure to
the benefit of Franchisor.
5.04. Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without Franchisor's prior written consent,
is an infringement of Franchisor's exclusive right to use the Proprietary Marks,
and during the term of this Agreement and after the expiration or termination
hereof, Franchisee covenants not to, directly or indirectly, commit an act of
infringement or contest or aid in contesting the validity or ownership of
Franchisor's Proprietary Marks, or take any other action in derogation thereof.
5.05. Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the validity of the ownership of, or
Franchisor's right to use, the Proprietary Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right to control any
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administrative proceeding or litigation involving the Proprietary Marks. In the
event Franchisor undertakes the defense or prosecution of any litigation
relating to the Proprietary Marks, Franchisee agrees to execute any and all
documents and to do such acts and things as may, in the opinion of counsel for
Franchisor, be necessary to carry out such defense or prosecution. Except to the
extent that such litigation is the result of Franchisee's use of the Proprietary
Marks in a manner inconsistent with the terms of this Agreement, Franchisor
agrees to reimburse Franchisee for its out of pocket costs in doing such acts
and things, except that Franchisee shall bear the salary costs of its employees.
5.06. Franchisee understands and agrees that its license with respect to
the Proprietary Marks is non-exclusive to the extent that Franchisor has and
retains the right under this Agreement:
A. To grant other licenses for the Proprietary Marks, in addition to
those licenses already granted to existing franchisees;
B. To develop and establish other franchise systems for the same,
similar, or different products or services utilizing proprietary
marks not now or hereafter designated as part of the System
licensed by this Agreement, and to grant licenses thereto,
without providing Franchisee any right therein; and
C. To develop and establish other systems for the sale, at wholesale
or retail, of similar or different products utilizing the same or
similar Proprietary Marks, without providing Franchisee any right
therein.
5.07. Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and identified by the Proprietary Marks used
in connection therewith shall inure directly and exclusively to the benefit of
Franchisor and is the property of Franchisor, and that upon the expiration or
termination of this Agreement or any other agreement, no monetary amount shall
be assigned as attributable to any goodwill associated with any of Franchisee's
activities in the operation of the Franchised Unit granted herein, or
Franchisee's use of the Proprietary Marks.
5.08. Franchisee understands and acknowledges that each and every detail
of the Churchs System is important to Franchisee, Franchisor, and other
franchisees in order to develop and maintain high and uniform standards of
quality and services, and hence to protect the reputation and goodwill of
Churchs restaurants. Accordingly, Franchisee covenants:
A. To operate and advertise the Franchised Unit, at Franchisee's own
expense, under the name "Churchs Chicken," without prefix or
suffix;
B. To adopt and use the Proprietary Marks licensed hereunder solely
in the manner prescribed by Franchisor;
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C. To observe such reasonable requirements with respect to trademark
registration notices as Franchisor may from time to time direct
in the Confidential Operating Standards Manual or otherwise in
writing.
5.09. In order to preserve the validity and integrity of the Proprietary
Marks licensed herein and to assure that Franchisee is properly employing the
same in the operation of the Franchised Unit, Franchisor or its agents shall at
all reasonable times have the right to inspect Franchisee's operations,
premises, and Franchised Unit and make periodic evaluations of the services
provided and the products sold and used therein. Franchisee shall cooperate
with Franchisor's representatives in such inspections and render such assistance
to the representatives as may reasonably be requested.
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If Franchisee, or any successor to or assignee of Franchisee, is a
corporation, or limited liability company:
A. Franchisee shall furnish to Franchisor, upon execution or any
subsequent transfer of this Agreement, a copy of the Franchisee's
Articles of Incorporation, Certificate of Incorporation, Bylaws
and a list of shareholders showing the percentage interest of
each, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto;
B. Franchisee shall promptly furnish Franchisor, on a regular basis,
with certified copies of such corporate records material to the
Franchised Business as Franchisor may require from time to time
in the Confidential Operating Standards Manual or otherwise in
writing; and
C. Franchisee shall maintain stop-transfer instructions against the
transfer, on its records, of any securities with voting rights,
subject to the restrictions of this Agreement, and each stock
certificate of the corporate Franchisee representing each share
of stock, shall have conspicuously endorsed upon it the following
legend:
"THE TRANSFER OF THIS STOCK IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CHURCHS CHICKEN FRANCHISE AGREEMENT WITH AFC
ENTERPRISES, INC. DATED ___________. REFERENCE IS MADE TO
THE PROVISIONS OF SAID FRANCHISE AGREEMENT AND TO THE
ARTICLES AND BY-LAWS OF THIS CORPORATION."
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6.02. If the Franchisee, or any successor to or assignee of Franchisee, is
a partnership, limited partnership or limited liability partnership, Franchisee
shall furnish to Franchisor, upon execution or any subsequent transfer of this
Agreement, a copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto.
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.
7.01. In order to protect the reputation and goodwill of Franchisor and
the Churchs System and to maintain uniform standards of operation under
Franchisor's Proprietary Marks, Franchisee shall conduct the Franchised Business
in accordance with Franchisor's Confidential Operating Standards Manual
(hereinafter, together with any other manuals created or approved for use in the
operation of the Franchised Business granted herein, and all amendments and
updates thereto, the "Manual").
7.02. Franchisee shall at all times treat the Manual, and the information
contained therein, as confidential, and shall use all reasonable efforts to keep
such information secret and confidential. Franchisee shall not, at any time,
without Franchisor's prior written consent, copy, duplicate, record, or
otherwise make the Manual available to any unauthorized person or entity.
7.03. The Manual shall at all times remain the sole property of
Franchisor.
7.04. In order for Franchisee to benefit from new knowledge information,
methods and technology adopted and used by Franchisor in the operation of the
System, Franchisor may from time-to-time revise the Manual and Franchisee agrees
to adhere to and abide by all such revisions.
7.05. Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of any dispute as to the contents of
Franchisee's Manual, the terms of the master copy of the Manual maintained by
Franchisor at Franchisor's home office, shall be controlling.
7.06. The Manual is intended to further the purposes of this Agreement,
and is specifically incorporated, by reference, into this Agreement. Except as
otherwise set forth in this Agreement, in the event of a conflict between the
terms of this Agreement and the terms of the Manual, the terms of this Agreement
shall control.
VIII. TRAINING
8.01. Franchisee, a partner of Franchisee if Franchisee is a partnership,
or a principal shareholder of Franchisee if Franchisee is a corporation, must
complete, to Franchisor's satisfaction, the Churchs New Franchisee Orientation
Program ("NFOP") prior to opening the first franchised Churchs Chicken unit
operated by Franchisee. NFOP shall consist of one (1) sixteen
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(16) hour week of workshops and seminars including CD-ROM instruction conducted
at a training facility designated by Franchisor.
8.02. In addition to completing the NFOP, Franchisee (or a partner or
principal shareholder of Franchisee), and up to four (4) designated management
employees of Franchisee, must attend and complete, to Franchisor's satisfaction,
the Churchs Management In Training program ("MIT"), prior to opening the
Franchised Unit. The exact number of Franchisee's management employees required
to attend and complete MIT shall be determined by Franchisor in its sole
discretion, but in no event shall the number be less than two (2). MIT shall
consist of up to five (5) weeks of in-store restaurant operations training at a
facility designated by Franchisor (a "Certified Training Facility") and certain
self-directed study programs. A management employee of Franchisee that
successfully completes MIT, shall be certified by Franchisor as an "MIT
Certified Manager".
8.03. Franchisee shall maintain the number of MIT Certified Managers
designated by the Franchisor in the employ of the Franchised Unit throughout the
term of this Agreement, which in no event shall be less than two (2). In the
event that Franchisee or any MIT Certified Manager ceases active employment at
the Franchised Unit, Franchisee must enroll a qualified replacement in the MIT
program within thirty (30) days of cessation of such individual's employment.
The replacement employee shall attend and complete the next regularly scheduled
MIT program to Franchisor's satisfaction.
8.04. The cost of conducting the NFOP and MIT programs (instruction and
required materials) shall be borne by Franchisor. All other expenses during
NFOP and MIT, including meals and lodging, wages and travel, shall be borne by
Franchisee.
8.05. Franchisor may make available to Franchisee or Franchisee's
employees, from time to time, such additional training programs as Franchisor,
in its sole discretion, may choose to conduct. Attendance at said training
programs may be mandatory. The cost of conducting such additional training
programs (instruction and required materials) shall be borne by Franchisor. All
other expenses during the training period, including meals and lodging, wages
and travel, shall be borne by the Franchisee.
IX. DUTIES OF THE FRANCHISOR
9.01. Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the Franchised Business, in person or by
electronic or written bulletins made available from time to time, as Franchisor
may deem appropriate.
9.02. Franchisor, in its sole discretion, may provide opening assistance
to Franchisee at the Franchised Unit.
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9.03. Franchisor will make available to Franchisee standard plans and
specifications to be utilized only in the construction of the Franchised Unit.
No modification to or deviations from the standard plans and specifications may
be made without the written consent of Franchisor. Franchisee shall obtain, at
its expense, further qualified architectural and engineering services to prepare
surveys, site and foundation plans, and to adapt the standard plans and
specifications to applicable local or state laws, regulations or ordinances.
Franchisee shall bear the cost of preparing plans containing deviations or
modifications from the standard plans.
9.04. Franchisor will loan one (1) copy of the Manual to Franchisee for
the duration of this Agreement, which the Manual contains the standards,
specifications, procedures and techniques of the Churchs System.
9.05. Franchisor will continue its efforts to maintain high and uniform
standards of quality, cleanliness, appearance and service at all Churchs
restaurants, to protect and enhance the reputation of the Churchs System and the
demand for the products and services of the System. Franchisor will establish
uniform criteria for approving suppliers; make every reasonable effort to
disseminate its standards and specifications to prospective suppliers of the
Franchisee upon the written request of the Franchisee, provided that Franchisor
may elect not to make available to prospective suppliers the standards and
specifications for such food formulae or equipment designs deemed by Franchisor
in its sole discretion to be confidential; and may conduct periodic inspections
of the premises and evaluations of the products used and sold at the Franchised
Unit and in all other Churchs restaurants.
9.06. Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
X. DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the System is
important to Franchisor, Franchisee and other franchisees in order to develop
and maintain high and uniform operating standards, to increase the demand for
Churchs products and services, and to protect the reputation and goodwill of
Franchisor. Accordingly, Franchisee agrees that:
10.01. Franchisee shall maintain, at all times during the term of this
Agreement, at Franchisee's expense, the premises of the Franchised Unit and all
fixtures, furnishings, signs, systems and equipment (hereinafter "improvements")
thereon or therein, in conformity with Franchisor's high standards and public
image and to make such additions, alterations, repairs, and replacements thereto
(but no others, without Franchisor's prior written consent) as may be required
by Franchisor, including but not limited to the following:
A. To keep the Franchised Unit in the highest degree of sanitation
and repair, including, without limitation, such periodic
repainting, repairs or
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replacement of impaired equipment, and replacement of obsolete
signs, as Franchisor may reasonably direct;
B. To meet and maintain the highest governmental standards and
ratings applicable to the operation of the Franchised Business;
C. At its sole cost and expense, to complete a full reimaging,
renovation, refurbishment and modernization of the Franchised
Unit, within the time frame required by Franchisor, but no more
often than once every seven (7) years, including the building
design, parking lot, landscaping, equipment, signs, interior and
exterior decor items, fixtures, furnishings, trade dress, color
scheme, presentation of trademarks and service marks, supplies
and other products and materials, to meet Franchisor's then-
current standards, specifications and design criteria for Churchs
restaurants, including without limitation, such structural
changes, remodeling and redecoration and such modifications to
existing improvements as may be necessary to do so (hereinafter,
a "Franchised Unit Renovation"). Franchisee shall not be
required to perform a Franchised Unit Renovation if there are
less than five (5) years remaining on the term of this Agreement.
Nothing herein shall be deemed to limit Franchisee's other
obligations, during the term of this Agreement, to operate the
Franchised Unit in accordance with Franchisor's standards and
specifications for the Churchs System, including, but not limited
to, the obligations set forth in this Section X.
10.02. Franchisee shall operate the Franchised Unit in conformity with
such uniform methods, standards, and specifications as Franchisor may from time
to time prescribe in the Manual or otherwise in writing, to insure that the
highest degree of quality, service and cleanliness is uniformly maintained and
to refrain from any deviation therefrom and from otherwise operating in any
manner which reflects adversely on Franchisor's name and goodwill or on the
Proprietary Marks, and in connection therewith:
A. To maintain in sufficient supply, and use at all times, only such
ingredients, products, materials, supplies, and paper goods as
conform to Franchisor's standards and specifications, and to
refrain from deviating therefrom by using non-conforming items,
without Franchisor's prior written consent;
B. To sell or offer for sale only such products and menu items that
have been expressly approved for sale in writing by Franchisor,
meet Franchisor's uniform standards of quality and quantity and
as have been prepared in accordance with Franchisor's methods and
techniques for product preparation; to sell or offer for sale the
minimum menu items specified in the Manual or otherwise in
writing; to refrain from any deviation from Franchisor's
standards and specifications for serving or selling the menu
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items, without Franchisor's prior written consent; upon thirty
(30) days written notice from Franchisor, to sell or offer for
sale only such beverages produced by Franchisor's Designated
Beverage Supplier (as defined in Section 10.03 below); and to
discontinue selling or offering for sale such items as Franchisor
may, in its discretion, disapprove in writing at any time;
C. To use the premises of the Franchised Unit solely for the purpose
of conducting the business franchised hereunder, and to conduct
no other business or activity thereon, whether for profit or
otherwise, without Franchisor's prior written consent;
D. To keep the Franchised Unit open and in normal operation during
such business hours as Franchisor may prescribe in the Manual or
otherwise in writing;
E. To permit Franchisor or its agents, at any time during ordinary
business hours, to remove from the Franchised Unit samples of any
ingredients, products, materials, supplies, and paper goods used
in the operation of the Franchised Unit, without payment
therefor, in amounts reasonably necessary for testing by
Franchisor or an independent laboratory, to determine whether
such samples meet Franchisor's then-current standards and
specifications. In addition to any other remedies it may have
under this Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient, products,
materials, supplier or paper goods have been obtained from a
supplier not approved by Franchisor, or if the sample fails to
conform to Franchisor's specifications;
F. To purchase, install and construct, at Franchisee's expense, all
improvements furnishings, signs and equipment specified in the
approved standard plans and specifications, and such other
furnishings, signs or equipment as Franchisor may reasonably
direct from time to time in the Manual or otherwise in writing;
and to refrain from installing or permitting to be installed on
or about the premises of the Franchised Unit, without
Franchisor's written consent, any improvements, furnishings,
signs or equipment not first approved in writing as meeting
Franchisor's standards and specifications;
G. To comply with all applicable federal, state and local laws,
regulations and ordinances pertaining to the operation of the
Franchised Business; and
H. Franchisee shall grant Franchisor and its agents the right to
enter upon the premises of the Franchised Unit at any time during
ordinary business hours for the purpose of conducting
inspections; cooperate with Franchisor's
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representatives in such inspections by rendering such assistance
as they may reasonably request; and, upon notice from Franchisor
or its agents, and without limiting Franchisor's other rights
under this Agreement, take such steps as may be necessary
immediately to correct the deficiencies detected during any such
inspection, including, without limitation, immediately desisting
from the further use of any equipment, promotional materials,
products, or supplies that do not conform with Franchisor's then-
current specifications, standards, or requirements.
10.03. Franchisee shall (i) purchase all ingredients, products, materials,
supplies, and other items required in the operation of the Franchised Business
which are or incorporate trade-secrets of Franchisor, as designated by
Franchisor ("Trade-Secret Products") only from Franchisor or suppliers
designated by Franchisor; and (ii) upon thirty (30) days prior written notice
that Franchisor has designated an exclusive beverage supplier for any or all
beverage products sold within the Churchs System ("Designated Beverage
Products"), Franchisee shall purchase all such Designated Beverage Products only
from Franchisor's designated beverage supplier ("Designated Beverage Supplier").
10.04. Franchisee shall purchase all ingredients, products, materials,
supplies, paper goods, and other items required for the operation of the
Franchised Business, except Trade-Secret Products and Designated Beverage
Products, solely from suppliers who demonstrate, to the continuing reasonable
satisfaction of Franchisor, the ability to meet Franchisor's reasonable
standards and specifications for such items; who possess adequate quality
controls and capacity to supply Franchisee's needs promptly and reliably; and
who have been approved in writing by Franchisor and such approval has not
thereafter been revoked. If Franchisee desires to purchase any such items from
an unapproved supplier, Franchisee shall submit to Franchisor a written request
for approval, or shall request the supplier itself to seek approval. Franchisor
shall have the right to require, as a condition of its approval, that its
representatives be permitted to inspect the supplier's facilities, and that
samples from the supplier be delivered, at Franchisor's option, either to
Franchisor or to an independent laboratory designated by Franchisor for testing
prior to granting approval. A charge not to exceed Franchisor's reasonable cost
of inspection and the actual cost of testing shall be paid by the supplier or
Franchisee. Franchisor reserves the right, at its option, to reinspect the
facilities and products of any such approved supplier from time to time and to
revoke its approval upon failure of such supplier to continue to meet any of the
foregoing criteria.
10.05. Franchisor shall have the right, in its sole discretion, to
establish an advertising cooperative ("Cooperative") in any dominant market
area ("DMA"). In addition, a Cooperative for the DMA in which the Franchised
Unit is located may be established upon the favorable vote of the owners of all
Churchs restaurants (including non-franchised restaurants) within the same DMA.
Each owner will be entitled to cast one (1) vote for each restaurant owned and
operated by that owner within such DMA. If 80% of all votes entitled to be
cast vote in favor of establishing a Cooperative, then such Cooperative shall be
formed.
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A. Once a Cooperative is established in the DMA in which the
Franchised Unit is located, Franchisee shall become a member of
such Cooperative upon commencement of operation of the Franchised
Unit if the Cooperative is in existence at that time, or no later
than thirty (30) days after the date on which the Cooperative
commences operation. In no event shall Franchisee be required to
be a member of more than one Cooperative with respect to the
Franchised Unit.
B. If a Cooperative has been established, Franchisee shall
contribute an amount, to be determined by the Cooperative, which
when added to the amount required by Franchisor to be contributed
to the Advertising Fund, shall not be less than four percent (4%)
of its weekly Gross Sales.
C. Each Cooperative shall be organized and governed in a form and
manner, and shall commence operations on a date, approved in
advance by Franchisor in writing.
(1) Each Cooperative shall be organized for the exclusive
purpose of administering regional advertising programs and
developing, subject to Franchisor's approval, standardized
promotional materials for use by its members in local
advertising.
(2) No advertising or promotional plans or materials may be used
by a Cooperative or furnished to its members without the
prior approval of the Franchisor, pursuant to the procedures
and terms set forth in Section 10.07 hereof.
(3) Franchisee shall pay its required contribution to the
Cooperative weekly on Gross Sales for the preceding week,
together with such statements or reports as may be required
by Franchisor, or by the Cooperative with the Franchisor's
prior written approval.
D. Franchisor, in its sole discretion, may grant an exemption to any
franchisee for any length of time from the requirement of
membership in a Cooperative, and/or from the obligation to
contribute thereto (including a reduction, deferral or waiver of
such contribution), upon written request of such franchisee
stating reasons supporting such exemption. Franchisor's decision
concerning such request for exemption shall be final. If an
exemption is granted to a franchisee, such franchisee shall be
required to expend on local advertising, on a monthly basis, the
same amount as would otherwise be assessed by the Cooperative, as
set forth in Section 10.05.B hereof.
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10.06. All local advertising by Franchisee shall be in such media, and of
such type and format as Franchisor may approve; shall be conducted in a
dignified manner; and shall conform to such standards and requirements as
Franchisor may specify. Franchisee shall not use any advertising or promotional
plans or materials unless and until Franchisee has received written approval
from Franchisor, pursuant to the procedures and terms set forth in Section 10.07
hereof.
10.07. All advertising and promotional plans proposed to be used by
Franchisee or the Cooperative, where applicable, except such plans and materials
that have been previously approved by Franchisor shall be submitted to
Franchisor for Franchisor's written approval (except with respect to prices to
be charged) prior to any use thereof. Franchisor shall use its best efforts to
complete its review of Franchisee's proposed advertising and promotional plans
within fifteen (15) days after Franchisor receives such plans. If written
approval is not received by Franchisee or the Cooperative from Franchisor within
fifteen (15) days after receipt by Franchisor of such plans, Franchisor shall be
deemed to have disapproved such plans.
10.08. Franchisee shall, at Franchisor's request, require all of its
supervisory employees, as a condition of their employment, to execute an
agreement prohibiting them, during the term of their employment or thereafter,
from communicating, divulging, or using for the benefit of any person, persons,
partnership, association, corporation or other entity any confidential
information, trade secrets, knowledge, or know-how concerning the Churchs System
or methods of operation of the Franchised Unit which may be acquired as a result
of their employment with Franchisee or other franchisees. A duplicate original
of each such agreement shall be provided by Franchisee to Franchisor immediately
upon execution.
10.09. If Franchisee operates more than one (1) Franchised Unit,
Franchisee shall have a supervisor, which may be Franchisee, to supervise and
coordinate the operation of the Franchised Units (hereinafter, a "Supervisor").
In addition to the foregoing, Franchisee shall employ an additional Supervisor
upon the opening of Franchisee's ninth (9th) Franchised Unit and upon the
opening of each successive eighth (8th) Franchised Unit thereafter. Each
Supervisor shall attend and successfully complete the MIT program set forth in
Section 8.02 hereof prior to assuming any supervisory responsibilities and shall
meet such other standards as Franchisor may reasonably impose. No Supervisor
may have supervisory responsibilities for more than eight (8) Franchised Units.
10.10. If at any time the Franchised Unit is proposed to be operated by an
entity or individual other than the Franchisee, Franchisor reserves the right to
review and approve the operating entity or individual and to require and approve
an operating agreement prior to such party's assumption of operations.
Franchisor may, in its sole discretion, reject either the operating entity, the
individual operator or the operating agreement. If approved by Franchisor, the
operating entity and/or individual shall agree in writing to comply with all of
Franchisee's obligations under the Franchise Agreement as though such party were
the franchisee designated therein, on such form as may be designated by
Franchisor. The operation of the Franchised Unit by any party other than
Franchisee, without Franchisor's prior written consent, shall be deemed
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a material default of this Agreement for which Franchisee may terminate this
Agreement pursuant to the provisions of Section 15.02 hereof.
10.11. Franchisee shall, prior to opening the Franchised Unit, become a
member of the Churchs Operators Purchasing Association (hereinafter "COPA"), or
any successor thereto, shall remain a member in good standing of COPA throughout
the term of this Agreement, and shall pay all reasonable membership fees
assessed by COPA.
10.12 Franchisee shall, within thirty (30) days from receipt of written
notice from Franchisor, purchase and install computer hardware and software
equipment at the Franchised Unit and/or at Franchisee's principal business
office, which computer hardware shall include telecommunications devices, and
which software may be a single program or set of programs, all of which must be
obtained in accordance with the Franchisor's standards and specifications (the
"Required Computer Equipment"). The Required Computer Equipment shall permit 24
hour per day electronic communications between Franchisor and Franchisee
including access to the internet and Franchisor's intranet,"AFC On-Line" or any
successor thereto. Franchisee shall only be required to purchase and install the
Required Computer Equipment at one, central location, which shall satisfy the
conditions of this section 10.02 (or its equivalent) for all Franchised Units
operated by Franchisee.
10.13. Franchisee shall comply with all other requirements set forth in
this Agreement.
XI. INSURANCE
11.01. INSURANCE PROGRAM. Franchisee shall procure, prior to commencement
of construction of the Franchised Unit, and shall maintain in full force and
effect during the Term of this Agreement at Franchisee's expense, an insurance
policy or policies protecting Franchisee and Franchisor, and their officers,
directors, agents and employees, against any loss, liability, or expense
whatsoever from personal injury, death or property damage or casualty,
including, fire, lightning, theft, vandalism, malicious mischief, and other
perils normally included in an extended coverage endorsement arising from,
occurring upon or in connection with the construction, operation or occupancy of
the Franchised Unit, as Franchisor may reasonably require for its own and
Franchisee's protection.
11.02. INSURANCE REQUIREMENTS. Such policy or policies shall be written
by an insurance company satisfactory to Franchisor, and shall include, at a
minimum the following coverage:
A. Workers' Compensation Insurance, with statutory limits as
-------------------------------
required by the laws and regulations applicable to the employees
of Franchisee who are engaged in the performance of their duties
relating to the Franchised Unit, including any pre-opening
training programs, as well as such other insurance as may be
required by statute or regulation of the state in which the
Franchised Unit is located.
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B. Employer's Liability Insurance, for employee bodily injuries and
------------------------------
deaths, with a limit of $500,000 each accident.
C. Comprehensive or Commercial General Liability Insurance, covering
-------------------------------------------------------
claims for bodily injury, death and property damage, including
Premises and Operations, Independent Contractors, Products and
Completed Operations, Personal Injury, Contractual, and Broadform
Property Damage liability coverages, with limits as follows:
Occurrence/Aggregate Limit of $1,000,000 for bodily injury, death
and property damage each occurrence and $2,000,000 for general
aggregate
OR
Split liability limits of:
$1,000,000 for bodily injury per person
$1,000,000 for bodily injury per occurrence
$ 500,000 for property damage
D. Comprehensive Automobile Liability Insurance, if applicable,
--------------------------------------------
covering owned, non-owned and hired vehicles, with limits as
follows:
Combined Single Limit of $500,000 for bodily injury, death and
property damage per occurrence
OR
Split liability limits of:
$500,000 for bodily injury per person
$500,000 for bodily injury per occurrence
$250,000 for property damage
E. All Risk Property Insurance, on a replacement cost basis, with
---------------------------
limits as appropriate, covering the real property of Franchisee
and any real property which the Franchisee may be obligated to
insure by contract. Such real property may including building,
machinery, equipment, furniture, fixtures and inventory.
11.03. All such policies of insurance shall provide that the same shall
not be cancelled, modified or changed without first giving thirty (30) days
prior written notice thereof to Franchisor. No such cancellation, modification
or change shall affect Franchisee's obligation to maintain the insurance
coverages required by this Agreement. Except for Workers' Compensation
Insurance, Franchisor shall be named as an Additional Insured on all such
required policies. All liability insurance policies shall be written on an
"occurrence" policy form. Franchisee shall be responsible for payment of any
and all deductibles from insured claims under its policies of insurance. The
coverage afforded under any insurance policy obtained by Franchisee pursuant
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to this Agreement shall be primary coverage regardless of whether or not
Franchisor has similar coverage. Franchisee shall not satisfy the requirements
of this Article XI unless and until certificates of such insurance, including
renewals thereof, have been delivered to and approved by Franchisor. Franchisee
shall not self-insure any of the insurance coverages required by this Agreement,
or non-subscribe to any State's applicable workmen's compensation laws without
the prior written consent of Franchisor. The minimum limits of coverage required
by this Agreement may be satisfied by a combination of primary and excess or
umbrella insurance policies. Franchisor shall have the right, at any time during
the term of this Agreement to increase the minimum limits of insurance coverage
or otherwise modify the insurance requirements of this Agreement upon written
notice in the Manual or as otherwise prescribed by Franchisor in writing. If
Franchisee shall fail to comply with any of the insurance requirements herein,
upon written notice to Franchisee by Franchisor, Franchisor may, without any
obligation to do so, procure such insurance and Franchisee shall pay Franchisor,
upon demand, the cost thereof plus interest at the maximum rate permitted by
law, and a reasonable administrative fee designated by Franchisor.
11.04. NO LIMITATION ON COVERAGE. Franchisee's obligation to obtain and
maintain the foregoing policy or policies of insurance in the amounts specified
shall not be limited in any way by reason of any insurance which may be
maintained by Franchisor, nor shall Franchisee's performance of that obligation
relieve it of liability under the indemnity provisions set forth in Section
XVIII of this Agreement.
11.05. ISSUANCE OF INSURANCE. Franchisee must obtain the insurance
required by this Agreement no later than fifteen (15) days before the date on
which any construction is commenced. The Franchised Unit shall not be opened
for business prior to Franchisor's receipt of satisfactory evidence that all
insurance required by this Agreement is in effect. Upon obtaining such
insurance, and on each policy renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of payment therefor to
Franchisor, together with, upon request, copies of all policies and policy
amendments. The evidence of insurance shall include a statement by the insurer
that the policy or policies will not be canceled or materially altered without
at least thirty (30) days prior written notice to Franchisor.
XII. CONFIDENTIAL INFORMATION
12.01. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, corporation or other entity, any confidential
information, knowledge or know-how concerning the construction and methods of
operation of the Franchised Business which may be communicated to Franchisee, or
of which Franchisee may be apprised, by virtue of Franchisee's operation under
the terms of this Agreement. Franchisee shall divulge such confidential
information only to such employees of Franchisee as must have access to it in
order to exercise the franchise rights granted hereunder and to establish and
operate the Franchised Unit pursuant hereto and as Franchisee may be required by
law, provided Franchisee shall give Franchisor prior written notice of any such
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required disclosure immediately upon receipt of notice by Franchisee in order
for Franchisor to have the opportunity to seek a protective order or take such
other actions as it deems appropriate under the circumstances.
12.02. Any and all information, knowledge, and know-how, including,
without limitation, drawings, materials, equipment, recipes, prepared mixtures
or blends of spices or other food products, and other data, which Franchisor
designates as confidential, and any information, knowledge, or know-how which
may be derived by analysis thereof, shall be deemed confidential for purposes of
this Agreement, except information which Franchisee can demonstrate came to
Franchisee's attention prior to disclosure thereof by Franchisor; or which, at
the time of disclosure thereof by Franchisor to Franchisee, had become a part of
the public domain, through publication or communication by others; or which,
after disclosure to Franchisee by Franchisor, becomes a part of the public
domain, through publication or communication by others.
XIII. COVENANTS
13.01. Franchisee covenants that, during the term of the Agreement, except
as otherwise approved in writing by Franchisor, Franchisee or, alternatively,
one designated management employee if that employee assumes primary
responsibility for the operation of the Franchised Unit, shall devote full time,
energy and best efforts to the management and operation of the Franchised
Business.
13.02. Franchisee acknowledges that, pursuant to this Agreement,
Franchisee will receive valuable specialized training and confidential
information, including without limitation, information regarding the
operational, sales, promotional, and marketing methods, procedures and
techniques of Franchisor and the System.
Franchisee covenants that, during the term of this Agreement, Franchisee
(who, unless otherwise specified, shall include, for purposes of this Section
XIII, collectively and individually, all officers, directors and holders of a
beneficial interest of five percent (5%) or more of the securities with voting
rights of Franchisee and of any corporation, directly or indirectly controlling
Franchisee, if Franchisee is a corporation, and the general partner and any
limited partners, including any corporation, and the officers, directors and
holders of a beneficial interest of five percent (5%) or more of securities with
voting rights of a corporation which controls, directly or indirectly, any
general or limited partner, if Franchisee is a partnership) shall not, either
directly or indirectly, for itself or on behalf of, or in conjunction with, any
person, persons, partnership, association or corporation or other entity:
A. Divert or attempt to divert any business or customer of the
business franchised hereunder to any competitor by direct or
indirect inducements or otherwise, or to do or perform, directly
or indirectly, any other act injurious or prejudicial to the
goodwill associated with Franchisor's Proprietary Marks and the
System;
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B. Employ or seek to employ any person who is, at that time,
employed by Franchisor or by any other Churchs franchisee, or
otherwise, directly or indirectly, induce such person to leave
his or her employment therewith; or
C. Own, maintain, operate, engage in, or have any interest in any
fast food (either takeout, on premises consumption, or a
combination thereof) restaurant that specializes in the sale of
chicken ("Chicken Restaurant"); provided, however, that the term
"Chicken Restaurant" shall not apply to any business operated by
Franchisee under a franchise agreement with Franchisor or an
affiliate of Franchisor.
13.03. Franchisee covenants that Franchisee shall not, regardless of the
cause for termination, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, persons, partnership, association,
corporation or other entity:
A. For a period of two (2) years following the termination or
expiration of this Agreement, own, maintain, engage in, or have
any interest in any Chicken Restaurant which is located within a
radius of ten (10) miles of the location specified in Section I
hereof, or the location of any other Churchs Chicken restaurant
under the System, whether owned by Franchisor or any other
Churchs franchisee, which is in existence as of the date of
expiration or termination of this Agreement; or
B. For a period of one (1) year following the termination or
expiration of this Agreement, employ or seek to employ any person
who is, at the time, employed by Franchisor or by any other
Churchs franchisee, or otherwise, directly or indirectly, induce
such person to leave his or her employment therewith.
13.04. At Franchisor's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XIII
(including covenants applicable upon the termination of a person's relationship
with Franchisee) in a form satisfactory to Franchisor, including, without
limitation, specific identification of Franchisor as a third party beneficiary
of such covenants with the independent right to enforce them, from any or all of
the following persons:
A. All managers and assistant managers of the Franchised Unit, and
any other personnel employed by Franchisee who have received or
will receive training from Franchisor;
B. All officers, directors, and holders of a direct or indirect
beneficial ownership interest of five percent (5%) or more in
Franchisee.
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The failure of Franchisee to obtain execution of a covenant required by
this Section 13.04 shall constitute a material breach of this Agreement. A
duplicate original of each such covenant shall be provided by Franchisee to
Franchisor immediately upon execution.
13.05. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section XIII, is held unreasonable
or unenforceable by a court or agency having jurisdiction in a final decision,
Franchisee expressly agrees to be bound by any lesser covenant subsumed within
the terms of such covenant that imposes the maximum duty permitted by law, as if
the resulting covenant was separately stated in and made a part of this Section
XIII.
A. RIGHT TO REDUCE COVENANTS. Franchisee understands and
-------------------------
acknowledges that Franchisor shall have the right, in its sole
discretion, to reduce the scope of any covenant set forth in
Sections 13.02. and 13.03. of this Agreement, or any portion
thereof, without Franchisee's consent, effective immediately upon
receipt by Franchisee of written notice thereof, and Franchisee
agrees that it shall comply with any covenant as so modified,
which shall be fully enforceable notwithstanding the provisions
of Section XXII hereof.
B. INJUNCTIVE RELIEF. The parties acknowledge that it will be
-----------------
difficult to ascertain with any degree of certainty the amount of
damages resulting from a breach by Franchisee of any of the
covenants contained in this Section XIII. It is further agreed
and acknowledged that any violation by Franchisee of any of said
covenants will cause irreparable harm to Franchisor.
Accordingly, Franchisee agrees that upon proof of the existence
of a violation of any of said covenants, Franchisor will be
entitled to injunctive relief against Franchisee in any court of
competent jurisdiction having authority to grant such relief,
together with all costs and reasonable attorney's fees incurred
by Franchisor in bringing such action.
XIV. TRANSFERABILITY OF INTEREST
14.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right to
transfer or assign its interest in this Agreement to any person, persons,
partnership, association, corporation, or other entity. If Franchisor's
assignee assumes all the obligations of Franchisor hereunder and sends
Franchisee written notice of the assignment so attesting, Franchisee agrees
promptly to execute a general release of Franchisor, and any affiliates of
Franchisor, from claims or liabilities of Franchisor under this Agreement.
14.02. Transfer by Franchisee. Franchisee understands and acknowledges
----------------------
that the rights and duties set forth in this Agreement are personal to
Franchisee, and that Franchisor has granted
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this Agreement in reliance on Franchisee's business skill and financial
capacity. Accordingly, neither (i) Franchisee, nor (ii) any immediate or remote
successor to Franchisee, nor (iii) any individual, partnership, corporation or
other legal entity which directly or indirectly owns any interest in the
Franchisee or in this Franchise Agreement, shall sell, assign, transfer, convey,
donate, pledge, mortgage, or otherwise encumber any direct or indirect interest
in this Agreement or in any legal entity which owns the Franchised Business
without the prior written consent of Franchisor. Acceptance by Franchisor of any
royalty fee, advertising fee or any other amount accruing hereunder from any
third party, including, but not limited to any proposed transferee, shall not
constitute Franchisor's approval of such party as a transferee or the transfer
of this Franchise Agreement to such party. Any purported assignment or transfer,
by operation of law or otherwise, not having the written consent of Franchisor,
shall be null and void, and shall constitute a material breach of this
Agreement, for which Franchisor may then terminate without opportunity to cure
pursuant to Section 15.02.E. of this Agreement.
14.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in Section 14.02., when requested;
provided, however, that prior to the time of transfer;
A. All of Franchisee's accrued monetary obligations to Franchisor
and its subsidiaries and affiliates shall have been satisfied;
B. Franchisee shall have agreed to remain obligated under the
covenants contained in Section XIII hereof as if this Agreement
had been terminated on the date of the transfer;
C. The transferee must be of good moral character and reputation, in
the reasonable judgment of the Franchisor;
D. The Franchisor shall have determined, to its satisfaction, that
the transferee's qualifications meet the Franchisor's then
current criteria for new franchisees;
E. Franchisee and transferee shall execute a written assignment, in
a form satisfactory to Franchisor, pursuant to which the
transferee shall assume all of the obligations of Franchisee
under this Agreement and Franchisee shall unconditionally
release any and all claims Franchisee might have against
Franchisor as of the date of the assignment;
F. The transferee shall execute the then-current form of Franchise
Agreement and such other then-current ancillary agreements as
Franchisor may reasonably require. The then-current form of
Franchise Agreement may have significantly different provisions
including, without limitation, a higher royalty fee and
advertising contribution than that contained in this Agreement.
The then-current form of Franchise Agreement will expire on
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the expiration date of this Agreement and will contain the same
renewal rights, if any, as are available to Franchisee herein;
G. The transferee shall agree at its sole cost and expense, to (i)
complete a Franchised Unit Renovation, within the time frame
required by Franchisor, unless a Franchised Unit Renovation was
completed within seven (7) years prior to the date of the
transfer and (ii) perform such other scope of work as may be
determined by Franchisor.
H. The transferee and such other individuals as may be designated by
Franchisor in the Manual or otherwise in writing, must have
successfully completed the training course then in effect for new
franchisees. If the Franchised Unit is the transferee's first
Churchs restaurant, the transferee shall pay to Franchisor the
then-standard Training Fee;
I. If the transferee is a partnership, the partnership agreement
shall provide that further assignments or transfers of any
interest in the partnership are subject to all restrictions
imposed upon assignments and transfers in this Agreement;
J. Franchisee shall, at Franchisor's option and request, execute a
written guarantee of the transferee's obligations under the
Agreement, which guarantee shall not exceed a period of three (3)
years from the date of transfer.
K. The Franchisee shall pay to Franchisor a transfer fee of Five
Thousand Dollars ($5,000), to cover Franchisor's administrative
expenses in connection with the transfer; however no additional
franchise fee shall be charged by Franchisor for a transfer. If
the transferee is (i) a corporation formed by Franchisee for the
convenience of ownership and in which the Franchisee is the sole
shareholder, or (ii) an existing Franchisee under this Agreement,
no transfer fee shall be required.
14.04. Grant of Security Interest. Franchisee shall grant no security
--------------------------
interest in this Agreement, the Franchised Business, or in any of its assets
unless the secured party agrees that, in the event of any default by Franchisee
under any documents related to the security interest (i) Franchisor shall be
provided with notice of default and given a reasonable time within which to cure
said default, (ii) Franchisor shall have the right and option to be substituted
as obligor to the secured party and to cure any default of Franchisee or to
purchase the rights of the secured party upon payment of all sums then due to
such secured party, except such amounts which may have become due as a result of
any acceleration of the payment dates based upon the Franchisee's default, and
(iii) the secured party shall agree to such other requirements as Franchisor, in
its sole discretion, deems reasonable and necessary to protect the integrity of
the Proprietary Marks and the Churchs System.
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14.05. Transfer on Death or Mental Incapacity. Upon the death or mental
--------------------------------------
incapacity of any person with an interest in this Agreement, the Franchised
Business or Franchisee, the executor, administrator, or personal representative
of such person shall transfer his interest to a third party approved by
Franchisor within 12 months after such death or mental incapacity. Such
transfer, including, without limitation, transfer by devise or inheritance,
shall be subject to the same conditions as any inter vivos transfer. However,
----- -----
in the case of transfer by devise or inheritance, if the heirs or beneficiaries
of any such person are unable to meet the conditions in this Section XIV, the
personal representative of the deceased Franchisee shall have a reasonable time,
but in no event more than eighteen (18) months from Franchisee's death, to
dispose of the deceased's interest in this Agreement and the business conducted
pursuant hereto, which disposition shall be subject to all the terms and
conditions for assignments and transfers contained in this Agreement. If the
interest is not disposed of within twelve (12) or eighteen (18) months,
whichever is applicable, Franchisor may terminate this Agreement.
14.06. Right of First Refusal. Any party holding an interest in this
----------------------
Agreement, the Franchised Business or in Franchisee, and who desires to accept a
bona fide offer from a third party to purchase such interest, shall notify
- ---- ----
Franchisor in writing of such offer within ten (10) days of receipt of such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require. Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor. Any material change in
the terms of any offer prior to closing shall constitute a new offer subject to
the same rights of first refusal by Franchisor as in the case of an initial
offer. Failure of Franchisor to exercise the option afforded by this Section
14.06. shall not constitute a waiver of any other provisions of this Agreement,
including all of the requirements of this Section XIV, with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Franchisee, or the Franchised Business proposed to
be sold for the reasonable equivalent in cash. If the parties cannot agree
within a reasonable time as to the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding upon the parties.
14.07. Offerings by Franchisee. Securities or partnership interests in
-----------------------
Franchisee may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by federal or
state law shall be submitted to Franchisor for review prior to their being filed
with any governmental agency; and any materials to be used in any exempt
offering shall be submitted to Franchisor for review prior to their use. No
offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the
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underwriting, issuance, or offering of securities by Franchisee; and
Franchisor's review of any offering shall be limited solely to the subject of
the relationship between Franchisee and Franchisor. Franchisee and the other
participants in the offering shall fully indemnify Franchisor in connection with
the offering. For each proposed offering, Franchisee shall pay to Franchisor a
non-refundable fee of Five Thousand Dollars ($5,000), or such greater amount as
is necessary to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering, including, without limitation,
legal and accounting fees. Franchisee shall give Franchisor written notice at
least sixty (60) days prior to the date of commencement any offering or other
transaction covered by this Section 14.07.
XV. TERMINATION
15.01. Franchisee shall be deemed to be in default under this Agreement,
and all rights granted herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee
or such a petition is filed against Franchisee and not opposed by Franchisee; or
if Franchisee is adjudicated bankrupt or insolvent; or if a receiver or other
custodian (permanent or temporary) of Franchisee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under the applicable law of any
jurisdiction should be instituted by or against Franchisee; or if a final
judgment remains unsatisfied or of record for thirty (30) days or longer (unless
a supersedeas bond is filed); or if Franchisee is dissolved; or if execution is
levied against Franchisee's property or business; or if suit to foreclose any
lien or mortgage against the premises or equipment of any Franchised Unit
developed hereunder is instituted against the Franchisee and not dismissed
within thirty (30) days; or if the real or personal property of any Restaurant
developed hereunder shall be sold after levy thereon by any sheriff, marshal, or
constable.
15.02. Franchisee shall be deemed to be in default and Franchisor may, at
its option, terminate this Agreement and all rights granted hereunder without
affording Franchisee any opportunity to cure the default upon the occurrence of
any of the following events:
A. If Franchisee fails to complete construction of the Franchised
Unit and opens for business within one hundred eighty (180) days
of execution of this Agreement. Franchisor may, in its sole
discretion, extend this period to address unforeseen construction
delays, not within the control of Franchisee.
B. If Franchisee at any time ceases to operate the Franchised Unit
or otherwise abandons the Franchised Unit, or loses the right to
possession of the premises of the Franchised Unit, or otherwise
forfeits the right to do or transact business in the jurisdiction
where the Franchised Unit is located; provided, however, that if,
through no fault of Franchisee, the premises are damaged or
destroyed by an event not within the control of
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Franchisee such that repairs or reconstruction cannot be
completed within one hundred eighty (180) days thereafter, then
Franchisee shall have thirty (30) days after such event in which
to apply for Franchisor's approval to relocate and/or reconstruct
the premises, which approval shall not be unreasonably withheld,
but may be conditioned upon the payment of an agreed minimum
royalty to Franchisor during the period in which the Franchised
Unit is not in operation;
C. If Franchisee is convicted of or pleads guilty to a felony, a
crime involving moral turpitude, or any other crime or offense
that Franchisor believes is reasonably likely to have an adverse
effect on the System, the Proprietary Marks, the goodwill
associated therewith, or Franchisor's interest therein;
D. If a threat or danger to public health or safety results from the
construction, maintenance, or operation of the Franchised Unit;
E. If Franchisee, or any partner or shareholder of Franchisee
purports to transfer any rights or obligations under this
Agreement or any interest in Franchisee to any third party
without Franchisor's prior written consent, contrary to the terms
of Section XIV hereof;
F. If Franchisee fails to comply with the in-term covenants in
Section 13.02. hereof or fails to obtain execution of the
covenants required under Sections 10.08. or 13.04.. hereof;
G. If, contrary to the terms of Section VII hereof, Franchisee
discloses or divulges the contents of the Manual or any other
confidential information provided to Franchisee by Franchisor;
H. If an approved transfer is not effected as required by Section
14.05 hereof, following Franchisee's death or mental incapacity;
I. If Franchisee knowingly maintains false books or records, or
submits any false reports to Franchisor;
J. If Franchisee or any individual, group, association, limited or
general partnership, corporation or other business entity which
directly or indirectly controls, is controlled by, or is under
common control with Franchisee; or which directly or indirectly
owns, controls, or holds power to vote ten percent (10%) or more
of the outstanding voting securities of Franchisee; or which has
in common with Franchisee one or more partners, officers,
directors, trustees, branch managers, or other persons occupying
similar status or performing similar functions ("Affiliate")
commits any act of default under any other Franchise Agreement,
Development Agreement
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(except for failure to meet the development schedule thereunder),
asset purchase agreement, promissory note or any other agreement
entered into by Franchisee or an Affiliate of Franchisee, and
Franchisor, or any parent, subsidiary, affiliate, predecessor or
successor to Franchisor;
K. If Franchisee, after or during a default pursuant to Section
15.03. hereof, commits the same default again, whether or not
such default is cured after notice; or
L. If Franchisee defaults more than once in any twelve (12) month
period under Section 15.03. hereof for failure to substantially
comply with any of the requirements imposed by this Agreement,
whether or not cured after notice.
M. If Franchisee refuses to permit Franchisor or its agents to enter
upon the premises of the Franchised Unit to conduct any periodic
inspection as set forth in Sections 5.09. and 10.02.H hereof.
N. If Franchisee uses any of Franchisor's Proprietary Marks in any
unauthorized manner or is otherwise in default of the provisions
of Section V hereof.
15.03. Except as provided in Sections 15.01 and 15.02 of this Agreement,
upon any default by Franchisee which is susceptible of being cured, Franchisor
may terminate this Agreement only by giving written Notice of Termination
stating the nature of such default to Franchisee at least ten (10) days prior to
the effective date of termination if the default is for failure to pay
royalties, Advertising Fund contributions (including Cooperative contributions,
if any are due and/or any other financial obligations owed to Franchisor by
Franchisee), and thirty (30) days, prior to the effective date of termination
for any other default, provided, however, that Franchisee may avoid termination
by curing such default to Franchisor's satisfaction within the ten (10) day or
thirty (30) day period, as applicable. If any such default is not cured within
the specified time, this Agreement shall terminate without further notice to
Franchisee effective immediately upon the expiration of the ten (10) day or
thirty (30) day period, as applicable, or such longer period as applicable law
may require. Notwithstanding anything to the contrary set forth in this
Agreement, Franchisee hereby acknowledges that any agreement between Franchisee
and Franchisor relating to past due amounts accruing hereunder, (an "Arrearage
Agreement"), including, but not limited to any promissory note, payment plan or
amendment to this agreement shall be deemed to be a material part of this
agreement and shall be incorporated herein by reference. A default under any
Arrearage Agreement shall be deemed a material default of this Franchise
Agreement, regardless of the reason Franchisee fails to pay the amount which is
the subject of such Arrearage Agreement.
15.04. Franchisee shall indemnify and hold Franchisor harmless for all
costs, expenses and any losses incurred by Franchisor in enforcing the
provisions hereof, or in upholding the
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propriety of any action or determination by Franchisor pursuant to this
Agreement, or in defending any claims made by Franchisee against Franchisor, or
arising in any manner from Franchisee's breach of or failure to perform any
covenant or obligation hereunder, including, without limitation, reasonable
litigation expenses and attorney's fees incurred by Franchisor in connection
with any threatened or pending litigation relating to any part of this
Agreement, unless Franchisee shall be found, after due legal proceedings, to
have complied with all of the terms, provisions, conditions and covenants
hereof.
XVI. EFFECT OF TERMINATION OR EXPIRATION
16.01. Upon termination or expiration of this Agreement, all rights
granted herein shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised Unit
as a Churchs restaurant, and shall not thereafter, directly or
indirectly, represent to the public that the restaurant is a
Churchs restaurant;
B. Franchisee shall immediately and permanently cease to use, by
advertising or in any manner whatsoever, any menus, recipes,
confidential food for formulae, equipment, methods, procedures,
and the techniques associated with the System, Franchisor's
Proprietary Marks, and Franchisor's other trade names, trademarks
and service marks associated with the Churchs System. In
particular, and without limitation, Franchisee shall cease to use
all signs, furniture, fixtures, equipment, advertising materials,
stationery, forms, packaging, containers and any other articles
which display the Proprietary Marks;
C. Franchisee agrees, in the event Franchisee continues to operate
or subsequently begins to operate restaurants or other
businesses, not to use any reproduction, counterfeit, copy, or
colorable imitation of the Proprietary Marks in conjunction with
such other business which is likely to cause confusion or mistake
or to deceive, and further agrees not to utilize any trade dress,
designation of origin, description, or representation which
falsely suggests or represents an association or connection with
Franchisor;
D. Franchisee agrees, upon termination or expiration of this
Agreement or upon cessation of the Franchised Business at the
location specified in Section I hereof for any reason, whether or
not Franchisee continues to operate any business at such
location, and whether or not Franchisee owns or leases the
location, to make such modifications or alterations to the
Franchised Unit premises immediately upon termination or
expiration of this Agreement or cessation of operation of the
Franchised Business as may
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be necessary to prevent the operation of any businesses thereon
by Franchisee or others in derogation of this Section XVI, and
shall make such specified additional changes thereto as
Franchisor may reasonably request for that purpose. The
modifications and alterations required by this Section XVI shall
include, but are not limited to, removal of all trade dress,
proprietary marks and other indicia of the Churchs System;
E. Franchisee shall immediately pay all sums owing to Franchisor and
its subsidiaries and affiliates. In the event of termination for
any default by Franchisee, such sums shall include all damages,
costs and expenses, including reasonable attorneys' fees,
incurred by Franchisor as a result of the default; and
F. Franchisee shall immediately turn over to Franchisor the Manual,
all other manuals, records, files, instructions, correspondence
and any and all other materials relating to the operation of the
Franchised Business in Franchisee's possession and all copies
thereof (all of which are acknowledged to be Franchisor's
property) and shall retain no copy or record of any of the
foregoing, with the exception of Franchisee's copy of this
Agreement, any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with
any provision of law.
16.02. Franchisor shall have the right (but not the duty) to be exercised
by notice of intent to do so within thirty (30) days after termination or
expiration of this Agreement, to purchase any and all improvements, equipment,
advertising and promotional materials, ingredients, products, materials,
supplies, paper goods and any items bearing Franchisor's Proprietary Marks at
current fair market value. If the parties cannot agree on a fair market value
within a reasonable time, an independent appraiser shall be designated by
Franchisor, and his determination of fair market value shall be binding. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set-off all amounts due from Franchisee under this Agreement
and the cost of the appraisal, if any, against any payment therefor.
16.03. In the event the premises are leased to Franchisee, Franchisee
shall, upon termination of this Agreement and upon request by Franchisor,
immediately assign, set over and transfer unto Franchisor, at Franchisor's sole
option and discretion, said lease and the premises, including improvements. Any
such lease entered into by Franchisee shall contain a clause specifying the
landlord's consent to assign such lease to Franchisor or its assignee in the
event this Agreement is terminated.
16.04. Franchisee shall pay to Franchisor all damages, costs, and
expenses, including reasonable attorneys' fees, incurred by Franchisor in
seeking recovery of damages caused by any action of Franchisee in violation of,
or in obtaining injunctive relief for the enforcement of any
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portion of this Section XVI. Further, Franchisee acknowledges and agrees that
any failure to comply with the provisions of this Section XVI, shall result in
irreparable injury to Franchisor.
16.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
16.06. Franchisee shall comply with the covenants contained in Section
XIII of this Agreement.
16.07. Franchisee shall execute such documents as Franchisor may
reasonably require to effectuate termination of the franchise and Franchisee's
rights to use the trademarks and systems of Franchisor.
XVII. TAXES, PERMITS, AND INDEBTEDNESS
17.01. Franchisee shall promptly pay when due all taxes, accounts and
other indebtedness of every kind incurred by Franchisee in the conduct of the
Franchised Business under this Agreement.
17.02. Franchisee, in the conduct of the Franchised Business, shall comply
with all applicable laws and regulations, and shall timely obtain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
the businesses operated under this Agreement, including, without limitation,
licenses to do business, trade name registrations, sales tax permits and fire
clearances.
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
18.01. This Agreement does not constitute Franchisee an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever. It is understood and agreed that Franchisee shall be an
independent contractor and is in no way authorized to make any contract,
agreement, warranty, or representation on behalf of Franchisor. The parties
further agree that this Agreement does not create any fiduciary relationship
between them.
18.02. During the term of this Agreement and any extensions hereof,
Franchisee agrees to take such action as Franchisor deems reasonably necessary
for Franchisee to inform and hold itself out to the public as an independent
contractor operating the Franchised Business pursuant to a franchise from
Franchisor, including, without limitation, exhibiting a notice of that fact at
the Franchised Business in form and substance satisfactory to Franchisor.
18.03 Franchisee agrees to defend, indemnify and hold harmless Franchisor,
its parent, subsidiaries and affiliates, and their respective officers,
directors, employees, agents, successors
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and assigns from all claims, demands, losses, damages, liabilities, cost and
expenses (including attorney's fees and expense of litigation) resulting from,
or alleged to have resulted from, or in connection with Franchisee's operation
of the Franchised Business, including, but not limited to, any claim or actions
based on or arising out of any injuries, including death to persons or damages
to or destruction of property, sustained or alleged to have been sustained in
connection with or to have arisen out of or incidental to the Franchised
Business and/or the performance of this contract by Franchisee, its agents,
employees, and/or its subcontractors, their agents and employees, or anyone for
whose acts they may be liable, regardless of whether or not such claim, demand,
damage, loss, liability, cost or expense is caused in whole or in part by the
negligence of Franchisor, Franchisor's representative, or the employees, agents,
invitees, or licensees thereof.
18.04 Franchisor shall advise Franchisee in the event Franchisor receives
notice that a claim has been or may be filed with respect to a matter covered by
this Agreement, and Franchisee shall immediately assume the defense thereof at
Franchisee's sole cost and expense. In any event, Franchisor will have the
right, through counsel of its choice, to control any matter to the extent it
could directly or indirectly affect Franchisor and/or its parent, subsidiaries
or affiliates or their officers, directors, employees, agents, successors or
assigns. If Franchisee fails to assume such defense, Franchisor may defend,
settle, and litigate such action in the manner it deems appropriate and
Franchisee shall, immediately upon demand, pay to Franchisor all costs
(including attorney's fees and cost of litigation) incurred by Franchisor in
affecting such defense, in addition to any sum which Franchisor may pay by
reason of any settlement or judgment against Franchisor.
18.05 Franchisor's right to indemnity hereunder shall exist
notwithstanding that joint or several liability may be imposed upon Franchisor
by statute, ordinance, regulation or judicial decision.
18.06 Franchisee agrees to pay Franchisor all expenses including
attorney's fees and court costs, incurred by Franchisor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy any
defaults of or enforce any rights under this Agreement, effect termination of
this Agreement or collect any amounts due under this Agreement.
XIX. APPROVALS AND WAIVERS
19.01. Whenever this Agreement requires the prior approval of Franchisor,
Franchisee shall make a timely written request to Franchisor therefor, and such
approval or consent shall be in writing.
19.02. Franchisor makes no warranties or guarantees upon which Franchisee
may rely, and assumes no liability or obligation to Franchisee or any third
party to which Franchisor would not otherwise be subject, by providing any
waiver, approval, advice, consent, or suggestions to Franchisee in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
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19.03. No failure of Franchisor to exercise any power reserved to it in
this Agreement, or to insist upon compliance by Franchisee with any obligation
or condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with the terms of this Agreement. Waiver by
Franchisor of any particular default shall not affect or impair Franchisor's
right in respect to any subsequent default of the same or of a different nature,
nor shall any delay, forbearance, or omission of Franchisor to exercise any
power or rights arising out of any breach or default by Franchisee of any of the
terms, provisions, or covenants of this Agreement, affect or impair Franchisor's
rights, nor shall such constitute a waiver by Franchisor of any rights,
hereunder or right to declare any subsequent breach or default. Subsequent
acceptance by Franchisor of any payments due to it shall not be deemed to be a
waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants, or conditions of this Agreement.
XX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered , sent by registered mail, or by other
means which will provide evidence of the date received to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:
Notices to Franchisor: Franchise Department
AFC ENTERPRISES, INC.
Six Concourse Pkwy., Suite 1700
Atlanta, Georgia 30328-5352
cc: Legal Department
Notices to Franchisee: ____________________________
____________________________
____________________________
[ATTN:] ___________________
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement shall be addressed to the party to be notified
at its most current principal business address of which the notifying party has
been notified and shall be deemed so delivered (i) at the time delivered by
hand; (ii) one (1) business day after sending by telegraph, facsimile or
comparable electronic system; or (iii) if sent by registered or certified mail
or by other means which affords the sender evidence of delivery, on the date and
time of receipt or attempted delivery if delivery has been refused or rendered
impossible by the party being notified.
XXI. SEVERABILITY AND CONSTRUCTION
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21.01. Except as expressly provided to the contrary herein, each section,
paragraph, part, term, and/or provision of this Agreement shall be considered
severable; and if, for any reason, any section, part, term, and/or provision
herein is determined to be invalid and contrary to, or in conflict with, any
existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties hereto; and said invalid
portions, sections, parts, terms, and/or provisions shall be deemed not to be
part of this Agreement.
21.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Franchisee, Franchisor, Franchisor's officer,
directors, and employees, and Franchisee's permitted and Franchisor's respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
21.03. All captions in the Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
21.04. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgements, promises, covenants, agreements and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto on behalf of Franchisee.
21.05. This Agreement may be executed in counterparts, and each copy so
executed shall be deemed an original.
XXII. ENTIRE AGREEMENT: SURVIVAL
22.01. This Agreement, the documents referred to herein, the Development
Agreement, if any, and the exhibits hereto, constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof and supersede any and all prior agreements. Except for those
permitted to be made unilaterally by Franchisor hereunder, no amendment, change,
modification or variance of this Agreement shall be binding on either party
unless in writing and executed by Franchisor and Franchisee. Representations by
either party, whether oral, in writing, electronic or otherwise, that are not
set forth in this Agreement shall not be binding upon the party alleged to have
made such representations and shall be of no force or effect.
I have read this Section 22.01 and agree that I have not been
induced by and am not relying upon any representation not
contained in this Agreement.
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_________________________________, Franchisee
22.02. Notwithstanding anything herein to the contrary, upon the
termination of this Agreement for any reason whatsoever (including the execution
of a subsequent Franchise Agreement pursuant to the provisions of Sections
2.02.B and 14.03.F), or upon the expiration of the Term hereof, any provisions
of this Agreement which, by their nature, extend beyond the expiration or
termination of this Agreement, shall survive termination or expiration and be
fully binding and enforceable as though such termination or expiration had not
occurred.
XXIII. ACKNOWLEDGMENTS
23.01. Franchisee acknowledges that Franchisee has conducted an
independent investigation of the Churchs franchise and recognized that the
business venture contemplated by this Agreement involves business risks and
Franchisee's success will be largely dependent upon the ability of the
Franchisee as an independent business entity.
FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE
______ ACKNOWLEDGES THAT FRANCHISEE HAS NOT RECEIVED, ANY WARRANTY OR
GUARANTY, EXPRESSED OR IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS Franchise
OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT. must initial
23.02. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED A
COMPLETED COPY OF THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND
THE AGREEMENTS RELATING THERETO, IF ANY, AT LEAST FIVE (5) BUSINESS
DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED.
FRANCHISEE
_____ FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED THE DISCLOSURE
Franchisee DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE FEDERAL TRADE
must initial COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST
TEN (10) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT
WAS EXECUTED.
23.03. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS READ AND
UNDERSTOOD THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND
AGREEMENTS RELATING THERETO, IF ANY, AND THAT FRANCHISOR HAS
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___________ ACCORDED FRANCHISEE AMPLE TIME AND OPPORTUNITY AND HAS ENCOURAGED
Franchisee FRANCHISEE TO CONSULT WITH ADVISORS OF FRANCHISEE'S OWN CHOOSING
must initial ABOUT THE POTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS
AGREEMENT.
23.04. FRANCHISEE RECOGNIZES AND UNDERSTANDS THAT IT MAY
INCUR OTHER EXPENSES AND/OR OBLIGATIONS AS PART OF THE INITIAL
INVESTMENT IN THE FRANCHISED BUSINESS WHICH THE TERMS OF THIS
AGREEMENT MAY NOT
_____ ADDRESS, AND WHICH INCLUDE WITHOUT LIMITATION: OPENING ADVERTISING,
Franchisee EQUIPMENT, FIXTURES, OTHER FIXED ASSETS, CONSTRUCTION, LEASEHOLD
must initial IMPROVEMENTS AND DECORATING COSTS AS WELL AS WORKING CAPITAL
NECESSARY TO COMMENCE OPERATIONS.
XXIV. APPLICABLE LAW: VENUE
24.01. APPLICABLE LAW. This Agreement takes effect upon its acceptance
and execution by Franchisor and shall be interpreted and construed under the
laws of the State of Georgia which laws shall prevail in the event of any
conflict of law (without regard to, and without giving effect to, the
application of Georgia choice of law or conflict of law rules) except to the
extent governed by the U. S. Trademark Act of 1946, 15 U.S.C. (S) 1051, et seq.
-- ---
(the "Lanham Act") as amended; provided, however, that if the covenants in
Article XIII of this Agreement would not be enforceable under the laws of
Georgia, and the Franchised Unit is located outside of Georgia, then such
covenants shall be interpreted and construed under the laws of the state in
which the Franchised Unit is located. Nothing in this Section XXV is intended
by the parties to subject this Agreement to any franchise or similar law, rule,
or regulation of the State of Georgia to which this Agreement would not
otherwise be subject.
24.02. The parties agree that any action brought by Franchisee against
Franchisor in any court, whether federal or state, shall be brought within such
state and in the judicial district in which Franchisor has its principal place
of business. Any action brought by Franchisor against Franchisee in any court,
whether federal or state, may be brought within the state and in the judicial
district in which Franchisor has its principal place of business. Franchisee
hereby consents to personal jurisdiction and venue in the state and judicial
district in which Franchisor has its principal place of business.
24.03. No right or remedy herein conferred upon or reserved to Franchisor
is exclusive of any other right or remedy herein, or by law or equity provided
or permitted; but each shall be cumulative of any other right or remedy provided
in this Agreement
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24.04. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
24.05. Any and all claims and actions arising out of or relating to this
Agreement (including, but not limited to, the offer and sale of this franchise),
the relationship of Franchisee and Franchisor, or Franchisee's operation of the
Franchised Unit, brought by Franchisee shall be commenced within eighteen (18)
months from the occurrence of the facts giving rise to such claim or action, or
such claim or action shall be barred.
24.06. Franchisor and Franchisee hereby waive to the fullest extent
permitted by law any right to or claim of any consequential, punitive, or
exemplary damages against the other, and agree that in the event of a dispute
between them each shall be limited to the recovery of any actual damages
sustained by it.
XXV. CORPORATE FRANCHISEE
In the event the Franchisee named herein is a corporation at the time of
execution of this Agreement, it is warranted, covenanted and represented to
Franchisor that:
25.01. All of the issued and outstanding stock of Franchisee is owned,
legally and beneficially, by the person or persons listed on Exhibit "B"
---------------------
attached hereto.
- ---------------
25.02. The above-named person or persons has (have) individually, and
jointly and severally, executed this Agreement, and such person, or one of such
persons, is and shall be the chief executive officer of the Franchisee
corporation, holding such corporate office or offices as may be necessary to
maintain and exercise the actual power and authority actively to direct the
affairs of the Franchisee.
25.03. Franchisee is validly incorporated and duly existing under the laws
of the State of ________________________, is duly qualified to conduct business
therein, and has its principal place of business at
________________________________________________________________________________
_______. Franchisee shall promptly notify Franchisor in writing of any change
thereto during the term of this Agreement.
{SIGNATURE PAGE TO FRANCHISE AGREEMENT FOLLOWS}
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in triplicate
on the day and year first above-written.
WITNESS: FRANCHISOR:
AFC ENTERPRISES, INC.
__________________________ BY: __________________________________
__________________________
WITNESS: FRANCHISEE:
__________________________ BY: __________________________________
__________________________
{SIGNATURE PAGE TO FRANCHISE AGREEMENT}
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EXHIBIT "A"
-----------
CHURCHS CHICKEN
FRANCHISE AGREEMENT
NOTICE OF COMMENCEMENT DATE
---------------------------
Name of Franchisee: _____________________________________________________
Franchise Agreement Dated: _______________________________________________
Franchise Premises Address: _______________________________________________
_______________________________________________________________________
_______________________________________________________________________
Store Number: ___________________________________________________________
NOTICE is hereby given to the abovementioned Franchisee pursuant to Section
2.01 of the Franchise Agreement that the Term of the abovementioned Franchise
Agreement commenced on ________________, 19___, and that the Term shall expire
on ________________, _____, unless the Franchise Agreement is terminated
earlier, pursuant to its terms and conditions.
AFC ENTERPRISES, INC.
BY: __________________________________
TITLE: ________________________________
DATE OF NOTICE: ________________________
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EXHIBIT "B"
-----------
SHAREHOLDERS OF FRANCHISEE
--------------------------
(For Corporate Franchisees)
Name of Number of % Ownership
Shareholders Shares of Franchisee Title
- ------------ ------ ------------- -----
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EXHIBIT "C"
-----------
PROTECTED AREA
--------------
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EXHIBIT 10.10
STATE OF LOUISIANA
PARISH OF JEFFERSON
KNOW ALL MEN BY THESE PRESENTS, that:
WHEREAS, Alvin C. Copeland ("Alvin"), Gilbert E. Copeland ("Gilbert"),
Mary L. Copeland ("Mary"), Catherine Copeland ("Catherine") and Russell J. Jones
("Russell") are now the sole owners of the basic recipe and formula used in the
preparation of a spicy fried chicken commonly known as Popeyes Famous Fried
Chicken ("Popeye Formula"), said ownership being in the following proportions:
<TABLE>
<S> <C>
Alvin 80.000%
Mary 5.334%
Gilbert 8.666&
Catherine 4.000%
Russell 2.000%
-------
TOTAL 100.000%
</TABLE>
WHEREAS, pursuant to oral agreements with A. Copeland Enterprises, Inc.
("ACE") and its wholly-owned subsidiary, Popeyes Famous Fried Chicken, Inc.
("PFFC"), Alvin granted ACE the right to use the Popeye Formula and granted PFFC
the right to license others to use the Popeye Formula, and
WHEREAS, the parties hereto desire to confirm the prior oral agreements
referred to in the preceding paragraph and to enter into a written license
agreement;
NOW, THEREFORE, for and in consideration of the premises and mutual
undertakings hereinafter set forth, Alvin, Mary, Gilbert, Catherine, Russell,
ACE and PFFD do hereby agree as follows:
(1) Alvin warrants that the Popeye Formula, and detailed
instructions with respect thereto, have been committed to
writing and have been deposited in a safety deposit box at First
<PAGE>
Progressive Bank, 1501 Veterans Memorial Boulevard, Metairie,
Louisiana. In the event of the unavailability, incapacity or
death of Alvin, arrangements have been made that one of the
senior officers of ACE will always be in a position to gain
access to the Popeye Formula so that it will always be available
to ACE and PFFC.
(2) Alvin, Mary, Gilbert, Catherine and Russell ("Grantors") hereby
license and grant to ACE, its successors and assigns, the
exclusive right to use the Popeye Formula in the United States
of America and all foreign countries, in stores owned or
operated by ACE or any subsidiary of ACE, subject only to the
rights of PFFC as hereafter set forth.
(3) ACE shall pay to Grantors a royalty for the use of the Popeye
Formula, computed at the rate of one and one-half (1.5%) per
cent on gross receipts from all items sold, less the direct
sales taxes paid or owed with respect thereto, at all stores
owned or operated by ACE or any subsidiary of ACE.
(4) Grantors hereby license and grant to PFFC, its successors and
assigns the exclusive right to license others, except ACE or any
subsidiary of ACE, to use the Popeye Formula in the United
States of America and all foreign countries, subject only to the
rights of ACE as hereinabove set forth, and Grantors herewith
ratify and confirm all previous licenses granted by PFFC.
(5) With respect to any store operated pursuant to a Franchise
Agreement from PFFC or any subsidiary
<PAGE>
thereof PFFC shall pay to Grantors a royalty of one-half of one
(0.5%) per cent on the gross receipts from all items sold, less
the direct sales taxes paid or owed with respect thereto, from
all such stores.
(6) The royalties hereinabove set forth shall be paid on or before
the 10th day after the close of each month. Grantors or anyone
designated in writing by any of them shall have the right to
examine the books and records of ACE and PFFC or any subsidiary
of either, at reasonable times, to such limited extent as may be
necessary to determine the accuracy or inaccuracy of the royalty
being paid.
(7) ACE and PFFC specifically covenant and agree to maintain as
strictly confidential and secret, and not to disclose to anyone,
any or all information obtained or received from Alvin relating
to the Popeye Formula.
(8) During the life of this agreement, Alvin shall not disclose to
any party, other than designated representatives of ACE or PFFC,
the Popeye Formula or anything related thereto.
(9) Alvin has disclosed to ACE certain secret methods, secret
formulas and secret "know-how" used in connection with Popeyes
Famous Fried Chicken restaurants, including and without
limitation the following:
A unique system relating to the opening and operating of
restaurants specializing in the preparation and sale of highly
spiced chicken made with a unique spice and batter formula and
other
<PAGE>
related menu items utilizing confidential food formulas (the
"POPEYES Famous Fried Chicken System"), the distinguishing
characteristics of which include, without limitation, the name
POPEYES Famous Fried Chicken; other confidential food formulas
and recipes used in the preparation of other food products,
specialized menus; specially designed buildings; interior and
exterior layouts, unique trade dress and other identification
schemes ("Indicia of Origin"); standards and specifications for
equipment, equipment layouts, products, operating procedures and
management programs.
(10) The Popeye Formula, for which royalty is being paid pursuant to
Paragraphs 3 and 5 above, was developed prior to the
incorporation of ACE. The items referred to in Paragraph 9
above were substantially developed after the incorporation of
ACE and have always been the property of ACE. So that there
will be a written record, Grantors ratify and confirm the
ownership of ACE of all of the items referred to in Paragraph 9,
it being specifically understood that this ratification and
confirmation of ownership does not apply to the Popeye Formula.
(11) If Alvin makes, develops, or invents improvements in methods
relating to the production of the Popeye Formula or has or
hereafter acquires additional secret recipes for products
suitable for use in POPEYES Famous Friend Chicken restaurants,
such improvements and new recipes shall be promptly disclosed by
Alvin to ACE and PFFC and shall be included herein without any
alteration in royalty
<PAGE>
payments.
(12) Mary, Gilbert, Catherine and Russell stipulate and agree that
Alvin knows the entire Popeye Formula and is in the best
position to determine how and for what consideration it should
be licensed. Therefore, Mary, Gilbert, Catherine and Russell do
hereby give and grant to Alvin, his assigns, his succession
representative or anyone designated by him in his last will and
testament, for the mutual benefit of all owners of the Popeye
Formula, the absolute and irrevocable right, exercisable by
Alvin, in their sole discretion to (i) reduce the royalty
payments due by ACE or PFFC or any successor or assignee of
either, (ii) grant a moratorium on royalty payments due by ACE
or PFFC or any successor or assignee of either, (iii) terminate
either or all royalty payments, (iv) change the time at which
either or all royalty payments are made or (v) make any other
arrangement including and without limitation the lease or sale
thereof with any person, firm or corporation for the use of the
Popeye Formula, including the sale or transfer of ownership of
the entire Popeye Formula to any third person or corporation,
not related in any manner to Alvin, for cash, notes, stock or
any combination thereof. Additionally, Mary, Gilbert, Catherine
and Russell agree to execute any and all documents presented to
them for the purpose of accomplishing the foregoing, and, in the
event they are unwilling or unable for any reason to execute
such documents, they hereby appoint Alvin their agent, which
agency is coupled with an interest, for the purpose of executing
any
<PAGE>
and all documents necessary or desirable to accomplish such
purpose. The sole and only restriction upon Alvin, his assigns,
succession representative or anyone designated by him in his
last will and testament in relation to the Popeye Formula is
that if any when any cash, notes, stock or other consideration
or any combination thereof is received by Alvin or available by
virtue of the ownership of the Popeye Formula, 20% thereof will
be delivered or paid to Mary, Gilbert, Catherine and Russell in
their respective proportions at the same time Alvin receives
same.
(13) This agreement shall be subject to termination by Grantors or
ACE or PFFC upon default by the other party in the performance
of any of the terms, conditions, or covenants of this agreement
and failure to remedy said default within thirty (30) days after
written notice or demand, except that the rights of any third
person holding under any franchise agreement from PFFC, its
successors or assigns shall not be prejudiced by any such
termination. Termination of this agreement in any manner shall
not discharge the liability for royalty accrued or unpaid at the
time of such termination.
(14) This agreement shall remain in full force and effect unless
otherwise cancelled as provided in Paragraph 13 above, as long
as ACE or any subsidiary thereof or any franchisee of PFFC, its
successors or assigns, is using the Popeye Formula, it being
understood that a default or termination by ACE shall not
entitle Grantors to terminate
<PAGE>
PFFC and, similarly, a default or termination by PFFC shall not
entitle Grantors to terminate ACE.
IN WITNESS WHEREOF, the parties have executed this agreement at New
Orleans, Louisiana, effective as of the 2nd day of July, 1979.
WITNESSES:
/s/
- ---------------------------- /s/ Alvin C. Copeland
/s/ ---------------------------
- ---------------------------- Alvin C. Copeland
/s/
- ---------------------------- /s/ Mary L. Copeland
/s/ ----------------------------
- ---------------------------- Mary L. Copeland
/s/
- ---------------------------- /s/ Gilbert E. Copeland
/s/ ----------------------------
- ---------------------------- Gilbert E. Copeland
/s/
- ---------------------------- /s/ Catherine Copeland
/s/ ----------------------------
- ---------------------------- Catherine Copeland
/s/
- ---------------------------- /s/ Russell J. Jones
/s/ ----------------------------
- ---------------------------- Russell J. Jones
A. COPELAND ENTERPRISES, INC.
/s/
- ---------------------------- By: /s/ W. Ronald Lewis
/s/ -------------------------
- ---------------------------- W. Ronald Lewis
Vice President
POPEYES FAMOUS FRIED CHICKEN, INC.
/s/
- ---------------------------- By: /s/ W. Ronald Lewis
/s/ -------------------------
- ---------------------------- W. Ronald Lewis
Vice President
<PAGE>
EXHIBIT 10.11
AMENDMENT
---------
This Amendment made as of this 21st day of March, 1989 by and among
Alvin C. Copeland ("Copeland"), New Orleans Spice Company, Inc., a Louisiana
corporation ("Spice"), herein represented by its authorized officer, and Biscuit
Investments, Inc., a Louisiana corporation ("Biscuit"), represented herein by
its authorized officer;
W I T N E S S E T H
WHEREAS, by virtue of a certain agreement (the "Formula Agreement")
dated July 2, 1979 by and among A. Copeland Enterprises, Inc. ("ACE"), Popeye's
Famous Fried Chicken, Inc. ("Popeye's"), Copeland and others, ACE acquired the
right to use a certain recipe and formula for preparation of spicy fried
chicken, any developments or improvements relating to the production of such
recipe and formula and any additional recipes for products suitable for use in
Popeye's restaurants ("Formula") and Popeye's acquired the right to license
others to use the Formula:
WHEREAS, the manufacturing facilities have been conveyed to Spice;
WHEREAS, Spice, by virtue of certain contracts and transfer, has
acquired ACE's entire interest in the
<PAGE>
Formula and Copeland has acquired an additional four (4%) percent interest
therein, so that the Copeland and Spice together own the entire interest in the
Formula in the proportions of eighty four (84%) percent for Copeland and sixteen
(16%) percent for Spice:
Whereas, the parties desire to confer various rights upon one another
and to provide otherwise with regard to the use of the Formula and compensation
therefor;
NOW THEREFORE, in consideration of the premises and the agreements
herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the parties agree to amend the
Formula Agreement as follows:
I.
Copeland hereby authorizes Spice to utilize the Formula, and Spice
agrees that it shall enjoy the right to utilize the Formula in the preparation
of all spices, batter and other ingredients required in the preparation of spicy
fried chicken known as Popeyes Fried Chicken or other food products ("Product").
II.
Pursuant to a Supply Contract of even date herewith and annexed hereto
for reference, Spice has
2
<PAGE>
agreed to supply Biscuit's requirements of Product for Biscuit's company-owned
outlets as well as the franchisee-operated outlets in the system.
III.
In compensation for the rights hereby granted Biscuit, Biscuit shall pay
to Copeland and Spice the following:
A. As to sales from outlets operated and owned by Biscuit, Biscuit
shall pay Copeland one and twenty-six hundredths (1.26%) percent
and Spice twenty-four hundredths (.24%) percent of gross
receipts from all items sold, less the direct sales taxes paid
or owed with respect thereto, at all stores owned or operated by
Biscuit or any of its subsidiaries ("gross receipts").
B. As to sales made from outlets operated by Biscuit franchisees
and licensees, Biscuit shall pay Copeland forty-two
one-hundredths (.42%) percent and Spice eight one-hundredths
(.08%) percent of gross receipts.
C. All of such payments to Spice and Copeland shall be paid weekly
in arrears and shall
3
<PAGE>
EXHIBIT 10.12
SECOND AMENDMENT TO
FORMULA AGREEMENT
This Second Amendment to Formula Agreement (the "Second Amendment") is
effective the 21st day of March, 1989.
WHEREAS, on July 2, 1979, A. Copeland Enterprises, Inc., a Louisiana
corporation ("ACE"), Popeyes Famous Fried Chicken, Inc., a Louisiana corporation
("Popeyes"), Alvin C. Copeland ("Copeland"), and certain other individuals (the
"Other Parties") entered an agreement providing for the licensing to ACE and
Popeyes of certain secret recipes, formulated and processes (the "Formula") used
in the preparation of food products sold by Popeyes Famous Fried Chicken
restaurants owned and operated by ACE and franchised by Popeyes (the "Formula
Agreement");
WHEREAS, subsequent to July 2, 1979, Copeland and ACE acquired all of
the rights of the Other Parties in the Formula;
WHEREAS, subsequent to July 2, 1979, ACE and Popeyes each were merged
with and into Biscuit Investments, Inc., a Louisiana corporation
("Investments");
WHEREAS, subsequent to July 2, 1979, the facilities of ACE used to
manufacture spices, batter and other food products and ingredients prepared with
the Formula for use by Popeyes restaurants were conveyed to New Orleans Spice
Company, Inc., a Louisiana corporation ("Spice"), along with ACE's ownership
interest in the Formula;
WHEREAS, on March 21, 1989, Spice and Investments entered into a Supply
Contract whereby Spice agreed to sell and Investments agreed to purchase all of
Investments' requirements of spices, batter and other food products and
ingredients prepared with the Formula;
WHEREAS, on March 21, 1989, Copeland, Investments and Spice entered into
an amendment to the Formula Agreement providing for, among other things, the
payment by Investments to Copeland and Spice of certain royalties for the use of
the Formula; and
WHEREAS, pursuant to an amended and Restated Agreement and Plan of
Merger, and effective September 21, 1989, Investments will be merged with and
into Church's Fried Chicken, Inc., which will be the survivor of such merger and
will be renamed "Al Copeland Enterprises, Inc." at the effective time thereof;
and
WHEREAS, pursuant to the Amended and Restated Merger Loan Agreement
dated September 21, 1989, among Investments, Canadian Imperial Bank of Commerce,
New York Agency, as Agent (the "Agent"), and the financial institutions that are
parties thereto (the "Merger Loan Agreement"), Biscuit is required to deliver to
the
<PAGE>
Agent, as a condition to the making of the loans provided for under the Merger
Loan Agreement (the "Loans"), this Second Amendment.
NOW THEREFORE, in consideration of the premises, the mutual covenants
set forth herein, and the individual and collective benefits to Copeland,
Investments and Spice of the Merger Loan Agreement and the Loans, the parties
hereto agree as follows:
1. Copeland warrants that the Formula, and detailed instructions
with respect thereto, have been committed to writing and have been deposited in
a safety deposit box at First National Bank of Commerce, New Orleans, Louisiana.
In the event of the unavailability, incapacity or death of Copeland,
arrangements have been made that one of the senior officers of Spice will always
be in a position to gain access to the Formula so that it will always be
available to Spice.
2. The Formula Agreement, as amended, may not be amended after the
execution date of this Amendment without the written consent of the Agent for so
long as any of the Loans or any obligations (as such term is defined in the
Merger Loan Agreement) are unpaid.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed on this 21st day of September, 1989.
/s/ Alvin C. Copeland
-------------------------------
Alvin C. Copeland
BISCUIT INVESTMENTS, INC.
BY: /s/
-------------------------------
Title: Executive Vice President
NEW ORLEANS SPICE COMPANY, INC.
BY: /s/
-------------------------------
Title: Secretary and Treasurer
2
<PAGE>
EXHIBIT 10.13
SUPPLY CONTRACT
---------------
This Agreement made this 21st day Of March, 1989 by and between New
Orleans Spice Company, Inc., a Louisiana corporation ("Spice"), herein
represented by its undersigned officer and Biscuit Investments, Inc., a
Louisiana corporation ("Biscuit"), herein represented by its undersigned
officer.
WITNESSETH
WHEREAS, Spice, by virtue of a certain agreement dated July 2, 1979,
as amended ("Formula Agreement"), has the right to use a certain basic recipe
and formula in the preparation of spicy fried chicken commonly known as
Popeyes Famous Fried Chicken, any developments or improvements relating to the
production of such recipe and formula and any additional recipes for products
suitable for use in Popeyes Famous Chicken and Biscuit restaurants ("Popeye
Formula"),
WHEREAS, the Formula Agreement and the parties' interest therein are
more fully described in a certain Amendment of the Formula Agreement,
executed of even date herewith by the parties and Alvin C. Copeland;
WHEREAS, Biscuit owns and operates Popeyes Famous Fried Chicken and
Biscuits restaurants which specialize in the sale of spicy fried chicken
prepared with
<PAGE>
batter, spices, and other ingredients prepared with the Popeye Formula (such
batter, spices and other ingredients, "Product"); and
NOW THEREFORE, the parties for the mutual benefits conferred upon each
other herein, the receipt and adequacy of which are acknowledged, agree that:
I.
Spice shall sell to Biscuit, or as Biscuit directs, all of the Product
required by Biscuit, and Biscuit shall purchase its requirements for the
consideration hereafter stated.
II.
During any month, Spice shall not be obligated to supply an amount of
Product disproportionate to average amounts customarily supplied for the
preceding twelve month period.
III.
In consultation with Biscuit, Spice shall endeavor to estimate the
future requirement of Biscuit to assure maximum compliance herewith.
IV.
Prices for the Product shall be as quoted or posted from time to time by
Spice consistent with past practices, shall be payable C.O.D. or on such other
basis
2
<PAGE>
as shall be mutually determined, and shall be uniform throughout the Popeyes
Famous Fried Chicken and Biscuit system.
V.
The term hereof shall be fifteen years. Thereafter, this Agreement may
be terminated by the parties' agreement, subject to an accounting for Product
already sold but not yet paid for.
VI.
Without the other party's written consent first obtained, neither party
may assign or encumber its rights hereunder; nor may this Agreement be assumed
by any other person.
VII.
This Agreement may be amended only by a writing executed by the parties
hereto.
VIII.
This Agreement establishes no third party beneficiary rights in any
persons not parties hereto.
3
<PAGE>
IX
Spice hereby agrees that, upon the merger of Church's Fried Chicken,
Inc. ("Church's") and Biscuit becoming effective, Church's shall become the
Company hereunder and shall be entitled to all of the rights and benefits of
Biscuit hereunder, subject to all of the covenants, duties, obligations,
promises and liabilities of Biscuit hereunder.
X
This Agreement shall be construed in accordance with the internal laws
of the State of Louisiana.
Executed at New York, New York on the date first written above.
BISCUIT INVESTMENTS, INC. NEW ORLEANS SPICE CO., INC.
BY: /s/ BY: /s/
---------------------- ----------------------
Its: V.P. Its:
----------------- --------------------
4
<PAGE>
EXHIBIT 10.14
RECIPE ROYALTY AGREEMENT
This agreement is made this 21st day of March 1989 by and among Alvin C.
Copeland, a person of the full age of majority and a resident of the Parish of
Jefferson, State of Louisiana ("Copeland"), New Orleans Spice Company, Inc., a
Louisiana corporation ("Spice"), and Biscuit Investments, Inc., a Louisiana
corporation ("Biscuit").
W I T N E S S E T H:
--------------------
WHEREAS, Investments has made an offer (the "Tender Offer") to purchase
up to 30,100,000 shares of common stock of Church's Fried Chicken, Inc., a
Texas corporation ("Church's"), par value $0.04 per share (the "Church's
Stock"), at a price of $11.00 per share pursuant to an offer to Purchase dated
October 25, 1988 (as more specifically defined below, the "Offer to Purchase");
WHEREAS, in connection with and to finance the Tender Offer and the
Offer to Purchase Investments contemplates entering into (i) a Tender Loan
Agreement (the "Tender Loan Agreement") among Investments, Certain Banks, and
Canadian Imperial Bank of Commerce ("CIBC"),
<PAGE>
New York Agency, as Agent, (ii) a Merger Loan Agreement among Investments, A.
Copeland Enterprises, Inc., a Louisiana corporation ("Ace"), CIBC, Inc., acting
through its Atlanta Branch, Certain Banks, and Canadian Imperial Bank of
Commerce, acting through its New York Agency, as Agent, and (iii) a Financing
Agreement (the "Bridge Financing Agreement") between Investments and Merrill
Lynch & Co., Inc., a Delaware corporation ("ML&Co.");
WHEREAS, Investments, Ace and Church's entered into an Agreement and
Plan of Merger dated as of February 15, 1989 providing for, among other things,
the merger (the "Merger") of Investments and Church's as soon as practicable
after the Tender Purchase Date (as defined below);
WHEREAS, Copeland and Spice receive from Investments royalties for the
use by Investments of the Popeye Formula (as defined below) (the "Investments
Royalty Payments"), currently computed at the aggregate rate of 1.50% on gross
receipts from all items sold, less the direct sales taxes paid or owed with
respect thereto, at all Popeyes Famous Fried Chicken and Biscuit restaurants
owned or operated by Investments or any subsidiary of Investments;
2
<PAGE>
WHEREAS, Copeland and Spice also receive from Investments a royalty for
Investments' right to license others to use the Popeye Formula (the "Franchised
Store Royalty Payments"), currently computed at the aggregate rate of .50% on
gross receipts from all items sold, less the direct sales taxes paid or owed
with respect thereto, at all Popeyes Famous Fried Chicken and Biscuit
restaurants operating pursuant to franchise agreements from Investments, as
successor by merger with Popeyes, Inc., a Louisiana corporation ("Popeyes"), or
any subsidiary of Investments;
WHEREAS, in connection with certain borrowings by Copeland from American
Bank & Trust Co. ("American Bank"), Copeland, pursuant to the Assignment
Agreement (as defined below), has (i) pledged and assigned to American Bank
Copeland's interest in the Royalty Payments (as defined below) and (ii) assigned
to American Bank his entire right, title and interest in and to the License
Agreement (as defined below);
WHEREAS, American Bank as entered into an agreement with Copeland
pursuant to which American Bank, effective on March 21, 1989, waives any rights
that it has or might have to future Deferred Royalty Payments (as
3
<PAGE>
defined below) during the Deferral Period (as defined below);
WHEREAS, in recognition of the benefits contemplated by the Tender
Offer, and the Offer to Purchase Copeland has agreed, subject to the Assignment
Agreement, and Spice has agreed to forego and relinquish his right to receive
certain Royalty Payments upon the terms and subject to the conditions set forth
hereinbelow;
NOW THEREFORE, in consideration of the premises and agreements herein
contained, and other valuable consideration the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties hereby agree as
follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined
-------------
in the preamble and the recitals hereto shall have the meanings set forth
therein, and the following terms shall have the following respective meanings
(such definitions to be equally applicable to the singular and plural forms):
Assignment Agreement: The Assignment of Royalties by Copeland to
--------------------
American Bank & Trust Co. dated July 30, 1987.
