SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXHANGE ACT OF 1934
For the quarter ended March 31, 1997 Commission file number 1-7697
--------------- ------
I.C.H. Corporation
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 43-6069928
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9404 Genesee Avenue, LaJolla, California 92037
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (619) 587-8533
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes ___ No _x_
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _x_ No ___
Number of shares of common stock outstanding on April 30, 1997: 2,793,550* .
------------
* Assumes full conversion of all outstanding eligible shares of common stock and
preferred stock of pre-reorganized I.C.H. Corporation. See Note 4 of Notes to
Consolidated Financial Statement.
<PAGE>
I.C.H. Corporation and Subsidiaries
Index
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - February 19, 1997 and
March 31, 1997 3
Consolidated Statement of Operations and Retained
Earnings (Deficit) for the period February 19, 1997
through March 31, 1997 4
Consolidated Statement of Cash Flows for the period
February 19, 1997 through March 31, 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
Exhibit Index 18
2
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
--------------------
ICH Corporation and Subsidiaries
Consolidated Balance Sheets
Assets
<TABLE>
<CAPTION>
February 19, 1997 March 31, 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 500,000 $ 3,000,077
Other assets 200,000 881,455
Accounts receivable 2,790,203 45,385
Deferred tax benefit -- 54,000
Subsidiary held for sale 5,000,000 5,000,000
Real estate held for sale 3,700,000 --
------------ ------------
Total current assets 12,190,203 8,980,917
Property, Equipment and Land
Held for Future Development -- 3,766,242
------------ ------------
Total assets $ 12,190,203 $ 12,747,159
============ ============
Liability and Stockholders' Equity
Current liabilities -
Accounts payable and accrued liabilities $ -- $ 659,184
Preferred stock, $0.01 par value, 1,000,000 authorized
none issued and outstanding -- --
Common stock, $0.01 par value, 9,000,000 authorized
(see Note 2) -- --
Paid-in capital 12,190,203 12,190,203
Retained earnings (deficit) -- (102,228)
------------ ------------
Total liabilities and stockholders' equity $ 12,190,203 $ 12,747,159
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
I.C.H. Corporation and Subsidiaries
Consolidated Statement of Operations and Retained Earnings (Deficit)
For the Period February 19, 1997 through March 31, 1997
Revenues:
Real estate operations $ 31,356
Interest 9,350
-----------
Total revenues 40,706
-----------
Costs and expenses:
Real estate operations 100,144
General and administrative 96,790
-----------
Total costs and expenses 196,934
-----------
Income (Loss) Before Income taxes (156,228)
Provision (Benefit) for Income Taxes (54,000)
-----------
Net Income (Loss) (102,228)
Retained earnings - beginning of period --
-----------
Retained earnings (deficit) - end of period $ (102,228)
===========
Per Share Data:
Income (Loss) Per Share (Note 4) $ (.04)
===========
Average Common Shares Outstanding (Note 4) 2,793,550
===========
See accompanying notes to consolidated financial statements.
4
<PAGE>
I.C.H. Corporation and Subsidiaries
Consolidated Statement of Cash Flows
For the Period February 19, 1997 through March 31, 1997
Cash flow from operating activities:
Net income(loss) $ (102,228)
Changes in current assets and liabilities:
Accounts receivable 2,744,818
Deferred tax benefit (54,000)
Other assets (681,455)
Real estate held for sale 3,700,000
Accounts payable and accrued liabilities 659,184
-----------
Net cash provided by operating activities 6,266,319
-----------
Cash flows from (used in) investing activities - Property,
Equipment and Land Held for Future Development (3,766,242)
-----------
Net changes 2,500,077
Cash and cash equivalents at beginning of period 500,000
-----------
Cash and cash equivalents at end of period $ 3,000,077
===========
See accompanying notes to consolidated financial statements.
5
<PAGE>
I.C.H. Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Organization and Basis of Presentation
ICH Corporation (the "Company") is the post-reorganization successor to ICH
Corporation (the "Predecessor Company"). On October 10, 1995, the
Predecessor Company and three of its wholly-owned subsidiaries filed
voluntary petitions for relief under Chapter 11 of Title 11 of the United
States Bankruptcy Code (the "Code") in the United States Bankruptcy Court
for the Northern District of Texas, Dallas Division (the "Bankruptcy
Court"). Throughout the Chapter 11 case, the Predecessor Company continued
to operate and manage its assets and business as a debtor in possession as
authorized by Chapter 11 of the Code. During the Chapter 11 case, the
Predecessor Company also sold seven of its eight insurance subsidiaries and
sold all of the business of Bankers Multiple Line Insurance Company
("BML"), its remaining insurance subsidiary, through an assumption
reinsurance agreement. The Predessor Company's First Amended Joint Plan of
Reorganization under Chapter 11 (the "Reorganization Plan") was confirmed
by the Bankrutpcy Court on February 7, 1997 and became effective on
February 19, 1997 (the "Effective Date"). The Company, as of the Effective
Date, had no significant business operations and the activities subsequent
to that date have been devoted to the acquisition of Sybra, Inc. (See Note
6) and the evaluation and operation of the Perry Park Real Estate.
The Lone Star Liquidating Trust (the "Trust") was created on the Effective
Date as the vehicle to liquidate and distribute certain assets owned by the
Predecessor Company for the benefit of its creditors. The confirmation of
the Reorganization Plan resulted in the complete satisfaction, discharge
and release of all claims against and interests in the Company. The Company
retained certain designated assets of the Predecessor Company and emerged
from Chapter 11 owned by all but certain de minimus holders of the
preferred and common stock of the Predecessor Company. Pursuant to the
Reorganization Plan, all shares of the Predecessor Company's preferred and
common stock were canceled as of the Effective Date, and the Company has
issued new common stock for distribution to eligible holders of the former
preferred and common shares. See Note 4.
Assets of the Predecessor Company which were retained by the Trust and
postpetition and other liabilities are not reflected in these consolidated
financial statements as the Company does not have legal title to the assets
nor any obligations to satisfy the liabilities.
6
<PAGE>
The consolidated balance sheet, at February 19, 1997 included herein has
been prepared from the Company's audited consolidated balance sheet at that
date, includes the accounts of the Company and its wholly-owned
subsidiaries, SWL Holding Corporation ("SWL Holding") Perry Park Resorts,
Inc. ("PPRI") and Care Financial Corporation ("Care") which owns 100% of
BML. At March 31, 1997 the Company and its wholly-owned subsidiaries had no
significant ongoing business operations. The consolidated balance sheet at
March 31, 1997 and the consolidated statements of operations and retained
earnings (deficit) and cash flows and stockholders' equity for the interim
periods ended March 31, 1997 have been prepared by the Company, without
audit. In the opinion of management, all adjustments necessary to present
fairly the consolidated financial position, results of operations and cash
flows have been made. The results of operations for the interim periods are
not necessarily indicative of the operating results for a full year or of
future operations.
See Note 6.
As the holders of existing voting shares in the Predecessor Company
immediately prior to confirmation of the Reorganization Plan received less
than 50% of the voting shares of the emerging entity, and as reorganization
value was estimated to be less than postpetition liabilities and allowed
claims, the Company adopted "fresh-start" reporting in accordance with the
American Institute of Certified Public Accountants' Statement of Position
90-7. Accordingly, assets have been restated to reflect reorganization
value, which approximates fair value at the Effective Date.
In determining the applicability of fresh-start reporting, the
reorganization value of the Company was determined based on reorganization
value of the Predecessor Company prior to the confirmation of the
Reorganization Plan. As the Company had no significant, ongoing business
operations at March 31, 1997 management did not anticipate future earnings
in determining reorganization value. Accordingly, reorganization value
equals management's estimate of the fair value of assets as of the
Effective Date of the Reorganization Plan.
As a result of adjusting the assets to fair value with the adoption of
fresh-start reporting, the Company increased the carrying value of Perry
Park Real Estate by $961,000.
2. Other Assets, Accounts Payable and Accrued Liabilities
Other assets, the accounts payable and accrued liabilities relate primarily
to the Company's acquisition of Sybra, Inc.
7
<PAGE>
3. Income Taxes
Differences exist between the Company's carrying amounts of assets for
financial reporting purposes and the amounts used for tax purposes. The
Company's tax basis in the BML stock, a subsidiary held for sale,
significantly exceeds its carrying value for financial reporting purposes;
however, as any tax loss generated on the sale of BML stock could be
limited pursuant to the Internal Revenue Code and Treasury regulations
thereunder, no deferred tax asset has been recorded for the difference.
The Company's tax basis in Perry Park Real Estate is approximately
$8,000,000, resulting in a deferred tax asset of $1,460,000 using a 34%
federal rate. The Company recorded a full valuation allowance against this
deferred tax asset due to the uncertainty surrounding its realization as of
February 19, 1997.
The Company recorded a deferred tax asset during the period ended March 31,
1997 for the expected future tax benefits of the operating loss as the
ultimate realization is probable.
4. Equity and Earnings Per Common Share
On the Effective Date, all of the outstanding equity securities
("Predecessor Common Stock" and "Predecessor Preferred Stock" and
collectively, the "Predecessor Stock") of the Predecessor Company were
canceled. The Company's Restated Certificate of Incorporation authorizes
the issuance of 9,000,000 shares of common stock (the "Company's common
stock") and 1,000,000 shares of preferred stock. Holders of the Predecessor
Stock have two-years from the Effective Date in which to exchange the
canceled shares for the Company's common stock. With the exception of de
minimus holders of Predecessor Stock, holders of Predecessor Stock will
receive 0.0269 shares of the Company's common stock for each share of
Predecessor Common Stock and 0.2 shares of the Company's common stock for
each share of Predecessor Preferred Stock held as of the Effective Date.