4
<PAGE>
Company: (a) prior to the Merger, Investments and (b) thereafter,
-------
Church's.
Deferral Period: the period commencing on March 21, 1989 and
---------------
ending on the Termination Date.
Deferred Royalty Payments: the meaning ascribed thereto in
-------------------------
Subsection 2.1.2.
Existing Stores: all Popeyes Famous Fried Chicken and Biscuit
---------------
restaurants in existence and operated or managed by Investments or any
subsidiary of Investments at any time prior to March 21, 1989.
Existing Franchised Stores: All Popeyes Famous Fried Chicken and
--------------------------
Biscuit restaurants in existence and operated or managed by a franchisee
pursuant to a franchise agreement from Investments, as successor by merger with
Popeyes, or any subsidiary of Investments at any time prior to March 21, 1989.
License Agreement: the Agreement dated as of July 2, 1979 among
-----------------
Copeland, Ace, Popeyes, Gilbert E. Copeland, Mary L. Copeland, Catherine
Copeland and Russell J. Jones relating to, among other things, the Popeye
Formula, as supplemented and amended by the Agreement dated as of March 21,
1989 among Copeland, Investments and New Orleans Spice Company, Inc.
5
<PAGE>
Loans: the loans extended to Investments pursuant to the Tender Loan
-----
Agreement or the Merger Loan Agreement.
Merger Date: the date of the filing of the certificates of merger
-----------
relating to the Merger with the Secretary of State of Louisiana and the
Secretary of State of Texas.
New Stores: collectively, each restaurant that the Company or any
----------
subsidiary of the Company purchases, constructs, acquires, or opens for
operation, in each instance, on or after March 21, 1989.
New Franchised Stores: collectively, each restaurant that a franchisee,
---------------------
pursuant to a franchise agreement, or licenses, pursuant to a license agreement,
from the Company or any subsidiary of the Company, opens for operation,
purchases, constructs, or acquires, in each instance, on or after March 21,
1989.
Offer to Purchase: the Offer to Purchase by Investments dated
-----------------
October 25, 1988, as supplemented to and including the date hereof.
Popeyes Formula: the basic recipe and formula used in the preparation
---------------
of spicy fried chicken commonly known as Popeyes Famous Fried Chicken, any
developments or improvements relating to the production of such recipe
6
<PAGE>
and formula and any additional recipes for products suitable for use in Popeyes
Famous Fried Chicken and Biscuit restaurants.
Royalty Payments: collectively, at any time, the Investments Royalty
----------------
Payments and the Franchised Store Royalty Payments.
Tender Purchase Date: the first date on which Investments first pays
--------------------
for shares of Church's Stock pursuant to the Tender Offer.
Termination Date: the date (i) on which the Company has repaid in full
----------------
all loans under the Bridge Financing Agreement, (ii) on which the Company
has reduced the amounts outstanding under the Merger Loan Agreement to
$75,000,000 and (iii) on which the Fixed Charged Coverage Ratio (as defined in
the Indenture attached as an Exhibit to the Bridge Financing Agreement (the
"Fixed Charge Coverage Ratio")) first exceeds 2 to 1 for four consecutive fiscal
quarters.
1.2. Other Provisions. 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.
7
<PAGE>
SECTION 2
CERTAIN AGREEMENTS
2.1. Payments and Deferral of Royalty Payments. Copeland, Spice
-----------------------------------------
and the Company agree that Copeland and Spice shall receive from the Company,
and the Company shall pay to Copeland and Spice, Royalty Payments as follows.
2.1.1. The Company shall continue to pay to Copeland and Spice in
conformity with past practices and subject, in the case of Copeland, to the
Assignment Agreement, their respective portion of the Investments Royalty
Payments relating to Existing Stores and their respective portion of the
Franchised Store Royalty Payments relating to Existing Franchised Stores. These
payments to Copeland and Spice shall continue in that manner from and after the
termination of this Agreement.
2.1.2. Except as set forth in Section 2.3 below, Copeland and Spice
agree, during the Deferral Period, to forego and relinquish their respective
rights to receive, and the Company agrees to withhold payment to Copeland and
Spice of, (i) Investments Royalty Payments relating to New Stores and (ii)
Franchised Store Royalty Payments relating to New Franchised Stores (such
payments
8
<PAGE>
are referred to herein collectively as the "Deferred Royalty Payments").
2.2. Use of Deferred Royalty Payments. Copeland, Spice and the
--------------------------------
Company further agree that Copeland and Spice shall have no right to, and the
Company shall have absolute ownership of, the monies retained by the Company
constituting Deferred Royalty Payments.
2.3. Payments to Copeland and Spice. After the Termination Date,
------------------------------
all future payments constituting Deferred Royalty Payments as defined herein to
be paid to Copeland shall be subject to the pledge and assignment by Copeland in
favor of American Bank under the Assignment Agreement and shall be paid to him
in conformity with past practices and subject to the Assignment Agreement.
SECTION 3
TERM
This Agreement shall be effective on March 21, 1989 and shall terminate
on the Termination Date.
SECTION 4
MISCELLANEOUS
4.1. Notices. All notices, consents, and requests to or upon the
-------
respective parties hereto (a) to
9
<PAGE>
be effective shall be in writing or by telecopy or telex and (b) unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or two days after being deposited in the mail,
certified mail, return receipt requested, postage pre-paid, or, in the case of
telex or telecopy notice, when sent, addressed as follows, or to such address or
other address as may hereafter be notified by any of the parties hereto:
the Company: Biscuit Investments, Inc.
1333 South Clearview Parkway
Jefferson, Louisiana 70121
Telecopy: 504-733-7551
Attention: President
Copeland: Alvin C. Copeland
1333 South Clearview Parkway
Jefferson, Louisiana 70121
Telecopy: 504-733-7551
Spice: New Orleans Spice Company, Inc.
1333 South Clearview Parkway
Jefferson, Louisiana 70121
Telecopy: 504-733-7551
Attention: President
In each instance copies shall be sent to the indicated persons as follows:
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: Syndications,
Management Administration
Telecopy: 212-425-3462
Telex: 6716450
Answerback: CIBC SYN
10
<PAGE>
Merrill Lynch World Headquarters
South Tower
World Financial Center
New York, New York 10080-0736
Attention: Mary Beth Henson
Merrill Lynch & Co., Inc.
Telecopy: 212-449-8244
Sessions, Fishman, Boisfontaine,
Nathan, Winn, Butler & Barkley
Place St. Charles
35th Floor
201 St. Charles Avenue
New Orleans, Louisiana 70170-3500
Telecopy: 504-582-1555
Attention: Peter J. Butler, Esq.
4.2. Entire Agreement; Amendments. This Agreement constitutes the
----------------------------
entire agreement between the parties with respect to the subject matter hereof,
and there are no representations or commitments by the parties except as set
forth herein. This Agreement supersedes all prior and contemporaneous oral
agreements, understandings, negotiations and discussions of the parties hereto
relating to the transactions contemplated by this Agreement. This Agreement may
be amended only in writing executed by the parties hereto and after having
obtained the consent of CIBC, which shall not be unreasonably withheld.
4.3. Waiver. No waiver of any of the provisions of this Agreement
------
shall constitute a waiver of any other provision hereof or of a continuation of
the violation waived. Each party shall be entitled to rely upon
11
<PAGE>
one or more provisions of this Agreement without waiving any right to rely upon
any other provision at the same time or at any other time.
4.4. Parties in Interest. This Agreement shall be binding upon and
-------------------
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. Nothing in this Agreement is intended
or shall be construed to confer upon or to give any person other than the
parties hereto and their respective legal representations, successors and
assigns any rights or remedies under or by reason of this Agreement.
4.5. Headings. The headings of sections and subsections of this
--------
Agreement are merely for convenience of reference and have no substantive
significance. Headings shall be disregarded in the interpretations on this
Agreement.
4.6. Counterparts. This Agreement may be executed by the parties to
------------
this Agreement on any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
12
<PAGE>
4.7. Governing Law. This Agreement shall be governed by, and
-------------
construed and interpreted in accordance with, the laws of the State of
Louisiana.
4.8. Assumption by Church's. Copeland and Spice hereby agree that,
----------------------
upon the Merger becoming effective, Church's shall become the Company hereunder
and shall be entitled to all of the rights and benefits of the Company
hereunder, subject to all of the covenants, duties, obligations, promises and
liabilities of the Company hereunder.
13
<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.
/s/ Alvin C. Copeland
------------------------
Alvin C. Copeland
BISCUIT INVESTMENTS, INC.
By: /s/
-----------------------
Its: V.P.
----------------------
NEW ORLEANS SPICE COMPANY, INC.
By: /s/
-----------------------
Its:
----------------------
14
<PAGE>
EXHIBIT 10.15
King Features Syndicate Division
THE HEARST CORPORATION
235 East 45th Street
New York, New York 10017
March 11, 1976
Gentlemen:
The following when executed by the parties hereto shall set forth our
agreement with respect to your use of the characters contained in the cartoon
strip entitled POPEYE, their names, pictures, likenesses, images, symbols,
caricatures, cartoons and signatures in connection with your business as
specifically described below on the following terms and conditions:
2. We hereby agree not to object to your use and registration of
the mark POPEYES in connection with your business and trade during the term of
this agreement and after* which
* the expiration of the original copyright for the POPEYE cartoon feature
<PAGE>
business and trade is hereby described as the operation and supply and
franchising the operation of restaurants specializing in the sale of food items
such as fried chicken, french fries and other prepared or packaged foods or food
ingredients.*
* the foregoing shall not apply to the reproduction of any of the copyrighted
designs or the features licensed hereunder.
<PAGE>
7. All decisions relating to your business as described hereunder
and the operation thereof shall be, except as otherwise provided herein, within
your sole power and discretion.
You are aware of the high reputation that the Cartoon and Characters
enjoy and you agree that the quality of services, products and facilities
provided by you and your franchisees and/or licensees hereunder shall accord
with and maintain this high reputation, and that said cartoon characters will
not in any way be used by you or your franchisees in any way that will disparage
the POPEYE cartoon or the characters thereof.
8. We shall make available to you without cost at your request
existing original drawings, color separations or other mechanical aspects of
the Cartoon for your use hereunder. You will return all of the foregoing to us
in good condition upon request. Further, we shall furnish such cooperation and
assistance to you, at your request, as we are able with respect to the use of
said artwork and Cartoon hereunder in your business.
9. As a material condition of this agreement, you will properly
affix to each reproduction of the Cartoon or any part thereof licensed
hereunder such due notice of copyright in the name of King Features Syndicate,
Inc. (or any such other name as is furnished therefor in writing by us to you),
as is provided by the Universal Copyright Convention, such as "(c) by King
Features Syndicate, Inc.", and including in such notice as part thereof the
proper year or years.
10. We shall have the continuing right to approve all artistic and
literary materials displaying the cartoon characters and name thereof licensed
herein, and the manner of their use hereunder before said use. Such approval
shall be in our sole discretion, shall be in writing, and shall not be
unreasonably withheld. However, if we fail to approve or disapprove of any
<PAGE>
such materials within fifteen (15) days of our receipt thereof, our approval
thereof shall be conclusively presumed.
11. Upon the happening of any one of the following events, we shall
have the option to terminate this agreement forthwith: the filing by you of a
petition in bankruptcy; the filing against you of a petition of bankruptcy and
the failure of you to take affirmative action within sixty (60) days to have
such a petition dismissed; the making by you of a general assignment for the
benefit of your creditors; the involuntary appointment of a receiver or trustee
of all or substantially all of your assets and the failure by you to take
affirmative action within sixty (60) days to have such appointment dismissed;
the application for relief by you under any insolvency law; the liquidation, in
whole or in part, of your business.
13. Except as otherwise provided herein, we warrant and represent
that we have not heretofore granted nor will we hereafter grant any rights
inconsistent with or in direct conflict
<PAGE>
with those granted hereunder. We further warrant and represent that we are the
copyright proprietor of said Cartoon or possess the rights we are hereunder
granting from the said owner. It is understood that no warranty or
representation is made by us with regard to the use of the name WIMPY or
variations thereof and the use of said name may subject you to legal liability.
14. You acknowledge that the rights granted hereunder are of a
special, unique and extraordinary nature and that the breach of this agreement
will cause irreparable damage incapable of adequate compensation by damages in
an action at law and accordingly, we shall be entitled to and you consent to
injunctive or other equitable relief to prevent or cure any breach or
threatened breach of this agreement by you.
15. You agree to indemnify and hold us, King Features Syndicate,
Inc., and their and our respective successors and assigns, harmless from and
against all loss, liability, damage and expense (including reasonable attorney's
fees) arising out of any claims, demands, actions or suits resulting from your
operation hereunder and in connection with the supply, operation of or
franchising of POPEYES restaurants.
You warrant, represent and agree that you will exercise your best
efforts to insure that all food or other materials sold or supplied by you and
your franchisees and/or licensees and in connection with which the POPEYE
cartoons are used will at all times be of good merchantable quality, fit for
human consumption,
<PAGE>
free from any deleterious or injurious ingredients or substances and shall be
manufactured in strict adherence to all applicable federal, state and local
laws.
16. Nothing herein contained shall be deemed to create a
partnership, joint venture or other similar relationship between us.
17. You shall have no right to use the Cartoon or any part thereof
of equivalent thereto except to the extent expressly permitted hereunder. In
this connection, it is understood that you shall have no right hereunder to
reproduce, use or sell or cause to be sold reproductions of the Cartoon, or any
part thereof, either alone or in combination with any product or thing offered
for sale or resale, except as specifically authorized in paragraphs 1 and 2
hereof with respect to the described operation of the restaurant business only.
Upon termination of this agreement, you agree that you will not in any way or
manner in connection with the sale of any product, service or thing, use or
cause to be used, directly or indirectly, the Cartoon or any part, name or
element thereof as licensed hereunder. However, nothing herein shall be
construed to require your discontinuance of the POPEYES mark for your
restaurant services or food products after this agreement is terminated.
18. Any and all rights in and to the said Cartoon and Characters not
expressly granted to you herein are reserved to us and any one or more of these
said rights may be exercised or enjoyed by us, directly or indirectly, at any
and all times.
<PAGE>
19. Any and all rights and remedies reserved by or to us herein
shall be cumulative and shall not exclude any other right or remedy legally or
equitably available. Our failure to insist upon the strict performance of any
of the covenants or terms hereof to be performed by you shall not be construed
as a waiver of such covenants or terms.
20. All notices required or desired to be given hereunder shall be
by registered mail or telegram to the parties hereto at their addresses
herein set forth or as such may be from time to time supplied in writing.
Notices given by registered mail shall be deemed given on actual receipt by the
addressee or on the seventh day following delivery to the post office,
whichever occurs first; and those by telegram on the date delivered to the
addressee by the telegraph office.
21. You agree to pay any and all sales, use or other excise taxes,
including interest and penalties, which may be now or hereafter imposed or
levied on the transfer or use of the artwork or material hereunder or upon any
of the rights herein licensed or the exercise thereof. However, none of the
foregoing taxes shall be deemed to mean or include those imposed or levied on
us in the nature of a corporate income tax.
22. This agreement sets forth the entire understanding of the
parties and may not be modified or waived, in whole or in part, except in
writing signed by the party against whom such modification or waiver in sought
to be enforced. There are no
<PAGE>
warranties, representations or promises other than those herein expressly set
forth. This agreement shall be construed in accordance with and governed by the
laws of the United States of America, State of New York.
23. This agreement shall be binding upon and inure to the benefit of
The Hearst Corporation and its successors and assigns.
24. In the event of the declaration by a judicial tribunal having
jurisdiction over the parties of the invalidity of any portion of this
agreement, such decision shall not affect the remaining portion which shall
remain and continue in full force and effect.
25. See '87 Letter Agr
Very truly yours,
KING FEATURES
BY: /s/
--------------------------------
Vice President & General Manager
ACCEPTED AND APPROVED:
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin Copeland
--------------------------
Alvin Copeland, President
<PAGE>
EXHIBIT 10.16
Assignment and Amendment
________________________
WHEREAS, King Features Syndicate Division of THE HEARST CORPORATION, a
Delaware Corporation having an office at 235 East 45th Street, New York, New
York, United States of America (hereinafter referred to as "King Features") and
A. COPELAND ENTERPRISES, INC., a Louisiana Corporation having an office at 1333
South Clearview Parkway Jefferson, Louisiana, United States of America
(hereinafter referred to as "Copeland") entered into an agreement dated March
11, 1976 (the "Domestic Agreement") relating to the use of the Popeye cartoon
strip in the United States in connection with Copeland's business; and
WHEREAS, POPEYES FAMOUS FRIED CHICKEN, INC. a Louisiana corporation
having an office at 1333 South Clearview Parkway, Jefferson, Louisiana, United
States of America (hereinafter referred to as "PFFC") desired to be assigned
such rights as were previously licensed to Copeland; and
WHEREAS, Copeland desires to induce King Features to consent to the
said assignment.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants and agreements hereinafter set forth, it is hereby mutually
covenanted and agreed by and between the parties hereto as follows:
1. Copeland hereby assigns to PFFC all of the rights which were
licensed to it under the Domestic Agreement.
2. PFFC hereby assumes and agrees to perform and be bound by all
of the covenants, conditions and obligations contained in the Domestic
Agreement and warrants that its business and trade is the same as described in
paragraph 2 of the Domestic Agreement.
<PAGE>
3. Copeland guarantees that PFFC shall fully perform all of the
covenants, conditions and obligations, contained in the Domestic Agreement as
amended herein.
4. King Features hereby consents to the said assignment by
Copeland to PFFC of all the rights which were licensed to Copeland under the
Domestic Agreement.
5. PFFC guarantees that royalties paid to King Features in New York
under the Domestic Agreement shall equal at least $1 million United States
Dollars ($1,000,000.00.) during the period commencing January 1, 1981 and ending
December 31, 1985. To the extent that royalties are paid during this said period
to King Features pursuant to an agreement entered as of even date herewith
covering certain countries around the world between King Features and PFFC
(hereinafter referred to as the "International Agreement" royalties shall be
combined with the royalties paid to King Features under the Domestic Agreement
in determining if PFFC has met its minimum royalty obligation. PFFC agrees to
pay King Features the minimum royalty in no less than the increments listed in
the following schedule:
<TABLE>
<CAPTION>
Royalty For Year Ending Royalty
- ----------------------- -------
<S> <C>
December 31, 1981 $150,000
December 31, 1982 $170,000
December 31, 1983 $200,000
December 31, 1984 $230,000
December 31, 1985 $250,000
</TABLE>
Any balance due of the minimum royalty shall be payable in United States
currency within ninety (90) days of the end of each year.
-2-
<PAGE>
Any payments by PFFC to King Features required by the above schedule in excess
of actual royalties due under paragraph 3 of the Domestic Agreement and
paragraph 4 of the International Agreement collectively, may be taken as a
credit by PFFC against any subsequent royalties due under paragraph 3 of the
Domestic Agreement to the extent that such royalties exceed the minimum royalty
due for that year until King Features has received a cumulative minimum royalty
of $1,000,000.00.
6. PFFC agrees to pay the said minimum royalty of $1 million
United States Dollars set forth in paragraph 5 herein whether or not either or
both the Domestic Agreement and the International Agreement terminates or is
terminated and such obligation shall survive the termination(s) and shall be
paid in accordance with and at the time required by paragraph 5 herein.
7. The construction and validity of this assignment and each and
every provision hereof, and of the rights and duties of the parties hereunder,
shall be governed by the internal laws of the State of New York, United States
of America.
8. All of the covenants, conditions and obligations contained in
the Domestic Agreement, except as expressly modified
-3-
<PAGE>
herein, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Amendment to be executed as of January 1, 1981.
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin C. Copeland
---------------------------
Alvin C. Copeland, President
POPEYES FAMOUS FRIED CHICKEN, INC.
BY: /s/ Alvin C. Copeland
---------------------------
Alvin C. Copeland, President
THE HEARST CORPORATION
KING FEATURES SYNDICATE DIVISION
BY: /s/
---------------------------
<PAGE>
EXHIBIT 10.17
POPEYE LICENSE
THIS AGREEMENT made this 1st day of January 1981 by and between
---
KING FEATURES SYNDICATE,
Division of THE HEARST CORPORATION,
235 East 45th Street
New York, New York 10017
("King Features")
A
N
D
POPEYES FAMOUS FRIED CHICKEN, INC.
A Louisiana corporation,
1333 South Clearview Parkway
Jefferson, Louisiana 70121
("PFFC")
The following when executed by the parties hereto shall set forth their
agreement with respect to the use by PFFC of certain of the characters contained
in the cartoon strip entitled POPEYE, their names, pictures, likenesses, images,
symbols, caricatures, cartoons and signatures in connection with PFFC's business
as specifically described below on the following terms and conditions:
1. King Features grants to PFFC the sole and exclusive right in the
countries listed on the attached Schedule A for the term of this agreement to
reproduce and use, subject to the terms and conditions of this agreement, the
names, pictures, portraits, photographs, likenesses, images, symbols,
caricatures, cartoons and signatures of any of the characters of the POPEYE
cartoon strip listed in Schedule B (hereinafter collectively referred to as
"Cartoon") for the purpose of PFFC's business and trade only
-1-
<PAGE>
and the advertising thereof, as hereinafter defined and set forth. Moreover,
King Features agrees that each country outside of the United States and not
presently on Schedule A will be automatically added to the schedule when King
Features' presently existing licenses therein for hamburgers or restaurant
services are terminated or not renewed.
2. King Features hereby agrees not to object to PFFC's use and
registration of the mark POPEYES in connection with its business and trade in
any of the countries covered by the agreement during the term of this agreement.
Moreover, to effect the intent of this paragraph, King Features agrees to assign
to PFFC, subject to paragraph 19 hereof, or surrender for cancellation or
withdraw any trademark or service mark application or registration which it owns
and which is cited as a bar by any governmental authority to the registration of
POPEYES by PFFC pursuant to this paragraph in any country covered by this
agreement.
3. PFFC's business and trade is hereby described as the operation
and supply and franchising the operation of restaurants under the name POPEYES
specializing in the sale of food items such as fried chicken, french fries and
other prepared or packaged foods or food ingredients. The foregoing shall not
apply to the reproduction of any of the copyrighted designs or the features
licensed hereunder.
-2-
<PAGE>
4. In consideration of paragraphs 1 and 2 above, PFFC agrees to
account for and pay to King Features in United States currency a royalty of
one-half of one percent (1/2 of 1%) of gross sales in the countries covered by
this agreement on the first cumulative gross sales of One Hundred Million
Dollars ($100,000,000.00), and thereafter a royalty of three-eighths of one
percent (3/8 of 1%) of gross sales in such countries for so long as the United
States copyright in the original Popeye cartoon character is subsisting. As
used herein, "gross sales" means the gross sales of the POPEYES restaurant
units of PFFC, its subsidiaries and its franchisees and/or licensees.
5. Any and all monies due hereunder, pursuant to paragraph 4 hereof
shall be due and payable to King Features in New York, New York in United States
currency at the then prevailing rates of exchange in New York within ninety (90)
days following the completion of the first year ending December 31, 1981
covering all gross sales accruing during said year and thereafter within ninety
(90) days following the completion of each six (6) month period (January 1
through June 30 and July 1 through December 31) commencing as of January 1, 1982
and covering all gross sales during the said six (6) month period. Such payments
shall be made without any deduction for a tax, assessment or levy, or any cost
of exchange or expense of transmitting said funds. PFFC assumes the sole
responsibility of procuring such permits for the
-3-
<PAGE>
export of funds as may be required in the countries in which PFFC is licensed
hereunder. To the extent that it is impossible to make such payments due to the
"blocking" of funds by governmental rule, regulation or order, such blocked
funds shall be deposited to the credit of King Features in such depository as
King Features designates subject to such governmental rule, regulation or order.
Any payments which are not made by PFFC on or before the 90th day following the
completion of the applicable period as indicated above shall bear interest per
annum from the completion of such applicable period at the lower of the
following rates: (i) the prevailing prime rate of interest charged by
Manufacturers Hanover Trust Company in New York on the day following the
completion of the applicable period or, (ii) at the highest rate of interest
which may be charged under the laws of New York. This provision for the payment
of interest on late payments shall not act as a waiver of the right to terminate
this license under paragraph 6.
6. PFFC agrees to keep accurate and complete records on total gross
sales of all of its POPEYES operations in the countries covered by this
agreement and to open up all such books and records which reflect gross sales
for the inspection of King Features or its agents or designees at any time and
from time to time during regular business hours, whenever such inspection is
requested by King Features. King Features shall have the right to make copies of
such books and records.
-4-
<PAGE>
Further, PFFC agrees to render to King Features verified written statements of
such operations no later than forty-five (45) days following the completion of
each six (6) month period this agreement is in effect commencing as of July 1,
1981.
It is further agreed that if PFFC fails to make any such payments or to
render any such statements, as aforesaid, or if PFFC otherwise violates any of
the material terms of this agreement, and such default in performance or
violation of the agreement is not cured within sixty (60) days after written
notice thereof is given to PFFC, then King Features shall have the right to
treat each such failure or violation as a material breach of this agreement
entitling it to all rights and remedies allowable by law for such breach,
including, without limitation, the right to terminate this agreement at any time
after such breach and to retain whatever monies have theretofore been paid
hereunder by PFFC to King Features.
Further, PFFC agrees to cause its franchisees and/or licensees
to keep accurate and complete books and records of their total gross sales.
PFFC's franchise agreements shall provide for a right of inspection of such
books and records by PFFC or its representative. On request of King Features,
PFFC shall appoint King Features as its representative to inspect such books,
records and documents reflecting the franchisee's total gross sales in the
countries covered by this agreement. If such franchisee
-5-
<PAGE>
and/or licensees should refuse to comply with the said instructions or any of
them, PFFC agrees to institute and prosecute diligently and in good faith such
action or proceeding as may be necessary to compel compliance with the said
instructions.
7. The term of this agreement shall be for a five (5) year period
commencing as of January 1, 1981 and shall be automatically renewed thereafter
from year to year provided that all of the terms and conditions to be performed
by PFFC hereunder have been met and that PFFC is not in breach of or default of
this agreement. However, PFFC shall have the right not to renew this agreement
if it gives written notice thereof to King Features at least ninety (90) days
prior to the end of the then subsisting term.
8. All decisions relating to PFFC's business as described hereunder
and the operation thereof shall be, except as otherwise provided herein, within
PFFC's sole power and discretion.
PFFC is aware of the high reputation that the Cartoon and
characters enjoy and PFFC agrees that the quality of services, products and
facilities provided by it and its franchisees and/or licensees hereunder shall
accord with and maintain the high reputation, and that said Cartoon characters
will not in any way be used by it or its franchisees in any way that will
disparage the POPEYE cartoon or the characters thereof.
-6-
<PAGE>
9. King Features shall make available to PFFC without cost at
PFFC's request existing original drawings, color separations or other mechanical
aspects of the Cartoon for PFFC's use hereunder. PFFC will return all of the
foregoing to King Features in good condition upon request. Further, King
Features shall furnish such cooperation and assistance to PFFC, at PFFC's
request, as King Features is able with respect to the use of said artwork and
Cartoon hereunder in PFFC's business.
10. As a material condition of this agreement, PFFC will properly
affix to each reproduction of the Cartoon or any part thereof licensed hereunder
such due notice of copyright in the name of King Features Syndicate, Inc. (or
any such other name as is furnished therefor in writing by King Features to
PFFC), as is provided by the Universal Copyright Convention and the laws of the
particular country in which the reproduction is utilized, published or
exhibited, such as "(C) by King Features Syndicate, Inc." and including in such
notice as part thereof the proper year or years. PFFC agrees to duly execute and
deliver to King Features, upon demand, all instruments which shall be necessary
or proper more fully to effectuate the end and purpose of this clause. King
Features agrees that in any derivative work permitted under this agreement
wherein PFFC has reproduced the Cartoon or any part thereof PFFC shall as far as
King Features is concerned have the exclusive right to make use of such work
after all reproductions of the Cartoon or any part thereof have been removed
from such work.
-7-
<PAGE>
11. King Features shall have the continuing right to approve
artistic and literary materials displaying the Cartoon characters and name
thereof licensed herein, and the manner of their use hereunder before said use.
Such approval shall be in its sole discretion, shall be in writing, and shall
not be unreasonably withheld. However, if King Features fails to approve or
disapprove of any such materials within fifteen (15) days of its receipt
thereof, its approval thereof shall be conclusively presumed.
12. Upon the happening of any one of the following events, King
Features shall have the option to terminate this agreement forthwith: (a) the
filing by PFFC of a petition in bankruptcy; (b) the filing against PFFC of a
petition of bankruptcy and the failure of PFFC to take affirmative action within
sixty (60) days to have such a petition dismissed; (c) the making by PFFC of a
general assignment for the benefit of its creditors; (d) the involuntary
appointment of a receiver or trustee of all or substantially all of PFFC's
assets and the failure by PFFC to take affirmative action within sixty (60) days
to have such appointment dismissed; (e) the application for relief by PFFC under
any insolvency law; (f) the liquidation, in whole or in part, of PFFC's
business.
13. The rights herein granted are personal to PFFC and may not, in
whole or in part, be transferred or assigned without King Features' prior
written consent, which consent will not be unreasonably withheld. King Features
agrees, however, that PFFC has the right to sublicense its rights hereunder to
its individual POPEYE franchisees provided that said franchisees are also bound
by the same quality obligations imposed on PFFC hereunder. Additionally, PFFC
shall have the right to offer its stock publicly. Notwithstanding the
foregoing, nothing in this paragraph shall relieve PFFC of its obligations under
this agreement.
-8-
<PAGE>
14. Except as otherwise provided herein, King Features warrants and
represents that it has not heretofore granted nor will it hereafter grant any
rights inconsistent with or in direct conflict with those granted hereunder.
King Features further warrants and represents that it is the copyright
proprietor of the Popeye character or controls the rights of the copyright
proprietor thereof in the United States. In the event any countries listed in
Schedule A shall not extend to King Features copyright protection for the Popeye
character, notwithstanding King Features' ownership or control of the United
States copyright in the Popeye character, such non-extension of copyright
protection shall not affect the obligation to pay royalties as set forth in
paragraph 4 hereof.
In the event of any claim made against PFFC's right to use the Cartoon
in accordance in accordance with this agreement in any country listed added to,
Schedule A, King Features agrees to assist PFFC in defense of the claim at King
Features' expense, and PFFC shall have the right to withhold and to apply
royalties due King Features from that country to the extent required to defray
the costs and expenses of defending against such adverse claims.
If PFFC gives written notice to King Features that the royalties from
the country or countries involved in the adverse claims are insufficient to
defray PFFC's costs and expenses of defending against such claims, King Features
shall at its option, either (1) undertake to defend against the adverse claims
at its expense, or (2) delete the country from Schedule A, or (3) if the claim
involves a licensed character other than POPEYE, delete said character from
Schedule B as it relates to the country in
-9-
<PAGE>
issue. King Features will give written notice to PFFC of its option election
within fifteen (15) days of its receipt of PFFC's aforesaid notice. If King
Features elects option (1), PFFC agrees to render its assistance to King
Features in such defense. The terms of this paragraph shall apply only to claims
adverse to rights expressly granted by King Features, and shall not apply to use
of the Cartoon names as service marks or trademarks by PFFC, the right to such
usage not having been granted herein.
15. PFFC acknowledges that the rights granted hereunder are of a
special, unique and extraordinary nature and that the breach of this agreement
will cause irreparable damage incapable of adequate compensation by damages in
an action at law and accordingly, King Features shall be entitled to and PFFC
consents to injunctive or other equitable relief to prevent or cure any breach
or threatened breach of this agreement by PFFC.
16. PFFC agrees to indemnify and hold King Features and its
respective successors and assigns, harmless from and against all loss,
liability, damage and expense (including reasonable attorneys' fees) arising out
of any claims, demands, actions or suits resulting from PFFC's operation
hereunder and in connection with the supply, operation of or franchising of
POPEYES restaurants.
PFFC warrants, represents and agrees that it will exercise its best
efforts to insure that all food or other materials sold or supplied by it and
its franchises and/or licensees and in connection with which the cartoons are
used will at all times be of good merchantable quality, fit for human
consumption, free from
-10-
<PAGE>
any deleterious or injurious ingredients or substances and shall be manufactured
in strict adherence to all applicable laws.
17. Nothing herein contained shall be deemed to create a
partnership, joint venture or other similar relationship between the parties.
18. PFFC shall have no right to use the Cartoon or any part thereof
or equivalent thereto except to the extent expressly permitted hereunder. In
this connection, it is understood that PFFC shall have no right hereunder to
reproduce, use or sell or cause to be sold reproductions of the Cartoon, or any
part thereof, either alone or in combination with any product or thing offered
for sale or resale, except as specifically authorized in paragraphs 1 and 2
hereof with respect to the described operation of the restaurant business only.
Upon termination of this agreement, PFFC agrees that it will not in any way or
manner in connection with the sale of any product, service or thing, use or
cause to be used, directly or indirectly, the Cartoon or any part, name or
element thereof as licensed hereunder. However, nothing hereunder shall be
construed to require PFFC's discontinuance of the POPEYES mark for its
restaurant services or food products after this agreement is terminated.
19. Subject to paragraph 2, any and all rights in and to the said
Cartoon and characters not expressly granted to PFFC herein are reserved to King
Features and any one or more of these said rights may be exercised or enjoyed by
King Features, directly or indirectly, at any all and times including but not
-11-
<PAGE>
limited to the use of the Cartoon on foods, food ingredients and utensils
intended for sale to the general public through outlets other than restaurants.
In no circumstance shall King Features retain any right during the term of this
license or thereafter to use or to authorize others to use POPEYES as a service
mark or trademark in connection with restaurant services or chicken products of
any kind.
20. Any and all rights and remedies reserved by or to King Features
herein shall be cumulative and shall not exclude any other right or remedy
legally or equitably available. King Features' failure to insist upon the
strict performance of any of the covenants or terms hereof to be performed by
PFFC shall not be construed as a waiver of such covenants or terms.
21. All notices required or desired to be given hereunder shall be
by registered mail or telegram to the parties hereto at their addresses herein
set forth or as such may be from time to time supplied in writing. Notices
given by registered mail shall be deemed given on actual receipt by the
addressee and those by telegram on the date delivered to the addressee by the
telegraph office.
22. PFFC agrees to pay any and all sales, use or other excise taxes,
including interest and penalties, which may be now or hereafter imposed or
levied on the transfer or use of artwork or material hereunder or upon any of
the rights herein licensed or the exercise thereof. However, none of the
foregoing
-12-
<PAGE>
taxes shall be deemed to mean or include those imposed or levied on King
Features in the nature of a corporate income tax.
23. This agreement sets forth the entire understanding of the
parties and may not be modified or waived, in whole or in part, except in
writing signed by the party against whom such modification or waiver is sought
to be enforced. There are no warranties, representations or promises other than
those herein expressly set forth. This agreement shall be construed in
accordance with and governed by the internal laws of the State of New York,
United States of America.
24. This agreement shall be binding upon and inure to the benefit of
King Features and its successors and assigns.
THE HEARST CORPORATION
KING FEATURES SYNDICATE DIVISION
BY: /s/
---------------------------------
POPEYES FAMOUS FRIED CHICKEN, INC.
BY: /s/ Alvin C.Copeland
---------------------------------
Alvin C. Copeland, President
-13-
<PAGE>
To induce The Hearst Corporation to enter into the foregoing agreement
A. Copeland Enterprises, Inc. guarantees the performance by its subsidiary
Popeyes Famous Fried Chicken, Inc. of all the terms and conditions which are to
be performed by Popeyes Famous Fried Chicken, Inc. under the said agreement
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin C. Copeland
---------------------------------
Alvin C. Copeland, President
-14-
<PAGE>
SCHEDULE A
Afghanistan Guyana Paraguay
Albania Haiti Peru
Algeria Honduras Philippines
Andorra Poland
Angola Hungary Portugal
Argentina Iceland Qatar
Australia India Romania
Austria Indonesia Rwanda
Bahamas Iran Saint Lucia
Bahrain Iraq Saint Vincent & Grenadines
Bangladesh Ireland San Marino
Barbados Israel Sao Tome & Principe
Belgium Saudi Arabia
Belize Ivory Coast Senegal
Benin Jamaica Seychelles
Bhutan Japan Sierra Leone
Bolivia Jordan Singapore
Botswana Kampuchea Solomon Islands
Brazil Kenya Somalia
Bulgaria Kiribati South Africa
Burma Korea (North) Soviet Union
Burundi Korea (South) Spain
Cambodia Kuwait Sri Lanka
Cameroon Laos Sudan
Cape Verde Lebanon Suriname
Central African Republic Lesotho Swaziland
Chad Liberia
Chile Libya Switzerland
China Liechtenstein Syria
Colombia Luxembourg Taiwan
Comoros Madagascar Tanzania
Congo Malawi Thailand
Costa Rica Malaysia Togo
Cuba Maldives Tonga
Cyprus Mali Trinidad & Tobago
Czechoslovakia Malta Tunisia
Denmark Mauritania Turkey
Djibouti Mauritius Tuvalu
Dominica Mexico Uganda
Dominican Republic Monaco United Arab Emirates
Ecuador Mongolia United Kingdom
Egypt Morocco Upper Volta
El Salvador Mozambique Uruguay
Equatorial Guinea Namibia Vanuatu
Ethiopia Nauru Vatican City
Fiji Nepal Venezuela
Finland Netherlands Vietnam
Gabon New Zealand Western Sahara
Gambia Nicaragua Western Samoa
East Germany Niger Yemen (Aden)
West Germany Nigeria Yemen (Sanaa)
Ghana Norway Yugoslavia
Greece Oman Zaire
Grenada Pakistan Zambia
Guatemala Panama Zimbabwe
Guinea Papua New Guinea
Guinea-Bissau
<PAGE>
SCHEDULE B
----------
POPEYE NANA OYL
OLIVE OYL KING BLOZO
SWEE'PEA EUGENE THE JEEP
BRUTUS BERNARD
SEA HAG WIFFLE HEN
DUFUS GERARD
HAM GRAVY SALTY
MARS MAN WIMPY
(Use of the name Wimpy or variations thereof may subject PFFC to legal
liability for which King Features shall not be responsible, nor shall the
provision of paragraph 14 apply).
King Features shall add character (s) to Schedule B if such characters meet all
of the following three conditions: (i) the character is considered, in the
sole opinion of King Features, a regular character of the POPEYE cartoon strip
and can be licensed as provided for herein: (ii) King Features is the sole
owner of the copyright to the character in the United States of America and
(iii) King Features is not obligated in its sole opinion to share any royalties
produced under this license with any person or entity.
<PAGE>
EXHIBIT 10.18
[LETTERHEAD OF KING FEATURES]
September 17, 1981
Burgess McCranie, Esq.
Popeye's Famous Fried Chicken, Inc.
1333 South Clearview Parkway
Jefferson, La. 70121
Re: Agreement King Features Syndicate Division
of THE HEARST CORPORATION, and POPEYE'S
FAMOUS FRIED CHICKEN, INC., dated January 1,
1981 ("International Agreement").
Agreement King Features Syndicate Division
of THE HEARST CORPORATION and A. COPELAND
ENTERPRISES, INC., dated March 11, 1976
("Domestic Agreement").
Assignment and Amendment King Features Syndicate
Division of THE HEARST CORPORATION, dated
January 1, 1981 and referring to both the
Domestic Agreement and the International
Agreement ("Assignment and Amendment").
Dear Mr. McCranie:
With respect to the above captioned agreements dealing with the
use of the POPEYE cartoon in connection with POPEYES restaurants,
POPEYE'S FAMOUS FRIED CHICKEN, INC. ("PFFC") and KING FEATURES SYNDICATE
DIVISION of THE HEARST CORPORATION ("King Features") have agreed:
<PAGE>
-2-
1. Paragraph 4 of the International Agreement shall continue to apply in
those countries ("Post Expiration Countries") wherein King Features owns or
controls the service mark in the Popeye character for restaurant services or if
the country does not permit service mark registrations then the trademark
registration for chicken food products on the date that copyright protection for
the original Popeye cartoon character in the United States expires ("Copyright
Expiration"). PFFC agrees to assist King Features in obtaining trademark and
service mark registrations for the POPEYE cartoon character in any country of
the world; however nothing herein requires PFFC to use the POPEYE cartoon
character as a trademark or service mark. No country shall be concerned a Post
Expiration Country unless King Features shall undertake to stop uses in such
country which are reported to King Features by and PFFC and which uses
infringe the Popeye cartoon character as a mark for restaurant services and or
chicken food products. Further King Features and PFFC agree that after the
---
Copyright Expiration the provisions of the second and third paragraphs of
Paragraph numbered 14 of the International Agreement will apply in the Post
Expiration Countries not only to claims adverse to PFFC's permitted uses
hereunder but also to the aforesaid infringing uses of the Popeye cartoon
character it being understood that King Features may delete any country from the
group of Post Expiration Countries at any time. After such Copyright Expiration,
<PAGE>
-3-
2. The indemnity in the first paragraph of Paragraph number 16 of the
International Agreement extends to all of the activities of PFFC's franchisees
or licensees so that King Features shall be indemnified and held harmless with
respect to all such activities.
3. Any credit available to PFFC under Paragraph 5 of the Assignment and
Amendment may only be taken against royalties due King Features from gross sales
made under either the Domestic Agreement or the International Agreement prior to
January 1, 1986, and in no event are the use of such credits to affect the
minimum royalty guarantee of one million United States Dollars ($1,000,000).
Please indicate on the line provided below your confirmation of this
understanding.
With good wishes,
THE HEARST CORPORATION
KING FEATURES SYNDICATE DIVISION
BY: /s/ Joseph F. D'Angelo
---------------------------------
Joseph F. D'Angelo, President
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin C. Copeland
---------------------------------
Alvin C. Copeland, President
POPEYES FAMOUS FRIED CHICKEN, INC.
BY: /s/ Alvin C. Copeland
---------------------------------
Alvin C. Copeland, President
<PAGE>
EXHIBIT 10.19
LICENSE
THIS LICENSE made this 19th day of December, 1985 by and between:
KING FEATURES SYNDICATE, INC.
235 East 45th Street
New York, New York 10017
("King Features")
and
THE HEARST CORPORATION,
King Features Syndicate Division
235 East 45th Street
New York, New York 10017
("Hearst")
and
POPEYES, INC.
A Louisiana corporation,
1333 South Clearview Parkway
Jefferson, Louisiana 70121
("Popeyes")
and
A. COPELAND ENTERPRISES, INC.,
A Louisiana Corporation
1333 South Clearview Parkway
Jefferson, Louisiana 70121
("Copeland")
WHEREAS, King Features is the owner of the copyright in the characters
contained in a cartoon strip entitled "Popeye," including their names, pictures,
likenesses, images, symbols, caricatures, cartoons and signatures (hereinafter
collectively referred to as "Popeye cartoon"); and
WHEREAS, the first cartoon featuring the Popeye character was published
January 17, 1929 under the title "The Thimble Theater-Now Showing Gobs of Work"
and the copyright therein was duly registered by King Features Syndicate, Inc.,
a predecessor in interest of the present King Features under certificate C1.K5,
No. 36345, and renewed, by King Features under R164,887, for a term ending
December 31, 2004; and
<PAGE>
WHEREAS, the Popeye cartoon has been published from time to time in
various forms and media and the copyright therein has been duly registered by
King Features or its predecessor in interest; and
WHEREAS, King Features is a wholly owned subsidiary of Hearst and has
granted to Hearst certain rights to license the copyrights which King Features
owns; and
WHEREAS, Hearst granted A. Copeland Enterprises, Inc., a Louisiana
corporation, ("Copeland") a license on March 24, 1976 to the sole and exclusive
right in the U.S. to use the copyrighted Popeye cartoon in its business and
trade, and the advertising thereof, which is described as the operation and
supply and franchising the operation of restaurants specializing in the sale of
food items such as fried chicken, french fries and other prepared or packaged
food or food ingredients (hereinafter "Trade and Business"); and
WHEREAS, Popeyes is the successor of Copeland's rights under the March
24, 1976 license from Hearts, Popeyes having agreed to perform and be bound by
all of the covenants, conditions and obligations therein; and
WHEREAS, Popeyes is desirous of having a written license to reflect its
rights under the aforesaid agreement for recording in the Copyright Office
pursuant to 17 U.S.C. 205; and
WHEREAS, Copeland is desirous of having said written license recorded in
the Copyright Office.
NOW, THEREFORE, good and valuable consideration being extant, it is
hereby agreed by and between the parties that:
1. The parties ratify and confirm that Popeyes has the sole
exclusive right in the United States to use the Popeye cartoon in its Trade and
Business and in the advertising thereof pursuant to a license from Hearst under
copyright certificate C1.K5, No. 363,887, and the subsequent registrations of
the copyright of the Popeye cartoon obtained by King Features.
2. The rights of Popeyes to use the Popeye cartoon are subject to
and limited by the terms and conditions of the March 24, 1976 license.
3. The term of this license shall be for one (1) year and shall be
automatically renewed from year to year as of January 1st of each year, provided
that Popeyes has performed all of the terms and conditions set forth in the
March 24, 1976 agreement, and that it is not in default or breach of the
agreement.
2
<PAGE>
Notwithstanding anything to the contrary, however, Popeyes may terminate this
license on ninety (90) days' written notice.
4. As a material condition of this license, Popeyes shall properly
affix to each reproduction of the Popeye cartoon or any part thereof licensed
hereunder such due notice of copyright in the name of King Features Syndicate,
Inc., (or any other such name as is furnished to Popeyes in writing by Hearst),
as is provided by the Universal Copyright Convention, such as "(C) By King
Features Syndicate, Inc." and including in such notice as part thereof the
proper year of years.
5. Upon the happening of any one of the following events, Hearst
shall have the option to terminate this agreement forthwith:
A. The filing by Popeyes of a petition in bankruptcy.
B. The filing against Popeyes of a petition in bankruptcy
and the failure of it to take affirmative action within sixty (60) days
to have such petition dismissed.
C. The making by Popeyes of a general assignment for the
benefit of its creditors.
D. The involuntry appointment of a receiver or trustee of
all or substantially all of Popeyes' assets and the failure of Popeyes
to take affirmative action within sixty (60) days to have such
appointment dismissed.
E. The application for relief by Popeyes under any
insolvency law.
F. The liquidation in whole or in part of Popeyes'
business.
6. The rights granted pursuant to the March 24, 1976 agreement and
ratified herein are personal to Popeyes and its subsidiary corporations, and may
not, in whole or in part, be transferred or assigned without Hearsts' prior
written consent, which will not be unreasonably withheld. However, Popeyes
shall have the right to sublicense its rights hereunder to its franchisees
provided said franchisees are also bound by the same quality obligations imposed
on Popeyes under the March 24, 1976 license and hereunder. Notwithstanding the
foregoing, nothing in this paragraph shall relieve Popeyes of its obligations
under this agreement or the March 24, 1976 license.
7. Except as otherwise provided herein, Hearst and King Features
warrant and represent they have not heretofore granted nor will they hereafter
grant any rights inconsistent with or in
3
<PAGE>
direct conflict with those granted herein. King Features further warrants and
represents that it is the copyright proprietor of the Popeye cartoon. It is
understood that no warranty or representation is made by Hearst or King Features
with regard to the use of the name WIMPY or variations thereof and the use of
said name may subject Popeyes to legal liability.
8. Nothing herein contained shall be deemed to create a
partnership, joint venture or other similar relationship between the parties.
9. Popeyes has no right to use the Popeye cartoon or any part
thereof or equivalent thereto except to the extent expressly permitted
hereunder. Popeyes shall have no right hereunder to reproduce, use or sell, or
cause to be sold, reproductions of the Popeye cartoon or any part thereof,
either alone or in combination with any product or thing offered for sale or
resale, except as specifically authorized for the purposes of its Business and
Trade with respect to the described operation of the restaurant business.
10. Upon termination of this agreement, Popeyes will not in any way
or manner in connection with the sale of any product, service or thing use or
cause to be used, directly or indirectly, the Popeye cartoon or any part, name
or element thereof as licensed herein. However, nothing herein shall be
construed to require the discontinuance of the POPEYES mark for restaurant
services and food products by Popeyes after this agreement is terminated.
11. Any and all rights in and to the Popeye cartoon and characters
not expressly granted to Popeyes are reserved to Hearst and King Features and
any one or more of these said rights may be exercised or enjoyed by Hearst and
King Features, directly or indirectly at any and all times.
12. This agreement, coupled with the March 24, 1976 agreement, sets
forth the entire understanding of the parties and may not be modified or waived,
in whole or in part, except in writing signed by the party against whom such
modification or waiver is sought to be enforced. There are no warranties,
representations or promises other than those expressly set forth herein or in
the March 24, 1976 agreement.
13. This agreement shall be construed in accordance with and
governed by the laws of the states of America, state of New York.
14. This agreement shall be binding upon and inure to the benefit of
The Hearst Corporation and its successors and assigns.
4
<PAGE>
15. Copeland guarantees that Popeyes shall fully perform all of the
covenants, conditions and obligations, contained in the March 24, 1976 license
and in this agreement.
16. In the event of the declaration by a judicial tribunal having
jurisdiction over the parties of the invalidity of any portion of this
agreement, such decision shall not affect the remaining portion, which shall
remain and continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement to be
effective the month, day and year first above written.
THE HEARST CORPORATION, KING FEATURES SYNDICATE, INC.
King Features Syndicate Division
BY /s/ BY /s/
-------------------------- ----------------------
TITLE: President TITLE: President
---------------------- -------------------
A. COPELAND ENTERPRISES, INC. POPEYES, INC.
BY /s/ Alvin C. Copeland BY /s/
--------------------------- -----------------------
Alvin C. Copeland
TITLE: President TITLE: President
---------------------- -------------------
Chairman
5
<PAGE>
EXHIBIT 10.20
[LETTERHEAD OF POPEYES FAMOUS FRIED CHICKEN]
July 20, 1987
Mr. Jeffrey A. Brown
Vice President
The Hearst Corporation
King Features Syndicate Division
235 East 45th Street
New York, NY 10017
Dear Jeff:
This letter will supercede my earlier letter of December 5, 1986 which
we both signed, the said letter of December 5, 1986 shall be considered null and
void.
Popeyes, Inc. ("Popeyes") has succeeded to the rights and obligations of
A. Copeland Enterprises, Inc. ("Copeland") under the March 11, 1976 agreement
between Copeland and King Features Syndicate Division of The Hearst Corporation
("King Features") regarding the use of the characters contained in the cartoon
strip entitled POPEYE, their names, pictures, likenesses, images, symbols,
caricatures, cartoons and signatures in connection with our operation and supply
and franchising the operation of restaurants specializing in the sale of food
items such as fried chicken, french fries and other prepared or packaged foods
or ingredients.
It is the wish of Popeyes and King Features to modify the exclusivity
and royalty provisions of the March 11, 1976 agreement. Accordingly, the
following when executed by the parties shall set forth their agreement with
respect to such revisions.
Paragraphs 1, 3, 4, 5, 6 and 12 of the March 11, 1976 agreement are
cancelled and rewritten and a new paragraph 25 added as follows:
1. (A) King Features Syndicate Division of The Hearst
Corporation ("King Features") hereby grants Popeyes, Inc.
("Popeyes") the sole and exclusive right in the United States
only, for the term of this agreement and any renewal or extension
thereof, to reproduce and use, subject to the terms and conditions
of the agreement, the names, pictures, portraits, photographs,
likenesses, images, symbols, caricatures, cartoons and signature
of any of them, alone or with others of the POPEYE cartoon strip
(hereinafter collectively referred to as "Cartoon"), its principal
<PAGE>
Jeffrey A. Brown
July 20, 1987
Page 2
character and its companion characters for the purposes of your business and
trade only and the advertising thereof as hereinafter defined and set forth.
1. (B) Notwithstanding anything to the contrary in sub-paragraph I(A),
King Features shall have the right to license others in the food service field
to use the Cartoon or any element or elements thereof in connection with
promotions including but not limited to advertising, contest, and premium
promotions without Popeyes' prior consent provided that:
(i) The promotions are not involved with chicken or shrimp products,
biscuits, french fried potatoes or onion rings or any product promoted
as or relating to "cajun" or "New Orleans" style cooking or any major
new featured menu item which is related to "cajun" or "New Orleans"
style cooking which Popeyes is promoting throughout the POPEYES system
as hereinafter defined and of which Popeyes hereafter advises King
Features in writing at least One Hundred Twenty (120) days before such
product is introduced. It is understood that any promotion, which prior
to the receipt of such notice King Features has either licensed or is
engaged in active negotiations for and which negotiations conclude in a
license agreement no later than ten (10) business days after receipt of
such notice, shall not be prohibited by this sub-paragraph 1(B)(i).
(ii) The promotions are limited in duration not to exceed two (2)
months in their active phase, and the same entity, chain, or anyone
within the chain has not conducted two (2) Cartoon promotions during the
preceding eighteen (18) months measured from the commencement of the
promotion with the earlier active phase. The limitations of the
paragraph shall neither include test marketing, which is defined as not
exceeding four media markets and which does not include national,
regional or system-wide promotions of the licensee nor any period of
exclusivity either before or after the active phase of the promotion.
l.(C) King Features shall have the right to license the Cartoon and
any element or elements thereof other than Popeye, Olive Oyl, and Swee' Pea as
marks for foods sold by restaurants for consumption on or off the premises
provided that:
(i) The foods are not chicken or shrimp products, biscuits, french
fried potatoes or onion rings, or any food promoted as or relating to
"cajun" or "New Orleans" style cooking or any major new featured menu
item which is related to "cajun" or "New Orleans" style
<PAGE>
Jeffrey A. Brown
July 20, 1987
Page 3
cooking which Popeyes is promoting throughout the POPEYES system and
which Popeyes hereafter advises King Features in writing:
(ii) King Features obtains Popeyes prior written consent, which shall
not be unreasonably withheld. It being understood that if King Features
obtains Popeyes consent for such a license, prior to the introduction by
Popeyes of such a major new featured menu item which license would
otherwise be precluded under sub-paragraph l(C) (i), then the addition
of such new major featured menu item shall not have any effect on any
license which King Features may enter into based upon Popeyes prior
consent.
l.(D) King Features shall also have the right to license the Cartoon
and any element or elements thereof other than Popeye, Olive Oyl and Swee' Pea
as servicemarks for restaurant services provided that:
(i) The restaurant services do not and will not specialize in or
promote foods or cooking in the "Cajun" or "New Orleans" style, or
chicken or shrimp products, biscuits, french fried potatoes or onion
rings or any major new featured menu item which is related to "cajun" or
"New Orleans" style cooking which Popeyes is promoting throughout the
POPEYES system and which Popeyes hereafter advises King Features in
writing;
(ii) King Features obtains Popeyes' prior written consent, which
shall not be unreasonably withheld. It being understood that if King
Features obtains Popeyes consent for such a license, prior to the
introduction by Popeyes of a major new featured menu which would
otherwise be precluded under sub-paragraph l(D)(i), then the addition
of such new major featured menu item shall not have any effect on any
license which King Features may enter into based upon Popeyes prior
consent.
3. Commencing January 1, 1986, Popeyes shall pay to King Features
an annual royalty of Three Hundred Thousand Dollars ($300,000.00) in equal
semi-annual installments for the preceding six (6) months within thirty (30)
days from July 1 and January 1, respectively.
4. The royalties due for 1989 and each year thereafter shall be
adjusted by this percentage increase or decrease in the nationwide Average
Consumer Price Index for All Urban Consumers ("CPI-U") between the CPI-U for
1986 and for the year preceding the date in which the royalty is due. The
<PAGE>
Jeffrey A. Brown
July 20, 1987
Page 4
adjustment shall be reflected in each July semi-annual payment. (NOTE: The use
of the CPI-U or a GNP Implicit Price Deflator Index is subject to the choice of
King Features).
5. It is further agreed that if Popeyes fails to make any payments
pursuant to paragraph 3 and 4 above, or if it otherwise violates any of the
material terms of this agreement, King Features shall have the right to treat
each such failure or violation as a material breach of this agreement, entitling
King Features to all rights and remedies allowed by law for such breach,
including, without limitation, the right to terminate this agreement at any time
after such breach, and to retain whatever monies have theretofore been paid
hereunder by Popeyes to King Features, provided that King Features must give
ninety (90) days notice of such breach, which notice will be null and void if
the alleged breach is cured by Popeyes within sixty (60)
days of Popeyes' receipt of such notice.
6. The term of this Agreement shall extend through December 31,
1989 and shall be automatically removed from year to year thereafter, provided
that all of the terms and conditions to the performed by Popeyes hereunder have
been performed, and that Popeyes is not in breach or default of this agreement.
Further, the obligation of Popeyes to pay any royalties pursuant to paragraph 3
and 4 hereof shall cease at such time that the copyrights for the POPEYE cartoon
as it appeared in newspapers during March 1976 expire. Further, the amount of
the royalty shall be fixed as of the date that the original copyright in the
POPEYE cartoon character expires, and it shall not thereafter be adjusted under
any other paragraph of this agreement. Notwithstanding anything to the contrary
herein, this agreement may be terminated at any time after December 31, 1989 by
Popeyes giving King Features ninety (90) days' written notice together with a
pro-rata payment of the annual royalty.
12. The rights herein granted are personal to Popeyes and its
subsidiary corporations and may not, in whole or in part, be transferred or
assigned by operation of law or otherwise without King Features' prior written
consent which consent will not be unreasonably withheld. King Features agrees,
however, that Popeyes has the right to sub-license its rights hereunder to its
individual POPEYES franchisees provided that said franchisees are also bound by
the same quality obligations imposed on Popeyes hereunder. Notwithstanding the
foregoing, nothing in this paragraph shall relieve Popeyes of its obligations
under this agreement.
25.(A) The rights granted herein by King Features shall be limited to
the use of the Cartoon within the POPEYES system as hereinafter defined.
Nothing herein shall be construed to
<PAGE>
Jeffrey A. Brown
July 20, 1987
Page 5
permit Popeyes or any successors to use the Cartoon or any element or elements
thereof outside of the POPEYES system without the express written approval of
King Features. The POPEYES system shall be defined as the operation and supply
of restaurants bearing POPEYES as their primary name and specializing in the
sale of chicken, shrimp products, biscuits, french fried potatoes and onion
rings or food items prepared in "cajun" or "New Orleans" style cooking.
25.(B) Popeyes shall pay an additional annual royalty to King Features
if (1) Popeyes acquires or is acquired by, or affiliates with any entity having
or licensing or franchising twenty (20) or more restaurants in operation under a
mark other than POPEYES on the date of such acquisition or affiliation ("defined
entity"), (2) and one (1) or more of the restaurants of, or licensed by, or
franchised by, the defined entity are converted to POPEYES restaurants, and (3)
the total number of converted restaurants of all the defined entities exceeds
three hundred fifty (350) units in any five year period (the "Acquisition
Period"). The additional royalty shall be calculated by dividing the then
current royalty under paragraphs 3 and 4 by the total number of POPEYES
restaurants in operations on the effective date of the first acquisition by, or
affiliation of, any defined entity within the Acquisition Period. The quotient
shall be the additional royalty for each converted operating restaurant that was
acquired or affiliated within the said five (5) year period. The additional
royalty shall be pro-rated as applicable when the converted POPEYES restaurant
is in operation under this agreement for less than a full year but shall
thereafter continue at the full rate applicable to that POPEYES restaurant while
that restaurant is in operation under this Agreement. If the restaurants of a
defined entity operating under a different mark at the time of the acquisition
or affiliation are not converted to POPEYES restaurants within ten (10) years of
the effective date of such acquisition or affiliation (the "Conversion Period"),
they will no longer be considered as restaurants of a defined entity for the
purpose of this paragraph. The calculation of any additional royalty due from
the conversion to POPEYES restaurants of any additional restaurants which have
been acquired or affiliated during any subsequent Acquisition Period shall be
calculated in the same manner as provided for restaurants which have been
converted to POPEYES restaurants in the initial Acquisition Period. The payment
for the additional royalty for converted
<PAGE>
Jeffrey A. Brown
July 20, 1987
Page 6
POPEYES restaurants under this Paragraph shall be due at the same time
as the royalty due King Features under Paragraph 3 is due.
Very truly yours,
POPEYES, INC.
BY: /s/
-------------------------
TITLE: President
---------------------
In consideration of $300,000.00 for the 1986 royalty as set forth above,
the receipt of which I hereby acknowledge, the foregoing is accepted.
THE HEARST CORPORATION,
KING FEATURES SYNDICATE DIVISION
BY: /s/
-----------------------
TITLE: Vice President DATE:
------------------- --------------------
To induce The Hearst Corporation to enter into the foregoing agreement
A. Copeland Enterprises, Inc., guarantees the performance by its
subsidiary Popeyes, Inc., of all the terms and conditions which are to
be performed by Popeyes, Inc., under the said agreement.
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin C. Copeland
-------------------------
Alvin C. Copeland
President
<PAGE>
EXHIBIT 10.21
EMPLOYMENT AGREEMENT dated as of November 5, 1992 between
-
America's Favorite Chicken Company (the "Company") and
Frank J. Belatti ("Employee")
WHEREAS, the Company desires to employ Employee and to enter into an
agreement embodying the terms of such employment; and
WHEREAS, Employee desires to accept such employment and to enter into such
agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Agreement.
-----------------
This Agreement shall be effective as of the date hereof and, unless earlier
terminated pursuant to Section 9 hereof, shall terminate on the fifth
anniversary of the Commencement Date (the "Termination Date").
2. Employment.
----------
2.01 Position. Employee shall serve as Chairman of the Board of
--------
Directors, President and Chief Executive Officer of the Company and shall
perform such duties consistent with his position as may be assigned to him from
time to time by the Board of Directors of the Company.
2.02 Time and Efforts. Employee, so long as he is employed
----------------
hereunder, shall devote his full business time and attention to the services
required of him hereunder, except as otherwise agreed and for vacation time and
reasonable periods of absence due to sickness or personal injury, and shall use
his best efforts, judgment and energy to perform, improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position.
3. Base Salary.
-----------
Beginning on the Commencement Date and continuing during the term hereof,
the Company shall pay Employee, in equal installments no less frequently than
monthly, a base salary at the rate of no less than Four Hundred Thousand Dollars
(U.S.$400,000.00) per annum. The Employee's base salary shall be reviewed by the
Board of Directors of the Company on an annual basis.
1
<PAGE>
4. Bonus.
-----
4.01 Grant of Bonus. Employee shall be entitled to an annual bonus
--------------
(the "Bonus") determined as hereinafter provided.
4.02 Determination of Amount of Bonuses. The amount of the Bonus, if
----------------------------------
any, payable to Employee with respect to any fiscal year of the Company shall be
the percentage (set forth in Column B below) of the Base Salary for such fiscal
year that conforms to the "Operating Result" for such fiscal year set forth in
Column A. For any fiscal year of the Company, the "Operating Result" shall be
the result obtained from the following calculation:
Operating Result = Performance Earnings Before Interest and Taxes
----------------------------------------------
Target Earnings Before Interest and Taxes
<TABLE>
<CAPTION>
A B
- _
Percent of Annual Base Salary
Operating Result Payable to Employee as a Bonus
- ---------------- ------------------------------
<S> <C>
less than 0.80 0%
0.80 or greater but less than 60%
0.85
0.85 or greater but less than 70%
0.90
0.90 or greater but less than 80%
0.95
0.95 or greater but less than 90%
1.00
1.00 or greater 100% plus four (4%) percent
of each dollar of
Performance Earnings
before Interest and
Taxes, or fraction
thereof, in excess of
Target Earnings before
Interest and Taxes up
to a maximum bonus of
200% of Annual Base
Salary.
</TABLE>
4.03 Determination of Performance Earnings before Interest and Taxes.
---------------------------------------------------------------
Performance Earnings before Interest and Taxes for purposes of Section 4 is
defined to mean net income before extraordinary and nonrecurring items,
interest, income taxes and cumulative effects of changes in accounting
principles determined
2
<PAGE>
in accordance with generally accepted accounting principles ("GAAP") consistent
with prior periods and such principles used in determining Target Earnings
before Interest and Taxes. Performance Earnings before Interest and Taxes shall
be determined annually by the Company and reviewed by the accounting firm
auditing the financial statements of the Company. Any charge against earnings
resulting from a difference in the fair market value of the Stock Options
referred to in Section 5.01 and the option price thereof shall be considered an
"extraordinary item" for purposes of determining Performance Earnings before
Interest and Taxes.
4.04 Determination of Target Earnings before Interest and Taxes.
----------------------------------------------------------
Target Earnings before Interest and Taxes for any period shall be the projected
Target Earnings before Interest and Taxes for such period as set forth in the
Company's annual operating plan approved by the Board of Directors of the
Company.
4.05 Payment of Bonuses. If Employee is entitled to a bonus for any
------------------
fiscal year, an accounting will be furnished and payment will be made to
Employee within fifteen (15) days following completion of the annual audit, but
in no event later than 105 days following the end of each fiscal year.
4.06 First Bonus Period. Notwithstanding anything herein to the
------------------
contrary, at the end of the fiscal year of the Company in which the Commencement
Date occurs, Employee shall be entitled to a Bonus equal to 60% of base salary
of Employee prorated for the number of months or portion thereof from the
Commencement Date to the end of the then-current fiscal year, but in no event
less than three (3) months.
4.07 Termination of Employment. If Employee's employment hereunder
-------------------------
shall terminate other than pursuant to Section 9.04 and on or before the first
anniversary of the Commencement Date, the Bonus to which the Employee would have
been entitled for the fiscal year in which such termination occurs shall be
prorated for the number of full months elapsed in such fiscal year prior to such
termination. If Employee's employment hereunder shall terminate other than
pursuant to Section 9.04 and following the first anniversary of the Commencement
Date, the Employee shall receive the Bonus to which he would have been entitled
for the entire fiscal year in which such termination occurs. If Employee's
employment hereunder shall terminate pursuant to Section 9.04, no Bonus shall be
payable to Employee for the fiscal year in which such termination occurs.
3
<PAGE>
5. Stock Options; Registration Rights; Shareholder's Agreement.
------------------------------------------------------------
5.01 Stock Options. The Company will grant to Employee options (the
-------------
"Options") to purchase 682,000 shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), representing 6% of the fully diluted
Common Stock, on and as of the Commencement Date. The Options shall be granted
pursuant to the terms of the Company's 1992 Stock Option Plan (the "Plan"), a
copy of which is attached hereto as Exhibit "B," and the Nonqualified Stock
Option Agreement (the "Stock Option Agreement"), a copy of which is attached
hereto as Exhibit "C." The Company shall execute and deliver to Employee the
Stock Option Agreement simultaneous with the execution of this Agreement.
5.02 Registration Rights. The Company and Employee shall enter into the
-------------------
Registration Rights Agreement (the "Registration Rights Agreement"), a copy of
which is attached hereto as Exhibit "C," simultaneous with the execution of-this
Agreement.
5.03 Shareholders' Agreement. The Employee shall enter into the
-----------------------
Shareholders' Agreement (the "Shareholders' Agreement), a copy of which is
attached hereto as Exhibit "D," simultaneous with the execution of this
Agreement.
6. Employee Benefits.
-----------------
Employee shall be provided employee benefits, including $1,000,000.00 face
amount of life insurance, (assuming standard rates), health, accident and
disability insurance under the Company's plans, policies and programs available
to senior executive officers of the Company, in accordance with the provisions
of such plans, policies and programs governing eligibility and participation.
7. Perquisites.
-----------
7.01 Relocation. Provided Employee has agreed in writing to such
----------
relocation of the Company, the Company shall reimburse Employee for all
reasonable and customary out-of-pocket fees, costs and expenses incurred by
Employee in connection with his relocation from Atlanta, Georgia to another
location proximate to the Company's headquarters including without limitation,
(i) broker's commission on the sale of Employee's house in Atlanta, Georgia,
(ii) closing costs (including attorneys' fees, title insurance and mortgage
points up to a maximum of 3 points) on the purchase by Employee of a new house
proximate to the Company's headquarters, (iii) expenses of moving Employee's
household from Atlanta, Georgia, to such new house, (iv) expenses of temporary
lodging, and (v) federal, state and local income taxes paid by Employee for 1992
in respect of any amounts paid to Employee by the Company pursuant to clauses
(i) , (ii) , (iii) and (iv) of this Section 7.01.
4
<PAGE>
Employee shall provide the Company with written evidence of all such fees, costs
and expenses incurred by Employee together with his request for reimbursement.
7.02 Automobile and Car Phone Allowances. The Company shall provide
-----------------------------------
Employee with an automobile allowance in the amount of $750.00 per month and a
car phone allowance in the amount of $150.00 per month.
7.03 Club Membership. The Company shall furnish Employee with a
---------------
fully paid membership in a social club of Employee's choice throughout the term
hereof.
7.04 Vacation. Employee shall be entitled to four (4) weeks paid
--------
vacation each year during the term hereof.
7.05 Other Perquisites. Employee shall be provided additional
-----------------
perquisites in accordance with the Company's policies for similarly situated
senior executives of the Company.
8. Business Expenses.
-----------------
All reasonable and customary business expenses incurred by Employee in the
performance of his duties hereunder shall be paid or reimbursed by the Company
in accordance with the Company's policies.
9. Termination of Employment.
-------------------------
9.01 Definitions. For purposes of this Section 9, the following terms
-----------
shall have the following meanings:
(a) Cause. The term "Cause" shall mean (i) Employee commits fraud or
-----
is convicted (all appeals final) of a crime involving moral turpitude, (ii)
Employee, in carrying out his duties hereunder, has been guilty of gross neglect
or gross misconduct resulting in material harm to the Company or any of its
affiliates, (iii) Employee shall have repeatedly refused to follow or comply
with the duly promulgated directives (consistent with his position) of the board
of directors of the Company, or (iv) Employee otherwise materially breaches this
agreement and, if such breach is susceptible to cure, fails to cure such breach
within thirty (30) days of receipt of written notice thereof from the Company.
(b) Disability. The term "Disability" shall mean the good faith
----------
determination of the board of directors of the Company that Employee has failed
to or has been unable to perform his duties as the result of any physical or
mental disability for an aggregate of ninety (90) calendar days in any period of
365 calendar days.
5
<PAGE>
9.02 Termination upon Death or Disability. If Employee's employment
------------------------------------
is terminated due to his death or Disability, the Company shall pay to the
estate of Employee or to the Employee, as the case may be, within fifteen (15)
days following Employee's death or upon his termination in the event of
Disability, all amounts payable to Employee through the date of termination
pursuant to Sections 3, 4, 5, 6, 7 and 8. In addition the Company shall pay to
Employee the Bonus payable pursuant to Section 4.07 hereof.
9.03 Termination for other than Death or Disability or for Cause. If
-----------------------------------------------------------
Employee's employment is terminated by the Company other than (i) by reason of
his death or Disability or (ii) for Cause, the Company shall pay to Employee, in
addition to any amounts unpaid under Sections 3, 4, 5, 6, 7 and 8, severance
pay, as shown below:
<TABLE>
<CAPTION>
Date of Termination Severance Pay
------------------- -------------
<S> <C>
On or before second anniversary of 1 times Base Salary
Commencement Date
After second anniversary and on or 1 1/2 times Base Salary
before third anniversary of
Commencement Date
After third anniversary and on or 2 times Base Salary
before fourth anniversary of
Commencement Date
After fourth anniversary of 2 1/2 times Base Salary
Commencement Date
</TABLE>
In addition, all other employee benefits then being provided to Employee as
of the date of termination shall be continued for one year, and the Company
shall pay to Employee the Bonus payable to the Employee pursuant to Section 4.07
hereof.
9.04 Voluntary Termination by Employee or Termination for Cause.
----------------------------------------------------------
Employee may terminate his employment hereunder at any time whatsoever, with or
without cause, upon thirty (30) days written notice to the Company. The
Company may terminate Employee's employment hereunder at any time without notice
for Cause. In the event Employee's employment is terminated voluntarily by
Employee or by the Company for Cause:
(a) The Company shall pay to Employee upon such termination all
amounts then due under Sections 3,4, 5, 6, 7 and 8, prorated through the date of
termination for the year in which he is terminated; and
6
<PAGE>
(b) The Company shall be under no obligation to make severance
payments to Employee.
9.05 Additional Termination Benefits. Any further benefits
-------------------------------
payable following any termination of Employee's employment shall be determined
in accordance with plans, policies and practices of the Company at the time of
termination.
10. Change of Control; Change in Responsibilities.
---------------------------------------------
Upon the occurrence of any of the following events:
(a) the dissolution or liquidation of the Company, or a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the owners of all of the outstanding shares of
Common Stock immediately prior to such reorganization, merger or consolidation
own in the aggregate less than 50% of the outstanding shares of Common Stock of
the Company or any other entity into which the Company shall be merged or
consolidated immediately following the consummation thereof, or the sale,
transfer or other disposition of all or substantially all of the assets or more
than 50% of the then outstanding shares of Common Stock of the Company (a
"Change in Control");
(b) there is a material diminution of or change in Employee's
responsibilities, duties, title, or reporting relationship, or the Company's
principal office is relocated more than forty-five (45) miles from its location
immediately prior to such event (a "Change in Responsibilities"); provided that
a change of principal office initiated by Employee shall not be deemed a Change
of Responsibilities hereunder;
at Employee's election within ninety (90) days following the occurrence of any
such event, Employee may terminate this Agreement and in such event Employee
shall be deemed to have been terminated by the Company other than for Cause and
all amounts payable to Employee pursuant to Section 9.03 shall become
immediately due and payable.
Except as expressly contemplated by this Agreement, or in any other
agreement referred to in Section 5 hereof, no merger, reorganization,
recapitalization, sale of stock, sale of assets or other change in the capital
structure of the Company or in the identity of the legal or beneficial owners of
the Company shall affect the obligations of the Company or Employee hereunder.
11. Representations and Warranties of Company. The Company hereby
-----------------------------------------
represents, warrants, covenants and agrees as follows:
11.01 Organization. The Company is a corporation, duly organized,
------------
validly existing, and in good standing under the laws of Minnesota and all other
jurisdictions in which it transacts
7
<PAGE>
business, and has full power and authority to own or lease and operate its
properties as now being owned or leased and operated and to carry on its
business as now being conducted.
11.02 Authority. The Company has the power, legal capacity and
---------
authority to enter into and perform this Agreement. The execution, delivery, and
performance of this Agreement the Belatti Non-Qualified Stock Option Agreement,
the Registration Rights Agreement and Shareholders Agreement, of even date
herewith, have been duly and validly authorized and approved by all necessary
corporate action on the part of the Company and each such Agreement constitutes
and will constitute the valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws of general applicability relating to or affecting creditors'
rights, or by general equitable principles.
11.03 Stock Reserve. The Company has set aside and shall maintain, and
-------------
in the future shall set aside and maintain, if necessary, a sufficient number of
authorized but unissued shares of its Common Stock as may be necessary to
satisfy the rights of Employee under the Belatti Non-Qualified Stock Option
Agreement.
12. Indemnification.
---------------
(a) The Company hereby indemnifies and agrees to hold harmless Employee
against all liabilities, obligations, claims, demands, actions, causes of
action, lawsuits, judgments, expenses and costs, including but not limited to
the reasonable costs of investigation and attorney's fees, incurred by the
Employee as a result of any threat, demand, claim, action or lawsuit, made,
instituted or initiated against the Employee by Alvin C. Copeland, Sr., or any
relative of Alvin C. Copeland, Sr. by blood or by marriage, A1 Copeland
Enterprises, Inc., Diversified Foods and Seasonings, Inc., or any other person
or entity controlling, controlled by, or under common control with such persons
or entities which arises out of, results from, or relates to this Agreement or
any action taken or omitted by the Employee as a result of the relationship
created by this Agreement, except for Employee's own gross negligence or willful
misconduct.
(b) If any claim suit or other legal proceeding shall be commenced, or any
claim or demand be asserted against the Employee and Employee desires
indemnification pursuant to this paragraph, Employee shall be notified to such
effect with reasonable promptness and shall have the right to assume at its full
cost and expense the entire control of any legal proceeding, subject to the
right of the Employee to participate (at his full cost and expense and with
counsel of his choice) in the defense, compromise or settlement thereof. The
Employee shall cooperate fully in all respects with the Company in any such
defense, compromise or
8
<PAGE>
settlement, including, without limitation, making available to the Company all
pertinent information under the control of the Employee. The Company will not
compromise or settle any such action, suit, proceeding, claim or demand without
the prior written approval of the Employee which approval will not be
unreasonably withheld or delayed.
(c) The provisions of this paragraph 12 shall survive the termination of
this Agreement for any reason whatsoever for a period of twenty (20) years.
13. Arbitration.
-----------
In the event that any dispute should arise between the parties under or in
connection with any aspect of this Agreement, and such dispute shall not have
been resolved by the parties within sixty (60) days after it arose, then either
party may submit such dispute to arbitration. An election to submit a dispute to
arbitration shall be deemed to have been made if either-party shall give the
other party written notice, within seventy-five (75) days after the dispute
arose, of its election to arbitrate. In the event arbitration is so elected,
such arbitration shall be conducted by a single arbitrator agreeable to Employee
and the Company. If the parties are unable to agree upon a single arbitrator,
they shall each select an arbitrator, and the two (2) arbitrators shall choose a
third arbitrator. A majority of the three (3) arbitrators shall determine the
dispute or controversy. Each party shall pay the expenses of any arbitrator
chosen by it, and the parties shall share equally in the expenses of any
arbitrator chosen by the two (2) arbitrators. Such arbitration shall be
conducted in a mutually agreeable location (or if a location cannot be agreed
upon, in the city Of the Company's principal office), under the rules of the
American Arbitration Association. The award rendered by the arbitrators shall
specify the findings of fact upon which it is based and the reasons for such
award with reference to and reliance on applicable laws. Judgment upon such
award may be entered in any court having jurisdiction thereof. The Company and
the Employee consent to the jurisdiction of the state where the arbitration
proceeding is to be held pursuant to the terms hereof, for the purposes of
entering judgment with respect to such award. Once any judgment, determination,
order or award shall be made hereunder by a court or a panel of arbitrators, as
the case may be (and shall become "final" as hereinafter defined), the parties
shall promptly comply with the terms of such judgment, determination, order or
award. A judgment, determination, order or award shall be "final" if any and all
appeals available therefrom shall have been resolved or if twenty (20) days
shall have elapsed from the rendering or issuance of any such judgment,
determination, order or award (or of any decision of any appeal therefrom) and
neither party shall have commenced and be continuing to diligently prosecute any
such appeal or further appeal.
9
<PAGE>
14. Attorney's Fees and Expenses.
----------------------------
Except as otherwise provided in Section 12 above, in the event of any
dispute arising under or in connection with any aspect of this Agreement, the
prevailing party shall recover from the other party all costs and expenses,
including attorney's fees, incurred in connection with resolving such dispute.
15. Amendments.
----------
This agreement may not be altered, modified or amended except by a written
instrument signed by each of the parties hereto.
16. Successors.
----------
As used in this agreement, the term the Company shall include any
successors to all or substantially all of the business and/or assets of the
Company which assume and agree to perform this agreement.
17. Assignment.
----------
Neither this agreement nor any of the rights or obligations of either party
hereunder shall be assigned or delegated by any party hereto without the prior
written consent of the other party, except that the Company may without the
consent of Employee assign its rights and delegate its duties hereunder to any
successor to the business of the Company. No such assignment however, shall
relieve the Company from any of its liabilities hereunder.
18. Waiver.
------
Waiver by any party hereto of any breach or default by any other party of
any of the terms of this agreement shall not operate as a waiver of any other
breach or default, whether similar to or different from the breach or default
waived.
19. Severability.
------------
In the event that any one or more of the provisions of this agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
20. Survival.
--------
Notwithstanding anything herein to the contrary, the provisions of Sections
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 17 survive the termination of this
Agreement.
10
<PAGE>
21. Entire Agreement.
----------------
This agreement contains the entire understanding of the parties with
respect to the employment of Employee by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein. This agreement supersedes all prior agreements,
arrangements and understandings between the parties, whether oral or written,
with respect to the employment of Employee.
22. Notices.
-------
Notices and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee to:
If to the Company to:
America's Favorite Chicken Company Suite 1570
2500 Windy Ridge Parkway
Marietta, GA 30067
or to such other address or such other person as Employee or the Company shall
designate in writing in accordance with this Section 21 except that notices
regarding changes in notices shall be effective only upon receipt.
23. Headings.
--------
Headings to sections in this agreement are for the convenience of the
parties only and are not intended to be a part of, or to affect the meaning or
interpretation of, this agreement.
24. Governing Law.
-------------
The agreement shall be governed by the laws of the State Minnesota without
reference to the principles of conflict of laws.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this agreement to be executed
and Employee has hereunto set his hand as of the day and year first above
written.
COMPANY:
AMERICA'S FAVORITE CHICKEN
COMPANY
By: /s/ D R. Hollbrook
_______________________________
Title: Executive Vice President
____________________________
EMPLOYEE:
/s/ Frank J. Belatti
__________________________________
FRANK J. BELATTI
12
<PAGE>
EXHIBIT 10.22
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT DATED NOVEMBER 5, 1992
between
America's Favorite Chicken Company (the "Company")
and
Frank J. Belatti ("Employee")
WHEREAS, the Company and Employee entered into an Employment Agreement
dated November 5, 1992 (the "Employment Agreement") governing the terms and
conditions of Employee's employment with the Company; and
WHEREAS, the Company and Employee desire to amend certain provisions of the
Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Section 1 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 1 is inserted in lieu thereof:
1. Term of Agreement.
------------------
(a) The initial term of this Agreement and Employee's employment
hereunder shall continue through and including November 5, 1995.
(b) The extended term of this Agreement and Employee's employment
hereunder shall commence as of November 5, 1995 (the "Amendment Date")
and, unless earlier terminated pursuant to Section 9 hereof, shall
continue for a period of three (3) years (the "Term"). The Term of
this Agreement and Employee's employment hereunder will automatically
be extended for an additional one-year following the expiration of
each year of employment hereunder (the "Renewal Date"), without
further action by Employee or the Company unless written notice not to
renew for an additional one year period is given by either the Company
or Employee to the other not less than one year prior to the Renewal
Date. In the event a notice not to renew is given by one party to the
other as provided in the immediately preceding sentence, then the
automatic extension of the Term shall thereafter no longer be of any
further force or effect; and in the event such notice not to renew is
given by the Company to Employee, Employee may, at his option,
terminate this Agreement and his employment hereunder at any time
during the remaining Term hereof and receive the severance benefits
set forth in Sections 9.03 and 9.05 of this Agreement.
2. Section 2.01 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 2.01 is inserted in lieu thereof:
<PAGE>
2.01 Position. Employee shall serve as Chairman of the Board of
----------
Directors and Chief Executive Officer of the Company and shall perform such
duties consistent with his position as may be assigned to him from time to
time by the Board of Directors of the Company.
3. Section 3 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 3 is inserted in lieu thereof:
3. Base Salary.
------------
Beginning on the Amendment Date and continuing during the term hereof,
the Company shall pay Employee, in equal installments no less frequently
than monthly, a base salary at the rate of no less than Four Hundred Thirty
Thousand Dollars (U.S.$430,000.00) per annum. Employee's base salary shall
be reviewed by the Board of Directors of the Company on an annual basis.
4. Section 22 of the Employment Agreement is hereby amended by deleting
the address for notice to the Company set forth therein and inserting the
following address in lieu thereof:
America's Favorite Chicken Company
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5346
5. The Employment Agreement, as amended hereby, is hereby reaffirmed and
restated herein by the undersigned, and said Employment Agreement is hereby
incorporated herein by reference as fully as if set forth in its entirety in
this First Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
and Employee has hereunto set his hand this 4th day of December, 1995, as of
November 5, 1995.
COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/ Dick R. Holbrook
___________________________________
Dick R. Holbrook, President
EMPLOYEE:
/s/ Frank J. Belatti
______________________________________
FRANK J. BELATTI
<PAGE>
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
dated as of November 5, 1992
between
America's Favorite Chicken Company (the "Company")
and
Dick R. Holbrook ("Employee")
WHEREAS, the Company desires to employ Employee and to enter into an
agreement embodying the terms of such employment; and
WHEREAS, Employee desires to accept such employment and to enter into such
agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Agreement.
-----------------
This Agreement shall be effective as of the date hereof and, unless earlier
terminated pursuant to Section 9 hereof, shall terminate on the fifth
anniversary of the Commencement Date (the "Termination Date").
2. Employment.
----------
2.01 Position. Employee shall serve as Executive Vice President and
--------
Chief Operating Officer of the Company and shall perform such duties consistent
with his position as may be assigned to him from time to time by the Board of
Directors of the Company.
2.02 Time and Efforts. Employee, so long as he is employed
----------------
hereunder, shall devote his full business time and attention to the services
required of him hereunder, except as otherwise agreed and for vacation time and
reasonable periods of absence due to sickness or personal injury, and shall use
his best efforts, judgment and energy to perform, improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position.
3. Base Salary.
-----------
Beginning on the Commencement Date and continuing during the term hereof,
the Company shall pay Employee, in equal installments no less frequently than
monthly, a base salary at the rate of no less than Two Hundred Thousand Dollars
(U.S.$200,000.00) per annum. The Employee's base salary shall be reviewed by the
Board of Directors of the Company on an annual basis.
1
<PAGE>
4. BONUS.
-----
4.01 Grant of Bonus. Employee shal1 be entitled to an annual bonus
--------------
(the "Bonus") determined as hereinafter provided.
4.02 Determination of Amount of Bonuses. The amount of the Bonus, if
----------------------------------
any, payable to Employee with respect to any fiscal year of the Company shall be
the percentage (set forth in Column B below) of the Base Salary for such fiscal
year that conforms to the "Operating Result" for such fiscal year set forth in
Column A. For any fiscal year of the Company, the "Operating Result" shall be
the result obtained from the following calculation:
Operating Result = Performance Earnings Before Interest and Taxes
-----------------------------------------------------
Target Earnings Before Interest and Taxes
A B
Percent of Annual Base Salary
Operating Result Payable to Employee as a Bonus
- ---------------- ------------------------------
less than 0.80 0%
0.80 or greater but less than 40%
0.85
0.85 or greater but less than 45%
0.90
0.90 or greater but less than 50%
0.95
0.95 or greater but less than 55%
1.00
1.00 or greater 60% plus one and one-half (1-1/2%)
percent of each dollar of
Performance Earnings before
Interest and Taxes, or fraction
thereof, in excess of Target
Earnings before Interest and
Taxes up to a maximum bonus of
100% of Annual Base Salary.
4.03 Determination of Performance Earnings before Interest and Taxes.
---------------------------------------------------------------
Performance Earnings before Interest and Taxes for purposes of Section 4 is
defined to mean net income before extraordinary and nonrecurring items,
interest, income taxes and
<PAGE>
cumulative effects of changes in accounting principles determined in accordance
with generally accepted accounting principles ("GAAP") consistent with prior
periods and such principles used in determining Target Earnings before Interest
and Taxes. Performance Earnings before Interest and Taxes shall be determined
annually by the Company and reviewed by the accounting firm auditing the
financial statements of the Company. Any charge against earnings resulting from
a difference in the fair market value of the Stock Options referred to in
Section 5.01 and the option price thereof shall be considered an "extraordinary
item" for purposes of determining Performance Earnings before Interest and
Taxes.
4.04 Determination of Target Earnings before Interest and Taxes.
----------------------------------------------------------
Target Earnings before Interest and Taxes for any period shall be the projected
Target Earnings before Interest and Taxes for such period as set forth in the
Company's annual operating plan approved by the Board of Directors of the
Company.
4.05 Payment of Bonuses. If Employee is entitled to a bonus for any
------------------
fiscal year, an accounting will be furnished and payment will be made to
Employee within fifteen (15) days following completion of the annual audit, but
in no event later than 105 days following the end of each fiscal year.
4.06 First Bonus Period. Notwithstanding anything herein to the
------------------
contrary, at the end of the fiscal year of the Company in which the Commencement
Date occurs, Employee shall be entitled to a Bonus equal to 60% of base salary
of Employee prorated for the number of months or portion thereof from the
Commencement Date to the end of the then-current fiscal year, but in no event
less than three (3) months.