Until March 30, 1997, holders of Predecessor Preferred Stock could elect to
surrender their cancelled shares in exchange for a single cash payment of
$0.36 per share, to a maximum of $234, in lieu of receiving shares of the
Company's common stock. For that same 40 day period, holders of Predecessor
Common Stock could elect to receive a single cash payment of $0.05 per
share, to a maximum of $250, in lieu of receiving shares of the Company's
common stock. See Note 6.
Pursuant to the Reorganization Plan, holders of less than 101 shares of
Predecessor Common Stock or less than 14 shares of Predecessor Preferred
Stock (collectively, the "Nominal Shareholders") are not entitled either to
convert their Predecessor Stock into the Company's common stock or to
receive any cash payments for their Predecessor Stock.
Based on the number of outstanding shares of Predecessor Common Stock and
Predecessor Preferred Stock on the Effective Date, and after considering
the Nominal Shareholders of record and the shares
8
<PAGE>
which were exchanged for cash as described above, the Company estimates
that a maximum of approximately 2,793,550 shares of the Company's common
stock could be issued, although the amount could be lower. Upon conversion,
the par value of the issued common stock will be transferred from paid-in
capital to common stock. As a result of the cash payment option described
above and the likelihood that certain eligible holders of Predecessor Stock
will not exercise their conversion option during the two-year period,
management has not determined and cannot currently determine, the ultimate
number of shares of the Company's common stock which will be issued upon
completion of the stock conversion.
For the reasons set out above, the Company has used 2,793,550 shares in
computing earnings per share. Common stock equivalents are excluded from
the computation because the effect is antidilutive.
As of February 19, 1997, the Company declared a dividend of one right
(collectively, the "Rights") for each share of the Company's common stock.
Each Right represents the right to purchase one one-thousandth of a share
of Series A Junior Participating Preferred Stock (the "Junior Preferred
Stock"). The Rights have an exercise price of $10.07 per right and are
exercisable until February 19, 1999. Ten thousand shares of the Company's
authorized preferred stock have been designated as the Junior Preferred
Stock and have been reserved for issuance upon the exercise of the Rights.
The Rights are not exercisable until the occurrence of those "triggering
events" detailed in the Rights Agreement by and between the Company and the
Mid-America Bank of Louisville and Trust Company. Upon the occurrence of
any of such triggering events, all holders of Rights (other than the holder
that caused the triggering event to occur) will thereafter have the right
to receive upon exercise that number of shares of the Company's common
stock having a market value of two times the exercise price of the Right.
The Junior Preferred Stock has voting rights equal to 1,000 votes per share
and is entitled to receive dividends, on a cumulative basis, payable in
cash, equal to 1,000 times the aggregate per share amount of all cash
dividends or all non-cash dividends or other distributions declared on the
Company's common stock. Upon liquidation, the Junior Preferred Stock is
entitled to receive an aggregate amount per share equal to 1,000 times the
aggregate amount to be distributed per share to the holders of shares of
common stock plus any accrued and unpaid dividends. Reference is hereby
made to the Company's Registration Statement on Form 8-A, dated May 14,
1997, for a more complete description of the Rights.
5. Stock Options
The Company has two stock option plans, the ICH Corporation 1997 Employee
Stock Option Plan (the "ESP") and the ICH Corporation 1997 Director Stock
Option Plan (the "DSP"), (collectively the "Option Plans"). The ESP
provides for the grant of incentive stock options and non-qualifying
options to eligible officers and employees. The DSP authorizes grants of
non-qualifying options to eligible directors subject to an individual
maximum of 40,000 options and an aggregate maximum of 280,000 options. The
DSP also authorizes grants to individuals who have provided special
services to the Company, at the discretion of the Compensation and Stock
Option Committee of the Board of Directors. Options granted under the
Option Plans expire ten years from the date of grant. The Company has
reserved
9
<PAGE>
1,000,000 shares and 400,000 shares of the Company's common stock for the
ESP and the DSP, respectively.
Effective February 11, 1997, the Company granted 221,000 options under the
ESP, including 176,000 to an officer and director of the Company as part of
his two-year employment agreement, and 35,000 options under the DSP. The
options were granted at the estimated fair value of the stock on February
11, 1997 with an exercise price of $2.17 per share. See Note 6.
6. Subsequent Events
Pursuant to the terms of the Reorganization Plan, the Company purchased
shares of Predecessor Preferred Stock and shares of Predecessor Common
Stock for aggregate cash consideration of approximately $105,000.
On April 25, 1997, the Company exercised its option pursuant to the
Reorganization Plan, to sell all of the outstanding capital stock of BML,
an indirect wholly-owned subsidiary, to the Trust for cash consideration of
$5,000,000 from the Trust.
On April 30, 1997, the Company completed its previously announced agreement
of February 7, 1997 to acquire all of the outstanding capital stock of
Sybra, Inc., a Michigan corporation ("Sybra"). The aggregate purchase price
was approximately 37.7 million (including the repayment of $23.7 million of
Sybra indebtedness) with an additional $2 million contingent payment
obligation due within two years if certain leasing arrangements are
finalized. Concurrently with such acquisition, Sybra entered into a
sale/lease-back transaction on 63 of its restaurant sites with U.S.
Restaurant Properties Operating L.P. ("USRP"). For the fiscal year ended
December 28, 1996, Sybra had total revenues of approximately $116 million
and at December 28, 1996, Sybra had total assets of approximately $75
million.
The Company funded the acquisition through the use of approximately $2.0
million of its available cash resources, $5.0 million of the proceeds
received from the sale of BML to the Trust, and a $35 million fixed-rate
term loan from Atherton Capital, Incorporated, ("Atherton"), which loan
matures in approximately 12 years, bears interest at a rate of 10.63% per
annum and is guaranteed by the Company.
The Atherton loan agreement contains certain customary affirmative,
negative and financial covenants, including without limitation, (1) a fixed
charge coverage ratio of 1.30:1.00, as defined in the Atherton loan
agreement, (2) a restriction on borrower distributions or dividends unless
the fixed charge coverage ratio is at least 1.30:1.00 after giving account
to such dividend or distribution, and (3) a prohibition against additional
debt being incurred by Sybra in excess of $1 million per year, except for
capital leases and debt secured solely by purchase money security
interests, without the prior written consent of Atherton.
In connection with the acquisition of Sybra, the Company entered into
two-year employment agreements with each of Charles N. Hyslop, Chief
Executive Officer of Sybra, and Donald P. Zima, Chief Financial Officer of
Sybra. The employment agreements provide for, among
10
<PAGE>
other things, the grant of stock options which vest, in the case of Mr.
Hyslop, over a two-year period, and, in the case of Mr. Zima, over a
four-year period.
The foregoing description of the Sybra acquisition, the USRP leases, the
Atherton term loan and the employment agreements are not intended to be
complete and are qualified in their entirety by the complete text of the
material agreements setting forth the specific terms of such transactions,
which material agreements are filed as Exhibits 10.02 through 10.10 hereto
and are incorporated herein by reference.
On April 30, 1997, the Compensation and Stock Option Committee granted
options under the ESP Plan to purchase 368,200 shares of the common stock
of the Company to various employees of Sybra at an exercise price of $3.80
per share, the estimated fair value of the common stock.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On April 30, 1997, the Company closed its previously announced agreement of
February 7, 1997 to acquire all of the outstanding capital stock of Sybra. The
aggregate purchase price was approximately 37.7 million (including the repayment
of $23.7 million of Sybra indebtedness) with an additional $2 million contingent
payment obligation due within two years if certain leasing arrangements are
finalized. Concurrently with such acquisition, Sybra entered into a
sale/lease-back transaction on 63 of its restaurant sites with U.S. Restaurant
Properties Operating L.P. For the fiscal year ended December 28, 1996, Sybra had
total revenues of approximately $116 million and at December 28, 1996, Sybra had
total assets of approximately $75 million. See Note 6 of Notes to Financial
Statements for a more complete description of the Sybra acquisition and related
transactions.
Results of Operations:
As indicated in Note 1 of Notes to Financial Statements, the Company is the
post-reorganization successor to the Predecessor Company which together with
three of its wholly-owned subsidiaries filed voluntary petitions for relief
under Chapter 11 in the Bankruptcy Court on October 10, 1995. The Reorganization
Plan was confirmed on February 7, 1997 and became effective on February 19,
1997, the Effective Date.
The Company adopted "fresh start" reporting at the Effective Date since the
holders of existing voting shares immediately before filing and confirmation of
the Reorganization Plan received less than 50% of the voting shares of the
emerging entity and the reorganization value was estimated to be less than
postpetition liabilities and allowed claims. As the Company had no significant
business operations, as of March 30, 1997 management did not anticipate future
earnings in determining reorganization value.
The Company's principal activities since the Reorganization Date have been
devoted to (1) the acquisition of Sybra, (2) a review of the operations of its
real estate property, Perry Park,
11
<PAGE>
located in Owen County, Kentucky and (3) evaluation of the alternatives
available with respect to BML, a property and casualty insurer licensed in all
fifty states.
On April 25, 1997, BML was sold to the Trust for cash consideration of $5
million.
The Perry Park Real Estate consists of an approximately 2,600 acre planned
development including an 18 hole golf course, club house, restaurant, salable
lots, three lakes, additional platted but undeveloped lots and vacant acreage.
The platted undeveloped lots and vacant acreage are estimated to be
approximately 1,800 acres. The Perry Park development is held in a wholly owned
subsidiary of the Company, Perry Park Resorts, Inc., a Kentucky corporation.
The principal sources of revenue for Perry Park during 1996 were as follows:
Golf 48%
Restaurant 23%
Water and Sewer 6%
Maintenance 15%
Other 8%
The operations of Perry Park are seasonal in nature (golf and restaurant
revenues are the highest from April to October) and are expected to approximate
break-even for 1997. These operations are not expected to be material to the
Company's future operations.