4.07 Termination of Employment. If Employee's employment hereunder
-------------------------
shall terminate other than pursuant to Section 9.04 and on or before the first
anniversary of the Commencement Date, the Bonus to which the Employee would have
been entitled for the fiscal year in which such termination occurs shall be
prorated for the number of full months elapsed in such fiscal year prior to such
termination. If Employee's employment hereunder shall terminate other than
pursuant to Section 9.04 and following the first anniversary of the Commencement
Date, the Employee shall receive the Bonus to which he would have been entitled
for the entire fiscal year in which such termination occurs. If Employee's
employment hereunder shall terminate pursuant to Section 9.04, no Bonus shall be
payable to Employee for the fiscal year in which such termination occurs.
<PAGE>
5. Stock Options; Registration RightS; Shareholder's Agreement.
------------------------------------------------------------
5.01 Stock Options. The Company will grant to Employee options (the
-------------
"Options") to purchase 170,500 shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), representing 1.5% of the fully diluted
Common Stock, on and as of the Commencement Date. The Options shall be granted
pursuant to the terms of the Company's 1992 Stock Option Plan (the "Plan"), a
copy of which is attached hereto as Exhibit "A," and the Nonqualified Stock
Option Agreement (the "Stock Option Agreement"), a copy of which is attached
hereto as Exhibit "B." The Company shall execute and deliver to Employee the
Stock Option Agreement simultaneous with the execution of this Agreement.
5.02 Registration Rights. The Company and Employee shall enter into
-------------------
the Registration Rights Agreement (the "Registration Rights Agreement"), a copy
of which is attached hereto as Exhibit "C," simultaneous with the execution of
this Agreement.
5.03 Shareholders' Agreement. The Employee shall enter into the
-----------------------
Shareholders' Agreement (the "Shareholders' Agreement), a copy of which is
attached hereto as Exhibit "D," simultaneous with the execution of this
Agreement.
6. Employee Benefits.
-----------------
Employee shall be provided employee benefits, including $500,000.00 face
amount of life insurance, (assuming standard rates), health, accident and
disability insurance under the Company's plans, policies and programs available
to senior executive officers of the Company, in accordance with the provisions
of such plans, policies and programs governing eligibility and participation.
7. Perquisites.
-----------
7.01 Automobile and Car Phone Allowances. The Company shall provide
-----------------------------------
Employee with an automobile allowance in the amount of $750.00 per month and a
car phone allowance in the amount of $150.00 per month.
7.02 Vacation. Employee shall be entitled to four (4) weeks paid
--------
vacation each year during the term hereof.
7.03 Other Perquisites. Employee shall be provided additional
-----------------
perquisites in accordance with the Company's policies for similarly situated
senior executives of the Company.
<PAGE>
8. BUSINESS EXPENSES.
-----------------
All reasonable and customary business expenses incurred by Employee in the
performance of his duties hereunder shall be paid or reimbursed by the Company
in accordance with the Company's policies.
9. Termination of Employment.
-------------------------
9.01 Definitions. For purposes of this Section 9, the following terms
-----------
shall have the following meanings:
(a) Cause. The term "Cause" shall mean (i) Employee commits fraud or
-----
is convicted (all appeals final) of a crime involving moral turpitude, (ii)
Employee, in carrying out his duties hereunder, has been guilty of gross neglect
or gross misconduct resulting in material harm to the Company or any of its
affiliates, (iii) Employee shall have repeatedly refused to follow or comply
with the duly promulgated directives (consistent with his position) of the board
of directors of the Company or the President, or (iv) Employee otherwise
materially breaches this agreement and, if such breach is susceptible to cure,
fails to cure such breach within thirty (30) days of receipt of written notice
thereof from the Company.
(b) Disability. The term "Disability" shall mean the good faith
----------
determination of the board of directors of the Company that Employee has failed
to or has been unable to perform his duties as the result of any physical or
mental disability for an aggregate of ninety (90) calendar days in any period of
365 calendar days.
9.02. Termination upon Death or Disability. If Employee's employment is
------------------------------------
terminated due to his death or Disability, the Company shall pay to the estate
of Employee or to the Employee, as the case may be, within fifteen (15) days
following Employee's death or upon his termination in the event of Disability,
all amounts payable to Employee through the date of termination pursuant to
Sections 3, 4, 5, 6, 7 and 8. In addition the Company shall pay to Employee the
Bonus payable pursuant to Section 4.07 hereof.
9.03 Termination for other than Death or Disability or for Cause. If
-----------------------------------------------------------
Employee's employment is terminated by the Company other than (i) by reason of
his death or Disability or (ii) for Cause, the Company shall pay to Employee, in
addition to any amounts unpaid under Sections 3, 4, 5, 6, 7 and 8, severance
pay, as shown below:
<PAGE>
Date of Termination Severance Pay
------------------- -------------
On or before second anniversary of 1 times Base Salary
Commencement Date
After second anniversary and on or 1 1/2 times Base Salary
before third anniversary of
Commencement Date
After third anniversary and on or 2 times Base Salary
before fourth anniversary of
Commencement Date
After fourth anniversary of 2 1/2 times Base Salary
Commencement Date
In addition, all other employee benefits then being provided to Employee as
of the date of termination shall be continued for one year, and the Company
shall pay to Employee the Bonus payable to the Employee pursuant to Section 4.07
hereof.
9.04 Voluntary Termination by Employee or Termination for Cause.
----------------------------------------------------------
Employee may terminate his employment hereunder at any time whatsoever, with or
without cause, upon thirty (30) days written notice to the Company. The
Company may terminate Employee's employment hereunder at any time without notice
for Cause. In the event Employee's employment is terminated voluntarily by
Employee or by the Company for Cause:
(a) The Company shall pay to Employee upon such termination all
amounts then due under Sections 3, 4, 5, 6, 7 and 8, prorated through the date
of termination for the year in which he is terminated; and
(b) The Company shall be under no obligation to make severance
payments to Employee.
9.05 Additional Termination Benefits. Any further benefits
-------------------------------
payable following any termination of Employee's employment shall be determined
in accordance with plans, policies and practices of the Company at the time of
termination.
10. Change of Control; Change in Responsibilities.
---------------------------------------------
Upon the occurrence of any of the following events:
(a) the dissolution or liquidation of the Company, or a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the owners of all of the outstanding shares of
Common Stock immediately prior to such reorganization, merger or consolidation
own in the aggregate less than 50% of the outstanding shares of Common Stock of
the Company
<PAGE>
or any other entity into which the Company shall be merged or consolidated
immediately following the consummation thereof, or the sale, transfer or other
disposition of all or substantially all of the assets or more than 50% of the
then outstanding shares of Common Stock of the Company (a "Change in Control");
(b) there is a material diminution of or change in Employee's
responsibilities, duties, title, or reporting relationship that is not initiated
or consented to by Frank J. Belatti, or the Company's principal office is
relocated more than forty-five (45) miles from its location immediately prior to
such event (a "Change in Responsibilities"); provided that a relocation of
principal office to Atlanta, Georgia shall not be deemed a Change of
Responsibilities hereunder;
at Employee's election within ninety (90) days following the occurrence of any
such event, Employee may terminate this Agreement and in such event Employee
shall be deemed to have been terminated by the Company other than for Cause and
all amounts payable to Employee pursuant to Section 9.03 shall become
immediately due and payable.
Except as expressly contemplated by this Agreement, or in any other
agreement referred to in Section 5 hereof, no merger, reorganization,
recapitalization, sale of stock, sale of assets or other change in the capital
structure of the Company or in the identity of the legal or beneficial owners of
the Company shall affect the obligations of the Company or Employee hereunder.
11. Representations and Warranties of Company. The Company hereby
-----------------------------------------
represents, warrants, covenants and agrees as follows:
11.01 Organization. The Company is a corporation, duly organized,
------------
validly existing, and in good standing under the laws of Minnesota and all other
jurisdictions in which it transacts business, and has full power and authority
to own or lease and operate its properties as now being owned or leased and
operated and to carry on its business as now being conducted.
11.02 Authority. The Company has the power, legal capacity and
---------
authority to enter into and perform this Agreement. The execution, delivery, and
performance of this Agreement the Belatti Non-Qualified Stock Option Agreement,
the Registration Rights Agreement and Shareholders Agreement, of even date
herewith, have been duly and validly authorized and approved by all necessary
corporate action on the part of the Company and each such Agreement constitutes
and will constitute the valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws of general applicability relating to or affecting creditors'
rights, or by general equitable principles.
<PAGE>
11.03 Stock Reserve. The Company has set aside and shall maintain, and
-------------
in the future shall set aside and maintain, if necessary, a sufficient number of
authorized but unissued shares of its Common Stock as may be necessary to
satisfy the rights of Employee under the Belatti Non-Qualified Stock Option
Agreement.
12. Indemnification.
---------------
(a) The Company hereby indemnifies and agrees to hold harmless Employee
against all liabilities, obligations, claims, demands, actions, causes of
action, lawsuits, judgments, expenses and costs, including but not limited to
the reasonable costs of investigation and attorney's fees, incurred by the
Employee as a result of any threat, demand, claim, action or lawsuit, made,
instituted or initiated against the Employee by Alvin C. Copeland, Sr., or any
relative of Alvin C. Copeland, Sr. by blood or by marriage, A1 Copeland
Enterprises, Inc., Diversified Foods and Seasonings, Inc., or any other person
or entity controlling, controlled by, or under common control with such persons
or entities which arises out of, results from, or relates to this Agreement or
any action taken or omitted by the Employee as a result of the relationship
created by this Agreement, except for Employee's own gross negligence or willful
misconduct.
(b) If any claim suit or other legal proceeding shall be commenced, or any
claim or demand be asserted against the Employee and Employee desires
indemnification pursuant to this paragraph, Employee shall be notified to such
effect with reasonable promptness and shall have the right to assume at its full
cost and expense the entire control of any legal proceeding, subject to the
right of the Employee to participate (at his full cost and expense and with
counsel of his choice) in the defense, compromise or settlement thereof. The
Employee shall cooperate fully in all respects with the Company in any such
defense, compromise or settlement, including, without limitation, making
available to the Company all pertinent information under the control of the
Employee. The Company will not compromise or settle any such action, suit,
proceeding, claim or demand without the prior written approval of the Employee
which approval will not be unreasonably withheld or delayed.
(c) The provisions of this paragraph 12 shall survive the termination of
this Agreement for any reason whatsoever for a period of twenty (20) years.
13. Arbitration.
-----------
In the event that any dispute should arise between the parties under or in
connection with any aspect of this Agreement, and such dispute shall not have
been resolved by the parties within sixty (60) days after it arose, then either
party may submit such dispute
<PAGE>
to arbitration. An election to submit a dispute to arbitration shall be deemed
to have been made if either party shall give the other party written notice,
within seventy-five (75) days after the dispute arose, of its election to
arbitrate. In the event arbitration is so elected, such arbitration shall be
conducted by a single arbitrator agreeable to Employee and the Company. If the
parties are unable to agree upon a single arbitrator, they shall each select an
arbitrator, and the two (2) arbitrators shall choose a third arbitrator. A
majority of the three (3) arbitrators shall determine the dispute or
controversy. Each party shall pay the expenses of any arbitrator chosen by it,
and the parties shall share equally in the expenses of any arbitrator chosen by
the two (2) arbitrators. Such arbitration shall be conducted in a mutually
agreeable location (or if a location cannot be agreed upon, in the city of the
Company's principal office), under the rules of the American Arbitration
Association. The award rendered by the arbitrators shall specify the findings of
fact upon which it is based and the reasons for such award with reference to and
reliance on applicable laws. Judgment upon such award may be entered in any
court having jurisdiction thereof. The Company and the Employee consent to the
jurisdiction of the state where the arbitration proceeding is to be held
pursuant to the terms hereof, for the purposes of entering judgment with respect
to such award. Once any judgment, determination, order or award shall be made
hereunder by a court or a panel of arbitrators, as the case may be (and shall
become "final" as hereinafter defined), the parties shall promptly comply with
the terms of such judgment, determination, order or award. A judgment,
determination, order or award shall be "final" if any and all appeals available
therefrom shall have been resolved or if twenty (20) days shall have elapsed
from the rendering or issuance of any such judgment, determination, order or
award (or of any decision of any appeal therefrom) and neither party shall have
commenced and be continuing to diligently prosecute any such appeal or further
appeal.
14. Attorney's Fees and Expenses.
----------------------------
Except as otherwise provided in Section 12 above, in the event of any
dispute arising under or in connection with any aspect of this Agreement, the
prevailing party shall recover from the other party all costs and expenses,
including attorney's fees, incurred in connection with resolving such dispute.
15. Amendments.
----------
This agreement may not be altered, modified or amended except by a written
instrument signed by each of the parties hereto.
16. Successors.
----------
As used in this agreement, the term the Company shall include any
successors to all or substantially all of the business and/or
<PAGE>
assets of the Company which assume and agree to perform this agreement.
17. Assignment.
----------
Neither this agreement nor any of the rights or obligations of either party
hereunder shall be assigned or delegated by any party hereto without the prior
written consent of the other party, except that the Company may without the
consent of Employee assign its rights and delegate its duties hereunder to any
successor to the business of the Company. No such assignment however, shall
relieve the Company from any of its liabilities hereunder.
18. Waiver.
------
Waiver by any party hereto of any breach or default by any other party of
any of the terms of this agreement shall not operate as a waiver of any other
breach or default, whether similar to or different from the breach or default
waived.
19. Severability.
------------
In the event that any one or more of the provisions of this agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
20. Survival.
--------
Notwithstanding anything herein to the contrary, the provisions of Sections
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 17 survive the termination of this
Agreement.
21. Entire Agreement.
----------------
This agreement contains the entire understanding of the parties with
respect to the employment of Employee by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein. This agreement supersedes all prior agreements,
arrangements and understandings between the parties, whether oral or written,
with respect to the employment of Employee.
22. Notices.
-------
Notices and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
10
<PAGE>
If to Employee to:.
If to the Company to:
America's Favorite Chicken Company
Suite 1570
2500 Windy Ridge Parkway
Marietta, GA 30067
or to such other address or such other person as Employee or the Company shall
designate in writing in accordance with this Section 21 except that notices
regarding changes in notices shall be effective only upon receipt.
23. Headings.
--------
Headings to Sections in this agreement are for the convenience of the
parties only and are not intended to be a part of, or to affect the meaning or
interpretation of, this agreement.
24. Governing Law.
-------------
The agreement shall be governed by the laws of the State Minnesota without
reference to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this agreement to be executed
and Employee has hereunto set his hand as of the day and year first above
written.
COMPANY:
AMERICA'S FAVORITE CHICKEN
COMPANY
By: /s/ Frank J. Belatti
----------------------------
Title: ________________________
Employee:
/s/ Dick R. Holbrook
------------------------------
DICK R. HOLBROOK
11
<PAGE>
EXHIBIT 10.24
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT DATED NOVEMBER 5, 1992
BETWEEN
AMERICA'S FAVORITE CHICKEN COMPANY (THE "COMPANY")
AND
DICK R. HOLBROOK ("EMPLOYEE")
WHEREAS, the Company and Employee entered into an Employment Agreement
dated November 5, 1992 (the "Employment Agreement") governing the terms and
conditions of Employee's employment with the Company; and
WHEREAS, the Company and Employee desire to amend certain provisions of the
Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Section 1 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 1 is inserted in lieu thereof:
1. Term of Agreement.
------------------
(a) The initial term of this Agreement and Employee's employment
hereunder shall continue through and including November 5, 1995.
(b) The extended term of this Agreement and Employee's employment
hereunder shall commence as of November 5, 1995 (the "Amendment Date")
and, unless earlier terminated pursuant to Section 9 hereof, shall
continue for a period of three (3) years (the "Term"). The Term of
this Agreement and Employee's employment hereunder will automatically
be extended for an additional one year following the expiration of
each year of employment hereunder (the "Renewal Date"), without
further action by Employee or the Company unless written notice not to
renew for an additional one year period is given by either the Company
or Employee to the other not less than one-year prior to the Renewal
Date. In the event a notice not to renew is given by one party to the
other as provided in the immediately preceding sentence, then the
automatic extension of the Term shall thereafter no longer be of any
further force or effect; and in the event such notice not to renew is
given by the Company to Employee, Employee may, at his option,
terminate this Agreement and his employment hereunder at any time
during the remaining Term hereof and receive the severance benefits
set forth in Sections 9.03 and 9.05 of this Agreement.
2. Section 2.01 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 2.01 is inserted in lieu thereof:
<PAGE>
2.01 Position. Employee shall serve as President and Chief Operating
--------
Officer of the Company and shall perform such duties consistent with his
position as may be assigned to him from time to time by the Board of
Directors of the Company.
3. Section 3 of the Employment Agreement is hereby deleted in its
entirety and the following new Section 3 is inserted in lieu thereof:
3. Base Salary.
------------
Beginning on the Amendment Date and continuing during the term hereof,
the Company shall pay Employee, in equal installments no less frequently
than monthly, a base salary at the rate of no less than Three Hundred
Thousand Dollars (U.S.$300,000.00) per annum. Employee's base salary shall
be reviewed by the Board of Directors of the Company on an annual basis.
4. Section 22 of the Employment Agreement is hereby amended by deleting
the address for notice to the Company set forth therein and inserting the
following address in lieu thereof:
America's Favorite Chicken Company
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5346
5. The Employment Agreement, as amended hereby, is hereby reaffirmed and
restated herein by the undersigned, and said Employment Agreement is hereby
incorporated herein by reference as fully as if set forth in its entirety in
this First Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
and Employee has hereunto set his hand this 4th day of December, 1995, as of
---
November 5, 1995.
COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/ Frank J. Belatti
_________________________________
Frank J. Belatti, Chief Executive
Officer
EMPLOYEE:
/s/ Dick R. Holbrook
____________________________________
DICK R. HOLBROOK
<PAGE>
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
dated as of December 4, 1995 between
America's Favorite Chicken Company (the "Company") and
Samuel N. Frankel ("Employee")
WHEREAS, the Company desires to employ Employee and to enter into an
agreement embodying the terms of such employment; and
WHEREAS, Employee desires to accept such employment and to enter into such
agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term Of Agreement.
-----------------
This Agreement shall be effective as of the date hereof and, unless earlier
terminated pursuant to Section 9 hereof, shall be for one initial term of three
(3) years (the "Term"). The Term of this Agreement and Employee's employment
hereunder will automatically be extended for an additional one-year following
the expiration of each year of employment hereunder (the "Renewal Date"),
without further action by Employee or the Company unless either the Company or
Employee gives to the other written notice not to renew for an additional one
year not less than one (1) year prior to the Renewal Date. In the event the
Company gives the Employee written notice of nonrenewal as provided herein,
Employee shall have the right to terminate this Agreement at any time during the
remaining term hereof and receive the benefits set forth in Sections 4.07, 9.03
and 9.05 hereof.
2. Employment.
----------
2.01 Position. Employee shall serve as executive Vice President, General
--------
Counsel and Secretary of the Company and shall perform such duties consistent
with his position as may be assigned to him from time to time by the Board of
Directors of the Company.
2.02 Time and Efforts. Employee, so long as he is employed hereunder,
----------------
shall devote his full business time and attention to the services required of
him hereunder, except as otherwise agreed and for vacation time and reasonable
periods of absence due to sickness or personal injury, and shall use his best
efforts, judgment and energy to perform, improve and advance the business and
interests of the Company in a manner consistent with the duties of his position.
3. Base Salary.
-----------
Beginning on January 1, 1996 and continuing during the term hereof, the
Company shall pay Employee, in equal installments no less frequently than
monthly, a base salary at the rate of no less than Two Hundred Seventy-Five
Thousand Dollars (U.S. $275,000.00) per annum. The
<PAGE>
Employee's base salary shall be reviewed by. the Board of Directors of the
Company on an annual basis.
4. Bonus.
-----
4.01 Grant of Bonus. Employee shall be entitled to an annual bonus (the
--------------
"Bonus") determined as hereinafter provided.
4.02 Determination of Amount of Bonuses. The amount of the Bonus, if any,
----------------------------------
payable to Employee with respect to any fiscal year of the Company shall be the
percentage (set forth in Column B Below) of the Base Salary for such fiscal year
that conforms to the "Operating Result" for such fiscal year set forth in Column
A. For any fiscal year of the Company, the "Operating Result" shall be the
result obtained from the following calculation:
Operating Result = Performance Earnings Before Interest and Taxes
----------------------------------------------
Target Earnings Before Interest and Taxes
A B
- -
Percent of Annual Base Salary
Operating Result Payable to Employee as a Bonus
---------------- ------------------------------
less than 0.80 0%
0.80 or greater but less than 0.85 40%
0.85 or greater but less than 0.90 45%
0.90 or greater but less than 0.95 50%
0.95 Or greater but less than 1.00 55%
1.00 or greater 60% plus one and one-half (1-
1/2%) percent of each dollar
of Performance Earnings
before Interest and Taxes, or
fraction thereof, in excess
of Target Earnings before
Interest and Taxes up to a
maximum bonus of 100% of
Annual Base Salary.
4.03 Determination of Performance Earnings before Interest and Taxes.
---------------------------------------------------------------
Performance Earnings before Interest and Taxes for purposes of Section 4 is
defined to mean net income before extraordinary and nonrecurring items,
interest, income taxes and cumulative effects of
<PAGE>
changes in accounting principles determined in accordance with generally
accepted accounting principles ("GAAP") consistent with prior periods and such
principles used in determining Target Earnings before Interest and Taxes.
Performance Earnings before Interest and Taxes shall be determined annually by
the Company and reviewed by the accounting firm auditing the financial
statements of the Company. Any charge against earnings resulting from a
difference in the fair market value of the Stock Options referred to in Section
5.01 and the option price thereof shall be considered an "extraordinary item"
for purposes of determining Performance Earnings before Interest and Taxes.
4.04 Determination of Target Earnings before Interest and Taxes. Target
----------------------------------------------------------
Earnings before Interest and Taxes for any period shall be the projected Target
Earnings before Interest and Taxes for such period as set forth in the Company's
annual operating plan approved by the Board of Directors of the Company.
4.05 Payment of Bonuses. If Employee is entitled to a bonus for any fiscal
------------------
year, an accounting will be furnished and payment will be made to Employee
within fifteen (15) days following completion of the annual audit, but in no
event later than 105 days following the end of each fiscal year.
4.06 First Bonus Period. Notwithstanding anything herein to the contrary,
------------------
at the end of the 1995 fiscal year of the Company, Employee shall be entitled to
a Bonus calculated under the provisions of Section 4.02 hereof using the Base
Salary amount set forth in Section 3 hereof.
4.07 Termination of Employment. If Employee's employment hereunder shall
-------------------------
terminate other than pursuant to Section 9.04, the Employee shall receive the
Bonus to which he would have been entitled for the entire fiscal year in which
such termination occurs. If Employee's employment hereunder shall terminate
pursuant to Section 9.04, no Bonus shall be payable to Employee for the fiscal
year in which such termination occurs.
5. Stock Options; Registration Rights; Shareholder's Agreement.
-----------------------------------------------------------
5.01 Stock Options. The Company has granted to Employee options (the
-------------
"Options") to purchase 170,000 shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), representing 1.5% of the fully diluted
Common Stock. The Options were granted pursuant to the terms of the Company's
1992 Stock Option Plan (the "Plan") and a Nonqualified Stock Option Agreement
(the "Stock Option Agreement"), copies of which are on file in the records of
the Company.
5.02 Registration Rights. The Company and Employee shall enter into the
-------------------
Registration Rights Agreement (the "Registration Rights Agreement"), a copy of
which is attached hereto as Exhibit "A" simultaneous with the execution of this
Agreement.
5.03 Shareholders' Agreement. The Employee has agreed to be bound by the
-----------------------
terms of the Shareholders' Agreement (the "Shareholders' Agreement") as
identified in the Stock Option Agreement, a copy of which is on file in the
records of the Company.
<PAGE>
6.0 Employee Benefits.
-----------------
Employee shall be provided employee benefits, including $500,000.00 face
amount of life insurance (assuming standard rates), health, accident and
disability insurance under the Company's plans, policies and programs available
to senior executive officers of the Company, in accordance with the provisions
of such plans, policies and programs governing eligibility and participation.
7. Perquisites.
-----------
7.01 Automobile and Car Phone Allowances. The Company shall provide
-----------------------------------
Employee with an automobile allowance in the amount of $750.00 per month and a
car phone allowance in the amount of $150.00 per month.
7.02 Vacation. Employee shall be entitled to four (4) weeks paid vacation
--------
each year during the term hereof.
7.03 Other Perquisites. Employee shall be provided additional perquisites
-----------------
in accordance with the Company's policies for similarly situated senior
executives of the Company.
8. Business Expenses.
-----------------
All reasonable and customary business expenses incurred by Employee in the
performance of his duties hereunder shall be paid or reimbursed by the Company
in accordance with the Company's policies.
9. Termination of Employment.
-------------------------
9.01 Definitions. For purposes of this Section 9, the following terms shall
-----------
have the following meanings:
(a) Cause. The term "Cause" shall mean (I) Employee commits fraud
-----
or is convicted (all appeals final) of a crime involving moral turpitude, (ii)
Employee, in carrying out his duties hereunder, has been guilty of gross neglect
or gross misconduct resulting in material harm to the Company or any of its
affiliates, (iii) Employee shall have repeatedly refused to follow or comply
with the duly promulgated directives (consistent with his position) of the board
of directors of the Company or the President, or (iv) Employee otherwise
materially breaches this agreement, and if such breach is susceptible to cure,
fails to cure such breach within thirty (30) days of receipt of written notice
thereof from the Company.
(b) Disability. The term "Disability" shall mean to good faith
----------
determination of the board of directors of the Company that Employee has failed
to or has been unable to
<PAGE>
perform his duties as the result of any physical or mental disability for an
aggregate of ninety (90) calendar days.
9.02 Termination upon Death or Disability. If Employee's employment is
------------------------------------
terminated due to his death or disability, the Company shall pay to the estate
of the Employee or to the Employee, as the case may be, within fifteen (15) days
following Employee's death or upon his termination in the event of disability,
all amounts payable to Employee through the date of termination pursuant to
Sections 3, 4, 5, 6, 7 and 8. In addition the Company shall pay to Employee the
Bonus payable pursuant to Section 4.07 hereof.
9.03 Termination for other than Death or Disability or for Cause. If
-----------------------------------------------------------
Employee's employment is terminated by the Company other than (I) by reason of
his death or disability or (ii) for Cause, the Company shall pay to Employee, in
addition to any amounts unpaid under Sections 3, 4, 5, 6, 7 and 8, severance pay
in the amount of two and one-half (2-1/2) times Employee's Base Salary at the
time of termination.
In addition, all other employee benefits then being provided to Employee as
of the date of termination shall be continued for one year, and the Company
shall pay to Employee the Bonus payable to the Employee pursuant to Section 4.07
hereof.
9.04 Voluntary Termination by Employee or Termination for Cause. Employee
----------------------------------------------------------
may terminate his employment hereunder at any time whatsoever, with or without
cause, upon thirty (30) days written notice to the Company. The Company may
terminate Employee's employment hereunder at any time without notice for Cause.
In the event Employee's employment is terminated voluntarily by Employee or by
the Company for Cause:
(a) The Company shall pay to Employee upon such termination all
amounts then due under sections 3, 4, 5, 6, 7 and 8, prorated through the date
of termination for the year in which he is terminated; and
(b) The Company shall be under no obligation to make severance
payments to Employee.
9.05 Additional Termination Benefits. Any further benefits payable
-------------------------------
following any termination of Employee's employment shall be determined in
accordance with plans, policies and practices of the Company at the time of
termination.
10. Change of Control; Change in Responsibilities.
---------------------------------------------
Upon the occurrence of any of the following events:
(a) the dissolution or liquidation of the Company, or a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the owners or all of the outstanding shares of
Common Stock immediately prior to such reorganization, merger or consolidation
own in the aggregate less than 50% of the outstanding shares of
<PAGE>
Common Stock of the Company or any other entity into which the Company shall be
merged or consolidated immediately following the consummation thereof; or the
sale, transfer or other disposition of all or substantially all of the assets or
more than 50% of the then outstanding shares of Common Stock of the Company (a
"Change in Control");
(b) there is a material diminution of or change in Employee's
responsibilities, duties, title or reporting relationship that is not initiated
or consented to by Frank J. Belatti, or the Company's principal office is
relocated more than forty-five (45) miles from its location immediately prior to
such event (a "Change in Responsibilities"); provided that a relocation of
principal office to Atlanta, Georgia shall not be deemed a Change of
Responsibilities hereunder;
at Employee's election within ninety (90) days following the occurrence of any
such event, Employee may terminate this Agreement and in such event Employee
shall be deemed to have been terminated by the Company other than for Cause and
all amounts payable to Employee pursuant to Section 9.03 shall become
immediately due and payable.
Except as expressly contemplated by this Agreement, or in any other
agreement referred to in Section 5 hereof, no merger, reorganization,
recapitalization, sale of stock, sale of assets or other change in the capital
structure of the Company or in the identity of the legal or beneficial owners of
the Company shall affect the obligations of the Company or Employee hereunder.
11. Representations and Warranties of Company. The Company hereby
-----------------------------------------
represents, warrants, covenants and agrees as follows:
11.01 Organization. The Company is a corporation, duly organized,
------------
validly existing, and in good standing under the laws of Minnesota and all other
jurisdictions in which it transacts business, and has full power and authority
to own or lease and operate its properties as now being owned or leased and
operated and to carry on its business as now being conducted.
11.02 Authority. The Company has the power, legal capacity and
---------
authority to enter into and perform this Agreement. The execution, delivery, and
performance of this Agreement the Frankel Non-Qualified Stock Option Agreement
and, the Registration Rights Agreement have been duly and validly authorized and
approved by all necessary corporate action on the part of the Company and each
such Agreement constitutes and will constitute the valid, legal and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws of general applicability relating to or
affecting creditors' rights, or by general equitable principles.
11.03 Stock Reserve. The Company has set aside and shall maintain, and
-------------
in the future shall set aside and maintain, if necessary, a sufficient number of
authorized but unissued shares of its Common Stock as may be necessary to
satisfy the rights of Employee under the Frankel Non-Qualified Stock Option
Agreement.
<PAGE>
12. Indemnification.
---------------
A. The Company hereby indemnifies and agrees to hold harmless Employee
against all liabilities, obligations, claims, demands, actions, causes of
action, lawsuits, judgments, expenses and costs, including but not limited to
the reasonable costs of investigation and attorney's fees, incurred by the
Employee as a result of any threat, demand, claim action or lawsuits, made,
instituted or initiated against the Employee by Alvin C. Copeland, Sr., or any
relative of Alvin C. Copeland, Sr., by blood or by marriage, A1 Copeland
Enterprises, Inc., Diversified Foods and Seasonings, Inc., or any other person
or entity controlling, controlled by, or under common control with such persons
or entities which arises out of, results from, or relates to this Agreement or
any action taken or omitted by the Employee as a result of the relationship
created by this Agreement, except for Employee's own gross negligence or willful
misconduct.
B. If any claim suit or other legal proceeding shall be commenced, or any
claim or demand be asserted against the Employee and Employee desires
indemnification pursuant to this paragraph, Employee shall be notified to such
effect with reasonable promptness and shall have the fight to assume at its full
cost and expense the entire control or any legal proceeding, subject to the
right of the Employee to participate (at his full cost and expense and with
counsel of his choice) in the defense, compromise or settlement thereof. The
Employee shall cooperate fully in all respects with the Company in any such
defense, compromise or settlement, including, without limitation, making
available to the Company all pertinent information under the control of the
Employee. The Company will not compromise or settle any such action, suit,
proceeding, claim or demand without the prior written approval of.the Employee
which approval will not be unreasonably withheld or delayed.
C. The provisions of this paragraph 12 shall survive the termination of
this Agreement for any reason whatsoever for a period of twenty (20) years.
13. Arbitration.
-----------
In the event that any dispute should arise between the parties under or in
connection with any aspect of this Agreement, and such dispute shall not have
been resolved by the parties within (60) days after it arose, then either party
may submit such dispute to arbitration. An election to submit a dispute to
arbitration shall be deemed to have been made if either party shall give the
other party written notice, within seventy-five (75) days after the dispute
arose, of its election to arbitrate. In the event arbitration is so elected,
such arbitration shall be conducted by a single arbitrator agreeable to Employee
and the Company. If the parties are unable to agree upon a single arbitrator,
they shall each select an arbitrator, and the two (2) arbitrators shall choose a
third arbitrator. A majority of the three (3) arbitrators shall determine the
dispute or controversy. Each party shall pay the expenses of any arbitrator
chosen by it, and the parties shall share equally in the expenses or any
arbitrator chosen by it, and the parties shall share equally in the expenses of
any arbitrator chosen by the two (2) arbitrators. Such arbitration shall be
conducted in a mutually agreeable location (or if a location cannot be agreed
upon, in the city of the Company's principal office), under the rules of the
American Arbitration Association. The
<PAGE>
award rendered by the arbitrators shall specify the findings of fact upon which
it is based and the reasons for such award with reference to and reliance on
applicable laws. Judgment upon such award may be entered in any court having
jurisdiction thereof. The Company and the Employee consent to the jurisdiction
of the state where the arbitration proceeding is to be held pursuant to the
terms hereof, for the purposes of entering judgment with respect to such award.
Once any judgment, determination, order or award shall be made hereunder by a
court or a panel of arbitrators, as the case may be (and shall become "final" as
hereinafter defined), the parties shall promptly comply with the terms or such
judgment, determination, order or award. A judgment, determination, order or
award shall be "final" if any and all appeals available therefrom shall have
been resolved or if twenty (20) days shall have elapsed from the rendering or
issuance of any such judgment, determination, order or award (or of any decision
of any appeal, therefrom) and neither party shall have commenced and be
continuing to diligently prosecute any such appeal or further appeal.
14. Attorney's Fees and Expenses.
----------------------------
Except as otherwise provided in Section 12 above, in the event of any
dispute arising under or in connection with any aspect of this Agreement, the
prevailing party shall recover from the other party all costs and expenses,
including attorney's fees, incurred in connection with resolving such dispute.
15. Amendments.
----------
This agreement may not be altered, modified or amended except by a written
instruction signed by each of the parties hereto.
16. Successors.
----------
As used in this agreement, the term the Company shall include any
successors to all or substantially all of the business and/or assets of the
Company which assume and agree to perform this agreement.
17. Assignment.
----------
Neither this agreement nor any of the rights or obligations of either party
hereunder shall be assigned or delegated by any party hereto without the prior
written consent of the other party, except that the Company may without the
consent of Employee assign its rights and delegate its duties hereunder to any
successor to the business of the Company. No such assignment, however, shall
relieve the Company from any of its liabilities hereunder.
18. Waiver.
------
Waiver by any party hereto of any breach or default by any other party of
any of the terms of this agreement shall not operate as a waiver of any other
breach or default, whether similar to or different from the breach or default
waived.
<PAGE>
19 Severability.
------------
In the event that any one or more of the provisions of this agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
20. Survival.
--------
Notwithstanding anything herein to the contrary, the provisions of
Sections 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 17 survive the termination
of this Agreement.
21. Entire Agreement.
----------------
This agreement contains the entire understanding of the parties with
respect to the employment of Employee by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein. This agreement supersedes all prior agreements,
arrangements and understandings between the parties, whether oral or written,
with respect to the employment of Employee.
22. Notices.
-------
Notices and all other communications provided for in this agreement shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee:
If to the Company to:
America's Favorite Chicken Company
Suite 1700
Six Concourse Parkway
Atlanta, Georgia 30328-5352
or to such other address or such other person as Employee or the Company shall
designate in writing in accordance with this Section 21 except that notices
regarding changes in notices shall be effective only upon receipt.
23. Headings.
--------
Headings to Sections in this agreement are for the convenience of the
parties only and are
<PAGE>
not intended to be a part of, or to affect the meaning or interpretation of,
this agreement.
24. Governing Law.
-------------
The agreement shall be governed by the laws of the State of Minnesota
without reference to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this agreement to be executed
and Employee has hereunto set his hand as of the day and year first above
written.
COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/ Frank J. Belatti
------------------------------
Frank J. Belatti
Title: Chairman and Chief Executive Officer
EMPLOYEE:
/s/ Samuel N. Frankel
----------------------------------
Samuel N. Frankel
<PAGE>
EXHIBIT 10.26
1992 STOCK OPTION PLAN
OF
AMERICA'S FAVORITE CHICKEN COMPANY
1. PURPOSE.
----------
The purpose of this 1992 Stock Option Plan (the "Plan") is to secure
for America's Favorite Chicken Company, a Minnesota corporation (the "Company"),
and its shareholders the benefits arising from stock ownership by selected
executive officers of the Company (the "Participants") who are expected to
contribute to the Company's future growth and success, the identity of whom the
Company's Board of Directors (the "Board of Directors") may from time to time
determine. This Plan will provide a means whereby (i) such executive officers
may purchase shares of the common stock, par value $0.01 per share of the
Company (the "Common Stock") pursuant to nonqualified stock options not intended
to qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") (the "Options").
2. ADMINISTRATION.
-----------------
2.1 This Plan shall be administrated by the Board of Directors (the
"Board of Directors") or a committee thereof from time to time constituted, to
whom administration of this Plan has been duly delegated (the "Committee"). Any
action of the Board of Directors or the Committee with respect to administration
of this Plan shall be taken by a majority vote or written consent of its
members.
2.2 Subject to the limitations and provisions of this Plan, the Board
of Directors or the Committee shall have authority (i) to construe and interpret
this Plan, (ii) to define the terms used herein, (iii) to prescribe, amend and
rescind rules and regulations relating to this Plan, (iv) to determine, but only
from the group of persons who are eligible as described in Section 4 hereof, the
individuals to whom and the time or times at which Options shall be granted, the
number of shares of Common Stock to be subject to each Option, the exercise
price of each Option, the vesting schedule and number of installments, if any,
in which each Option may be exercised, and the duration of each Option, (V) to
approve and determine the duration of leaves of absence which may be granted to
Participants without constituting a termination of their employment for the
purposes of this Plan, and (vi) to make all other determinations necessary or
advisable for the administration of this Plan. All determinations and
interpretations made by the Board of Directors or the Committee shall be binding
and conclusive on all Participants and their legal representatives and
beneficiaries. Each grant of an Option shall be evidenced by a written agreement
between the Company and the recipient of such Option and no such grant shall be
valid unless and until so evidenced.
<PAGE>
3. SHARES SUBJECT TO THIS PLAN.
------------------------------
The shares of Common Stock to be issued under this Plan shall consist
of shares of the Company's authorized but unissued Common Stock, and the
aggregate number of such shares which may be issued upon exercise of all Options
under this Plan shall not exceed 1,364,000 shares, subject to adjustment as
provided in Section 12 hereof. If any Option granted under this Plan shall
expire or terminate for any reason, without having been exercised in full, the
unpurchased shares of Common Stock subject thereto shall be available for
Options to be granted under this Plan. The Company agrees to have available at
all times during the term of this Plan sufficient authorized and unissued shares
of Common Stock to satisfy the obligations of the Company hereunder and under
any option agreement entered into with respect hereto.
4. ELIGIBILITY AND PARTICIPATION.
--------------------------------
4.1 The following executive officers of the Company (the "Officers")
shall be eligible to receive Options: the Chairman of the Board of Directors,
President and Chief Executive Officer; the Executive Vice President and Chief
Operating Officer; the Executive Vice President and Chief Financial Officer;
the Executive Vice President - Marketing; the Executive Vice President -
Franchising; and such other executive officers as may be duly designated by a
majority of the Board of Directors.
4.2 All Options granted under this Plan shall be granted within five
years from the Effective Date (as defined in Section 14 hereof).
5. VESTING AND DURATION OF OPTIONS.
-----------------------------------
Vesting.
--------
5.1 The vesting schedule and number of installments in which each
Option may be exercised shall be as determined by the Board of Directors or the
Committee and specified in the option agreement governing the relevant Option.
Duration.
---------
5.2 Each Option and all rights associated therewith shall expire on
such date as the Board of Directors or the Committee shall determine and shall
specify in the option agreement governing the relevant Option, but in no event
later than fifteen years from the date on which the Option is granted, and shall
be subject to earlier expiration as provided herein.
-2-
<PAGE>
6. PRICE AND EXERCISE OF OPTIONS.
---------------------------------
6.1 The purchase price of each of the shares of Common Stock
underlying each Option shall be determined by the Board of Directors, provided,
--------
however, that the purchase price of shares underlying any outstanding Option is
- -------
subject to adjustment pursuant to Section 12 hereof. Unless otherwise provided
in the option agreement governing the relevant Option, the purchase price of a
share of Common Stock upon exercise of an Option shall be paid in full at the
time of such exercise (i) in cash or by certified or cashier's check payable to
the order of the Company, (ii) by combination thereof, or (iii) in such other
manner as the Board of Directors or the Committee may specify, as permitted by
applicable law, in order to facilitate the exercise of Options by the holders
thereof.
6.2 No Option granted under this Plan shall be exercisable if such
exercise would involve a violation of any applicable law or regulation
(including without limitation, federal and state securities laws and
regulations). Each Option shall be exercisable in such installments during the
period prior to its expiration date as the Board of Directors or the Committee
shall determine consistent with the provisions of Section 5.1 hereof; provided,
--------
however, that unless otherwise determined by the Board of Directors or the
- -------
Committee, if the Participant shall not in any given installment period purchase
all of the shares of Common Stock which the Participant is entitled to purchase
during such installment period, then such Participant's right to purchase any
such shares shall continue until the expiration date or sooner termination of
the Option. No option may be exercised for a fraction of a share.
7. WITHHOLDING TAX.
------------------
The Company shall have the right to require a Participant, and such
Participant by accepting an Option granted under this Plan agrees, to pay the
Company the amount of any taxes which the Company may be required to withhold
with respect to the exercise or disposition of such Option and the Company shall
not be obligated to issue certificates representing the shares of Common Stock
to be acquired through the exercise of such Option if such Participant fails to
provide the Company with adequate assurance that such Participant will pay such
amounts to the Company as hereinabove required. Participants shall notify the
Company in writing of any amounts included as income in Participants' federal
income tax returns in connection with an Option.
8. NONTRANSFERABILITY
---------------------
An Option shall, by its terms, be nontransferable by the holder either
voluntarily or by operation of law, other than by will or the laws of descent
and distribution, provided, however,
-3-
<PAGE>
that designation of a beneficiary by the holder does not constitute a transfer.
9. COMPLIANCE WITH SECURITIES LAWS.
----------------------------------
At the discretion of the Board of Directors or the Committee, any
option agreement governing an Option may provide that the Participant to whom an
Option is granted, by accepting such Option, represents and agrees, for the
Participant and the Participant's permitted transferees, that none of the shares
of Common Stock acquired upon exercise of Option will be acquired with a view to
any sale, transfer or distribution of such shares in violation of the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, and may further require, as a condition precedent to the
Company issuing certificates representing shares of Common Stock to be acquired
through the exercise of an Option, that the person entitled to exercise the
Option shall furnish evidence satisfactory to the Company (including written and
signed representations) to that effect in form and substance satisfactory to the
Company, including an indemnification of the Company in the event of any
violation by such person of the Securities Act and any applicable state
securities laws.
10. NO SPECIAL EMPLOYMENT RIGHTS/TERMINATION OF EMPLOYMENT.
----------------------------------------------------------
10.1 In no event shall the granting of this Option or its acceptance
by Participant give or be deemed to give Participant any rights to continue in
the employment of the Company.
10.2 If the holder of an Option ceases to be an employee of the
Company, such Option may be exercised, to the extent exercisable on the date of
such cessation, under the circumstances and during the time period or periods as
specified in the option agreement governing such Option, and the Option shall
terminate with respect to the underlying shares as to which the right to
purchase had not vested as of the date of such cessation, provided that this
Section 10.2 shall not apply with respect to the Option or such portion thereof
that becomes fully vested as a result of such cessation.
11. PRIVILEGES OF STOCK OWNERSHIP.
---------------------------------
Persons entitled to exercise any Option granted under this Plan shall
have all of the rights or privileges of a shareholder of the Company in respect
of any shares of Common Stock issuable upon exercise of such Option from and
after the date of exercise of an Option. No shares shall be issued and delivered
upon exercise of any Option unless and until, in the opinion of counsel for the
Company, there shall have been full compliance with any applicable registration
requirements of the Securities Act, any applicable listing requirements of any
national securities exchange or automated quotation system on which the Common
Stock is then
-4-
<PAGE>
listed or quoted, and any other requirements of law or of any regulatory bodies
having jurisdiction over such issuance and delivery. The Company agrees to take
all actions reasonably necessary to comply with all such requirements.
The Company agrees that shares of Common Stock issued upon the
exercise of Options shall, at the time of delivery, be validly issued and
outstanding, fully paid and nonassessable. The Company covenants and agrees that
it will pay, when due and payable, any and all federal and state stamp, original
issue, or similar taxes which may be payable in respect of the issue of the
Option or of Shares upon the exercise thereof.
12. ADJUSTMENTS.
---------------
12.1 If the outstanding shares of Common Stock are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company through a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar transaction, an appropriate and proportionate adjustment shall be made
in the maximum number and kind of shares as to which Options may be granted. A
corresponding adjustment changing the number or kind of shares allocated to
unexercised Options or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment to any of the
outstanding Options shall be made without change to the aggregate purchase price
applicable to the unexercised portion of such Option but with a corresponding
adjustment in the purchase price for each share underlying such Option.
12.2 For purposes of this Section 12.2, a "Change of Control" shall
mean the dissolution or liquidation of the Company, or a reorganization, merger
or consolidation of the Company with one or more corporations as a result of
which the owners of all of the outstanding shares of Common Stock immediately
prior to such reorganization, merger or consolidation own in the aggregate less
than 50% of the outstanding shares of Common Stock of the Company or any other
entity into which the Company shall be merged or consolidated immediately
following the consummation thereof, or the sale, transfer or other disposition
of all or substantially all of the assets or more than 50% of the then
outstanding shares of Common Stock of the Company. Upon the earlier of any such
Change of Control or the affirmative vote of the holders of a majority of the
then outstanding shares of Common Stock of the Company (a "Majority Vote")
approving a Change of Control: (i) each outstanding Option shall accelerate to
become fully vested and immediately exercisable; and (ii) to the extent required
by the terms of the transaction constituting a "Change of Control", each Option
holder shall be obligated to exercise any outstanding Option, to the extent not
previously exercised, and participate in the Change of Control on the same terms
and conditions as other holders of the Common Stock or, if the Option holder
does not so
-5-
<PAGE>
exercise his Option, such Option shall be cancelled as part of such Change of
Control.
Within ten days after a Majority Vote approving the Change of Control,
the Secretary of the Company shall deliver a written notice to each Option
holder stating the result of the vote, setting forth the terms of the Change of
Control and directing the Option holder to exercise the Option, to the extent
required by the terms of the transaction constituting the Change of Control and
not previously exercised, and (if required by its terms) participate in the
Change of Control, provided, however that if the terms of the Change of Control
-------- -------
provide that the Change of Control shall be consummated in less than ten days
after the date of the Majority Vote, then the Secretary of the Company shall
provide adequate written notice to each Option holder in order that the Option
holders may participate in the Change of Control at such time.
12.3 Adjustments under this Section 12 shall be made by the Board of
Directors or the Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive. No
fractional shares of stock shall be issued under this Plan on any such
adjustment.
13. AMENDMENT AND TERMINATION OF PLAN.
-------------------------------------
13.1 The Board of Directors may at any time suspend or terminate this
Plan or amend or revise the terms of this Plan, provided that no such amendment
or revision shall, except with the consent of each Participant, (i) decrease the
benefits accruing to Participants under this Plan, or (ii) decrease the maximum
number of shares of Common Stock which may be acquired pursuant to Options
granted under this Plan, except as permitted under the provisions of Section 12
hereof, and no amendment, suspension or termination of this Plan shall alter or
impair any rights or obligations under an outstanding Option without the consent
of the holders of such outstanding Options.
14. EFFECTIVE DATE OF PLAN.
--------------------------
This Plan shall be effective as of the date this Plan is approved by
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock (the "Effective Date").
-6-
<PAGE>
EXHIBIT 10.27
AMERICA'S FAVORITE CHICKEN COMPANY
FIRST AMENDMENT TO 1992 STOCK OPTION PLAN
America's Favorite Chicken Company, a Minnesota corporation, hereby amends
the 1992 Stock Option Plan adopted by the Company on November 5, 1992
(hereinafter referred to as the "Plan"), as follows:
1. The Plan is hereby amended by increasing the number of shares subject
to the Plan as set forth in the fifth (5th) line of Section 3 from "1,364,000
shares" to "1,397,727 shares."
2. This amendment is adopted by the Company pursuant to the provisions
of Section 2 of the Waiver, Consent and Amendment to Shareholders Agreement
executed by the Company and its shareholders, a copy of which amendment is on
file in the records of the Company.
3. Except as herein modified, the Plan shall remain in full force and
effect.
Dated as of this 15th day of July, 1993.
AMERICA'S FAVORITE CHICKEN COMPANY
BY: /s/ Frank J. Belatti
--------------------------------
Frank J. Belatti, President
and Chief Executive Officer
<PAGE>
EXHIBIT 10.28
AMERICA'S FAVORITE CHICKEN COMPANY
SECOND AMENDMENT TO
1992 NONQUALIFIED STOCK OPTION PLAN
The 1992 Nonqualified Stock Option Plan (the "Plan") of America's
Favorite Chicken Company, a Minnesota Corporation (the "Company"), adopted on
November 5, 1992, as amended on December 17, 1993, is hereby further amended as
hereinafter provided. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Plan.
1. INCREASE IN NUMBER OF RESERVED SHARES.
----------------------------------------
Section 3 of the Plan is hereby amended to adjust the aggregate number
of shares of Common Stock which may be issued upon exercise of all Options
subject to the Plan (the "Reserved Shares") by increasing the number of Reserved
Shares by 411,137 to a total of 1,808,864 shares.
2. EFFECTIVE DATE OF AMENDMENT.
-------------------------------
This Amendment shall be effective as of April 11, 1996.
<PAGE>
EXHIBIT 10.29
AMERICA'S FAVORITE CHICKEN COMPANY
THIRD AMENDMENT TO
1992 NONQUALIFIED STOCK OPTION PLAN
The 1992 Nonqualified Stock Option Plan (the "Plan") of America's
Favorite Chicken Company, a Minnesota Corporation (the "Company"), adopted on
November 5, 1992, as amended on December 17, 1993 and April 11, 1996, is hereby
further amended as hereinafter provided. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Plan.
1. AMENDMENTS TO OPTION AGREEMENTS.
-----------------------------------
The Plan is hereby further amended by adding thereto a Section 13.2
which shall provide as follows:
"13.2 The Board of Directors or the Committee may at any time authorize and
direct the amendment or revision of the terms of any stock option agreement
entered into pursuant to the Plan, subject, however to the limitations set
forth in Section 13.1 above."
2. EFFECTIVE DATE OF AMENDMENT.
--------------------------------
This Amendment shall be effective as of April 11, 1996.
<PAGE>
EXHIBIT 10.30
AMERICA'S FAVORITE CHICKEN COMPANY
1996 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN - EXECUTIVE
Section 1. Description of Plan. This is the 1996 Nonqualified
-------------------
Performance Stock Option Plan, dated April 11, 1996 (the "Plan"), of America's
Favorite Chicken Company (the "Company"). Under the Plan, officers and key
employees of the Company or any of the directly or indirectly owned subsidiaries
of the Company or any such Subsidiary which may be formed in the future
(individually, a "Subsidiary," and collectively, the "Subsidiaries"), to be
selected as set forth below, may be granted options ("Options") to purchase
shares of the Common Stock, $0.01 par value per share, of the Company (the
"Common Stock"). It is intended that Options under the Plan will not qualify for
treatment as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will thus be designated "Nonqualified
Stock Options."
Section 2. Purpose of Plan. The purpose of the Plan and of granting
---------------
Options to specified persons is to further the growth, development and financial
success of the Company and its Subsidiaries by providing additional incentives
to their officers and key employees. By assisting such persons in acquiring
shares of the Company's Common Stock, the Company can ensure that such persons
will themselves benefit directly from the Company's and the Subsidiaries'
growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
grants of Options under the Plan shall be the officers and key employees of the
Company and the Subsidiaries, designated by the Committee (as defined below). A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant.
Section 4. Administration.
--------------
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, at the Board's option, by a compensation committee
established by the Board (the Board and such committee, collectively, the
"Committee").
(b) The Committee is authorized and empowered to administer the Plan
and, subject to the Plan (i) to select the Participants, to specify the number
of shares of Common Stock with respect to which Options are granted to each
Participant, to specify the terms of the Options, and in general to grant
Options; (ii) to determine the dates upon which Options shall be granted and the
terms and conditions thereof (including, in particular, terms and conditions
relating to when Options become exercisable as set forth in Section 7 below) in
a manner consistent with the Plan, which terms and conditions need not be
identical as to the various Options granted; (iii) to interpret the Plan; (iv)
to prescribe, amend and rescind rules relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option previously granted by the Committee; (vi) to de termine
the rights and obligations of Participants under the Plan; (vii) to specify the
Option Price (as defined in Section 6); (viii) to accelerate the time during
which an Option may be exercised in accordance with the provisions of Section 15
hereof, and to otherwise accelerate the time during which an Option may be
exercised, in each case notwithstanding the provisions in the Option Agreement
(as defined in Section 12) stating the time during which it may be exercised;
and (ix) to make all other determinations deemed necessary or advisable for the
administration of the Plan. The good faith interpretation and construction by
the Committee of any provision of the Plan or of any Option granted under the
Plan shall be final, conclusive and binding. No member of the Committee shall be
liable for any action or determination made with respect to the Plan or any
Option granted hereunder.
Section 5. Shares Subject to the Plan. The number of shares of
--------------------------
Common Stock which may be purchased pursuant to the exercise of Options granted
under the Plan shall not exceed
<PAGE>
1,662,000 subject to adjustment as provided in Section 11 hereof. Upon the
expiration or termination, in whole or in part, for any reason of an outstanding
Option or any portion thereof which shall not have been exercised in full or in
the event that any shares of Common Stock acquired pursuant to the Plan are
reacquired by the Company, (a) any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise or (b)
the shares reacquired, as the case may be, shall again become available for the
granting of additional Options under the Plan.
Notwithstanding any provision to the contrary contained in a
particular Option Agreement (as defined in Section 12 hereof), no Participant
may be granted Options to purchase in excess of 1,662,000 shares of Common Stock
in the aggregate.
Section 6. Option Price. The purchase price per share (the "Option
------------
Price") of the shares of Common Stock underlying each Option shall be determined
by the Committee, and shall be subject to adjustment as provided herein.
Section 7. Restrictions on Grants; Exercisability of Options.
-------------------------------------------------
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to ten (10) years
from the date hereof. Options shall become exercisable based on the Company's
attaining of performance criteria as specified at the time of the granting
thereof. The Committee shall determine the performance criteria, the
performance measurement period(s) and the schedule of exercisability applicable
to each Option or group of Options in a schedule, a copy of which shall be filed
with the records of the Committee and attached to each Option Agreement to which
the same applies. The performance criteria, the performance measurement
period(s), and the schedule of exercisability need not be identical for all
Options granted hereunder. Following the conclusion of each applicable
performance measurement period, the Committee shall determine, in its sole good
faith judgment, the extent, if at all, that each Option subject thereto shall
have become exercisable based upon the applicable performance criteria and the
schedule of exercisability. To the extent each such Option shall remain
nonexercisable following the final performance measurement period because the
applicable performance criteria have not been met, it shall, to that extent,
automatically terminate and cease to be exercisable to such extent
notwithstanding the stated term during which it otherwise may have been
exercised. The Committee shall promptly notify each affected Participant of such
determination. The Committee may periodically review the performance criteria
applicable to any Option or Options and, in its sole good faith judgment, may
adjust the same to reflect mergers, acquisitions, asset sales and significant
changes in the level of capital expenditures.
Section 8. Exercise of Options. To the extent exercisable, and prior
-------------------
to its termination date, an Option may be exercised by the Participant by giving
written notice to the Company specifying the number of full shares to be
purchased and accompanied by payment of the full purchase price therefor in
cash, by check or in such other form of lawful consideration as the Committee
may approve from time to time, including, without limitation and in the sole
discretion of the Committee, the assignment and transfer by the Participant to
the Company of outstanding shares of Common Stock theretofore held by the
Participant. To the extent exercisable, and prior to its termination date, an
Option may only be exercised by the Participant or in the event of death of the
Participant, by the person or persons (including the deceased Participant's
estate) to whom the deceased Participant's rights under such Option shall have
passed by will or the laws of descent and distribution. Notwithstanding the
foregoing in the immediately preceding sentence, in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of a Participant, a
designee, or if the Participant has no designee, the legal representative, of
such Participant may exercise the Option on behalf of such Participant (provided
such Option would have been exercisable by such Participant) until the right to
exercise such Option expires, as set forth in such Participant's particular
Option Agreement.
2.
<PAGE>
Section 9. Issuance of Common Stock. The Company's obligation to
------------------------
issue shares of its Common Stock upon exercise of an Option is expressly
conditioned upon the compliance by the Company with any registration or other
qualification obligations with respect to such shares under any state and/or
federal law or rulings and regulations of any government regulatory body and/or
the making of such investment representations or other representations and
undertakings by the Participant (or the Participant's legal representative, heir
or legatee, as the case may be) in order to comply with the requirements of any
exemption from any such reg istration or other qualification obligations with
respect to such shares which the Company in its sole discretion shall deem
necessary or advisable. Such required representations and under takings may
include representations and agreements that such Participant (or the
Participant's legal representative, heir or legatee): (a) is purchasing such
shares for investment and not with any present intention of selling or otherwise
disposing of such shares; and (b) agrees to have a legend placed upon the face
and reverse of any certificates evidencing such shares (or, if appli cable, an
appropriate data entry made in the ownership records of the Company) setting
forth (i) any representations and undertakings which such Participant has given
to the Company or a reference thereto, and (ii) that, prior to effecting any
sale or other disposition of any such shares, the Participant must furnish to
the Company an opinion of counsel, satisfactory to the Company and its counsel,
to the effect that such sale or disposition will not violate the applicable
requirements of state and federal laws and regulatory agencies; provided,
however, that any such legend or data entry shall be removed when no longer
applicable. The inability of the Company to obtain, from any regulatory body
having jurisdiction, registration, qualification or other necessary
authorization, or the unavailability of any exemption from registration or
qualification obligation, deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder shall suspend the Company's
obligation to permit the exercise of any affected Option or to issue any Shares
thereupon and shall relieve the Company of any liability in respect of the
nonissuance or sale of such shares as to which such requisite authority shall
not have been obtained. Any shares of Common Stock issued by the Company upon
exercise of an Option granted hereunder shall be subject to a right of first
refusal of the Company with respect to all shares proposed to be transferred by
Participant, as described in Section 12 hereof and as more fully described in
each particular Option Agreement.
Section 10. Nontransferability. An Option may not be sold, pledged,
------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or to a trust for the benefit of
the Participant or the Participant's spouse or issue. Any permitted transferee
shall be required prior to any transfer of an Option or shares of Common Stock
acquired pursuant to the exercise of an Option to execute a written undertaking
to be bound by the provisions of the applicable Option Agreement.
Section 11. Adjustments Upon Reorganization, Etc. Subject to Section
------------------------------------
14(b) hereof, if the outstanding shares of the Common Stock of the Company are
changed into, or exchanged for, a different number or kind of shares or
securities of the Company through any capital reorganization or
reclassification, or if the number of outstanding shares is changed through a
stock split or stock dividend, an appropriate adjustment shall be made by the
Committee in the number, kind or exercise price of shares as to which Options
may be granted under the Plan. A corresponding adjustment shall likewise be
made in the number, kind or exercise price of shares with respect to which
unexercised Options have theretofore been granted. Any such adjustment in an
outstanding Option, however, shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share covered by the Option. In making such
adjustments, or in determining that no such adjustments are necessary, the
Committee may rely upon the advice of counsel and accountants to the Company,
and the good faith determination of the Committee shall be final, conclusive and
binding. No fractional shares of stock shall be issued under the Plan on
account of any such adjustment.
3.
<PAGE>
The grant of an Option under the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications or changes
in its capital or business structures or to merge, consolidate, dissolve, or
liquidate or to sell or transfer all or any part of its business or assets.
Section 12. Option Agreement. Each Option granted under the Plan
----------------
shall be evidenced by a written nonqualified stock option agreement (an "Option
Agreement") executed by the Company and the Participant which (a) shall contain
each of the provisions and agree ments herein specifically required to be
contained therein; (b) shall contain provisions which give the Company a right
of first refusal to purchase any Common Stock issued pursuant to the exercise of
Options which a Participant proposes to sell; (c) may contain provisions which
give certain drag-along rights; and (d) may contain such other terms and
conditions as the Committee deems desirable and which are not inconsistent with
the Plan.
Section 13. Rights as a Stockholder. A Participant or a permitted
-----------------------
transferee of a Participant shall have no rights as a stockholder with respect
to any shares covered by an Option until the date an entry evidencing such
ownership is made in the stock transfer books of the Company (the "Exercise
Date"). Except as otherwise provided in Section 11 hereof, no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the Exercise Date.
Section 14. Termination of Options.
----------------------
(a) Each Option shall terminate and expire, and shall no longer be
subject to exercise, as the Committee may determine in granting such Option, and
each Option granted under the Plan shall set forth a termination date thereof,
which shall be no later than ten (10) years from the date such Option is granted
subject to earlier termination as set forth in Section 7, Section 14(b) or
Section 15 hereof, or as otherwise set forth in each particular Option
Agreement. The termination of employment of a Participant for any reason shall
not accelerate or otherwise affect the number of shares with respect to which an
Option may be exercised; provided, however, that the Option may only be
exercised with respect to that number of shares which could have been purchased
under the Option had the Option been exercised by the Participant on the date of
such termination.
(b) Subject to Section 15 hereof, unless the Committee shall, in its
sole discretion, determine otherwise, upon (i) the dissolution, liquidation or
sale of all or substantially all of the business, properties and assets of the
Company, (ii) upon any reorganization, merger or consolidation in which the
Company does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities of
another corporation and/or other property in exchange for their capital stock of
the Company, or (iv) upon any acquisition by any person or group (as defined in
Section 13d of the Securities Act of 1934) of beneficial ownership of more than
fifty percent (50%) of the Company's then outstanding shares of Common Stock
(each of the events described in clauses (i), (ii), (iii) or (iv) is referred to
herein individually as an "Extraordinary Event"), the Plan and each outstanding
Option shall terminate. In such event each Participant shall have the right
until ten (10) days before the effective date of the Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then exercisable pursuant to the
provisions of said Option or Options and of Section 7 of the Plan.
In its sole and absolute discretion, the surviving entity (which may
be the Company) or the entity that has acquired all or substantially all of the
Company's assets (the "Surviving Entity") may, but shall not be so obligated,
tender to any Participant an option or options to purchase shares or equity
interests in such
4.
<PAGE>
Surviving Entity, and such new option or options shall contain such terms and
provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan with any reasonable
changes to take into account the circumstances of the Surviving Entity.
Section 15. Acceleration of Options. Notwithstanding the provisions
-----------------------
of Section 7 or Section 14 hereof, or any provision to the contrary contained in
a particular Option Agreement, the Committee, in its sole discretion, at any
time, or from time to time, may elect to accelerate the time at which all or any
portion of any Option then outstanding becomes exercisable. In addition, upon
the occurrence of an Extraordinary Event, the Committee will review the
Company's performance in connection with its consideration of the acceleration
of Options granted hereunder and will accelerate the exercisability of each
Option granted hereunder by a percentage amount at least equal to the amount
determined pursuant to the formula set forth on Schedule I hereto. The decision
by the Committee to accelerate an Option or decline to accelerate an Option
shall be final, conclusive and binding. In the event of the acceleration of the
exercisability of Options as the result of a decision by the Committee pursuant
to this Section 15, each outstanding Option so accelerated shall be exercisable
for a period from and after the date of such acceleration and upon such other
terms and conditions as the Committee may determine in its sole discretion
provided that such terms and conditions (other than terms and conditions
relating solely to the acceleration of exercisability and the related
termination of an Option) may not adversely affect the rights of any Participant
without the consent of the Participant so adversely affected. Any outstanding
Option which has not been exercised by the holder at the end of such stated
period shall terminate automatically and become null and void.
Section 16. Withholding of Taxes. The Company, or a Subsidiary, as
--------------------
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiary) by the Participant
of the required withholding tax, as the Committee may determine; provided,
however, that, in the sole discretion of the Committee, the Participant may pay
such tax by reducing the number of shares of Common Stock issued upon exercise
of an Option (for which purpose such shares shall be valued at fair market value
as determined in good faith by the Committee, which determination shall be
final, conclusive and binding).
Section 17. Effectiveness and Termination of the Plan. The Plan
-----------------------------------------
shall be effective on the date on which it is adopted by the Board. The Plan
shall terminate at the earliest of the time when all shares of Common Stock
which may be issued hereunder have been so issued or at such other time as set
forth in Section 14(b) hereof; provided, however, that the Board may in its sole
discretion terminate the Plan at any other time. Subject to Section 14(b)
hereof, no such termination shall in any way affect any Option then outstanding.
Section 18. Time of Granting Options. The date of grant of an Option
------------------------
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.
Section 19. Amendment of Plan. The Committee may make such
-----------------
amendments to the Plan and, with the consent of each Participant affected, in
the terms and conditions of granted Options as it
5.
<PAGE>
shall deem advisable, including, without limitation, accelerating the time at
which an Option may be exercised. No amendment shall in any way adversely affect
any Option then outstanding, without the consent of the Participant so adversely
affected.
Section 20. Transfers and Leaves of Absence. For purposes of the
-------------------------------
Plan, (a) a transfer of a Participant's employment, without an intervening
period, between the Company and a Subsidiary shall not be deemed a termination
of employment and (b) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of the Company (or a Subsidiary,
whichever is applicable) during such leave of absence.
Section 21. No Obligation to Exercise Option. The granting of an
--------------------------------
Option shall impose no obligation on the Participant to exercise such Option.
Section 22. Indemnification. In addition to such other rights of
----------------
indemnification as they may have as directors, the members of the Board or
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is not entitled to
indemnification under applicable law; provided that within sixty (60) days after
institution of any such action, suit or proceeding such Committee member shall
in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same.
Section 23. Governing Law. The Plan and any Option granted pursuant
-------------
to the Plan shall be construed under and governed by the laws of the State of
Minnesota without regard to conflict of law provisions thereof.
Section 24. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued relationship with, the Company
or any Subsidiary in favor of any Participant or limit the ability of the
Company or any Subsidiary to terminate, with or without cause, in its sole and
absolute discretion, the employment of, or relationship with, any Participant,
subject to the terms of any written employment or other agreement to which a
Participant is a party.
6.
<PAGE>
SCHEDULE I
Percentage Amount for an Option equals:
(i) [aggregate EBITDA (as defined below) earned from the fiscal
quarter ending March 31, 1996 through the last complete quarter
preceding the Extraordinary Event ("Actual EBITDA")
divided by an amount equal to the sum of the Maximum EBITDA
amounts for all years from 1996 up to and including the relevant
pro rata amount of Maximum EBITDA through the last complete
quarter preceding the Extraordinary Event]
times the maximum potential options available to be earned
through the year in which the Extraordinary Event occurred
less
(ii) the percentage amount of the Option that is then previously
vested;
provided that the Percentage Amount for an Option shall be zero if Actual EBITDA
is less than the sum of the Minimum EBITDA amounts for all years from 1996 up to
and including the year in which the Extraordinary Event occurred;
"EBITDA" means the Company's earnings before interest, taxes, depreciation and
amortization.
The following chart sets forth, by year, Minimum EBITDA and Maximum EBITDA
amounts.
<TABLE>
<CAPTION>
Year Minimum EBITDA Maximum EBITDA
---- -------------- --------------
<S> <C> <C>
1996 $60.0 million $65.0 million
1997 68.0 74.0
1998 75.0 84.0
1999 84.0 96.0
2000 90.0 110.0
</TABLE>
7.
<PAGE>
EXHIBIT 10.31
AMERICA'S FAVORITE CHICKEN COMPANY
1996 NONQUALIFIED PERFORMANCE STOCK OPTION PLAN - GENERAL
Section 1. Description of Plan. This is the 1996 Nonqualified
-------------------
Performance Stock Option Plan, dated April 11, 1996 (the "Plan"), of America's
Favorite Chicken Company (the "Company"). Under the Plan, officers and key
employees of the Company or any of the directly or indirectly owned subsidiaries
of the Company or any such Subsidiary which may be formed in the future
(individually, a "Subsidiary," and collectively, the "Subsidiaries"), to be
selected as set forth below, may be granted options ("Options") to purchase
shares of the Common Stock, $0.01 par value per share, of the Company (the
"Common Stock"). It is intended that Options under the Plan will not qualify for
treatment as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will thus be designated "Nonqualified
Stock Options."
Section 2. Purpose of Plan. The purpose of the Plan and of granting
---------------
Options to specified persons is to further the growth, development and financial
success of the Company and its Subsidiaries by providing additional incentives
to their officers and key employees. By assisting such persons in acquiring
shares of the Company's Common Stock, the Company can ensure that such persons
will themselves benefit directly from the Company's and the Subsidiaries'
growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
grants of Options under the Plan shall be the officers and key employees of the
Company and the Subsidiaries, designated by the Committee (as defined below). A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant.
Section 4. Administration.
--------------
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, at the Board's option, by a compensation committee
established by the Board (the Board and such committee, collectively, the
"Committee").
(b) The Committee is authorized and empowered to administer the Plan
and, subject to the Plan (i) to select the Participants, to specify the number
of shares of Common Stock with respect to which Options are granted to each
Participant, to specify the terms of the Options, and in general to grant
Options; (ii) to determine the dates upon which Options shall be granted and the
terms and conditions thereof (including, in particular, terms and conditions
relating to when Options become exercisable as set forth in Section 7 below) in
a manner consistent with the Plan, which terms and conditions need not be
identical as to the various Options granted; (iii) to interpret the Plan; (iv)
to prescribe, amend and rescind rules relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option previously granted by the Committee; (vi) to determine
the rights and obligations of Participants under the Plan; (vii) to specify the
Option Price (as defined in Section 6); (viii) to accelerate the time during
which an Option may be exercised in accordance with the provisions of Section 15
hereof, and to otherwise accelerate the time during which an Option may be
exercised, in each case notwithstanding the provisions in the Option Agreement
(as defined in Section 12) stating the time during which it may be exercised;
and (ix) to make all other determinations deemed necessary or advisable for the
administration of the Plan. The good faith interpretation and construction by
the Committee of any provision of the Plan or of any Option granted under the
Plan shall be final, conclusive and binding. No member of the Committee shall be
liable for any action or determination made with respect to the Plan or any
Option granted hereunder.
Section 5. Shares Subject to the Plan. The number of shares of Common
--------------------------
Stock which may be purchased pursuant to the exercise of Options granted under
the Plan shall not exceed
<PAGE>
1,288,295 subject to adjustment as provided in Section 11 hereof. Upon the
expiration or termination, in whole or in part, for any reason of an outstanding
Option or any portion thereof which shall not have been exercised in full or in
the event that any shares of Common Stock acquired pursuant to the Plan are
reacquired by the Company, (a) any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise or (b)
the shares reacquired, as the case may be, shall again become available for the
granting of additional Options under the Plan.
Notwithstanding any provision to the contrary contained in a particular
Option Agreement (as defined in Section 12 hereof), no Participant may be
granted Options to purchase in excess of 1,288,295 shares of Common Stock in the
aggregate.
Section 6. Option Price. The purchase price per share (the "Option
------------
Price") of the shares of Common Stock underlying each Option shall be determined
by the Committee, and shall be subject to adjustment as provided herein.
Section 7. Restrictions on Grants: Exercisability of Options.
-------------------------------------------------
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to ten (10) years
from the date hereof. Options shall become exercisable based on the Company's
attaining of performance criteria as specified at the time of the granting
thereof. The Committee shall determine the performance criteria, the performance
measurement period(s) and the schedule of exercisability applicable to each
Option or group of Options in a schedule, a copy of which shall be filed with
the records of the Committee and attached to each Option Agreement to which the
same applies. The performance criteria, the performance measurement period(s),
and the schedule of exercisability need not be identical for all Options granted
hereunder. Following the conclusion of each applicable performance measurement
period, the Committee shall determine, in its sole good faith judgment, the
extent, if at all, that each Option subject thereto shall have become
exercisable based upon the applicable performance criteria and the schedule of
exercisability. To the extent each such Option shall remain nonexercisable
following the final performance measurement period because the applicable
performance criteria have not been met, it shall, to that extent, automatically
terminate and cease to be exercisable to such extent notwithstanding the stated
term during which it otherwise may have been exercised. The Committee shall
promptly notify each affected Participant of such determination. The Committee
may periodically review the performance criteria applicable to any Option or
Options and, in its sole good faith judgment, may adjust the same to reflect
mergers, acquisitions, asset sales and significant changes in the level of
capital expenditures.
Section 8. Exercise of Options. To the extent exercisable, and prior to
-------------------
its termination date, an Option may be exercised by the Participant by giving
written notice to the Company specifying the number of full shares to be
purchased and accompanied by payment of the full purchase price therefor in
cash, by check or in such other form of lawful consideration as the Committee
may approve from time to time, including, without limitation and in the sole
discretion of the Committee, the assignment and transfer by the Participant to
the Company of outstanding shares of Common Stock theretofore held by the
Participant. To the extent exercisable, and prior to its termination date, an
Option may only be exercised by the Participant or in the event of death of the
Participant, by the person or persons (including the deceased Participant's
estate) to whom the deceased Participant's rights under such Option shall have
passed by will or the laws of descent and distribution. Notwithstanding the
foregoing in the immediately preceding sentence, in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of a Participant, a
designee, or if the Participant has no designee, the legal representative, of
such Participant may exercise the Option on behalf of such Participant (provided
such Option would have been exercisable by such Participant) until the right to
exercise such Option expires, as set forth in such Participant's particular
Option Agreement.
2.
<PAGE>
Section 9. Issuance of Common Stock. The Company's obligation to issue
------------------------
shares of its Common Stock upon exercise of an Option is expressly conditioned
upon the compliance by the Company with any registration or other qualification
obligations with respect to such shares under any state and/or federal law or
rulings and regulations of any government regulatory body and/or the making of
such investment representations or other representations and undertakings by the
Participant (or the Participant's legal representative, heir or legatee, as the
case may be) in order to comply with the requirements of any exemption from any
such registration or other qualification obligations with respect to such shares
which the Company in its sole discretion shall deem necessary or advisable. Such
required representations and undertakings may include representations and
agreements that such Participant (or the Participant's legal representative,
heir or legatee): (a) is purchasing such shares for investment and not with any
present intention of selling or otherwise disposing of such shares; and (b)
agrees to have a legend placed upon the face and reverse of any certificates
evidencing such shares (or, if applicable, an appropriate data entry made in the
ownership records of the Company) setting forth (i) any representations and
undertakings which such Participant has given to the Company or a reference
thereto, and (ii) that, prior to effecting any sale or other disposition of any
such shares, the Participant must furnish to the Company an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that such sale or
disposition will not violate the applicable requirements of state and federal
laws and regulatory agencies; provided, however, that any such legend or data
entry shall be removed when no longer applicable. The inability of the Company
to obtain, from any regulatory body having jurisdiction, registration,
qualification or other necessary authorization, or the unavailability of any
exemption from registration or qualification obligation, deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares hereunder
shall suspend the Company's obligation to permit the exercise of any affected
Option or to issue any Shares thereupon and shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained. Any shares of Common Stock
issued by the Company upon exercise of an Option granted hereunder shall be
subject to a right of first refusal of the Company with respect to all shares
proposed to be transferred by Participant, as described in Section 12 hereof and
as more fully described in each particular Option Agreement.
Section 10. Nontransferability. An Option may not be sold, pledged,
------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or to a trust for the benefit of
the Participant or the Participant's spouse or issue. Any permitted transferee
shall be required prior to any transfer of an Option or shares of Common Stock
acquired pursuant to the exercise of an Option to execute a written undertaking
to be bound by the provisions of the applicable Option Agreement.
Section 11. Adjustments Upon Reorganization. Etc. Subject to Section
------------------------------------
14(b) hereof, if the outstanding shares of the Common Stock of the Company are
changed into, or exchanged for, a different number or kind of shares or
securities of the Company through any capital reorganization or
reclassification, or if the number of outstanding shares is changed through a
stock split or stock dividend, an appropriate adjustment shall be made by the
Committee in the number, kind or exercise price of shares as to which Options
may be granted under the Plan. A corresponding adjustment shall likewise be made
in the number, kind or exercise price of shares with respect to which
unexercised Options have theretofore been granted. Any such adjustment in an
outstanding Option, however, shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share covered by the Option. In making such
adjustments, or in determining that no such adjustments are necessary, the
Committee may rely upon the advice of counsel and accountants to the Company,
and the good faith determination of the Committee shall be final, conclusive and
binding. No fractional shares of stock shall be issued under the Plan on account
of any such adjustment.
3.
<PAGE>
The grant of an Option under the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications or changes
in its capital or business structures or to merge, consolidate, dissolve, or
liquidate or to sell or transfer all or any part of its business or assets.
Section 12. Option Agreement. Each Option granted under the Plan shall
----------------
be evidenced by a written nonqualified stock option agreement (an "Option
Agreement") executed by the Company and the Participant which (a) shall contain
each of the provisions and agreements herein specifically required to be
contained therein; (h) shall contain provisions which give the Company a right
of first refusal to purchase any Common Stock issued pursuant to the exercise of
Options which a Participant proposes to sell; (c) may contain provisions which
give certain drag-along rights; and (d) may contain such other terms and
conditions as the Committee deems desirable and which are not inconsistent with
the Plan.
Section 13. Rights as a Stockholder. A Participant or a permitted
-----------------------
transferee of a Participant shall have no rights as a stockholder with respect
to any shares covered by an Option until the date an entry evidencing such
ownership is made in the stock transfer books of the Company (the "Exercise
Date"). Except as otherwise provided in Section 11 hereof, no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the Exercise Date.
Section 14. Termination of Options.
----------------------
(a) Each Option shall terminate and expire, and shall no longer be
subject to exercise, as the Committee may determine in granting such Option, and
each Option granted under the Plan shall set forth a termination date thereof,
which shall be no later than ten (10) years from the date such Option is granted
subject to earlier termination as set forth in Section 7, Section 14(b) or
Section 15 hereof, or as otherwise set forth in each particular Option
Agreement. The termination of employment of a Participant for any reason shall
not accelerate or otherwise affect the number of shares with respect to which an
Option may be exercised; provided, however, that the Option may only be
exercised with respect to that number of shares which could have been purchased
under the Option had the Option been exercised by the Participant on the date of
such termination.
(b) Subject to Section 15 hereof, unless the Committee shall, in its
sole discretion, determine otherwise, upon (i) the dissolution, liquidation or
sale of all or substantially all of the business, properties and assets of the
Company, (ii) upon any reorganization, merger or consolidation in which the
Company does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities of
another corporation and/or other property in exchange for their capital stock of
the Company, or (iv) upon any acquisition by any person or group (as defined in
Section 13d of the Securities Act of 1934) of beneficial ownership of more than
fifty percent (50%) of the Company's then outstanding shares of Common Stock
(each of the events described in clauses (i), (ii), (iii) or (iv) is referred to
herein individually as an "Extraordinary Event"), the Plan and each outstanding
Option shall terminate. In such event each Participant shall have the right
until ten (10) days before the effective date of the Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then exercisable pursuant to the
provisions of said Option or Options and of Section 7 of the Plan.
In its sole and absolute discretion, the surviving entity (which may be
the Company) or the entity that has acquired all or substantially all of the
Company's assets (the "Surviving Entity") may, but shall not be so obligated,
tender to any Participant an option or options to purchase shares or equity
interests in such
4.
<PAGE>
Surviving Entity, and such new option or options shall contain such terms and
provisions as shall be required to substantially preserve the rights and
benefits of any Option then outstanding under the Plan with any reasonable
changes to take into account the circumstances of the Surviving Entity.
Section 15. Acceleration of Options. Notwithstanding the provisions of
-----------------------
Section 7 or Section 14 hereof, or any provision to the contrary contained in a
particular Option Agreement, the Committee, in its sole discretion, at any time,
or from time to time, may elect to accelerate the time at which all or any
portion of any Option then outstanding becomes exercisable. In addition, upon
the occurrence of an Extraordinary Event, the Committee will review the
Company's performance in connection with its consideration of the acceleration
of Options granted hereunder and will accelerate the exercisability of each
Option granted hereunder by a percentage amount at least equal to the amount
determined pursuant to the formula set forth on Schedule I hereto. The decision
by the Committee to accelerate an Option or decline to accelerate an Option
shall be final, conclusive and binding. In the event of the acceleration of the
exercisability of Options as the result of a decision by the Committee pursuant
to this Section 15, each outstanding Option so accelerated shall be exercisable
for a period from and after the date of such acceleration and upon such other
terms and conditions as the Committee may determine in its sole discretion
provided that such terms and conditions (other than terms and conditions
relating solely to the acceleration of exercisability and the related
termination of an Option) may not adversely affect the rights of any Participant
without the consent of the Participant so adversely affected. Any outstanding
Option which has not been exercised by the holder at the end of such stated
period shall terminate automatically and become null and void.
Section 16. Withholding of Taxes. The Company, or a Subsidiary, as the
--------------------
case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiary) by the Participant
of the required withholding tax, as the Committee may determine; provided,
however, that, in the sole discretion of the Committee, the Participant may pay
such tax by reducing the number of shares of Common Stock issued upon exercise
of an Option (for which purpose such shares shall be valued at fair market value
as determined in good faith by the Committee, which determination shall be
final, conclusive and binding).
Section 17. Effectiveness and Termination of the Plan. The Plan shall
-----------------------------------------
be effective on the date on which it is adopted by the Board. The Plan shall
terminate at the earliest of the time when all shares of Common Stock which may
be issued hereunder have been so issued or at such other time as set forth in
Section 14(b) hereof; provided, however, that the Board may in its sole
discretion terminate the Plan at any other time. Subject to Section 14(b)
hereof, no such termination shall in any way affect any Option then outstanding.
Section 18. Time of Granting Options. The date of grant of an Option
------------------------
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.
Section 19. Amendment of Plan. The Committee may make such amendments
-----------------
to the Plan and, with the consent of each Participant affected, in the terms and
conditions of granted Options as it
5.
<PAGE>
shall deem advisable, including, without limitation, accelerating the time at
which an Option may be exercised. No amendment shall in any way adversely affect
any Option then outstanding, without the consent of the Participant so adversely
affected.
Section 20. Transfers and Leaves of Absence. For purposes of the Plan,
-------------------------------
(a) a transfer of a Participant's employment, without an intervening period,
between the Company and a Subsidiary shall not be deemed a termination of
employment and (h) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of the Company (or a Subsidiary,
whichever is applicable) during such leave of absence.
Section 21. No Obligation to Exercise Option. The granting of an
--------------------------------
Option shall impose no obligation on the Participant to exercise such Option.
Section 22. Indemnification. In addition to such other rights of
---------------
indemnification as they may have as directors, the members of the Board or
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is not entitled to
indemnification under applicable law; provided that within sixty (60) days after
institution of any such action, suit or proceeding such Committee member shall
in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same.
Section 23. Governing Law. The Plan and any Option granted pursuant to
-------------
the Plan shall be construed under and governed by the laws of the State of
Minnesota without regard to conflict of law provisions thereof.
Section 24. Not an Employment or Other Agreement. Nothing contained in
------------------------------------
the Plan or in any Option Agreement shall confer, intend to confer or imply any
rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued relationship with, the Company
or any Subsidiary in favor of any Participant or limit the ability of the
Company or any Subsidiary to terminate, with or without cause, in its sole and
absolute discretion, the employment of, or relationship with, any Participant,
subject to the terms of any written employment or other agreement to which a
Participant is a party.
6.
<PAGE>
SCHEDULE I
Percentage Amount for an Option equals:
(i) [aggregate EBITDA (as defined below) earned from the fiscal quarter
ending March 31, 1996 through the last complete quarter preceding the
Extraordinary Event ("Actual EBITDA")
divided by an amount equal to the sum of the Maximum EBITDA amounts
for all years from 1996 up to and including the relevant pro rata
amount of Maximum EBITDA through the last complete quarter preceding
the Extraordinary Event]
times the maximum potential options available to be earned through the
year in which the Extraordinary Event occurred
less
(ii) the percentage amount of the Option that is then previously vested;
provided that the Percentage Amount for an Option shall be zero if Actual EBITDA
is less than the sum of the Minimum EBITDA amounts for all years from 1996 up to
and including the year in which the Extraordinary Event occurred;
"EBITDA" means the Company's earnings before interest, taxes, depreciation and
amortization.
The following chart sets forth, by year, Minimum EBITDA and Maximum EBITDA
amounts.
<TABLE>
<CAPTION>
Year Minimum EBITDA Maximum EBITDA
---- -------------- --------------
<S> <C> <C>
1996 $60.0 million $ 65.0 million
1997 68.0 74.0
1998 75.0 84.0
1999 84.0 96.0
2000 90.0 110.0
</TABLE>
<PAGE>
EXHIBIT 10.32
AMERICA'S FAVORITE CHICKEN COMPANY, INC.
1996 NONQUALIFIED STOCK OPTION PLAN
Section 1. Description of Plan. This is the 1996 Nonqualified Stock
-------------------
Option Plan, dated April 11, 1996 (the "Plan"), of America's Favorite Chicken
Company, Inc. (the "Company"). Under the Plan, officers and key employees of the
Company or any of the directly or indirectly owned subsidiaries of the Company
or any such Subsidiary which may be formed in the future (individually, a
"Subsidiary," and collectively, the "Subsidiaries"), to be selected as set forth
below, may be granted options ("Options") to purchase shares of the Common
Stock, $0.01 par value per share, of the Company (the "Common Stock"). It is
intended that Options under the Plan will not qualify for treatment as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and will thus be designated "Nonqualified Stock Options."
Section 2. Purpose of Plan. The purpose of the Plan and of granting
---------------
Options to specified persons is to further the growth, development and financial
success of the Company and its Subsidiaries by providing additional incentives
to their officers and key employees. By assisting such persons in acquiring
shares of the Company's Common Stock, the Company can ensure that such persons
will themselves benefit directly from the Company's and the Subsidiaries'
growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
grants of Options under the Plan shall be the officers and key employees of the
Company and the Subsidiaries designated by the Committee (as defined below). A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant.
Section 4. Administration.
--------------
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, at the Board's option, by a compensation committee
established by the Board (the Board and such committee, collectively, the
"Committee").
(b) The Committee is authorized and empowered to administer the Plan
and, subject to the Plan (i) to select the Participants, to specify the number
of shares of Common Stock with respect to which Options are granted to each
Participant, to specify the terms of the Options, and in general to grant
Options; (ii) to determine the dates upon which Options shall be granted and the
terms and conditions thereof (including, in particular, terms and conditions
relating to when Options become exercisable as set forth in Section 7 below) in
a manner consistent with the Plan, which terms and conditions need not be
identical as to the various Options granted; (iii) to interpret the Plan; (iv)
to prescribe, amend and rescind rules relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option previously granted by the Committee; (vi) to determine
the rights and obligations of Participants under the Plan; (vii) to specify the
Option Price (as defined in Section 6); (viii) to accelerate the time during
which an Option may be exercised in accordance with the provisions of Section 15
hereof, and to otherwise accelerate the time during which an Option may be
exercised, in each case notwithstanding the provisions in the Option Agreement
(as defined in Section 12) stating the time during which it may be exercised;
and (ix) to make all other determinations deemed necessary or advisable for the
administration of the Plan. The good faith interpretation and construction by
the Committee of any provision of the Plan or of any Option granted under the
Plan shall be final, conclusive and binding. No member of the Committee shall be
liable for any action or determination made with respect to the Plan or any
Option granted hereunder.
Section 5. Shares Subject to the Plan. The number of shares of
--------------------------
Common Stock which may be purchased pursuant to the exercise of Options granted
under the Plan shall not exceed
<PAGE>
1,808,863 subject to adjustment as provided in Section 11 hereof. Upon the
expiration or termination, in whole or in part, for any reason of an outstanding
Option or any portion thereof which shall not have been exercised in full or in
the event that any shares of Common Stock acquired pursuant to the Plan are
reacquired by the Company, (a) any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise or (b)
the shares reacquired, as the case may be, shall again become available for the
granting of additional Options under the Plan.
Notwithstanding any provision to the contrary contained in a
particular Option Agreement (as defined in Section 12 hereof), no Participant
may be granted Options to purchase in excess of 1,808,863 shares of Common Stock
in the aggregate.