The Company's principal focus, following its emergence from bankruptcy, will be
the management and operation of its recent acquisition, Sybra. Sybra is the
second largest Arby's franchisee in the United States and currently operates 150
restaurants clustered in four regions, as follows:
Southwestern (Dallas) 58
Northern (primarily Michigan) 45
Eastern (Pennsylvania, Maryland and Virginia) 27
Southeastern (Florida) 20
The historical and pro forma financial statements of Businesses to be Acquired
((delta)210.3-05 and (delta)210.11 of Regulation S-X) as required by Item 7
Financial Statements and Exhibits of Form 8-K, will be filed no later than July
9, 1997.
12
<PAGE>
Liquidity and Capital Resources
Cash Flows
- ----------
Cash used in operations reflects the Company's initial operations after emerging
from bankruptcy and results of the real estate operations which were offset by
limited interest income after available cash was reduced for costs incurred in
connection with the Sybra acquisition. The BML investment generated no revenue
for the Company.
Inventory and Financing Activities
- ----------------------------------
The Company had no material investing (other than Perry Park Real Estate) or
financing activities during the period from February 19, 1997 through March 31,
1997. See Note 6 of Notes to Financial Statements for subsequent investing and
financing activities.
Liquidity and Capital Resources
- -------------------------------
The increase in cash equivalents during the period ended March 31, 1997 is
primarily attributable to the receipt of cash from the Trust in payment of a
receivable as of the Effective Date of $2.5 million and $.5 million from the
settlement of a claim with Tenneco, Inc.
The principal source of capital for the Company is the subsidiary held for sale
(which was converted to cash prior to the Sybra acquisition) and cash retained
by the Company pursuant to the Reorganization Plan, which was substantially
reduced following the purchase of Sybra. In the future, the Company's liquidity
and capital resources will primarily depend on the operations of Sybra which,
under the term of its loan agreement, would permit, under certain conditions,
distributions and dividends to ICH. The Company believes that, based upon past
performance, Sybra's net cash flow provided by operations will be adequate to
meet its operating requirements, as well as scheduled debt service on its term
loans, scheduled lease payments and required capital expenditures, although no
assurances can be given. If necessary, the Company believes that it would be
able to secure additional credit facilities, or issue additional debt or equity
securities, on acceptable terms to meet its future cash requirements, although
no assurances can be given.
Recent Accounting Pronouncements
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation". This Statement defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
base method of accounting prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company applies the intrinsic value method
permitted by SFAS No. 123 in accounting for the DSP Plan and the ESP Plan and
accordingly, no compensation expense has been recognized but if the compensation
costs for stock option awards under the Plan had been determined
13
<PAGE>
based on the fair value at the grant date, the effect on the Company's earnings
would not be material.
14
<PAGE>
I.C.H. CORPORATION
Part II Other Information
Item 5. Other Information
-----------------
On April 30, 1997, the Company closed its previously announced
agreement of February 7, 1997 to acquire all of the outstanding capital
stock of Sybra, Inc., a Michigan corporation ("Sybra"). The aggregate
purchase price was approximately 37.7 million (including the repayment of
$23.7 million of Sybra indebtedness) with an additional $2 million
contingent payment obligation due within two years if certain leasing
arrangements are finalized. Concurrently with such acquisition, Sybra
entered into a sale/lease-back transaction on 63 of its resaurant sites
with U.S. Restaurant Properties Operating L.P. For the fiscal year ended
December 28, 1996, Sybra had total revenues of approximately $116 million
and at December 28, 1996, Sybra had total assets of approximately $75
million. See Note 6 of Notes to Financial Statements for a more complete
description of the Sybra acquisition and related transactions.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are filed herewith:
Exhibit
Number Exhibit Title
- ------- -------------
10.02 Stock Purchase Agreement, dated as of February 7, 1997, by and between
I.C.H. Corporation and Valcor, Inc.
10.03 First Amendment to Stock Purchase Agreement, dated as of April 18,
1997, by and between I.C.H. Corporation and Valcor, Inc.
10.04 Form of Loan Agreement by and between Sybra, Inc. and Atherton Capital
Incorporated.
10.05 Form of Promissory Note executed by Sybra, Inc. in favor of Atherton
Capital Incorporated.
10.06 Form of Leasehold/Deed of Trust Mortgage executed by Sybra, Inc. in
favor of Atherton Capital Incorporated.
10.07 Form of Security Agreement executed by Sybra, Inc. in favor of
Atherton Capital Incorporated.
10.08 Form of Master Lease by and between Sybra, Inc. and U.S. Restaurant
Properties Operating L.P.
10.09 Employment Agreement, dated as of April 30, 1997, by and between
I.C.H. Corporation and Charles N. Hyslop.
10.10 Employment Agreement, dated as of April 30, 1997, by and between
I.C.H. Corporation and Donald P. Zima.