Section 6. Option Price. Subject to adjustment as provided herein,
------------
the purchase price per share (the "Option Price") of the shares of Common Stock
underlying each Option shall be determined by the Committee.
Section 7. Restrictions on Grants; Exercisability of Options.
-------------------------------------------------
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to ten (10) years
from the date hereof. Options may become exercisable based on the passage of
time, as determined by the Committee and specified at the time of the granting
thereof in a schedule, a copy of which shall be filed with the records of the
Committee and attached to each Option Agreement to which the same applies.
Section 8. Exercise of Options. To the extent exercisable, and prior
-------------------
to its termination date, an Option may be exercised by the Participant by giving
written notice to the Company specifying the number of full shares to be
purchased and accompanied by payment of the full purchase price therefor in
cash, by check or in such other form of lawful consideration as the Committee
may approve from time to time, including, without limitation and in the sole
discretion of the Committee, the assignment and transfer by the Participant to
the Company of outstanding shares of Common Stock theretofore held by the
Participant. To the extent exercisable, and prior to its termination date, an
Option may only be exercised by the Participant or in the event of death of the
Participant, by the person or persons (including the deceased Participant's
estate) to whom the deceased Participant's rights under such Option shall have
passed by will or the laws of descent and distribution. Notwithstanding the
foregoing in the immediately preceding sentence, in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of a Participant, a
designee, or if the Participant has no designee, the legal representative, of
such Participant may exercise the Option on behalf of such Participant (provided
such Option would have been exercisable by such Participant) until the right to
exercise such Option expires, as set forth in such Participant's particular
Option Agreement.
Section 9. Issuance of Common Stock. The Company's obligation to issue
------------------------
Units upon exercise of the Warrants is expressly conditioned upon the compliance
by the Company with any registration or other qualification obligations under
any state and/or federal law or rulings and regulations of any government
regulatory body and/or the making of such investment representations or other
representations and undertakings by the Registered Holder in order to comply
with the requirements of any exemption from any such registration or other
qualification obligations with respect to such shares which the Company in its
sole discretion shall deem necessary or advisable. Such required representations
and undertakings may include representations and agreements that the Registered
Holder: (a) is purchasing such shares for investment and not with any present
intention of selling or otherwise disposing of such shares; and (b) agrees to
have a restrictive legend placed upon the face and reverse of any certificates
evidencing such Units (or, if applicable, an
2.
<PAGE>
appropriate data entry made in the ownership records of the Company) setting
forth (i) any representations and undertakings which such Participant has given
to the Company or a reference thereto, and (ii) that, prior to effecting any
sale or other disposition of any such shares, the Participant must furnish to
the Company an opinion of counsel, satisfactory to the Company and its counsel,
to the effect that such sale or disposition will not violate the applicable
requirements of state and federal laws and regulatory agencies; provided,
however, that any such legend or data entry shall be removed when no longer
applicable. The inability of the Company to obtain, from any regulatory body
having jurisdiction, registration, qualification or other necessary
authorization, or the unavailability of any exemption from registration or
qualification obligation, deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder shall suspend the Company's
obligation to permit the exercise of any affected Warrant or to issue any Units
thereupon and shall relieve the Company of any liability in respect of the
nonissuance or sale of such Units as to which such requisite authority or
exemption shall not have been obtained. In event of such suspension, the
Expiration Date of the Warrants specified in Section 2 shall be extended until
the 30th day after the Company has given notice to the Registered Holder that
the Warrants may be exercised under the applicable securities laws.
Section 10. Nontransferability. An Option may not be sold, pledged,
------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or to a trust for the benefit of
the Participant or the Participant's spouse or issue. Any permitted transferee
shall be required prior to any transfer of an Option or shares of Common Stock
acquired pursuant to the exercise of an Option to execute a written undertaking
to be bound by the provisions of the applicable Option Agreement.
Section 11. Adjustments Upon Reorganization, Etc. Subject to Section
------------------------------------
14(b) hereof, if the outstanding shares of the Common Stock of the Company are
changed into, or exchanged for, a different number or kind of shares or
securities of the Company through any capital reorganization or
reclassification, or if the number of outstanding shares is changed through a
stock split or stock dividend, an appropriate adjustment shall be made by the
Committee in the number, kind or exercise price of shares as to which Options
may be granted under the Plan. A corresponding adjustment shall likewise be
made in the number, kind or exercise price of shares with respect to which
unexercised Options have theretofore been granted. Any such adjustment in an
outstanding Option, however, shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share covered by the Option. In making such
adjustments, or in determining that no such adjustments are necessary, the
Committee may rely upon the advice of counsel and accountants to the Company,
and the good faith determination of the Committee shall be final, conclusive and
binding. No fractional shares of stock shall be issued under the Plan on
account of any such adjustment.
The grant of an Option under the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications or changes
in its capital or business structures or to merge, consolidate, dissolve, or
liquidate or to sell or transfer all or any part of its business or assets.
Section 12. Option Agreement. Each Option granted under the Plan
----------------
shall be evidenced by a written nonqualified stock option agreement (an "Option
Agreement") executed by the Company and the Participant which (a) shall contain
each of the provisions and agreements herein specifically required to be
contained therein; (b) shall contain provisions which give the Company a right
of first refusal to purchase any Common Stock issued pursuant to the exercise of
Options which a Participant proposes to sell; (c) may contain provisions which
give certain drag-along rights; and (d) may contain such other terms and
conditions as the Committee deems desirable and which are not inconsistent with
the Plan.
3.
<PAGE>
Section 13. Rights as a Stockholder. A Participant or a permitted
-----------------------
transferee of a Participant shall have no rights as a stockholder with respect
to any shares covered by an Option until the date an entry evidencing such
ownership is made in the stock transfer books of the Company (the "Exercise
Date"). Except as otherwise provided in Section 11 hereof, no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the record date is
prior to the Exercise Date.
Section 14. Termination of Options.
----------------------
(a) Each Option shall terminate and expire, and shall no longer be
subject to exercise, as the Committee may determine in granting such Option, and
each Option granted under the Plan shall set forth a termination date thereof,
which shall be no later than ten (10) years from the date such Option is granted
subject to earlier termination as set forth in Section 7, Section 14(b) or
Section 15 hereof, or as otherwise set forth in each particular Option
Agreement. The termination of employment of a Participant for any reason shall
not accelerate or otherwise affect the number of shares with respect to which an
Option may be exercised; provided, however, that the Option may only be
exercised with respect to that number of shares which could have been purchased
under the Option had the Option been exercised by the Participant on the date of
such termination.
(b) Subject to Section 15 hereof, unless the Committee shall, in its
sole discretion, determine otherwise, upon (i) the dissolution, liquidation or
sale of all or substantially all of the business, properties and assets of the
Company, (ii) upon any reorganization, merger or consolidation in which the
Company does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities of
another corporation and/or other property in exchange for their capital stock of
the Company, or (iv) upon any acquisition by any person or group (as defined in
Section 13d of the Securities Act of 1934) of beneficial ownership of more than
fifty percent (50%) of the Company's then outstanding shares of Common Stock
(each of the events described in clauses (i), (ii), (iii) or (iv) is referred to
herein individually as an "Extraordinary Event"), the Plan and each outstanding
Option shall terminate. In such event each Participant shall have the right
until ten (10) days before the effective date of the Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then exercisable pursuant to the
provisions of said Option or Options and of Section 7 of the Plan.
In its sole and absolute discretion, the surviving entity (which may
be the Company) or the entity that has acquired all or substantially all of the
Company's assets (the "Surviving Entity") may, but shall not be so obligated,
tender to any Participant an option or options to purchase shares or equity
interests in such Surviving Entity, and such new option or options shall contain
such terms and provisions as shall be required to substantially preserve the
rights and benefits of any Option then outstanding under the Plan with any
reasonable changes to take into account the circumstances of the Surviving
Entity.
Section 15. Acceleration of Options. Notwithstanding the provisions
-----------------------
of Section 7 or Section 14 hereof, or any provision to the contrary contained in
a particular Option Agreement, the Committee, in its sole discretion, at any
time, or from time to time, may elect to accelerate the time at which all or any
portion of any Option then outstanding becomes exercisable. The decision by the
Committee to accelerate an Option or decline to accelerate an Option shall be
final, conclusive and binding. In the event of the acceleration of the
exercisability of Options as the result of a decision by the Committee pursuant
to this Section 15, each outstanding Option so accelerated shall be exercisable
for a period from and after the date of such acceleration and upon such other
terms and conditions as the Committee may determine in its sole discretion
provided that such terms and conditions (other than terms
4.
<PAGE>
and conditions relating solely to the acceleration of exercisability and the
related termination of an Option) may not adversely affect the rights of any
Participant without the consent of the Participant so adversely affected. Any
outstanding Option which has not been exercised by the holder at the end of such
stated period shall terminate automatically and become null and void.
Section 16. Withholding of Taxes. The Company, or a Subsidiary, as
--------------------
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiary) by the Participant
of the required withholding tax, as the Committee may determine; provided,
however, that, in the sole discretion of the Committee, the Participant may pay
such tax by reducing the number of shares of Common Stock issued upon exercise
of an Option (for which purpose such shares shall be valued at fair market value
as determined in good faith by the Committee, which determination shall be
final, conclusive and binding).
Section 17. Effectiveness and Termination of the Plan. The Plan
-----------------------------------------
shall be effective on the date on which it is adopted by the Board. The Plan
shall terminate at the earliest of the time when all shares of Common Stock
which may be issued hereunder have been so issued or at such other time as set
forth in Section 14(b) hereof; provided, however, that the Board may in its sole
discretion terminate the Plan at any other time. Subject to Section 14(b)
hereof, no such termination shall in any way affect any Option then outstanding.
Section 18. Time of Granting Options. The date of grant of an Option
------------------------
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.
Section 19. Amendment of Plan. The Committee may make such
-----------------
amendments to the Plan and, with the consent of each Participant affected, in
the terms and conditions of granted Options as it shall deem advisable,
including, without limitation, accelerating the time at which an Option may be
exercised. No amendment shall in any way adversely affect any Option then
outstanding, without the consent of the Participant so adversely affected.
Section 20. Transfers and Leaves of Absence. For purposes of the
-------------------------------
Plan, (a) a transfer of a Participant's employment, without an intervening
period, between the Company and a Subsidiary shall not be deemed a termination
of employment and (b) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of the Company (or a Subsidiary,
whichever is applicable) during such leave of absence.
Section 21. No Obligation to Exercise Option. The granting of an
--------------------------------
Option shall impose no obligation on the Participant to exercise such Option.
Section 22. Indemnification. In addition to such other rights of
----------------
indemnification as they may have as directors, the members of the Board or
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure
5.
<PAGE>
to act under or in connection with the Plan or any Option granted thereunder,
and against all amounts paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is not
entitled to indemnification under applicable law; provided that within sixty
(60) days after institution of any such action, suit or proceeding such
Committee member shall in writing offer the Company the opportunity, at the
Company's expense, to handle and defend the same.
Section 23. Governing Law. The Plan and any Option granted pursuant
-------------
to the Plan shall be construed under and governed by the laws of the State of
Minnesota without regard to conflict of law provisions thereof.
Section 24. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued relationship with, the Company
or any Subsidiary in favor of any Participant or limit the ability of the
Company or any Subsidiary to terminate, with or without cause, in its sole and
absolute discretion, the employment of, or relationship with, any Participant,
subject to the terms of any written employment or other agreement to which a
Participant is a party.
6.
<PAGE>
EXHIBIT 10.33
AMERICA'S FAVORITE CHICKEN COMPANY
NONQUALIFIED STOCK OPTION AGREEMENT - EXECUTIVE
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of ________________, 1996 by and between America's Favorite Chicken
Company, a Minnesota corporation (the "Company"), and ____________ ("Optionee")
pursuant to the Company's 1996 Nonqualified Stock Option Plan dated
_____________, 1996 (the "Plan").
R E C I T A L S:
- - - - - - - -
A. Optionee is an employee of the Company and/or of a direct or
indirect subsidiary of the Company (individually, a "Subsidiary," and
collectively, the "Subsidiaries") and the Company considers it desirable to give
Optionee an added incentive to advance the Company's interests.
B. The Company has determined to grant Optionee the right to
purchase certain stock of the Company pursuant to the terms and conditions of
this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the covenants hereinafter set
forth, and pursuant to the authority granted to the Committee (as defined in the
Plan) by the Board of Directors of the Company, the parties agree as follows:
1. Option; Number of Shares; Price. The Company hereby grants to
-------------------------------
Optionee the right (the "Option") to purchase up to a maximum of _______ shares
(the "Shares") of the Common Stock, $0.01 par value per share, of the Company
(the "Common Stock"), at a purchase price of $3.317 per share (the "Option
Price"), to be paid in accordance with Section 6 hereof. The Option and the
right to purchase all or any portion of the Shares is subject to the terms and
conditions stated in this Agreement and in the Plan, including, without
limitation, the provisions of Sections 4 and 11 of the Plan under which the
Option shall be subject to modification and Sections 14(b) and 15 of the Plan
and Sections 3 and 4 hereof pursuant to which the Option is subject to
acceleration and/or termination. It is intended that the Option will not
qualify for treatment as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercisability. Subject to Section 3 below, the Option shall
--------------
become exercisable as provided on Schedule A hereto.
----------
3. Term of Agreement. Except for the rights conferred upon the
-----------------
Company pursuant to Section 7 below, the Option, and Optionee's right to
exercise the Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Section 14(b) or Section 15 of the
Plan;
(b) the expiration of seven (7) years from the date hereof;
(c) 45 days after the date of termination of Optionee's
employment or other relationship with the Company and all of the Subsidiaries,
unless such termination results from Optionee's death or disability (within the
meaning of Section 22(e)(3) of the Code) or Optionee dies within 30 days after
the date of termination (other than for cause) of Optionee's employment or other
relationship with the Company and all of the Subsidiaries;
<PAGE>
(d) 180 days after the date of termination of Optionee's
employment or other relationship with the Company and all of the Subsidiaries,
if such termination results from Optionee's death or disability (within the
meaning of Section 22(e)(3) of the Code) or Optionee dies within 30 days after
the date of termination (other than for cause) of Optionee's employment or other
relationship with the Company and all of the Subsidiaries; or
(e) on the date of termination of Optionee's employment or other
relationship with the Company and all of the Subsidiaries, if such termination
was for cause (as determined in good faith by the Board of Directors of the
Company (the "Board")).
4. Termination of Employment or Other Relationship. The termination
-----------------------------------------------
for any reason of Optionee's employment or other relationship with the Company
and all of the Subsidiaries shall not accelerate the time at with the Option
becomes exercisable or affect the number of Shares with respect to which the
Option may be exercised. The Option may only be exercised with respect to that
number of Shares which could have been purchased under the Option had the Option
been exercised by Optionee on the date of such termination.
5. Death of Optionee; No Assignment. The rights of Optionee under
--------------------------------
this Agreement may not be assigned or transferred except by will or by the laws
of descent or distribution, and may be exercised during the lifetime of Optionee
only by such Optionee; provided, however, that in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of Optionee, a designee of
Optionee, or if Optionee has not designated anyone, his or her legal
representative, may exercise the Option on behalf of Optionee (provided the
Option would have been exercisable by Optionee) until the right to exercise the
Option expires pursuant to Section 3 hereof. Any attempt to sell, pledge,
assign, hypothecate, transfer or otherwise dispose of the Option in
contravention of this Agreement or the Plan shall be void and shall have no
effect. If Optionee should die while Optionee is engaged in an employment or
other relationship with the Company and/or any Subsidiary, and provided
Optionee's rights hereunder shall have become exercisable, in whole or in part,
pursuant to Section 2 hereof, Optionee's legal representative, Optionee's
legatee or the person who acquired the right to exercise the Option by reason of
the death of Optionee (individually, a "Successor") shall succeed to Optionee's
rights under this Agreement. After the death of Optionee, only a Successor may
exercise the Option.
6. Exercise of Option. On or after time at which the Option becomes
------------------
exercisable in accordance with Section 2 hereof and until termination of the
Option in accordance with Section 3 hereof, the Option may be exercised by
Optionee (or such other person specified in Section 5 hereof) to the extent
exercisable as determined under Section 2 hereof, upon delivery of the following
to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement
and states the number of Shares (which may not be less than 100, or all of the
Shares if less than 100 Shares then remain covered by the Option) then being
purchased;
(b) a check, cash or any combination thereof in the amount of the
Option Price (or payment of the aggregate Option Price in such other form of
lawful consideration as the Committee may approve from time to time under the
provisions of Section 8 of the Plan) or payment of the Option Price by (i) the
assignment and transfer by Optionee to the Company of outstanding shares of
Common Stock theretofore held by Optionee or (ii) the surrender of that number
of exercisable Options necessary (based on the amount that the aggregate fair
market value of the Shares covered by the Options being surrendered exceeds the
aggregate Option Price with respect to such Shares), to pay the Option Price
with respect to those Options being exercised. Such shares of Common Stock
delivered or Shares covered by
2.
<PAGE>
Options surrendered in payment of the Option Price shall be valued at fair
market value as determined by the Committee in good faith, which determination
shall be final, conclusive and binding;
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any, recognized
by Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Optionee elects to pay such tax by reducing the number of shares of
Common Stock issued upon exercise of the Option (for which purpose such shares
shall be valued at fair market value as determined in good faith by the
Committee, which determination shall be final, conclusive and binding) or unless
the Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other income paid to Optionee by the
Company or any Subsidiary, provided any arrangement set forth in this
parenthetical shall satisfy the requirements of applicable tax laws); and
(d) a written representation and undertaking, if requested by the
Company pursuant to Section 8(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
Successor, as the case may be, and such other agreements, representations and
undertakings as described in the Plan.
7. Repurchase Option Upon Termination. In the event that Optionee's
----------------------------------
employment or other relationship with the Company and all of the Subsidiaries
terminates for any reason on or prior to the fifth anniversary of the date of
grant of this Option (including, without limitation, by reason of Optionee's
death, disability, retirement, voluntary resignation or dismissal by the Company
or any of its Subsidiaries, with or without cause), the Company shall have the
option (the "Repurchase Option") to purchase from Optionee all or any portion of
the Shares acquired by Optionee pursuant to this Option for a period of six
months after the effective date of such termination (the effective date of
termination is hereinafter referred to as the "Termination Date"). The purchase
price (the "Repurchase Price") for each Share to be purchased pursuant to the
Repurchase Option shall equal the greater of the Option Price and the Fair
Market Value (as hereinafter defined) thereof (subject to adjustment as set
forth herein). The "Fair Market Value" of a Share shall be the fair market
value of a Share as of the Termination Date, as determined by the Board, acting
in good faith and based upon the best available evidence, which determination
shall be final and binding. The Repurchase Price for any Shares to be purchased
pursuant to the Repurchase Option shall be increased or decreased appropriately
to reflect any distribution of Shares of capital stock or other securities of
the Company or any successor or assign of the Company which is made in respect
of, in exchange for or in substitution of the Shares by reason of any stock
dividend, stock split, reverse split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. The Repurchase Option
shall be exercised by the Company by delivery to Optionee, within the six-month
period specified above, of (a) a written notice specifying the number of Shares
to be purchased and (b) a check in the amount of the Repurchase Price,
calculated as provided in this Section 7, for all Shares to be purchased. The
Repurchase Option shall terminate upon (i) the Company's initial underwritten
public offering of shares of Common Stock registered under the Securities Act of
1933, as amended, on form S-1, that results in gross proceeds to the Company in
excess of $25 million from the sale of Common Stock, or (ii) the acquisition by
any person or group (as defined in Section 13d of the Securities Act of 1934) of
beneficial ownership of more than fifty percent (50%) of the Company's then
outstanding shares of Common Stock.
8. Representations and Warranties of Optionee.
------------------------------------------
(a) Optionee represents and warrants that the Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
3.
<PAGE>
(b) Optionee acknowledges that the Company may issue Shares upon
the exercise of the Option without registering such Common Stock under the
Securities Act on the basis of certain exemptions from such registration
requirement. Accordingly, Optionee agrees that Optionee's exercise of the Option
may be expressly conditioned upon Optionee's delivery to the Company of such
representations and undertakings as the Company may reasonably require in order
to secure the availability of such exemptions, including a representation that
Optionee is acquiring the Shares for investment and not with a present intention
of selling or otherwise disposing of such Shares. Optionee acknowledges that,
because Shares received upon exercise of an Option may be unregistered, Optionee
may be required to hold the Shares indefinitely unless they are subsequently
registered for resale under the Securities Act or an exemption from such
registration is available.
(c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.
9. No Rights as Stockholder. Optionee shall have no rights as a
------------------------
stockholder of any shares of Common Stock covered by the Option until the date
an entry evidencing such ownership is made in the stock transfer books of the
Company (the "Exercise Date"). The Company will make no adjustment for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the Exercise Date.
10. Limitation of Company's Liability for Nonissuance. The inability
-------------------------------------------------
of the Company to obtain, from any regulatory body having jurisdiction,
registration, qualification or other necessary authorization, or the
unavailability of an exemption from registration or qualification obligation
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares of its Common Stock hereunder and under the Plan shall suspend the
Company's obligation to permit the exercise of any affected Option or to issue
any Shares thereupon and shall relieve the Company of any liability in respect
of the nonissuance or sale of such Shares as to which such requisite authority
or exemption shall not have been obtained. In the event that exercisability of
an Option shall be suspended as provided in this Section 10, the term of such
Option shall be extended until the thirtieth (30th) day after the date on which
the Company shall have given notice that such Option may be exercised; provided
that in no event may an Option be exercised after (i) the expiration, if
applicable, of the post-employment exercise periods specified in Section 3 of
this Agreement, unless Optionee shall have delivered written notice of exercise
pursuant to Section 6(a) of this Agreement prior to the date of such expiration,
or (ii) the seventh anniversary of the date of its grant.
11. This Agreement Subject to Plan. This Agreement is made under the
------------------------------
provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The good faith interpretation of the Committee of any provision
of the Plan, the Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.
12. Restrictive Legends. Optionee hereby acknowledges that federal
-------------------
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
shall be removed when no longer applicable.
4.
<PAGE>
13. Notices. All notices, requests and other communications
-------
hereunder shall be in writing and, if given by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
given by personal delivery, shall be deemed to have been validly served, given
or delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):
If to the Company:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attn: Legal Department
If to Optionee, at the address appearing on the signature page
hereof.
14. Not an Employment or Other Agreement. Nothing contained in this
------------------------------------
Agreement shall confer, intend to confer or imply any rights to an employment or
other relationship or rights to a continued employment by, or rights to any
other relationship with, the Company and/or any Subsidiary in favor of Optionee
or limit the ability of the Company and/or any Subsidiary to terminate, with or
without cause, in its sole and absolute discretion, the employment of, or other
relationship with, Optionee, subject to the terms of any written employment or
other agreement to which Optionee is a party.
15. Governing Law. This Agreement shall be construed under and
-------------
governed by the laws of the State of Delaware without regard to the conflict of
law provisions thereof.
16. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and both of which together shall be
deemed one Agreement.
17. RIGHTS IN OTHER CAPACITIES; OPTIONEE'S REVIEW OF AGREEMENT.
----------------------------------------------------------
(a) THIS AGREEMENT (AND THE STOCK OPTION EVIDENCED HEREBY) SHALL
NOT GIVE THE OPTIONEE ANY RIGHT TO EMPLOYMENT OR CONTINUED EMPLOYMENT BY THE
COMPANY (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE
COMPANY) AND THE COMPANY (AND ANY SUCH AFFILIATE) MAY TERMINATE OPTIONEE'S
EMPLOYMENT AND OTHERWISE DEAL WITH OPTIONEE AS AN EMPLOYEE WITHOUT REGARD TO THE
EFFECT ANY SUCH ACTION MAY HAVE ON OPTIONEE'S RIGHTS UNDER THIS AGREEMENT.
OPTIONEE REPRESENTS THAT, IF OPTIONEE AT ANY TIME ACQUIRES SHARES OF THE COMPANY
PURSUANT TO EXERCISE OF HIS OR HER OPTIONS UNDER THIS AGREEMENT, OPTIONEE WILL
BE ACQUIRING THE SHARES FOR THEIR POTENTIAL AS AN EQUITY INVESTMENT AND WITHOUT
ANY EXPECTATION UNDER SECTION 302A.751 OF THE MINNESOTA BUSINESS CORPORATION ACT
OR OTHERWISE THAT THE OWNERSHIP OF THE SHARES WILL ENTITLE OPTIONEE TO ANY
RIGHTS AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY (OR OF ANY SUCH
SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY) THAT WOULD NOT EXIST IF OPTIONEE
WERE NOT A SHAREHOLDER. OPTIONEE FURTHER AGREES THAT NO CHANGE IN HIS OR HER
EXPECTATIONS CONCERNING EMPLOYMENT OR CONCERNING HIS OR HER PARTICIPATION AS AN
OFFICER OR DIRECTOR, IF ANY, WILL HAVE A REASONABLE BASIS UNLESS SET FORTH IN A
WRITTEN AGREEMENT EXPRESSLY GIVING OPTIONEE ADDITIONAL
5.
<PAGE>
RIGHTS AS TO SUCH MATTERS. THE COMPANY HEREBY ADVISES OPTIONEE THAT THE COMPANY
IS GRANTING STOCK OPTIONS TO OPTIONEE IN RELIANCE ON THE FOREGOING
REPRESENTATIONS OF OPTIONEE AND IN THE EXPECTATION THAT OPTIONEE WILL NOT HAVE
ANY RIGHT TO EMPLOYMENT BY THE COMPANY (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY
OR OTHER AFFILIATE OF THE COMPANY) OR TO CONTINUE TO BE AN OFFICER OR DIRECTOR
OF THE COMPANY (OR OF ANY SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE OF
OPTIONEE'S OWNERSHIP OF ANY SHARES, AND THAT THE COMPANY WOULD NOT GRANT THE
OPTION OR ISSUE SHARES TO OPTIONEE IF OPTIONEE HAD ANY CONTRARY EXPECTATIONS.
(b) OPTIONEE CONFIRMS THAT OPTIONEE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.
THE COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: ___________________________
Name: Frank J. Belatti
Title: Chief Executive Officer
OPTIONEE:
________________________________
ADDRESS:
________________________________
________________________________
________________________________
6.
<PAGE>
Schedule A
SCHEDULE OF EXERCISABILITY
______________________________________________________________
Twenty-five percent (25%) of the shares of Common Stock that are
subject to the Option shall become exercisable on the first anniversary of the
date hereof, and an additional twenty-five percent (25%) of the shares of Common
Stock that are subject to the Option shall become exercisable on each of the
second, third and fourth anniversaries of the date hereof.
<PAGE>
EXHIBIT 10.34
AMERICA'S FAVORITE CHICKEN COMPANY
NONQUALIFIED STOCK OPTION AGREEMENT - GENERAL
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is entered into
as of ________________, 1996 by and between America's Favorite Chicken Company,
a Minnesota corporation (the "Company"), and ____________ ("Optionee") pursuant
to the Company's 1996 Nonqualified Stock Option Plan dated _____________, 1996
(the "Plan").
R E C I T A L S:
- - - - - - - -
A. Optionee is an employee of the Company and/or of a direct or indirect
subsidiary of the Company (individually, a "Subsidiary," and collectively, the
"Subsidiaries") and the Company considers it desirable to give Optionee an added
incentive to advance the Company's interests.
B. The Company has determined to grant Optionee the right to purchase
certain stock of the Company pursuant to the terms and conditions of this
Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
and pursuant to the authority granted to the Committee (as defined in the Plan)
by the Board of Directors of the Company, the parties agree as follows:
1. Option; Number of Shares; Price. The Company hereby grants to
-------------------------------
Optionee the right (the "Option") to purchase up to a maximum of _______ shares
(the "Shares") of the Common Stock, $0.01 par value per share, of the Company
(the "Common Stock"), at a purchase price of $3.317 per share (the "Option
Price"), to be paid in accordance with Section 6 hereof. The Option and the
right to purchase all or any portion of the Shares is subject to the terms and
conditions stated in this Agreement and in the Plan, including, without
limitation, the provisions of Sections 4 and 11 of the Plan under which the
Option shall be subject to modification and Sections 14(b) and 15 of the Plan
and Sections 3 and 4 hereof pursuant to which the Option is subject to
acceleration and/or termination. It is intended that the Option will not
qualify for treatment as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercisability. Subject to Section 3 below, the Option shall become
--------------
exercisable as provided on Schedule A hereto.
----------
3. Term of Agreement. Except for the rights conferred upon the Company
-----------------
pursuant to Sections 8 and 9 below, the Option, and Optionee's right to exercise
the Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Section 14(b) or Section 15 of the Plan;
(b) the expiration of seven (7) years from the date hereof;
(c) 45 days after the date of termination of Optionee's employment or
other relationship with the Company and all of the Subsidiaries, unless such
termination results from Optionee's death or disability (within the meaning of
Section 22(e)(3) of the Code) or Optionee dies within 30 days after the date of
termination (other than for cause) of Optionee's employment or other
relationship with the Company and all of the Subsidiaries;
<PAGE>
(d) 180 days after the date of termination of Optionee's employment
or other relationship with the Company and all of the Subsidiaries, if such
termination results from Optionee's death or disability (within the meaning of
Section 22(e)(3) of the Code) or Optionee dies within 30 days after the date of
termination (other than for cause) of Optionee's employment or other
relationship with the Company and all of the Subsidiaries; or
(e) on the date of termination of Optionee's employment or other
relationship with the Company and all of the Subsidiaries, if such termination
was for cause (as determined in good faith by the Board of Directors of the
Company (the "Board")).
4. Termination of Employment or Other Relationship. The termination for
-----------------------------------------------
any reason of Optionee's employment or other relationship with the Company and
all of the Subsidiaries shall not accelerate the time at with the Option becomes
exercisable or affect the number of Shares with respect to which the Option may
be exercised. The Option may only be exercised with respect to that number of
Shares which could have been purchased under the Option had the Option been
exercised by Optionee on the date of such termination.
5. Death of Optionee; No Assignment. The rights of Optionee under this
--------------------------------
Agreement may not be assigned or transferred except by will or by the laws of
descent or distribution, and may be exercised during the lifetime of Optionee
only by such Optionee; provided, however, that in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of Optionee, a designee of
Optionee, or if Optionee has not designated anyone, his or her legal
representative, may exercise the Option on behalf of Optionee (provided the
Option would have been exercisable by Optionee) until the right to exercise the
Option expires pursuant to Section 3 hereof. Any attempt to sell, pledge,
assign, hypothecate, transfer or otherwise dispose of the Option in
contravention of this Agreement or the Plan shall be void and shall have no
effect. If Optionee should die while Optionee is engaged in an employment or
other relationship with the Company and/or any Subsidiary, and provided
Optionee's rights hereunder shall have become exercisable, in whole or in part,
pursuant to Section 2 hereof, Optionee's legal representative, Optionee's
legatee or the person who acquired the right to exercise the Option by reason of
the death of Optionee (individually, a "Successor") shall succeed to Optionee's
rights under this Agreement. After the death of Optionee, only a Successor may
exercise the Option.
6. Exercise of Option. On or after time at which the Option becomes
------------------
exercisable in accordance with Section 2 hereof and until termination of the
Option in accordance with Section 3 hereof, the Option may be exercised by
Optionee (or such other person specified in Section 5 hereof) to the extent
exercisable as determined under Section 2 hereof, upon delivery of the following
to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and
states the number of Shares (which may not be less than 100, or all of the
Shares if less than 100 Shares then remain covered by the Option) then being
purchased;
(b) a check, cash or any combination thereof in the amount of the
Option Price (or payment of the aggregate Option Price in such other form of
lawful consideration as the Committee may approve from time to time under the
provisions of Section 8 of the Plan) or payment of the Option Price by (i) the
assignment and transfer by Optionee to the Company of outstanding shares of
Common Stock theretofore held by Optionee or (ii) the surrender of that number
of exercisable Options necessary (based on the amount that the aggregate fair
market value of the Shares covered by the Options being surrendered exceeds the
aggregate Option Price with respect to such Shares), to pay the Option Price
with respect to those Options being exercised. Such shares of Common Stock
delivered or Shares covered by
2.
<PAGE>
Options surrendered in payment of the Option Price shall be valued at fair
market value as determined by the Committee in good faith, which determination
shall be final, conclusive and binding;
(c) a check or cash in the amount reasonably requested by the Company
to satisfy the Company's withholding obligations under federal, state or other
applicable tax laws with respect to the taxable income, if any, recognized by
Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Optionee elects to pay such tax by reduc ing the number of shares of
Common Stock issued upon exercise of the Option (for which purpose such shares
shall be valued at fair market value as determined in good faith by the
Committee, which determination shall be final, conclusive and binding) or unless
the Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other income paid to Optionee by the
Company or any Subsidiary, provided any arrangement set forth in this
parenthetical shall satisfy the requirements of applicable tax laws); and
(d) a written representation and undertaking, if requested by the
Company pursuant to Section 11(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
Successor, as the case may be, and such other agreements, representations and
undertakings as described in the Plan.
7. Restriction on Transfer of Shares Acquired Upon Exercise of Option.
------------------------------------------------------------------
(a) Except as otherwise provided in paragraph (b) below, Optionee may
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of
(collectively, "Transfer") any of the Shares acquired upon exercise of the
Option, or any right, title or interest therein, prior to the fifth anniversary
of the date of grant of the Option and, thereafter, any Transfer must be in
compliance with Section 9 hereof. Any purported Transfer or Transfers
(including involuntary Transfers initiated by operation of legal process), of
any of the Shares or any right, title or interest therein, except in strict
compliance with the terms and conditions of this Agreement, shall be null and
void.
(b) Optionee may, at any time, Transfer any or all of the Shares: (i)
inter vivos to Optionee's spouse or issue, a trust for their or Optionee's
benefit or pursuant to any will or testamentary trust or (ii) upon Optionee's
death, to any person in accordance with the laws of descent and/or testamentary
distribution (such persons are collectively referred to herein as "Permitted
Transferees"). Notwithstanding the foregoing in this Section 7(b), Shares shall
not be Transferred pursuant to this Section 7(b) until the Permitted Transferee
executes a valid undertaking, in form and substance reasonably satisfactory to
the Company, to the effect that the Permitted Transferee and the Shares so
Transferred shall thereafter remain subject to all of the provisions of this
Agreement (including the Repurchase Option (as defined in Section 8 hereof)), as
though the Permitted Transferee were a party to this Agreement, bound in every
respect in the same way as Optionee. Transfers made in accordance with this
Section 7(b) shall not be subject to the provisions of Section 9 of this
Agreement, provided that any Shares transferred pursuant to this Section 5 shall
remain subject to the provisions of Section 4 of this Agreement.
(c) The restrictions on transfer contained in this Section 7 shall
terminate upon the Company's initial underwritten public offering of shares of
Common Stock registered under the Securities Act of 1933, as amended, on form S-
1, that results in gross proceeds to the Company in excess of $25 million from
the sale of Common Stock (an "Initial Public Offering").
8. Repurchase Option Upon Termination. In the event that Optionee's
----------------------------------
employment or other relationship with the Company and all of the Subsidiaries
terminates for any reason on or prior to the fifth anniversary of the date of
grant of this Option (including, without limitation, by reason of Optionee's
death, disability, retirement, voluntary resignation or dismissal by the Company
or any of its Subsidiaries, with
3.
<PAGE>
or without cause), the Company shall have the option (the "Repurchase Option")
to purchase from Optionee all or any portion of the Shares acquired by Optionee
pursuant to this Option for a period of six months after the effective date of
such termination (the effective date of termination is hereinafter referred to
as the "Termination Date"). The purchase price (the "Repurchase Price") for each
Share to be purchased pursuant to the Repurchase Option shall equal the greater
of the Option Price and the Fair Market Value (as hereinafter defined) thereof
(subject to adjustment as set forth herein). The "Fair Market Value" of a Share
shall be the fair market value of a Share as of the Termination Date, as
determined by the Board, acting in good faith and based upon the best available
evidence, which determination shall be final and binding. The Repurchase Price
for any Shares to be purchased pursuant to the Repurchase Option shall be
increased or decreased appropriately to reflect any distribution of Shares of
capital stock or other securities of the Company or any successor or assign of
the Company which is made in respect of, in exchange for or in substitution of
the Shares by reason of any stock dividend, stock split, reverse split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. The Repurchase Option shall be exercised by the Company by delivery
to Optionee, within the six-month period specified above, of (a) a written
notice specifying the number of Shares to be purchased and (b) a check in the
amount of the Repurchase Price, calculated as provided in this Section 8, for
all Shares to be purchased. The Repurchase Option shall terminate upon (i) an
Initial Public Offering or (ii) the acquisition by any person or group (as
defined in Section 13d of the Securities Act of 1934) of beneficial ownership of
more than fifty percent (50%) of the Company's then outstanding shares of Common
Stock.
9. Right of First Refusal; Obligation to Sell
------------------------------------------
(a) At any time on or after the fifth anniversary of the Closing Date
and after the Option shall have become exercisable and Optionee shall have
exercised all or any portion of the Option in accordance with its terms,
Optionee may sell for cash (and only for such form of consideration) any or all
of the Shares to any third party subject to the provisions of this Section 9(a).
Prior to any such intended sale, Optionee shall first give at least 30 days'
advance written notice (the "Notice") to the Company specifying (i) Optionee's
bona fide intention to sell such Shares; (ii) the name(s) and address(es) of the
proposed purchaser(s); (iii) the number of Shares Optionee proposes to sell (the
"Offered Shares"); (iv) the price for which Optionee proposes to sell the
Offered Shares; and (v) all other material terms and conditions of the proposed
sale. Within 15 days of receipt of the Notice, the Company or its nominee(s) or
assignee(s) may elect to purchase any or all of the Offered Shares at the price
and on the terms and conditions set forth in the Notice by delivery of written
notice of such election to Optionee, which notice shall specify in reasonable
detail any proposed payment to any other person of any portion of the purchase
price as specified in the following sentence; provided, however, that if the
Company designates any assignee or nominee as the purchaser of such Shares, it
shall provide Optionee with reasonable assurance that such sale complies with
applicable federal and state securities laws. Within 15 days after delivery of
such notice to Optionee, the Company or its nominee(s) or assignee(s) shall
deliver to Optionee a check, payable to Optionee or to such person as Optionee
shall request, in the amount of the purchase price of the Offered Shares; pro
vided, however, that in the event that the Shares to be purchased have been
pledged to secure any indebtedness of Optionee to the Company or its
assignee(s), the Company may retain or deliver to its assignee(s) (as the case
may be) any portion of such purchase price, and/or direct its nominee(s) or
assignee(s) to deliver to the Company or its assignee(s), as the case may be,
any portion of such purchase price, necessary to satisfy such indebtedness. If
the Company or its nominee(s) or assignee(s) do not elect to purchase all of the
Offered Shares, Optionee shall be entitled to sell all or the remaining portion
of the Offered Shares to the purchaser(s) named in the Notice at the price
specified in the Notice or at a higher price and on the terms and conditions set
forth in the Notice; provided, however, that such sale must be consummated
within 90 days from the date of the Notice and any proposed sale after such 90-
day period may be made only by again complying with the procedures set forth in
this Section 9(a).
4.
<PAGE>
(b) If FS Equity Partners III, L.P., a Delaware limited partnership,
and FS Equity Partners International, L.P., a Delaware limited partnership
(collectively, "Equity Partners"), find a third party buyer (other than an
affiliate of Equity Partners) for all of the shares of Common Stock held by
Equity Partners, then at the request of the Company or Equity Partners the
Optionee shall sell all of his or her Options and/or Shares on the same terms
and conditions as apply to the sale by Equity Partners of its shares of Common
Stock (in the case of Options, deducting the exercise price of such Options from
the consideration to be received for shares of Common Stock; if the exercise
price of such Options is greater than the consideration to be received, such
Options shall be cancelled without any payment to the Optionee). The obligation
of Optionee under this Section 9(b) shall terminate upon an Initial Public
Offering or in the event that Equity Partners hold in the aggregate a number of
shares of Common Stock which represents less than 33-1/3% of the total number of
shares of Common Stock outstanding at any time.
(c) The rights provided the Company and its nominee(s) and
assignee(s) under Section 9(a) hereof shall terminate (i) with respect to all
Options and Shares upon an Initial Public Offering, or upon the acquisition by
any person or group (as defined in Section 13d of the Securities Act of 1934) of
beneficial ownership of more than fifty percent (50%) of the Company's then
outstanding shares of Common Stock, or (ii) upon a sale of the Shares to a third
party pursuant to Section 9(a) hereof, with respect to the Shares sold.
(d) The Optionee agrees to consent to any sale, transfer,
reorganization, exchange, merger, combination or other form of transaction
described in Section 9(b) and to execute such agreements, powers of attorney,
voting proxies or other documents and instruments as may be necessary or
desirable to consummate such sale, transfer, reorganization, exchange, merger,
combination or other form of transaction. The Optionee further agrees to timely
take such other actions as the Company or Equity Partners may reasonably request
in connection with the approval of the consummation of such sale, transfer,
reorganization, exchange, merger, combination or other form of transaction,
including voting as a stockholder to approve any such sale, transfer,
reorganization, exchange, merger, combination or other form of transaction.
(e) The obligations of the Optionee pursuant to this Section 9 shall
be binding on any transferee of any of the Options or the Shares and any
transfer of any of the Options or Shares shall be void unless a written
commitment to be bound by such provisions from such transferee is delivered to
the Company and Equity Partners prior to any transfer. The obligations of the
Optionee pursuant to this Section 9 shall apply to any securities received in
substitution or exchange for the Options or the Shares, including (without
limitation) pursuant to Section 11 of the Plan.
10. Obligations of Equity Partners. If Equity Partners find a third-party
------------------------------
buyer (other than an affiliate of Equity Partners), for all or part of the
shares of Common Stock held by Equity Partners (whether such sale is by way of
purchase, exchange, merger or other form of transaction), the Employee shall
have the right to sell, on the terms set forth in a written notice (the
"Offering Notice") delivered by Equity Partners to the Employee describing the
terms of the proposed sale (including the minimum sale price for the shares of
Common Stock that Equity Partners plan to sell), that amount of his or her
Shares which constitute the same percentage of his or her Shares as the
percentage of Common Stock sold by Equity Partners, in the aggregate. Each such
right shall be exercisable by delivering written notice to Equity Partners
within 15 days after receipt of the Offering Notice. Failure to exercise such
right within such 15-day period shall be regarded as a waiver of such rights.
The obligations of Equity Partners under this Section 10 shall terminate upon an
Initial Public Offering.
5.
<PAGE>
11. Representations and Warranties of Optionee.
------------------------------------------
(a) Optionee represents and warrants that the Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
(b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Common Stock under the
Securities Act on the basis of certain exemptions from such registration
requirement. Accordingly, Optionee agrees that Optionee's exercise of the
Option may be expressly conditioned upon Optionee's delivery to the Company of
such representations and undertakings as the Company may reasonably require in
order to secure the availability of such exemptions, including a representation
that Optionee is acquiring the Shares for investment and not with a present
intention of selling or otherwise disposing of such Shares. Optionee
acknowledges that, because Shares received upon exercise of an Option may be
unregistered, Optionee may be required to hold the Shares indefinitely unless
they are subsequently registered for resale under the Securities Act or an
exemption from such registration is available.
(c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.
12. No Rights as Stockholder. Optionee shall have no rights as a
------------------------
stockholder of any shares of Common Stock covered by the Option until the date
an entry evidencing such ownership is made in the stock transfer books of the
Company (the "Exercise Date"). The Company will make no adjustment for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the Exercise Date.
13. Limitation of Company's Liability for Nonissuance. The inability of
-------------------------------------------------
the Company to obtain, from any regulatory body having jurisdiction,
registration, qualification or other necessary authorization, or the
unavailability of an exemption from registration or qualification obligation
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares of its Common Stock hereunder and under the Plan shall suspend the
Company's obligation to permit the exercise of any affected Option or to issue
any Shares thereupon and shall relieve the Company of any liability in respect
of the nonissuance or sale of such Shares as to which such requisite authority
or exemption shall not have been obtained. In the event that exercisability of
an Option shall be suspended as provided in this Section 13, the term of such
Option shall be extended until the thirtieth (30th) day after the date on which
the Company shall have given notice that such Option may be exercised; provided
that in no event may an Option be exercised after (i) the expiration, if
applicable, of the post-employment exercise periods specified in Section 3 of
this Agreement, unless Optionee shall have delivered written notice of exercise
pursuant to Section 6(a) of this Agreement prior to the date of such expiration,
or (ii) the seventh anniversary of the date of its grant.
14. This Agreement Subject to Plan. This Agreement is made under the
------------------------------
provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The good faith interpretation of the Committee of any provision
of the Plan, the Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.
6.
<PAGE>
15. Restrictive Legends. Optionee hereby acknowledges that federal
-------------------
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
shall be removed when no longer applicable.
16. Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, if given by telegram, telecopy or telex, shall be
deemed to have been validly served, given or delivered when sent, if given by
personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):
If to the Company:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attn: Legal Department
If to Optionee, at the address appearing on the signature page hereof.
17. Not an Employment or Other Agreement. Nothing contained in this
------------------------------------
Agreement shall confer, intend to confer or imply any rights to an employment or
other relationship or rights to a continued employment by, or rights to any
other relationship with, the Company and/or any Subsidiary in favor of Optionee
or limit the ability of the Company and/or any Subsidiary to terminate, with or
without cause, in its sole and absolute discretion, the employment of, or other
relationship with, Optionee, subject to the terms of any written employment or
other agreement to which Optionee is a party.
18. Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Delaware without regard to the conflict of law
provisions thereof.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and both of which together shall be deemed one
Agreement.
20. RIGHTS IN OTHER CAPACITIES; OPTIONEE'S REVIEW OF AGREEMENT.
----------------------------------------------------------
(a) THIS AGREEMENT (AND THE STOCK OPTION EVIDENCED HEREBY) SHALL NOT
GIVE THE OPTIONEE ANY RIGHT TO EMPLOYMENT OR CONTINUED EMPLOYMENT BY THE COMPANY
(OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY) AND
THE COMPANY (AND ANY SUCH AFFILIATE) MAY TERMINATE OPTIONEE'S EMPLOYMENT AND
OTHERWISE DEAL WITH OPTIONEE AS AN EMPLOYEE WITHOUT REGARD TO THE EFFECT ANY
SUCH ACTION MAY HAVE ON OPTIONEE'S RIGHTS UNDER THIS AGREEMENT. OPTIONEE
REPRESENTS THAT, IF OPTIONEE AT ANY TIME ACQUIRES SHARES OF THE COMPANY PURSUANT
TO EXERCISE OF HIS OR HER OPTIONS UNDER THIS AGREEMENT, OPTIONEE WILL BE
ACQUIRING THE SHARES FOR THEIR POTENTIAL AS AN EQUITY INVESTMENT AND WITHOUT ANY
EXPECTATION UNDER SECTION 302A.751 OF THE MINNESOTA BUSINESS CORPORATION ACT
7.
<PAGE>
OR OTHERWISE THAT THE OWNERSHIP OF THE SHARES WILL ENTITLE OPTIONEE TO ANY
RIGHTS AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY (OR OF ANY SUCH
SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY) THAT WOULD NOT EXIST IF OPTIONEE
WERE NOT A SHAREHOLDER. OPTIONEE FURTHER AGREES THAT NO CHANGE IN HIS OR HER
EXPECTATIONS CONCERNING EMPLOYMENT OR CONCERNING HIS OR HER PARTICIPATION AS AN
OFFICER OR DIRECTOR, IF ANY, WILL HAVE A REASONABLE BASIS UNLESS SET FORTH IN A
WRITTEN AGREEMENT EXPRESSLY GIVING OPTIONEE ADDITIONAL RIGHTS AS TO SUCH
MATTERS. THE COMPANY HEREBY ADVISES OPTIONEE THAT THE COMPANY IS GRANTING STOCK
OPTIONS TO OPTIONEE IN RELIANCE ON THE FOREGOING REPRESENTATIONS OF OPTIONEE AND
IN THE EXPECTATION THAT OPTIONEE WILL NOT HAVE ANY RIGHT TO EMPLOYMENT BY THE
COMPANY (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE
COMPANY) OR TO CONTINUE TO BE AN OFFICER OR DIRECTOR OF THE COMPANY (OR OF ANY
SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE OF OPTIONEE'S OWNERSHIP OF ANY
SHARES, AND THAT THE COMPANY WOULD NOT GRANT THE OPTION OR ISSUE SHARES TO
OPTIONEE IF OPTIONEE HAD ANY CONTRARY EXPECTATIONS.
(b) OPTIONEE CONFIRMS THAT OPTIONEE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT.
IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
as of the date first above written.
THE COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: ___________________________
Name: Frank J. Belatti
Title: Chief Executive Officer
OPTIONEE:
______________________________
ADDRESS:
______________________________
______________________________
______________________________
8.
<PAGE>
With respect to Section 10 only:
EQUITY PARTNERS:
FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: ________________________________
Name:
Title:
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: ________________________________
Name:
Title:
9.
<PAGE>
Schedule A
SCHEDULE OF EXERCISABILITY
______________________________________________________________
Twenty-five percent (25%) of the shares of Common Stock that are
subject to the Option shall become exercisable on the first anniversary of the
date hereof, and an additional twenty-five percent (25%) of the shares of Common
Stock that are subject to the Option shall become exercisable on each of the
second, third and fourth anniversaries of the date hereof.
10.
<PAGE>
EXHIBIT 10.35
AMERICA'S FAVORITE CHICKEN COMPANY
1996 EMPLOYEE STOCK BONUS PLAN - EXECUTIVE
Section 1. Description of Plan. This is the 1996 Employee Stock Bonus
-------------------
Plan, dated April 11, 1996 (the "Plan"), of America's Favorite Chicken
Company, a Minnesota corporation (the "Company"). Under the Plan, officers, key
employees and certain consultants of the Company or any of the directly or
indirectly owned subsidiaries of the Company or any such Subsidiary which may be
formed in the future (individually, a "Subsidiary," and collectively, the
"Subsidiaries"), to be selected as set forth below, may be issued shares of the
Common Stock, $0.01 par value per share, of the Company ("Shares").
Section 2. Purpose of Plan. The purpose of the Plan and the issuance
---------------
of Shares to specified persons is to further the growth, development and
financial success of the Company and the Subsidiaries by providing additional
incentives to officers, key employees, and certain consultants. By granting
such persons Shares, the Company can ensure that such persons will themselves
benefit directly from the Company's and the Subsidiaries' growth, development
and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
Shares under the Plan shall be the officers, key employees and certain
consultants of the Company and the Subsidiaries, designated by the Committee (as
defined below) (each, a "Participant").
Section 4. Administration. The Plan shall be administered by the
--------------
Board of Directors of the Company (the "Board") or, at the Board's option, by a
compensation committee established by the Board (the Board and such committee,
the "Committee") who shall be empowered to interpret and administer the Plan in
its sole discretion.
Section 5. Shares Subject to the Plan. The number of Shares that may
--------------------------
be issued pursuant to the Plan shall not exceed 2,649,969 subject to adjustment
to reflect any stock split, reverse split, combination, recapitalization or
reclassification with respect to the Shares. In the event that any Shares
issued pursuant to the Plan are reacquired by the Company, such Shares shall
again become available for issuance under the Plan.
Section 6. Issuance of Shares. The Company's obligation to issue
------------------
Shares pursuant to the Plan is expressly conditioned upon the completion by the
Company of any registration or other qualification of such Shares under any
state and/or federal law or rulings and regulations of any government regulatory
body and the making of such investment repre sentations or other representations
and undertakings by a Participant (or such person's legal representative, heir
or legatee, as the case may be) in order to comply with the requirements of any
exemption from any such registration or other qualification of such Shares which
the Company in its sole discretion shall deem necessary or advisable.
Section 7. Stock Bonus Agreement. The Shares issued pursuant to the
---------------------
Plan shall be evidenced by a written stock bonus agreement (a "Stock Bonus
Agreement") executed by the Company and the Participant. Each Stock Bonus
Agreement (i) shall contain such terms and conditions as the Committee deems
desirable and which are not inconsistent with the Plan; (ii) shall contain each
of the provisions and agreements herein specifically required to be contained
therein; and (iii) may contain provisions which (A) give the Company a right to
repurchase all or any portion of a Participant's Shares under specified
circumstances, (B) give the Company a right of first refusal to purchase any
Shares which a Participant proposes to sell, and (C) give certain drag-along
rights.
<PAGE>
Section 8. Withholding of Taxes. The Company or a Subsidiary, as the
--------------------
case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to a Participant the requisite tax
upon the amount of taxable income, if any, recognized by such person in
connection with the issuance of the Company's Shares, as may be required from
time to time under any federal or state tax laws and regulations. This
withholding of tax shall be made from the Company's (or such Subsidiary's)
concurrent or next payment of wages, salary, bonus or other income to a
Participant or by payment to the Company (or such Subsidiary) by the such person
of the required withholding tax, as the Committee may determine.
Section 9. Effectiveness and Termination of Plan. The Plan shall be
-------------------------------------
effective on the date on which it is adopted by the Board and the Board may in
its sole discretion terminate the Plan at any time.
Section 10. Amendment of Plan. The Committee may make such
-----------------
amendments to the Plan and, with the consent of each Participant affected, to
the terms and conditions of the applicable Stock Bonus Agreement as it shall
deem advisable.
Section 11. Indemnification. In addition to such other rights of
---------------
indemnification as they may have as directors, the members of the Board and the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within 60 days after institution of any such action, suit or proceeding
such Board or Committee member shall in writing offer the Company the
opportunity, at the Company's expense, to handle and defend the same.
Section 12. Governing Law. The Plan shall be construed under and
-------------
governed by the laws of the State of Minnesota without regard to conflict of law
provisions thereof.
Section 13. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Stock Bonus Agreement shall confer, intend to confer or
imply any rights of employment or rights to any other relationship or rights to
continued employment by, or rights to a continued relationship with, the Company
or any Subsidiary in favor of any Participant or limit the ability of the
Company or any Subsidiary to terminate, with or without cause, in its sole and
absolute discretion, the employment of, or relationship with, any Participant
subject to the terms of any written employment or other agreement to which a
Participant is a party.
2.
<PAGE>
EXHIBIT 10.36
AMERICA'S FAVORITE CHICKEN COMPANY
1996 EMPLOYEE STOCK BONUS PLAN - GENERAL
Section 1. Description of Plan. This is the 1996 Employee Stock Bonus
-------------------
Plan, dated April 11, 1996 (the "Plan"), of America's Favorite Chicken Company,
a Minnesota corporation (the "Company"). Under the Plan, officers, key employees
and certain consultants of the Company or any of the directly or indirectly
owned subsidiaries of the Company or any such Subsidiary which may be formed in
the future (individually, a "Subsidiary," and collectively, the "Subsidiaries"),
to be selected as set forth below, may be issued shares of the Common Stock,
$0.01 par value per share, of the Company ("Shares").
Section 2. Purpose of Plan. The purpose of the Plan and the issuance of
---------------
Shares to specified persons is to further the growth, development and financial
success of the Company and the Subsidiaries by providing additional incentives
to officers, key employees, and certain consultants. By granting such persons
Shares, the Company can ensure that such persons will themselves benefit
directly from the Company's and the Subsidiaries' growth, development and
financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
Shares under the Plan shall be the officers, key employees and certain
consultants of the Company and the Subsidiaries, designated by the Committee (as
defined below) (each, a "Participant").
Section 4. Administration. The Plan shall be administered by the Board of
--------------
Directors of the Company (the "Board") or, at the Board's option, by a
compensation committee established by the Board (the Board and such committee,
the "Committee") who shall be empowered to interpret and administer the Plan in
its sole discretion.
Section 5. Shares Subject to the Plan. The number of Shares that may be
---------------------------
issued pursuant to the Plan shall not exceed 364,803 subject to adjustment to
reflect any stock split, reverse split, combination, recapitalization or
reclassification with respect to the Shares. In the event that any Shares issued
pursuant to the Plan are reacquired by the Company, such Shares shall again
become available for issuance under the Plan.
Section 6. Issuance of Shares. The Company's obligation to issue Shares
------------------
pursuant to the Plan is expressly conditioned upon the completion by the Company
of any registration or other qualification of such Shares under any state and/or
federal law or rulings and regulations of any government regulatory body and the
making of such investment representations or other representations and
undertakings by a Participant (or such person's legal representative, heir or
legatee, as the case may be) in order to comply with the requirements of any
exemption from any such registration or other qualification of such Shares which
the Company in its sole discretion shall deem necessary or advisable.
Section 7. Stock Bonus Agreement. The Shares issued pursuant to the Plan
---------------------
shall be evidenced by a written stock bonus agreement (a "Stock Bonus
Agreement") executed by the Company and the Participant. Each Stock Bonus
Agreement (i) shall contain such terms and conditions as the Committee deems
desirable and which are not inconsistent with the Plan; (ii) shall contain each
of the provisions and agreements herein specifically required to be contained
therein; and (iii) may contain provisions which (A) give the Company a right to
repurchase all or any portion of a Participant's Shares under specified
circumstances, (B) give the Company a right of first refusal to purchase any
Shares which a Participant proposes to sell, and (C) give certain drag-along
rights.
<PAGE>
Section 8. Withholding of Taxes. The Company or a Subsidiary, as the case
--------------------
may be, may deduct and withhold from the wages, salary, bonus and other income
paid by the Company or such Subsidiary to a Participant the requisite tax upon
the amount of taxable income, if any, recognized by such person in connection
with the issuance of the Company's Shares, as may be required from time to time
under any federal or state tax laws and regulations. This withholding of tax
shall be made from the Company's (or such Subsidiary's) concurrent or next
payment of wages, salary, bonus or other income to a Participant or by payment
to the Company (or such Subsidiary) by the such person of the required
withholding tax, as the Committee may determine.
Section 9. Effectiveness and Termination of Plan. The Plan shall be
-------------------------------------
effective on the date on which it is adopted by the Board and the Board may in
its sole discretion terminate the Plan at any time.
Section 10. Amendment of Plan. The Committee may make such amendments to
-----------------
the Plan and, with the consent of each Participant affected, to the terms and
conditions of the applicable Stock Bonus Agreement as it shall deem advisable.
Section 11. Indemnification. In addition to such other rights of
---------------
indemnification as they may have as directors, the members of the Board and the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within 60 days after institution of any such action, suit or proceeding
such Board or Committee member shall in writing offer the Company the
opportunity, at the Company's expense, to handle and defend the same.
Section 12. Governing Law. The Plan shall be construed under and governed
-------------
by the laws of the State of Minnesota without regard to conflict of law
provisions thereof.
Section 13. Not an Employment or Other Agreement. Nothing contained in the
------------------------------------
Plan or in any Stock Bonus Agreement shall confer, intend to confer or imply any
rights of employment or rights to any other relationship or rights to continued
employment by, or rights to a continued relationship with, the Company or any
Subsidiary in favor of any Participant or limit the ability of the Company or
any Subsidiary to terminate, with or without cause, in its sole and absolute
discretion, the employment of, or relationship with, any Participant subject to
the terms of any written employment or other agreement to which a Participant is
a party.
2.
<PAGE>
EXHIBIT 10.37
AMERICA'S FAVORITE CHICKEN COMPANY
STOCK BONUS AGREEMENT - EXECUTIVE
THIS STOCK BONUS AGREEMENT (this "Agreement") is made and entered into as
of _____________________, 1996 by and between America's Favorite Chicken Company
(the "Company") and _________________________ ("Employee").
R E C I T A L S:
- - - - - - - -
A. The Company desires to grant to Employee shares of Common Stock, $0.01
par value per share, of the Company (the "Common Stock"), subject to the terms
and conditions set forth in this Agreement and the Company's 1996 Employee Stock
Bonus Plan. The date on which such grant shall occur shall be
____________________, 1996 (the "Closing Date").
B. In order to induce the Company to grant such shares of Common Stock,
Employee agrees to hold such shares and any other shares of Common Stock that
Employee now holds or hereinafter acquires subject to the restrictions and
interests created by this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and conditions contained herein, the parties agree as follows:
1. Grant of Stock. The Company hereby agrees to grant to Employee,
--------------
subject to the conditions and restrictions contained in this Agreement,
_____________ shares (individually, a "Share," and collectively, the "Shares")
of the Common Stock. In connection with the purchase of Shares hereunder,
Employee acknowledges that he or she has reviewed the memorandum regarding
Section 83(b) of the Internal Revenue Code of 1986, as amended, attached hereto
as Exhibit A.
2. Repurchase Option Upon Termination.
----------------------------------
(a) The Company's Repurchase Option. In the event that Employee's
-------------------------------
employment or other relationship with the Company and all of its directly or
indirectly owned subsidiaries (individually, a "Subsidiary," and collectively,
the "Subsidiaries") terminates for any reason on or prior to the fifth
anniversary of the Closing Date (including, without limitation, by reason of
Employee's death, disability, retirement, voluntary resignation or dismissal by
the Company or any of its Subsidiaries, with or without cause), the Company
shall have the option (the "Repurchase Option") to purchase from Employee all or
any portion of the Shares for a period of six months after the effective date of
such termination (the effective date of termination is hereinafter referred to
as the "Termination Date").
(b) Repurchase Price. The purchase price for each share to be
----------------
purchased pursuant to the Repurchase Option (the "Repurchase Price") shall be
the Fair Market Value (as hereinafter defined) per Share (subject to adjustment
as provided in Section 2(d) below). For purposes hereof, the Repurchase Price
for shares of capital stock or other securities of the Company or any successor
or assign of the Company which are issued in respect of, in exchange for or in
substitution of the Shares by reason of any stock dividend, stock split, reverse
split, recapitalization, reclassification, combination, merger, consolidation or
otherwise shall be determined in the same manner and proportion as the
underlying Shares on which such shares of capital stock or other securities were
issued.
<PAGE>
(c) Definition of Fair Market Value. As used herein, the "Fair Market
-------------------------------
Value" of a Share shall be determined by the Board of Directors on the basis of
the best available evidence, which determination shall be final and binding.
(d) Adjustments of Purchase Price Under Repurchase Option. The
-----------------------------------------------------
Repurchase Price for any Shares to be purchased pursuant to the Repurchase
Option shall be increased or decreased appropriately to reflect any distribution
of shares of capital stock or other securities of the Company or any successor
or assign of the Company which is made in respect of, in exchange for or in
substitution of the Shares by reason of any stock dividend, stock split, reverse
split, recapitalization, reclassification, combination, merger, consolidation or
otherwise.
(e) Exercise of Repurchase Option. The Repurchase Option shall be
-----------------------------
exercised by the Company by delivery to Employee, within the six-month period
specified in Section 2(a) hereof, of a written notice of its election to so
exercise. Such notice shall therein specify (i) the number of Shares which the
Company elects to repurchase; (ii) the calculation of the Repurchase Price for
such Shares; and (iii) a day, which shall not be more than 30 days after the
date such notice is delivered, on or before which Employee shall surrender (if
Employee has not already done so) the certificate or certificates representing
the Shares to be purchased pursuant to the Repurchase Option (with a stock
assignment or stock assignments duly endorsed in blank for Transfer) at the
principal office of the Company in exchange for a check, payable to Employee or
such person as Employee shall request, in the amount equal to the Repurchase
Price, calculated as provided in this Section 2, multiplied by the number of the
Shares to be purchased. If Employee fails to so surrender such certificate or
certificates on or before such date, from and after such date the Shares which
the Company elected to repurchase shall be deemed to be no longer outstanding,
and Employee shall cease to be a stockholder with respect to such Shares and
shall have no rights with respect thereto except only the right to receive
payment of the Repurchase Price, without interest, upon surrender of the
certificate or certificates therefor (with a stock assignment or stock
assignments duly endorsed in blank for Transfer). Notwithstanding the foregoing
in this Section 2(e), in the event any principal, interest, fees, expenses or
other amounts are owed to the Company by Employee (the "Outstanding Amount"),
the Repurchase Price for the number of the Shares to be repurchased hereunder
shall be reduced (to an amount not less than zero) by such Outstanding Amount,
which reduction shall be specified in reasonable detail in the Company's written
notice of election to exercise the Repurchase Option. If the Outstanding Amount
exceeds the Repurchase Price for the number of the Shares to be repurchased,
Employee shall remain obligated and liable to the Company for the unpaid balance
thereof.
(f) Termination of Repurchase Option. The Repurchase Option shall
--------------------------------
terminate upon (i) the Company's initial underwritten public offering of shares
of Common Stock registered under the Securities Act of 1933, as amended, on Form
S-1, that results in gross proceeds to the Company in excess of $25 million from
the sale of Common Stock or (ii) the acquisition by any person or group (as
defined in Section 13d of the Securities Act of 1934) of beneficial ownership of
more than fifty percent (50%) of the Company's then outstanding shares of Common
Stock.
3. Investment Representations. Employee represents and warrants to the
--------------------------
Company as follows:
(a) Employee's Own Account. Employee is acquiring the Shares for
----------------------
Employee's own account and not with a view to or for sale in connection with any
distribution of the Shares.
(b) Access to Information. Employee (i) is familiar with the business
---------------------
of the Company and its Subsidiaries; (ii) has had an opportunity to discuss with
representatives of the Company and its Subsidiaries the condition of and
prospects for the continued operation and financing of the Company and its
Subsidiaries and such other matters as Employee has deemed appropriate in
considering whether to
2.
<PAGE>
invest in the Shares; and (iii) has been provided access to all available
information about the Company and its Subsidiaries requested by Employee.
(c) Shares Not Registered. Employee understands that the Shares have
---------------------
not been registered under the Act or registered or qualified under the
securities laws of any state and that Employee may not Transfer the Shares
unless they are subsequently registered under the Act and registered or
qualified under applicable state securities laws, or unless an exemption is
available which permits Transfers without such registration and qualification.
4. Partial Termination. This Agreement shall terminate with respect to
-------------------
those Shares which are acquired by the Company pursuant to Section 2(a), upon
such acquisition.
5. Miscellaneous.
-------------
(a) Legends on Certificates. Any and all certificates now or
-----------------------
hereafter issued evidencing shares of Common Stock shall have endorsed upon them
a legend substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
BY THE COMPANY PURSUANT TO THAT CERTAIN STOCK BONUS AGREEMENT DATED AS
OF _____________, 1996 BY AND BETWEEN AMERICA'S FAVORITE CHICKEN
COMPANY AND THE ORIGINAL EMPLOYEE HEREOF, A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF AMERICA'S FAVORITE
CHICKEN COMPANY."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances. Each party hereto agrees to perform any
------------------
further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Agreement.
(c) Notices. Except as otherwise provided herein, all notices,
-------
requests, demands and other communications under this Agreement shall be in
writing, and if given by telegram, telecopy or telex, shall be deemed to have
been validly served, given or delivered when sent, if given by personal
delivery, shall be deemed to have been validly served, given or delivered upon
actual delivery and, if mailed, shall be deemed to have been validly served,
given or delivered three business days after deposit in the United States mails,
as registered or certified mail, with proper postage prepaid and addressed to
the party or parties to be notified, at the following addresses (or such other
address(es) a party may designate for itself by like notice):
If to the Company:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
If to Employee:
______________________________
______________________________
______________________________
3.
<PAGE>
(d) Amendments; No Waiver. This Agreement may be amended only by a
---------------------
written agreement executed by both of the parties hereto.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Minnesota.
(f) Disputes. In the event of any dispute among the parties arising
--------
out of this Agreement, the prevailing party shall be entitled to recover from
the nonprevailing party the reasonable expenses of the prevailing party
including, without limitation, reasonable attorneys' fees and expenses.
(g) Entire Agreement. This Agreement and the instruments and
----------------
agreements referenced herein constitute the entire agreement and understanding
among the parties pertaining to the subject matter hereof and supersede any and
all prior agreements, whether written or oral, relating hereto.
(h) Recapitalizations or Exchanges Affecting the Company's Capital
--------------------------------------------------------------
Stock. The provisions of this Agreement shall apply to any and all shares of
- -----
capital stock or other securities of the Company or any successor or assign of
the Company which may be issued in respect of, in exchange for or in
substitution of, the Shares by reason of any stock dividend, stock split,
reverse split, recapitalization, reclassification, combination, merger,
consolidation or otherwise, and such shares or other securities shall be
encompassed within the term "Shares" for purposes of this Agreement.
(i) No Rights. Nothing in this Agreement shall affect in any manner
---------
whatsoever the rights of the Company or any of its Subsidiaries to terminate
Employee's employment or other relationship for any reason, with or without
cause, subject to the terms and conditions of any agreement to which Employee
may be a party.
(j) Disclosure. The Company shall have no duty or obligation to
----------
affirmatively disclose to Employee, and Employee shall have no right to be
advised of, any material information regarding the Company or any of its
Subsidiaries at any time prior to, upon or in connection with the Company's
repurchase of the Shares under this Agreement at or after the cessation or
termination of Employee's employment or other relationship with the Company
and/or any of its Subsidiaries.
(k) Successors and Assigns. The Company may assign with absolute
----------------------
discretion any or all of its rights and/or obligations and/or delegate any of
its duties under this Agreement to any of its affiliates, successors and/or
assigns and this Agreement shall inure to the benefit of, and be binding upon,
such respective affiliates, successors and/or assigns of the Company in the same
manner and to the same extent as if such affiliates, successors and/or assigns
were original parties hereto. Without limiting the foregoing, the Company may
assign the Repurchase Option provided for in Section 2 of this Agreement to any
nominee, affiliate, successor and/or assign. Unless specifically provided herein
to the contrary, Employee may not assign any or all of its rights and/or
obligations and/or delegate any or all of its duties under this Agreement
without the prior written consent of the Company. Upon an assignment of any or
all of Employee's rights and/or obligations and/or a delegation of any or all of
its duties under this Agreement in accordance with the terms of this Agreement,
this Agreement shall inure to the benefit of, and be binding upon, Employee's
respective affiliates, successors and/or assigns in the same manner and to the
same extent as if such affiliates, successors and/or assigns were original
parties hereto.
(l) Headings. Introductory headings at the beginning of each section
--------
and subsection of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or description of the contents
of any such section and subsection of this Agreement.
4.
<PAGE>
(m) Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed an original and both of which, when taken
together, shall constitute one and the same Agreement.
(n) RIGHT IN OTHER CAPACITIES; EMPLOYEE'S REVIEW OF AGREEMENT.
---------------------------------------------------------
(i) ALTHOUGH AFTER HIS/HER RECEIPT OF THE SHARES, EMPLOYEE WILL BE OR
CONTINUE TO BE AN EMPLOYEE, OFFICER AND/OR DIRECTOR OF THE COMPANY (OR OF A
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY), EMPLOYEE
REPRESENTS THAT EMPLOYEE IS ACQUIRING THE SHARES FOR THEIR POTENTIAL AS AN
EQUITY INVESTMENT AND WITHOUT ANY EXPECTATION UNDER SECTION 302A.751 OF THE
MINNESOTA BUSINESS CORPORATION ACT OR OTHERWISE THAT THE OWNERSHIP OF THE SHARES
WILL ENTITLE EMPLOYEE TO ANY RIGHTS AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE
COMPANY (OR ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY)
THAT WOULD NOT EXIST IF EMPLOYEE WERE NOT A SHAREHOLDER. EMPLOYEE FURTHER
AGREES THAT NO CHANGE IN HIS OR HER EXPECTATIONS CONCERNING EMPLOYMENT OR
CONCERNING HIS OR HER PARTICIPATION AS AN OFFICER OR DIRECTOR, IF APPLICABLE,
WILL HAVE A REASONABLE BASIS UNLESS SET FORTH IN A WRITTEN AGREEMENT EXPRESSLY
GIVING EMPLOYEE ADDITIONAL RIGHTS AS TO SUCH MATTERS. THE COMPANY HEREBY
ADVISES EMPLOYEE THAT THE COMPANY IS ISSUING THE SHARES IN RELIANCE ON THE
FOREGOING REPRESENTATIONS OF EMPLOYEE AND IN THE EXPECTATION THAT EMPLOYEE WILL
NOT HAVE ANY RIGHT TO EMPLOYMENT BY THE COMPANY (OR BY ANY DIRECT OR INDIRECT
SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY) OR TO CONTINUE TO BE AN OFFICER OR
DIRECTOR OF THE COMPANY (OR OF ANY SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE
OF EMPLOYEE'S OWNERSHIP OF THE SHARES AND THAT THE COMPANY WOULD NOT ISSUE
SHARES TO EMPLOYEE IF EMPLOYEE HAD ANY CONTRARY EXPECTATIONS.
(ii) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS BEEN
ADVISED TO CONSULT WITH LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS
AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN OR AMONG EMPLOYEE, THE COMPANY AND
ANY OF ITS PRESENT OR PROSPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS AND/OR
EMPLOYEES.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
THE COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: ________________________________
Name:
Title:
5.
<PAGE>
EMPLOYEE:
_______________________________________
ADDRESS:
_______________________________________
_______________________________________
_______________________________________
6.
<PAGE>
EXHIBIT 10.38
AMERICA'S FAVORITE CHICKEN COMPANY
STOCK BONUS AGREEMENT - GENERAL
THIS STOCK BONUS AGREEMENT (this "Agreement") is made and entered into as
of _____________________, 1996 by and between America's Favorite Chicken Company
(the "Company") and _________________________ ("Employee").
R E C I T A L S:
- - - - - - - -
A. The Company desires to grant to Employee shares of Common Stock, $0.01
par value per share, of the Company (the "Common Stock"), subject to the terms
and conditions set forth in this Agreement and the Company's 1996 Employee Stock
Bonus Plan. The date on which such grant shall occur shall be
____________________, 1996 (the "Closing Date").
B. In order to induce the Company to grant such shares of Common Stock,
Employee agrees to hold such shares and any other shares of Common Stock that
Employee now holds or hereinafter acquires subject to the restrictions and
interests created by this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and conditions contained herein, the parties agree as follows:
1. Grant of Stock. The Company hereby agrees to grant to Employee,
--------------
subject to the conditions and restrictions contained in this Agreement,
_____________ shares (individually, a "Share," and collectively, the "Shares")
of the Common Stock. In connection with the purchase of Shares hereunder,
Employee acknowledges that he or she has reviewed the memorandum regarding
Section 83(b) of the Internal Revenue Code of 1986, as amended, attached hereto
as Exhibit A.
2. Restriction on Transfer of the Shares. Except as otherwise provided
-------------------------------------
in Section 5, Employee may not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of (collectively, "Transfer") any of the Shares, or any right,
title or interest therein prior to the fifth anniversary of the Closing Date
and, thereafter, any Transfer must be in compliance with Sections 4 and 6
hereof; provided that the restrictions contained in this Section 2 shall
terminate upon the Company's initial underwritten public offering of shares of
Common Stock registered under the Securities Act of 1933, as amended, on Form S-
1, that results in gross proceeds to the Company in excess of $25 million from
the sale of Common Stock (an "Initial Public Offering"). Any purported Transfer
or Transfers (including involuntary Transfers initiated by
<PAGE>
operation of legal process) of any of the Shares or any right, title or interest
therein, except in strict compliance with the terms and conditions of this
Agreement, shall be null and void.
3. Repurchase Option Upon Termination.
----------------------------------
(a) The Company's Repurchase Option. In the event that Employee's
-------------------------------
employment or other relationship with the Company and all of its directly or
indirectly owned subsidiaries (individually, a "Subsidiary," and collectively,
the "Subsidiaries") terminates for any reason on or prior to the fifth
anniversary of the Closing Date (including, without limitation, by reason of
Employee's death, disability, retirement, voluntary resignation or dismissal by
the Company or any of its Subsidiaries, with or without cause), the Company
shall have the option (the "Repurchase Option") to purchase from Employee all or
any portion of the Shares for a period of six months after the effective date of
such termination (the effective date of termination is hereinafter referred to
as the "Termination Date").
(b) Repurchase Price. The purchase price for each share to be
----------------
purchased pursuant to the Repurchase Option (the "Repurchase Price") shall be
determined in accordance with the following formulas (in all cases subject to
adjustment as set forth in Section 3(d) hereof). The Repurchase Price shall
equal: (i) 50% of the Fair Market Value per Share (as defined below) if the
Termination Date is prior to the first anniversary date of the Closing Date;
(ii) 60% of the Fair Market Value per Share (as defined below) if the
Termination Date is on or after the first anniversary of the Closing Date but
prior to the second anniversary date thereof; (iii) 70% of the Fair Market Value
per Share (as defined below) if the Termination Date is on or after the second
anniversary of the Closing Date but prior to the third anniversary date thereof;
(iv) 80% of the Fair Market Value per Share (as defined below) if the
Termination Date is on or after the third anniversary of the Closing Date but
prior to the fourth anniversary date thereof; and (v) 90% of the Fair Market
Value per Share (as defined below) if the Termination Date is on or after the
fourth anniversary of the Closing Date until the fifth anniversary date thereof.
For purposes hereof, the Repurchase Price for shares of capital stock or other
securities of the Company or any successor or assign of the Company which are
issued in respect of, in exchange for or in substitution of the Shares by reason
of any stock dividend, stock split, reverse split, recapitalization,
reclassification, combination, merger, consolidation or otherwise shall be
determined in the same manner and proportion as the underlying Shares on which
such shares of capital stock or other securities were issued. Notwithstanding
the above formulas, if Employee's employment or other relationship with the
Company, and its Subsidiaries, if applicable, is terminated as a result of
Employee's death or disability, the Repurchase Price shall be the Fair Market
Value per Share (as defined below).
(c) Definition of Fair Market Value. As used herein, the "Fair Market
-------------------------------
Value" of a Share shall be determined by the Board of Directors on the basis of
the best available evidence, which determination shall be final and binding.
2.
<PAGE>
(d) Adjustments of Purchase Price Under Repurchase Option. The
-----------------------------------------------------
Repurchase Price for any Shares to be purchased pursuant to the Repurchase
Option shall be increased or decreased appropriately to reflect any distribution
of shares of capital stock or other securities of the Company or any successor
or assign of the Company which is made in respect of, in exchange for or in
substitution of the Shares by reason of any stock dividend, stock split, reverse
split, recapitalization, reclassification, combination, merger, consolidation or
otherwise.
(e) Exercise of Repurchase Option. The Repurchase Option shall be
-----------------------------
exercised by the Company by delivery to Employee, within the six-month period
specified in Section 3(a) hereof, of a written notice of its election to so
exercise. Such notice shall therein specify (i) the number of Shares which the
Company elects to repurchase; (ii) the calculation of the Repurchase Price for
such Shares; and (iii) a day, which shall not be more than 30 days after the
date such notice is delivered, on or before which Employee shall surrender (if
Employee has not already done so) the certificate or certificates representing
the Shares to be purchased pursuant to the Repurchase Option (with a stock
assignment or stock assignments duly endorsed in blank for Transfer) at the
principal office of the Company in exchange for a check, payable to Employee or
such person as Employee shall request, in the amount equal to the Repurchase
Price, calculated as provided in this Section 3, multiplied by the number of the
Shares to be purchased. If Employee fails to so surrender such certificate or
certificates on or before such date, from and after such date the Shares which
the Company elected to repurchase shall be deemed to be no longer outstanding,
and Employee shall cease to be a stockholder with respect to such Shares and
shall have no rights with respect thereto except only the right to receive
payment of the Repurchase Price, without interest, upon surrender of the
certificate or certificates therefor (with a stock assignment or stock
assignments duly endorsed in blank for Transfer). Notwithstanding the foregoing
in this Section 3(e), in the event any principal, interest, fees, expenses or
other amounts are owed to the Company by Employee (the "Outstanding Amount"),
the Repurchase Price for the number of the Shares to be repurchased hereunder
shall be reduced (to an amount not less than zero) by such Outstanding Amount,
which reduction shall be specified in reasonable detail in the Company's written
notice of election to exercise the Repurchase Option. If the Outstanding Amount
exceeds the Repurchase Price for the number of the Shares to be repurchased,
Employee shall remain obligated and liable to the Company for the unpaid balance
thereof.
(f) Termination of Repurchase Option. The Repurchase Option shall
--------------------------------
terminate upon an Initial Public Offering or upon the acquisition by any person
or group (as defined in Section 13d of the Securities Act of 1934) of beneficial
ownership of more than fifty percent (50%) of the Company's then outstanding
shares of Common Stock.
4. Right of First Refusal.
----------------------
(a) Sales; Notice. At any time on or after the fifth anniversary of
-------------
the Closing Date, Employee may Transfer for cash (and only for such form of
consideration) any or all of the Shares to any third party subject to the
provisions of this Section 4 and Sections 7(c) and 9(a)
3.
<PAGE>
hereof. Prior to any such intended Transfer, Employee shall first give written
notice (the "Notice") to the Company specifying (i) Employee's bona fide
intention to sell such Shares; (ii) the name(s) and address(es) of the proposed
transferee(s); (iii) the number of Shares Employee proposes to Transfer
(individually, an "Offered Share," and collectively, the "Offered Shares"); (iv)
the price for which Employee proposes to Transfer each Offered Share (the
"Proposed Purchase Price"); and (v) all other material terms and conditions of
the proposed Transfer.
(b) Election by the Company. Within 15 days after receipt of the
-----------------------
Notice, the Company may elect to purchase all, but not less than all, of the
Offered Shares at the price and on the terms and conditions set forth in the
Notice by delivery of written notice of such election to Employee, specifying a
day, which shall not be more than 15 days after such notice is delivered, on or
before which Employee shall surrender (if Employee has not already done so) the
certificate or certificates representing the Offered Shares (with a stock
assignment or stock assignments duly endorsed in blank for Transfer) at the
principal office of the Company. Within 15 days after delivery of such notice
to Employee, the Company shall deliver to Employee a check, payable to Employee
or to such person as Employee shall request, in the amount equal to the product
of the Proposed Purchase Price multiplied by the number of Offered Shares (the
"First Refusal Price") in exchange for the Offered Shares. If Employee fails to
so surrender such certificate or certificates on or before such date, from and
after such date the Offered Shares shall be deemed to be no longer outstanding,
and Employee shall cease to be a stockholder with respect to such Shares and
shall have no rights with respect thereto except only the right to receive
payment of the First Refusal Price, without interest, upon surrender of the
certificate or certificates therefor (duly endorsed in blank for Transfer). If
the Company does not elect to purchase the Offered Shares, Employee shall be
entitled to Transfer the Offered Shares to the transferee(s) named in the Notice
at the Proposed Purchase Price or at a higher price and on the terms and
conditions set forth in the Notice; provided, however, that such Transfer must
be consummated within 90 days after the date of the Notice and any proposed
Transfer after such 90-day period may be made only by again complying with the
procedures set forth in this Section 4.
(c) Termination of Right of First Refusal. All rights provided to the
-------------------------------------
Company under this Section 4 shall terminate upon the consummation of an Initial
Public Offering, or upon the acquisition by any person or group (as defined in
Section 13d of the Securities Act of 1934) of beneficial ownership of more than
fifty percent of the Company's then outstanding Common Stock. Upon a Transfer of
the Shares pursuant to Section 4(b) hereof, the rights provided the Company
under this Section 4 shall terminate with respect to the Shares (and only those
Shares) so Transferred.
5. Permitted Transfers. Employee may, at any time, Transfer any or all
-------------------
of the Shares (a) intervivos to Employee's spouse or issue, a trust for
Employee's or their benefit or pursuant to any will or testamentary trust or (b)
upon Employee's death, to any person in accordance with the laws of descent
and/or testamentary distribution (such persons are
4.
<PAGE>
collectively referred to herein as "Permitted Transferees"). Notwithstanding
the foregoing in this Section 5, Shares shall not be Transferred pursuant to
this Section 5 until the Permitted Transferee executes a valid undertaking, in
form and substance reasonably satisfactory to the Company, to the effect that
the Permitted Transferee and the Shares so Transferred shall thereafter remain
subject to all of the provisions of this Agreement (including the Repurchase
Option) as though the Permitted Transferee were a party to this Agreement, bound
in every respect in the same way as Employee. Transfers made in accordance with
this Section 5 shall not be subject to the provisions of Section 4 of this
Agreement, provided that any Shares transferred pursuant to this Section 5 shall
remain subject to the provisions of Section 4 of this Agreement.
6. Other Agreements.
----------------
(a) If FS Equity Partners III, L.P., a Delaware limited partnership,
and FS Equity Partners International, L.P., a Delaware limited partnership
(collectively, "Equity Partners ") find a third party buyer (other than an
affiliate of Equity Partners) for all of the shares of Common Stock held by
Equity Partners, then upon the request of the Company or Equity Partners,
Employee shall sell all of his or her shares of Common Stock, including the
Shares, and all of his or her options to acquire shares of Common Stock, if any,
on the same terms and conditions as apply to the sale by Equity Partners of its
shares of Common Stock (in the case of options to acquire shares of Common
Stock, deducting the exercise price of such options from the consideration to be
received for shares of Common Stock; if the exercise price of such options is
greater than the consideration to be received, then such options shall be
cancelled without any payment to the optionee). The obligations of Employee
under this Section 6(a) shall terminate upon an Initial Public Offering. The
obligations of Employee under this Section 6(a) also shall terminate in the
event that Equity Partners hold in the aggregate a number of shares of Common
Stock which represents less than 33-1/3% of the total number of shares of Common
Stock outstanding at any time.
(b) If Equity Partners find a third-party buyer (other than an
affiliate of Equity Partners), for all or part of the shares of Common Stock
held by Equity Partners (whether such sale is by way of purchase, exchange,
merger or other form of transaction), the Employee shall have the right to sell,
on the terms set forth in a written notice (the "Offering Notice") delivered by
Equity Partners to the Employee describing the terms of the proposed sale
(including the minimum sale price for the shares of Common Stock that Equity
Partners plan to sell), that amount of his or her Shares which constitute the
same percentage of his or her Shares as the percentage of Common Stock sold by
Equity Partners, in the aggregate. Each such right shall be exercisable by
delivering written notice to Equity Partners within 15 days after receipt of the
Offering Notice. Failure to exercise such right within such 15-day period shall
be regarded as a waiver of such rights. The obligations of Equity Partners
under this Section 6(b) shall terminate upon an Initial Public Offering.
5.
<PAGE>
(c) Employee agrees to consent to any sale, transfer, reorganization,
exchange, merger, combination or other form of transaction described in Section
6(a) and to execute such agreements, powers of attorney, voting proxies or other
documents and instruments as may be necessary or desirable to consummate such
sale, transfer, reorganization, exchange, merger, combination or other form of
transaction. Employee further agrees to timely take such other actions as the
Company or Equity Partners may reasonably request in connection with the
approval of the consummation of such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction, including voting as a
stockholder to approve any such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction.
(d) The obligations of Employee pursuant to Section 6(a) shall be
binding on any transferee of any of shares of Common Stock or options to acquire
shares of Common Stock and any transfer of such shares or options shall be void
unless a written commitment to be bound by such provisions from such transferee
is delivered to the Company and Equity Partners prior to any transfer. The
obligations of Employee pursuant to Section 6(a) shall apply to any securities
received in substitution or exchange for any shares of Common Stock or options
to acquire shares of Common Stock.
7. Investment Representations. Employee represents and warrants to the
--------------------------
Company as follows:
(a) Employee's Own Account. Employee is acquiring the Shares for
----------------------
Employee's own account and not with a view to or for sale in connection with any
distribution of the Shares.
(b) Access to Information. Employee (i) is familiar with the business
---------------------
of the Company and its Subsidiaries; (ii) has had an opportunity to discuss with
representatives of the Company and its Subsidiaries the condition of and
prospects for the continued operation and financing of the Company and its
Subsidiaries and such other matters as Employee has deemed appropriate in
considering whether to invest in the Shares; and (iii) has been provided access
to all available information about the Company and its Subsidiaries requested by
Employee.
(c) Shares Not Registered. Employee understands that the Shares have
---------------------
not been registered under the Act or registered or qualified under the
securities laws of any state and that Employee may not Transfer the Shares
unless they are subsequently registered under the Act and registered or
qualified under applicable state securities laws, or unless an exemption is
available which permits Transfers without such registration and qualification.
8. Partial Termination. This Agreement shall terminate with respect to
-------------------
those Shares which are (a) acquired by the Company pursuant to Section 3(a),
upon such acquisition; or (b) acquired by the Company or a third party pursuant
to Section 4 hereof, upon such acquisition; provided, however, that with respect
to those Shares that are acquired by a third party, the obligations of Section 6
of this Agreement shall survive such termination.
6.
<PAGE>
9. Miscellaneous.
-------------
(a) Legends on Certificates. Any and all certificates now or
-----------------------
hereafter issued evidencing shares of Common Stock shall have endorsed upon them
a legend substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THAT CERTAIN STOCK BONUS AGREEMENT
DATED AS OF _____________, 1996 BY AND BETWEEN AMERICA'S FAVORITE
CHICKEN COMPANY AND THE ORIGINAL EMPLOYEE HEREOF, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF AMERICA'S
FAVORITE CHICKEN COMPANY SUCH SECURITIES ALSO ARE SUBJECT TO THE
VOTING AGREEMENT CONTAINED IN SUCH STOCK BONUS AGREEMENT."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances. Each party hereto agrees to perform any
------------------
further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Agreement.
(c) Notices. Except as otherwise provided herein, all notices,
-------
requests, demands and other communications under this Agreement shall be in
writing, and if given by telegram, telecopy or telex, shall be deemed to have
been validly served, given or delivered when sent, if given by personal
delivery, shall be deemed to have been validly served, given or delivered upon
actual delivery and, if mailed, shall be deemed to have been validly served,
given or delivered three business days after deposit in the United States mails,
as registered or certified
7.
<PAGE>
mail, with proper postage prepaid and addressed to the party or parties to be
notified, at the following addresses (or such other address(es) a party may
designate for itself by like notice):
If to the Company:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
If to Employee:
______________________________
______________________________
______________________________
(d) Amendments; No Waiver. This Agreement may be amended only by a
---------------------
written agreement executed by both of the parties hereto. Section 6 may only be
amended with the approval of Equity Partners, it being understood that Equity
Partners are intended to be third party beneficiaries hereunder. In no event
shall any action or inaction by the Company be deemed to constitute a waiver of
any rights of Equity Partners hereunder.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Minnesota.
(f) Disputes. In the event of any dispute among the parties arising
--------
out of this Agreement, the prevailing party shall be entitled to recover from
the nonprevailing party the reasonable expenses of the prevailing party
including, without limitation, reasonable attorneys' fees and expenses.
(g) Entire Agreement. This Agreement and the instruments and
----------------
agreements referenced herein constitute the entire agreement and understanding
among the parties pertaining to the subject matter hereof and supersede any and
all prior agreements, whether written or oral, relating hereto.
(h) Recapitalizations or Exchanges Affecting the Company's Capital
--------------------------------------------------------------
Stock. The provisions of this Agreement shall apply to any and all shares of
- -----
capital stock or other securities of the Company or any successor or assign of
the Company which may be issued in respect of, in exchange for or in
substitution of, the Shares by reason of any stock dividend, stock split,
reverse split, recapitalization, reclassification, combination, merger,
consolidation or otherwise, and such shares or other securities shall be
encompassed within the term "Shares" for purposes of this Agreement.
8.
<PAGE>
(i) No Rights. Nothing in this Agreement shall affect in any manner
---------
whatsoever the rights of the Company or any of its Subsidiaries to terminate
Employee's employment or other relationship for any reason, with or without
cause, subject to the terms and conditions of any agreement to which Employee
may be a party.
(j) Disclosure. The Company shall have no duty or obligation to
----------
affirmatively disclose to Employee, and Employee shall have no right to be
advised of, any material information regarding the Company or any of its
Subsidiaries at any time prior to, upon or in connection with the Company's
repurchase of the Shares under this Agreement at or after the cessation or
termination of Employee's employment or other relationship with the Company
and/or any of its Subsidiaries.
(k) Successors and Assigns. The Company may assign with absolute
----------------------
discretion any or all of its rights and/or obligations and/or delegate any of
its duties under this Agreement to any of its affiliates, successors and/or
assigns and this Agreement shall inure to the benefit of, and be binding upon,
such respective affiliates, successors and/or assigns of the Company in the same
manner and to the same extent as if such affiliates, successors and/or assigns
were original parties hereto. Without limiting the foregoing, the Company may
assign the Repurchase Option and/or the right of first refusal provided for in
Sections 3 and 4 of this Agreement, respectively, to any nominee, affiliate,
successor and/or assign. Unless specifically provided herein to the contrary,
Employee may not assign any or all of its rights and/or obligations and/or
delegate any or all of its duties under this Agreement without the prior written
consent of the Company. Upon an assignment of any or all of Employee's rights
and/or obligations and/or a delegation of any or all of its duties under this
Agreement in accordance with the terms of this Agreement, this Agreement shall
inure to the benefit of, and be binding upon, Employee's respective affiliates,
successors and/or assigns in the same manner and to the same extent as if such
affiliates, successors and/or assigns were original parties hereto.
(l) Headings. Introductory headings at the beginning of each section
--------
and subsection of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or description of the contents
of any such section and subsection of this Agreement.
(m) Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed an original and both of which, when taken
together, shall constitute one and the same Agreement.
(n) RIGHT IN OTHER CAPACITIES; EMPLOYEE'S REVIEW OF AGREEMENT.
---------------------------------------------------------
(i) ALTHOUGH AFTER COMPLETION OF HIS/HER PURCHASE OF THE SHARES,
EMPLOYEE WILL BE OR CONTINUE TO BE AN EMPLOYEE, OFFICER AND/OR DIRECTOR OF THE
COMPANY (OR OF A DIRECT OR INDIRECT
9.
<PAGE>
SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY), EMPLOYEE REPRESENTS THAT EMPLOYEE
IS ACQUIRING THE SHARES FOR THEIR POTENTIAL AS AN EQUITY INVESTMENT AND WITHOUT
ANY EXPECTATION UNDER SECTION 302A.751 OF THE MINNESOTA BUSINESS CORPORATION ACT
OR OTHERWISE THAT THE OWNERSHIP OF THE SHARES WILL ENTITLE EMPLOYEE TO ANY
RIGHTS AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY (OR ANY DIRECT OR
INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE COMPANY) THAT WOULD NOT EXIST IF
EMPLOYEE WERE NOT A SHAREHOLDER. EMPLOYEE FURTHER AGREES THAT NO CHANGE IN HIS
OR HER EXPECTATIONS CONCERNING EMPLOYMENT OR CONCERNING HIS OR HER PARTICIPATION
AS AN OFFICER OR DIRECTOR, IF APPLICABLE, WILL HAVE A REASONABLE BASIS UNLESS
SET FORTH IN A WRITTEN AGREEMENT EXPRESSLY GIVING EMPLOYEE ADDITIONAL RIGHTS AS
TO SUCH MATTERS. THE COMPANY HEREBY ADVISES EMPLOYEE THAT THE COMPANY IS
ISSUING THE SHARES IN RELIANCE ON THE FOREGOING REPRESENTATIONS OF EMPLOYEE AND
IN THE EXPECTATION THAT EMPLOYEE WILL NOT HAVE ANY RIGHT TO EMPLOYMENT BY THE
COMPANY (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF THE
COMPANY) OR TO CONTINUE TO BE AN OFFICER OR DIRECTOR OF THE COMPANY (OR OF ANY
SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE OF EMPLOYEE'S OWNERSHIP OF THE
SHARES AND THAT THE COMPANY WOULD NOT ISSUE SHARES TO EMPLOYEE IF EMPLOYEE HAD
ANY CONTRARY EXPECTATIONS.
(ii) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS BEEN
ADVISED TO CONSULT WITH LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS
AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN OR AMONG EMPLOYEE, THE COMPANY AND
ANY
10.
<PAGE>
OF ITS PRESENT OR PROSPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS AND/OR
EMPLOYEES.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
THE COMPANY:
AMERICA'S FAVORITE CHICKEN COMPANY
By: ________________________________
Name:
Title:
EMPLOYEE:
_______________________________________
11.
<PAGE>
With respect to Section 6(b) only:
EQUITY PARTNERS:
FS EQUITY PARTNERS III, L.P.,
a Delaware limited partnership
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: ________________________________
Name:
Title:
FS EQUITY PARTNERS INTERNATIONAL, L.P.,
a Delaware limited partnership
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings Limited
Its: General Partner
By: ________________________________
Name:
Title:
12.
<PAGE>
EXHIBIT 10.39
FORM OF
SECURED PROMISSORY NOTE
$_______________ _______ , 1997
FOR VALUE RECEIVED, the undersigned ______________________________________
("Borrower") hereby promises to pay to the order of AFC Enterprises, Inc.
("Payee"), the principal sum of _______________________________________________
dollars ($______________________________) together with interest on so much of
the unpaid balance of this Note as may be outstanding from time to time as set
forth below. The principal balance of, and all accrued and unpaid interest on,
this Promissory Note shall be payable in full by Borrower to Payee
on ________________________________ (the "Maturity Date").
The unpaid principal balance of this Note shall bear interest at the rate
of six and one-quarter percent (6 1/4%) per annum and accrued interest shall be
payable on the Maturity Date. Accrued interest on this Note shall be calculated
on the basis of the actual days elapsed during a 365-day year.
Payments of principal and interest on this Promissory Note shall be made at
such place as Payee shall have designated in writing to Borrower, and shall be
made in legal tender of the United States of America; provided, however, that
(x) upon the Maturity Date or (y) within 60 days following (i) an Initial Public
Offering (as defined below) or (ii) a Change of Control (as defined below),
Borrower may, at his or her option, substitute for legal tender shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), with a
Fair Market Value (as defined below) equal to the amount of legal tender for
which such shares of Common Stock are being substituted.
For purposes of this Note, "Initial Public Offering" shall mean the
Company's initial underwritten public offering of Common Stock registered under
the Securities Act of 1933, as amended, on Form S-1, that results in gross
proceeds to the Company in excess of $25 million from the sale of Common Stock.
"Change of Control" shall mean the acquisition by any person or group (as
defined in Section 13d of the Securities Act of 1934) of beneficial ownership of
more than fifty percent (50%) of the Company's then outstanding shares of Common
Stock. The "Fair Market Value" of a share of Common Stock shall be determined as
follows: (i) prior to an Initial Public Offering, the board of directors of the
Company (the "Board of Directors") shall act in good faith to determine the Fair
Market Value of each share of Common Stock as of the date of transfer, which
determination shall be final and binding, and (ii) upon the consummation of an
Initial Public Offering, the Fair Market Value of each share of Common Stock
shall be determined based on the average of the "Quoted Prices" (as defined
below) of a share of Common Stock for the five consecutive business days prior
to date of transfer. The "Quoted Price" of a share of Common Stock shall be the
last reported sales price of the Common Stock as reported by NASDAQ ("NASDAQ"),
or if the Common Stock is listed on a securities exchange, the last reported
sales price of the Common Stock on such exchange (which shall be for
consolidated trading if applicable to such exchange), or if the Common Stock is
not so reported or listed, the average of the last reported bid and asked price
of the Common Stock. If at any time the Common Stock is not listed on any
exchange or NASDAQ, the Board of Directors shall determine such Fair Market
Value on the basis of the best available evidence, which determination shall be
final and binding.
<PAGE>
If the date set for any payment of principal or interest on this Promissory
Note is a Saturday, Sunday or legal holiday, then such payment shall be due on
the next succeeding business day.
Borrower has acquired certain shares (the "Shares") of the capital stock of
Payee pursuant to the terms of that certain Stock Bonus Agreement dated as of
April 11, 1996 (the "Bonus Agreement"). Payment of this Promissory Note shall be
secured by the Shares as provided in that certain Stock Pledge Agreement of even
date herewith by and between Payee and Borrower (the "Pledge Agreement").
The principal balance of, and accrued and unpaid interest on, this
Promissory Note may be prepaid at any time, in whole or in part, without premium
or penalty. In addition, Borrower (or Permitted Transferees (as defined in the
Bonus Agreement)) may not effect a Transfer (as defined in the Bonus Agreement)
of Shares to anyone (other than a Permitted Transferee) without first paying to
Payee an amount at least equal to the Net Proceeds (as defined below) of such
Transfer. "Net Proceeds" shall mean the gross proceeds received upon a Transfer
of Shares less the tax liability of the Borrower with respect to such Transfer,
as such liability is determined by the Board of Directors, which determination
shall be final and binding. Any prepayments on this Promissory Note shall be
first applied to the payment of any accrued and unpaid interest and then to the
unpaid balance of the principal amount.
In the event Borrower shall commit a breach of or default under the Pledge
Agreement, Payee may accelerate this Promissory Note and declare the entire
unpaid principal amount of this Promissory Note and all accrued and unpaid
interest hereon to be immediately due and payable and, thereupon, the unpaid
principal amount and all such accrued and unpaid interest shall become and be
immediately due and payable, without notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor, or other notices or
demands of any kind (all of which are hereby expressly waived by Borrower). The
failure of Payee to accelerate this Promissory Note shall not constitute a
waiver of any of Payee's rights under this Promissory Note as long as Borrower's
default under this Promissory Note or breach of or default under the Pledge
Agreement continues.
The provisions of this Promissory Note shall be governed by and construed
in accordance with the laws of the State of Georgia without regard to the
conflicts of law rules thereof. In the event that Payee is required to take any
action to collect or otherwise enforce payment of this Promissory Note, Borrower
agrees to pay such reasonable attorneys' fees, court costs and other expenses as
Payee may incur as a result thereof, whether or not suit is commenced.
Time is of the essence of this Note.
In no contingency or event whatsoever shall the aggregate of all amounts
deemed interest hereunder and charged or collected pursuant to the terms of this
Note exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that the Payee has charged or received
interest hereunder in excess of the highest applicable rate, the Payee shall
promptly refund such excess
<PAGE>
interest to the Borrower and such rate shall automatically be reduced to the
maximum rate permitted by such law.
All notices, requests, demands or other communications under this
Promissory Note shall be delivered in accordance with the provisions of the
Pledge Agreement to the address(es) set forth therein.
IN WITNESS WHEREOF, this Promissory Note has been duly executed and
delivered by Borrower on the date first above written.
BORROWER:
---------------------------------------
(Name)
---------------------------------------
<PAGE>
EXHIBIT 10.40
FORM OF
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made as of
April ______, 1996 by and between __________________, as pledgor ("Pledgor"),
and America's Favorite Chicken Company ("Pledgee").
R E C I T A L S:
- - - - - - - -
A. Pledgor has acquired shares of Common Stock, $0.01 par value per
share, of Pledgee (the "Shares") pursuant to that certain Stock Bonus Agreement
dated April _______, 1996, by and between Pledgor and Pledgee (the "Bonus
Agreement").
B. In order to induce Pledgee to make the loan evidenced by that
certain Secured Promissory Note (the "Note") of even date herewith delivered by
Pledgor to Pledgee, Pledgor agrees to have any and all of Pledgor's Shares
subject to this Pledge Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties hereto agree as
follows:
1. Grant of Security Interest. Pledgor hereby grants to Pledgee a
--------------------------
security interest in the Shares, pledges and hypothecates the Shares to Pledgee,
and deposits the certificates evidencing the Shares (the "Certificates") with
Pledgee as collateral security for the payment by Pledgor of all obligations
existing under the Note, whether for principal, interest, fees, expenses or
otherwise, and the satisfaction of all obligations of Pledgor under this Pledge
Agreement. The Certificates, together with one or more stock assignments duly
executed in blank with signatures appropriately guaranteed or witnessed, are
being delivered herewith to Pledgee, to be retained by Pledgee as the
pledgeholder for the Shares.
2. Representations and Warranties of Pledgor. Pledgor represents
-----------------------------------------
and warrants to Pledgee that the Shares are free and clear of all claims,
mortgages, pledges, liens and other encumbrances of any nature whatsoever,
except (a) the liens and restrictions set forth herein and in the Note and (b)
any restrictions upon sale and distribution imposed by the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws.
3. Voting of Shares. So long as there shall exist no Event of
----------------
Default (as hereinafter defined), Pledgor shall be entitled to exercise, as
Pledgor deems proper but in a manner not inconsistent with the terms hereof,
Pledgor's rights to voting power with respect to the Shares. Pledgee, and not
Pledgor, shall be entitled to vote the Shares at any time that there exists an
Event of Default.
<PAGE>
4. Dividends and Other Distributions. So long as there shall exist
---------------------------------
no Event of Default and except as provided in Section 5 of this Pledge
Agreement, Pledgor shall be entitled to receive any dividend or other
distribution with respect to the Shares. If there exists an Event of Default,
such dividend or distribution shall be delivered to Pledgee to be held as
additional collateral security under this Pledge Agreement.
5. Stock Dividends. In the event of any dividend or distribution in
---------------
shares of capital stock or other securities of Pledgee or any successor or
assign of Pledgee which is issued in respect of, in exchange for or in
substitution of, the Shares by reason of any stock dividend, stock split,
reverse split, recapitalization, reclassification, combination, merger,
consolidation or otherwise, the shares or other securities to be distributed to
Pledgor shall be held by Pledgee as additional collateral security under this
Pledge Agreement and shall be encompassed within the term "Shares" for purposes
of this Pledge Agreement.
6. Pledgee's Duties. So long as Pledgee exercises reasonable care
----------------
with respect to the Shares in its possession, Pledgee shall have no liability
for any loss or damage to such Shares, and in no event shall Pledgee have
liability for any diminution in value of the Shares occasioned by economic or
market conditions or events. Pledgee shall be deemed to have exercised
reasonable care within the meaning of the preceding sentence if the Shares in
its possession are accorded treatment substantially equal to that which Pledgee
accords its own property, it being understood that Pledgee shall not have any
responsibility under this Pledge Agreement for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to the Shares, whether or not Pledgee has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any person or entity with respect to the Shares.
7. Release from Pledge; Transfers to Permitted Transferees. In the
-------------------------------------------------------
event of a purchase by the Company of any or all of the Shares pursuant to the
Bonus Agreement, such purchased Shares shall be released from this Pledge
Agreement.
In the event of a Transfer (as defined in the Bonus Agreement) to a
party other than Pledgee pursuant to Section 4 of the Bonus Agreement, the
Shares so Transferred shall be released from this Pledge Agreement only upon
payment to Pledgee of an amount at least equal to the Net Proceeds (as defined
below) of such Transfer. "Net Proceeds" shall mean the gross proceeds received
upon a Transfer of Shares less the tax liability of the Pledgor with respect to
such Transfer, as such liability is determined by the board of directors of the
Company, which determination shall be final and binding.
In the event of a Transfer pursuant to Section 5 of the Bonus
Agreement, the Pledgor authorizes the Pledgee to cause the certificate or
certificates evidencing the Shares to be reissued in the name of the Permitted
Transferee or Transferees (as defined in the Bonus Agreement); provided that (a)
the Shares shall continue to be subject to this Agreement and the Permitted
Transferee(s) shall execute an undertaking to be bound by this Pledge Agreement
in accordance with Section 5 of the Bonus Agreement, (b) the reissued
certificate or certificates shall
2
<PAGE>
continue to be held by the Pledgee pursuant hereto, and (c) the Permitted
Transferee or Transferees shall execute and deliver to the Pledgee stock
assignments in blank with respect to the Shares.
8. Sale of Collateral. Upon the occurrence of any Event of Default,
------------------
Pledgee shall have all the rights and remedies of a secured party under the
Uniform Commercial Code (the "UCC") and also may, without notice, except as
specified below, at its option, sell all or any part of the Shares, for cash,
notes or other property upon credit for future delivery or upon such other terms
as Pledgee may deem commercially reasonable. Upon such sale, Pledgee, unless
prohibited by a provision of any applicable statute, may purchase all or any
part of the Shares being sold, free from and discharged of all trusts, claims,
rights of redemption and equities of Pledgor. If the proceeds of any sale of
the Shares shall be insufficient to pay all amounts due under the Note and
satisfy the obligations of Pledgor under the Bonus Agreement and this Pledge
Agreement, including collection costs and expenses of such sale, Pledgor shall
remain obligated and liable for any deficiency with respect thereto. If, at any
time when Pledgee shall determine to exercise its rights to sell all or any part
of the Shares pursuant to this Section 8, such Shares, or the part thereof to be
sold, shall not be effectively registered under the Act as then in effect or any
similar statute then in force, subject to the provisions of Section 9 hereof,
Pledgee, in its sole and absolute discretion, is hereby expressly authorized to
sell such Shares, or any part thereof, by private sale in such manner and under
such circumstances as Pledgee may deem necessary or advisable in order that such
sale may be effectuated legally without such registration. Without limiting the
generality of the foregoing, Pledgee, in its sole and absolute discretion, may
approach and negotiate with a restricted number of potential purchasers to
effectuate such sale or restrict such sale to a purchaser or purchasers who
shall represent and agree that such purchaser or purchasers are purchasing for
its or their own account, for investment only, and not with a view to the
distribution or sale of such Shares or any part thereof. Any sale conducted in
the manner described in the foregoing sentence shall be deemed to be a sale
conducted in a commercially reasonable manner within the meaning of the UCC, and
Pledgor hereby consents and agrees that Pledgee shall incur no responsibility or
liability for selling all or any part of the Shares at a price which is not
unreasonably low, notwithstanding the possibility that a substantially higher
price might be realized if the sale were public. Pledgee shall not be obligated
to make any sale of the Shares regardless of notice of sale having been given.
Pledgee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and any such sale may, without further
notice, be made at the time and place to which it was so adjourned.
9. Redemption of Collateral. Notwithstanding any other provision of
------------------------
this Pledge Agreement, upon the occurrence of an Event of Default, Pledgee shall
give Pledgor written notice of the time and place of any public sale or of the
time on or after which any private sale or other Transfer is to be made at least
five days before the date fixed for any public sale or before the day on or
after which any private sale or other Transfer is to be made. Pledgor agrees
that, to the extent notice of sale shall be required by law, such five days'
notice shall constitute reasonable notification. This notice shall also specify
the aggregate outstanding monetary obligations of the Pledgor to Pledgee at the
date of such notice (the "Total Obligation"). At any time during such five-day
period, Pledgor shall have the right to redeem the Shares by the payment by
certified or bank cashier's check of an amount equal to the Total Obligation.
3
<PAGE>
10. Events of Default. At the option of Pledgee, the principal
-----------------
balance of the Note and all accrued and unpaid interest thereon, and all other
obligations of Pledgor to Pledgee thereunder, under the Bonus Agreement and
hereunder, shall become and be immediately due and payable, without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind (all of which are hereby
expressly waived by Pledgor), upon the occurrence of any of the events set forth
below (individually, an "Event of Default"):
(a) Pledgor shall fail to make complete payment of principal and
accrued interest when due under the Note;
(b) Pledgor shall fail to make the prepayment of principal and
accrued interest on the Note as required by the seventh paragraph of the Note;
or
(c) Pledgor shall commit a breach of or default under this Pledge
Agreement.
11. Termination. This Pledge Agreement shall terminate only upon
-----------
payment to Pledgee of all unpaid obligations existing under the Note, whether
for principal, interest, fees, expenses or otherwise and all unsatisfied
obligations of Pledgor under this Pledge Agreement. Upon termination of this
Pledge Agreement, Pledgor shall be entitled to the return of the Certificates
then held by Pledgee and any other collateral security then held by Pledgee
pursuant to Section 4 or 5 of this Pledge Agreement.
12. Cumulation of Remedies; Waiver of Rights. The remedies provided
----------------------------------------
herein in favor of Pledgee shall not be deemed exclusive but shall be cumulative
and shall be in addition to all of the remedies in favor of Pledgee existing at
law or in equity. Nothing in this Pledge Agreement shall require Pledgee to
proceed against or exhaust its remedies against the Shares before proceeding
against Pledgor or executing against any other security or collateral securing
performance of Pledgor's obligations to Pledgee under the Note or this Pledge
Agreement. No delay on the part of Pledgee in exercising any of its options,
powers or rights, or the partial or single exercise thereof, shall constitute a
waiver thereof.
13. Execution of Endorsements, Assignments, Etc. Upon the occurrence
-------------------------------------------
of an Event of Default, Pledgee shall have the right for and in the name, place
and stead of Pledgor to execute endorsements, assignments or other instruments
of conveyance or transfer with respect to all or any of the Shares and any other
shares of the capital stock of Pledgee or other property which is held by
Pledgee as collateral security pursuant to this Pledge Agreement.
14. Miscellaneous.
-------------
(a) Further Assurances. Each party hereto agrees to perform any
------------------
further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Pledge Agreement.
4
<PAGE>
(b) Notice. All notices, requests and other communications
------
hereunder shall be in writing and, if given by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
given by personal delivery, shall be deemed to have been validly served, given
or delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mail, as registered or certified mail, with proper postage prepaid
and addressed to the party or parties to be notified, at the following addresses
(or such other address(es) as a party may designate for itself by like notice):
If to Pledgee:
America's Favorite Chicken Company
6 Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
If to Pledgor, at the address appearing on the signature page
hereof.
(c) Amendments. This Pledge Agreement may be amended only by a
----------
written agreement executed by the parties hereto.
(d) Governing Law. This Pledge Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Georgia.
(e) Disputes. In the event of any dispute between the parties
--------
arising out of this Pledge Agreement, the prevailing party shall be entitled to
recover from the nonprevailing party the reasonable expenses of the prevailing
party including, without limitation, reasonable attorneys' fees and expenses.
(f) Entire Agreement. This Pledge Agreement and the instruments
----------------
and agreements referred to herein constitute the entire agreement and
understanding among the parties pertaining to the subject matter hereof and
supersede any and all prior agreements, whether written or oral, relating
hereto.
(g) Successors and Assigns. Pledgee shall have the right to assign
----------------------
with absolute discretion any or all of its rights and/or obligations and/or
delegate any or all of its duties under this Pledge Agreement to any of its
affiliates, successors and/or assigns, including, without limitation to any of
its banks or lending institutions as collateral security, and this Pledge
Agreement shall inure to the benefit of, and be binding upon, such respective
affiliates, successors and/or assigns of Pledgee in the same manner and to the
same extent as if such affiliates, successors and/or assigns were original
parties hereto. Unless specifically provided herein to the contrary, Pledgor
may not assign any or all of its rights and/or obligations and/or delegate any
or all of its duties under this Pledge Agreement without the prior written
consent of Pledgee. Upon an assignment of any or all of Pledgor's rights and/or
obligations and/or a delegation of any or all of its
5
<PAGE>
duties under this Pledge Agreement in accordance with the terms of this Pledge
Agreement, this Pledge Agreement shall inure to the benefit of, and be binding
upon, Pledgor's respective affiliates, successors and/or assigns in the same
manner and to the same extent as if such affiliates, successors and/or assigns
were original parties hereto.
(h) Headings. Introductory headings at the beginning of each
--------
section and subsection of this Pledge Agreement are solely for the convenience
of the parties and shall not be deemed to be a limitation upon or description of
the contents of any such section and subsection of this Pledge Agreement.
(i) Counterparts. This Pledge Agreement may be executed in two
------------
counterparts, each of which shall be deemed an original and both of which, when
taken together, shall constitute one and the same Pledge Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge
Agreement as of the day and year first above written.
PLEDGEE:
AMERICA'S FAVORITE CHICKEN COMPANY
By:
----------------------------------
Name:
Title:
PLEDGOR:
-------------------------------------
ADDRESS:
--------------------------------------
--------------------------------------
--------------------------------------
6
<PAGE>
EXHIBIT 10.41
AMERICA'S FAVORITE CHICKEN COMPANY
1994 SUPPLEMENTAL BENEFIT PLAN
FOR EXECUTIVE OFFICERS
ARTICLE I
PURPOSE
The purpose of this 1994 Supplemental Benefit Plan (the "Plan") is to
provide certain executive officers of America's Favorite Chicken Company, a
Minnesota corporation (the "Company"), certain death, disability, retirement and
medical benefits to encourage such officers to remain in the employ of the
Company and to use their best efforts, judgment and energy to perform, improve
and advance the business and interests of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth opposite such terms.
2.1 Beneficiary. The term "Beneficiary" shall mean the person or
-----------
persons designated by a Participant on his Enrollment Form or any amendment
thereto to receive his benefits payable hereunder at his death or, if no such
person survives the Participant or if no such designation is made, the
Participant's estate.
2.2 Board. The term "Board" shall mean the Board of Directors of the
-----
Company.
2.3 Change of Control. The term "Change of Control" shall mean the
-----------------
dissolution or liquidation of the Company, or a reorganization, merger or
consolidation of the Company with one or more corporations as a result of which
the owners of all of the outstanding shares of common stock of the Company
immediately prior to such reorganization, merger or consolidation own in the
aggregate less than 50% of the outstanding shares of common stock of the Company
or any other entity into which the Company shall be merged or consolidated
immediately following the consummation thereof, or the sale, transfer or other
disposition of all or substantially all of the assets or more than 50% of the
then outstanding shares of common stock of the Company.
2.4 Code. The term "Code" shall mean the Internal Revenue Code of
----
1986, as amended.
2.5 Company. The term "Company" shall mean America's Favorite
-------
Chicken Company, a Minnesota corporation.
2.6 Compensation. The term "Compensation" shall mean for each
------------
Participant for each Plan Year, the stated base annual
<PAGE>
salary amount payable to that Participant for the services he renders to the
Company as an officer during such Plan Year. The stated base annual salary for
each Participant for the initial Plan Year is set forth on Schedule "I" attached
hereto and made a part hereof, which Schedule shall be amended for each
subsequent Plan Year to reflect each Participant's stated base annual salary;
provided, however, in the event of a failure to amend such Schedule, a
Participant's stated annual base salary shall be the greater of (i) the amount
set forth on the most recent Schedule or (ii) the salary or other compensation,
excluding bonuses and the value of stock options, actually paid to each
Participant during the Plan Year.
2.7 Death Benefit. The term "Death Benefit" shall mean, for each
-------------
Participant, an amount equal to five (5) times his Compensation as set forth on
Schedule "I", or such greater amount as may be determined by the Board from time
to time taking into account increases in the Participant's Compensation.
2.8 Deferred Compensation Amount. The "Deferred Compensation Amount"
----------------------------
of a Participant shall be determined as follows:
(a) Determine the Participant's average Compensation for the last five
Plan Years immediately preceding the Participant's Retirement Date.
(b) Multiply the average obtained in (a) above by thirty (30%)
percent.
(c) Multiply the product obtained in (b) above by ten (10), and the
product thus obtained shall equal the Deferred Compensation Amount of such
Participant.
2.9 Deferred Compensation Benefit. The term "Deferred Compensation
-----------------------------
Benefit" shall mean that portion of the Deferred Compensation Amount payable to
a Participant upon his Retirement under Section 6.1 hereof.
2.10 Disability. The term "Disability" with respect to any
----------
Participant shall have the meaning ascribed to it in such Participant's
Supplemental Disability Policy.
2.11 Disability Benefit. The term "Disability Benefit" with respect
------------------
to any Participant shall mean the supplemental disability income benefits
payable to a Participant upon his Disability under Article VIII hereof.
2.12 Early Retirement Age. The term "Early Retirement Age" shall mean
--------------------
the age of fifty-five (55) years.
2.
<PAGE>
2.13 Enrollment Form. The term "Enrollment Form" shall mean the
---------------
form, substantially similar to Exhibit "A" attached to this Plan, executed by
(a) each Participant to acknowledge and accept participation in this Plan and
the Insurance Agreement and to designate his Beneficiary, and (b) the Plan
Administrator to acknowledge and accept such participation on behalf of the
Company.
2.14 Executive Benefits. The term "Executive Benefits" shall mean the
------------------
Retirement Benefit, the Disability Benefit, the Death Benefit and the Medical
Reimbursement Benefit.
2.15 Insurance Agreement. The term "Insurance Agreement" shall mean
-------------------
the split dollar and/or term insurance agreements incorporated in this Plan as
Article VII.
2.16 Insurer. The term "Insurer" shall mean any insurance company
-------
issuing one or more of the life or disability insurance policies subject to this
Plan.
2.17 Life Insurance Policy. The term "Life Insurance Policy" with
---------------------
respect to any Participant shall mean the policy or policies maintained by the
Company on the life of such Participant pursuant to Article VII hereof.
2.18 Medical Expenses. The term "Medical Expenses" shall mean expenses
----------------
for medical and dental care as defined in Section 213(e) of the Code (or the
corresponding law as hereafter amended), as well as premiums on accident,
health, hospitalization, disability income and surgical and medical insurance.
2.19 Medical Insurance Benefit. The term "Medical Insurance Benefit"
-------------------------
shall mean the medical insurance coverage furnished by the Company to a
Participant and his spouse upon the Retirement of the Participant pursuant to
Section 6.2 hereof.
2.20 Normal Retirement Age. The term "Normal Retirement Age" shall
---------------------
mean the age of 62 years.
2.21 Participants. The term "Participants" shall mean the following
------------
executive officers of the Company:
(a) Frank J. Belatti (Chairman of the Board of Directors,
President and Chief Executive Officer).
(b) Dick R. Holbrook (Executive Vice President and Chief
Operating Officer).
3.
<PAGE>
(c) Kamal M. Nassar (Executive Vice President and Chief Financial
Officer).
(d) Joseph R. Genovese (Executive Vice President - Marketing).
(e) Samuel N. Frankel (Secretary and General Counsel).
2.22 Plan Administrator. The term "Plan Administrator" shall mean the
------------------
Company; however, the Company, acting through the Board, may from time to time
designate an individual or a committee of individuals pursuant to Section 3.1 to
perform the duties of Plan Administrator.
2.23 Plan Year. The term "Plan Year" shall mean the period commencing
---------
January 1, 1994, and ending December 31, 1994, and thereafter, each twelve (12)
consecutive month period commencing on each January 1 and terminating on the
following December 31.
2.24 Retirement. The term "Retirement" shall mean the termination of
----------
a Participant's employment with the Company for any reason other than his death
at any time after he has (i) completed ten (10) Years of Service with the
Company (unless such Years of Service requirement is waived or reduced in
writing by the Company) and (ii) attained the Early Retirement Age.
2.25 Retirement Date. The term "Retirement Date" shall mean the
---------------
effective date of a Participant's Retirement.
2.26 Retirement Benefit. The "Retirement Benefit" shall be comprised
------------------
of the Deferred Compensation Benefit and the Medical Insurance Benefit.
2.27 Supplemental Disability Policy. The term "Supplemental
------------------------------
Disability Policy" with respect to any Participant shall mean the disability
policy maintained by the Company pursuant to Article VII hereof for such
Participant.
2.28 Year of Service. The term "Year of Service" means a twelve (12)
---------------
month period during which the Participant has not less than one thousand (1,000)
hours of service with the Company. Computation of any twelve (12) month period
shall be made with reference to the date on which the Participant's employment
commenced.
4.
<PAGE>
ARTICLE III
PLAN ADMINISTRATOR
3.1 The Company shall be the Plan Administrator and Named Fiduciary
of this Plan for purposes of ERISA; however, the Company, may at any time or
from time to time in its sole discretion, appoint an individual or a committee
of individuals to perform its duties as Plan Administrator. The Company hereby
designates Jeannette Ferrell to serve in such capacity until her resignation,
removal by the Board or inability to serve in such capacity for any reason.
3.2 If a committee, the Plan Administrator shall select one of its
members as its Chairman and shall hold its meeting at such times and places as
it may determine. A majority of its members shall constitute a quorum. The
committee may appoint a secretary to keep minutes of its meetings and may make
such rules and regulations for the conduct of its business as it shall deem
advisable.
3.3 All determinations of the Plan Administrator, if a committee,
shall be made by a majority vote of its members. Any decision or determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
3.4 The Plan Administrator may employ others to render advice with
regard to its duties under the Plan and allocate to others its fiduciary
responsibilities and exercise any and all other powers necessary to fulfill its
responsibilities under this Plan to the extent not in conflict with ERISA.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Plan Administrator
appointed under Section 3.1.
4.2 The Plan Administrator shall have the authority to interpret the
Plan and to prescribe, amend and rescind such rules, regulations and
documentation and to make such other determinations as it deems reasonable,
necessary and proper for the administration of the Plan and the implementation
of its purposes.
4.3 The Plan Administrator may correct any defect, supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem necessary. Any decision made, or action taken, by the Plan
Administrator arising
5.
<PAGE>
out of or in connection with the interpretation or administration of the Plan
shall be final and conclusive in all cases.
4.4 The Plan Administrator shall be indemnified by the Company
against all reasonable costs and expenses necessarily incurred by it in
connection with any action, suit or proceeding to which it may become a party by
reason of action taken or failure to act in connection with the Plan. Any other
expenses of administering the Plan shall also be borne by the Company. The Plan
Administrator, if an individual, or any member of the Plan Administrator
committee, if any, shall not be personally liable for any act done or
determination made in good faith.
ARTICLE V
PARTICIPATION
5.1 Each Participant shall be entitled to participate in all of the
Executive Benefits under this Plan upon the terms and conditions set forth
herein as of the date he delivers to the Plan Administrator an Enrollment Form.
5.2 Except as otherwise provided herein, Participant shall remain a
participant in this Plan until the termination of his employment with the
Company. Except in the event of a termination by reason of death, Disability or
Retirement, or an involuntary termination following a Change of Control as
provided, in Article X hereof, following any such termination neither the
Participant nor his Beneficiary shall have any claim whatsoever for any
Executive Benefits under this Plan. Any termination of participation in this
Plan shall be effective as of the date such termination occurs.
ARTICLE VI
RETIREMENT BENEFIT
Upon his Retirement from the Company, a Participant shall be entitled
to both the Deferred Compensation Benefit and the Medical Insurance Benefit as
hereinafter set forth.
6.1 Deferred Compensation Benefit. The amount of Deferred
-----------------------------
Compensation Benefit and the manner of payment thereof shall be as hereinafter
set forth:
(a) Amount of Deferred Compensation. The Deferred Compensation
-------------------------------
Benefit shall equal that percentage of the Deferred Compensation Amount set
forth below:
(1) Early Retirement Age. If the Participant's Retirement
--------------------
occurs on or after his attaining the Early Retirement Age but prior to his
attaining the Normal
6.
<PAGE>
Retirement Age, then the Deferred Compensation Benefit shall equal the Deferred
Compensation Amount reduced by five (5%) percent of such Amount for each year or
part thereof by which the Participant's Retirement Date precedes the date the
Participant would attain the Normal Retirement Age. An involuntary termination
following a Change of Control as provided in Article X shall not, for purposes
of this Plan, be considered an Early Retirement.
(2) Normal Retirement Age. If the Participant's Retirement
---------------------
occurs on or after his attaining the Normal Retirement Age, then the Deferred
Compensation Benefit shall equal one hundred (100%) percent of the Deferred
Compensation Amount.
(b) Payment of Deferred Compensation Benefit. An eligible
----------------------------------------
Participant's Deferred Compensation Benefit shall be payable in one hundred
twenty (120) equal monthly installments, commencing on the first day of the
month following the Participant's Retirement Date. If a Participant should die
after payment of the Deferred Compensation Benefit has commenced hereunder but
before such Benefit has been paid in full, the unpaid balance will continue to
be paid in equal monthly installments to the Beneficiary.
6.2 Medical Insurance Benefits. The Company shall provide to the
--------------------------
Participant and his or her spouse health care benefits equivalent to the
coverage then being provided by the Company to its executive officers under the
Company's basic health care benefit program for a period commencing on the
Retirement Date and terminating on the earlier to occur of (a) the expiration of
the 120 month period during which the Deferred Compensation Benefits are payable
hereunder, or (b) the date of death of the last to die of the Participant and
his spouse.
ARTICLE VII
DEATH BENEFIT/
INSURANCE AGREEMENT
7.1 Death Benefit. In the event of the death of a Participant during
-------------
the term of his employment with the Company and after the Company first obtains
the Life Insurance Policy required by Section 7.2 hereof, the Beneficiary shall
be entitled to receive an amount equal to the Death Benefit from the death
benefit proceeds payable under such Life Insurance Policy.
7.
<PAGE>
7.2 Policy Ownership and Dividend Application.
-----------------------------------------
(a) As soon as practical following Enrollment of a Participant,
the Company shall apply for and purchase, at its option, either a term or
permanent Life Insurance Policy on the life of each Participant having minimum
death proceeds equal to such Participant's Death Benefit. If for any reason the
Company, after reasonable efforts, is not able to obtain the Life Insurance
Policy required hereby for any Participant, then such Participant and his
Beneficiary shall not be entitled to any Death Benefit hereunder except as may
otherwise be determined in the discretion of the Company and set forth in
writing. The Company shall have and may exercise all ownership rights in such
Life Insurance Policy, except as provided in this Article VII.
(1) Each Participant shall be entitled to designate the
Beneficiary to receive payment of that portion of the death benefit proceeds
payable under the Life Insurance Policy on his life which equals the Death
Benefit payable with respect to such Participant. The initial Beneficiary or
Beneficiaries shall be designated in the Participant's Enrollment Form.
Thereafter, upon receipt of written notice of a Participant's desire to change
his Beneficiary designation in form acceptable to the Company, the Company will
promptly take such action as is necessary to evidence such change and such
change shall become effective as provided in the applicable Life Insurance
Policies.
(2) The Company will not, without the written consent of a
Participant, assign its rights in any Life Insurance Policy on such
Participant's life, other than for purposes of obtaining a loan against the Life
Insurance Policy as provided in paragraph (3) below.
(3) The Company will have the right to (A) borrow from the
Insurer and secure that loan by a Participant's Life Insurance Policy for any
purpose including, but not limited to, borrowing for the purpose of paying
premiums on that Policy without giving notice to the insured Participant, and
(B) make partial withdrawals of policy surrender values; provided, however, that
if the exercise of such rights would reduce the death benefit payable to any
Participant's Beneficiary pursuant to Section 7.2(a)(1), then such rights shall
be exercisable by the Company only with the written consent of that Participant.
(b) Except as provided in paragraph 7.2(a) above, as long as the
Insurance Agreement contained in the Plan is in force, the Company will not
exercise any rights under any Life
8.
<PAGE>
Insurance Policy which will compromise or reduce the death benefit payable to
such Participant's Beneficiary.
(c) Dividends payable under the Life Insurance Policies, if any,
will be applied as provided in the Policies.
(d) For matters between a Participant and the Company, the
Insurance Agreement shall take precedence over any provisions of a Life
Insurance Policy (including any riders, amendments and attachments thereto) in
case of a conflict between the terms of the Life Insurance Policy and this
Article VII.
7.3 Payment of Premiums.
-------------------
(a) As long as the Insurance Agreement is in force, the Company
shall pay the premiums on each term Life Insurance Policy, and each Participant
and the Company agree to share in the payment of premiums on each permanent Life
Insurance Policy on such Participant's life held under this Plan in such amounts
and in the manner set forth below:
(1) Unless paragraph (2) below applies, the Participant's
share of the annual premium shall be that portion of the annual premium due on
the Life Insurance Policy that is equal to the amount of the economic benefit
that would be taxable to the Participant, but for the payment by the Participant
of such amount based upon an amount of insurance protection equal to the
Participant's portion of the death benefit proceeds specified in Section 7.2.
The Company shall pay the balance of each such annual premium.
(2) If the Life Insurance Policy is a flexible premium
contract such that premiums may be varied as to the amount and timing of premium
payments, then the Participant shall be required to make an annual premium
contribution in an amount determined in accordance with paragraph (1) above,
beginning on the Policy issue date and continuing on each subsequent anniversary
of such date.
The Company shall pay premiums at such times and in such amounts as it may
determine in its sole discretion.
(b) The amount of economic benefit that would be taxable to each
Participant shall be computed in accordance with the cost of life insurance per
$1,000 as shown in the table contained in Revenue Ruling 55-747, 1955-2 C.B. 22
as provided in Revenue Ruling 64-328, 1964-2 C.B. II (often commonly referred to
as the "P.S. 58 costs").
9.
<PAGE>
(c) In order to facilitate the payment of premiums on the Life
Insurance Policies, the Company, in the first policy year and in each subsequent
year for as long as this Insurance Agreement is in force, shall forward the
total amount of the premium then currently due and payable on the Policies
directly to the Insurer and shall indicate immediately in the appropriate
Company records that the annual sum payable by the Participant as provided in
Section 7.3(a) shall be added to his annual salary or compensation.
7.4 Beneficiary Provisions.
----------------------
(a) If a Participant dies while this Insurance Agreement is in
force, the total death benefit proceeds from policies held by the Company on his
life shall be divided as follows:
(1) That portion of such proceeds which equals the
Participant's Death Benefit shall be paid to the Participant's Beneficiary; and
(2) The balance of such proceeds, if any, shall be paid to
the Company.
(b) No Beneficiary shall have any right to reimbursement or
contribution from the estate of the Participant or from the Company with respect
to the amount collected by the Company under any Life Insurance Policy held
under this Plan.
(c) If the Participant dies while this Insurance Agreement is in
force, the Company agrees to take such action as may be necessary to obtain
payment from the Insurer to the Participant's designated Beneficiary of the
amounts payable under any applicable Life Insurance Policy.
7.5 Termination of the Insurance Agreement. This Insurance Agreement
--------------------------------------
shall automatically terminate with respect to any Participant upon the
Participant's termination of employment for any reason prior to his death. Upon
termination of this Insurance Agreement, the Company shall become sole owner of
such policy unless within thirty (30) days following such termination
Participant elects to purchase such Policy from the Company for an amount equal
to its net cash surrender value.
ARTICLE VIII
DISABILITY BENEFITS
The Company shall procure for each Participant as soon as possible
after the Enrollment of the Participant and shall maintain in full force and
effect during the Participant's
10.
<PAGE>
employment with the Company a Supplemental Disability Income Policy which will
supplement the benefits payable under any disability benefit provided to the
Participant by the Company under its basic employee health care benefit program,
so that, with respect to a Disability occurring after the Company first obtains
the Supplemental Disability Income Policy, the total monthly disability benefit
payable to the Participant under all disability policies maintained by the
Company, after a maximum elimination period of ninety (90) days, shall equal the
lesser of Thirty Thousand and No/100 Dollars ($30,000.00) or the sum of the
following amounts:
(1) 80% of the first $250,000.00 of the Participant's Compensation;
plus
(2) 70% of the next $100,000.00 of the Participant's Compensation;
plus
(3) 25% of the Participant's Compensation in excess of $100,000.00.
If for any reason the Company, after reasonable efforts, is not able to obtain
the Supplemental Income Disability Policy required hereby for any Participant,
then such Participant shall not be entitled to any Disability Benefit hereunder
except as may otherwise be determined in the discretion of the Company and set
forth in writing.
ARTICLE IX
MEDICAL REIMBURSEMENT BENEFITS
9.1 Benefits. The Company will reimburse, at least quarterly, each
--------
Participant for all Medical Expenses incurred by such Participant and his or her
spouse and dependents, during his employment with the Company to the extent of
the limitations herein provided.
9.2 Payments by the Company. The Company shall be authorized to
-----------------------
purchase such insurance or insurance contracts to fund all or any portion of its
obligations under this Article IX, or may pay such Medical Expenses directly
from the funds of the Company, as may from time to time be determined by the
Board. The Company may, in its discretion, pay directly any or all of the
Medical Expenses in lieu of making reimbursement therefor, in which event, the
Company shall be relieved of all further responsibility with regard to such
Medical Expenses.
11.
<PAGE>
9.3 Limitations.
-----------
(a) Reimbursable Medical Expenses shall not exceed Ten Thousand
and No/100 ($10,000.00) Dollars in any Plan Year.
(b) Reimbursement or payment under the Plan shall be made by the
Company only in the event and to the extent that such reimbursement or payment
is not provided under any insurance policy or policies, whether owned by the
Company or the Participant, or under any other health and accident or wage
continuation plan. In the event that there is such an insurance policy or other
plan in effect, providing for reimbursement in whole or in part, then to the
extent of the coverage under such policy or plan, the Company shall be relieved
of any and all liability hereunder.
9.4 Submission of Proof. Any eligible Participant of the Company
-------------------
applying for reimbursement under this Plan shall submit to the Company all
receipts or bills for Medical Expenses for which reimbursement is sought.
Payments may be made, in the discretion of the Company, either with or without
the required verification. Also, it shall not be necessary that the Medical
Expenses have been paid at the time such Participant seeks reimbursement or
payment, but merely that, if not yet paid, there exists an obligation on the
part of the eligible Participant to pay the Medical Expenses.
ARTICLE X
CHANGE OF CONTROL
Notwithstanding anything herein to the contrary, in the event of a
Change of Control during a Participant's employment with the Company, this Plan
and the rights of each Participant hereunder shall remain in full force and
effect, except as follows:
(a) The Years of Service requirement with respect to each
Participant's right to receive Retirement Benefits shall be eliminated.
(b) In the event of the involuntary termination of a
Participant's employment with the Company prior to his death, Disability or
Retirement, such Participant shall continue to be a Participant under this Plan
and the Executive Benefits granted to such Participant hereunder shall continue
and remain in full force and effect as if such Participant remained in the
employ of the Company until the earlier of (i) the Participant's death, in which
event the Beneficiary of the deceased Participant shall be entitled to the
Participant's Death Benefit or (ii) the
12.
<PAGE>
receipt of written notice by the Company of a Retirement Date designated by the
Participant, at any time on or after he attains the Early Retirement Age, in
which event the Participant shall be entitled to the Retirement Benefit, based
upon the Compensation he received during the last five Plan Years in which such
Participant was employed by the Company.
ARTICLE XI
DISTRIBUTIONS
11.1 Source of Distributions. All distributions under this Plan shall
-----------------------
be made by the Company from its general assets, and the status of each
Participant's or Beneficiary's claim to a benefit shall be the same as the
status of any other general unsecured creditor of the Company; provided,
however, any Death Benefit amount due from the general assets of the Company
under Section 7.1 shall be offset by any death benefit proceeds received by the
Participant's Beneficiary under the Insurance Agreement under Article VII. No
person shall look to, or have any claim whatsoever against the Plan
Administrator, any member of the Board, other Executives or officers of the
Company, other employees, shareholders or any other persons acting on behalf of
the Company in their individual capacities for the distribution of any Executive
Benefit or for the payment of any other amounts under this Plan. As part of its
general assets and in support of the Executive Benefit promises made under this
Plan, the Company may continue to own and maintain, in whole or in part, any
existing insurance policies on the life or well-being of any of the Participants
or purchase new policies of the same type, but no Participant nor any
Beneficiary, legal heir, successor or assign of his shall have any claim
whatsoever to any such policy or the proceeds of any such policy, except as may
be specifically provided in the Insurance Agreement under Article VII.
11.2 Mental or Legal Incompetence. The Company, in its sole
----------------------------
discretion, may make distribution to the guardian or other legal representative
of a Participant or Beneficiary, if the Company determines that the Participant
or Beneficiary is mentally or legally incompetent to receive such benefit
distribution. Any such distribution shall be in full and complete satisfaction
of any and all claims whatsoever by or behalf of such Participant or Beneficiary
under this Plan against the Company, the Plan Administrator, any member of the
Board, other Participants or officers of the Company, other employees,
shareholders and any other person acting on behalf of them.
13.
<PAGE>
ARTICLE XII
CLAIMS PROCEDURES
12.1 Filing of a Claim for Benefits. Any Participant or Beneficiary
------------------------------
entitled to one or more Executive Benefits under this Plan will file a claim
request with the Plan Administrator with respect to the applicable Executive
Benefits.
12.2 Denial of Claim. A claim for an Executive Benefit under this
---------------
Plan shall be denied if the Company determines that the Participant or
Beneficiary is not entitled to receive such Executive Benefit under the Plan.
Notice of a denial shall be furnished to the Participant or Beneficiary within a
reasonable period of time after receipt of the claim by the Plan Administrator.
12.3 Content of Notice. Within ninety (90) days of the denial of a
-----------------
claim under this Plan, the Plan Administrator shall provide to every Participant
or Beneficiary who is denied a claim written notice setting forth, in a manner
calculated to be understood by such Participant or Beneficiary, the following:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary to perfect the claim, and any explanation of why such material or
information is necessary; and
(d) An explanation of the Plan's claim review procedure as set
forth below.
12.4 Review Procedure. The purpose of the review procedure is to
----------------
provide a method by which a Participant or Beneficiary may have a reasonable
opportunity to appeal a denial of a claim to the Plan Administrator for a full
and fair review. To accomplish that purpose, the Participant, Beneficiary or a
duly authorized representative:
(a) May require a review upon written application to the Plan
Administrator;
(b) May review pertinent Plan documents; and
(c) May submit issues and comments in writing.
14.
<PAGE>
A review shall be requested by filing a written application with the Plan
Administrator at any time within sixty (60) days after receipt by the
Participant or Beneficiary of a written notice of the denial of his claim
pursuant to Section 12.3.
12.5 Decision on Review. A decision on review of a denied claim shall
------------------
be made in the following manner:
(a) The decision on review shall be made by the Plan Administer
who may, in his discretion, hold a hearing on the claim. Such decision shall be
made promptly, and not later than sixty (60) days after receipt of the request
for review pursuant to Section 12.4, unless special circumstances (such as the
need to hold a hearing) require an extension of time for processing, in which
case a decision shall be rendered as soon as possible, but not later than one
hundred and twenty (120) days after receipt of the request for review.
(b) The decision on review shall be in writing and shall include
specific reasons for the decisions, written in a manner calculated to be
understood by the Participant or Beneficiary, and specific references to the
pertinent Plan provisions upon which the decision is based.
ARTICLE XIII
AMENDMENT AND TERMINATION OF PLAN
The Board may at any time or from time to time amend or revise the
terms of this Plan, provided that no such amendment or revision shall, except
with the consent of each Participant affected, adversely affect any right to any
Executive Benefits granted hereunder prior to such amendment or revision.
ARTICLE XIV
MISCELLANEOUS
14.1 Company Liability. Nothing in this Plan shall be construed to
-----------------
limit in any way the right of the Company to terminate the employment of any
Participant at any time; or to be evidence of any agreement or understanding,
express or implied, that the Company will employ any Participant in any
particular position or at any particular rate of remuneration or for any
particular period of time.
14.2 Indemnification. The Company shall indemnify and hold harmless
---------------
the Plan Administrator, any member thereof and any employee who may act on
behalf of the Company in the administration of this Plan from and against any
liability, loss, cost or expense (including reasonable attorneys' fees) incurred
at any time as a result of or in connection with any claims,
15.
<PAGE>
demands, actions or causes of action of any Participant, any person claiming
through or under any of them, or any other person, party or authority claiming
to have an interest in this Plan or standing to act for any persons or groups
having an interest in this Plan, for or on account of, any of the acts or
omissions (or alleged acts or omissions) of the Plan Administrator, any member
thereof or any such employee, except to the extent resulting from such person's
willful misconduct.
14.3 Tax Effects. The Company makes no warranties or representations
-----------
with regard to the tax effects or results of this Plan. Any Participant
electing participation under this Plan shall be deemed to have relied upon his
own tax advisors with regard to such effects.
14.4 No Assignment; Binding Effect. Neither a Participant nor his
-----------------------------
Beneficiary shall have the right to alienate, assign, commute or otherwise
encumber his rights hereunder for any purpose whatsoever, and any attempt to do
so shall be disregarded completely as null and void. The provisions of this
Plan shall be binding on each Participant and on each person who claims a
benefit under him and on the Company and any successor to the Company.
14.5 Self-Interest. No Participant shall have any right to vote or
-------------
decide upon any matter related directly or indirectly to him or any right of his
to claim any benefit under the Plan. Accordingly, if the Plan Administrator is
a Participant, the Board shall make all decisions with respect to his rights
under this Plan.
14.6 Construction. This Plan shall be construed in accordance with
------------
the laws of the State of Georgia. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan. In the construction of this Plan,
the masculine, feminine or neuter genders, and the singular and plural numbers,
shall each include the other wherever appropriate.
14.7 References. Unless otherwise indicated, all references made in
----------
this Plan shall be to articles, sections and subsections of this Plan.
16.
<PAGE>
14.8 Effective Date of Plan. This Plan shall be effective as of
----------------------
April 19, 1994, the date this Plan was approved by the Board.
Dated as of the 9th AMERICA'S FAVORITE CHICKEN COMPANY
day of May, 1994.
By: /s/
----------------------------
Frank J. Belatti, President
and Chief Executive Officer
17.
<PAGE>
SCHEDULE "I"
<TABLE>
<CAPTION>
<S> <C>
Frank J. Belatti $400,000
Dick R. Holbrook $200,000
Kam M. Nassar $200,000
Joseph R. Genovese $175,000
Samuel N. Frankel $200,000
</TABLE>
18.
<PAGE>
EXHIBIT A
AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR EXECUTIVE OFFICERS
ENROLLMENT FORM
PART I. ENROLLMENT
- -------------------
The Plan Administrator appointed to administer the Supplemental
Benefit Plan for Executive Officers (the "Plan") has determined that
_______________________ ("Participant") is eligible for and deserving of
consideration under the Plan, a copy of which is attached hereto and
incorporated in this Enrollment Form for all purposes. Capitalized terms which
are used in this Enrollment Form and not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
Execution of this Enrollment Form shall evidence Participant's full
acceptance of the terms and conditions of the Plan, the Insurance Agreement
contained therein and this Enrollment Form.
The Plan Administrator reserves the right to modify or cancel this
Enrollment Form at any time, subject to the express provisions of the Plan.
This Enrollment Form shall continue in effect until superseded or cancelled by
the Plan Administrator.
PART II. BENEFICIARY DESIGNATION
- --------------------------------
I hereby designate ___________________________________, my
____________________ (state relationship), whose current address is
_______________________________________________ as my primary Beneficiary under
the Plan. If such person fails to survive me, I hereby designate
________________________________, my ___________________________ (state
relationship), whose current address is ___________________________________ as
my secondary Beneficiary under the Plan. If such secondary Beneficiary fails to
survive me, my Beneficiary shall be my estate. This Beneficiary designation
shall become effective only upon its receipt and acceptance by the Plan
Administrator during my lifetime and upon becoming effective, shall supersede
all previous designations made by me.
Date: _____________ Signature:_________________________________
Print Name: _______________________________
19.
<PAGE>
THE PLAN ADMINISTRATOR FOR THE AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR EXECUTIVE OFFICERS HEREBY ACKNOWLEDGES RECEIPT AND
ACCEPTANCE OF THIS ENROLLMENT FORM THIS ____ DAY OF _________________, 1994.
____________________________
Plan Administrator
20.
<PAGE>
EXHIBIT 10.42
AMERICA'S FAVORITE CHICKEN COMPANY
1994 SUPPLEMENTAL BENEFIT PLAN
FOR SENIOR AND EXECUTIVE STAFF OFFICERS
ARTICLE I
PURPOSE
The purpose of this 1994 Supplemental Benefit Plan (the "Plan") is to
provide certain senior and executive staff officers of America's Favorite
Chicken Company, a Minnesota corporation (the "Company"), certain death,
disability, retirement and medical benefits to encourage such officers to remain
in the employ of the Company and to use their best efforts, judgment and energy
to perform, improve and advance the business and interests of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth opposite such terms.
2.1 Beneficiary. The term "Beneficiary" shall mean the person or
-----------
persons designated by a Participant on his Enrollment Form or any amendment
thereto to receive his benefits payable hereunder at his death or, if no such
person survives the Participant or if no such designation is made, the
Participant's estate.
2.2 Board. The term "Board" shall mean the Board of Directors of the
-----
Company.
2.3 Code. The term "Code" shall mean the Internal Revenue Code of
----
1986, as amended.
2.4 Company. The term "Company" shall mean America's Favorite
-------
Chicken Company, a Minnesota corporation.
2.5 Compensation. The term "Compensation" shall mean for each
------------
Participant the stated base annual salary payable to that Participant for the
services he renders to the Company as an officer during any twelve (12) month
period.
2.6 Death Benefit. The term "Death Benefit" shall mean, for each
-------------
Participant, an amount equal to the lesser of (i) an amount determined by the
President of the Company as provided in Article X hereof or (ii) five (5) times
his Compensation on the date he becomes a Participant of this Plan, or such
greater amount as may be determined by the Board or the President from time to
time taking into account increases in the Participant's Compensation.
<PAGE>
2.7 Deferred Compensation Amount. The "Deferred Compensation Amount"
----------------------------
of a Participant shall be determined as follows:
(a) Determine the Participant's average Compensation for the last five
Plan Years immediately preceding the Participant's Retirement Date.
(b) Multiply the average obtained in (a) above by thirty (30%)
percent.
(c) Multiply the product obtained in (b) above by ten (10), and the
product thus obtained shall equal the Deferred Compensation Amount of such
Participant.
2.8 Deferred Compensation Benefit. The term "Deferred Compensation
-----------------------------
Benefit" shall mean that portion of the Deferred Compensation Amount payable to
a Participant upon his Retirement under Section 6.1 hereof.
2.9 Disability. The term "Disability" with respect to any
----------
Participant shall have the meaning ascribed to it in such Participant's
Supplemental Disability Policy.
2.10 Disability Benefit. The term "Disability Benefit" with respect
------------------
to any Participant shall mean the supplemental disability income benefits
payable to a Participant upon his Disability under Article VIII hereof.
2.11 Early Retirement Age. The term "Early Retirement Age" shall mean
--------------------
the age of fifty-five (55) years.
2.12 Effective Date. The term "Effective Date" is defined in Section
--------------
14.8 hereof.
2.13 Enrollment Form. The term "Enrollment Form" shall mean the form,
---------------
substantially similar to Exhibit "A" attached to this Plan, executed by (a) each
Participant to acknowledge and accept participation in this Plan and the
Insurance Agreement and to designate his Beneficiary, and (b) the Plan
Administrator to acknowledge and accept such participation on behalf of the
Company.
2.14 Executive Benefits. The term "Executive Benefits" shall mean the
------------------
Retirement Benefit, the Disability Benefit, the Death Benefit and the Medical
Reimbursement Benefit.
2.15 Insurance Agreement. The term "Insurance Agreement" shall mean
-------------------
the split dollar and/or term insurance agreements incorporated in this Plan as
Article VII.
2.
<PAGE>
2.16 Insurer. The term "Insurer" shall mean any insurance company
-------
issuing one or more of the life or disability insurance policies subject to this
Plan.
2.17 Life Insurance Policy. The term "Life Insurance Policy" with
---------------------
respect to any Participant shall mean the policy or policies maintained by the
Company on the life of such Participant pursuant to Article VII hereof.
2.18 Medical Expenses. The term "Medical Expenses" shall mean expenses
----------------
for medical and dental care as defined in Section 213(e) of the Code (or the
corresponding law as hereafter amended), as well as premiums on accident,
health, hospitalization, disability income and surgical and medical insurance.
2.19 Medical Insurance Benefit. The term "Medical Insurance Benefit"
-------------------------
shall mean the medical insurance coverage furnished by the Company to a
Participant and his spouse upon the Retirement of the Participant pursuant to
Section 6.2 hereof.
2.20 Normal Retirement Age. The term "Normal Retirement Age" shall
---------------------
mean the age of 62 years.
2.21 Participants. The term "Participants" shall mean the following
------------
senior officers of the Company:
(a) Stu Brostoff (Senior Vice President - Strategic Planning).
(b) Donna Lyons-Miller (Senior Vice President - Purchasing and
Distribution).
(c) C. Michael Whitten (Senior Vice President - Franchising).
(d) Ed Odmark (Senior Vice President - Finance).
(e) Jeannette Ferrell (Vice President - Human Resources).
2.22 Plan Administrator. The term "Plan Administrator" shall mean the
------------------
Company; however, the Company, acting through the Board, may from time to time
designate an individual or a committee of individuals pursuant to Section 3.1 to
perform the duties of Plan Administrator.
2.23 Plan Year. The term "Plan Year" shall mean the period commencing
---------
on the Effective Date, and ending December 31, 1994, and thereafter, each twelve
(12) consecutive month period
3.
<PAGE>
commencing on each January 1 and terminating on the following December 31.
2.24 Retirement. The term "Retirement" shall mean the termination of
----------
a Participant's employment with the Company for any reason other than his death
at any time after he has (i) completed ten (10) Years of Service with the
Company (unless such Years of Service requirement is waived or reduced in
writing by the Company) and (ii) attained the Early Retirement Age.
2.25 Retirement Date. The term "Retirement Date" shall mean the
---------------
effective date of a Participant's Retirement.
2.26 Retirement Benefit. The "Retirement Benefit" shall be comprised
------------------
of the Deferred Compensation Benefit and the Medical Insurance Benefit.
2.27 Supplemental Disability Policy. The term "Supplemental
------------------------------
Disability Policy" with respect to any Participant shall mean the disability
policy maintained by the Company pursuant to Article VII hereof for such
Participant.
2.28 Year of Service. The term "Year of Service" means a twelve (12)
---------------
month period during which the Participant has not less than one thousand (1,000)
hours of service with the Company. Computation of any twelve (12) month period
shall be made with reference to the date on which the Participant's employment
commenced.
ARTICLE III
PLAN ADMINISTRATOR
3.1 The Company shall be the Plan Administrator and Named Fiduciary
of this Plan for purposes of ERISA; however, the Company, may at any time or
from time to time in its sole discretion, appoint an individual or a committee
of individuals to perform its duties as Plan Administrator. The Company hereby
designates Jeannette Ferrell to serve in such capacity with respect to all
Participants other than herself until her resignation, removal by the Board or
inability to serve in such capacity for any reason. The Company hereby
designates Kamal M. Nassar to serve in such capacity with respect to Jeannette
Ferrell until his resignation, removal by the Board or inability to serve in
such capacity for any reason.
3.2 If a committee, the Plan Administrator shall select one of its
members as its Chairman and shall hold its meeting at such times and places as
it may determine. A majority of its members shall constitute a quorum. The
committee may appoint a secretary to keep minutes of its meetings and may make
4.
<PAGE>
such rules and regulations for the conduct of its business as it shall deem
advisable.
3.3 All determinations of the Plan Administrator, if a committee,
shall be made by a majority vote of its members. Any decision or determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
3.4 The Plan Administrator may employ others to render advice with
regard to its duties under the Plan and allocate to others its fiduciary
responsibilities and exercise any and all other powers necessary to fulfill its
responsibilities under this Plan to the extent not in conflict with ERISA.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Plan Administrator
appointed under Section 3.1.
4.2 The Plan Administrator shall have the authority to interpret the
Plan and to prescribe, amend and rescind such rules, regulations and
documentation and to make such other determinations as it deems reasonable,
necessary and proper for the administration of the Plan and the implementation
of its purposes.
4.3 The Plan Administrator may correct any defect, supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem necessary. Any decision made, or action taken, by the Plan
Administrator arising out of or in connection with the interpretation or
administration of the Plan shall be final and conclusive in all cases.
4.4 The Plan Administrator shall be indemnified by the Company
against all reasonable costs and expenses necessarily incurred by it in
connection with any action, suit or proceeding to which it may become a party by
reason of action taken or failure to act in connection with the Plan. Any other
expenses of administering the Plan shall also be borne by the Company. The Plan
Administrator, if an individual, or any member of the Plan Administrator
committee, if any, shall not be personally liable for any act done or
determination made in good faith.
ARTICLE V
PARTICIPATION
5.1 To be eligible to participate in this Plan, a Participant must be
a Senior Vice President or Executive Staff
5.
<PAGE>
Officer. Each Participant shall be entitled to participate in all of the
Executive Benefits under this Plan upon the terms and conditions set forth
herein as of the date he delivers to the Plan Administrator an Enrollment Form.
5.2 Except as otherwise provided herein, a Participant shall remain a
participant in this Plan as long as such person is eligible and until the
termination of his employment with the Company. Except in the event of a
termination by reason of death, Disability or Retirement, following any such
termination neither the Participant nor his Beneficiary shall have any claim
whatsoever for any Executive Benefits under this Plan. Any termination of
participation in this Plan shall be effective as of the date such termination
occurs.
ARTICLE VI
RETIREMENT BENEFIT
Upon his Retirement from the Company, a Participant shall be entitled
to both the Deferred Compensation Benefit and the Medical Insurance Benefit as
hereinafter set forth.
6.1 Deferred Compensation Benefit. The amount of Deferred
-----------------------------
Compensation Benefit and the manner of payment thereof shall be as hereinafter
set forth:
(a) Amount of Deferred Compensation. The Deferred Compensation
-------------------------------
Benefit shall equal that percentage of the Deferred Compensation Amount set
forth below:
(1) Early Retirement Age. If the Participant's Retirement occurs on
--------------------
or after his attaining the Early Retirement Age but prior to his attaining the
Normal Retirement Age, then the Deferred Compensation Benefit shall equal the
Deferred Compensation Amount reduced by five (5%) percent of such Amount for
each year or part thereof by which the Participant's Retirement Date precedes
the date the Participant would attain the Normal Retirement Age.
(2) Normal Retirement Age. If the Participant's Retirement occurs on
---------------------
or after his attaining the Normal Retirement Age, then the Deferred Compensation
Benefit shall equal one hundred (100%) percent of the Deferred Compensation
Amount.
(b) Payment of Deferred Compensation Benefit. An eligible
----------------------------------------
Participant's Deferred Compensation Benefit shall be payable in one hundred
twenty (120) equal monthly installments, commencing on the first day of the
month following the Participant's Retirement Date. If a Participant should die
after
6.
<PAGE>
payment of the Deferred Compensation Benefit has commenced hereunder but before
such Benefit has been paid in full, the unpaid balance will continue to be paid
in equal monthly installments to the Beneficiary.
6.2 Medical Insurance Benefits. The Company shall provide to the
--------------------------
Participant and his or her spouse health care benefits in an amount determined
as provided in Article X hereof, but in no event greater than the coverage then
being provided by the Company to its senior officers under the Company's basic
health care benefit program for a period commencing on the Retirement Date and
terminating on the earlier to occur of (a) the expiration of the 120 month
period during which the Deferred Compensation Benefits are payable hereunder, or
(b) the date of death of the last to die of the Participant and his spouse.
ARTICLE VII
DEATH BENEFIT/
INSURANCE AGREEMENT
7.1 Death Benefit. In the event of the death of a Participant during
-------------
the term of his employment with the Company and after the Company first obtains
the Life Insurance Policy required by Section 7.2 hereof, the Beneficiary shall
be entitled to receive an amount equal to the Death Benefit from the death
benefit proceeds payable under such Life Insurance Policy.
7.2 Policy Ownership and Dividend Application.
-----------------------------------------
(a) As soon as practical following Enrollment of a Participant, the
Company shall apply for and, if available at regular non-rated premiums,
purchase, at its option, either a term or permanent Life Insurance Policy on the
life of each Participant having minimum death proceeds equal to such
Participant's Death Benefit; provided, however, that if the premiums for any
policy on the life of any Participant shall exceed regular, non-rated premiums,
the Company may, but shall have no obligation to, fund such excess. In the
event the Company determines not to fund such excess it shall promptly notify
the Participant and the Participant may, at his option, elect to pay the excess.
If the Participant fails to pay such excess or if for any other reason the
Company, after reasonable efforts, is not able to obtain the Life Insurance
Policy required hereby for any Participant, then such Participant and his
Beneficiary shall not be entitled to any Death Benefit hereunder except as may
otherwise be determined in the discretion of the Company and set forth in
writing. The Company shall have and may exercise all ownership rights in such
Life Insurance Policy, except as provided in this Article VII.
7.
<PAGE>
(1) Each Participant shall be entitled to designate the Beneficiary to
receive payment of that portion of the death benefit proceeds payable under the
Life Insurance Policy on his life which equals the Death Benefit payable with
respect to such Participant. The initial Beneficiary or Beneficiaries shall be
designated in the Participant's Enrollment Form. Thereafter, upon receipt of
written notice of a Participant's desire to change his Beneficiary designation
in form acceptable to the Company, the Company will promptly take such action as
is necessary to evidence such change and such change shall become effective as
provided in the applicable Life Insurance Policies.
(2) The Company will not, without the written consent of a
Participant, assign its rights in any Life Insurance Policy on such
Participant's life, other than for purposes of obtaining a loan against the Life
Insurance Policy as provided in paragraph (3) below.
(3) The Company will have the right to (A) borrow from the Insurer and
secure that loan by a Participant's Life Insurance Policy for any purpose
including, but not limited to, borrowing for the purpose of paying premiums on
that Policy without giving notice to the insured Participant, and (B) make
partial withdrawals of policy surrender values; provided, however, that if the
exercise of such rights would reduce the death benefit payable to any
Participant's Beneficiary pursuant to Section 7.2(a)(1), then such rights shall
be exercisable by the Company only with the written consent of that Participant.
(b) Except as provided in paragraph 7.2(a) above, as long as the
Insurance Agreement contained in the Plan is in force, the Company will not
exercise any rights under any Life Insurance Policy which will compromise or
reduce the death benefit payable to such Participant's Beneficiary.
(c) Dividends payable under the Life Insurance Policies, if any,
will be applied as provided in the Policies.
(d) For matters between a Participant and the Company, the Insurance
Agreement shall take precedence over any provisions of a Life Insurance Policy
(including any riders, amendments and attachments thereto) in case of a conflict
between the terms of the Life Insurance Policy and this Article VII.
7.3 Payment of Premiums.
-------------------
(a) As long as the Insurance Agreement is in force, the Company shall
pay the premiums on each term Life
8.
<PAGE>
Insurance Policy, and each Participant and the Company agree to share in the
payment of premiums on each permanent Life Insurance Policy on such
Participant's life held under this Plan in such amounts and in the manner set
forth below:
(1) Unless paragraph (2) below applies, the Participant's share of the
annual premium shall be that portion of the annual premium due on the Life
Insurance Policy that is equal to the amount of the economic benefit that would
be taxable to the Participant, but for the payment by the Participant of such
amount based upon an amount of insurance protection equal to the Participant's
portion of the death benefit proceeds specified in Section 7.2. The Company
shall pay the balance of each such annual premium.
(2) If the Life Insurance Policy is a flexible premium contract such
that premiums may be varied as to the amount and timing of premium payments,
then the Participant shall be required to make an annual premium contribution in
an amount determined in accordance with paragraph (1) above, beginning on the
Policy issue date and continuing on each subsequent anniversary of such date.
The Company shall pay premiums at such times and in such amounts as it may
determine in its sole discretion.
(b) The amount of economic benefit that would be taxable to each
Participant shall be computed in accordance with the cost of life insurance per
$1,000 as shown in the table contained in Revenue Ruling 55-747, 1955-2 C.B. 22
as provided in Revenue Ruling 64-328, 1964-2 C.B. II (often commonly referred to
as the "P.S. 58 costs").
(c) In order to facilitate the payment of premiums on the Life
Insurance Policies, the Company, in the first policy year and in each subsequent
year for as long as this Insurance Agreement is in force, shall forward the
total amount of the premium then currently due and payable on the Policies
directly to the Insurer and shall indicate immediately in the appropriate
Company records that the annual sum payable by the Participant as provided in
Section 7.3(a) shall be added to his annual salary or compensation.
7.4 Beneficiary Provisions.
----------------------
(a) If a Participant dies while this Insurance Agreement is in force,
the total death benefit proceeds from policies held by the Company on his life
shall be divided as follows:
9.
<PAGE>
(1) That portion of such proceeds which equals the Participant's Death
Benefit shall be paid to the Participant's Beneficiary; and
(2) The balance of such proceeds, if any, shall be paid to
the Company.
(b) No Beneficiary shall have any right to reimbursement or
contribution from the estate of the Participant or from the Company with respect
to the amount collected by the Company under any Life Insurance Policy held
under this Plan.
(c) If the Participant dies while this Insurance Agreement is in
force, the Company agrees to take such action as may be necessary to obtain
payment from the Insurer to the Participant's designated Beneficiary of the
amounts payable under any applicable Life Insurance Policy.
7.5 Termination of the Insurance Agreement. This Insurance Agreement
--------------------------------------
shall automatically terminate with respect to any Participant upon the
Participant's termination of employment for any reason prior to his death. Upon
termination of this Insurance Agreement, the Company shall become sole owner of
such policy unless within thirty (30) days following such termination
Participant elects to purchase such Policy from the Company for an amount equal
to its net cash surrender value.
ARTICLE VIII
DISABILITY BENEFITS
The Company shall procure for each Participant as soon as possible
after the Enrollment of the Participant and shall maintain in full force and
effect during the Participant's employment with the Company a Supplemental
Disability Policy which will supplement the benefits payable under any
disability benefit provided to the Participant by the Company under its basic
employee health care benefit program, so that, with respect to a Disability
occurring after the Company first obtains the Supplemental Disability Policy,
the total monthly disability benefit payable to the Participant under all
disability policies maintained by the Company, after a maximum elimination
period of ninety (90) days, shall equal the lesser of (a) the amount determined
by the President of the Company as provided in Article X hereof, (b) Thirty
Thousand and No/100 Dollars ($30,000.00) or (c) the sum of the following
amounts:
(1) 80% of the first $250,000.00 of the Participant's Compensation;
plus
10.
<PAGE>
(2) 70% of the next $100,000.00 of the Participant's Compensation;
plus
(3) 25% of the Participant's Compensation in excess of $100,000.00.
For purposes of this Article VIII, the Compensation of a Participant
shall be deemed to equal the Compensation payable to such Participant on the
date he becomes a participant in the Plan or such greater amount as may be
determined by the Board or the President of the Company from time to time,
taking into account increases in such Participant's Compensation.
Notwithstanding anything herein to the contrary, that if the premiums
for any Supplemental Disability Income Policy of any Participant shall exceed
regular, non-rated premiums, the Company may, but shall have no obligation to,
fund such excess. In the event the Company determines not to fund such excess
it shall promptly notify the Participant and the Participant may, at his option,
elect to pay the excess. If the Participant fails to pay such excess or if for
any other reason the Company, after reasonable efforts, is not able to obtain
the Supplemental Disability Income Policy required hereby for any Participant,
then such Participant shall not be entitled to any Disability Benefit hereunder
except as may otherwise be determined in the discretion of the Company and set
forth in writing.
ARTICLE IX
MEDICAL REIMBURSEMENT BENEFITS
9.1 Benefits. The Company will reimburse, at least quarterly, each
--------
Participant for all Medical Expenses incurred by such Participant and his or her
spouse and dependents, during his employment with the Company to the extent of
the limitations herein provided.
9.2 Payments by the Company. The Company shall be authorized to
-----------------------
purchase such insurance or insurance contracts to fund all or any portion of its
obligations under this Article IX, or may pay such Medical Expenses directly
from the funds of the Company, as may from time to time be determined by the
Board. The Company may, in its discretion, pay directly any or all of the
Medical Expenses in lieu of making reimbursement therefor, in which event, the
Company shall be relieved of all further responsibility with regard to such
Medical Expenses.
9.3 Limitations.
-----------
(a) Reimbursable Medical Expenses shall not exceed the lesser of (i)
an amount determined by President of the
11.
<PAGE>
Company as provided in Article X or (ii) Two Thousand Five Hundred and No/100
($2,500.00) Dollars in any Plan Year.
(b) Reimbursement or payment under the Plan shall be made by the
Company only in the event and to the extent that such reimbursement or payment
is not provided under any insurance policy or policies, whether owned by the
Company or the Participant, or under any other health and accident or wage
continuation plan. In the event that there is such an insurance policy or other
plan in effect, providing for reimbursement in whole or in part, then to the
extent of the coverage under such policy or plan, the Company shall be relieved
of any and all liability hereunder.
9.4 Submission of Proof. Any eligible Participant of the Company
-------------------
applying for reimbursement under this Plan shall submit to the Company all
receipts or bills for Medical Expenses for which reimbursement is sought.
Payments may be made, in the discretion of the Company, either with or without
the required verification. Also, it shall not be necessary that the Medical
Expenses have been paid at the time such Participant seeks reimbursement or
payment, but merely that, if not yet paid, there exists an obligation on the
part of the eligible Participant to pay the Medical Expenses.
ARTICLE X
AMOUNT OF EXECUTIVE BENEFITS
The determination of the amount of the Disability Benefit, the Death
Benefit and the Medical Reimbursement Benefit to be granted to a Participant
shall be made by the President of the Company, provided that in no event shall
such amount exceed the maximum benefit authorized hereby. The initial amount of
each such Executive Benefit authorized by the President with respect to each
Participant shall be set forth in such Participant's Enrollment Form, and such
amounts may be increased or decreased by the President at any time or from time
to time thereafter upon written notice to the Participant prior to such
Participant's death, Disability or Retirement.
ARTICLE XI
DISTRIBUTIONS
11.1 Source of Distributions. All distributions under this Plan shall
-----------------------
be made by the Company from its general assets, and the status of each
Participant's or Beneficiary's claim to a benefit shall be the same as the
status of any other general unsecured creditor of the Company; provided,
however, any Death Benefit amount due from the general assets of the Company
under Section 7.1 shall be offset by any death benefit proceeds
12.
<PAGE>
received by the Participant's Beneficiary under the Insurance Agreement under
Article VII. No person shall look to, or have any claim whatsoever against the
Plan Administrator, any member of the Board, other officers of the Company,
other employees, shareholders or any other persons acting on behalf of the
Company in their individual capacities for the distribution of any Executive
Benefit or for the payment of any other amounts under this Plan. As part of its
general assets and in support of the Executive Benefit promises made under this
Plan, the Company may continue to own and maintain, in whole or in part, any
existing insurance policies on the life or well-being of any of the Participants
or purchase new policies of the same type, but no Participant nor any
Beneficiary, legal heir, successor or assign of his shall have any claim
whatsoever to any such policy or the proceeds of any such policy, except as may
be specifically provided in the Insurance Agreement under Article VII.
11.2 Mental or Legal Incompetence. The Company, in its sole
----------------------------
discretion, may make distribution to the guardian or other legal representative
of a Participant or Beneficiary, if the Company determines that the Participant
or Beneficiary is mentally or legally incompetent to receive such benefit
distribution. Any such distribution shall be in full and complete satisfaction
of any and all claims whatsoever by or behalf of such Participant or Beneficiary
under this Plan against the Company, the Plan Administrator, any member of the
Board, other Participants or officers of the Company, other employees,
shareholders and any other person acting on behalf of them.
ARTICLE XII
CLAIMS PROCEDURES
12.1 Filing of a Claim for Benefits. Any Participant or Beneficiary
------------------------------
entitled to one or more Executive Benefits under this Plan will file a claim
request with the Plan Administrator with respect to the applicable Executive
Benefits.
12.2 Denial of Claim. A claim for an Executive Benefit under this
---------------
Plan shall be denied if the Company determines that the Participant or
Beneficiary is not entitled to receive such Executive Benefit under the Plan.
Notice of a denial shall be furnished to the Participant or Beneficiary within a
reasonable period of time after receipt of the claim by the Plan Administrator.
12.3 Content of Notice. Within ninety (90) days of the denial of a
-----------------
claim under this Plan, the Plan Administrator shall provide to every Participant
or Beneficiary who is denied a claim written notice setting forth, in a manner
calculated to be understood by such Participant or Beneficiary, the following:
13.
<PAGE>
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary to perfect the claim, and any explanation of why such material or
information is necessary; and
(d) An explanation of the Plan's claim review procedure as set
forth below.
12.4 Review Procedure. The purpose of the review procedure is to
----------------
provide a method by which a Participant or Beneficiary may have a reasonable
opportunity to appeal a denial of a claim to the Plan Administrator for a full
and fair review. To accomplish that purpose, the Participant, Beneficiary or a
duly authorized representative:
(a) May require a review upon written application to the Plan
Administrator;
(b) May review pertinent Plan documents; and
(c) May submit issues and comments in writing.
A review shall be requested by filing a written application with the Plan
Administrator at any time within sixty (60) days after receipt by the
Participant or Beneficiary of a written notice of the denial of his claim
pursuant to Section 12.3.
12.5 Decision on Review. A decision on review of a denied claim shall
------------------
be made in the following manner:
(a) The decision on review shall be made by the Plan Administrator who
may, in his discretion, hold a hearing on the claim. Such decision shall be
made promptly, and not later than sixty (60) days after receipt of the request
for review pursuant to Section 12.4, unless special circumstances (such as the
need to hold a hearing) require an extension of time for processing, in which
case a decision shall be rendered as soon as possible, but not later than one
hundred and twenty (120) days after receipt of the request for review.
(b) The decision on review shall be in writing and shall include
specific reasons for the decisions, written in a manner calculated to be
understood by the Participant or Beneficiary, and specific references to the
pertinent Plan provisions upon which the decision is based.
14.
<PAGE>
ARTICLE XIII
AMENDMENT AND TERMINATION OF PLAN
The Board may at any time or from time to time amend or revise the
terms of this Plan to either increase or decrease the Executive Benefits
authorized hereunder.
ARTICLE XIV
MISCELLANEOUS
14.1 Company Liability. Nothing in this Plan shall be construed to
-----------------
limit in any way the right of the Company to terminate the employment of any
Participant at any time; or to be evidence of any agreement or understanding,
express or implied, that the Company will employ any Participant in any
particular position or at any particular rate of remuneration or for any
particular period of time.
14.2 Indemnification. The Company shall indemnify and hold harmless
---------------
the Plan Administrator, any member thereof and any employee who may act on
behalf of the Company in the administration of this Plan from and against any
liability, loss, cost or expense (including reasonable attorneys' fees) incurred
at any time as a result of or in connection with any claims, demands, actions or
causes of action of any Participant, any person claiming through or under any of
them, or any other person, party or authority claiming to have an interest in
this Plan or standing to act for any persons or groups having an interest in
this Plan, for or on account of, any of the acts or omissions (or alleged acts
or omissions) of the Plan Administrator, any member thereof or any such
employee, except to the extent resulting from such person's willful misconduct.
14.3 Tax Effects. The Company makes no warranties or representations
-----------
with regard to the tax effects or results of this Plan. Any Participant
electing participation under this Plan shall be deemed to have relied upon his
own tax advisors with regard to such effects.
14.4 No Assignment; Binding Effect. Neither a Participant nor his
-----------------------------
Beneficiary shall have the right to alienate, assign, commute or otherwise
encumber his rights hereunder for any purpose whatsoever, and any attempt to do
so shall be disregarded completely as null and void. The provisions of this
Plan shall be binding on each Participant and on each person who claims a
benefit under him and on the Company and any successor to the Company.
14.5 Self-Interest. No Participant shall have any right to vote or
-------------
decide upon any matter related directly or
15.
<PAGE>
indirectly to him or any right of his to claim any benefit under the Plan.
Accordingly, if the Plan Administrator is a Participant, the Board shall make
all decisions with respect to his rights under this Plan.
14.6 Construction. This Plan shall be construed in accordance with
------------
the laws of the State of Georgia. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan. In the construction of this Plan,
the masculine, feminine or neuter genders, and the singular and plural numbers,
shall each include the other wherever appropriate.
14.7 References. Unless otherwise indicated, all references made in
----------
this Plan shall be to articles, sections and subsections of this Plan.
14.8 Effective Date of Plan. This Plan shall be effective as of
----------------------
April 19, 1994 (the "Effective Date"), the date this Plan was approved by the
Board.
Dated as of the 9th AMERICA'S FAVORITE CHICKEN
day of May, 1994. COMPANY
By: /s/
-------------------------------------
Frank J. Belatti, President and Chief
Executive Officer
16.
<PAGE>
EXHIBIT A
AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR SENIOR AND EXECUTIVE
STAFF OFFICERS
ENROLLMENT FORM
PART I. ENROLLMENT
- -------------------
The Plan Administrator appointed to administer the Supplemental
Benefit Plan for Senior and Executive Staff Officers (the "Plan") has determined
that __________________________ ("Participant") is eligible for and deserving of
consideration under the Plan, a copy of which is attached hereto and
incorporated in this Enrollment Form for all purposes. Capitalized terms which
are used in this Enrollment Form and not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
Participant acknowledges that the amount of each of the following
Executive Benefits granted to Participant as of the date hereof is as follows:
a. Disability Benefit:_______________________________
b. Death Benefit:____________________________________
c. Medical Reimbursement Benefit: ___________________
Execution of this Enrollment Form shall evidence Participant's full
acceptance of the terms and conditions of the Plan, the Insurance Agreement
contained therein and this Enrollment Form.
The Plan Administrator reserves the right to modify or cancel this
Enrollment Form at any time, subject to the express provisions of the Plan.
This Enrollment Form shall continue in effect until superseded or cancelled by
the Plan Administrator.
PART II. BENEFICIARY DESIGNATION
- ---------------------------------
I hereby designate ___________________________________, my
_____________ (state relationship), whose current address is
_________________________________________ as my primary Beneficiary under the
Plan. If such person fails to survive me, I hereby designate
___________________________________, my____________________________, whose
(state relationship)
current address is ______________________________________________________ as
my secondary Beneficiary under the Plan. If such secondary
17.
<PAGE>
Beneficiary fails to survive me, my Beneficiary shall be my estate. This
Beneficiary designation shall become effective only upon its receipt and
acceptance by the Plan Administrator during my lifetime and upon becoming
effective, shall supersede all previous designations made by me.
Date: _____________ Signature:______________________________
Print Name: ____________________________
18.
<PAGE>
THE PLAN ADMINISTRATOR FOR THE AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR SENIOR AND EXECUTIVE STAFF OFFICERS HEREBY
ACKNOWLEDGES RECEIPT AND ACCEPTANCE OF THIS ENROLLMENT FORM THIS __ DAY OF
______, 1994.
________________________________________
Plan Administrator
19.
<PAGE>
EXHIBIT 10.43
AMERICA'S FAVORITE CHICKEN COMPANY
1994 SUPPLEMENTAL BENEFIT PLAN
FOR SENIOR OFFICERS/GENERAL MANAGERS
ARTICLE I
PURPOSE
The purpose of this 1994 Supplemental Benefit Plan (the "Plan") is to
provide certain senior officers of America's Favorite Chicken Company, a
Minnesota corporation (the "Company"), certain death, disability, retirement and
medical benefits to encourage such officers to remain in the employ of the
Company and to use their best efforts, judgment and energy to perform, improve
and advance the business and interests of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth opposite such terms.