27 Financial Data Schedule
15
<PAGE>
(b) Reports on Form 8-K
On March 6, 1997, the Company filed a Current Report on Form 8-K
regarding the confirmation of its Plan of Reorganization (the "Plan") pursuant
to Chapter 11 of the United States Bankruptcy Code and the date of the Plan
becoming effective. No financial statements were filed.
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
I.C.H. Corporation has duly cause this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 15, 1997
I.C.H. Corporation
By: /s/James R. Arabia
-------------------------
James R. Arabia
Chairman and Chief
Executive Officer
By: /s/Kenneth P. Giddens
-------------------------
Kenneth P. Giddens
Chief Accounting Officer
17
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit Title
- ------- -------------
10.02 Stock Purchase Agreement, dated as of February 7, 1997, by and between
I.C.H. Corporation and Valcor, Inc.
10.03 First Amendment to Stock Purchase Agreement, dated as of April 18,
1997, by and between I.C.H. Corporation and Valcor, Inc.
10.04 Form of Loan Agreement by and between Sybra, Inc. and Atherton Capital
Incorporated.
10.05 Form of Promissory Note executed by Sybra, Inc. in favor of Atherton
Capital Incorporated.
10.06 Form of Leasehold/Deed of Trust Mortgage executed by Sybra, Inc. in
favor of Atherton Capital Incorporated.
10.07 Form of Security Agreement executed by Sybra, Inc. in favor of
Atherton Capital Incorporated.
10.08 Form of Master Lease by and between Sybra, Inc. and U.S. Restaurant
Properties Operating L.P.
10.09 Employment Agreement, dated as of April 30, 1997, by and between
I.C.H. Corporation and Charles N. Hyslop.
10.10 Employment Agreement, dated as of April 30, 1997, by and between
I.C.H. Corporation and Donald P. Zima.
27 Financial Data Schedule
18
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BETWEEN
VALCOR, INC.
AND
I.C.H. CORPORATION
FEBRUARY 7, 1997
<PAGE>
TABLE OF CONTENTS
1. Definitions ........................................................... 1
2. Purchase and Sale of Sybra Shares ..................................... 6
(a) Basic Transaction ............................................. 6
(b) Purchase Price ................................................ 6
(c) Pre-Closing Dividends and Distributions to Seller ............. 6
(d) The Closing ................................................... 6
(e) Deliveries at the Closing ..................................... 6
(f) Adjustment to Purchase Price ................................. 7
(g) Contingent Consideration ...................................... 7
3. Representations and Warranties Concerning the Transaction ............. 8
(a) Representations and Warranties of the Seller .................. 8
(i) Organization of the Seller ......................... 8
(ii) Authorization of Transaction ....................... 9
(iii) Noncontravention ................................... 9
(iv) Brokers' Fees ...................................... 9
(v) Sybra Shares ....................................... 9
(b) Representations and Warranties of the Buyer ................... 10
(i) Organization of the Buyer .......................... 10
(ii) Authorization of Transaction ....................... 10
(iii) Noncontravention ................................... 10
(iv) Brokers' Fees ...................................... 11
(v) Investment ......................................... 11
(vi) Financing .......................................... 11
(vii) Due Diligence ...................................... 11
4. Representations and Warranties Concerning Sybra ....................... 11
(a) Organization, Qualification, and Corporate Power .............. 11
(b) Capitalization ................................................ 12
(c) Noncontravention .............................................. 12
(d) Brokers' Fees ................................................. 12
(e) Title to Tangible Assets Other than the Real Property Assets .. 12
(f) Subsidiaries .................................................. 12
(g) Financial Statements .......................................... 13
(h) Events Subsequent to Most Recent Fiscal Quarter End ........... 13
(i) Legal Compliance .............................................. 13
(j) Income Tax Matters ............................................ 13
(k) Intellectual Property ......................................... 14
(l) Contracts ..................................................... 14
(m) Litigation .................................................... 14
(n) Employee Benefits ............................................. 15
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5. Pre-Closing Covenants ................................................. 16
(a) General ....................................................... 16
(b) Notices and Consents .......................................... 16
(c) Operation of Business ......................................... 16
(d) Access ........................................................ 16
(e) Notice of Developments ........................................ 17
(f) Other Transactions ............................................ 17
(g) Estoppel Certificates ......................................... 17
6. Post-Closing Covenants ................................................ 18
(a) General ....................................................... 18
(b) Litigation Support ............................................ 18
(c) Employee Benefits Matters ..................................... 18
7. Conditions to Obligation to Close ..................................... 19
(a) Conditions to Obligation of the Buyer ......................... 19
(b) Conditions to Obligation of the Seller ........................ 20
8. Remedies for Breaches of this Agreement ............................... 21
(a) Survival of Representations and Warranties .................... 21
(b) Indemnification Provisions for Benefit of the Buyer ........... 22
(c) Indemnification Provisions for Benefit of the Seller .......... 22
(d) Matters Involving Third Parties ............................... 22
(e) Determination of Adverse Consequences ......................... 23
(f) Other Indemnification Provisions .............................. 23
9. Termination ........................................................... 23
(a) Termination of Agreement ...................................... 23
(b) Effect of Termination ......................................... 24