2.1 Beneficiary. The term "Beneficiary" shall mean the person or
-----------
persons designated by a Participant on his Enrollment Form or any amendment
thereto to receive his benefits payable hereunder at his death or, if no such
person survives the Participant or if no such designation is made, the
Participant's estate.
2.2 Board. The term "Board" shall mean the Board of Directors of the
-----
Company.
2.3 Code. The term "Code" shall mean the Internal Revenue Code of
----
1986, as amended.
2.4 Company. The term "Company" shall mean America's Favorite
-------
Chicken Company, a Minnesota corporation.
2.5 Compensation. The term "Compensation" shall mean for each
------------
Participant the stated base annual salary payable to that Participant for the
services he renders to the Company as an officer during any twelve (12) month
period.
2.6 Death Benefit. The term "Death Benefit" shall mean, for each
-------------
Participant, an amount equal to the lesser of (i) an amount determined by the
President of the Company as provided in Article X hereof or (ii) five (5) times
his Compensation on the date he becomes a Participant of this Plan, or such
greater amount as may be determined by the Board or the President from time to
time taking into account increases in the Participant's Compensation.
<PAGE>
2.7 Deferred Compensation Amount. The "Deferred Compensation Amount"
----------------------------
of a Participant shall be determined as follows:
(a) Determine the Participant's average Compensation for the last
five Plan Years immediately preceding the Participant's Retirement Date.
(b) Multiply the average obtained in (a) above by thirty (30%)
percent.
(c) Multiply the product obtained in (b) above by ten (10), and
the product thus obtained shall equal the Deferred Compensation Amount of such
Participant.
2.8 Deferred Compensation Benefit. The term "Deferred Compensation
-----------------------------
Benefit" shall mean that portion of the Deferred Compensation Amount payable to
a Participant upon his Retirement under Section 6.1 hereof.
2.9 Disability. The term "Disability" with respect to any
----------
Participant shall have the meaning ascribed to it in such Participant's
Supplemental Disability Policy.
2.10 Disability Benefit. The term "Disability Benefit" with respect
------------------
to any Participant shall mean the supplemental disability income benefits
payable to a Participant upon his Disability under Article VIII hereof.
2.11 Early Retirement Age. The term "Early Retirement Age" shall mean
--------------------
the age of fifty-five (55) years.
2.12 Effective Date. The term "Effective Date" is defined in Section
--------------
14.8 hereof.
2.13 Enrollment Form. The term "Enrollment Form" shall mean the form,
---------------
substantially similar to Exhibit "A" attached to this Plan, executed by (a) each
Participant to acknowledge and accept participation in this Plan and the
Insurance Agreement and to designate his Beneficiary, and (b) the Plan
Administrator to acknowledge and accept such participation on behalf of the
Company.
2.14 Executive Benefits. The term "Executive Benefits" shall mean the
------------------
Retirement Benefit, the Disability Benefit, the Death Benefit and the Medical
Reimbursement Benefit.
2.15 Insurance Agreement. The term "Insurance Agreement" shall mean
-------------------
the split dollar and/or term insurance agreements incorporated in this Plan as
Article VII.
2.
<PAGE>
2.16 Insurer. The term "Insurer" shall mean any insurance company
-------
issuing one or more of the life or disability insurance policies subject to this
Plan.
2.17 Life Insurance Policy. The term "Life Insurance Policy" with
---------------------
respect to any Participant shall mean the policy or policies maintained by the
Company on the life of such Participant pursuant to Article VII hereof.
2.18 Medical Expenses. The term "Medical Expenses" shall mean
----------------
expenses for medical and dental care as defined in Section 213(e) of the Code
(or the corresponding law as hereafter amended), as well as premiums on
accident, health, hospitalization, disability income and surgical and medical
insurance.
2.19 Medical Insurance Benefit. The term "Medical Insurance Benefit"
-------------------------
shall mean the medical insurance coverage furnished by the Company to a
Participant and his spouse upon the Retirement of the Participant pursuant to
Section 6.2 hereof.
2.20 Normal Retirement Age. The term "Normal Retirement Age" shall
---------------------
mean the age of 62 years.
2.21 Participants. The term "Participants" shall mean the following
------------
senior officers of the Company:
(a) Steve Clark (Senior Vice President -Operations).
(b) Joseph Cote (Senior Vice President -Production).
(c) Mark Rinna (Senior Vice President - Popeyes).
(d) William S. VanEpps (Senior Vice President -International).
2.22 Plan Administrator. The term "Plan Administrator" shall mean the
------------------
Company; however, the Company, acting through the Board, may from time to time
designate an individual or a committee of individuals pursuant to Section 3.1 to
perform the duties of Plan Administrator.
2.23 Plan Year. The term "Plan Year" shall mean the period commencing
---------
on the Effective Date, and ending December 31, 1994, and thereafter, each twelve
(12) consecutive month period commencing on each January 1 and terminating on
the following December 31.
3.
<PAGE>
2.24 Retirement. The term "Retirement" shall mean the termination of a
----------
Participant's employment with the Company for any reason other than his death at
any time after he has (i) completed ten (10) Years of Service with the Company
(unless such Years of Service requirement is waived or reduced in writing by the
Company) and (ii) attained the Early Retirement Age.
2.25 Retirement Date. The term "Retirement Date" shall mean the
---------------
effective date of a Participant's Retirement.
2.26 Retirement Benefit. The "Retirement Benefit" shall be comprised
------------------
of the Deferred Compensation Benefit and the Medical Insurance Benefit.
2.27 Supplemental Disability Policy. The term "Supplemental
------------------------------
Disability Policy" with respect to any Participant shall mean the disability
policy maintained by the Company pursuant to Article VII hereof for such
Participant.
2.28 Year of Service. The term "Year of Service" means a twelve (12)
---------------
month period during which the Participant has not less than one thousand (1,000)
hours of service with the Company. Computation of any twelve (12) month period
shall be made with reference to the date on which the Participant's employment
commenced.
ARTICLE III
PLAN ADMINISTRATOR
3.1 The Company shall be the Plan Administrator and Named Fiduciary
of this Plan for purposes of ERISA; however, the Company, may at any time or
from time to time in its sole discretion, appoint an individual or a committee
of individuals to perform its duties as Plan Administrator. The Company hereby
designates Jeannette Ferrell to serve in such capacity until her resignation,
removal by the Board or inability to serve in such capacity for any reason.
3.2 If a committee, the Plan Administrator shall select one of its
members as its Chairman and shall hold its meeting at such times and places as
it may determine. A majority of its members shall constitute a quorum. The
committee may appoint a secretary to keep minutes of its meetings and may make
such rules and regulations for the conduct of its business as it shall deem
advisable.
3.3 All determinations of the Plan Administrator, if a committee,
shall be made by a majority vote of its members. Any decision or determination
reduced to writing and signed by all of
4.
<PAGE>
the members shall be fully as effective as if it had been made by a majority
vote at a meeting duly called and held.
3.4 The Plan Administrator may employ others to render advice with
regard to its duties under the Plan and allocate to others its fiduciary
responsibilities and exercise any and all other powers necessary to fulfill its
responsibilities under this Plan to the extent not in conflict with ERISA.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Plan Administrator
appointed under Section 3.1.
4.2 The Plan Administrator shall have the authority to interpret the
Plan and to prescribe, amend and rescind such rules, regulations and
documentation and to make such other determinations as it deems reasonable,
necessary and proper for the administration of the Plan and the implementation
of its purposes.
4.3 The Plan Administrator may correct any defect, supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem necessary. Any decision made, or action taken, by the Plan
Administrator arising out of or in connection with the interpretation or
administration of the Plan shall be final and conclusive in all cases.
4.4 The Plan Administrator shall be indemnified by the Company
against all reasonable costs and expenses necessarily incurred by it in
connection with any action, suit or proceeding to which it may become a party by
reason of action taken or failure to act in connection with the Plan. Any other
expenses of administering the Plan shall also be borne by the Company. The Plan
Administrator, if an individual, or any member of the Plan Administrator
committee, if any, shall not be personally liable for any act done or
determination made in good faith.
ARTICLE V
PARTICIPATION
5.1 To be eligible to participate in this Plan, a Participant must be
a Senior Vice President/General Manager of the Company. Each Participant shall
be entitled to participate in all of the Executive Benefits under this Plan upon
the terms and conditions set forth herein as of the date he delivers to the Plan
Administrator an Enrollment Form.
5.
<PAGE>
5.2 Except as otherwise provided herein, a Participant shall remain a
participant in this Plan as long as such person is eligible and until the
termination of his employment with the Company. Except in the event of a
termination by reason of death, Disability or Retirement, following any such
termination neither the Participant nor his Beneficiary shall have any claim
whatsoever for any Executive Benefits under this Plan. Any termination of
participation in this Plan shall be effective as of the date such termination
occurs.
ARTICLE VI
RETIREMENT BENEFIT
Upon his Retirement from the Company, a Participant shall be entitled
to both the Deferred Compensation Benefit and the Medical Insurance Benefit as
hereinafter set forth.
6.1 Deferred Compensation Benefit. The amount of Deferred
-----------------------------
Compensation Benefit and the manner of payment thereof shall be as hereinafter
set forth:
(a) Amount of Deferred Compensation. The Deferred Compensation
-------------------------------
Benefit shall equal that percentage of the Deferred Compensation Amount set
forth below:
(1) Early Retirement Age. If the Participant's Retirement
--------------------
occurs on or after his attaining the Early Retirement Age but prior to his
attaining the Normal Retirement Age, then the Deferred Compensation Benefit
shall equal the Deferred Compensation Amount reduced by five (5%) percent of
such Amount for each year or part thereof by which the Participant's Retirement
Date precedes the date the Participant would attain the Normal Retirement Age.
(2) Normal Retirement Age. If the Participant's Retirement
---------------------
occurs on or after his attaining the Normal Retirement Age, then the Deferred
Compensation Benefit shall equal one hundred (100%) percent of the Deferred
Compensation Amount.
(b) Payment of Deferred Compensation Benefit. An eligible
----------------------------------------
Participant's Deferred Compensation Benefit shall be payable in one hundred
twenty (120) equal monthly installments, commencing on the first day of the
month following the Participant's Retirement Date. If a Participant should die
after payment of the Deferred Compensation Benefit has commenced hereunder but
before such Benefit has been paid in full, the unpaid balance will continue to
be paid in equal monthly installments to the Beneficiary.
6.
<PAGE>
6.2 Medical Insurance Benefits. The Company shall provide to the
--------------------------
Participant and his or her spouse health care benefits in an amount determined
as provided in Article X hereof, but in no event greater than the coverage then
being provided by the Company to its senior officers under the Company's basic
health care benefit program for a period commencing on the Retirement Date and
terminating on the earlier to occur of (a) the expiration of the 120 month
period during which the Deferred Compensation Benefits are payable hereunder, or
(b) the date of death of the last to die of the Participant and his spouse.
ARTICLE VII
DEATH BENEFIT/
INSURANCE AGREEMENT
7.1 Death Benefit. In the event of the death of a Participant during
-------------
the term of his employment with the Company and after the Company first obtains
the Life Insurance Policy required by Section 7.2 hereof, the Beneficiary shall
be entitled to receive an amount equal to the Death Benefit from the death
benefit proceeds payable under such Life Insurance Policy.
7.2 Policy Ownership and Dividend Application.
-----------------------------------------
(a) As soon as practical following Enrollment of a Participant,
the Company shall apply for and, if available at regular non-rated premiums,
purchase, at its option, either a term or permanent Life Insurance Policy on the
life of each Participant having minimum death proceeds equal to such
Participant's Death Benefit; provided, however, that if the premiums for any
policy on the life of any Participant shall exceed regular, non-rated premiums,
the Company may, but shall have no obligation to, fund such excess. In the event
the Company determines not to fund such excess it shall promptly notify the
Participant and the Participant may, at his option, elect to pay the excess. If
the Participant fails to pay such excess or if for any other reason the Company,
after reasonable efforts, is not able to obtain the Life Insurance Policy
required hereby for any Participant, then such Participant and his Beneficiary
shall not be entitled to any Death Benefit hereunder except as may otherwise be
determined in the discretion of the Company and set forth in writing. The
Company shall have and may exercise all ownership rights in such Life Insurance
Policy, except as provided in this Article VII.
(1) Each Participant shall be entitled to designate the
Beneficiary to receive payment of that portion of the death benefit proceeds
payable under the Life Insurance
7.
<PAGE>
Policy on his life which equals the Death Benefit payable with respect to such
Participant. The initial Beneficiary or Beneficiaries shall be designated in
the Participant's Enrollment Form. Thereafter, upon receipt of written notice
of a Participant's desire to change his Beneficiary designation in form
acceptable to the Company, the Company will promptly take such action as is
necessary to evidence such change and such change shall become effective as
provided in the applicable Life Insurance Policies.
(2) The Company will not, without the written consent of a
Participant, assign its rights in any Life Insurance Policy on such
Participant's life, other than for purposes of obtaining a loan against the Life
Insurance Policy as provided in paragraph (3) below.
(3) The Company will have the right to (A) borrow from the
Insurer and secure that loan by a Participant's Life Insurance Policy for any
purpose including, but not limited to, borrowing for the purpose of paying
premiums on that Policy without giving notice to the insured Participant, and
(B) make partial withdrawals of policy surrender values; provided, however, that
if the exercise of such rights would reduce the death benefit payable to any
Participant's Beneficiary pursuant to Section 7.2(a)(1), then such rights shall
be exercisable by the Company only with the written consent of that Participant.
(b) Except as provided in paragraph 7.2(a) above, as long as the
Insurance Agreement contained in the Plan is in force, the Company will not
exercise any rights under any Life Insurance Policy which will compromise or
reduce the death benefit payable to such Participant's Beneficiary.
(c) Dividends payable under the Life Insurance Policies, if any,
will be applied as provided in the Policies.
(d) For matters between a Participant and the Company, the
Insurance Agreement shall take precedence over any provisions of a Life
Insurance Policy (including any riders, amendments and attachments thereto) in
case of a conflict between the terms of the Life Insurance Policy and this
Article VII.
7.3 Payment of Premiums.
-------------------
(a) As long as the Insurance Agreement is in force, the Company
shall pay the premiums on each term Life Insurance Policy, and each Participant
and the Company agree to share in the payment of premiums on each permanent Life
Insurance
8.
<PAGE>
Policy on such Participant's life held under this Plan in such amounts and in
the manner set forth below:
(1) Unless paragraph (2) below applies, the Participant's
share of the annual premium shall be that portion of the annual premium due on
the Life Insurance Policy that is equal to the amount of the economic benefit
that would be taxable to the Participant, but for the payment by the Participant
of such amount based upon an amount of insurance protection equal to the
Participant's portion of the death benefit proceeds specified in Section 7.2.
The Company shall pay the balance of each such annual premium.
(2) If the Life Insurance Policy is a flexible premium
contract such that premiums may be varied as to the amount and timing of premium
payments, then the Participant shall be required to make an annual premium
contribution in an amount determined in accordance with paragraph (1) above,
beginning on the Policy issue date and continuing on each subsequent anniversary
of such date. The Company shall pay premiums at such times and in such amounts
as it may determine in its sole discretion.
(b) The amount of economic benefit that would be taxable to each
Participant shall be computed in accordance with the cost of life insurance per
$1,000 as shown in the table contained in Revenue Ruling 55-747, 1955-2 C.B. 22
as provided in Revenue Ruling 64-328, 1964-2 C.B. II (often commonly referred to
as the "P.S. 58 costs").
(c) In order to facilitate the payment of premiums on the Life
Insurance Policies, the Company, in the first policy year and in each subsequent
year for as long as this Insurance Agreement is in force, shall forward the
total amount of the premium then currently due and payable on the Policies
directly to the Insurer and shall indicate immediately in the appropriate
Company records that the annual sum payable by the Participant as provided in
Section 7.3(a) shall be added to his annual salary or compensation.
7.4 Beneficiary Provisions.
----------------------
(a) If a Participant dies while this Insurance Agreement is in
force, the total death benefit proceeds from policies held by the Company on his
life shall be divided as follows:
(1) That portion of such proceeds which equals the
Participant's Death Benefit shall be paid to the Participant's Beneficiary; and
9.
<PAGE>
(2) The balance of such proceeds, if any, shall be paid to
the Company.
(b) No Beneficiary shall have any right to reimbursement or
contribution from the estate of the Participant or from the Company with respect
to the amount collected by the Company under any Life Insurance Policy held
under this Plan.
(c) If the Participant dies while this Insurance Agreement is in
force, the Company agrees to take such action as may be necessary to obtain
payment from the Insurer to the Participant's designated Beneficiary of the
amounts payable under any applicable Life Insurance Policy.
7.5 Termination of the Insurance Agreement. This Insurance Agreement
--------------------------------------
shall automatically terminate with respect to any Participant upon the
Participant's termination of employment for any reason prior to his death. Upon
termination of this Insurance Agreement, the Company shall become sole owner of
such policy unless within thirty (30) days following such termination
Participant elects to purchase such Policy from the Company for an amount equal
to its net cash surrender value.
ARTICLE VIII
DISABILITY BENEFITS
The Company shall procure for each Participant as soon as possible
after the Enrollment of the Participant and shall maintain in full force and
effect during the Participant's employment with the Company a Supplemental
Disability Policy which will supplement the benefits payable under any
disability benefit provided to the Participant by the Company under its basic
employee health care benefit program, so that, with respect to a Disability
occurring after the Company first obtains the Supplemental Disability Policy,
the total monthly disability benefit payable to the Participant under all
disability policies maintained by the Company, after a maximum elimination
period of ninety (90) days, shall equal the lesser of (a) the amount determined
by the President of the Company as provided in Article X hereof, (b) Thirty
Thousand and No/100 Dollars ($30,000.00) or (c) the sum of the following
amounts:
(1) 80% of the first $250,000.00 of the Participant's
Compensation; plus
(2) 70% of the next $100,000.00 of the Participant's
Compensation; plus
10.
<PAGE>
(3) 25% of the Participant's Compensation in excess of
$100,000.00.
For purposes of this Article VIII, the Compensation of a Participant
shall be deemed to equal the Compensation payable to such Participant on the
date he becomes a participant in the Plan or such greater amount as may be
determined by the Board or the President of the Company from time to time,
taking into account increases in such Participant's Compensation.
Notwithstanding anything herein to the contrary, that if the premiums
for any Supplemental Disability Income Policy of any Participant shall exceed
regular, non-rated premiums, the Company may, but shall have no obligation to,
fund such excess. In the event the Company determines not to fund such excess
it shall promptly notify the Participant and the Participant may, at his option,
elect to pay the excess. If the Participant fails to pay such excess or if for
any other reason the Company, after reasonable efforts, is not able to obtain
the Supplemental Disability Income Policy required hereby for any Participant,
then such Participant shall not be entitled to any Disability Benefit hereunder
except as may otherwise be determined in the discretion of the Company and set
forth in writing.
ARTICLE IX
MEDICAL REIMBURSEMENT BENEFITS
9.1 Benefits. The Company will reimburse, at least quarterly, each
--------
Participant for all Medical Expenses incurred by such Participant and his or her
spouse and dependents, during his employment with the Company to the extent of
the limitations herein provided.
9.2 Payments by the Company. The Company shall be authorized to
-----------------------
purchase such insurance or insurance contracts to fund all or any portion of its
obligations under this Article IX, or may pay such Medical Expenses directly
from the funds of the Company, as may from time to time be determined by the
Board. The Company may, in its discretion, pay directly any or all of the
Medical Expenses in lieu of making reimbursement therefor, in which event, the
Company shall be relieved of all further responsibility with regard to such
Medical Expenses.
9.3 Limitations.
-----------
(a) Reimbursable Medical Expenses shall not exceed the lesser of
(i) an amount determined by President of the Company as provided in Article X or
(ii) Five Thousand and No/100 ($5,000.00) Dollars in any Plan Year.
11.
<PAGE>
(b) Reimbursement or payment under the Plan shall be made by the
Company only in the event and to the extent that such reimbursement or payment
is not provided under any insurance policy or policies, whether owned by the
Company or the Participant, or under any other health and accident or wage
continuation plan. In the event that there is such an insurance policy or other
plan in effect, providing for reimbursement in whole or in part, then to the
extent of the coverage under such policy or plan, the Company shall be relieved
of any and all liability hereunder.
9.4 Submission of Proof. Any eligible Participant of the Company
-------------------
applying for reimbursement under this Plan shall submit to the Company all
receipts or bills for Medical Expenses for which reimbursement is sought.
Payments may be made, in the discretion of the Company, either with or without
the required verification. Also, it shall not be necessary that the Medical
Expenses have been paid at the time such Participant seeks reimbursement or
payment, but merely that, if not yet paid, there exists an obligation on the
part of the eligible Participant to pay the Medical Expenses.
ARTICLE X
AMOUNT OF EXECUTIVE BENEFITS
The determination of the amount of the Disability Benefit, the Death
Benefit and the Medical Reimbursement Benefit to be granted to a Participant
shall be made by the President of the Company, provided that in no event shall
such amount exceed the maximum benefit authorized hereby. The initial amount of
each such Executive Benefit authorized by the President with respect to each
Participant shall be set forth in such Participant's Enrollment Form, and such
amounts may be increased or decreased by the President at any time or from time
to time thereafter upon written notice to the Participant prior to such
Participant's death, Disability or Retirement.
ARTICLE XI
DISTRIBUTIONS
11.1 Source of Distributions. All distributions under this Plan shall
-----------------------
be made by the Company from its general assets, and the status of each
Participant's or Beneficiary's claim to a benefit shall be the same as the
status of any other general unsecured creditor of the Company; provided,
however, any Death Benefit amount due from the general assets of the Company
under Section 7.1 shall be offset by any death benefit proceeds received by the
Participant's Beneficiary under the Insurance
12.
<PAGE>
Agreement under Article VII. No person shall look to, or have any claim
whatsoever against the Plan Administrator, any member of the Board, other
officers of the Company, other employees, shareholders or any other persons
acting on behalf of the Company in their individual capacities for the
distribution of any Executive Benefit or for the payment of any other amounts
under this Plan. As part of its general assets and in support of the Executive
Benefit promises made under this Plan, the Company may continue to own and
maintain, in whole or in part, any existing insurance policies on the life or
well-being of any of the Participants or purchase new policies of the same type,
but no Participant nor any Beneficiary, legal heir, successor or assign of his
shall have any claim whatsoever to any such policy or the proceeds of any such
policy, except as may be specifically provided in the Insurance Agreement under
Article VII.
11.2 Mental or Legal Incompetence. The Company, in its sole
----------------------------
discretion, may make distribution to the guardian or other legal representative
of a Participant or Beneficiary, if the Company determines that the Participant
or Beneficiary is mentally or legally incompetent to receive such benefit
distribution. Any such distribution shall be in full and complete satisfaction
of any and all claims whatsoever by or behalf of such Participant or Beneficiary
under this Plan against the Company, the Plan Administrator, any member of the
Board, other Participants or officers of the Company, other employees,
shareholders and any other person acting on behalf of them.
ARTICLE XII
CLAIMS PROCEDURES
12.1 Filing of a Claim for Benefits. Any Participant or Beneficiary
------------------------------
entitled to one or more Executive Benefits under this Plan will file a claim
request with the Plan Administrator with respect to the applicable Executive
Benefits.
12.2 Denial of Claim. A claim for an Executive Benefit under this
---------------
Plan shall be denied if the Company determines that the Participant or
Beneficiary is not entitled to receive such Executive Benefit under the Plan.
Notice of a denial shall be furnished to the Participant or Beneficiary within a
reasonable period of time after receipt of the claim by the Plan Administrator.
12.3 Content of Notice. Within ninety (90) days of the denial of a
-----------------
claim under this Plan, the Plan Administrator shall provide to every Participant
or Beneficiary who is denied a claim written notice setting forth, in a manner
calculated to be understood by such Participant or Beneficiary, the following:
13.
<PAGE>
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary to perfect the claim, and any explanation of why such material or
information is necessary; and
(d) An explanation of the Plan's claim review procedure as set
forth below.
12.4 Review Procedure. The purpose of the review procedure is to
----------------
provide a method by which a Participant or Beneficiary may have a reasonable
opportunity to appeal a denial of a claim to the Plan Administrator for a full
and fair review. To accomplish that purpose, the Participant, Beneficiary or a
duly authorized representative:
(a) May require a review upon written application to the Plan
Administrator;
(b) May review pertinent Plan documents; and
(c) May submit issues and comments in writing.
A review shall be requested by filing a written application with the Plan
Administrator at any time within sixty (60) days after receipt by the
Participant or Beneficiary of a written notice of the denial of his claim
pursuant to Section 12.3.
12.5 Decision on Review. A decision on review of a denied claim shall
------------------
be made in the following manner:
(a) The decision on review shall be made by the Plan
Administrator who may, in his discretion, hold a hearing on the claim. Such
decision shall be made promptly, and not later than sixty (60) days after
receipt of the request for review pursuant to Section 12.4, unless special
circumstances (such as the need to hold a hearing) require an extension of time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than one hundred and twenty (120) days after receipt of the
request for review.
(b) The decision on review shall be in writing and shall include
specific reasons for the decisions, written in a manner calculated to be
understood by the Participant or Beneficiary, and specific references to the
pertinent Plan provisions upon which the decision is based.
14.
<PAGE>
ARTICLE XIII
AMENDMENT AND TERMINATION OF PLAN
The Board may at any time or from time to time amend or revise the
terms of this Plan to either increase or decrease the Executive Benefits
authorized hereunder.
ARTICLE XIV
MISCELLANEOUS
14.1 Company Liability. Nothing in this Plan shall be construed to
-----------------
limit in any way the right of the Company to terminate the employment of any
Participant at any time; or to be evidence of any agreement or understanding,
express or implied, that the Company will employ any Participant in any
particular position or at any particular rate of remuneration or for any
particular period of time.
14.2 Indemnification. The Company shall indemnify and hold harmless
---------------
the Plan Administrator, any member thereof and any employee who may act on
behalf of the Company in the administration of this Plan from and against any
liability, loss, cost or expense (including reasonable attorneys' fees) incurred
at any time as a result of or in connection with any claims, demands, actions or
causes of action of any Participant, any person claiming through or under any of
them, or any other person, party or authority claiming to have an interest in
this Plan or standing to act for any persons or groups having an interest in
this Plan, for or on account of, any of the acts or omissions (or alleged acts
or omissions) of the Plan Administrator, any member thereof or any such
employee, except to the extent resulting from such person's willful misconduct.
14.3 Tax Effects. The Company makes no warranties or representations
-----------
with regard to the tax effects or results of this Plan. Any Participant
electing participation under this Plan shall be deemed to have relied upon his
own tax advisors with regard to such effects.
14.4 No Assignment; Binding Effect. Neither a Participant nor his
-----------------------------
Beneficiary shall have the right to alienate, assign, commute or otherwise
encumber his rights hereunder for any purpose whatsoever, and any attempt to do
so shall be disregarded completely as null and void. The provisions of this
Plan shall be binding on each Participant and on each person who claims a
benefit under him and on the Company and any successor to the Company.
15.
<PAGE>
14.5 Self-Interest. No Participant shall have any right to vote or
-------------
decide upon any matter related directly or indirectly to him or any right of his
to claim any benefit under the Plan. Accordingly, if the Plan Administrator is a
Participant, the Board shall make all decisions with respect to his rights under
this Plan.
14.6 Construction. This Plan shall be construed in accordance with the
------------
laws of the State of Georgia. The headings and subheadings in this Plan have
been inserted for convenience of reference only and are to be ignored in
construction of the provisions of this Plan. In the construction of this Plan,
the masculine, feminine or neuter genders, and the singular and plural numbers,
shall each include the other wherever appropriate.
14.7 References. Unless otherwise indicated, all references made in
----------
this Plan shall be to articles, sections and subsections of this Plan.
14.8 Effective Date of Plan. This Plan shall be effective as of April
----------------------
19, 1994 (the "Effective Date"), the date this Plan was approved by the Board.
Dated as of the 9th AMERICA'S FAVORITE CHICKEN
day of May, 1994. COMPANY
By: /s/
------------------------------
Frank J. Belatti, President and Chief
Executive Officer
16.
<PAGE>
EXHIBIT 10.44
AMERICA'S FAVORITE CHICKEN COMPANY
1994 SUPPLEMENTAL BENEFIT PLAN
FOR DESIGNATED OFFICERS
ARTICLE I
PURPOSE
The purpose of this 1994 Supplemental Benefit Plan (the "Plan") is to
provide certain officers of America's Favorite Chicken Company, a Minnesota
corporation (the "Company"), certain death and disability benefits to encourage
such officers to remain in the employ of the Company and to use their best
efforts, judgement and energy to perform, improve and advance the business and
interests of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth opposite such terms.
2.1 Beneficiary. The term "Beneficiary" shall mean the person or
-----------
persons designated by a Participant on his Enrollment Form or any amendment
thereto to receive his benefits payable hereunder at his death or, if no such
person survives the Participant or if no such designation is made, the
Participant's estate.
2.2 Board. The term "Board" shall mean the Board of Directors of the
-----
Company.
2.3 Company. The term "Company" shall mean America's Favorite
-------
Chicken Company, a Minnesota corporation.
2.4 Compensation. The term "Compensation" shall mean for each
------------
Participant the stated base annual salary payable to that Participant for the
services he renders to the Company as an officer during any twelve (12) month
period.
2.5 Death Benefit. The term "Death Benefit" shall mean, for each
-------------
Participant, an amount equal to the lesser of (i) an amount determined by the
President of the Company as provided in Article VIII hereof or (ii) five (5)
times his Compensation on the date he becomes a Participant of this Plan, or
such greater amount as may be determined by the Board or the President from time
to time taking into account increases in the Participant's Compensation.
2.6 Disability. The term "Disability" with respect to any
----------
Participant shall have the meaning ascribed to it in such Participant's
Supplemental Disability Policy.
<PAGE>
2.7 Disability Benefit. The term "Disability Benefit" with respect
------------------
to any Participant shall mean the supplemental disability income benefits
payable to a Participant upon his Disability under Article VII hereof.
2.8 Effective Date. The term "Effective Date" is defined in Section
--------------
12.8 hereof.
2.9 Enrollment Form. The term "Enrollment Form" shall mean the form,
---------------
substantially similar to Exhibit "A" attached to this Plan, executed by (a) each
Participant to acknowledge and accept participation in this Plan and the
Insurance Agreement and to designate his Beneficiary, and (b) the Plan
Administrator to acknowledge and accept such participation on behalf of the
Company.
2.10 Executive Benefits. The term "Executive Benefits" shall mean the
------------------
Disability Benefit and the Death Benefit.
2.11 Insurance Agreement. The term "Insurance Agreement" shall mean
-------------------
the split dollar and/or term insurance agreements incorporated in this Plan as
Article VI.
2.12 Insurer. The term "Insurer" shall mean any insurance company
-------
issuing one or more of the life or disability insurance policies subject to this
Plan.
2.13 Life Insurance Policy. The term "Life Insurance Policy" with
---------------------
respect to any Participant shall mean the policy or policies maintained by the
Company on the life of such Participant pursuant to Article VI hereof.
2.14 Participants. The term "Participants" shall mean those vice-
------------
presidents of the Company designated by the Board or the President from time to
time in writing who are not covered by any other Supplemental Benefit Plan
adopted by the Company.
2.15 Plan Administrator. The term "Plan Administrator" shall mean the
------------------
Company; however, the Company, acting through the Board, may from time to time
designate an individual or a committee of individuals pursuant to Section 3.1 to
perform the duties of Plan Administrator.
2.16 Plan Year. The term "Plan Year" shall mean the period commencing
---------
on the Effective Date, and ending December 31, 1994, and thereafter, each twelve
(12) consecutive month period commencing on each January 1 and terminating on
the following December 31.
2.
<PAGE>
2.17 Supplemental Disability Policy. The term "Supplemental
------------------------------
Disability Policy" with respect to any Participant shall mean the disability
policy maintained by the Company pursuant to Article VII hereof for such
Participant.
2.18 Year of Service. The term "Year of Service" means a twelve (12)
---------------
month period during which the Participant has not less than one thousand (1,000)
hours of service with the Company. Computation of any twelve (12) month period
shall be made with reference to the date on which the Participant's employment
commenced.
ARTICLE III
PLAN ADMINISTRATOR
3.1 The Company shall be the Plan Administrator and Named Fiduciary
of this Plan for purposes of ERISA; however, the Company, may at any time or
from time to time in its sole discretion, appoint an individual or a committee
of individuals to perform its duties as Plan Administrator. The Company hereby
designates Jeannette Ferrell to serve in such capacity until her resignation,
removal by the Board or inability to serve in such capacity for any reason.
3.2 If a committee, the Plan Administrator shall select one of its
members as its Chairman and shall hold its meeting at such times and places as
it may determine. A majority of its members shall constitute a quorum. The
committee may appoint a secretary to keep minutes of its meetings and may make
such rules and regulations for the conduct of its business as it shall deem
advisable.
3.3 All determinations of the Plan Administrator, if a committee,
shall be made by a majority vote of its members. Any decision or determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
3.4 The Plan Administrator may employ others to render advice with
regard to its duties under the Plan and allocate to others its fiduciary
responsibilities and exercise any and all other powers necessary to fulfill its
responsibilities under this Plan to the extent not in conflict with ERISA.
3.
<PAGE>
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Plan Administrator
appointed under Section 3.1.
4.2 The Plan Administrator shall have the authority to interpret the
Plan and to prescribe, amend and rescind such rules, regulations and
documentation and to make such other determinations as it deems reasonable,
necessary and proper for the administration of the Plan and the implementation
of its purposes.
4.3 The Plan Administrator may correct any defect, supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem necessary. Any decision made, or action taken, by the Plan
Administrator arising out of or in connection with the interpretation or
administration of the Plan shall be final and conclusive in all cases.
4.4 The Plan Administrator shall be indemnified by the Company
against all reasonable costs and expenses necessarily incurred by it in
connection with any action, suit or proceeding to which it may become a party by
reason of action taken or failure to act in connection with the Plan. Any other
expenses of administering the Plan shall also be borne by the Company. The Plan
Administrator, if an individual, or any member of the Plan Administrator
committee, if any, shall not be personally liable for any act done or
determination made in good faith.
ARTICLE V
PARTICIPATION
5.1 To be eligible to participate in this Plan, a Participant must be
an Officer of the Company. Each Participant shall be entitled to participate in
all of the Executive Benefits under this Plan upon the terms and conditions set
forth herein as of the date he delivers to the Plan Administrator an Enrollment
Form.
5.2 Except as otherwise provided herein, a Participant shall remain a
participant in this Plan as long as such person is eligible and until the
termination of his employment with the Company. Except in the event of a
termination by reason of death or Disability, following any such termination
neither the Participant nor his Beneficiary shall have any claim whatsoever for
any Executive Benefits under this Plan. Any termination of participation in
this Plan shall be effective as of the date such termination occurs.
4.
<PAGE>
ARTICLE VI
DEATH BENEFIT/
INSURANCE AGREEMENT
6.1 Death Benefit. In the event of the death of a Participant during
-------------
the term of his employment with the Company and after the Company first obtains
the Life Insurance Policy required by Section 6.2 hereof, the Beneficiary shall
be entitled to receive an amount equal to the Death Benefit from the death
benefit proceeds payable under such Life Insurance Policy.
6.2 Policy Ownership and Dividend Application.
-----------------------------------------
(a) As soon as practical following Enrollment of a Participant,
the Company shall apply for and, if available at regular non-rated premiums,
purchase, at its option, either a term or permanent Life Insurance Policy on the
life of each Participant having minimum death proceeds equal to such
Participant's Death Benefit; provided, however, that if the premiums for any
policy on the life of any Participant shall exceed regular, non-rated premiums,
the Company may, but shall have no obligation to, fund such excess. In the event
the Company determines not to fund such excess it shall promptly notify the
Participant and the Participant may, at his option, elect to pay the excess. If
the Participant fails to pay such excess or if for any other reason the Company,
after reasonable efforts, is not able to obtain the Life Insurance Policy
required hereby for any Participant, then such Participant and his Beneficiary
shall not be entitled to any Death Benefit hereunder except as may otherwise be
determined in the discretion of the Company and set forth in writing. The
Company shall have and may exercise all ownership rights in such Life Insurance
Policy, except as provided in this Article VI.
(1) Each Participant shall be entitled to designate the
Beneficiary to receive payment of that portion of the death benefit proceeds
payable under the Life Insurance Policy on his life which equals the Death
Benefit payable with respect to such Participant. The initial Beneficiary or
Beneficiaries shall be designated in the Participant's Enrollment Form.
Thereafter, upon receipt of written notice of a Participant's desire to change
his Beneficiary designation in form acceptable to the Company, the Company will
promptly take such action as is necessary to evidence such change and such
change shall become effective as provided in the applicable Life Insurance
Policies.
(2) The Company will not, without the written consent of a
Participant, assign its rights in any Life
5.
<PAGE>
Insurance Policy on such Participant's life, other than for purposes of
obtaining a loan against the Life Insurance Policy as provided in paragraph (3)
below.
(3) The Company will have the right to (A) borrow from the
Insurer and secure that loan by a Participant's Life Insurance Policy for any
purpose including, but not limited to, borrowing for the purpose of paying
premiums on that Policy without giving notice to the insured Participant, and
(B) make partial withdrawals of policy surrender values; provided, however, that
if the exercise of such rights would reduce the death benefit payable to any
Participant's Beneficiary pursuant to Section 6.2(a)(1), then such rights shall
be exercisable by the Company only with the written consent of that Participant.
(b) Except as provided in paragraph 6.2(a) above, as long as the
Insurance Agreement contained in the Plan is in force, the Company will not
exercise any rights under any Life Insurance Policy which will compromise or
reduce the death benefit payable to such Participant's Beneficiary.
(c) Dividends payable under the Life Insurance Policies, if any,
will be applied as provided in the Policies.
(d) For matters between a Participant and the Company, the
Insurance Agreement shall take precedence over any provisions of a Life
Insurance Policy (including any riders, amendments and attachments thereto) in
case of a conflict between the terms of the Life Insurance Policy and this
Article VI.
6.3 Payment of Premiums.
-------------------
(a) As long as the Insurance Agreement is in force, the Company
shall pay the premiums on each term Life Insurance Policy, and each Participant
and the Company agree to share in the payment of premiums on each permanent Life
Insurance Policy on such Participant's life held under this Plan in such amounts
and in the manner set forth below:
(1) Unless paragraph (2) below applies, the Participant's
share of the annual premium shall be that portion of the annual premium due on
the Life Insurance Policy that is equal to the amount of the economic benefit
that would be taxable to the Participant, but for the payment by the Participant
of such amount based upon an amount of insurance protection equal to the
Participant's portion of the death benefit proceeds specified in Section 6.2.
The Company shall pay the balance of each such annual premium.
6.
<PAGE>
(2) If the Life Insurance Policy is a flexible premium
contract such that premiums may be varied as to the amount and timing of premium
payments, then the Participant shall be required to make an annual premium
contribution in an amount determined in accordance with paragraph (1) above,
beginning on the Policy issue date and continuing on each subsequent anniversary
of such date.
The Company shall pay premiums at such times and in such amounts
as it may determine in its sole discretion.
(b) The amount of economic benefit that would be taxable to each
Participant shall be computed in accordance with the cost of life insurance per
$1,000 as shown in the table contained in Revenue Ruling 55-747, 1955-2 C.B. 22
as provided in Revenue Ruling 64-328, 1964-2 C.B. II (often commonly referred to
as the "P.S. 58 costs").
(c) In order to facilitate the payment of premiums on the Life
Insurance Policies, the Company, in the first policy year and in each subsequent
year for as long as this Insurance Agreement is in force, shall forward the
total amount of the premium then currently due and payable on the Policies
directly to the Insurer and shall indicate immediately in the appropriate
Company records that the annual sum payable by the Participant provided in
Section 6.3(a) shall be added to his annual salary or compensation.
6.4 Beneficiary Provisions.
----------------------
(a) If a Participant dies while this Insurance Agreement is in
force, the total death benefit proceeds from policies held by the Company on his
life shall be divided as follows:
(1) That portion of such proceeds which equals the
Participant's Death Benefit shall be paid to the Participant's Beneficiary; and
(2) The balance of such proceeds, if any, shall be paid to
the Company.
(b) No Beneficiary shall have any right to reimbursement or
contribution from the estate of the Participant or from the Company with respect
to the amount collected by the Company under any Life Insurance Policy held
under this Plan.
(c) If the Participant dies while this Insurance Agreement is in
force, the Company agrees to take such action as may be necessary to obtain
payment from the Insurer to the
7.
<PAGE>
Participant's designated Beneficiary of the amounts payable under any applicable
Life Insurance Policy.
6.5 Termination of the Insurance Agreement. This Insurance Agreement
--------------------------------------
shall automatically terminate with respect to any Participant upon the
Participant's termination of employment for any reason prior to his death. Upon
termination of this Insurance Agreement, the Company shall become sole owner of
such policy unless within thirty (30) days following such termination
Participant elects to purchase such Policy from the Company for an amount equal
to its net cash surrender value.
ARTICLE VII
DISABILITY BENEFITS
The Company shall procure for each Participant as soon as possible
after the Enrollment of the Participant and shall maintain in full force and
effect during the Participant's employment with the Company a Supplemental
Disability Policy which will supplement the benefits payable under any
disability benefit provided to the Participant by the Company under its basic
employee health care benefit program, so that, with respect to a Disability
occurring after the Company first obtains the Supplemental Disability Policy,
the total monthly disability benefit payable to the Participant under all
disability policies maintained by the Company, after a maximum elimination
period of ninety (90) days, shall equal the lesser of (a) an amount determined
by the President of Company as provided in Article VIII, or (b) Thirty Thousand
and No/100 Dollars ($30,000.00) or (c) the sum of the following amounts:
(1) 80% of the first $250,000.00 of the Participant's Compensation;
plus
(2) 70% of the next $100,000.00 of the Participant's Compensation;
plus
(3) 25% of the Participant's Compensation in excess of $100,000.00.
For purposes of this Article VII, the Compensation of a Participant
shall be deemed to equal the Compensation payable to such Participant on the
date he becomes a participant in the Plan or such greater amount as may be
determined by the Board or the President of the Company from time to time,
taking into account increases in such Participant's Compensation.
Notwithstanding anything herein to the contrary, that if the premiums
for any Supplemental Disability Income Policy of
8.
<PAGE>
any Participant shall exceed regular, non-rated premiums, the Company may, but
shall have no obligation to, fund such excess. In the event the Company
determines not to fund such excess it shall promptly notify the Participant and
the Participant may, at his option, elect to pay the excess. If the Participant
fails to pay such excess or if for any other reason the Company, after
reasonable efforts, is not able to obtain the Supplemental Disability Income
Policy required hereby for any Participant, then such Participant shall not be
entitled to any Disability Benefit hereunder except as may otherwise be
determined in the discretion of the Company and set forth in writing.
ARTICLE VIII
AMOUNT OF EXECUTIVE BENEFITS
The determination of the amount of each Executive Benefit to be
granted to a Participant shall be made by the President of the Company, provided
that in no event shall such amount exceed the maximum benefit authorized hereby.
The initial amount of each Executive Benefit authorized by the President with
respect to each Participant shall be set forth in such Participant's Enrollment
Form, and such amounts may be increased or decreased by the President at any
time or from time to time thereafter upon written notice to the Participant
prior to such Participant's death or Disability.
ARTICLE IX
DISTRIBUTIONS
9.1 Source of Distributions. All distributions under this Plan shall
-----------------------
be made by the Company from its general assets, and the status of each
Participant's or Beneficiary's claim to a benefit shall be the same as the
status of any other general unsecured creditor of the Company; provided,
however, any Death Benefit amount due from the general assets of the Company
under Section 6.1 shall be offset by any death benefit proceeds received by the
Participant's Beneficiary under the Insurance Agreement under Article VI. No
person shall look to, or have any claim whatsoever against the Plan
Administrator, any member of the Board, other officers of the Company, other
employees, shareholders or any other persons acting on behalf of the Company in
their individual capacities for the distribution of any Executive Benefit or for
the payment of any other amounts under this Plan. As part of its general assets
and in support of the Executive Benefit promises made under this Plan, the
Company may continue to own and maintain, in whole or in part, any existing
insurance policies on the life or well-being of any of the Participants or
purchase new policies of the same type, but no
9.
<PAGE>
Participant nor any Beneficiary, legal heir, successor or assign of his shall
have any claim whatsoever to any such policy or the proceeds of any such policy,
except as may be specifically provided in the Insurance Agreement under Article
VI.
9.2 Mental or Legal Incompetence. The Company, in its sole
----------------------------
discretion, may make distribution to the guardian or other legal representative
of a Participant or Beneficiary, if the Company determines that the Participant
or Beneficiary is mentally or legally incompetent to receive such benefit
distribution. Any such distribution shall be in full and complete satisfaction
of any and all claims whatsoever by or behalf of such Participant or Beneficiary
under this Plan against the Company, the Plan Administrator, any member of the
Board, other Participants or officers of the Company, other employees,
shareholders and any other person acting on behalf of them.
ARTICLE X
CLAIMS PROCEDURES
10.1 Filing of a Claim for Benefits. Any Participant or Beneficiary
------------------------------
entitled to one or more Executive Benefits under this Plan will file a claim
request with the Plan Administrator with respect to the applicable Executive
Benefits.
10.2 Denial of Claim. A claim for an Executive Benefit under this
---------------
Plan shall be denied if the Company determines that the Participant or
Beneficiary is not entitled to receive such Executive Benefit under the Plan.
Notice of a denial shall be furnished to the Participant or Beneficiary within a
reasonable period of time after receipt of the claim by the Plan Administrator.
10.3 Content of Notice. Within ninety (90) days of the denial of a
-----------------
claim under this Plan, the Plan Administrator shall provide to every Participant
or Beneficiary who is denied a claim written notice setting forth, in a manner
calculated to be understood by such Participant or Beneficiary, the following:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary to perfect the claim, and any explanation of why such material or
information is necessary; and
10.
<PAGE>
(d) An explanation of the Plan's claim review procedure as set
forth below.
10.4 Review Procedure. The purpose of the review procedure is to
----------------
provide a method by which a Participant or Beneficiary may have a reasonable
opportunity to appeal a denial of a claim to the Plan Administrator for a full
and fair review. To accomplish that purpose, the Participant, Beneficiary or a
duly authorized representative:
(a) May require a review upon written application to the Plan
Administrator;
(b) May review pertinent Plan documents; and
(c) May submit issues and comments in writing.
A review shall be requested by filing a written application with the Plan
Administrator at any time within sixty (60) days after receipt by the
Participant or Beneficiary of a written notice of the denial of his claim
pursuant to Section 10.3.
10.5 Decision on Review. A decision on review of a denied claim shall
------------------
be made in the following manner:
(a) The decision on review shall be made by the Plan
Administrator who may, in his discretion, hold a hearing on the claim. Such
decision shall be made promptly, and not later than sixty (60) days after
receipt of the request for review pursuant to Section 10.4, unless special
circumstances (such as the need to hold a hearing) require an extension of time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than one hundred and twenty (120) days after receipt of the
request for review.
(b) The decision on review shall be in writing and shall include
specific reasons for the decisions, written in a manner calculated to be
understood by the Participant or Beneficiary, and specific references to the
pertinent Plan provisions upon which the decision is based.
ARTICLE XI
AMENDMENT AND TERMINATION OF PLAN
The Board may at any time or from time to time amend or revise the
terms of this Plan to either increase or decrease the Executive Benefits
authorized hereunder.
11.
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.1 Company Liability. Nothing in this Plan shall be construed to
-----------------
limit in any way the right of the Company to terminate the employment of any
Participant at any time; or to be evidence of any agreement or understanding,
express or implied, that the Company will employ any Participant in any
particular position or at any particular rate of remuneration or for any
particular period of time.
12.2 Indemnification. The Company shall indemnify and hold harmless
---------------
the Plan Administrator, any member thereof and any employee who may act on
behalf of the Company in the administration of this Plan from and against any
liability, loss, cost or expense (including reasonable attorneys' fees) incurred
at any time as a result of or in connection with any claims, demands, actions or
causes of action of any Participant, any person claiming through or under any of
them, or any other person, party or authority claiming to have an interest in
this Plan or standing to act for any persons or groups having an interest in
this Plan, for or on account of, any of the acts or omissions (or alleged acts
or omissions) of the Plan Administrator, any member thereof or any such
employee, except to the extent resulting from such person's willful misconduct.
12.3 Tax Effects. The Company makes no warranties or representations
-----------
with regard to the tax effects or results of this Plan. Any Participant electing
participation under this Plan shall be deemed to have relied upon his own tax
advisors with regard to such effects.
12.4 No Assignment: Binding Effect. Neither a Participant nor his
-----------------------------
Beneficiary shall have the right to alienate, assign, commute or otherwise
encumber his rights hereunder for any purpose whatsoever, and any attempt to do
so shall be disregarded completely as null and void. The provisions of this
Plan shall be binding on each Participant and on each person who claims a
benefit under him and on the Company and any successor to the Company.
12.5 Self-Interest. No Participant shall have any right to vote or
-------------
decide upon any matter related directly or indirectly to him or any right of his
to claim any benefit under the Plan. Accordingly, if the Plan Administrator is a
Participant, the Board shall make all decisions with respect to his rights under
this Plan.
12.6 Construction. This Plan shall be construed in accordance with
------------
the laws of the State of Georgia. The headings
12.
<PAGE>
and subheadings in this Plan have been inserted for convenience of reference
only and are to be ignored in construction of the provisions of this Plan. In
the construction of this Plan, the masculine, feminine or neuter genders, and
the singular and plural numbers, shall each include the other wherever
appropriate.
12.7 References. Unless otherwise indicated, all references made in
----------
this Plan shall be to articles, sections and subsections of this Plan.
12.8 Effective Date of Plan. This Plan shall be effective as of April
----------------------
19, 1994, the date this Plan was approved by the Board.
Dated as of the 9th AMERICA'S FAVORITE CHICKEN
--- COMPANY
day of May, 1994.
By: /s/
-------------------------------
Frank J. Belatti, President
and Chief Executive Officer
13.
<PAGE>
EXHIBIT A
AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR JUNIOR OFFICERS
ENROLLMENT FORM
PART I. ENROLLMENT
- -------------------
The Plan Administrator appointed to administer the Supplemental
Benefit Plan for Officers (the "Plan") has determined that
_______________________ ("Participant") is eligible for and deserving of
consideration under the Plan, a copy of which is attached hereto and
incorporated in this Enrollment Form for all purposes. Capitalized terms which
are used in this Enrollment Form and not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
Participant acknowledges that the amount of each Executive benefit
under the Plan granted to Participant as of the date hereof is as follows:
A. Disability Benefit:_______________________________
B. Death Benefit:____________________________________
Execution of this Enrollment Form shall evidence Participant's full
acceptance of the terms and conditions of the Plan, the Insurance Agreement
contained therein and this Enrollment Form.
The Plan Administrator reserves the right to modify or cancel this
Enrollment Form at any time, subject to the express provisions of the Plan.
This Enrollment Form shall continue in effect until superseded or cancelled by
the Plan Administrator.
PART II. BENEFICIARY DESIGNATION
- ---------------------------------
I hereby designate ___________________________________ my
_____________ (state relationship), whose current address is
_________________________________________as my primary Beneficiary under the
Plan. If such person fails to survive me, I hereby designate
____________________________________, my _____________ (state relationship),
whose current address is _______________________________________________________
as my secondary Beneficiary under the Plan. If such secondary Beneficiary fails
to survive me, my Beneficiary shall be my estate. This Beneficiary designation
shall become effective only upon its receipt and acceptance by the Plan
Administrator during my lifetime and upon becoming effective, shall supersede
all previous designations made by me.
Date: _____________ Signature:___________________________________
Print Name: _________________________________
<PAGE>
THE PLAN ADMINISTRATOR FOR THE AMERICA'S FAVORITE CHICKEN COMPANY
SUPPLEMENTAL BENEFIT PLAN FOR OFFICERS HEREBY ACKNOWLEDGES RECEIPT AND
ACCEPTANCE OF THIS ENROLLMENT FORM THIS ____ DAY OF __________________, 1994.
_____________________________________________
Plan Administrator
<PAGE>
EXHIBIT 10.45
SETTLEMENT AGREEMENT BETWEEN
ALVIN C. COPELAND ("COPELAND") AND
DIVERSIFIED FOODS AND SEASONINGS, INC. ("DIVERSIFIED")
AND AFC ENTERPRISES, INC. ("AFC") AND
FLAVORITE LABORATORIES, INC. ("FLAVORITE")
1. AFC will quitclaim, transfer and assign to Copeland and
Diversified any interest it may have in the formulas and recipes for Popeyes and
Churchs products currently claimed to be owned by Copeland and Diversified (the
"Copeland formulas"). Copeland and Diversified will quitclaim, transfer and
assign to AFC any interest they may have in the formulas and recipes for Popeyes
and Churchs products currently held by AFC (the "Flavorite formulas"). In
addition, AFC will direct Flavorite to turn over to AFC all of the
documentation in its records relating to the development of the Flavorite
formulas (the "Flavorite documentation").
2. All claims, counter-claims and cross-claims asserted in
Copeland, et al, v. Flavorite Laboratories, Inc., et al., Civil Action No.
3:94CV686BS, U.S. District Court for the Southern District of Mississippi, shall
be dismissed with prejudice, and the parties well execute a mutual release.
3. Once the settlement is effective, Copeland, Diversified and AFC
agree that no defaults exist under the Formula Agreement or the Supply Agreement
and that such agreements are in full force and effect as modified by this
Settlement Agreement.
4. Diversified will continue to supply product(s) to the Popeyes
system utilizing the Copeland formulas under the terms of the Supply Contract
dated March 21, 1989 (the "Supply Contract"). The Supply Contract will be
amended to extend the term of such contract until March 20, 2029 (the "Amended
Supply Contract"). The Amended Supply Contract will cover all products covered
by the Supply Contract. At the end of its term, the Amended Supply Contract
shall be renewed in five (5) year increments, or terms agreed to by
Diversified and AFC.
From and after March 20, 2004, and continuing so long as the Amended
Supply Contract (or any renewal thereof) shall remain in effect, the Formula
Agreement dated June 2, 1979, between Alvin
<PAGE>
C. Copeland, et al., on the one hand, and A. Copeland Enterprises, Inc., et al.,
on the other hand, as amended (the "Formula Agreement"), shall be further
amended and modified by providing that in lieu of the royalty payments otherwise
required to be paid thereunder, the royalty payment required to be paid shall be
a sum certain in the amount of $254,166.67 per month, pro rated for any period
less than a full month. Upon any initiation of legal proceedings for the payment
of additional royalties the Amended Supply Contract (or any renewal thereof)
shall be terminated without additional notice.
Paragraph 1(c) of the Letter Agreement executed on June 13, 1994, by and
between Copeland and Diversified, et al., on the one hand, and AFC, on the other
hand, as amended by this Agreement, shall remain in full force and effect so
long as the Amended Supply Contract (or any renewal thereof) shall remain in
effect. The premature assertion of any claim described in said Paragraph 1(c)
shall terminate the Amended Supply Agreement (or any renewal thereof) without
additional notice. Said Paragraph 1(c) is amended to provide that neither
Copeland nor Diversified shall ever seek to recover from AFC royalties based on
sales at New Stores and New Franchised Stores occurring while the Amended Supply
Contract (or any renewal thereof) is in effect.
5. AFC will require franchisees in Thailand and Korea to purchase Popeyes
products being supplied by Diversified as soon as Diversified receives approval
for such products to be imported into each such country; provided, however, in
any event, there shall be no such requirement to purchase such products until
the event set out above has occurred and there has been a sufficient period of
time after the occurrence of such event, not to exceed six months, to run off
any inventory of Flavorite, or any other distributor, of existing supplies of
products being furnished to such franchisees.
2
<PAGE>
This the 29th day of May, 1997.
AGREED TO AND APPROVED:
SIGNATURE PAGE ATTACHED
----------------------------
ALVIN C. COPELAND
DIVERSIFIED FOODS & SEASONINGS, INC.
BY: SIGNATURE PAGE ATTACHED
------------------------
G.L. HART
PRESIDENT
AFC ENTERPRISES, INC.
BY: SIGNATURE ATTACHED
------------------------
FRANK L. BELATH
CHAIRMAN AND CEO
FLAVORITE LABORATORIES, INC.
BY: /s/ LARRY D. SHAW
------------------------
LARRY D. SHAW
VICE PRESIDENT FINANCE
3
<PAGE>
This 29th day of May, 1997.
---- ---
AGREED AND APPROVED:
/S/ Alvin
- ------------------------
ALVIN
DIVERSIFIED FOODS & SEASONINGS, INC.
BY: /S/
------------
PRESIDENT
AFC ENTERPRISES, INC.
BY: /S/ Frank
-----------------
FRANK
CHAIRMAN AND CEO
LABORATORIES, INC.
BY: /S/ Larry Shaw
----------------------
LARRY SHAW
VICE PRESIDENT FINANCE
4
<PAGE>
June 13, 1994 Ka n M. Mesmar
Executive Vice President
Chief Financial Officer
VIA FACSIMILE (504) 832-8918
- ----------------------------
and FEDERAL EXPRESS
- -------------------
Mr. Al Copeland
Copeland's of New Orleans
1405 Airline Highway
Meterie, Louisiana 70001
RE: Pending Litigation
------------------
Dear Al:
This letter is intended to reflect our mutual agreement to settle all
claims and demands made by either of us in that certain proceeding in the
Chapter 11 Bankruptcy In re Al Copeland Enterprises, Inc. (Bankr. W.D. Tex. Case
No. 91-12575-FM, Adv. Pro. 93 1016-FM) ("Equitable Subordination Adversary") and
in that certain litigation between us pending in the Federal District Court of
the Eastern District of Louisiana (E.D. La. Civil Action No. 92-3961) ("Recipe
Royalty Lawsuit"). This letter will bind the parties to the various promises as
set forth below, and obligates each of the parties to take whatever steps are
necessary to conclude the settlement, including but not limited to the
execution, delivery, and filing of any necessary formal documentation and the
dismissal of the Equitable Subordination Adversary and Recipe Royalty Lawsuit.
It is understood between AFCC and CIBC, on the one hand, and Al Copeland
and his owned or controlled entities (namely Diversified MFY, NDC, CP
Partnership and Gulf Venture) on the other hand, that they wish to fully and
finally settle and receive all claims, disputes and issues relating to the two
lawsuits referenced above. Accordingly, the parties agree and promise among
themselves as follows:
1(a). The Equitable Subordination Adversary (which includes all claims
filed by Al Copeland, Diversified, MFY, NDC, CP Partnership and Gulf Ventures or
any other party or entity owned or controlled by Al Copeland in the matter of In
re: Al Copeland Enterprises, Inc., Debtor, Chapter 11, Case No. 91-12575-FM-11,
United States Bankruptcy Court, Western District of Texas) and the Recipe
Royalty Lawsuit (the "Litigation") shall be dismissed with prejudice.
1(b). In consideration of AFCC entering into the Farrocis Agreement
Modification and other good and valuable consideration, including settlement of
all the Litigation, Al Copeland and Diversified agree that notwithstanding the
provisions or current or future status
[LETTERHEAD OF CHURCH'S - POPEYE'S]
<PAGE>
Mr. Al Copeland
June 13, 1994
Page 2
of any other agreements, including the Formula Agreement, as amended, and the
Recipe Royalty Agreement, neither they nor any of their heirs, representatives,
successors or assigns shall ever be entitled to or ever have any right or claim
to royalties or other payments from AFCC relating to sales or any other business
whatsoever transacted prior to March 21, 2004 at New Stores or New Franchised
Stores. As used in this paragraph, the terms "New Stores" and "New Franchised
Stores" have the same meaning as set forth in the Recipe Royalty Agreement.
Nothing in this paragraph is meant to constitute an admission by AFCC or in any
way to imply that Al Copeland and Diversified may have a legitimate claim for
royalties relating to sales or other business transacted subsequent to March 21,
2004 at New Stores or New Franchised Stores, or that, but for this paragraph, Al
Copeland and Diversified would be entitled to any such royalties for business
transacted at such stores prior to March 21, 2004.
1(c). Al Copeland and Diversified agree to the dismissal with prejudice
of the Recipe Royalty Lawsuit by Court order, such dismissal to be subject to
the terms and conditions set forth herein. Al Copeland and Diversified further
covenant and agree never to file any lawsuit or make any claims against any
person or party relating to the past, present or future validity or enforcement
of the Recipe Royalty Agreement or to the alleged termination thereof, subject
only to the exception set forth in the following sentence. Notwithstanding the
foregoing sentences, Al Copeland and Diversified reserve the right to file
subsequent to March 20, 2004, but at no time before then, a legal action against
AFCC seeking (a) a declaration that the Recipe Royalty Agreement has terminated
because the resolutory conditions for its termination have in fact all been
fulfilled, and (b) to recover royalties based on sales at New Stores and New
Franchised Stores occurring after March 20, 2004. The grounds of and relief
sought in any such lawsuit shall be strictly limited as set forth in the
preceding sentence. AFCC in turn reserves its right to contest the validity of
any such lawsuit or claims on any and all grounds, and by entering into this
agreement does not waive any of its rights or available defenses and in no way
admits, implies or suggests that any such lawsuit or claims would be valid or
legitimate. The parties agree, however, that any such lawsuit shall not be
deemed barred by the res judicate effect of the dismissal of the Recipe Royalty
--- --------
Lawsuit, or by the collateral estoppel effect of any decisions rendered therein,
because the prospective ground for termination is not one that was raised or
could have been raised in the Recipe Royalty Lawsuit.
2. The Formula Agreement dated July 2, 1979, between Alvin C. Copeland
------------ -----------------
Gilbert E. Copeland, Mary L. Copeland, Catherine Copeland, Russell J. Jones, on
- -------------------------------------------------------------------------------
the one hand, and A. Copeland Enterprises, Inc. and Popeyes Famous Fried
- ------------------------------------------------------------------------
Chicken, Inc., on the other hand, as amended (the "Formula Agreement") is
- --------------------------------
further amended and modified by providing that in lieu of the royalty payments
otherwise required to be paid thereunder, the royalty payments required to be
paid under the Formula Agreement for the period beginning May 1, 1994 and ending
April 30, 1999, shall be a sum certain in amount of $237,500.00 per month and
thereafter, the royalties required to be paid for the period beginning May 1,
1999 and ending March 20, 2004, shall be a sum certain in the amount of
$254,165.67 per
<PAGE>
Mr. Al Copeland
June 13, 1994
Page 7
month pro rated for any period less than a full month. Except as otherwise
provided herein, the Formula Agreement will remain in full force and effect.
3. AFCC and Al Copeland and Diversified reaffirm the Supply Contract
dated March 21, 1989 between New Orleans Spice Company, Inc. and Biscuit
Investments, Inc. (the "Supply Contract"), acknowledge that each party intends
to perform its obligations under such contract, and agree, provided all
covenants and obligations under such contract are performed and satisfied by the
parties thereto, that the Supply Contract will remain in full force and effect
until March 20, 2004, at which time the parties acknowledge and agree the Supply
Contract terminates.
The parties agree that the items covered by the Supply Agreement (the
"Covered Items") include such Covered Items as the same may be modified from
time to time (with the approval and content of AFC).
The parties further agree that a change in the method of processing,
manufacturing, producing or preparing products used by AFC in the Popeyes system
(the "Products") shall not constitute a new Product for purposes of the Supply
Agreement. For example a change from (a) fresh to frozen, (b) marination
in-store to pre-marination or (c) cooked-in-store to pre-cooked shall not
constitute a new Product and AFC shall otherwise continue to purchase the Items
identified in the Supply Contract from Diversified used in connection with the
preparation of such Product as changed, provided that Diversified modifies such
Items, to the extent necessary, in order for such Items to be used in the new
processing, manufacturing, and/or preparation of such Products as changed.
By way of further example, AFC has decided to use a freezer-to-fryer
butterfly shrimp product versus a fresh product. The Supply Contract identifies
as an Item the breading used in the preparation of butterfly shrimp. In order
to accommodate AFC's freezer to fryer product, it is necessary to modify the
breading in order to obtain the same taste profile and color. In such instance,
the breading will continue as an Item under the Supply Agreement provided
Diversified modifies such item as above stated.
4. Upon execution of this letter, the parties may enter into a separate
Settlement Agreement, but the failure to do so shall not effect this settlement
agreement in any way whatsoever; and further, the parties shall cause
stipulations of dismissal to be entered with respect to the two lawsuits
referenced above, dismissing the actions with prejudice, with each party to bear
its respective costs.
5. To the extent that any party institutes legal action against another
in connection with the subject matter of the terms of the settlement agreement
or any promises made thereunder, the prevailing party will be entitled to
recover its costs and attorneys fees incurred in connection with prosection or
defense of the action.
<PAGE>
Mr. Al Copeland
June 13, 1994
Page 4
6. Any sums due AFCC for the Race Team Assets will be forgiven.
7. The parties specifically except from this settlement agreement any
claims or obligations arising under franchise agreements for the operation of
Church's or Popeyes restaurants.
8. The parties agree to cooperate with each other to the extent possible,
to provide for advantageous tax consequences to all parties resulting from the
settlement provided for herein; provided that the failure of the parties to
reach an agreement regarding the structure of the payments or other aspects of
the settlement as provided herein shall not otherwise affect this settlement
agreement.
In addition to the foregoing, each party shall bear its own costs and
attorneys fees, except as specified above. This letter will be governed by
the laws of the State of Louisiana.
Al, if you are in agreement, then please indicate your agreement to the
foregoing terms by signing below, fax the executed copy to me and overnight to
me the original.
Sincerely,
/s/ Kam M. Nassar
----------------------------
Kam M. Nassar
Executive Vice President
and Chief Financial Officer
America's Favorite Chicken
Company (AFCC)
I hereby acknowledge that I have
read and understood the terms of
the settlement embodied herein, that
I have consulted with counsel of my
choice in connection therewith, and I
agree to such settlement as set forth
hereinabove.
/s/ Al Copeland
- ----------------------------------
Al Copeland, individually, and on
behalf of Diversified Foods and Seasonings, Inc.
(Diversified), My Favorite Year, Inc. (MFY),
National Development Corporation (NDC),
Gulf Venture Associates (Gulf Venture) and
CP Partnership
<PAGE>
EXHIBIT 10.46
SUBLEASE
THIS SUBLEASE (THE "SUBLEASE") is made as of the 1st day of March, 1997, by
and between AFC Enterprises, Inc., a Minnesota corporation ("Sublessee"), and
Foresight Software, Inc. a Delaware corporation ("Sublessor");
WITNESSETH:
WHEREAS, Sublessor is the Tenant under that certain Lease Agreement (the
"Lease") dated September 30, 1996, having Concourse VI Associates ("Lessor"), as
Lessor, for lease of office space at Corporate Center VI, Six Concourse Parkway,
Fulton County, Georgia, such office space being on the twenty-second floor and
comprising 26,591 square feet, a copy of which Lease is attached hereto as
EXHIBIT "A", and made a part hereof by reference; and,
WHEREAS, Sublessor wishes to lease to Sublessee, and Sublessee wishes to
lease from Sublessor, a portion of the office space leased under the Lease;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Sublessor leases to Sublessee, and Sublessee leases from Sublessor, on
the terms and conditions specified herein, a portion of the office space leased
under the Lease, such subleased space being about 14,372 rentable square feet
("RSF"), as more particularly described in EXHIBIT "B", attached hereto and
made a part hereof by reference (the "Subleased Space"). Sublessor hereby
represents and warrants to the Sublessee that the copy of the Lease attached as
Exhibit "A" is true, correct and complete, that the Lease is in full force and
effect and is not in default (nor has any event occurred that with the passage
of time, the giving of notice, or both, will constitute a default under the
Lease), that the Sublessor has full power and authority to enter into this
Sublease and, as evidenced by Lessor's execution of this Sublease, received
appropriate consent from the Lessor, and Sublessor hereby covenants and warrants
that so long as the Sublessee does not commit an uncured default hereunder, it
shall have quiet enjoyment and possession of the Subleased Space.
2. The primary term of this Sublease shall be from March 1, 1997, until
February 28, 1999, subject, however, to the provisions hereof. Rent shall be as
follows:
<TABLE>
<CAPTION>
PER RSF PER ANNUM PER MONTH
- ---------------------------------------------------------------
<S> <C> <C> <C>
3-1-97 through 12-31-97 $ 20.00 $287,440.00 $ 23,953.33
- ---------------------------------------------------------------
1-1-98 through 2-28-99 $ 22.00 $316,184.00 $ 26,348.67
- ---------------------------------------------------------------
3-1-99 through 12-31-02 $ 22.00 $316,184.00 $ 26,348.67
- ---------------------------------------------------------------
</TABLE>
<PAGE>
Sublessee shall pay rental to Sublessor in advance on the first day of
the month at such address as the Sublessor shall designate from time-to-time, in
accordance with the requirements under the Lease. Sublessee agrees to pay
promptly upon demand a prorated share (54.05%) of any additional rent, tax
payments, or any other sums that may be due from Sublessor to Lessor from
time-to-time under Paragraph 3 of the Lease, while reserving its rights to
dispute operating statements in accordance with Paragraph 3(f) of the Lease.
Sublessor agrees to promptly and timely provide to Sublessee copies of all
operating statements, or related notices, provided to it by the Lessor. Prior to
the execution of this Sublease, Sublessor shall provide Sublessee a copy of the
1997 Operating Expense Estimate provided by the Landlord.
Sublessee shall have the option to extend the term of this Sublease for
the balance of the term of the Lease. Sublessee shall give written notice of its
intent to exercise this option not later than 180 days prior to expiration of
the primary term of this Sublease.
3. Sublessee covenants and agrees with Sublessor to comply with any and
all terms and provisions of the Lease. In the event of a default by either party
under this Sublease that also constitutes a default under the Lease, the
Sublessor or the Sublessee, as applicable, shall have all rights available to
them at law or in equity, or as provided under the Lease, with respect to such
default.
4. Sublessor agrees to indemnify, hold harmless and defend the
Sublessee from and against any and all claims, losses or damage, of any kind or
nature whatsoever, arising from Sublessor's default under this Sublease, or
under the Lease, unless such claim, loss or damage arises solely because of the
willful act or gross negligence of the Sublessee. Sublessee agrees to indemnify,
hold harmless and defend the Sublessor from and against any and all claims,
losses or damage, of any kind or nature whatsoever, arising from Sublessee's
default under this Sublease, unless such claim, loss or damage arises solely
because of the willful act or gross negligence of Sublessor.
5. Sublessor agrees not to permit an uncured default under the Lease,
provided such default is not caused by Lessor or by Sublessee; provided,
however, in the event Sublessor defaults under the Lease, and fails to cure same
in a timely manner, Sublessor agrees that Sublessee may, but is not obligated
to, cure any such default under the Lease in order to preserve Sublessee's
rights under this Sublease. Any sums expended by Sublessee to cure Sublessor's
default under the Lease may be collected by all means available to Sublessee, at
law and in equity, or may be offset against any rental or other sums due under
this Sublease. Sublessor agrees to forward to Sublessee any and all notices of
default, or related notices, it receives from the Lessor under the Lease, in a
timely manner.
6. Sublessor hereby represents and warrants to the Sublessee that the
Subleased Space is in normal operating condition, and currently free of defects,
normal wear and tear accepted. AFC agrees to refit the Subleased Space in
accordance with plans and specifications to be submitted to the Sublessor and
the Lessor, such plans to be submitted not later than fifteen (15) days
following the date of this Sublease. The Sublessor and Sublessee agree to
cooperate reasonably in presenting such plans to the Lessor, and in working
toward approval of such plans. In the event the parties and
2
<PAGE>
the Lessor, acting in good faith, are unable to agree upon such plans within
thirty (30) days following the date of this Sublease, Sublessee, in its sole
discretion, may terminate this Sublease, and shall have no further liability or
obligation under this Sublease. Sublessee shall bear all costs related to
documentation and to all construction and related costs associated with
preparing the Subleased Space pursuant to such plans.
7. Sublessee may assign this Sublease, or sub-sublet any or all of the
Subleased Space, without Sublessor's consent, so long as Sublessee remains
liable under this Sublease.
8. Should Sublessor choose to further sublet or vacate any of the
additional office space demised under the Lease, then it shall give prior,
written notice to Sublessee, and Sublessee shall have fourteen (14) days from
receipt of such notice within which to agree to sublet such space upon terms in
effect under the Sublease at that time. Sublessee's failure to respond within
this fourteen (14) day period shall be deemed a rejection of such additional
space, and Sublessor shall then be free to sublet, vacate, or otherwise to
demise the balance of this office space as it deems fit.
9. No provision hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.
10. Any and all notices, elections, demands, requests and responses
thereto permitted or required to be given under this Sublease (hereinafter
sometimes "Notice") shall be in writing, signed by or on behalf of the party
giving the same, and shall be deemed to have been properly given or served and
shall be effective upon being actually received by the addressee, regardless of
the method of delivery, or upon being deposited in the United States Mail,
postage prepaid, certified mail, return receipt requested, to the other party at
the address of such other party set forth below or at such other address as such
other party may designate by Notice specifically designated as a notice of
change of address and given in accordance herewith; provided, however, that the
time period in which a response to any Notice must be given shall commence on
the date of receipt thereof; and provided further that no Notice specifically
designated as a notice of change of address shall be effective until the date of
receipt thereof. Personal delivery to a party or to any officer, partner, agent
or employee of such party at said address shall constitute receipt. Rejection or
other refusal to claim or accept any Notice or inability to deliver because of
changed address of which no Notice specifically designated as a notice of change
of address has been received shall also constitute receipt. Any such Notice
shall be addressed as follows:
SUBLESSEE: AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attn: Assets Management
3
<PAGE>
With a copy to: AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328
Attn: Corporate Counsel -
Real Estate
SUBLESSOR: Foresight Software, Inc.
Six Concourse Parkway
Suite 2200
Atlanta, Georgia 30328
Attn: Chief Financial Officer
11. This Sublease constitutes the sole and entire agreement between or
among the parties with respect to the subject matter hereof. No representation,
warranty, covenant, inducement or obligation not expressly stated in this
Sublease shall be binding upon the parties.
12. Time is of the essence hereunder. This Sublease has been made in,
and shall be governed and construed in accordance with the laws of, the State of
Georgia. This Sublease is a usufruct.
13. The parties acknowledge that it and its legal counsel have
participated in the negotiation and preparation of this Sublease; therefore,
this Sublease shall be construed without regard to any presumption or other rule
requiring construction against the party causing this Sublease to be drafted.
14. This Sublease may be executed in multiple counterparts, each of
which shall be an original and all of which together shall constitute one and
the same original and all of which together shall constitute one and the same
agreement. It shall not be necessary that each party execute each counterpart,
or that any one counterpart be executed by more than one party, so long as each
party executes at least one counterpart.
15. By Approval of this Sublease and the attached floor plan, Lessor
agrees to relieve the Sublessee and Sublessor of their requirements under
Paragraph 1, in the Special Stipulations of the Master Lease, which would
potentially require Tenant to remove any such repair or improvement to the
Premises.
IN WITNESS WHEREOF, the parties have executed this Sublease effective
the day and year first above written.
(Signatures commence on following page)
4
<PAGE>
AFC ENTERPRISES, INC.
By: /s/
------------------------------
Name:
- -------------------------- ----------------------------
Witness Title:
---------------------------
- -------------------------- [CORPORATE SEAL]
Notary
FORESIGHT SOFTWARE, INC.
By: /s/
------------------------------
Name:
- -------------------------- ----------------------------
Witness Title:
---------------------------
- -------------------------- [CORPORATE SEAL]
Notary
CONCOURSE VI ASSOCIATES, a
GEORGIA GENERAL PARTNERSHIP
By: /s/
------------------------------
Name:
- -------------------------- ----------------------------
Witness Title:
---------------------------
- -------------------------- [Authorized party to bind said entity]
Notary
5
<PAGE>
ADDENDUM
Lessor hereby consents to this Sublease. By consenting to this Sublease, Lessor
in no way agrees to perform or be obligated to perform any services on behalf of
Sublessee hereunder, but shall continue to provide any such services to the
Subleased Space in accordance with the terms and conditions of the Lease.
Sublessee shall have no rights or claims against Lessor but shall instead look
solely to Sublessor for any such claims. By consenting to this Sublease, Lessor
does not release or relieve Sublessor from any of its obligations under the
Lease, and Sublessor is and shall remain so bound. Notwithstanding the terms of
Paragraph 7 of the Sublease, Lessor does not consent to Sublessee's rights to
subsublet or subassign without Lessor's consent, and Lessor has such a right to
consent to any such subsublet or subassignment.
Consented to by:
LESSOR:
CONCOURSE VI ASSOCIATES, a
Georgia general partnership
By: Dan Properties, Inc., as
general partner
By: /s/
--------------------------
Its:
--------------------
By: JV Georgia One, Inc., as
general partner
By: /s/
--------------------------
Its:
--------------------
6
<PAGE>
EXHIBIT 10.47
LEASE AGREEMENT
CONCOURSE
THIS LEASE AGREEMENT (the "Lease"), made this 31st day of December, 1992,
by and between CONCOURSE VI ASSOCIATES ("Landlord"), a Georgia general
partnership which has as its address for all purposes hereunder as follows:
Concourse VI Associates
c/o The Landmarks Group General Corporation
Six Concourse Parkway
Suite 400
Atlanta, Georgia 30328-5351
and America's Favorite Chicken Company, a corporation of the State of Minnesota
("Tenant"), which has as its address:
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5351
[Prior to occupancy of the Premises:]
Two Concourse Parkway
Suite 600
Atlanta, Georgia 30328-5347
Attention: Legal Counsel
WITNESSETH:
----------
1. PREMISES AND TERM
-----------------
(a) Landlord hereby rents and leases to Tenant, and Tenant hereby
rents and leases from Landlord, the following described space (the "Premises"):
Floor: 16th, 17th and 18th floors
Suite: 1700
Square Feet: 76,614 rentable square feet
See Special Stipulation #2 and #3
---------------------------------
located at the herein called "Building":
Building: Corporate Center Six
Address: Six Concourse Parkway
Fulton County, Georgia
Total Building Rentable Area: 697,400
(b) The Premises are more particularly shown and outlined on the
space plans attached hereto as Exhibit "B", and made a part hereof, and are
-----------
located in that portion of the Building shown on Exhibit "A", attached hereto
-----------
and by this reference incorporated herein. The term of this Lease (the "Term")
shall commence, subject to the provisions of Paragraph 4 herein, on the date as
determined in Special Stipulation #4, (the "Commencement Date"), and end at
----------------------
midnight ten (10) years thereafter, unless sooner terminated as
<PAGE>
herein provided. See Special Stipulation #5. This Lease shall be effective and
--------------------------
enforceable upon its execution and delivery, whether such execution and delivery
occurs on, prior to, or after the Commencement Date.
(c) "Lease Year" as used herein shall mean (i) each and every twelve
(12) month period during the Term of this Lease, or (ii) in the event of Lease
expiration or termination, the period between the last twelve (12) month period
and said expiration or termination. The first such twelve (12) month period
shall commence on the Commencement Date.
(d) The Building and the land upon which said Building is located,
more particularly described on Exhibit "E", attached hereto and by this
-----------
reference incorporated herein, is herein referred to as the "Property".
(e) The Premises shall include the appurtenant right to use, in
common with others, public lobbies, entrances, stairs, corridors, elevators, and
other public portions of the Building. All the windows and outside walls of the
Premises, and any space in the Premises used for shafts, pipes, conduits, ducts,
telephone ducts and equipment, electric or other utilities, sinks or other
Building facilities, and the use thereof and access thereto through the Premises
for the purposes of operation, maintenance, inspection, display and repairs are
hereby reserved to Landlord. No easement for light, air or view is granted or
implied hereunder, and the reduction or elimination of Tenant's light, air or
view will not affect this Lease.
(f) In addition to the Premises described in Paragraph 1(a) herein,
Landlord hereby rents and leases to Tenant, and Tenant hereby rents and leases
from Landlord, two thousand seven hundred twenty-one (2721) square feet of
basement space in the Building (the "Storage Space"), as more particularly shown
on Exhibit "A" attached hereto, upon the same terms and conditions as contained
-----------
in the Lease, except as follows:
(i) the monthly rental for the Storage Space shall be Two Thousand Two
Hundred Sixty-Seven and 50/100 Dollars ($2,267.50) (based on Ten and
No/100 Dollars ($10.00) per square foot per annum, and adjusted on the
basis of the exact number of square feet within and a part of the
Storage Space). Monthly rental on the Storage Space shall be escalated
at the time of any Renewal Term by the same percentage increase or
decrease (as applicable) as the Monthly Rental is increased or
decreased for such Renewal Term, when comparing the Market Rate
established for the Renewal Term in question and the Monthly Rental
(i) at the beginning of the Term (for the first Renewal Term), and
(ii) at the beginning of the first Renewal Term (for the second
Renewal Term). Tenant may, however, at Tenant's option and in Tenant's
sole discretion, elect not to lease the Storage Space for a Renewal
Term, after the monthly rental for the Storage Space any such Renewal
Term is established under this Paragraph. Tenant shall make such
election by giving notice to Landlord within thirty (30)
<PAGE>
days after the decision on the Market Rate has been made, so that
Tenant and Landlord can determine what the monthly rental would be for
the Storage Space.
(ii) Tenant shall not be obligated to pay "Operating Costs" (as that term
is herein defined) with respect to the Storage Space, and the monthly
rental due from Tenant for such Storage Space shall not be increased
throughout the initial Term.
(iii) Tenant may use the Storage Space only as a storage area and people may
not be assigned to work therein on a full time basis.
(iv) Landlord shall provide only the following services to the Storage
----
Space:
A) electricity;
B) elevator access; and
C) janitor service for common areas.
(v) The Storage Space shall not be included in determining the number of
parking spaces Landlord must provide to Tenant.
(vi) The Storage Space shall be built out for Tenant's use with a Building
standard door and hardware, lighting, concrete floor, electrical
receptacles (as currently located within said area) and demising
walls. Except for these items, Tenant shall accept such Storage Space
on an "as is, where is" basis, and no other work or improvements shall
be required from Landlord for such Storage Space. Tenant, however,
shall have the right to improve such area with such improvements as
are consistent with space which is used for storage but not for
general use or habitation by employees. Such improvements shall be
subject to Landlord's consent, such consent not to be unreasonably
withheld or delayed, and shall generally be subject to the terms and
conditions of Paragraph 7 herein.
2. RENT
----
(a) Tenant shall pay to Landlord at the address of Landlord indicated
herein, or at such other place Landlord reason-ably designates without demand,
deduction or setoff, an annual rental for the first year of the Term as set
forth in Special Stipulation #1, due and payable in equal monthly installments
----------------------
(the "Monthly Rental") in advance on the first (1st) day of each calendar month
during the Term. The Monthly Rental for the first Lease Year is $111,090.30
(the "Initial Monthly Rental").
(b) If the Term commences or terminates at any time other than the
last day of a month, the amount of Rent due from Tenant shall be proportionately
adjusted based on that portion of the month that this Lease is in effect.
<PAGE>
(c) The term "Rent", as used herein, shall mean Monthly Rental,
"Tenant's Share" of "Operating Costs" (as those terms are defined herein) and
any other amounts due of Tenant hereunder.
3. REIMBURSEMENT FOR INCREASES IN OPERATING EXPENSES AND TAXES
-----------------------------------------------------------
(a) Tenant hereby covenants and agrees and shall be obligated to pay
to Landlord, in addition to and not in lieu of the other amounts specified
herein, Tenant's Share of the "Operating Costs," as hereinafter defined, of
repairing, maintaining, and operating the Building and Property. These payments
shall be in addition to and not in lieu of any other payments due from Tenant
hereunder. The "Initial Operating Costs" shall be $7.40 per rentable square
foot per annum. See Special Stipulation #12.
---------------------------
(b) The term "Operating Costs" shall mean all operating expenses of
the Property and Building, computed on an accrual basis and including all
reasonable expenses, costs, and disbursements of every kind and nature, which
Landlord (i) shall pay; and/or (ii) become obligated to pay during the Term,
exclusive of reimbursements, rebates or credits actually received by Landlord
including, but not limited to, the following:
(i) Wages and salaries of all employees engaged in the operation and
maintenance of the Property and Building, including, but not
limited to, taxes, insurance and benefits relating thereto, and
to the extent that any employee of the Building performs services
for any other buildings, then only the portion of such party's
compensation which is reasonably allocable to services with
respect to the Building shall be included hereunder;
(ii) All supplies and materials used in the operation and maintenance
of the Property and Building;
(iii) Cost of water, sewage, electricity and other utilities furnished
in connection with the operation of the Building;
(iv) Cost of all service agreements and maintenance for the Property
and Building and the equipment therein, including, but not
limited to, trash removal, security services, alarm services,
window cleaning, janitorial service, HVAC maintenance, elevator
maintenance, and grounds maintenance;
(v) Cost of all insurance relating to the Property and Building
including, but not limited to, the cost of casualty and liability
insurance applicable to the Property and Building and Landlord's
personal property used in connection therewith;
(vi) All taxes (ad valorem and otherwise), assessments, and
governmental charges whether federal, state, county, or
municipal, and whether by taxing districts
<PAGE>
or authorities presently taxing the Property and Building or by
others, subsequently created or otherwise, and any other taxes
(other than federal and state income taxes), and assessments
attributable to the Property and Building or its operation and
any reasonable consultants fees incurred with respect to issues
or concerns involving the taxes or the Building, the Property, or
both;
(vii) Cost of repairs and general maintenance of the interior and
exterior of the Property and Building (including, but not limited
to, glass breakage), parking areas, and landscaping;
(viii) A management fee for general operation and management of the
Property and Building, such management fee to be consistent with
the management fee paid for the management of other first-class
office buildings in the area of the Building;
(ix) An amortization cost due to any capital expenditures incurred (i)
which have the effect of reducing or limiting Operating Costs of
the Property and Building, if such reduction or limitation inures
to Tenant's benefit (but only to the extent and in the amount
that such Operating Costs of the Property and Building are
reduced), or (ii) which may be required by governmental authority
or by Landlord's insurance carrier (but expressly excluding any
such costs incurred in connection with a reconstruction or
renovation of the Building following casualty or condemnation;
(x) all assessments made, charged, levied, assessed or accrued
against Landlord by The Concourse Office Park Association, Inc.
Excluded from "Operating Costs" are those items set forth in Special Stipulation
-------------------
# 12(b).
- -------
(c) The term "Tenant's Share" shall mean the proportion that the
Square Feet in the Premises bears to ninety-five percent (95%) of the Total
Building Rentable Area, or the average percentage of the Total Building Rentable
Area actually leased in the Building for any calendar year, if such average is
greater than ninety-five percent (95%) of the Total Building Rentable Area. The
average shall be determined by adding together the total leased space on the
last day of each month during the calendar year in question and dividing by
twelve (12). Tenant's Share is used in this Lease to determine the portion of
Operating Costs payable by Tenant, on a per square foot per annum basis.
Notwithstanding anything to the contrary contained herein, if the Building is
not fully occupied during any calendar year, appropriate adjustments shall be
made to determine Operating Costs as though the Building had been ninety-five
percent (95%) occupied in such calendar year, but Tenant shall not be required
to pay more than Tenant's Share of Operating Costs.
<PAGE>
(d) Tenant shall pay, for the first calendar year in which this
Lease is in effect, the Initial Operating Costs. Such payments shall be made in
equal monthly installments for the months in such calendar year in which this
Lease is in effect, at the same time Monthly Rental is due hereunder. If
Tenant's Share of the actual Operating Costs for the calendar year (projected
for a full calendar year if the Commencement Date occurs in the year that the
Building is first ready for occupancy) in which this Lease commences ("Initial
Calendar Year") exceeds the Initial Operating Costs paid by Tenant as herein
described projected for a full calendar year, Tenant shall pay Tenant's Share of
the Initial Calendar Year's increase in the Operating Costs over the Initial
Operating Costs, proportionately to the extent this Lease was in effect during
the Initial Calendar Year. Landlord shall, within one hundred twenty (120) days
(or as soon thereafter as practical) after the close of the Initial Calendar
Year, give Tenant an unaudited statement of such year's actual Operating Costs
and a comparison with the Initial Operating Costs, and if an additional amount
is due, Tenant shall pay such Additional Rent to Landlord within thirty (30)
days of statement receipt.
(e) On January 15 of each calendar year after the Initial Calendar
Year (or as soon thereafter as practical), Landlord shall provide Tenant with
the projected Operating Costs for such current calendar year, and Tenant shall
thereafter pay Tenant's Share of projected Operating Costs for operating the
Property and Building. Such projected Operating Costs shall be payable in
advance on a monthly basis by paying one-twelfth (1/12th) of such amount during
each month of such respective calendar year. If Landlord has not furnished
Tenant such comparison by January 15, Tenant shall continue to pay on the basis
of the prior year's estimate until the month after such comparison is given.
Landlord shall, within one hundred twenty (120) days (or as soon thereafter as
practical) after each calendar year during the Term provide Tenant an unaudited
statement of such year's actual Operating Costs. If actual Operating Costs are
greater than projected Operating Costs, Tenant shall pay Landlord, within thirty
(30) days of such statement's receipt, Tenant's Share of the difference thereof.
If such year's projected Operating Costs are greater than the Actual Operating
Costs, Landlord shall credit Tenant, within thirty (30) days of such statement
issuance, Tenant's Share of the difference between projected Operating Costs and
actual Operating Costs within (30) days after final determination of such
figure.
(f) If this Lease commences or terminates at any time other than the
first day of a calendar year the amount of additional rent due from Tenant shall
be proportionately adjusted based on that portion of the year that this Lease
was in effect.
(g) Within one hundred twenty (120) days of its receipt of the
operating statement, Tenant at its sole cost and expense shall have the right to
review in Landlord's offices and during normal business hours Landlord's records
of Operating Costs. If within such one hundred twenty (120) day period, Tenant
does not give notice stating in detail reasonable objections to such Additional
Rent calculations, Tenant shall be deemed to have given approval of such
calculations. Failure to pay such Additional Rent, unless under protest within
said one hundred twenty (120) day period shall
<PAGE>
constitute a failure to pay a sum when due hereunder. If any component is
disputed, Tenant shall be required to pay all Additional Rent due except for
that portion of the Additional Rent which has been disputed in a notice to
Landlord, and then only that portion of the particular line item in dispute (and
not the entire line item) may be withheld by Tenant.
(h) Tenant's payments of Operating Costs shall not be deemed payments
of base rental under any governmental wage and price controls or analogous
governmental actions affecting the amount of Rent which Landlord may charge
Tenant for the Premises.
4. DELIVERY OF THE PREMISES
------------------------
See Special Stipulation #4.
--------------------------
5. ACCEPTANCE OF THE PREMISES
--------------------------
The taking of possession of Premises by Tenant shall be conclusive
evidence that Tenant accepts the same "as is" and that said Premises and the
Building were in good and satisfactory condition for the use intended at the
time such possession was taken, subject to "punch-list" items which must be
remedied after Tenant's acceptance of the Premises. See Special Stipulation
-----------------------
#13.
- ---
6. USE
---
Tenant shall use the Premises only for general and executive office
purposes generally in accordance with the manner of use by other tenants in the
Building. Tenant's use of the Premises shall not violate any ordinance, law or
regulation of any governmental body or the "Rules and Regulations" of Landlord
(the "Rules") as set forth in Exhibit "D" attached hereto and made a part
-----------
hereof, or cause an unreasonable amount of use of any of the services provided
in the Building. Tenant shall conduct its business in the manner and according
to the generally accepted business principles of the business or profession in
which Tenant is engaged. Also See Special Stipulation #3.
-------------------------------
7. TENANT'S CARE OF THE PREMISES
-----------------------------
(a) Tenant will maintain the Premises and the fixtures and
appurtenances therein in a first-class condition, and will neither commit nor
suffer waste or injury thereof. Any repair work and alterations permitted by
Landlord in the Premises (i) shall be done at Tenant's sole cost and expense;
(ii) shall be done by Landlord's employees or agents or, with Landlord's consent
(such consent not to be unreasonably withheld or delayed), by persons requested
by Tenant; and (iii) shall first be consented to by Landlord. Tenant shall, at
Tenant's expense, but under the direction of Landlord and performed by
Landlord's employees or agents, or with Landlord's consent (such consent not to
be unreasonably withheld or delayed), by persons requested by Tenant and
consented to by Landlord, promptly repair any injury or damage to the Premises
or Building caused by the misuse or neglect thereof by Tenant, by Tenant's
contractors, sub-contractors, employees, licensees or agents.
<PAGE>
(b) Tenant will not, without Landlord's prior consent, make
alterations, additions or improvements (including, but not limited to,
structural alterations, additions or improvements) in or about Premises and will
not do anything to or on the Premises which will increase the rate of insurance
on the Building or the Property. All alterations, additions or improvements of a
permanent nature made or installed by Tenant to the Premises shall become the
property of Landlord at the expiration or early termination of this Lease.
Landlord reserves the right to require Tenant to remove any improvements or
additions made to the Premises (excluding the Tenant Improvements for the
Premises initially leased under this Lease) by Tenant and to repair and restore
the Premises to their condition prior to such alteration, addition or
improvement, reasonable wear and tear, unrepaired casualty and condemnation
excepted, unless Landlord has agreed at or prior to the time Tenant requests the
right to make such alteration, addition or improvement that such item need not
be removed by Tenant at the expiration or early termination of the Term. See
---
Special Stipulations #16(b) and #19.
- -----------------------------------
(c) No later than the last day of the Term, Tenant will remove
Tenant's personal property and repair injury done by or in connection with
installation or removal of said property and surrender the Premises (together
with all keys, access cards or entrance passes to the Premises and/or the
Building) in as good a condition at the beginning of the Term, reasonable wear
and tear, unrepaired casualty and condemnation excepted. All property of Tenant
remaining in the Premises after expiration of the Term shall be deemed
conclusively abandoned and may be removed by Landlord, and Tenant shall
reimburse Landlord for the cost of removing the same, subject however, to
Landlord's right to require Tenant to remove any improvements or additions made
to the Premises by Tenant pursuant to the preceding Paragraph.
(d) In doing any work on the installation of Tenant's furnishings,
fixtures, or equipment in the Premises, (and subject to the terms and conditions
of Paragraph 7(a) herein), Tenant will use only contractors or workers consented
to by Landlord (such consent not to be unreasonably withheld or delayed) prior
to the time such work is commenced, or Tenant's Contractor. Landlord may
condition its consent upon its receipt from such contractors or workers of
acceptable (i) lien waivers; and (ii) evidence of liability and personal
property insurance coverage in amounts and with insurance carriers reasonably
satisfactory to Landlord. Tenant shall promptly bond off or remove any lien or
claim of lien for material or labor claimed against the Premises or Building, or
both, by such contractors or workers if such claim should arise, and hereby
indemnifies and holds Landlord harmless from and against any and all loss, cost,
damage, expense or liabilities including, but not limited to, attorney's fees,
incurred by Landlord, as a result of or in any way related to such claims or
liens.
(e) All personal property brought into the Premises by Tenant, its
employees, licensees and invitees shall be at the sole risk of Tenant, and
Landlord shall not be liable for theft thereof or of money deposited therein or
for any damages thereto, such theft or damage being the sole responsibility of
Tenant, subject to Landlord's security obligations hereunder.
<PAGE>
8. SERVICES
--------
(a) Landlord shall furnish the following services (the cost of which
services shall be reimbursed to Landlord in accordance with Paragraph 3 herein):
(i) Elevator service for passenger and delivery needs.
(ii) Air conditioning during summer operations and heat during winter
operations at temperature levels similar to other first class office
buildings in the Atlanta area, but consistent with and subject to all
Federal and local energy conservation regulations.
(iii) Public restrooms, including the furnishing of soap, paper towels, and
toilet tissue and any other sanitary necessities.
(iv) Either hot and cold or tempered running water for all restrooms and
lavatories.
(v) Janitorial service, including sanitizing, dusting, cleaning, mopping,
vacuuming, and trash removal, each Monday through Friday, and floor
waxing and polishing, window washing, smudge removal and venetian
blind cleaning as appropriate.
(vi) The replacement of building standard fluorescent lamps and ballasts as
needed.
(vii) Repairs and maintenance, for maintaining in good order at all times
the exterior walls, exterior windows, exterior doors and roof of the
Building, public corridors, stairs, elevators, storage rooms,
restrooms, the heating, ventilating and air conditioning systems,
electrical and plumbing systems of the Building, and the walks, paving
and landscaping surrounding the Building.
(viii) Grounds care, including the sweeping of walks and parking areas and
the maintenance of landscaping in an attractive manner.
(ix) General management, including supervision, inspections and management
functions.
(x) Electricity for the Premises, Building and Property.
See Special Stipulation # 8.
---------------------------
(b) The services provided in Paragraph 8(a) are predicated on and are
in anticipation of the use of the Premises as follows:
(i) Services shall be provided for the Building during normal business
hours as described in the Rules.
(ii) HVAC design is based on sustained outside temperatures being no higher
than 95 degrees Fahrenheit and no
<PAGE>
lower than 14 degrees Fahrenheit with sustained occupancy of the
Premises by no more than one person per 150 square feet of floor area
and heat generated by electrical lighting and fixtures not to exceed
3.0 watts per square foot.
(iii) Electric power usage and consumption for the Premises shall be based
on lighting of the Premises during normal business hours on a level
suitable for normal office use and power for small desk-top machines
and devices using no more than 110 volt, 20 amp circuits (allowable
load of 15 amps). Heavier use items shall not be used or installed,
unless expressly permitted elsewhere herein or by consent of Landlord.
(iv) Should Tenant's total rated electrical design load per square foot in
the Premises exceed the Building standard rated electrical design load
on a per square foot basis [which Building standard is 5.5 watts per
usable square foot, with a voltage capacity of 120 volts], for either
low or high voltage electrical consumption, or if Tenant's electrical
design requires low voltage or high voltage circuits in excess of
Tenant's share of the Building standard circuits, as such share is
determined by Landlord in Landlord's reasonable judgment, Landlord may
(at Tenant's expense), if reasonably possible, install within the
Building one (1) additional high voltage panel and/or one (1)
additional low voltage panel with associated transformer (the
"Additional Electrical Equipment") as necessary to accommodate the
aforesaid requirements. If the Additional Electrical Equipment is
installed because Tenant's low or high voltage rated electrical design
load exceeds the applicable Building standard rated electrical design
load (on a per square foot basis), then a meter may also be added by
Landlord (at Tenant's expense) to measure the electricity provided
through the Additional Electrical Equipment.
(c) If Tenant uses any services in an amount or for a period in
excess of that provided for herein, Landlord also reserves the right to charge
Tenant reimbursement for the cost of such added services. Landlord reserves the
right to install separate metering devices to determine such excessive periods
and/or amounts, at Tenant's sole cost and expense. If there is disagreement as
to such additional charge, the opinion of the appropriate local utility company
or an independent professional engineering firm shall prevail.
(d) Landlord shall not be liable for any damages directly or
indirectly, and Tenant shall have no right of set-off or reduction in Rent,
resulting from the installation, use, malfunction, or interruption of use of any
equipment in connection with the furnishing of services referred to herein,
including, but not limited to, any interruption in services by any cause beyond
the immediate control of the Landlord; provided however, Landlord shall exercise
due care in furnishing adequate and uninterrupted services. Without limitation
on the foregoing, under no circumstances shall Landlord
<PAGE>
incur liability for damages caused directly or indirectly by any malfunction of
Tenant's computer systems resulting from or arising out of the failure or
malfunction of any electrical, air conditioning or other system serving the
Building, and Tenant hereby expressly waives the right to make any such claim
against Landlord, unless caused by Landlord's willful misconduct or gross
negligence. See Special Stipulation # 14.
----------------------------
(e) There is available in the Building a Fairchild Communications
Systems Service (the "Fairchild Service"), upon terms, conditions and fees to be
agreed upon by Tenant and the party providing such Fairchild Service. Neither
Landlord nor any manager of the Building shall be liable to Tenant for any
damages should the furnishing of any or all of such Fairchild Service be
disrupted, terminated or diminished in any manner, nor shall any disruption,
diminution, or cessation relieve Tenant from the performance of any of Tenant's
covenants, conditions and agreements under this Lease, nor shall any disruption,
diminution or cessation constitute constructive eviction or entitle Tenant to an
abatement of Rent. Tenant holds Landlord and any such manager harmless from any
claims Tenant may have arising out of or connected with such cessation or
interruption. If Tenant elects not to use the Fairchild Service, and Tenant has
telephone or other such equipment installed at Tenant's own direction, such
system shall not (i) cause the Building not to be in compliance with any
municipal safety codes or ordinances, including, but not limited to, fire safety
codes; (ii) cause damage to the Building; (iii) require an amount of electrical
or other services unreasonably in excess of the requirements for customary
business-telephone systems; or (iv) impact upon the normal use, function and
operation of the Fairchild Service. If Tenant elects not to use or be a part of
the Fairchild Service, Tenant shall not use any wiring or other equipment which
is a part of the Fairchild Service without the prior, written consent of the
provider of such services. If Tenant uses any such wiring or equipment without
such consent, Tenant shall be liable for, and shall pay to the provider of such
services on demand, (i) the cost of such use; (ii) the cost of repairing or
replacing any wiring or equipment damaged or altered by such use; and (iii) any
and all other damages caused by such use.
See Special Stipulation # 19.
----------------------------
9. DESTRUCTION OR DAMAGE TO PREMISES
---------------------------------
(a) If the Premises or the Building are totally destroyed (or so
substantially damaged as to be untenantable in the determination of the
Architect of the Building) by storm, fire, earthquake or other casualty,
Landlord shall have the option to:
(i) Terminate this Lease as of the date of the occurrence of the
storm, earthquake, fire or other casualty by giving notice to
Tenant within sixty (60) days from the date of such damage or
destruction; or
(ii) Commence the process of restoration of the Premises to a
tenantable condition within sixty (60) days from the date of
receipt by Landlord of substantially all of the insurance proceeds
paid with respect to such casualty, and proceed with due diligence
to complete
<PAGE>
said restoration of the Premises. If Landlord chooses to restore
the Premises, Rent shall abate with respect to the untenantable
portion of the Premises from the date of such casualty until the
date of Substantial Completion.
If Landlord fails to complete such restoration within one hundred eighty (180)
days of the date of the casualty, this Lease may be terminated as of the date of
the casualty upon notice from Tenant to Landlord following the expiration of
said one hundred eighty (180) day period. If such notice is not given, this
Lease shall remain in force and effect and Rent shall commence upon delivery of
the Premises to Tenant in a tenantable condition (evidenced by notice to Tenant
by the Architect of the Building or Tenant's Architect, whichever is monitoring
such work of Substantial Completion). If such damage or destruction occurs
within six (6) months of the expiration of the Term, Tenant may, at its option
on notice to Landlord within thirty (30) days of such destruction or damage,
terminate this Lease as of the date of such destruction or damage.
(b) If the Premises are damaged but not rendered wholly untenantable
by any event set forth in Paragraph 9(a) above, Rent shall abate in the
proportion the Premises have been made untenantable. Landlord shall restore the
Premises expeditiously, and upon the date of Substantial Completion Rent shall
commence.
See Special Stipulation #29.
- ---------------------------
10. DEFAULT BY TENANT; LANDLORD'S REMEDIES
--------------------------------------
(a) The occurrence of any of the following shall constitute an Event
of Default hereunder by Tenant:
(i) The Rent or any other sum of money due of Tenant hereunder is not
paid within ten (10) days of the date when due;
(ii) The Premises are abandoned or vacated;
(iii) Any petition is filed by or against Tenant under any section or
chapter of the National or Federal Bankruptcy Act or any other
applicable Federal or State bankruptcy, insolvency or other
similar law, and, in the case of a petition filed against Tenant,
such petition is not dismissed within thirty (30) days after the
date of such filing; if Tenant shall become insolvent or transfer
property to defraud creditors; if Tenant shall make an assignment
for the benefit of creditors; or if receiver is appointed for any
of Tenant's assets;
(iv) Tenant fails to bond off or otherwise remove any lien filed
against the Premises or the Building by reason of Tenant's
actions, within fifteen (15) days after Tenant has notice of the
filing of such lien;
(v) Tenant fails to observe, perform and keep the covenants,
agreements, provisions, stipulations, conditions and Rules herein
contained to be observed,
<PAGE>
performed and kept by Tenant (other than the failure to pay when
due any Rent or any other sum of money becoming due Landlord
hereunder, which under all circumstances is governed by and
subject to Paragraph 10(a)(i) herein), and persists in such
failure after ten (10) days written notice by Landlord requiring
that Tenant remedy, correct, desist or comply (or if any such
failure to comply on the part of Tenant would reasonably require
more than ten (10) days to rectify, unless Tenant commences
rectification within the ten (10) day notice period and
thereafter promptly, effectively and continuously proceeds with
the rectification of the failure to comply on the part of Tenant
and, in all such events, cures such failure to comply on the part
of Tenant no later than ninety (90) days after such notice).
See Special Stipulations # 26 and 30.
------------------------------------
(b) Upon the occurrence of an Event of Default, Landlord shall have
the option to do and perform any one or more of the following:
(i) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord. If Tenant shall fail to do
so, Landlord may, without further notice and without prejudice to
any other remedy Landlord may have, enter upon the Premises
without the requirement of resorting to the dispossessory
procedures set forth in O.C.G.A. (S)(S) 44-7-50 et seq. and expel
-- ---
or remove Tenant and Tenant's effects without being liable for
any claim for trespass or damages therefor. Upon any such
termination, Tenant shall remain liable to Landlord for damages,
due and payable monthly on the day Rent would have been payable
hereunder, in an amount equal to the Rent and any other amounts
which would have been owing by Tenant for the balance of the
Term, had this Lease not been terminated, less the net proceeds,
if any, of any reletting of the Premises by Landlord, after
deducting all of Landlord's costs and expenses (including,
without limitation, advertising expenses and professional fees)
incurred in connection with or in any way related to the
termination of this Lease, eviction of Tenant and such reletting;
and/or
(ii) Declare the entire amount of Rent calculated on the current rate
being paid by Tenant, and other sums which in Landlord's
reasonable determination would become due and payable during the
remainder of the Term (including, but not limited to, increases
in Rent pursuant to Paragraph 2(b) and 3(e) herein), discounted
to present value by using a reasonable discount rate selected by
Landlord, to be due and payable immediately. Upon such
acceleration of such amounts, Tenant agrees to pay the same at
once, together with all Rent and other amounts theretofore due,
at Landlord's address as provided herein;
<PAGE>
provided however, that such payment shall not constitute a
penalty or forfeiture but shall constitute liquidated damages for
Tenant's failure to comply with the terms and provisions of this
Lease (Landlord and Tenant agreeing that Landlord's actual
damages in such an event are impossible to ascertain and that the
amount set forth above is a reasonable estimate thereof). Upon
making such payment, Tenant shall receive from Landlord all rents
received by Landlord from other tenants renting the Premises
during the Term, provided that the monies to which Tenant shall
so become entitled shall in no event exceed the entire amount
actually paid by Tenant to Landlord pursuant to the preceding
sentence, less all of Landlord's costs and expenses (including,
without limitation, advertising expenses and professional fees)
incurred in connection with or in any way related to the
reletting of the Premises. The acceptance of such payment by
Landlord shall not constitute a waiver of rights or remedies to
Landlord for any failure of Tenant thereafter occurring to comply
with any term, provision, condition or covenant of this Lease;
and/or
(iii) Enter the Premises as the agent of Tenant without the requirement
of resorting to the dispossessory procedures set forth in
O.C.G.A. (S)(S) 44-7-50 et seq. and without being liable for any
claim for trespass or damages therefor, and, in connection
therewith, rekey the Premises, remove Tenant's effects therefrom
and store the same at Tenant's expense, without being liable for
any damage thereto, and relet the Premises as the agent of
Tenant, without advertisement, by private negotiations, for any
term Landlord deems proper, and receive the rent therefor. Tenant
shall pay Landlord on demand any deficiency that may arise by
reason of such reletting, but Tenant shall not be entitled to any
surplus so arising. Tenant shall reimburse Landlord for all costs
and expenses (including, without limitation, advertising expenses
and professional fees) incurred in connection with or in any way
related to the eviction of Tenant and reletting the Premises, and
for the amount of any other Rent which would have been due of
Tenant to Landlord hereunder if not for certain concessions
granted by Landlord to Tenant. Landlord, in addition to but not
in lieu of or in limitation of any other right or remedy provided
to Landlord under the terms of this Lease or otherwise (but only
to the extent such sum is not reimbursed to Landlord in
conjunction with any other payment made by Tenant to Landlord),
shall have the right to be immediately repaid by Tenant the
amount of all sums expended by Landlord and not repaid by Tenant
in connection with preparing or improving the Premises to
Tenant's specifications and any and all costs and expenses
incurred in renovating or altering the Premises to make it
suitable for reletting; and/or
<PAGE>
(iv) As agent of Tenant, do whatever Tenant is obligated to do under
this Lease, including, but not limited to, entering the Premises,
without being liable to prosecution or any claims for damages, in
order to accomplish this purpose. Tenant agrees to reimburse
Landlord immediately upon demand for any expenses which Landlord
may incur in thus effecting compliance with this Lease on behalf
of Tenant. Landlord shall not be liable for any damages resulting
to Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
(c) Pursuit by Landlord of any of the foregoing remedies shall not
preclude the pursuit of general or special damages incurred, or of any of the
other remedies provided herein, at law or in equity.
(d) No act or thing done by Landlord or Landlord's employees or
agents during the Term shall be deemed an acceptance of a surrender of the
Premises. Neither the mention in this Lease of any particular remedy, nor the
exercise by Landlord of any particular remedy hereunder, at law or in equity,
shall preclude Landlord from any other remedy Landlord might have under this
Lease, at law or in equity. Any waiver of or redress for any violation of any
covenant or condition contained in this Lease or any of the Rules now or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by Landlord of Rent with knowledge of the
breach of any covenant in this Lease shall not be deemed a waiver of such
breach.
11. ASSIGNMENT AND SUBLETTING
-------------------------
(a) Tenant shall not sublet any part of the Premises, nor assign this
Lease or any interest herein, without the prior consent of Landlord, such
consent not to be unreasonably withheld or delayed. Landlord may deny consent to
an assignment or sublease if, by way of illustration but not limitation the rate
of compensation, including, but not limited to, all rent requested by Tenant for
the portion of the Premises to be subleased (but only if such sublease is for
more than an increment of thirty percent (30%) of the space then leased by
Tenant in the Building) or for the assignment of the Lease would impact upon or
impair Landlord's ability to rent space in the Building at the then market rate
as offered by Landlord (but only if such sublease is for more than an increment
of thirty percent (30%) of the space then leased by Tenant in the Building), or
if the financial statements of the proposed assignee or sublessee are
unsatisfactory. Additionally, neither Tenant nor any other person having an
interest in the possession, use, occupancy or utilization of the Premises shall
enter into any lease, sublease, license, concession, assignment or other
agreement for use, occupancy or utilization of space in the Premises which
provides for rental or other payment for such use, occupancy or utilization
based, in whole or in part, on the net income or profits derived by any person
or entity from the Premises leased, used, occupied or utilized. Any such
purported lease, sublease, license, concession, assignment or other agreement
shall be absolutely void and ineffective as a
<PAGE>
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises. If such a sublease is entered into,
neither the rental payable thereunder nor the amount thereof passed on to any
person or entity shall have deducted therefrom any expenses or costs related in
any way to the subleasing of such space.
(b) Consent by Landlord to one assignment or sublease shall not
destroy or waive this provision, and all later assignments and subleases shall
likewise be made only upon prior consent of Landlord. If a sublease or
assignment is consented to by Landlord, any sublessees or assignees shall become
liable directly to Landlord for all obligations of Tenant hereunder without
relieving or in any way modifying Tenant's liability hereunder. If Tenant
notifies Landlord of Tenant's intent to sublease or assign this Lease, Landlord
shall within thirty (30) days from such notice (a) consent to such proposed
subletting; (b) deny such consent, giving reasons for denying such consent at
the time of the denial; or (c) with respect to an assignment of the Lease (but
not a sublease) elect to cancel this Lease, or to reduce the Premises by the
area requested to be assigned if the area is less than the entire Premises. If
Landlord elects to cancel or to reduce the area of the Premises, Tenant shall
have ten (10) days from such notice to notify Landlord of Tenant's acceptance of
such cancellation or reduction or Tenant's desire to remain in possession of
Premises for the Term. If Tenant fails to so notify Landlord of Tenant's
election to accept termination or reduction or to continue as Tenant hereunder,
such failure shall be deemed an election to terminate or have the area of
Premises reduced, as the case may be, and such termination or reduction shall be
effective as of the end of the ten (10) day period provided for in Landlord's
notice as hereinabove provided. If Landlord gives its consent to any such
assignment or sublease, fifty percent (50%) of any gross rent or other charge to
the assignee or subtenant for all or any portion of the Premises over and above
the Rent payable by Tenant for such space shall be due and payable, and shall be
paid, to Landlord. Any costs payable with respect to such a sublease or
assignment shall be paid entirely by Tenant, and shall not be factored into the
rate of the sublease or assignment in question for the purposes of determining
the portion of excess proceeds payable to Landlord or Tenant.
(c) The sale or transfer of Tenant's voting stock (if a corporation)
or partnership interest (if a partnership) resulting in the transfer of control
of a majority of such stock or interest, or the occupancy of the Premises by any
successor firm of Tenant or by any firm into which or with which Tenant may
become merged or consolidated shall be deemed an assignment of this Lease
requiring the prior consent of Landlord.
See Special Stipulation # 13.
----------------------------
12. CONDEMNATION
------------
If the Premises, or a part of such Premises such that the Premises in
the judgment of the Architect for the Building are untenantable, are taken by
eminent domain or other similar proceeding or are conveyed in lieu of such
taking, this Lease shall expire on the date when title or right of possession
vests, and Rent paid for
<PAGE>
any period beyond said date shall be repaid to Tenant. If there is a partial
taking where this Lease is not terminated, the Rent shall be adjusted in
proportion to the square feet of Premises taken, determined by the Architect for
the Building. In either event, Landlord shall be entitled, and Tenant shall not
have any right, to claim any award made in any condemnation proceeding, action
or ruling relating to the Building or the Property; provided, however, Tenant
shall be entitled to make a claim in any condemnation proceeding, action or
ruling relating to the Building for Tenant's moving expenses and the unamortized
value of leasehold improvements in the Premises actually paid for by Tenant, to
the extent such claim does not in any manner impact upon or reduce Landlord's
claim or award in such condemnation proceeding, action or ruling. Landlord
shall have, in Landlord's sole discretion, the option of terminating this Lease
if any such condemnation, action, ruling or conveyance in lieu thereof makes
continuation of Landlord's use of the Building economically unfeasible. See
---
Special Stipulation # 18.
- ------------------------
13. INSPECTIONS
-----------
Landlord, its agents or employees may enter the Premises at reasonable
hours with reasonable prior notice, except in the event of emergency, for which
no notice shall be required, to (a) exhibit the Premises to prospective
purchasers or tenants of the Premises or the Building; (b) inspect the Premises
to see that Tenant is complying with its obligations hereunder; and (c) make
repairs (i) required of Landlord under the terms hereof; (ii) to any adjoining
space in the Building; or (iii) to any systems serving the Building which run
through the Premises. Such entry shall be accomplished in a manner so as not to
unreasonably disrupt or otherwise disturb Tenant's operations or business.
Landlord shall, in accordance with this Lease, repair, at no cost or expense to
Tenant, any damage to the Premises and Tenant's property therein caused by such
entry into the Premises.
14. SUBORDINATION
-------------
(a) This Lease shall be subject and subordinate to any underlying
land leases or first priority deed to secure debt which may now or hereafter
affect this Lease, the Building or the Property and also to all renewals,
modifications, extensions, consolidations, and replacements of such underlying
land leases and such deeds to secure debt. In confirmation of the subordin-
ation set forth in this Paragraph 14, Tenant shall, at Landlord's request,
execute and deliver such further instruments as may be desired by the holder of
the first priority deed to secure debt (a "Mortgagee") or by any lessor under
any such underlying land leases. Notwithstanding the foregoing, Landlord or
such Mortgagee shall have the right to subordinate or cause to be subordinated,
in whole or in part, any such underlying land leases or first priority deed to
secure debt to this Lease (but not in respect to priority of entitlement of
insurance or condemnation proceeds). If any such underlying land leases or
first priority deed to secure debt terminates for any reason or any such first
deed to secure debt is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall, notwithstanding any subordination, deliver to
Mortgagee within ten (10) days of written request an attornment agreement,
providing
<PAGE>
that such Tenant shall continue to abide by and comply with the terms and
conditions of this Lease.
(b) If any proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale or conveyance in lieu of foreclosure
under any deed to secure debt, Tenant shall at the option of the purchaser at
such foreclosure or other sale, attorn to such purchaser and recognize such
person as Landlord under this Lease. The institution of any suit, action or
other proceeding by a Mortgagee or a sale of the Property pursuant to the powers
granted to a Mortgagee under its deed to secure debt, shall not, by operation of
law or otherwise, result in the cancellation or the termination of this Lease or
of the obligations of Tenant hereunder.
(c) If such purchaser requests and accepts such attornment, from and
after such attornment, Tenant shall have the same remedies against such
purchaser for the breach of an agreement contained in this Lease that Tenant
might have had against Landlord if the deed to secure debt had not been
terminated or foreclosed, except such purchaser shall not be (i) liable for any
act or omission of the prior Landlord; (ii) subject to any offsets or defenses
which Tenant might have against the prior Landlord; or (iii) bound by any Rent
or security deposit which Tenant might have paid in advance to the prior
Landlord.
See Special Stipulation # 10
----------------------------
15. INDEMNIFICATION AND HOLD HARMLESS
---------------------------------
(a) Tenant hereby indemnifies and holds Landlord harmless from and
against any injury, expense, damage, liability or claim, imposed on Landlord by
any person whomsoever, whether due to damage to the Premises, claims for
injuries to the person or property of any other tenant of the Building or of any
other person in or about the Building for any purpose whatsoever, or
administrative or criminal action by a governmental authority, whether such
injury, expense, damage, liability or claim results either directly or
indirectly from the act, omission, negligence, misconduct or breach of any
provisions of this Lease by Tenant, the agents, servants, or employees of
Tenant. Tenant further agrees to reimburse Landlord for any costs or expenses,
including, but not limited to, court costs and reasonable attorney's fees, which
Landlord may incur in investigating, handling or litigating any such claim or
any action by a governmental authority.
(b) Tenant shall give notice to Landlord of any defective condition
in or about the Premises known to Tenant, and further agrees to attempt to
contact Landlord by telephone immediately in such instance.
See Special Stipulation # 14
----------------------------
16. TENANT'S INSURANCE
------------------
Tenant shall carry (at its sole expense during the Term) (i) fire and
extended coverage insurance insuring Tenant's interest in its improvements to
the Premises and any and all furniture, equipment, supplies, contents and other
property owned, leased, held or possessed by Tenant and contained therein, such
insurance coverage
<PAGE>
to be in an amount equal to the full insurable value of such improvements and
property, as such may increase from time to time, (ii) worker's compensation
insurance as required by applicable law, and (iii) comprehensive liability
coverage for injury to or death of a person or persons and for damage to
property occasioned by or arising out of any construction work being done on the
Premises, or arising out of the condition, use, or occupancy of the Premises, or
other portions of the Building or Property, the limits of such policy or
policies to be in amounts not less than One Million Five Hundred Thousand
Dollars ($1,500,000) with respect to injuries to or death of any one person,
Three Million Dollars ($3,000,000) with respect to any one casualty or
occurrence and Three Hundred Thousand Dollars ($300,000) with respect to
property damage. Landlord and Tenant shall each have included in all policies of
insurance respectively obtained by them with respect to the Building or Premises
a waiver by the insurer of all right of subrogation against the other in
connection with any loss or damage insured against. To the full extent permitted
by law, Landlord and Tenant each waives all right of recovery against the other,
and agrees to release the other from liability for loss or damage to the extent
such loss or damage is covered by valid and collectible insurance in effect at
the time of such loss or damage; provided, however, that the foregoing release
by each party is conditioned upon the other party's carrying insurance with the
above described waiver of subrogation, and if such coverage is not obtained or
maintained by either party, then the other party's foregoing release shall be
deemed to be rescinded until such waiver is either obtained or reinstated. All
said insurance policies shall be carried with companies licensed to do business
in the State of Georgia reasonably satisfactory to Landlord and shall be
noncancellable except after twenty (20) days' written notice to Landlord. Each
policy shall name Landlord, Landlord's Property Manager and any other person
designated by Landlord as additional insureds and provide that it is primary to,
and not contributing with, any policy carried by Landlord, Landlord's Property
Manager, or other designated person covering the same loss. At Landlord's
request, duly executed certificates of such insurance shall be delivered to
Landlord prior to the Commencement Date and at least thirty (30) days prior to
the expiration of each respective policy term.
See Special Stipulation #21.
- ---------------------------
17. REMEDIES CUMULATIVE
-------------------
The rights given to Landlord and Tenant herein are in addition to any
rights that may be given to Landlord or Tenant by any statute or under law.
18. ENTIRE AGREEMENT - NO WAIVER
----------------------------
This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties not embodied herein shall be of any force and effect. The failure
of either party to insist in any instance on strict performance of any covenant
or condition hereof, or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in any other
instance. This Lease cannot be changed or terminated orally, and can be
modified only in writing, executed by each party hereto.
<PAGE>
19. HOLDING OVER
------------
If Tenant remains in possession of the Premises after expiration of
the Term, or after any termination of the Lease by Landlord, with Landlord's
acquiescence and without any written agreement between the parties, Tenant shall
be a tenant at sufferance and such tenancy shall be subject to all the
provisions hereof, except that the Monthly Rental for said holdover period shall
be double the amount of Rent due in the last month of the Term. There shall be
no renewal of this Lease by operation of law. Nothing in this Paragraph shall
be construed as a consent by Landlord to the possession of the Premises by
Tenant after the expiration of the Term or any termination of the Lease by
Landlord.
See Special Stipulation # 9.
- ---------------------------
20. HEADINGS
--------
The headings in this Lease are included for convenience only and shall
not be taken into consideration in any construction or interpretation of any
part of this Lease.
21. NOTICES
-------
(a) Any notice, request or consent by either party to the other
hereunder shall be valid only if in writing and shall be deemed to be duly given
only if hand-delivered, or sent by certified mail or by a recognized national
overnight delivery service which has a receipt of notice as a part of its
delivery function. Such notices shall be addressed (i) if to Tenant, at the
Premises, with a copy to Samuel N. Frankel, Esq., Frankel, Hardwick, Tanenbaum &
Fink, P.C., Suite 400, 359 East Paces Ferry Road, N.E., Atlanta, Georgia 30305,
and (ii) if to Landlord, at Landlord's address set forth above, or at such other
address for either party as that party may designate by notice to the other.
Notice shall be deemed given, if delivered personally, upon delivery thereof,
and if mailed three (3) business days after the mailing thereof.
(b) Tenant hereby appoints as its agent to receive service of all
dispossessory or distraint proceedings, Samuel N. Frankel, Esq., Frankel,
Hardwick, Tanenbaum & Fink, P.C., Suite 400, 359 East Paces Ferry Road, N.E.,
Atlanta, Georgia 30305.
22. HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES
----------------------------------------
(a) This Lease shall bind and inure to the benefit of Landlord and
Tenant, and their respective successors, heirs, legal representatives and
assigns. The term "Landlord" as used in this Lease means only the owner (or the
ground lessee) for the time being of the Property and Building of which the
Premises are a part, so that in the event of any sale or sales of said Property
(or of any lease thereof), Landlord named herein shall be and hereby is entirely
released of all covenants and obligations of Landlord hereunder accruing
thereafter, and it shall be deemed without further agreement that the purchaser,
or the lessee, as the case may be, has assumed and agreed to carry out any and
all covenants and obligations of Landlord hereunder during the period such party
has possession of the Property and Building. If the Property and Building are
severed as to ownership by sale and/or lease, the owner of the entire Building
<PAGE>
or lessee of the entire Building that has the right to lease space in the
Building to tenants shall be deemed "Landlord". Tenant shall be bound to any
such succeeding party for performance by Tenant of all the terms, covenants, and
conditions of this Lease and agrees to execute any attornment agreement not in
conflict with the terms and provisions of this Lease at the request of any such
party.
(b) The parties "Landlord" and "Tenant" and pronouns relating
thereto, as used herein, shall include male, female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.
23. ATTORNEY'S FEES
---------------
If any law suit or court action between Landlord and Tenant arises out
of or under this Lease, the prevailing party in such law suit or court action
shall be entitled to and shall collect from the non-prevailing party the
reasonable attorney's fees and court costs actually incurred by the prevailing
party with respect to said lawsuit or court action.
24. TIME OF ESSENCE
---------------
TIME IS OF THE ESSENCE OF THIS LEASE.
25. NO ESTATE IN LAND
-----------------
Tenant has only a usufruct under this Lease, not subject to levy or
sale. No estate shall pass out of Landlord by this Lease.
26. SECURITY DEPOSIT
----------------
Tenant has deposited with Landlord $ 0 as a security deposit
---------
for the performance by Tenant of all the terms, covenants and conditions of this
Lease upon Tenant's part to be performed. Landlord shall have no obligation to
segregate such security deposit from any other funds of Landlord, and interest
earned on such security deposit, if any, shall belong to Landlord. The security
deposit shall be returned to Tenant within thirty (30) days after the expiration
of the Term, if Tenant has fully performed its obligations hereunder. Landlord
shall have the right to apply any part of said security deposit to cure any
default of Tenant and if Landlord does so, Tenant shall upon demand deposit with
Landlord the amount so applied so that Landlord shall have the full security
deposit on hand at all times during the Term of this Lease. If there is a sale
or lease of the Building subject to this Lease, Landlord shall transfer the
security deposit to the vendee or lessee, and Landlord shall be released from
all liability for the return of such security deposit. Tenant shall look solely
to the successor Landlord for the return of said security deposit. This
provision shall apply to every transfer or assignment made of the security
deposit to a successor Landlord. The security deposit shall not be assigned or
encumbered by Tenant without the prior consent of Landlord and any such
unapproved assignment or encumbrance shall be void.
27. COMPLETION OF THE PREMISES
--------------------------
Landlord shall monitor completion of the work described in Exhibit "C"
-----------
subject to and limited by the terms of said Exhibit "C", and subject to payments
-----------
which may be required of Tenant thereunder. Any work required by Tenant as
provided for in said Exhibit "C" shall
-----------
<PAGE>
be performed within the provisions and according to all standards of said
Exhibit "C".
- -----------
28. PARKING ARRANGEMENTS
--------------------
Landlord shall maintain 2.75 unreserved parking spaces per 1000 usable
square feet leased by Tenant, for the purpose of accommodating the parking needs
of Tenant and Tenant's invitees and employees. Such parking shall be available
subject to the limitations and conditions from time to time reasonably imposed
by Landlord, but at no additional costs to Tenant. Said parking shall be
maintained on the Property or on areas located in the vicinity of the Property
and within the Project.
29. RULES AND REGULATIONS
---------------------
The Rules set forth on Exhibit "D" are a part of this Lease. Landlord
-----------
may from time to time amend, modify, delete or add additional, reasonable Rules
for the use, operation, safety, cleanliness and care of the Premises and the
Building. Such new or modified Rules shall be effective upon notice to Tenant.
Tenant will cause its employees and agents, or any others permitted by Tenant to
occupy or enter the Premises to at all times abide by the Rules. If there is a
breach of any Rules, then after the expiration of the applicable notice and cure
periods set forth in Paragraph 10 of this Lease, Landlord shall have all
remedies in this Lease provided for in the Event of Default by Tenant and shall,
in addition, have any remedies available at law or in equity, including but not
limited to, the right to enjoin any breach of such Rules. Landlord shall not be
responsible to Tenant for the nonobservance by any other tenant or person of any
such Rules; provided, however, that Landlord shall use reasonable efforts to
cause other tenants to comply with such Rules.
30. RIGHT TO PARTIALLY RELOCATE
---------------------------
At any time or from time to time during the Term of this Lease or any
renewal thereof, Landlord shall have the unrestricted and unconditional right to
partially relocate Tenant to any other office space within the Building but only
with regard to space leased by a Tenant on a floor, where Tenant leases less
than twelve-thousand five hundred (12,500) rentable square feet on such floor;
provided, however, that such right shall not exist as to space Tenant leases on
either the 15th or the 19th floors of the Building. Any such relocation shall
only be onto floors in the mid-rise or high-rise elevator banks of the Building,
and shall be into space comparable (in terms of quality of build-out and
functionality of lay-out) to the space from which Tenant is being located.
Landlord shall deliver notice to Tenant of Landlord's desire to relocate Tenant,
together with a proposal for the area to which such Premises shall be relocated.
Should Landlord exercise its right to relocate Tenant under this Section 45 then
(i) any and all reasonable expenses including, but not limited to, those
incurred by Tenant, of said relocation or of any necessary renovation or
alteration, as calculated by Landlord prior to any relocation, shall be paid by
Landlord, and (ii) following such relocation, the substituted space shall for
all purposes thereinafter constitute the Premises and all terms and conditions
of this Lease shall apply with full force and effect to the Premises as so
relocated. If Tenant has not relocated its premises within sixty (60) days
after the later to occur of (i) when Landlord first notifies Tenant of
Landlord's desire to relocate
<PAGE>
Tenant or (ii) the relocation space is Substantially Complete, Landlord shall
have the right to terminate this Lease as to the space in question by giving
notice of such termination to Tenant. Such termination shall be effective upon
any date selected by Landlord in the Termination Notice which is at least ten
(10) days after the Termination Notice is given by Landlord to Tenant. Tenant
hereby further covenants and agrees to promptly execute and deliver to Landlord
any lease amendment or other such document appropriate to reflect the changes in
the Lease described or contemplated above.
31. LATE PAYMENTS
-------------
Any payment due of Tenant hereunder not received by Landlord within
five (5) days of the date when due shall be assessed a five percent (5%) charge
for Landlord's administrative and other costs in processing and pursuing the
payment of such late payment. Acceptance by Landlord of a payment, and the
cashing of a check, in an amount less than that which is currently due shall in
no way affect Landlord's rights under this Lease and in no way be an accord and
satisfaction. This provision does not prevent Landlord from declaring the non-
payment of Rent when due after the expiration of any applicable notice and cure
periods set forth in this Lease an event of default hereunder. Also See Special
----------------
Stipulations # 2 and 26.
- ------------------------
32. ESTOPPEL CERTIFICATE
--------------------
At any time after the date hereof, Tenant shall, within ten (10) days
of the request by Landlord, execute, acknowledge and deliver to Landlord, any
Mortgagee, prospective Mortgagee or any prospective purchaser of the Property,
the Building, or both (as designated by Landlord), or any prospective purchaser
or transferee of the Building an Estoppel Certificate in recordable form, or in
such other form as Landlord may from time to time reasonably require, evidencing
whether or not (a) this Lease is in full force and effect; (b) this Lease has
been amended in any way; (c) Tenant has accepted and is occupying the Premises;
(d) there are any existing defaults on the part of Landlord hereunder or
defenses or offsets against the enforcement of this Lease to the knowledge of
Tenant (specifying the nature of such defaults, defenses or offsets, if any);
(e) the date to which Rent and other amounts due hereunder, if any, have been
paid; and (f) any such other information as may be reasonably requested by
Landlord. Each certificate delivered pursuant to this Paragraph may be relied
on by Landlord, any prospective purchaser or transferee of Landlord's interest
hereunder, or any Mortgagee or prospective Mortgagee.
33. SEVERABILITY AND INTERPRETATION
-------------------------------
(a) If any clause or provision of this Lease shall be deemed illegal,
invalid or unenforceable under present or future laws effective during the Term,
the remainder of this Lease shall not be affected by such illegality, invalidity
or unenforce- ability, and in lieu of each clause or provision of this Lease
that is illegal, invalid or unenforceable, there shall be added as a part of
this Lease a clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
<PAGE>
(b) If any provisions of this Lease require judicial interpretation,
the court interpreting or construing the same shall not apply a presumption that
the terms of any such provision shall be more strictly construed against one
party or the other by reason of the rule of construction that a document is to
be construed most strictly against the party who itself or through its agent
prepared the same, as all parties hereto have participated in the preparation of
this Lease.
34. MULTIPLE TENANTS
----------------
If more than one individual or entity comprises and constitutes
Tenant, then all individuals and entities comprising Tenant are and shall be
jointly and severally liable for the due and proper performance of Tenant's
duties and obligations arising under or in connection with this Lease.
35. FORCE MAJEURE. See Special Stipulation # 15
------------- ----------------------------
36. QUIET ENJOYMENT
---------------
So long as Tenant is in full compliance with the terms and conditions
of this Lease, Landlord shall warrant and defend Tenant in the quiet enjoyment
and possession of the Premises during the Term against any and all claims made
by, through or under Landlord, subject to the terms of this Lease.
37. BROKERAGE COMMISSION; INDEMNITY
-------------------------------
THE LANDMARKS GROUP SERVICES CORPORATION OF GEORGIA ("SERVICES") HAS
ACTED AS AGENT FOR LANDLORD IN THIS TRANSACTION AND ARMADA ASSOCIATES ("ARMADA")
HAS ACTED AS AGENT FOR TENANT IN THIS TRANSACTION. BOTH SERVICES AND ARMADA ARE
TO BE PAID A COMMISSION BY LANDLORD. Tenant warrants that there are no other
claims for broker's commissions or finder's fees in connection with its
execution of this Lease. Tenant hereby indemnifies Landlord and holds Landlord
harmless from and against all loss, cost, damage or expense, including, but not
limited to, attorney's fees and court costs, incurred by Landlord as a result of
or in conjunction with a claim of any real estate agent or broker, if made by,
through or under Tenant. Landlord hereby indemnifies Tenant and holds Tenant
harmless from and against all loss, cost, damage or expense, including, but not
limited to, attorney's fees and court costs, incurred by Tenant as a result of
or in conjunction with a claim of any real estate agent or broker, if made by,
through or under Landlord.
38. EXCULPATION OF LANDLORD
-----------------------
Landlord's liability to Tenant with respect to this Lease shall be
limited solely to Landlord's interest in the Building. Neither Landlord, any of
the partners of Landlord, any officer, director, or shareholder of Landlord nor
any of the partners of Landlord shall have any personal liability whatsoever
with respect to this Lease.
39. ORIGINAL INSTRUMENT
-------------------
Any number of counterparts of this Lease may be executed, and each
such counterpart shall be deemed to be an original instrument.
<PAGE>
40. GEORGIA LAW
-----------
This Lease has been made under and shall be construed and interpreted
under and in accordance with the laws of the State of Georgia.
41. NO RECORDATION OF LEASE
-----------------------
Without the prior consent of Landlord, neither this Lease nor any
memorandum hereof shall be recorded or placed on public record.
42. HAZARDOUS WASTES
----------------
Tenant shall not (either with or without negligence) cause or permit
the escape, disposal or release of any biologically or chemically active or
other hazardous substances or materials. Tenant shall not allow the storage or
use of such substances or materials in any manner not sanctioned by law or by
the highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Building, the Premises
or the Property, any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after notice is given to Landlord of
the identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and
the regulations adopted under these acts. If any lender or govern-mental agency
shall ever require testing to ascertain whether or not there has been any
release of hazardous materials as a result of a release by, through or under
Tenant, then the reasonable costs thereof shall be reimbursed by Tenant to
Landlord upon demand as additional charges if such requirement applies to the
Premises. In addition, Tenant shall execute affidavits, representations and the
like from time to time at Landlord's request concerning Tenant's best knowledge
and belief regarding the presence of hazardous substances or materials on the
Premises. In all events, Tenant shall indemnify Landlord in the manner
elsewhere provided in this Lease from any release of hazardous materials on the
Premises occurring while Tenant is in possession, or elsewhere, if caused by
Tenant or persons acting under Tenant. The within covenants shall survive the
expiration or earlier termination of the Lease Term.
See Special Stipulation # 25.
----------------------------
43. LEASE BINDING UPON DELIVERY
---------------------------
This Lease shall not be binding until and unless all parties have duly
executed said Lease and a fully executed counterpart of said Lease has been
delivered to Tenant.
44. SPECIAL STIPULATIONS
--------------------
The special stipulations attached hereto and made a part hereof, if
any, shall control if in conflict with any of the remaining provisions of this
Lease.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed under seal, on the day and year first above written.
<PAGE>
TENANT:
AMERICA'S FAVORITE CHICKEN COMPANY,
a Minnesota corporation
By: /s/
-------------------------------
Name:__________________________
Its:___________________________
Attest:____________________________
Name:__________________________
Its:___________________________
(CORPORATE SEAL)
(Federal Identification Number:_________)
*Note: If Tenant is a corporation, two authorized corporate officers must
execute this Lease in their appropriate capacities for Tenant, affixing
the corporate seal.
[Signatures continued on next page]
<PAGE>
[Signatures continued from previous page]
"LANDLORD"
CONCOURSE VI ASSOCIATES, a Georgia general
partnership
By: Landmark Forty-Two, L.P., as a
general partner of Concourse VI
Associates
By: THE LANDMARKS GROUP PROPERTIES
CORPORATION, as the sole
general partner of Landmark
Forty-Two, L.P.
By: /s/
--------------------------------
Its:__________________________________
By: /s/
--------------------------------
Its:__________________________________
(CORPORATE SEAL)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C> <C>
1. Premises and Term....................... 1
2. Rent.................................... 3
3. Reimbursement for Increases in Operating
Expenses and Taxes...................... 3
4. Delivery of the Premises................ 6
5. Acceptance of the Premises.............. 6
6. Use..................................... 6
7. Tenant's Care of the Premises........... 6
8. Services................................ 7
9. Destruction or Damage to Premises....... 9
10. Default by Tenant; Landlord's Remedies.. 10
11. Assignment and Subletting............... 13
12. Condemnation............................ 14
13. Inspections............................. 14
14. Subordination........................... 14
15. Indemnification and Hold Harmless....... 15
16. Tenant's Insurance...................... 15
17. Remedies Cumulative..................... 16
18. Entire Agreement-No Waiver.............. 16
19. Holding Over............................ 16
20. Headings................................ 17
21. Notices................................. 17
22. Heirs, Successors and Assigns-Parties... 17
23. Attorney's Fees......................... 18
24. Time of Essence......................... 18
25. No Estate in Land....................... 18
26. Security Deposit........................ 18
27. Completion of the Premises.............. 18
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
28. Parking Arrangements.................... 18
29. Rules and Regulations................... 18
30. Right to Partially Relocate............. 19
31. Late Payments........................... 19
32. Estoppel Certificate.................... 20
33. Severability and Interpretation......... 20
34. Multiple Tenants........................ 20
35. Force Majeure........................... 20
36. Quiet Enjoyment......................... 20
37. Brokerage Commission; Indemnity......... 20
38. Exculpation of Landlord................. 21
39. Original Instrument..................... 21
40. Georgia Law............................. 21
41. No Recordation of Lease................. 21
42. Hazardous Wastes........................ 21
43. Lease Binding Upon Delivery............. 22
44. Special Stipulations.................... 22
Signature Page.......................... 22
</TABLE>
Exhibit "A" - Location of Premises Within Building
Exhibit "B" - Space Plan of Premises
Exhibit "C" - Work Letter
Exhibit "D" - Rules and Regulations
Exhibit "E" - Description of the Property
Exhibit "F" - HVAC Specifications
Exhibit "G" - Cleaning Specifications
Exhibit "H" - Refusal Space
<PAGE>
DEFINITIONS
-----------
Defined Term Paragraph
- ------------ ---------
Additional Electrical Equipment. . . . . . . . . . . . .8(b)(iv)
Allowance. . . . . . . . . . . . . . . . . . . . . . . .Special
Stipulation 6
Armada . . . . . . . . . . . . . . . . . . . . . . . . .37
Building . . . . . . . . . . . . . . . . . . . . . . . .1(a)
Commencement Date. . . . . . . . . . . . . . . . . . . .1(b)
Deed to Secure Debt. . . . . . . . . . . . . . . . . . .Special
Stipulation 10
Fairchild Service. . . . . . . . . . . . . . . . . . . .8(e)
First Refusal Space. . . . . . . . . . . . . . . . . . .Special
Stipulation 11
Initial Calendar Year. . . . . . . . . . . . . . . . . .3(d)
Initial Monthly Rental . . . . . . . . . . . . . . . . .2(a)
Initial Operating Costs. . . . . . . . . . . . . . . . .3(a)
Landlord . . . . . . . . . . . . . . . . . . . . . . . .Caption
Lease. . . . . . . . . . . . . . . . . . . . . . . . . .Caption
Lease Year . . . . . . . . . . . . . . . . . . . . . . .1(c)
Market Rate. . . . . . . . . . . . . . . . . . . . . . .Special
Stipulation 5
Monthly Rental . . . . . . . . . . . . . . . . . . . . .2(a)
Mortgagee. . . . . . . . . . . . . . . . . . . . . . . .14(a)
Operating Costs. . . . . . . . . . . . . . . . . . . . .3(b)
Premises . . . . . . . . . . . . . . . . . . . . . . . .1(a)
Property . . . . . . . . . . . . . . . . . . . . . . . .1(d) and
Exhibit "E"
Rent . . . . . . . . . . . . . . . . . . . . . . . . . .2(c)
Renewal Term . . . . . . . . . . . . . . . . . . . . . .Special
Stipulation 5
Rules. . . . . . . . . . . . . . . . . . . . . . . . . .6 and
Exhibit "D"
Services . . . . . . . . . . . . . . . . . . . . . . . .37
Storage Space. . . . . . . . . . . . . . . . . . . . . .1(f)
Tenant . . . . . . . . . . . . . . . . . . . . . . . . .Caption
Tenant's Share . . . . . . . . . . . . . . . . . . . . .3(c)
Term. . . . . . . . . . . . . . . . . . . . . . . . . .1(b)
<PAGE>
FOR: CONCOURSE VI
------------------
LEASE AGREEMENT
---------------
CONCOURSE
---------
ATLANTA, GEORGIA
----------------
LANDLORD: CONCOURSE VI ASSOCIATES
TENANT: AMERICA'S FAVORITE CHICKEN COMPANY
BUILDING: CONCOURSE CORPORATE CENTER VI
SUITE: 1700
SQ. FT.: 76,614 RENTABLE SQUARE FEET
TERM: TEN (10) YEARS
<PAGE>
SPECIAL STIPULATIONS ATTACHED TO LEASE
AGREEMENT INVOLVING CONCOURSE VI ASSOCIATES
(AS "LANDLORD") AND AMERICA'S FAVORITE CHICKEN COMPANY (AS "TENANT")
--------------------------------------------------------------------
1. Premises and Rent. (a) The Premises shall consist of the following:
-----------------
<TABLE>
<CAPTION>
Usable Rentable
Floor Square Feet Square Feet
----- ----------- -----------
<S> <C> <C> <C>
16 23,216 25,538
17 23,216 25,538
18 23,216 25,538
The Monthly Rental for the Term shall be as follows:
Per Rentable
Square Foot Annual
Lease Year Per Annum Monthly Rental Base Rental
- ---------- ------------ -------------- -----------
1 - 5 $17.40 $111,090.30 $1,333,083.60
6 - 7 $22.40 $143,012.80 $1,716,153.60
8 - 9 $25.00 $159,612.50 $1,915,350.00
10 $26.50 $169,189.25 $2,030,271.00
</TABLE>
provided, however, that this provision shall not eliminate or be deemed to
eliminate Tenant's obligation to pay any other amounts or charges due of Tenant
under this Lease, including, but not limited to, the amounts and charges due of
Tenant under Paragraphs 3 and 8(c) of this Lease, and Landlord does not waive
the right to collect any such sums.
(b) The figures set forth above for Monthly Rental and Annual Base
Rental have been calculated based on the Premises containing seventy-six
thousand six hundred fourteen (76,614) rentable square feet, and such figures
shall be adjusted to reflect the actual rentable square feet within the
Premises. The rentable square feet within the Premises shall be determined by
multiplying (i) the usable area of the Premises, measured and determined in
accordance with the American National Standard Method of Measuring Floor Area in
Office Buildings of the Building Owners and Manager's Association International
(ANSI Z65.1-1980 [approved July 31, 1980]), by (ii) (A) 1.16, for a floor which
Tenant leases part, but not all, of; and (B) 1.10, for a floor which Tenant
leases in its entirety.
2. Late Payments. Tenant shall be charged, in addition to any amounts
-------------
charged under Paragraph 31 of the Lease, interest on any amounts not paid within
five (5) days after such payment is due hereunder, interest on the amount of
such late payment equal to the lesser of (a) the highest rate of interest
------
permitted by applicable law or (b) the prime rate of interest indicated in the
Wall Street Journal from time to time, or, if such index is no longer available,
- -------------------
some reasonable substitute therefor.
3. Use. (a) In addition to the uses permitted under Paragraph 6 of the
---
Lease, the Premises may be used for training
<PAGE>
purposes as Tenant may require in connection with the business of or the
operation of Tenant's corporate headquarters, which uses shall include sales and
marketing suites, classroom uses and such other uses expressly contemplated by
the plans submitted and consented to by Landlord under the Work Letter.
(b) Tenant shall be entitled to keep and maintain a non-cooking snack
bar, with vending machines and microwave oven, in the Premises for the use and
benefit of Tenant and Tenant's employees, guests and invitees.
4. Commencement Date. The "Commencement Date" shall be August 1, 1993,
-----------------
notwithstanding that Tenant may occupy the Premises prior to said date, and the
Term shall be for ten (10) full years after said Commencement Date.
Notwithstanding said Commencement Date, Tenant may occupy floors of the Premises
prior to said date, and Rent shall commence on said floor as of the date Tenant
occupies all or any portion of that floor. Tenant shall commence paying Monthly
Rental and Tenant's Share of Operating Costs on said floors occupied prior to
the Commencement Date at the rate payable in the first (1st) Lease Year.
5. Renewal of Lease. (a) Provided this Lease is then in full force and
----------------
effect and Tenant is not in default under this Lease beyond any applicable grace
or cure periods expressly provided for in this Lease, Landlord hereby grants to
Tenant two (2) options to renew this Lease for a period of five (5) years each
(a "Renewal Term", or collectively the "Renewal Terms"), at a rental rate equal
to ninety percent (90%) of the effective rental rate then being offered by
landlords to tenants desiring to lease comparable space of comparable height and
view and is the size of or comparable to the Premises, in the other comparable
first-class buildings with comparable amenities and facilities in the North-
Central/I-285/GA 400 submarket and the Buckhead/Lenox submarket of metropolitan
Atlanta, Georgia, as currently described in Dorey's Atlanta Office Guide, taking
----------------------------
into account any abatements or other concessions then being offered to such
comparable tenants, seeking comparable space, but excluding, for the purposes of
determining any such Market Rate under this Special Stipulation #5, the value of
any tenant improve-ments or tenant improvement allowance in any other such
trans-actions (the "Market Rate"). Such rate shall be initially determined by
Landlord. If Tenant desires to renew the Lease, Tenant shall notify Landlord at
least fourteen (14) months in advance of the expiration of the Term, or the
Renewal Term, as the case may be. Landlord shall make an offer to Tenant based
upon the above-described terms at least twelve (12) months prior to the end of
the Term or the Renewal Term, as the case may be. Tenant shall have thirty (30)
days from the date Landlord makes such offer to either accept or reject such
offer. If Tenant fails to respond within such thirty (30) day period, then the
Lease shall terminate as of the end of the Term as established herein or the
Renewal Term, as the case may be. If Tenant accepts such offer, then the Term
or the Renewal Term, as the case may be, shall be extended by said five (5) year
period, the rent for such period shall be the rent as offered by Landlord and
accepted by Tenant pursuant to the terms and conditions of this Paragraph, and
the Lease for the Renewal Term in question shall be otherwise on the same terms
<PAGE>
and conditions as contained in the Lease (except that there shall be no
Allowance for such Renewal Term).
(b) If that Tenant rejects such offer within the thirty (30) day
period, Tenant may notify Landlord in writing of its intention to submit the
issue of Market Rate to arbitration and of the name of the arbitrator selected
by Tenant. If Tenant fails to give such notice of its desire to arbitrate
within said thirty (30) day period, then this Lease shall expire as of the end
of the Term as established herein or the Renewal Term, as the case may be.
Within ten (10) days after receipt of such notice by Landlord from Tenant,
Landlord shall notify Tenant of the arbitrator selected by Landlord. Within ten
(10) days after the appointment of Landlord's arbitrator, the arbitrators so
appointed shall jointly appoint a third arbitrator. If such arbitrators are
unable to select a third arbitrator within ten (10) days after the appointment
of Landlord's arbitrator, then Landlord or Tenant, or both, shall immediately by
petition to the Presiding Judge of the Superior Court of Fulton County, Georgia,
request the appointment of five (5) persons, each of whom shall be qualified to
serve as a third arbitrator, and none of whom shall have any interest in or be
in any way affiliated with or related to either Landlord or Tenant as a
stockholder, officer, employee or agent of Landlord or Tenant or a relative of
any stockholder, officer, agent or employee of Landlord or Tenant. From the
five (5) persons so appointed, Landlord and Tenant shall, within ten (10) days
after such appointment, alternatively strike two names each, Tenant striking one
name first. The remaining person shall act as the third arbitrator. If either
Landlord or Tenant shall fail or refuse to appoint an arbitrator within the time
provided, then the other party shall petition the then Presiding Judge of the
Superior Court of Fulton County, Georgia to appoint an arbitrator for such party
and any arbitrator so appointed shall be considered as having been appointed by
the party so failing or refusing to appoint an arbitrator. If either party
shall fail or refuse within the time provided to strike from the list of the
five (5) persons appointed by the Presiding Judge of the Superior Court of
Fulton County, then the other party shall proceed to select the third arbitrator
from said list. Notwith-standing anything to the contrary set forth in this
paragraph, each of the arbitrators selected shall be qualified arbitrators and
experienced in the type of issues to be arbitrated.
(c) After a third arbitrator has been appointed in accordance with
the foregoing paragraph, the arbitrators shall hold such meetings as either
Landlord or Tenant, or both, may reasonably request and at such meetings hear
and consider any evidence which either Landlord or Tenant, or both, desire to
present. Within twenty (20) days after the appointment of the third arbitrator,
the arbitrators shall make their final determination deciding the issue of
Market Rate. In determining Market Rate for the purposes of this Lease, the
arbitrators shall select the Market Rate which is twelve (12) months prior to
the month in which the Renewal Term in question is to commence.
(d) The determination made by the arbitrator as to the Market Rate
shall be in writing and signed by at least two arbitrators and shall be binding
upon Landlord and Tenant.
<PAGE>
(e) Landlord shall pay the fees and expenses of the arbitrator
selected by Landlord and Tenant shall pay the fees and expenses of the
arbitrator selected by Tenant. The fees and expenses of the third arbitrator,
together with any expenses of the arbitration proceeding itself, shall be
divided equally between Landlord and Tenant.
6. Allowance. Landlord shall cause the tenant fit-up and finish work in
---------
the Premises to be completed in accordance with plans and specifications to be
agreed upon by Landlord and Tenant, in their respective reasonable judgment.
Landlord shall provide an allowance for the tenant fit-up and finish work in the
Premises and for any other actual costs incurred by Tenant in connection with or
as a part of the move by Tenant to the Premises or the use by Tenant of the
Premises of Forty Three and 50/100 Dollars ($43.50) per usable square foot
initially leased by Tenant within the Premises (the "Allowance"). If the costs
to complete the tenant fit-up and finish work and for the other actual costs
incurred by Tenant in connection with or as a part of the move by Tenant to the
Premises or the use in the Premises are less than the Allowance, the difference
shall be, up to the amount of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), paid to Tenant in a check within thirty (30) days after the
Commencement Date, with the remainder of any such unused Allowance being
credited against Rent first due from Tenant hereunder. If the costs to complete
the tenant fit-up and finish work in the Premises are greater than the
Allowance, then the amount of such excess shall be paid by Tenant.
7. Signage. (a) Tenant shall be entitled to install its own graphics and
-------
signage in the elevator lobbies of any floor which Tenant leases in its
entirety, subject to Landlord's prior consent as to the design, size and color
of such graphics, such consent not to be unreasonable withheld or delayed by
Landlord.
(b) So long as Tenant is not in default under this Lease after any
applicable grace or cure periods expressly provided for in this Lease, Tenant
shall also have the right to have a 2 foot by 4 foot plaque on the Building's
existing, free-standing pylon sign at the entrance to the Building. The
graphics on such plaque shall be subject to Landlord's consent, such consent not
to be unreasonably withheld or delayed. The cost of such sign shall be paid by
Landlord.
8. HVAC Service. (a) Landlord shall make available to Tenant additional
------------
HVAC service for hours other than the Building standard hours of operation.
Such HVAC service shall be available to Tenant at a rate of Thirty-Eight and
No/100 Dollars ($38.00) per floor per hour, as such rate may be increased from
time to time as the costs to provide such service increase. Such service shall
be provided without profit to Landlord, but may include charges for
administration and overhead for Landlord, and additional wear and tear on
equipment and machinery, as Landlord, in its reasonable judgment, determines as
appropriate amounts for such charges. Tenant shall provide Landlord with at
least twenty-four (24) hours notice of Tenant's desire to use such service,
except that Landlord shall use
<PAGE>
reasonable efforts to provide such service without such advance notice, if
Tenant desires such service be provided but is unable to provide at least
twenty-four (24) hours' notice of such desire. Tenant shall pay amounts due in
connection with such additional HVAC services within ten (10) days after the
bill for such services is given to Tenant.
(b) Heating, ventilation and air conditioning services will be
provided in accordance with the specifications set forth on Exhibit "F" attached
-----------
hereto and made a part hereof, but subject to all federal, state and local
energy regulations.
9. Holdover. (a) So long as Tenant is not in default under this Lease
--------
after any applicable grace or cure periods, Tenant may, in its sole discretion,
elect to holdover in the Premises after the expiration of the Term. Tenant
shall exercise such election by giving notice of such election at least two (2)
months prior to the end of the then expiring Term. In such notice, Tenant shall
specify the number of months, up to six (6) months, which Tenant desires to hold
over under such circumstances. No such election shall be for a fraction of or
less than a full month. If Tenant does exercise this election, then there shall
be payments due from Tenant as follows:
(i) For the first three (3) months of such holdover, one hundred
fifty percent (150%) of the rate of Rent payable by Tenant at the end
of the then expiring Term or Renewal Term, as applicable.
(ii) For the fourth (4th) fifth (5th) and sixth (6th) months of
any such holdover, one hundred seventy-five percent (175%) of the rate
of Rent payable by Tenant at the end of the then expiring Term or
Renewal Term, as applicable.
(iii) For any months of such holdover thereafter, two hundred
percent (200%) of the rate of Rent payable by Tenant at the end of the
then expiring Term or Renewal Term, as applicable.
(b) If there is any holdover in the Premises by Tenant past the
expiration or early termination of the Lease, without Landlord's consent, then
Tenant shall be a Tenant at sufferance, and there shall be payments due from
Tenant of two hundred percent (200%) of the rate of Rent payable by Tenant at
the end of the then expiring Term or Renewal Term, as applicable.
10. Ownership of Property. Landlord warrants that Landlord currently owns
---------------------
the Property and Building free and clear of any mortgages, deeds to secure debt
or other like instruments (collectively as "Deed to Secure Debt").
Notwithstanding the terms and conditions of Paragraph 14 of the Lease, Tenant
shall not be required to subordinate to any Deed to Secure Debt subsequently
placed on the Property or Building, unless the holder of such Deed to Secure
Debt delivers to Tenant a corresponding non-disturbance agreement which provides
that as long as Tenant is in full compliance with the terms and conditions of
the Lease, Tenant's use and
<PAGE>
occupancy of the Premises shall not be disturbed by the holder of any such Deed
to Secure Debt.
11. Expansion by Tenant; First Refusal Space. Provided this Lease is in
----------------------------------------
full force and effect and Tenant is not in default under this Lease after any
applicable grace or cure periods expressly provided for in the Lease, Tenant
shall have a right of first refusal to lease any available and unencumbered
space on the 15th floor of the Building and on the 19th floor of the Building,
in the locations indicated on Exhibit "H" by this reference incorporated herein
-----------
(the "First Refusal Space"), upon and subject to the following terms and
conditions:
(a) Should Landlord receive an offer to lease all or a portion of the
Refusal Space upon terms and at a rental rate acceptable to Landlord, Landlord
shall give notice to Tenant of Landlord's desire to lease the portion of the
Refusal Space at issue. Tenant shall then have ten (10) business days after
receipt of Landlord's notice to respond as to whether Tenant desires to lease
the Refusal Space at issue. If Tenant elects not to lease such space or fails
to respond within the ten (10) business day period, then Landlord shall be free
to lease such space in question to the third party offeror for a period of
twelve (12) months following the date of Tenant's receipt of the above-described
written notice. If Landlord has not leased such space to such third party
within the twelve (12) month period, Landlord shall have the right to give
Tenant an additional written notice to be received by Tenant not less than
thirty (30) days prior to the expiration of the twelve (12) month period, and
provided that Landlord is then negotiating in good faith with such prospective
third party, then Landlord shall be entitled to a thirty (30) day extension of
the twelve (12) month negotiating period. Should such third party not lease
such space in question, then Tenant's first refusal rights will be fully
reinstated.
(b) If Tenant elects to lease the Refusal Space in question, the
rental for such Refusal Space shall be the rental rate then in effect payable by
Tenant on a per square foot per annum basis for the Premises.
(c) The rental for the Refusal Space take by Tenant shall commence on
the earlier to occur of: (i) one hundred twenty (120) days after the date of
Tenant's notice of election to lease the Refusal Space in question; or (ii) the
date Tenant first occupies the Refusal Space in question taken by Tenant.
Except as expressly set forth to the contrary herein, all of the terms and
conditions of this Lease shall apply to the Refusal Space in question taken by
Tenant, and from and after the date Tenant commences paying rental for the
Refusal Space in question taken by Tenant, the Refusal Space in question taken
by Tenant shall be deemed to be a part of the Premises, provided, however, that
Tenant shall not receive any Allowance with respect to the Refusal Space in
question taken by Tenant except as set forth below.
(d) An allowance of Forty-One and 50/100 Dollars ($41.50) per usable
square foot within the Refusal Space shall be pro rated by
<PAGE>
multiplying such amount by a fraction, the numerator of which is the number of
months left in the Term commencing with the month Tenant commences paying
Monthly Rental on the Refusal Space in question, and the denominator of which
shall be one hundred twenty (120).
(e) With respect to the space on the 19th floor, Tenant acknowledges
that an entity by the name of Lexmark International, Inc. ("Lexmark") currently
leases 12,581 rentable square feet, more or less, on said floor, and that
Lexmark has certain rights, prior to the rights of Tenant, to lease a portion of
said floor (consisting of 3,000 rentable square feet, more or less) under an
option, and to lease the remainder of said floor under a right of first refusal.
12. Operating Costs. (a) Notwithstanding the terms and conditions of
---------------
Paragraph 3 of the Lease, except as described below, in no event shall Tenant's
Share of Operating Costs for any year exceed one hundred five percent (105%) of
Tenant's Share of Operating Costs for the prior year; provided, however, and
notwithstanding the above limitation, that for the purposes of determining
whether or not the aforesaid limit on increases in Tenant's Share of Operating
Costs from year to year is exceeded or not, the components of Operating Costs
related to taxes and assessments attributable to the Property or Building or its
operation, utilities costs to the Building, Property or Premises and insurance
premiums related to or payable in connection with the Building, Property or
Premises shall not be considered or factored in to such determination, and there
shall be no limit on the amounts of Operating Costs related to taxes, utilities
and insurance premiums for the Building, Property or Premises that can be passed
on by Landlord to Tenant or that shall be due of Tenant at any time and from
year to year, except as expressly provided for in this Lease.
(b) Exclusions from Operating Costs:
-------------------------------
The following shall not be charged or included as a part of Operating
Costs:
(i) Replacement of capital items (except those expenditures
referred to above);
(ii) Specific costs billed to and paid by specific tenants or
other third parties;
(iii) Depreciation;
(iv) Principal, interest, and other costs directly related to
financing, or ground rents paid with respect to, the
Building or Property;
(v) The cost of any repairs or maintenance paid by the proceeds of
insurance policies carried on the Property or Building;
(vi) The wages and salaries of any supervisory or management
employee of Landlord not involved in
<PAGE>
the operation or maintenance of the Property or Building;
(vii) Legal, accounting and other professional fees incurred by
Landlord arising from a sale or financing of the Building or
the Property;
(viii) The cost of membership in any political organization;
(ix) The cost of any political contributions;
(x) Brokerage commissions, leasing commissions, legal fees,
damages, costs and other expenses incurred for or in
connection with leasing or improving space to or for or
litigating with tenants;
(xi) Landlord's cost of electricity or other services sold to
tenants for which Landlord is reimbursed under the lease with
that tenant;
(xii) Costs incurred because Landlord or another identified tenant
violated any lease;
(xiii) Items and services for which Tenant reimburses Landlord or
pays third parties or that Landlord provides selectively to
one or more tenants in the Building other than Tenant in a
substantial and material manner without reimbursement or which
are provided or performed to a materially greater extent or in
a more favorable manner than that available to or furnished to
Tenant;
(xiv) Costs incurred due to the violation or failure of Landlord to
timely comply with or pay amounts due with respect to any
contractual requirement, ordinance, governmental rule,
regulation or law;
(xv) Costs of any professional or trade groups, except for any
costs associated with professional or trade groups which
enhance the qualifications, knowledge or experience related to
or which primarily deal with buildings or general commercial
real estate of such members, such as, by was of illustration
but not limitation, BOMA, IREM and the ULI;
(xvi) The portion of any cost paid to an entity affiliated with
Landlord for the provision of goods or a service for the
Building which is above the cost which would have been paid to
a party not affiliated with Landlord in an arms-length
transaction for the provision of similar quality goods or
service;
<PAGE>
(xvii) Advertising and marketing expenditures in connection with the
leasing of the Building;
(xviii) Auditing and legal fees unrelated to the determination of
Operating Costs for the Building and each tenant's pro rata
share thereof, and the costs of statements and reports
rendered to Landlord or its partners exclusive of statements
and reports described above.
(c) At all times during all terms of this Lease, Tenant shall have
the full right to audit and contest all of Landlord's estimates and actual
statements of Operating Costs incurred for the Premises and for the Building.
If after audit it is determined that Operating Costs for the year in question
varied to Tenant's detriment by more than five percent (5.0%) of the Operating
Costs shown on the Operating Costs statement for the year in question, Landlord
shall pay all of Tenant's expenses incurred in the audit.
(d) Notwithstanding anything to the contrary contained in the Lease,
if Tenant installs an air conditioning unit to be used to cool Tenant's computer
room, such air conditioning unit shall be separately metered from the Building
and Premises. Tenant shall pay for the cost of such submeter and the
electricity used for such air conditioning unit.
(e) If Landlord deems such action appropriate and reasonable, in
Landlord's sole discretion, Landlord shall take reasonable steps to protect
against any increase in real estate or ad valorem taxes on the Building and to
protest the inclusion of the Building within, and the amount of, any assessment
levied on the Building, including without limitation, Landlord's timely response
to any notice of the assessed value of the Building or the application thereto
of an assessment or charge and entering into arbitration thereof at reasonable
costs.
13. Assignment and Subletting. Tenant shall have the right to assign the
-------------------------
Lease or sublet the Premises, or any part thereof or otherwise permit the
occupancy of the Premises, without Landlord's consent, but subject to Landlord's
rights to notice and prohibition contained herein, to any parent, subsidiary,
affiliate or controlled corporation or to corporation which Tenant may be
converted or which it may merge. Tenant shall have the obligation to notify
Landlord of its intent of any such arrangement, and if Landlord reasonably
determines that the proposed assignee, sublessee or occupant is engaged in a
business which would materially interfere with the operation of the Property or
that permitting the assignment, subletting or occupancy would cause a violation
by Landlord of its obligations under any lease covering a portion of the
Property, Landlord shall have the right to prohibit such arrangement based upon
the issue of the business of the proposed assignee, sublessee or occupant or the
compatibility of the proposed assignee, sublessee or occupant with the
businesses in the Building.
<PAGE>
14. Landlord's Indemnity. Landlord hereby agrees to indemnify and hold
--------------------
Tenant harmless from and against any and all loss, cost or damage incurred by
Tenant arising out of the willful misconduct or gross negligence of Landlord,
its agents, employees or contractors. In no event shall Tenant ever be deemed
to release or indemnify Landlord against Landlord's willful misconduct or
negligence notwithstanding any other provision of this Lease to the contrary.
15. Force Majeure. Landlord and Tenant shall be excused for the period of
-------------
any delay and shall not be deemed in default with respect to the performance of
any of the terms, covenants and conditions of this Lease when prevented from so
doing by causes beyond the respective control of Landlord and Tenant, which
shall include, but not be limited to, all labor disputes, governmental
regulations or controls, fire or other casualty, inability to obtain any
material or services, or acts of God; provided, however, that an inability to
pay money shall not under any circumstances or for any reason be or be deemed to
be an event beyond the control of Tenant.
16. Condition of Premises. (a) The taking of possession of any portion of
---------------------
the Premises by Tenant shall be conclusive evidence that Tenant accepts such
portion of the Premises "as is" and that said portion of the Premises and the
Building were in good and satisfactory condition for the use intended at the
time such possession was taken, subject to any "punch-list" items agreed upon by
Landlord and Tenant which must be remedied after Tenant's acceptance of the
Premises, and subject to any latent defects in such portion of the Premises;
provided, however, Tenant shall be deemed to have accepted such portion of the
Premises, subject to all matters not disclosed in writing with specificity by
Tenant to Landlord (expressly including latent defects) within twelve (12)
months of when Tenant occupies the Premises.
(b) There shall be no obligation of Tenant to remove any of the
improvements included as a part of the initial Tenant Improvements performed in
accordance with the Tenant Improvement Construction Documents, and, except with
respect to floor penetrations of in excess of 50 square inches (for which there
shall be no implied or deemed consent), there shall be no obligation of Tenant
to remove any of the improvements included as a part of any Tenant Improvements
performed in accordance with the Tenant Improvement Construction Documents
generated with respect to any space leased hereunder, to which Landlord has had
the opportunity to review and consent to.
17. Repairs by Tenant. Tenant will not, without Landlord's prior consent,
-----------------
which consent shall not be unreasonably withheld or delayed by Landlord, make
alterations, additions or improvements to the Premises in excess of Twenty-Five
Thousand and No/100 Dollars ($25,000.00) for any single alteration, addition or
improvement, nor do anything to or on the Premises which will increase the rate
of fire or other insurance on the Building or the Property, nor do anything that
shall affect the structural integrity or HVAC or other systems of the Building.
With respect to any alteration for which Landlord's consent is not required
hereunder, Tenant shall, nonetheless, deliver to Landlord as-built plans and
specifications
<PAGE>
with respect to any such work within thirty (30) days after the completion of
such work. All alterations, additions or improvements of a permanent nature made
or installed by Tenant to the Premises shall become the property of Landlord at
the expiration or early termination of this Lease. Landlord reserves the right
to require Tenant to remove any improvements or additions made to the Premises
by Tenant and to repair and restore the Premises to their condition prior to
such alteration, addition or improvement, reasonable wear and tear, unrepaired
casualty not caused by Tenant, and condemnation excepted, unless Landlord has
agreed in writing, at or prior to the time Tenant requests the right to make
such alteration, addition or improvement, that such item need not be removed by
Tenant at the expiration or early termination of the Term.
18. Condemnation. (a) If all of the Premises, or a part of such Premises
------------
such that the Premises in the judgment of the Architect for the Building are
untenantable, are taken, by virtue of eminent domain or other similar proceeding
or are conveyed in lieu of such taking, this Lease shall expire on the date when
title or right of possession shall vest, and any Rent paid for any period beyond
said date shall be repaid to Tenant. If there is a partial taking where this
Lease is not terminated, the Rent shall be adjusted in proportion to the square
feet of Premises taken, as determined by the Architect for the Building. In
either event, Landlord shall be entitled to, and Tenant shall not have any right
to claim, any award made in any condemnation proceeding, action or ruling
relating to the Building or the Property; provided, however, Tenant shall be
entitled to make a separate claim in any such condemnation proceeding, action or
ruling for Tenant's moving expenses, loss of goodwill and the unamortized value
of leasehold improvements in the Premises actually paid for by Tenant or any
other lawful claim (excluding Tenant's leasehold interest), to the extent such
claim does not in any manner impact upon or reduce Landlord's claim or award in
such condemnation proceeding, action or ruling.
(b) If there is a condemnation where more than fifteen percent (15%)
of the Premises are taken, Tenant shall have the right to terminate this Lease.
Such termination right shall be exercised by Tenant within sixty (60) days of
the date of Tenant's notice of such termination, or Tenant shall have no further
right to terminate this Lease for such cause.
19. Interruption of Services. If services to the Premises, or any portion
------------------------
thereof, as described herein which are provided by, through or under Landlord
are interrupted, such interruption of services materially interferes with
Tenant's use, occupancy and enjoyment of the Premises or the portion thereof, as
applicable, and the provision of such service (and the interruption thereof) is
within the reasonable control of Landlord, then if such interruption lasts in
excess of five (5) consecutive business days, Tenant may abate payments of its
Monthly Rental (but not any of the charges due from Tenant under Paragraph 3
herein, except payments for those services not being provided during the
aforesaid period, and thereby creating the rights in Tenant provided in this
Paragraph) for the portion of the Premises in question after said fifth (5th)
consecutive business day until such service is once again provided to
<PAGE>
the portion of the Premises in question at a level which does not materially
interfere with Tenant's use or occupancy of the portion of the Premises in
question.
20. Tenant's Self Help Remedy. (a) If Landlord fails to keep or perform
-------------------------
its obligations under the Lease with respect to repairs of the Premises required
under the Lease to be made by Landlord, or with respect to the prosecution and
pursuit of the Substantial Completion of Tenant Improvements once a Construction
Contract has been duly executed by a Contractor, if such failure materially and
adversely affects Tenant's ability to use the Premises for normal business
operations, and if there is no event of default then in existence, then, if
Landlord or a party acting under or through Landlord does not commence to cure
such failure within ten (10) business days after the receipt from Tenant by
Landlord and any mortgagee of which Tenant has been given notice, indicating
with specificity the nature of the failure, and Landlord or a party acting under
or through Landlord does not diligently continue to cure such failure with due
diligence, and without waiving or releasing Landlord from any obligation, then
Tenant may (but is under no obligation to), unless and until Landlord does
commence to cure or diligently continue to attempt to cure such failure,
undertake (after notice from Tenant to Landlord and two (2) days opportunity to
cure by Landlord or a party acting under or through Landlord) to perform such
obligation, and all sums actually paid or incurred by Tenant and all necessary
and incidental costs and expenses (but not costs to improve the Premises beyond
rectifying Landlord's failure), including reasonable expenses incurred by Tenant
in making such payment or performing such obligation, together with interest
thereon at the prime rate of interest quoted from time to time to time by Trust
Company Bank, main branch, Atlanta, Georgia, plus one (1%) percent interest per
annum, but not to exceed thirteen (13%) percent per annum, from the date the
payment in question is made by Tenant until the date the payment in question is
reimbursed to and received by Tenant, shall be paid by Landlord to Tenant within
thirty (30) days after demand, and if such sum is not so paid by Landlord,
Tenant shall have the right and option to offset such payment or failure to make
payment against any Rent, or any other amounts thereafter payable under the
Lease, or (ii) Tenant may pursue any other remedies available to Tenant at law
or in equity to collect payment and/or cause Landlord to cure such failure. Any
contractors employed by Tenant hereunder shall be reputable contractors and
Tenant upon completion of such work shall provide appropriate lien waivers to
Landlord. Landlord shall have the right to dispute costs incurred by Tenant
under this Paragraph.
(b) In effecting a cure in connection with Tenant's rights hereunder,
Tenant shall take precautions that a reasonably prudent building manager would
take to avoid any interference with other tenants in the Building or the
Building systems.
(c) In addition to and not in lieu of the indemnity provided in the
Lease, Tenant shall indemnify Landlord and hold Landlord harmless from and
against any loss, cost, damage or expense, including, but not limited to, court
costs and reasonable attorneys fees, incurred by Landlord as a result of or in
connection with
<PAGE>
Tenant's exercise of Tenant's remedies hereunder which results in a claim made
against Landlord.
21. Insurance. (a) If Landlord believe activities of Tenant in the
---------
Building may or will cause increases in insurance rates applicable to Landlord's
insurance on the Building, Landlord shall provide Tenant with thirty (30) days
prior notice of such belief and the specific activity involved, and Tenant shall
be entitled to cease or otherwise cure any such activity within such period and
thereby avoid any charge for any such increase; provided, however, that Tenant
shall not be required to comply with any requirement which is not a valid legal
requirement of Landlord's insurer. Use of the Premises for general office
purposes shall not increase Landlord's insurance rates if such operation of the
Premises is conducted in accordance with applicable law.
(b) Landlord shall have the right to self-insure as to any risks
associated with the Building or Property. If Landlord does so self-insure, and
if there is a claim or casualty, then Tenant shall be entitled to the same
limitations on claims against Tenant as Tenant would have had, had Landlord
carried a commercially typical and reasonable all-risk insurance policy covering
the risk in question, with a waiver of subrogation contained in Paragraph 16 of
the Lease.
22. Telephone Availability. Landlord represents that the Building is
----------------------
adequately constructed for Tenant to obtain, without undue or unusual cost and
expense to Tenant, telephone service.
23. Landlord's Standard of Care. Landlord shall maintain in first-class
---------------------------
order, condition and repair and provide security and otherwise operate the
Building in all respects at a level and standard at least equal to the level and
standard kept by other first-class mixed-use office projects in the north
central Perimeter market of Atlanta, Georgia, the structural and common portions
of the Building, including, without limitation, the Building shell, roof, roof
membrane, foundation, floors, plate glass and exterior walls as well as the
heating, ventilation, plumbing, electrical, elevator and other Building systems,
and all common areas in the Building, as well as any exterior landscaping and
parking areas, and Landlord shall be responsible for all repairs in the Premises
(excluding normal wear and tear) except to the extent the need for any such
repair arises as a result of Tenant's negligence or misconduct.
24. Zoning. Landlord represents and warrants to Tenant that as of the
------
date of this Lease the Building complies with all applicable zoning, building,
land use, or other laws, ordinances, rules or regulations of any governmental
authority, whether federal, state or local, having jurisdiction over the
Building.
25. Hazardous Wastes. Landlord warrants that Landlord did not use in the
----------------
construction of the Building any materials which are currently built into or are
a part of the Building and which are built into or are a part of the Building in
quantities which would be hazardous to the health of Tenant's employees.
<PAGE>
26. Defaults and Late Payment Charges; Late Payments of Rent. (a)
--------------------------------------------------------
Notwithstanding the terms and conditions of Paragraph 10(a)(i) of the Lease, it
shall not be an event of default under the Lease unless and until the Rent
payable under the Lease or any other sum of money due of Tenant hereunder is not
paid within ten (10) days of the date notice of such late payment is received by
Tenant; provided, however, if more than two (2) payments due of Tenant hereunder
in any one (1) calendar year are not made until after notice of such late
payment is received by Tenant, then it shall be an event of default hereunder by
Tenant if any subsequent payments due of Tenant hereunder in the same calendar
year are not made within ten (10) days of the date when due.
(b) Notwithstanding the terms and conditions of Paragraph 31 of the
Lease, there shall be no late fee due under the Lease unless and until the Rent
payable under the Lease or any other sum of money due of Tenant hereunder is not
paid within ten (10) days of the date notice of such late payment is received by
Tenant; provided, however, if more than one (1) payment due of Tenant hereunder
in any one (1) calendar year is not made until after notice of such late payment
is received by Tenant, then such late fee shall be due if any subsequent payment
due of Tenant hereunder in the same calendar year is not made within five (5)
days of the date when due.
27. Cleaning Specifications. Attached hereto as Exhibit "G", and by this
----------------------- -----------
reference incorporated herein are the cleaning specifications for the Building.
28. Access to Premises. Subject to security measures imposed by Landlord
------------------
from time to time, and any casualty or condemnation affecting the Building,
Tenant shall have access to the Premises on a 24 hour per day 7 day per week
basis.
29. Casualty; Alternate Space. If there is a casualty that precludes
-------------------------
Tenant from occupying all or a portion of the Premises and the Lease is to
continue and be in effect after the casualty, then Landlord shall use reasonable
efforts to provide Tenant with alternate built-out, unoccupied space during such
period in which Tenant is not occupying the Premises, at such reasonable and
equitable rental rate as Landlord and Tenant shall agree.
30. Abatement and Vacation of the Premises. Notwithstanding the terms and
--------------------------------------
conditions of Paragraph 10 of the Lease, if Tenant has abandoned or vacated the
Premises or any full floor thereof for in excess of ninety (90) days (after
Tenant has notified Landlord of Tenant's intent to abandon or vacate for up to
ninety (90) days), then, if such notice has been given by Tenant, Landlord's
sole remedy shall be in such instance to terminate the Lease as to that floor or
floors, or the Premises, whichever is applicable (which Landlord shall have the
option, but not the obligation to do). In the event of such termination, Tenant
shall not be liable for damages for such early termination of the Lease;
provided, however, in no event shall such termination eliminate or otherwise
limit any claims which Landlord might have against Tenant for any acts or
omissions occurring prior to the date of such termination. Except for such
possible termination by Landlord, Tenant shall not otherwise be in
<PAGE>
default hereunder and this Lease shall remain in full force and effect as to the
remainder of the Premises not terminated.