10. Income Tax Matters .................................................... 24
(a) Income Tax Sharing Agreements ................................. 25
(b) Income Taxes of Other Persons ................................. 25
(c) Returns for Periods Through the Closing Date .................. 25
(d) Audits ........................................................ 25
(e) Carrybacks .................................................... 25
(f) Post-Closing Elections ........................................ 26
(g) Indemnification for Post-Closing Transactions ................. 26
(h) Post-Closing Transactions not in the Ordinary Course .......... 26
11. Miscellaneous ......................................................... 26
(a) Press Releases and Public Announcements ....................... 26
(b) No Third Party Beneficiaries Other than Affiliated Group Parent 26
(c) Entire Agreement .............................................. 27
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(d) Succession and Assignment ............................................ 27
(e) Counterparts ......................................................... 27
(f) Headings ............................................................. 27
(g) Notices .............................................................. 27
(h) Governing Law; Jurisdiction .......................................... 28
(i) Amendments and Waivers ............................................... 29
(j) Severability ......................................................... 29
(k) Expenses ............................................................. 29
(l) Construction ......................................................... 29
(m) Incorporation of Exhibits ............................................ 29
EXHIBITS
EXHIBIT A Agreed Value
EXHIBIT B Disclosure Schedule
EXHIBIT C Financial Statements
EXHIBIT D Form of Estoppel Certificate
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
February 7, 1997, by and between I.C.H. CORPORATION, a Delaware corporation (the
"Buyer"), and VALCOR, INC., a Delaware corporation (the "Seller"). The Buyer and
the Seller are referred to individually as a "Party" and collectively as the
"Parties."
The Seller holds all of the outstanding capital stock of Sybra, Inc.,
a Michigan corporation (the "Sybra").
This Agreement contemplates a transaction in which the Buyer will
purchase for cash consideration from the Seller, and the Seller will sell to the
Buyer, all of the outstanding capital stock of Sybra.
Now, therefore, in consideration of the premises and the mutual
promises, representations, warranties and covenants set forth below, the Parties
agree as follows.
1. Definitions.
"Accrued Expenses and Payables" means any liability of Sybra
classified as a current liability in its financial statements prepared in
accordance with GAAP, excluding any current liability classified as (i) current
portion of long-term debt, (ii) current portion of a capital lease obligation,
(iii) payable to affiliates, (iv) current or deferred income taxes payable or
(v) current portion of a reserve for store closures.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group of companies within the
meaning of Code [section]1504(a).
"Affiliated Group Parent" means, during the period from October 1,
1987 to present, Contran.
"Applicable Rate" means the "Prime Rate" as identified in the Wall
Street Journal Money Rates section from time to time as the base rate of
interest for corporate loans.
"Buyer" has the meaning set forth in the preface above.
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"Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in [section]2(d) below.
"Closing Date" has the meaning set forth in [section]2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of Sybra that is not already generally available to the
public.
"Contran" means Contran Corporation, a Delaware corporation.
"Debt Repayment" has the meaning set forth in [section]2(b) below.
"Determination Date" has the meaning set forth in [section]2(g)(ii)
below.
"Disclosure Schedule" has the meaning set forth in [section]3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
[section]3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
[section]3(1).
"Environmental Law" means any national or local statute, law,
ordinance, rule, regulation, order, consent, decree, judicial or administrative
decision or directive of applicable law at any time relating to (A) pollution or
protection of the environment, including natural resources, (B) exposure of
persons, including employees, to hazardous substances or other products,
materials or chemicals, or (C) protection of the public health or welfare from
the effects of products, by-products, waste, emissions, discharges or releases
of chemical or other substances from industrial or commercial activities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Statements" has the meaning set forth in [section]4(g)
below.
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"Fiscal Month" means, as applicable, the four or five consecutive
weeks within an accounting cycle for Sybra for Unit #740.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Gross Revenues" means all revenues and other items of income as
those terms are normally used in accordance with GAAP.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Indemnified Party" has the meaning set forth in [section]8(d) below.
"Indemnifying Party" has the meaning set forth in [section]8(d)
below.
"Inventories" means inventories, including supplies, calculated in
accordance with GAAP applied on a basis consistent with the preparation of the
Financial Statements.
"Knowledge" means actual knowledge without independent investigation
of the referenced person or, if an entity, the executive officers of the
referenced entity and, in the case of Sybra, the executive officers and regional
vice presidents of Sybra.
"Lease" means a lease by and between Sybra and USRP pursuant to which
Sybra leases from USRP the Acquired Assets as defined in the USRP Agreement.
"Monthly Free Cash Flow" means, for each Fiscal Month, or portion
thereof, the excess of Gross Revenues over Operating Expenses.
"Most Recent Financial Statements" has the meaning set forth in
[section]4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in
[section]4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA
[section]3(37).