<PAGE>
EXHIBIT "A"
-----------
LOCATION OF PREMISES WITHIN BUILDING
To Be Attached.
<PAGE>
EXHIBIT "B"
-----------
SPACE PLAN OF PREMISES
To Be Attached
<PAGE>
EXHIBIT "C"
-----------
WORK AGREEMENT FOR
COMPLETION OF THE PREMISES
------------
Landlord and Tenant executed a Lease for Premises on the sixteenth (16th),
seventeenth (17th) and eighteenth (18th) floors of the Building and hereby
attach this Work Agreement to said Lease as Exhibit "C" thereto.
-----------
In order to induce Tenant to enter into the Lease (which is hereby incorporated
by reference) and in consideration of the mutual covenants herein contained,
Landlord and Tenant agree as follows:
ARTICLE 1 - DEFINITIONS
-----------------------
The following terms shall have the meanings described below. Terms not defined
herein shall have the meaning given in the Lease:
Allowance shall mean Forty-Three and 50/100 Dollars ($43.50) multiplied by
---------
the usable square feet within the Premises initially leased by Tenant
(69,648 usable square feet).
Base Building Improvements shall mean all Building Standard improvements to
--------------------------
be constructed or installed in the Building, specified in Section 2.01
hereof.
BOMA shall mean the standards and practices for measurement of office
----
buildings, set forth in the American National Standard Method of Measuring
Floor Area in Office Buildings of the Building Owners and Managers
Association International (ANSI Z65.1 - 1980 [approved July 1, 1980, as
modified]).
Building Plans and Specifications shall mean the final drawings and
---------------------------------
specifications for Base Building Improvements.
Building Standard Materials shall mean such materials described in the
---------------------------
Building Plans and Specifications, or materials of comparable quality as
may be substituted therefor by Landlord. Attached hereto as Exhibit "C-1",
-------------
and by this reference incorporated herein, is the price list for Building
Standard Materials. Except with respect to Building Standard Hardware and
all items pre-installed by Landlord as listed on Exhibit "C-1", Tenant may,
-------------
but is not obligated to, purchase the Building Standard Materials, in any
quantity which Tenant elects, at the prices shown on Exhibit "C-1". Tenant
-------------
shall be obligated to buy the Building Standard Hardware and all items pre-
installed by Landlord at the price specified in Exhibit "C-1". Tenant may
-------------
also be obligated to utilize and pay for
<PAGE>
certain other Building Standard Materials in accordance with and subject to
Section 4.02(c) herein.
Contractor shall mean the party selected in accordance with Article 6
----------
herein to do the Tenant Improvements.
Change Order shall mean any material alteration, substitution, addition or
------------
change to or in the Tenant Space Plans or Tenant Improvement Construction
Documents requested by Tenant after the same have been consented to by
Landlord.
Completion Date shall mean, as to any floor of the Premises, the date of
---------------
Substantial Completion of Tenant Improvements in accordance with the Tenant
Improvement Construction Documents (excepting the Punchlist Items) for the
floor in question.
Construction Contract shall mean the agreement to be entered between Tenant
---------------------
and Contractor for the construction of the Tenant Improvements.
Punchlist Items shall mean those items not completed in the Premises at the
---------------
time of the Substantial Completion, as identified in a written list
prepared by Tenant's Architect, which do not substantially interfere with
Tenant's use or enjoyment of the Premises.
Substantial Completion or Substantially Complete shall be as described in
---------------------- ----------------------
Section 4.05 hereof.
Tenant's Costs shall mean the aggregate of all costs and expenses related
--------------
to the Tenant Improvements in excess of the Allowance.
Tenant Improvements shall mean all improvements constructed or installed in
-------------------
or on the Premises in accordance with the Tenant Improvement Construction
Documents.
Tenant's Architect shall mean Smallwood, Reynolds, Stewart, Stewart &
------------------
Associates Architectural Services.
Tenant Improvement Costs shall mean the aggregate cost for the Tenant
------------------------
Improvements, approved by Tenant in accordance with Section 4.01 hereof,
together with the cost of any Change Orders as provided in Section 4.05
hereof.
Tenant Improvement Construction Documents shall mean the working drawings,
-----------------------------------------
specifications and finish schedules for the Tenant Improvements prepared by
Tenant's Architect and consented to by Landlord in accordance with Article
3 and Section 4.05 hereof.
<PAGE>
Tenant Space Plans shall mean the schematic presentation of the Premises
------------------
prepared by Tenant's Architect and consented to by Landlord in accordance
with Article 3 and Section 4.05 hereof.
Working Day shall mean the period from 9:00 A.M. until 5:00 P.M. on any
-----------
Monday through Friday, excluding federal and Georgia state holidays. By way
of illustration, any period described in this Work Agreement as expiring at
the end of the third (3rd) Working Day after receipt of a document, then:
(i) if receipt occurs at 9:01 A.M. on Monday, said period shall expire at
5:00 P.M. on the following Thursday; and (ii) if receipt occurs at 4:59
P.M. on Wednesday, the period shall expire at 5:00 P.M. on the following
Monday.
ARTICLE 2. BASE BUILDING CONDITION
-----------------------------------
Section 2.01 Base Building Improvements
- -----------------------------------------
The Premises shall be improved by Landlord at no cost to Tenant with the Base
Building Improvements set forth in this Article 2.
Landlord shall provide the following Base Building Improvements:
1. Building Standard heating, ventilation and air conditioning systems
installed in accordance with the Building Plans and Specifications,
including at least one air handling unit in a mechanical room on each
floor, with primary sheetmetal distribution loop and PIU/VAV units
installed in place. PIU units shall have the linear diffusers and flexible
ducts installed at perimeter.
2. Building Standard automatic fire sprinkler system throughout the Premises,
located as required by the applicable National Fire Protection Association
codes, affixed to the structure and ready for extension and/or relocation
so as to accommodate Tenant's partition plan. Landlord shall also furnish
and install the Building Standard fire protective alarm and voice
communications systems system (including speakers) in the public areas in
compliance with all applicable codes, which alarm and voice communications
system shall include provision for Tenant installation of additional
speakers, if required by Tenant's layout, throughout the floor.
3. One (1) Building Standard drinking fountain per floor.
4. Building Standard ladies' and men's toilets that include wall-mounted
fixtures, ceiling-mounted toilet partitions, vanity tops and tile floors
and wet walls.
5. One (1) Building Standard janitorial closet per floor.
6. Building Standard electrical equipment necessary to provide base Building
electrical service including the main electrical
<PAGE>
switch gear, buss duct, lighting/power panels and lighting control points
for public areas.
7. Building Standard full-height (unless otherwise specified by applicable
codes) doors of first quality, heavy-duty frames installed on all
mechanical, electrical, telephone and janitors' rooms, in addition to all
stairwells. Door closers and/or locking devices will be installed on core
area doors where required by applicable codes. There shall also be
Building Standard graphics and signage available in the core elements of
the Building.
8. Building Standard stairwell (painted hand rails, all exposed metal, walls
and ceilings) between all floors contained within the Premises.
9. Building Standard exit signs in the public areas of the Building as
required by code, including emergency power requirements for exiting.
ARTICLE 3. TENANT SPACE PLANS AND TENANT
-----------------------------------------
IMPROVEMENT PLANS AND SPECIFICATIONS
------------------------------------
Section 3.01 Schedule for Preparation
- --------------------------------------
Tenant shall contract with Tenant's Architect for the preparation of the Tenant
Space Plans and Tenant Improvement Construction Documents. Tenant Space Plans
and Tenant Improvement Construction Documents for the Tenant Improvements to be
constructed in the Premises shall be prepared by Tenant's Architect and
consented to by Landlord as provided hereinbelow. Such Tenant Space Plans shall
be prepared and sealed by an architect licensed in the State of Georgia.
1. As soon as reasonably possible (but in no event later than January 15,
1993), Tenant's Architect shall prepare and deliver to Landlord Tenant
Space Plans.
2. By the end of the third (3rd) full Working Day after receipt of the Tenant
Space Plans, Landlord shall review and resubmit the same to Tenant's
Architect, either with Landlord's consent or with Landlord's comments
thereto.
3. By the end of the third (3rd) full Working Day after receipt of Landlord's
comments to the Tenant Space Plans, Tenant's Architect shall resubmit to
Landlord the Tenant Space Plans with such changes or information as
requested by Landlord.
4. This process described in Section 3.01(1),(2) and (3) shall continue until
Landlord has satisfied itself that such proposed Tenant Space Plans are
acceptable, but once Tenant Space Plans
<PAGE>
have been resubmitted to Landlord, Landlord shall confine Landlord's
comments thereupon only to the changes made by Tenant or the changes
requested by Landlord to the prior submission of Tenant Space Plans, but
not made by Tenant. Once Landlord has satisfied itself that such proposed
Tenant Space Plans are acceptable, in accordance with the above, Landlord
shall so notify Tenant, and the Tenant Space Plans as so consented to by
Landlord shall constitute the final Tenant Space Plans. When Landlord gives
such final consent, Landlord shall notify Tenant of the amount of time
Landlord estimates, in Landlord's reasonable judgement, Substantial
Completion of Tenant Improvements within the portion of the Premises shown
on such Tenant Space Plans will require.
5. As soon as reasonably possible after final consent to the Tenant Space
Plans, Tenant's Architect shall prepare and deliver to Landlord the
prepared Tenant Improvement Construction Documents; provided, however that
the engineering drawings for the Premises shall be prepared by an engineer
engaged by Landlord.
6. By the end of the third (3rd) full Working Day after receipt of the Tenant
Improvement Construction Documents, Landlord shall review and resubmit the
same to Tenant's Architect, either with Landlord's consent or with
Landlord's comments thereto.
7. By the end of the third (3rd) full Working Day after receipt of Landlord's
comments to the Tenant Improvement Construction Documents, Tenant's
Architect shall resubmit to Landlord the Tenant Improvement Construction
Documents with such changes or information as requested by Landlord.
8. This process described in Section 3.01(5), (6) and (7) shall continue until
Landlord has satisfied itself that such proposed Tenant Improvement
Construction Documents are acceptable, but once Tenant Space Plans have
been resubmitted to Landlord, Landlord shall confine Landlord's comments
thereupon only to the changes made by Tenant or the changes requested by
Landlord to the prior submission of Tenant Improvement Construction
Document, but not made by Tenant. Once Landlord has satisfied itself that
such proposed Tenant Improvement Construction Documents are acceptable in
accordance with the above, Landlord shall so notify Tenant, and the Tenant
Improvement Construction Documents as so consented to by Landlord shall
constitute the final Tenant Improvement Construction Documents for the
Tenant Improvements.
9. Any approval or consent by Landlord of the Tenant Space Plans, the Tenant
Improvement Construction Documents, or other items submitted by Tenant or
Tenant's Architect (expressly excluding the engineering drawings) to and/or
reviewed by Landlord pursuant to this Work Agreement shall be deemed to be
strictly limited to an acknowledgment of approval or consent by Landlord
<PAGE>
thereto and shall not imply or be deemed to imply any representation or
warranty by Landlord that the design is safe or structurally sound or will
comply with any legal or governmental requirements. Any deficiency,
mistake or error in design (expressly excluding the engineering drawings),
although the same has the consent or approval of Landlord, shall be the
sole responsibility of Tenant and Tenant's Architect, and Tenant shall be
liable for all costs and expenses which may be incurred and all delays
suffered in connection with or resulting from any such deficiency, mistake
or error in design.
ARTICLE 4. CONSTRUCTION OF TENANT IMPROVEMENTS
-----------------------------------------------
Section 4.01 Timing of Drawings for Tenant Improvements
- --------------------------------------------------------
Attached hereto as Exhibit "C-2", by this reference incorporated herein, is a
-------------
proposed schedule (the "Tenant Improvement Schedule") of timing of the Tenant
Space Plans, Tenant Improvement Construction Documents and Tenant Improvements.
<PAGE>
Section 4.02 Pricing of Tenant Improvements
- --------------------------------------------
(a) Within the time periods specified above, Tenant shall obtain a price
proposal for the Tenant Improvements from Contractor. Should Tenant desire to
seek adjustments of such price proposal, Tenant shall work promptly with
Tenant's Architect and Contractor to alter the Tenant Improvement Construction
Documents necessary to cause the price quotation based thereon to be acceptable
to Tenant and to establish Tenant Improvement Costs.
(b) Included in the pricing for the Tenant Improvements shall be the cost of
those Building Standard Materials which Tenant is obligated to purchase under
this Work Agreement, which shall be purchased by Tenant in appropriate
quantities for the Premises, at the rates set out in Exhibit "C-1". The cost of
-------------
such Building Standard Materials shall be charged against the Allowance, to the
extent available.
(c) If Tenant has, as a part of any specifications for the Tenant Improvements,
designated Building Standard Materials or a standard that allows for equivalent
quality items and would permit the use of Building Standard Materials, Landlord
shall have the right, at Landlord's option and in Landlord's sole discretion, to
sell those Building Standard Materials to Tenant at the price given for such
item (on a unit cost basis) by the bidder selected to perform that portion of
the work which will be using the Building Standard Materials in question. Any
such costs shall be charged against the Allowance, to the extent available.
Section 4.03 Construction of Tenant Improvements.
- -------------------------------------------------
Tenant will enter into a Construction Contract with Contractor to construct
the Tenant Improvements. Occupancy by Tenant (or Contractor) merely for the
purpose of completing the Tenant Improvements shall not be deemed occupancy for
the purposes of Special Stipulation 4 of the Lease.
Section 4.04 Landlord Delay
- ----------------------------
If there is delay in achieving Substantial Completion of Tenant's Improvements
or any part thereof as a result of or in connection with Landlord's failure to
respond within any of the time periods in which Landlord is to respond herein,
to the extent such failure actually causes a delay such that the Certificate of
Occupancy for a floor is delivered after the Commencement Date for that floor,
then such shall be a "Landlord Delay", and there shall be a day of abatement of
Monthly Rental after the Commencement Date for the floor in question for each of
such day of Landlord Delay.
Section 4.05 Completion of Premises
- -------------------------------------
<PAGE>
A. The Premises shall be substantially completed, as to any floor of the
Premises, and Substantial Completion shall have occurred, as to any
floor of the Premises, upon the following:
(i) Tenant Improvements shall have been completed as to the floor of
the Premises in question, in substantial compliance with the
Construction Contract, except for Punch List Items; and
(ii) A certificate of occupancy for the floor of the Premises in
question has been obtained;
(iii) All access and facilities necessary to Tenant's occupancy of the
floor of the Premises in question have been installed and are in
good operating order.
provided however, that, if and to the extent compliance with any of the
conditions set forth in clauses (i), (ii) and (iii) above would have occurred
earlier but for any days of Landlord Delay, then compliance with such condition
shall be deemed to have occurred on the date it would have occurred but for
Landlord Delay.
B. Tenant may take and occupy the Premises over a time period. A
Commencement Date Agreement (with an Acceptance of Premises) in the form
attached hereto as Exhibit "C-3", and by this reference incorporated herein,
-------------
modified as appropriate for the floors of the Premises in question, shall be
executed by Landlord and Tenant at the time of occupancy of any floor by Tenant
hereunder. Tenant shall be deemed to have taken possession of a part of the
Premises for use and occupancy (herein called actual possession) when any
personnel of Tenant or of anyone claiming under or through Tenant shall first
occupy such part for the conduct of normal business. Tenant's actual possession
of any part or parts of the Premises prior to the Commencement Date shall be
subject to all of the obligations of this Lease, except that fixed rent
apportioned to the rentable area of each such part and prorated from the date of
taking actual possession shall be payable at the end of each calendar month
preceding the Commencement Date and, for the period directly following the
Commencement Date, on the Commencement Date.
Section 4.06 Changes in Plans and Specifications
- -------------------------------------------------
A. If at any time after Tenant Improvement Costs are determined, Tenant desires
to make any Change Order which is material in nature, Tenant shall submit for
pricing by Contractor working drawings and specifications for any and all such
desired Change Order, and send a copy thereof to Landlord. Landlord shall
respond to Tenant within five (5) Working Days of such request by Tenant. A
failure by Landlord to respond to any such Change Order notice shall be deemed
consent of the Change Order. Once the cost and the schedule change, if any, for
such Change Order has been approved by Tenant, all references in this Work
Agreement to the "Tenant Improvement
<PAGE>
Construction Documents" shall be to the Tenant Improvement Construction
Documents adopted pursuant to the procedures of Section 3, as changed and
modified pursuant to this Section 4.06, and all references to "Tenant
Improvement Costs" shall include the net aggregate approved cost for the Change
Orders as determined in this Section 4.06 (after taking into account any savings
affected by such Change Order).
B. Once the Change Order, the costs therefor and the schedule change associated
therewith have been approved and a form evidencing such approval executed by
Tenant and Tenant's Architect is delivered to Landlord, Tenant shall be deemed
to have given full authorization to cause Contractor to proceed with the work of
constructing and installing the Tenant Improvements in accordance with the
Tenant Improvement Construction Documents as modified and revised; provided that
any changes required by Tenant which constitute a material deviation from the
previously approved Tenant Improvement Construction Documents shall be effective
only after consent of Landlord, which consent shall not be unreasonably withheld
or delayed.
ARTICLE 5. PAYMENT OF COSTS
----------------------------
Section 5.01 Allowances for Tenant Improvement Costs
- -----------------------------------------------------
Landlord shall pay the Tenant Improvement Costs, up to, but not in excess of,
the Allowance. Included in the Allowance are funds for Tenant's use in the
process of preparing the Tenant Space Plans and other items as described in
Special Stipulation 6, and no separate allowance or funds shall be provided for
or made available to Tenant for such purpose. The Allowance is applicable to
Tenant Improvements, except to the extent any items are a part of the Base
Building Improvements described in Article II herein.
<PAGE>
Section 5.02 Tenant's Costs
- ----------------------------
Tenant shall pay Tenant Improvement Costs (if any) in excess of the
Allowance.
Landlord shall be entitled to receive a fee for Landlord's role in
reviewing Tenant Improvement Construction Documents, and in performing certain
other functions under this Work Agreement. Such fee shall be equal to
$27,860.00, and shall be payable by Tenant on or before August 1, 1993. Such
amount may be funded out of the Allowance.
Section 5.03 Funding of Allowance.
- ----------------------------------
(a) Tenant shall by the fifth (5th) calendar day of each calendar
month (or the close of the next business day thereafter if the fifth (5th)
calendar day falls on a weekend or holiday) deliver to Landlord an invoice for
the costs incurred with respect to the Tenant Improvements previously paid or
incurred by Tenant and, as to those Tenant Improvements which consist of all
Tenant fit-up and finish work (as opposed to other, moveable, non-permanent,
attached items), previously certified and approved by Tenant's Architect; and
(b) Landlord shall pay Tenant the amount of such invoice by the fifth
(5th) day of the following calendar month (or the close of the next business day
thereafter if the fifth (5th) calendar day falls on a weekend or holiday).
(c) At least Fifteen and No/100 Dollars ($15.00) per usable square
foot in the Premises shall be spent upon and allocated to the physical
components of and Construction Contract for the Tenant Improvements, and shall
be funded through the Allowance.
ARTICLE 6. CONTRACTOR REQUIREMENTS
-----------------------------------
A. The following shall be acceptable to Landlord as the "Contractor":
(i) KR - Witwer, Inc.
(ii) W.K. Barber Construction Corporation
(iii) Hardin Interior Services
(iv) Beers Construction Company
(v) Choate Interior Construction
(vi) Weich Tarkington
Tenant may, however, select another party as Contractor, subject to
Landlord's consent, such consent not to be unreasonably withheld or
delayed.
B. Tenant shall be responsible for preparing any bid instructions for
prospective contractors, shall receive and qualify any bids, and shall
determine the
<PAGE>
responsiveness of any bids received. Landlord shall have the right to
review such work and services.
ARTICLE 7. TENANT'S CONSTRUCTION OBLIGATIONS
--------------------------------------------
A. Tenant will improve the Premises in accordance with the Tenant Improvement
Construction Documents. Tenant shall construct the Premises in a good and
workmanlike manner.
B. Tenant shall require Contractor to purchase from and maintain, in a company
or companies licensed in and lawfully authorized to do business in Georgia
and to which Landlord has no reasonable objection, the insurance set forth
on Exhibit "C-4" attached hereto and incorporated herein by reference.
-------------
Landlord and The Landmarks Group General Corporation shall be named as
additional insureds under the All Risk Insurance and Builder's Risk
Insurance specified in Exhibit "C-4". All insurance required by this
-------------
Section may be carried by Tenant's contractors or subcontractors in whole
or in part under a blanket policy (or policies). Tenant shall require each
contractor to furnish to Landlord and Tenant evidence of the maintenance of
such insurance coverage, with assurances that it will not be cancelled
without thirty (30) days advance written notice to Tenant and Landlord.
C. Tenant shall use its best efforts to cause Contractor and all
subcontractors to abide by the Rules and Regulations for the Building
attached hereto as Exhibit "C-5" and incorporated herein by reference and
-------------
Tenant shall comply with such rules and regulations.
D. Tenant shall be responsible for cleaning and rubbish removal.
E. Tenant shall provide adequate protection for Tenant's materials, supplies,
tools, fixtures, equipment and other property.
F. Tenant shall obtain all governmental approvals, permits and other
governmental consents required to commence, perform and complete the Tenant
Improvements; cause the Tenant Improvements to comply with all applicable
laws; and maintain for inspection by Landlord copies of all receipts for
tax payments, and all such approvals, permits, inspection reports and other
governmental consents obtained by Tenant. Tenant shall provide Landlord
with the appropriate Certificate of Occupancy with respect to the Premises
and final lien waivers in the form attached hereto as Exhibit "C-6" and by
-------------
this reference incorporated herein, upon completion of the Tenant
Improvements.
<PAGE>
G. For a period of one year from the date of Substantial Completion of each
floor of the Premises the Tenant Improvements will be free from defects.
Therefore, if prior to the first anniversary of the date of Substantial
Completion of any floor any workmanship or material used in the Tenant
Improvements on such floor is defective, Tenant shall, prior to such first
anniversary of such date, cause such defective workmanship or material to
be appropriately corrected, repaired or replaced.
H. In no event shall anything in this Work Letter modify or abate Tenant's
obligation to pay Rent with respect to each floor of the Premises from and
after the Commencement Dates for each floor of the Premises, as Tenant's
obligation to pay Rent is in no way contingent upon, dependent upon or
otherwise tied to Substantial Completion.
I. Tenant shall promptly repair and restore, at its expense, any portion of
the Building damaged in the process of performing the Work.
ARTICLE 8. DESIGNATION OF REPRESENTATIVES
-----------------------------------------
Section 8.01 Landlord's Agent
- -----------------------------
For purposes of this Work Agreement, Landlord hereby designates Mr. Ron
Commander to act as its authorized representative on all matters relating to the
work contemplated in this Work Agreement, and any response from Mr. Ron
Commander as to matters contemplated under this Work Agreement shall be the
response of Landlord hereunder.
Section 8.02 Tenant's Agent
- ---------------------------
For purposes of this Work Agreement, Tenant hereby designates Farley Hunter to
act as its authorized representative on all matters relating to the work
contemplated in this Work Agreement, and any response from Farley Hunter as to
matters contemplated under this Work Agreement shall be the response of Tenant
hereunder.
Section 8.03 Mutual Cooperation
- -------------------------------
Landlord's Agent and Tenant's Agent shall cooperate with one another in
coordinating Substantial Completion of Tenant's Work, and in controlling and
minimizing the time and costs of the Tenant Improvements and Tenant Work.
ARTICLE 9. ADA COMPLIANCE
--------------------------
Section 9.01 Building
- ---------------------
<PAGE>
Tenant shall not be required to pay for any construction expenses which
Landlord is required to make under the Americans With Disabilities Act (the
"ADA"), to the extent such expenses are (i) under generally accepted accounting
practices, classified as capital expenditures, and (ii) not mandated by or as a
result of Tenant's use, occupancy of, or employment practices within the
Premises.
Section 9.02 Tenant's Improvements
- ----------------------------------
Tenant Improvements shall be and Tenant shall cause the Tenant Space Plans to be
in compliance with the ADA, but only to the extent that the ADA requirements are
applicable and mandatory and are not voluntary with respect to such Tenant
Improvements.
<PAGE>
CONCOURSE
EXHIBIT "D"
RULES AND REGULATIONS
The rules and regulations set forth in this Exhibit shall be and hereby are
made a part of the Lease to which they are attached. Whenever the term "Tenant"
is used in these rules and regulations, it shall be deemed to include Tenant,
its employees or agents and any other persons permitted by Tenant to occupy or
enter the Premises. The following rules and regulations may from time to time
be modified by Landlord in the manner set forth in Paragraph 29 of the Lease.
1. Obstruction. The sidewalks, entries, passages, corridors, halls,
-----------
lobbies, stairways, elevators and other common facilities of the Building shall
be controlled by Landlord and shall not be obstructed by Tenant or used for any
purposes other than ingress or egress to and from the Premises. Tenant shall
not place any item in any of such locations, whether or not any such item
constitutes an obstruction, without the prior written consent of Landlord.
Landlord shall have the right to remove any obstruction or any such item without
notice to Tenant and at the expense of Tenant. The floors, skylights and
windows that reflect or admit light into any place in said Building shall not be
covered or obstructed by Tenant.
2. Ordinary Business Hours. Whenever used in the Lease or in these rules
-----------------------
and regulations, the ordinary business hours of the Building shall be from 8:00
A.M. to 6:00 P.M. Monday through Friday and 8:00 A.M. to 1:00 P.M. Saturday of
each week, excluding the legal holidays of New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and any other
holidays observed by owners of comparable buildings.
3. Deliveries. Tenant shall insure that all deliveries of supplies to
----------
the Premises shall be made only upon the elevator designated by Landlord for
deliveries and only during the ordinary business hours of the Building. If any
person delivering supplies to Tenant damages the elevator or any other part of
the Building, Tenant shall pay to Landlord upon demand the amount required to
repair such damage.
4. Moving. Furniture and equipment shall be moved in or out of the
------
Building only upon the elevator designated by Landlord for deliveries and then
only during such reasonable hours and in such manner as may be prescribed by
Landlord. Landlord shall have the right to approve or disapprove the movers or
moving company employed by Tenant and Tenant shall cause such movers to use only
the loading facilities and elevator designated by Landlord. If Tenant's movers
damage the
<PAGE>
elevator or any other part of the Building, Tenant shall pay to Landlord upon
demand the amount required to repair such damage.
5. Heavy Articles. No safe or article the weight of which may, in the
--------------
reasonable opinion of Landlord, constitute a hazard or damage to the Building or
its equipment, shall be moved into the Premises. Landlord shall have the right
to designate the location of such articles in the Premises. Safes and other
heavy equipment, the weight of which will not constitute a hazard or damage the
Building or its equipment shall be moved into, from or about the Building only
during such hours and in such manner as shall be reasonably prescribed by
Landlord.
6. Nuisance. Tenant shall not do or permit anything to be done in the
--------
Premises, or bring or keep anything therein which would in any way constitute a
nuisance or waste, or obstruct or interfere with the rights of other tenants of
the Building, or in any way injure or annoy them, or conflict with the laws
relating to fire, or with any regulations of the fire department or with any
insurance policy upon the Building or any part thereof, or conflict with any of
the rules or ordinances of any governmental authority having jurisdiction over
the Building.
7. Building Security. Landlord may restrict access to and from the
-----------------
Premises and the Building outside of the ordinary business hours of the
Building. Landlord may require identification of persons entering and leaving
the Building during this period and, for this purpose, may issue Building passes
to tenants of the Building.
8. Pass Key. The janitor of the Building may at all times keep a pass
--------
key to the Premises, and he and other agents of Landlord shall at all reasonable
times be allowed admittance to the Premises.
9. Locks and Keys for Premises. No additional lock or locks shall be
---------------------------
placed by Tenant on any door in the Building and no existing lock shall be
changed unless the written consent of Landlord shall first have been obtained.
A reasonable number of keys to the Premises and to the toilet rooms, if locked
by Landlord, will be furnished by Landlord, and Tenant shall not have any
duplicate key made. At the termination of this tenancy Tenant shall promptly
return to Landlord all keys to the Building, Premises and toilet rooms.
10. Signs. Signs on Tenant's entrance doors will be provided for Tenant
-----
by Landlord, the cost of the signs to be charged to and paid for by Tenant. No
advertisement, sign or other notice shall be inscribed, painted or affixed on
any part of the outside or inside of the Building, except upon the interior
doors as permitted by Landlord, which advertisement, signs, or other notices
shall be of Building standard order, size and style, and at such places as shall
be designated by Landlord.
<PAGE>
11. Use of Water Fixtures. Water closets and other water fixtures shall
---------------------
not be used for any purpose other than that for which the same are intended, and
any damage resulting to the same from misuse on the part of Tenant shall be paid
for by Tenant. No person shall waste water by tying back or wedging the faucets
or in any other manner.
12. No Animals, Excessive Noise. No animals shall be allowed in the
---------------------------
offices, halls, corridors and elevators in the Building. No person shall
disturb the tenants of this or adjoining buildings or space by the use of any
radio or musical instrument or by the making of loud or improper noises.
13. Bicycles. Bicycles or other vehicles shall not be permitted anywhere
--------
inside or on the sidewalks outside of the Building, except in those areas
designated by Landlord for bicycle parking.
14. Trash. Tenant shall not allow anything to be placed on the outside of
-----
the Building, nor shall anything be thrown by Tenant out of the windows or
doors, or down the corridors, elevator shafts, or ventilating ducts or shafts of
the Building. All trash shall be placed in receptacles provided by Tenant on
the Premises or in any receptacles provided by Landlord for the Building.
15. Windows and Entrance Doors. Window shades, blinds or curtains of a
--------------------------
uniform Building standard, color and pattern only shall be used throughout the
Building to give uniform color exposure through exterior windows. Exterior
blinds shall remain in the lowered position at all times to provide uniform
exposure from the outside. Tenant entrance doors should be kept closed at all
times in accordance with the fire code.
16. Hazardous Operations and Items. Tenant shall not install or operate
------------------------------
any steam or gas engine or boiler, or carry on any hazardous business in the
Premises without Landlord's prior written consent, which consent may be withheld
in Landlord's absolute discretion. The use of oil, gas or inflammable liquids
for heating, lighting or any other purpose is expressly prohibited. Explosives
or other articles deemed extra hazardous shall not be brought into the Building.
17. Hours for Repairs, Maintenance and Alterations. Any repairs,
----------------------------------------------
maintenance and alterations required or permitted to be done by Tenant under the
Lease shall be done only during the ordinary business hours of the Building
unless Landlord shall have first consented in writing to such work being done
outside of such times. If Tenant desires to have such work done by Landlord's
employees on Saturdays, Sundays, holidays or weekdays outside of ordinary
business hours, Tenant shall pay the extra cost of such labor.
18. No Defacing of Premises. Except as permitted by Landlord, Tenant
-----------------------
shall not mark upon, cut, drill into, drive
<PAGE>
nails or screws into, or in any way deface the doors, walls, ceilings, or floors
of the Premises or of the Building, nor shall any connection be made to the
electric wires or electric fixtures without the consent in writing on each
occasion of Landlord or its agents. Any defacement, damage or injury to the
Premises or Building caused by Tenant shall be paid for by Tenant. Nothing
contained in this Paragraph shall prohibit Tenant from decorating the walls of
the Premises with such items as are normally found in first-class, commercial
office buildings, so long as such items are no heavier than twenty (20) pounds.
19. Limit on Equipment. Tenant shall not, without Landlord's prior
------------------
written consent, which consent shall not be unreasonably withheld or delayed,
install or operate any equipment which will consume in conjunction with Tenant's
other equipment throughout the Premises, an amount of electricity which exceeds
that provided for under the Lease. If Tenant requires any interior wiring such
as for a business machine, intercom, printing equipment or copying equipment,
such wiring shall be done by the electrician of the Building only at Tenant's
expense, and no outside wiring persons shall be allowed to do work of this kind
unless by the written consent of Landlord or its representatives. If
telegraphic or telephonic service is desired, the wiring for same shall be done
as directed by the electrician of the Building or by some other employee of
Landlord who may be instructed by the superintendent of the Building to
supervise same, and no boring or cutting for wiring shall be done unless
approved by Landlord or its representatives, as stated.
20. Solicitation. Landlord reserves the right to restrict, control or
------------
prohibit canvassing, soliciting and peddling within the Building. Tenant shall
not grant any concessions, licenses or permission for the sale or taking of
orders for food or services or merchandise in the Premises, nor install or
permit the installation or use of any machine or equipment for dispensing goods
or foods or beverages in the Building, nor permit the preparation, serving,
distribution or delivery of food or beverages in the Premises without the
approval of Landlord and in compliance with arrangements prescribed by Landlord.
Only persons approved in writing by Landlord shall be permitted to serve,
distribute, or deliver food and beverages within the Building, or to use the
elevators or public areas of the Building for that purpose.
21. Doors. Doors for entrance to and exit from the Premises shall be kept
-----
closed at all times, except when in use for entering or exiting the Premises.
22. Captions. The caption for each of these rules and regulations is
--------
added as a matter of convenience only and shall be considered of no effect in
the construction of any provision or provisions of these rules and regulations.
<PAGE>
23. No Smoking. Landlord shall prohibit smoking in any area other than
----------
certain designated smoking areas in the Building. Landlord shall notify Tenant
of such designated areas from time to time.
<PAGE>
EXHIBIT "E"
LEGAL DESCRIPTION - CORPORATE CENTER VI
---------------------------------------
All that tract or parcel of land lying and being in Land Lot 17, 17th District,
Fulton County, Georgia and being more particularly described as follows: To
reach the TRUE POINT OF BEGINNING, commence at the intersection of the former
southern Right-of-Way of Hammond Drive (variable Right-of-Way, but was 47.9 feet
from the centerline) extended and the former western Right-of-Way of Peachtree
Dunwoody Road (variable Right-of-Way, but was 41.7 feet from the centerline)
extended; thence along the former southern Right-of-Way of Hammond Drive North
86 (degrees) 36' 33" West a distance of 169.01 feet to a point; thence
continuing along said former Right-of-Way North 84 (degrees) 29' 08" West a
distance of 208.47 feet to a point; thence continuing along said former Right-
of-Way North 87 (degrees) 58' 03" West a distance of 344.41 feet to a point;
thence leaving said former Right-of-Way South 02 (degrees) 01' 32" West a
distance of 23.63 feet to a point on the existing southern Right-of-Way of
Hammond Drive (variable Right-of-Way); thence continuing along said existing
Right-of-Way North 87 (degrees) 59' 35" West a distance of 173.23 feet to a
point; thence continuing along said Right-of-Way North 74 (degrees) 42' 17" West
a distance of 51.80 feet to a point; thence continuing along said Right-of-Way
North 87 (degrees) 44' 16" West a distance of 120.26 feet to a point; thence
leaving said Right-of-Way South 02 (degrees) 13' 27" West a distance of 47.46
feet to a point; thence North 87 (degrees) 17' 49" West a distance of 340.88
feet to a point being the TRUE POINT OF BEGINNING; thence North 87 (degrees) 17'
49" West a distance of 259.25 feet to a point; thence South 00 (degrees) 28' 40"
East a distance of 115.99 feet to a point; thence along a curve to the right an
arc distance of 162.30 feet (said curve having a radius of 1301.00 feet, a chord
distance of 162.20 feet, and a chord bearing of South 03 (degrees) 05' 46" West)
to a point; thence South 06 (degrees) 40' 11" West a distance of 133.86 feet to
a point; thence along a curve to the left an arc distance of 156.81 feet (said
curve having a radius of 1000.00 feet, a chord distance of 156.65 feet, and a
chord bearing of South 02 (degrees) 10' 40" West) to a point; thence South 02
(degrees) 18' 52" East a distance of 22.60 feet to a point; thence South 87
(degrees) 41' 08" West a distance of 109.76 feet to a point; thence along a
curve to the left an arc distance of 217.01 feet (said curve having a radius of
3701.72 feet, a chord distance of 216.97 feet, and a chord bearing of South 02
(degrees) 46' 11" East) to a point; thence South 10 (degrees) 51' 39" East a
distance of 127.09 feet to a point; thence South 06 (degrees) 43' 25" East a
distance of 85.90 feet to a point; thence South 16 (degrees) 29' 48" East a
distance of 217.42 feet to a point; thence along a curve to the left an arc
distance of 835.81 feet (said curve having a radius of 941.74 feet, a chord
distance of 808.65 feet, and a chord bearing of South 48 (degrees) 01' 33" East)
to a point; thence North 17 (degrees) 25' 43" East a distance of 169.03 feet to
a point); thence along a curve to the right an arc distance of 46.09 feet (said
curve having a radius of 567.11 feet, a chord
<PAGE>
distance of 46.08 feet, and a chord bearing of North 66 (degrees) 51' 40" West)
to a point; thence North 56 (degrees) 26' 51" West a distance of 185.58 feet to
a point; thence along a curve to the right an arc distance of 108.18 feet (said
curve having a radius of 438.02 feet, a chord distance of 107.91 feet, and a
chord bearing of North 49 (degrees) 22' 19" West) to a point; thence North 42
(degrees) 17' 47" West a distance of 196.00 feet to a point; thence along a
curve to the right an arc distance of 344.02 feet (said curve having a radius of
438.02 feet, a chord distance of 335.25 feet, and a chord bearing of North 19
(degrees) 47' 47" West) to a point; thence North 02 (degrees) 42' 13" East a
distance of 10.50 feet to a point; thence North 87 (degrees) 17' 47" West a
distance of 52.06 feet to a point on the east line of Road Easement #4; thence
along said easement along a curve to the right an arc distance of 92.00 feet
(said curve having a radius of 835.47 feet, a chord distance of 91.95 feet, and
a chord bearing of North 09 (degrees) 07' 34" West) to a point; thence leaving
said Road Easement South 87 (degrees) 17' 47" East a distance of 70.91 feet to a
point; thence North 02 (degrees) 42' 13" East a distance of 127.59 feet to a
point; thence North 87 (degrees) 17' 47" West a distance of 10.00 feet to a
point; thence North 02 (degrees) 42' 13" East a distance of 10.00 feet to a
point; thence North 87 (degrees) 17' 47" West a distance of 55.80 feet to a
point; thence North 02 (degrees) 42' 13" East a distance of 244.00 feet to a
point; thence South 87 (degrees) 17' 47" East a distance of 129.80 feet to a
point; thence South 02 (degrees) 42' 13" West a distance of 244.00 feet to a
point; thence South 87 (degrees) 17' 47" East a distance of 174.00 feet to a
point; thence South 42 (degrees) 17' 47" East a distance of 75.00 feet to a
point; thence South 02 (degrees) 42' 13" West a distance of 20.42 feet to a
point; thence South 87 (degrees) 17' 47" East a distance of 101.33 feet to a
point; thence North 00 (degrees) 00' 00" East a distance of 211.03 feet to a
point; thence North 47 (degrees) 42' 11" East a distance of 105.51 feet to a
point; thence North 48 (degrees) 42' 12" East a distance of 103.91 feet to a
point; thence along a curve to the left an arc distance of 150.75 feet (said
curve having a radius of 1317.92 feet, a chord distance of 150.67 feet, and a
chord bearing of North 41 (degrees) 59' 43" East) to a point; thence along a
curve to the left an arc distance of 37.41 feet (said curve having a radius of
23.00 feet, a chord distance of 33.42 feet, and a chord bearing of North 07
(degrees) 52' 36" West) to a point; thence along a curve to the left an arc
distance of 44.69 feet (said curve having a radius of 78.00 feet, a chord
distance of 44.08 feet, and a chord bearing of North 70 (degrees) 53' 04" West)
to a point; thence North 87 (degrees) 17' 49" West a distance of 129.20 feet to
a point; thence South 02 (degrees) 42' 11" West a distance of 10.75 feet to a
point; thence North 87 (degrees) 17' 49" West a distance of 77.00 feet to a
point; thence South 02 (degrees) 42' 11" West a distance of 22.00 feet to a
point; thence North 87 (degrees) 17' 49" West a distance of 60.67 feet to a
point; thence North 02 (degrees) 42' 11" East a distance of 22.00 feet to a
point; thence North 87 (degrees) 17' 49" West a distance of 193.33 feet to a
point; thence North 02 (degrees) 42' 11" East a distance of 279.00 feet to a
point being the TRUE POINT OF BEGINNING, said tract containing 13.065 acres as
shown on As-Built Survey for Concourse VI Associates, JV Georgia One, Inc.,
Lawyers Title
<PAGE>
Insurance Corporation and Ticor Title Insurance Company of California, prepared
by Benchmark Engineering Corporation, bearing the certification of Dennis Huff,
Georgia Registered Land Surveyor No. 2337, dated September 12, 1991.
<PAGE>
EXHIBIT "F"
-----------
HVAC SPECIFICATIONS
-------------------
Year round air conditioning system capable of producing and maintaining the
following conditions throughout the Premises:
(i) Temperature - inside temperature to be maintained at:
-----------
Summer: 76 degrees FDB + 2 degrees FDB, subject to outside
-
temperature of 94 degrees FDB.
Winter: 72 degrees FDB + 2 degrees FDB, subject to outside
-
temperature of 17 degrees FDB.
<PAGE>
EXHIBIT "G"
-----------
CLEANING SPECIFICATIONS
-----------------------
I. LEASED PREMISES
---------------
A. Quality Assurance
-----------------
To assure that these Cleaning Specifications are being fulfilled, the
following inspections will be performed:
1. Once a week, all common areas of the Building, as well as one
randomly selected floor of the leased premises will be inspected
by the Building Manager and a representative of the Cleaning
Contractor.
2. Once a month, the entire leased premises will be inspected by a
representative of the Tenant, the Building Manager and a
representative of the Cleaning Contractor.
B. Office Areas (Nightly)
----------------------
1. Waste Baskets - Emptied and exterior spot cleaned with contents
removed to disposal area. Metal and plastic receptacles shall be
washed and sanitized on an annual basis. Wood receptacles shall
be sprayed with disinfectant and wiped clean on the same annual
schedule.
2. Furnish and replace plastic liners on all waste baskets as
needed.
3. Empty and wipe clean ash trays.
4. Vacuum all rugs and carpeted areas.
5. Dust furniture, files, fixtures and all low-reach areas.
6. Polish all glass furniture tops.
7. Remove marks and smudges from vertical surfaces.
8. Clean all water fountains.
9. Sweep all private stairways nightly; vacuum if carpeted.
10. Damp mop spillage in office and public areas as required.
11. Dust all telephones as necessary.
<PAGE>
12. Clean doors, door knobs, light switches and other door areas of
frequent usage.
C. Rest Rooms and Break Room Areas (Nightly)
-----------------------------------------
1. Damp Mop.
2. All ceramic surfaces of rest rooms will be mopped with a
germicide nightly and scrubbed with a germicide cleaner monthly.
All noncarpeted floors shall be swept nightly; all spots shall be
hand cleaned or the entire floor will be mopped as needed. Tile
floors shall be scrubbed and recoated as needed.
3. Clean all mirrors, bright work and enameled surfaces.
4. Wash and disinfect all fixtures.
5. Empty all receptacles and remove refuse for disposal.
6. Fill toilet tissue, soap and towel dispensers.
7. Clean flushometers and other metal work as needed.
8. Wash and polish all wall partitions, tile walls and enamel
surfaces from trim to floor as required.
9. Vacuum all louvers, ventilating grilles and dust light fixtures
as required.
D. Floors
------
1. Sweep with treated cloth; all spots shall be spot cleaned or
entire floor shall be mopped as needed on all ceramic tile, marble
and terrazzo floor on a nightly basis and scrubbed on a monthly
schedule.
2. Sweep vinyl composition floors and bases nightly. Spray shine and
buff tile floors monthly and strip as necessary, but not less
frequently than annually.
3. Carpet shall be vacuumed and spot cleaned as required.
Shampooing/steam cleaning, etc. will be performed outside the
scope of general office cleaning on an as-needed basis as
requested by the Tenant. The cost of shampooing/steaming, etc.
will be charged as additional services to the Tenant's account.
<PAGE>
E. Glass
-----
1. Clean all perimeter windows once a year inside and out. The
exterior of the perimeter windows will be cleaned twice per year.
Wipe clean all metal during this cleaning.
2. Interior glass shall be cleaned at least twice per year.
3. Clean glass entrance doors and adjacent glass panels nightly.
4. Clean partition glass and interior glass doors on a biweekly
basis. Spot clean, wash overall as often as needed.
F. High Dusting
------------
1. Dust all picture frames, charts, graphs, etc. monthly.
2. Vacuum dust all air-conditioning diffusers quarterly.
3. Dust the exterior surfaces of lightly fixtures quarterly.
4. Dust venetian blinds, as necessary; minimum quarterly.
G. Day Services
------------
1. Check all washrooms for toilet tissue and sanitary napkins
replacements.
2. Clean all Secure Areas as requested by Tenant and in the presence
of Tenant's representative.
It is understood that no services of the character herein
provided for shall be performed on Saturdays, Sundays or
holidays.
II. OTHER AREAS OF THE BUILDING
---------------------------
A. Entrance Lobby and Public Areas
-------------------------------
1. Sweep with treated cloth and spot clean by hand or mop as
necessary all lobby and entrance vestibule floors nightly. Spray
buff on a weekly schedule and wax, buff, apply sealer or finishes
as needed.
2. Clean sweep public, elevator lobby, and corridor flooring
nightly. Spray buff stone, ceramic tile, marble, or terrazzo
flooring once
<PAGE>
a week (machine scrub floors as necessary). Resilient flooring
shall be maintained once a week. Carpeting shall be vacuumed
nightly and spot cleaned as necessary.
3. Wipe down all metal surfaces within reach of attendant in the
lobby and Building exterior, and polish as required; once a month
at a minimum.
4. Dust all lobby and public corridor walls nightly and wash as
required.
5. High dust and wash all electrical and air-conditioning fixtures
at least quarterly in elevator lobbies, corridors, and entrance
lobby.
6. Dust mail depository. Telephone booths shall be swept daily and
glass cleaned nightly.
7. Clean cigarette urns, screen sand, and supply sand as necessary
on a daily basis.
8. Clean entrances and lobby doors at least once a day. On the first
rental floor, clean all elevator, stairway, utility and office
doors as necessary to remove dirt and finger marks.
9. Sweep or shake out all rubber mats and clean wool or nylon
runners nightly as necessary if used during the day.
B. Elevators
---------
1. Clean saddles, doors and frames of elevator lobby nightly.
2. Clean saddles and frames on floors above lobby once a week and
vacuum dirt from door tracts nightly.
3. Clean inside surfaces of elevator cabs nightly.
4. Clean elevator pits as needed.
5. Sweep and spot clean resilient floor in elevators nightly and
wash and wax as necessary.
NOTE: If carpets are installed, regular carpet care shall be provided
---- in lieu of Item 5. Spot clean elevator carpets as necessary,
including spares.
C. Public Stairwells
-----------------
<PAGE>
1. Check all public stairwells throughout the Building and keep in
clean condition; sweep daily and mop as necessary at least once a
week.
2. Inspect and keep clean fire hoses, extinguishers and similar
equipment and report any discrepancies to the Building Manager
---
and enter in logbook.
3. Dust all railings, etc. weekly and high dusting quarterly.
D. Building Service Areas
----------------------
1. Keep locker rooms and slop sink room in a neat, orderly and clean
condition at all times.
2. Sweep, blow, or hose all ramps, loading docks, truck areas, etc.
daily and scrub, if necessary, or as instructed by Building
Manager.
3. Clean mechanical equipment areas, electric, and telephone closets
as often as necessary or as instructed by Building Manager.
4. Keep elevator areas in a neat, clean condition at all times. Keep
wastepaper, cardboard, rubbish, etc. stored in an approved area.
Clean the floors, walls, doors, etc. as necessary.
E. Exterior Cleaning
-----------------
Maintain entire building exterior, including metalwork, entrance
doors, building trim, and exterior window frames and mullions. Clean
standpipes, sprinkler connections and hose bibs.
F. Roof Area
---------
Police roof on a weekly schedule and clean as often as necessary.
G. Sidewalk Area
-------------
1. Sweep sidewalk daily, weather permitting.
2. Remove snow and ice from all sidewalks as soon as possible.
3. Keep in clean condition and water as appropriate all planting
areas.
4. Remove chewing gum and other foreign matter from sidewalks on
sight.
<PAGE>
H. Duties of Day Personnel
-----------------------
1. Day Porter(s)
It is understood that the Day Porter will attend to the Building
on a daily, part-time schedule. His work day will be scheduled
with similar responsibilities at other buildings. The following
is a general list of duties:
a. Continually check all public areas, picking up all foreign
matter on sight.
b. Clean all planters of litter daily.
c. Water all planting areas in accordance with the watering
schedule.
d. Remove all chewing gum from sidewalks on sight.
e. Check all roofs on a weekly schedule and clean roof as often
as necessary.
f. Sweep lobby as required, five (5) days a week, using an
approved chemically treated cloth.
g. Empty and strain all cigarette urns; material to be supplied
by Landlord.
h. Vacuum clean elevator cab floors once a day and on an as-
needed basis.
i. Wipe clean and remove finger marks from all metal bright
works throughout interior of lobby daily.
j. Sweep or blow sidewalks, plaza, ramps, loading docks,
trucking areas, etc. daily and scrub as necessary.
k. Lay down and remove lobby runners as necessary.
l. Sweep and dust exterior staircases daily.
m. Wash exterior staircases on an as-needed basis.
n. Sweep and wash the flooring in the chiller room, pump room,
etc. as required.
o. Check all men's lavatories twice daily.
p. Fill all dispensers as required.
<PAGE>
q. Clean Secure Areas as requested by Tenant and in the
presence of Tenant's representative.
2. Day Matron(s)
It is understood that the Day Matron will attend to the subject
Building on a daily, part-time basis. Her work day will be
scheduled with similar responsibilities at other buildings. The
following is a general list of duties:
a. Police all ladies' lavatories twice daily.
b. Fill toilet tissue and towel dispensers as required.
c. Service sanitary napkins dispensers with sanitary napkins
furnished by Landlord.
d. Collect coins from sanitary napkin dispensers and turn
proceeds over to the duly authorized representative of the
Landlord.
e. Wipe clean all sinks, glass and powder shelves twice daily.
I. Window Cleaning
---------------
1. Clean all windows on the outside and inside from the main floor
to the roof, at least once a year as directed by the Building
Manager. Wipe clean window frames and associated metal at the
same time.
2. Clean entrance doors daily.
3. Clean directory glass daily.
4. Clean all glass within the attendants' reach on first-floor lobby
areas on an as-needed basis.
J. Pest Control
------------
1. The public spaces throughout the Building shall be kept under
pest control treatment. The public spaces throughout the Building
will be treated on a monthly basis or as required to control
pests.
2. The leased premises shall be treated as required to control
pests.
<PAGE>
3. All service shall be rendered by licensed operators with special
emergency calls on request. There shall be no charge for
emergency calls unless the call relates to paper mites (for which
there shall be an extra charge).
<PAGE>
EXHIBIT "H"
-----------
REFUSAL SPACE
To Be Attached
<PAGE>
EXHIBIT 10.48
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "First Amendment"), is made
this __ day of January, 1993, by and between CONCOURSE VI ASSOCIATES (as
"Landlord" ) and AMERICA'S FAVORITE CHICKEN COMPANY (as "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant did enter that certain Lease Agreement (the
"Original Lease"), dated as of __, 1992.
WHEREAS, Landlord and Tenant desire to modify and amend the Original Lease,
in the manner and for the purposes herein set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
and for other good and valuable consideration, paid by the parties hereto to one
another, the receipt and sufficiency of which are acknowledged by the parties
hereto, the parties hereto hereby covenant and agree as follows:
1. Reimbursement for Increases in Operating Expenses and Taxes.
-----------------------------------------------------------
(a) With respect to Paragraph 3(g) of the Original Lease, Tenant hereby agrees
that it must elect whether or not to review or audit Landlord's records of
Operating Costs by giving notice to Landlord of such election within sixty (60)
days of Tenant's receipt of the operating statement described in said Paragraph
3 of the Original Lease.
(b) With respect to Special Stipulation 12(c) of the Original Lease,
Landlord and Tenant agree that Landlord shall only be obligated to keep and
retain the books and records related to Operating Costs for the Building for a
period of three (3) years after the end of the calendar year for which those
Operating Costs relate.
2. Tenant's Care of the Premises. With respect to Paragraph 7(e)
-----------------------------
of the Original Lease, the phrase "if any", shall be inserted after the phrase
"obligations".
3. Services. With respect to Paragraph 8(a)(iii) of the Original
--------
Lease, the word "necessities" is hereby deleted, and the phrase "items as
Landlord deems necessary, in Landlord's reasonable judgment, from time to
time" is inserted in lieu thereof.
4. Destruction or Damage to Premises. With respect to Paragraph 9(a)
---------------------------------
of the Original Lease, Landlord and Tenant hereby covenant and agree that if
Landlord has indicated that it will substantially complete the restoration of
the Premises within one hundred eighty (180) days of the date of damage or
destruction and, on the basis of said statement, Tenant has elected to not
cancel the Lease, but, at the end of the one hundred eightieth (180th) day after
the damage or destruction in question, the Premises are not substantially
completed, but are under construction and could be completed within thirty (30)
days thereafter with reasonable diligence, then Landlord shall have an
additional thirty (30) days to so substantially complete the work in the
Premises, and an additional
<PAGE>
thirty (30) days shall pass, prior to Tenant having the right to terminate the
Lease arising out of Landlord's failure to so substantially complete the
Premises within the time period indicated.
5. Hazardous Wastes. With respect to Paragraph 42 of the Original
----------------
Lease, Landlord and Tenant agree that nothing in said Paragraph 42 shall
preclude or prohibit Landlord from charging any testing related or with respect
to a release of hazardous materials as an Operating Cost of the Building, to the
extent such cost would be chargeable as an Operating Cost under the Original
Lease.
6. Condemnation. With respect to Special Stipulation 18(b) of the
------------
Original Lease, Tenant shall only be able to terminate the Lease if the taking
specified in said Special Stipulation 18(b) materially interferes with Tenant's
ability to conduct its business from the Premises, as such interference is
determined in Tenant's reasonable judgment.
7. Interruption of Services. With respect to Special Stipulation 19 of
------------------------
the Original Lease, after the word "Landlord" in the 7th line of said paragraph,
the phrase "and Tenant has given notice to Landlord of the existence and effect
of such interruption" shall be inserted in and made a part of said provision.
8. No Other Modifications. Except as expressly modified by the
----------------------
terms and conditions of this First Amendment, the Original Lease remains
unmodified and of full force and effect.
9. Transfers, Successors and Assigns. This First Amendment shall
---------------------------------
inure to the benefit of and shall be binding upon Landlord, Tenant and their
respective transfers, successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be
executed under seal and delivered, on the day and year first above written.
"Landlord"
Concourse VI Associates, a Georgia general partnership
By: Landmark Forty-Two, L.P., a Georgia
limited partnership, as the managing
general partner of Concourse VI
Associates
By: The Landmarks Group Properties
Corporation, a Georgia corporation, as
the sole general partner of Landmark
Forty-Two, L.P.
By: /s/
-------------------------------------
Its:
---------------------------------
<PAGE>
By: /s/
-------------------------------------
Its:
---------------------------------
(CORPORATE SEAL)
"Tenant"
America's Favorite Chicken
Company, a Minnesota corporation
By: /s/
-------------------------------------
Its:
---------------------------------
Attest: /s/
---------------------------------
Its:
-----------------------------
(CORPORATE SEAL)
<PAGE>
EXHIBIT 10.49
SECOND AMENDMENT TO LEASE AGREEMENT
-----------------------------------
THIS SECOND AMENDMENT TO LEASE AGREEMENT (the "Second Amendment"), is made
this 28th day of June, 1993, by and between CONCOURSE VI ASSOCIATES (as
"Landlord") and AMERICA'S FAVORITE CHICKEN COMPANY (as "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant did enter into that certain Lease Agreement
(the "Original Lease"), dated as of December 31, 1992, for certain space more
particularly described in the Original Lease (the "Premises") in a building
known as Concourse Corporate Center VI (the "Building").
WHEREAS, Landlord and Tenant did enter into that certain First Amendment to
Lease Agreement (the "First Amendment"), dated as of January ___, 1993.
WHEREAS, the Original Lease, as modified by the First Amendment, is herein
sometimes collectively referred to as the "Lease."
WHEREAS, Landlord and Tenant desire to modify and amend the Lease, in the
manner and for the purposes herein set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, and for Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, paid by the parties hereto to one another, the receipt and
sufficiency of which are acknowledged by the parties hereto, the parties hereto
hereby covenant and agree as follows:
1. Option. In addition to, and not in lieu of, the rights granted to
------
Tenant in Special Stipulation 11 of the Original Lease, Tenant is hereby granted
an option to lease, and Landlord hereby grants Tenant an option to lease, that
certain area on the fifteenth (15th) floor of the Building, in the area shown on
Exhibit "A", attached hereto and by this reference incorporated herein (the
- -----------
"Option Space"). Provided this Lease is then in full force and
<PAGE>
effect and Tenant is in full compliance with the terms and conditions of this
Lease, then beginning on the Commencement Date and continuing for one (1) year
thereafter, Tenant shall have the option to lease the Option Space, on and
subject to the following terms and conditions:
(a) Tenant shall exercise its option to lease the Option Space by
giving Landlord written notice thereof at any time prior to twelve (12) months
after the Commencement Date. If Tenant fails to give such notice within said
period, Tenant shall have no further right to lease the Option Space.
(b) The base rent for the Option Space shall be at the same rate of
Monthly Rental (on a per square foot per annum basis) then being paid by Tenant
for the Premises, which rate of Monthly Rental shall increase as provided in the
Lease.
(c) The Rent for the Option Space shall commence and be due and
payable from Tenant on the earliest to occur of (i) the date Tenant first
occupies the Option Space, (ii) ninety (90) days after Tenant gives the notice
to Landlord specified in Paragraph 1(a) above, or (iii) twelve (12) months after
the Commencement Date (it being acknowledged and agreed to that Tenant may have
the obligation to commence paying Rent on the Option Space prior to the
completion or Tenant's occupancy thereof).
(d) Landlord shall cause the tenant fit-up and finish work in the
Option Space to be completed in accordance with plans and specifications to be
agreed upon by Landlord and Tenant, in their respective reasonable judgment, and
shall provide an allowance for the tenant fit-up and finish work in the Option
Space equal to $41.50 per usable square foot within the Option Space multiplied
by a fraction, the numerator of which shall be the number of months left in the
initial ten (10) year Term after Tenant commences paying rent for the Option
Space, and the denominator of which shall be one hundred twenty (120) (the
"Option Space Allowance"). To the extent the costs to complete the tenant fit-
up and finish work in the Option Space are greater than the Option Space
Allowance, then the amount of such excess shall be paid by Tenant to Landlord on
demand.
(e) Except as expressly set forth to the contrary herein, all other
terms and conditions of this Lease shall apply to the Option Space, and from and
after the date Tenant elects to lease the Option Space, the Option Space shall
be and shall be deemed to be a part of the Premises.
<PAGE>
2. Rights as to First Refusal Space. (a) In addition to and not in lieu
--------------------------------
of anything contained to the contrary in the Original Lease, if, with respect to
the 15th floor, upon which Tenant has a right-of-first-refusal under the Lease,
Tenant does not elect to lease space offered to Tenant under such a right-of-
first-refusal, then as long as no Event of Default of the part of Tenant then
exists, such right shall exist after the end of the term of the third-party
lease (including any renewals or extensions thereof, whether a part of such
lease or not) for which Tenant has elected not to exercise its right of first
refusal.
(b) In addition to and not in lieu of anything contained to the
contrary in the Lease, if Tenant, with respect to the 15th floor of the
Building, does elect to lease space upon and after an offer, then Tenant shall
lease, as a part of such election, for the first six (6) Lease Years, the
greater of (i) the amount of square footage to be leased under the third-party
- -------
offer and lease, or (ii) the lesser of (A) twelve thousand five hundred (12,500)
------
rentable square feet, or (B) the remainder of the 15th floor of the Building not
then leased by Tenant, and thereafter, the greater of (i) the amount of square
-------
footage to be leased under the third-party offer and lease, or (ii) the
remainder of the 15th floor of the Building not then leased by Tenant.
3. Additional Space Leased. (a) Subject to the terms and conditions of
-----------------------
Paragraph 3(b) herein, Tenant hereby agrees to lease from Landlord, and Landlord
hereby agrees to lease to Tenant, certain space on the fifth (5th) floor of the
Building, consisting of one thousand three hundred ninety-five (1,395) usable
square feet and one thousand six hundred eighteen (1,618) rentable square feet,
more or less, as more particularly shown on Exhibit "B", attached hereto and by
-----------
this reference incorporated herein (the "5th Floor Space"). Such 5th Floor
Space shall be leased subject to and in accordance with the following terms and
conditions:
(i) With respect to the relocation rights of Landlord, which do exist
as to the 5th Floor Space, any such relocation of the 5th Floor Space shall be
no further from a freight elevator than the 5th Floor Space is. Landlord shall
attempt to achieve such relocation of the 5th Floor Space on any floor below the
5th Floor Space, but there shall be no requirement that such space be below the
5th Floor Space in the Building.
<PAGE>
(ii) (I) Tenant may use the 5th Floor Space as a laboratory kitchen;
provided, however, that Tenant shall take all precautions to ensure (A) that no
odors are emitted from the Premises; (B) that no increases in premiums, dues or
the like for insurance are due or demanded as a result of or in connection with
such activity; (C) that there is no impact or effect on the availability of all
appropriate insurance coverage on the Building or the Premises as a result of or
in connection with such use; (D) that all waste or refuse associated with any
such use is disposed of in a safe and lawful manner, acceptable to Landlord in
Landlord's sole discretion; (E) that there is no danger to life or property
associated with such activity and use; and (F) that only customary Building
services are required for the 5th Floor Space.
(II) Tenant shall keep clean at all times the area and corridor
between the freight elevator and the 5th Floor Space, and such obligation may
include the requirement that such area and corridor be cleaned through or under
Tenant more than once per day. If Tenant for any reason fails to so clean the
area and corridor to the satisfaction of Landlord, then Landlord may elect, at
its option and in its sole discretion, to clean such area and corridor itself,
and charge Tenant the costs thereof (which Tenant shall pay within fifteen (15)
days after Landlord's demand therefor); provided, however, that prior to
Landlord so undertaking such clean-up activities, Landlord shall provide notice
to Tenant of Landlord's dissatisfaction with the cleaning being provided by
Tenant, and Tenant shall have five (5) days after such notice from Landlord to
clean-up the aforesaid area and corridor to Landlord's satisfaction, and if
Landlord is so satisfied, then Landlord shall not exercise such right unless and
until Landlord is once again dissatisfied with such cleaning being done by
Tenant.
(iii) Landlord shall cause the tenant fit-up and finish work in the
5th Floor Space to be completed in accordance with plans and specifications to
be agreed upon by Landlord and Tenant, in their respective reasonable judgment,
and shall provide an allowance for the tenant fit-up and finish work in the 5th
Floor Space equal to $41.50 per usable square foot within the 5th Floor Space
multiplied by a fraction, the numerator of which shall be the number of months
left in the initial ten (10) year Term after Tenant commences paying rent for
the 5th Floor Space, and the denominator of which shall be one hundred twenty
(120) (the "5th Floor Allowance"). To the extent the costs to complete the
tenant fit-up and finish work in the 5th Floor Space are greater than the 5th
Floor Space Allowance, then the amount of such excess shall be paid by Tenant to
Landlord on demand.
(iv) All other terms and conditions which apply to the Premises and
which are not expressly addressed in this Second Amendment shall apply to the
5th Floor Space, and from and after the date of this Second Amendment, the 5th
Floor Space shall be and shall be deemed to be a part of the Premises.
(b) Tenant's obligation to lease the Fifth (5th) Floor Space is
contingent upon Tenant and Landlord entering into a lease for a restaurant of
Tenant's in the Building (the "Restaurant Lease"). If Landlord and Tenant have
not executed and delivered the Restaurant Lease on or before June 1, 1993, then
this entire Paragraph 3 shall be null, void, and of no force and effect.
Nothing contained herein shall mean or be deemed to mean that either Tenant of
Landlord shall have the right to terminate the lease as to the Fifth (5th) Floor
Space if the Restaurant Lease is terminated after it is originally executed and
delivered.
<PAGE>
4. Tenant's Right to Install Satellite Antenna Module
--------------------------------------------------
(a) Subject to the terms and conditions as described below, Tenant
shall have the right to place on the roof of the Building a satellite antenna
module (the "Antenna") and related hardware and cabling, connected to the
Premises, provided Tenant obtains and pays for all permits and license fees
which may be required to be paid for the erection and maintenance of any and all
such Antenna. The right of Tenant to install such Antenna is expressly
conditioned upon Tenant's Antenna not interfering with any antennae presently
existing on or within the Concourse Project, and Tenant hereby covenants and
agrees that this Antenna will not so interfere.
(b) Tenant shall furnish detailed plans and specifications for such
Antenna systems to Landlord for Landlord's consent, which consent shall not be
unreasonably withheld, conditioned or delayed, provided Landlord may condition
its consent by requiring that such systems be installed in the least conspicuous
of all acceptable locations on which the systems might be located and that all
components and elements thereof (except the terminal devices and structures) be
concealed from view from within and without the Building. Upon the giving of
such consent, such systems shall be installed, at Tenant's expense, by a
contractor selected by Tenant and approved by Landlord, such approval not to be
unreasonably withheld, conditioned or delayed. In the installation of such
systems, Tenant shall comply with all applicable laws, and keep the Premises,
Building and Property free and clear from liens arising from or related to
Tenant's installation. Tenant shall be entitled to use such portions of the
Building as may be reasonably necessary for the installation, operation and
maintenance of the Antenna, and Tenant shall have reasonable access to such
portions of the Building at all times throughout the term of this Lease for such
purposes; provided however, that except for the roof, any cables, conduits or
other physical connections between such Antenna and the Premises shall be
concealed underground or within permanent walls, floors, columns and ceilings of
the Building and in the shafts of the Building provided for such installations,
not damaging the appearance of the Building or reducing the usable or rentable
space of the Building; and provided further, that except for the roof and
Premises, any installation or maintenance work performed by Tenant or at
Tenant's direction shall be performed without unreasonably interfering with
Landlord's or any other tenant's use of the Building, and upon completion of
such installation and maintenance (initially and from time to time) Tenant shall
restore such portions of the Building to a condition reasonably comparable to
that existing prior to such installation or maintenance.
(c) Tenant shall be responsible for procuring whatever licenses or
permits may be required for the use of such systems or operation of any
equipment served thereby, and Landlord shall cooperate with Tenant, at Tenant's
expense, in procuring such licenses or permits, to the extent required by
applicable laws. Tenant shall also be responsible for procuring insurance for
claims arising out of or with respect to said insurance or in the alternative
for providing that all of Tenant's existing insurance policies apply to and
cover the Antenna. Tenant shall provide proof to Landlord of such insurance
coverage (whichever applies).
<PAGE>
(d) Landlord makes no warranties whatsoever as to the permissibility
of such systems under applicable laws. Tenant's Antenna shall not constitute a
nuisance, or unreasonably interfere with the operations of other tenant of the
Building or with the normal use of the area surrounding the Building by
occupants thereof.
(e) Upon termination or expiration of this Lease, Tenant shall remove
the Antenna installed by it pursuant to this Paragraph, at its expense, and
shall repair and restore the Building to a condition comparable to that existing
prior to such installation, normal wear and tear excepted. Landlord reserves
the right to relocate said Antenna at Landlord's sole expense, provided such
relocation, in the sole reasonable opinion of Tenant, shall have no adverse
impact on the operations of such Antenna.
(f) Tenant shall pay to Landlord, at the same time Tenant pays Rent to
Landlord under the Lease, the sum of Five Hundred and No/100 Dollars ($500.00)
per month, for each and every month in which said Antenna is on or connected to
the Building.
5. Additional Storage Space. In addition to the storage space provided
------------------------
and leased to Tenant in the Lease, Landlord hereby rents and leases to Tenant,
and Tenant hereby rents and leases from Landlord, six hundred seventy-one (671)
square feet (more or less) of basement space in the Building (the "Additional
Storage Space"), as more particularly shown on Exhibit "C" attached hereto and
-----------
by this reference incorporated herein, upon the same terms and conditions as
contained in the Lease, except as follows:
<PAGE>
(i) the Monthly Rental for the Additional Storage Space shall be Five Hundred
Fifty-Nine and 17/100 Dollars ($559.17) (based on $10.00 per square foot per
year, and adjusted on the basis of the exact number of square feet within and a
part of the Additional Storage Space).
(ii) Tenant shall not be obligated to pay "Operating Costs" (as that term is
herein defined) with respect to the Additional Storage Space;
(iii) Tenant may use the Additional Storage Space only as a storage area and
people may not be assigned to work therein on a full time basis;
(iv) Landlord shall provide only the following services to the Additional
----
Storage Space:
(A) electricity;
(B) elevator access;
(C) janitor service for common areas; and
(D) climate control.
(v) The Additional Storage Space shall not be included in determining the
number of parking spaces Landlord must provide to Tenant.
6. Commencement Date. Special Stipulation #4 of the Original Lease is
-----------------
amended by deleting from the first sentence of said Special
<PAGE>
Stipulation the date "August 1, 1993" and substituting in lieu thereof the date
"June 1, 1993", such that the "Commencement Date" for the Lease shall be June 1,
1993.
7. Work Agreement Fee. Section 5.02 of Exhibit "C" of the Original Lease
------------------ -----------
is amended by deleting from the second sentence of the second paragraph of said
section the date "August 1, 1993" and substituting in lieu thereof the date
"June 1, 1993", such that Landlord's fee of $27,860.00 for reviewing Tenant
Improvement Construction Documents and performing certain other functions under
the Work Agreement shall by payable by Tenant on or before June 1, 1993.
8. Operating Costs; Original Lease. Landlord and Tenant hereby agree
-------------------------------
that with respect to the Original Lease, that it was the intent that the Initial
Operating Costs of 47.40 per rentable square foot per annum be a part of and
included withinn the Monthly Rental, and that the obligations of Tenant to pay
Operating Costs shall only be to pay Tenant's Share of Operating costs in excess
of the Initial Operating Costs. To the extent that Paragraph 3 and Special
Stipulation No. 1 of the Original lease are inconsistent with this provision,
then Paragraph 3 and Special Stipulation No. 1 of the Original Lease are deemed
modified.
9. No Other Modifications. Except as expressly modified by this Second
----------------------
Amendment, the Lease remains unmodified and of no further force or effect.
10. Transfers, Successors and Assigns. This Second Amendment shall inure
---------------------------------
to the benefit of and shall be binding upon Landlord, Tenant, and their
respective transfers, successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be
executed under seal and delivered, on the day and year first above written.
"LANDLORD"
CONCOURSE VI ASSOCIATES, a Georgia
general partnership
By: Landmark Forty-Two, L.P., a Georgia
limited partnership, as the
<PAGE>
managing general partner of
Concourse VI Associates
By: The Landmarks Group Properties
Corporation, a Georgia corporation,
as the sole general partner of
Landmark Forty-Two, L.P.
By: /s/
----------------------------------
Its:
------------------------------
By: /s/
----------------------------------
Its:
------------------------------
(CORPORATE SEAL)
[Signatures continued on next page]
<PAGE>
"TENANT"
AMERICA'S FAVORITE CHICKEN COMPANY,
a Minnesota corporation
By: /s/
---------------------------------
Its:
-----------------------------
By: /s/
---------------------------------
Its:
-----------------------------
(CORPORATE SEAL)
<PAGE>
EXHIBIT 10.50
THIRD AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS THIRD AMENDMENT TO LEASE AGREEMENT (the "Third Amendment"), is made
this 17th day of June, 1994, by and between CONCOURSE VI ASSOCIATES (as
"Landlord") and AMERICA'S FAVORITE CHICKEN COMPANY (as "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant did enter into that certain Lease Agreement
(the "Original Lease"), dated as of December 31, 1992, for certain space more
particularly described in the Original Lease (the "Premises") in a building
known as Concourse Corporate Center VI (the "Building").
WHEREAS, Landlord and Tenant did enter into that certain First Amendment to
Lease Agreement (the "First Amendment"), dated as of January ___, 1993.
WHEREAS, Landlord and Tenant did enter into that certain Second Amendment
to Lease Agreement (the "Second Amendment"), dated as of June ____, 1993.
WHEREAS, the Original Lease, as modified by the First Amendment and the
Second Amendment, is herein sometimes collectively referred to as the "Lease."
WHEREAS, Landlord and Tenant desire to modify and amend the Lease, in the
manner and for the purposes herein set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, and for Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, paid by the parties hereto to one another, the receipt and
sufficiency of which are acknowledged by the parties hereto, the parties hereto
hereby covenant and agree as follows:
1. 15th Floor Option Space. Tenant hereby leases and rents from
-----------------------
Landlord, and Landlord hereby leases and rents to Tenant, that certain area on
the fifteenth (15th) floor of the Building, in the area shown on Exhibit "A",
-----------
attached hereto and by this reference incorporated herein (the "15th Floor
Option Space"), containing 10,561 rentable square feet, more or less, in full
compliance with the terms and conditions of the
<PAGE>
Lease. This 15th Floor Option Space is leased by Tenant on and subject to the
following terms and conditions:
(a) The base rent for the 15th Floor Option Space shall be at the same
rate of Monthly Rental (on a per square foot per annum basis) then being paid by
Tenant for the Premises, which rate of Monthly Rental shall increase as provided
in the Lease.
(b) The Rent for the 15th Floor Option Space shall commence and be due
and payable from Tenant on and from and after the later date to occur of (i)
October 1, 1994, or (ii) the date the tenant fit-up and finish work in the 15th
Floor Option Space is Substantially Complete; provided, however, that the
following provisions and dates shall apply to the Substantial Completion of the
tenant fit-up and finish work in the 15th Floor Option Space:
(i) Hardin Interior Services shall be Contractor with respect to
the 15th Floor Option Space;
(ii) Tenant and Landlord shall comply with the following schedule
with respect to the 15th Floor Option Space:
1. Tenant has received a draft of the plans and
specifications for the tenant fit-up and finish work in the 15th
Floor Option Space on or before June 24, 1994;
2. Tenant shall have made all comments to and approved the
plans and specifications for the 15th Floor Option Space within
ten (10) days after the delivery of said plans and
specifications;
3. Tenant shall diligently pursue the completion and
acceptance of the pricing drawings for the tenant fit-up and
finish work with respect to the 15th Floor Option Space, and
shall have executed a construction contract with Contractor for
the tenant fit-up and finish work for the 15th Floor Option Space
on or before July 30, 1994;
4. Such construction contract shall provide for a
completion date of on or before October 1, 1994;
(iii) Landlord, or its managing agent, shall supervise all such
work, and shall be paid a fee by Tenant for supervising such tenant
fit-up and finish work of two percent (2%) of the costs to complete
the tenant fit-up and finish work in the 15th Floor Option Space
(including funding for the furniture, fixtures and equipment for the
15th Floor Option Space), to the extent those costs exceed Twenty and
NO/100 Dollars ($20.00) per usable square foot in the 15th Floor
Option Space. Such fee shall be payable upon the Substantial
Completion of the tenant fit-up and finish work for said 15th Floor
Option Space.
<PAGE>
(c) (i) Tenant shall cause the tenant fit-up and finish work in the
15th Floor Option Space to be completed in accordance with plans and
specifications to be agreed upon by Landlord and Tenant, in their respective
reasonable judgment, and shall provide an allowance for the tenant fit-up and
finish work in the 15th Floor Option Space equal to $35.97 per usable square
foot within the 15th Floor Option Space (this figure is determined by
multiplying the original tenant improvement allowance of $41.50 by a fraction,
the numerator of which shall be one hundred four (104), and the denominator of
which shall be one hundred twenty (120)) (the "15th Floor Option Space
Allowance"). Tenant may use such allowance to purchase furniture, fixtures and
equipment for the 15th Floor Option Space.
(ii) To the extent the costs to complete the tenant fit-up and
finish work in the 15th Floor Option Space are greater than the 15th Floor
Option Space Allowance, then the amount of such excess shall be paid by Tenant
to Landlord within ten (10) days after the demand therefor. If the costs to
complete the tenant fit-up and finish work in the 15th Floor Option Space are
less than the 15th Floor Option Space Allowance, then, after all work is
completed and all appropriate or necessary back-up data and lien waivers for
such work are received by Landlord, the difference shall be paid to Tenant in
cash.
(d) Except as expressly set forth to the contrary herein, all other
terms and conditions of this Lease shall apply to the 15th Floor Option Space,
and from and after the date Tenant elects to lease the 15th Floor Option Space,
the 15th Floor Option Space shall be and shall be deemed to be a part of the
Premises.
2. No Other Modifications. Except as expressly modified by this Third
----------------------
Amendment, the Lease remains unmodified and in full force and effect, including
all rights of first refusal and rights to option space as set forth in Special
Stipulation 11 of the Original Lease and the Second Amendment.
3. Transfers, Successors and Assigns. This Third Amendment shall inure
---------------------------------
to the benefit of and shall be binding upon Landlord, Tenant, and their
respective transfers, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be
executed under seal and delivered, on the day and year first above written.
"LANDLORD"
CONCOURSE VI ASSOCIATES, a Georgia general partnership
By: Landmark Forty-Two, L.P., a Georgia limited
partnership, as the managing general partner of
Concourse VI Associates
By: The Landmarks Group Properties Corporation, a
Georgia corporation, as the sole general
partner of Landmark Forty-Two, L.P.
By: /s/
--------------------------------------
Its:__________________________________
By: /s/
--------------------------------------
Its:__________________________________
(CORPORATE SEAL)
[Signatures continued on next page]
<PAGE>
[Signatures continued from previous page]
"TENANT"
AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota
corporation
By: /s/
--------------------------------------------
Its: ______________________________________
By: /s/
--------------------------------------------
Its: /s/
---------------------------------------
(CORPORATE SEAL)
6/17/94
<PAGE>
EXHIBIT 10.51
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and WILLIAM M. WARDLAW, director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to have been fully
delivered as of the date on which they are hand delivered or deposited in the
United States mail for delivery by registered or certified mail, postage and
fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
----------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.52
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and RONALD P. SPOGLI, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company
<PAGE>
agrees that it shall not, and the Company hereby waives all rights that it has
or may have to, refuse to indemnify or advance expenses, or withhold payment of
amounts for which Director is indemnified hereunder, or for advance of expenses
to Director, based on any breach or alleged breach of any of the provisions of
this Agreement by Director or for any other reason whatsoever. In the event
Director is required to bring any action to enforce Director's rights or to
collect monies due to Director under this Agreement, and is successful in such
action, the Company shall reimburse Director for all of Director's legal fees
and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the
-2-
<PAGE>
date on which they are hand delivered or deposited in the United States mail for
delivery by registered or certified mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.53
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and JOHN M. ROTH, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company
<PAGE>
agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the
-2-
<PAGE>
date on which they are hand delivered or deposited in the United States mail for
delivery by registered or certified mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.54
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of May 1, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and KELVIN J. PENNINGTON, director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company
<PAGE>
agrees that it shall not, and the Company hereby waives all rights that it has
or may have to, refuse to indemnify or advance expenses, or withhold payment of
amounts for which Director is indemnified hereunder, or for advance of expenses
to Director, based on any breach or alleged breach of any of the provisions of
this Agreement by Director or for any other reason whatsoever. In the event
Director is required to bring any action to enforce Director's rights or to
collect monies due to Director under this Agreement, and is successful in such
action, the Company shall reimburse Director for all of Director's legal fees
and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the
<PAGE>
date on which they are hand delivered or deposited in the United States mail for
delivery by registered or certified mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
<PAGE>
EXHIBIT 10.55
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and DICK R. HOLBROOK, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to have been fully
delivered as of the date on which they are hand delivered or deposited in the
United States mail for delivery by registered or certified mail, postage and
fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.56
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of May 1, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and TODD W. HALLORAN, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the date on which they are hand delivered or
deposited in the United States mail for delivery by registered or certified
mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
----------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.57
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and SAMUEL N. FRANKEL, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to have been fully
delivered as of the date on which they are hand delivered or deposited in the
United States mail for delivery by registered or certified mail, postage and
fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
--------------------------------------
Frank Belatti, Chief Executive Officer
/s/
----------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.58
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and MATT L. FIGEL, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the date on which they are hand delivered or
deposited in the United States mail for delivery by registered or certified
mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
----------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.59
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of July 2, 1996, is made by
and between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and PAUL H. FARRAR, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company
<PAGE>
agrees that it shall not, and the Company hereby waives all rights that it has
or may have to, refuse to indemnify or advance expenses, or withhold payment of
amounts for which Director is indemnified hereunder, or for advance of expenses
to Director, based on any breach or alleged breach of any of the provisions of
this Agreement by Director or for any other reason whatsoever. In the event
Director is required to bring any action to enforce Director's rights or to
collect monies due to Director under this Agreement, and is successful in such
action, the Company shall reimburse Director for all of Director's legal fees
and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the
<PAGE>
date on which they are hand delivered or deposited in the United States mail for
delivery by registered or certified mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
<PAGE>
EXHIBIT 10.60
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and MARK J. DORAN, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company
<PAGE>
agrees that it shall not, and the Company hereby waives all rights that it has
or may have to, refuse to indemnify or advance expenses, or withhold payment of
amounts for which Director is indemnified hereunder, or for advance of expenses
to Director, based on any breach or alleged breach of any of the provisions of
this Agreement by Director or for any other reason whatsoever. In the event
Director is required to bring any action to enforce Director's rights or to
collect monies due to Director under this Agreement, and is successful in such
action, the Company shall reimburse Director for all of Director's legal fees
and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to this Agreement must be made in writing and shall be deemed to
have been fully delivered as of the
-2-
<PAGE>
date on which they are hand delivered or deposited in the United States mail for
delivery by registered or certified mail, postage and fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
----------------------------------------
Director
-3-
<PAGE>
EXHIBIT 10.61
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, dated as of April 11, 1996, is made by and
between AMERICA'S FAVORITE CHICKEN COMPANY, a Minnesota corporation (the
"Company"), and FRANK BELATTI, a director of the Company ("Director").
WHEREAS, Director is a member of the Board of Directors of the Company; and
WHEREAS, it will be difficult to retain directors of the Company unless
such directors are adequately indemnified against liabilities incurred and
claims made in performance of their duties as directors of the Company; and
WHEREAS, it is in the best interests of the Company to retain such
directors by providing adequate indemnification by means of indemnification
agreements with individual directors.
NOW, THEREFORE, in consideration of Director's continued service as a
director of the Company, and as an inducement to Director to continue to serve
as a director of the Company, the Company and Director agree as follows:
1. INDEMNIFICATION. The Company agrees to indemnify and hold Director
---------------
harmless from and against any claims, liabilities, damages, judgments,
penalties, fines or expenses of any type whatsoever incurred by Director in or
arising out of the status, capacities or activities of Director as a director of
the Company to the maximum extent permitted under Minnesota Statutes, Section
302A.521 (attached hereto as Exhibit A) as in effect on the date hereof.
2. ADVANCES OF EXPENSES. Subject to Director's execution of a written
--------------------
affirmation, satisfactory to the Company, of the Director's good faith belief
that the criteria for indemnification have been satisfied and to repay all
amounts advanced by the Company if it is ultimately determined that the criteria
for indemnification have not been satisfied, the Company shall advance all
expenses incurred by Director in connection with the investigation, defense,
settlement or appeal of any proceeding, action or investigation to which
Director is a party or is threatened to be made a party arising out of the
status, capacities or activities of Director as a director of the Company to the
maximum extent permitted under Minnesota Statutes, Section 302.521, subd. 3 as
in effect on the date of this Agreement upon the determination by the Company
that the facts then known to those making the determination would not preclude
indemnification under Section 502A.521, subd. 6 within 60 days after receipt of
said written affirmation. Director shall have a reasonable right to appear in
person and to be represented by counsel.
3. OTHER RIGHTS OF DIRECTORS. The right of Director to indemnification
-------------------------
or advance of expenses pursuant to this Agreement shall not be exclusive of
other rights Director may have (i) under applicable law, (ii) pursuant to other
agreements between the Company and Director or the Company's Articles of
Incorporation or Bylaws, or (iii) pursuant to any agreement with a third party
(by way of insurance, indemnification or otherwise).
<PAGE>
4. ABSOLUTE RIGHT TO INDEMNIFICATION AND ADVANCES OF EXPENSES. The
----------------------------------------------------------
Company agrees that it shall not, and the Company hereby waives all rights that
it has or may have to, refuse to indemnify or advance expenses, or withhold
payment of amounts for which Director is indemnified hereunder, or for advance
of expenses to Director, based on any breach or alleged breach of any of the
provisions of this Agreement by Director or for any other reason whatsoever. In
the event Director is required to bring any action to enforce Director's rights
or to collect monies due to Director under this Agreement, and is successful in
such action, the Company shall reimburse Director for all of Director's legal
fees and expenses in bringing and pursuing such action.
5. AMENDMENTS TO MINNESOTA STATUTES OR COMPANY'S ARTICLES OF
---------------------------------------------------------
INCORPORATION OR BYLAWS. The Company represents that its Bylaws provide for
- -----------------------
indemnification of Director to the maximum extent permitted by Minnesota
Statutes, Section 302A.521 as in effect on the date hereof and to the maximum
extent required by this Agreement. The Company shall not amend its Articles of
Incorporation or Bylaws to reduce or eliminate the Director's right to
indemnification or advances provided for under this Agreement. Any amendments
to the Articles of Incorporation or Bylaws of the Company made subsequent to the
date of this Agreement which reduce or eliminate rights of persons entitled to
indemnification or advances under such Articles of Incorporation or Bylaws shall
not limit the rights of Director pursuant to this Agreement. If the Minnesota
Statutes, the Articles of Incorporation or the Bylaws of the Company are amended
so as to provide for greater indemnification rights or benefits, and Director
shall be entitled to such greater rights or benefits, and Director shall be
entitled to such greater rights and benefits immediately upon such amendment.
Subsequent amendments to the Minnesota Statutes or other applicable law shall in
no way reduce Director's rights under this Agreement.
6. MAINTENANCE OF INSURANCE. The Company represents that it presently
------------------------
has in force and effect directors and officers insurance under a Directors' and
Officers' Liability Insurance Policies including Company Reimbursement issued by
Executive Re. Indemnity, Inc. (Policy No. 751-004259-95) and Zurich Insurance
Company (Policy No. EOC 793938202) covering certain liabilities which may be
incurred by its officers and directors. The Company may maintain in effect, for
the benefit of Director, directors' and officers' insurance providing such
coverage as may, from time to time, be determined by the Board of Directors of
the Company, in their absolute discretion.
7. NOTIFICATION. Promptly after receipt by Director of the Company of
------------
any notice or document respecting the commencement of any action, suit,
proceeding or investigation naming or involving Director and relating to any
matter concerning which Director may be entitled to indemnification or advances
pursuant to this Agreement, the party receiving notice will notify the other of
the receipt of same, but the failure by Director to so notify the Company shall
not relieve the Company from any obligation under this Agreement or otherwise.
8. AMENDMENT. This Agreement may be amended at any time by written
---------
instrument executed by the Company and Director.
9. NOTICES. All notices and other communications between the parties
-------
with respect to
-2-
<PAGE>
this Agreement must be made in writing and shall be deemed to have been fully
delivered as of the date on which they are hand delivered or deposited in the
United States mail for delivery by registered or certified mail, postage and
fees prepaid.
10. BINDING EFFECT. Due to the personal nature of the services to be
--------------
rendered by Director, Director may not assign this Agreement. Subject to the
foregoing, the provisions of this Agreement are binding upon and inure to the
benefit of (i) Director and Director's respective heirs, legal representatives
and administrators, and (ii) the Company and its successors, transferees and
assigns.
11. SURVIVAL. The obligations of the Company to Director as provided in
--------
this Agreement shall survive and continue after Director has ceased to be a
director of the Company.
12. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be discussed between the parties in a good
faith effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding the parties' good faith efforts, a dispute remains unresolved
for a period of 45 days after initial notice from one party to the other of the
dispute, the parties shall submit such dispute to arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
may be entered in any court having jurisdiction over the controversy. The costs
of the proceeding shall be paid by the Company. Unless otherwise agreed upon,
the place of arbitration proceedings shall be Fulton County, Georgia.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
AMERICA'S FAVORITE CHICKEN COMPANY
By: /s/
---------------------------------------
Frank Belatti, Chief Executive Officer
/s/
---------------------------------------
Director
-3-
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. AFC Properties, Inc., a Georgia corporation.