"Operating Expenses" shall mean reasonably necessary and customary
costs and other types of expenses, provided, however, that Operating Expenses
shall
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exclude (x) depreciation, amortization and other non-cash expenses, (y)
interest expense and (z) provision for income taxes, as all of those terms are
normally used in accordance with GAAP.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including, without limitation, with
respect to quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in [section]2(b) below.
"Real Property Assets" means the real property assets that Sybra
intends to sell to USRP and USRP intends to purchase from Sybra as described in
the USRP Agreement.
"Reportable Event" has the meaning set forth in ERISA [section]4043.
"Required Consents of Seller" has the meaning set forth in
[section]3(a)(iii) below.
"Required Consents of Buyer" has the meaning set forth in
[section]3(b)(iii) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
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"Subsidiary" means any corporation or other entity with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the common
stock or other equity interests, or has the power to vote or direct the voting
of sufficient securities to elect a majority of the directors or other persons
performing similar functions with respect to such entity.
"Sybra" has the meaning set forth in the preambles above.
"Sybra Share" means any share of the Common Stock, par value $.50 per
share, of Sybra.
"Tax" means any federal, state, local, or foreign tax, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto.
"Third Party Claim" has the meaning set forth in [section]8(d) below.
"Unit #740" means Sybra's Unit #740 located at the Park City Mall in
Lancaster, Pennsylvania.
"Units Purchase Agreement" means the Units Purchase Agreement by and
between Valhi and USRP, as amended, supplemented or modified.
"USRP" means U.S. Restaurant Properties Master L. P., a Delaware
limited partnership.
"USRP Agreement" means the Asset Purchase Agreement dated December
23, 1996 by and between Sybra and USRP, as amended, supplemented or modified.
"Valcor" means Valcor, Inc., a Delaware corporation.
"Valhi" means Valhi, Inc., a Delaware corporation.
2. Purchase and Sale of Sybra Shares.
(a) Basic Transaction. On the terms and subject to the conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, at Closing, all of its Sybra Shares for the
consideration specified below in this [section]2.
(b) Purchase Price. The Buyer agrees (i) to pay to the Seller at the
Closing $14,000,000 (the "Purchase Price"), subject to adjustment as provided in
[section][section]2(f) and (g)
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below, by delivery of cash in the amount of the Purchase Price payable by wire
transfer or delivery of other immediately available funds, and (ii) to pay in
full indebtedness of Sybra, in an amount not to exceed $23,772,000, more
particularly described in [section]2(b) of the Disclosure Schedule (the "Debt
Repayment").
(c) Pre-Closing Dividends and Distributions to Seller. Immediately
prior to or concurrently with the Closing, the Seller will cause Sybra to pay to
the Seller an aggregate amount equal to Sybra's good faith estimate of the
consolidated Cash of Sybra as of the Closing, including, without limitation, all
of the net cash proceeds of Sybra's sale of certain of its assets to USRP
pursuant to the USRP Agreement, provided however, Seller shall not permit Sybra
to dividend Cash to the extent that, based on Sybra's good faith estimate,
remaining Cash and Inventories as of the Closing Date and after such dividend
would be less than $2,605,000. The Seller may cause Sybra to make any such
payment to it in the form of a dividend or a redemption of capital stock. In
addition, prior to the Closing, the Seller will cause Sybra to dividend to
Seller all of its right, title and interest in and to the real property
described in [section]2(c) of the Disclosure Schedule.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Valcor in Dallas,
Texas, commencing at 9:00 a.m. local time on the second business day following
the satisfaction or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated by this Agreement (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Seller may mutually
determine (the "Closing Date"); provided, however that the Closing Date shall be
no later than April 14, 1997.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will
execute, acknowledge (if appropriate), and deliver to the Buyer the various
certificates, instruments, and documents to be delivered by Seller as referred
to in [section]7(a) below, (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents to be delivered by Buyer as referred to
in [section]7(b) below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of its Sybra Shares, endorsed in blank or
accompanied by duly executed assignment documents, (iv) the Buyer will deliver
to the Seller the Purchase Price specified in [section]2(b) above, and (v) the
Buyer will pay or cause to be paid the Debt Repayment described in [section]2(b)
above.
(f) Adjustment to Purchase Price. The Purchase Price shall be
increased by the Agreed Value set forth on Exhibit A of each restaurant unit
that is not purchased by USRP under the USRP Agreement and Buyer shall pay such
increase at Closing. The Purchase Price also shall be adjusted as provided in
[section]5(g)(ii). In addition, as promptly as practicable, but no later than 90
days following the Closing Date, Seller and Buyer shall jointly prepare, or
cause to be prepared, in accordance with GAAP financial statements of Sybra,
including a consolidated balance sheet as of the close of business on the
Closing Date (after giving effect to the transactions contemplated in the USRP
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Agreement and all dividends contemplated by this [section]2) (the "Closing
Balance Sheet"). Within ten (10) days after completion of the Closing Balance
Sheet, if the aggregate amount of Accrued Expenses and Payables as set forth in
the Closing Balance Sheet, net of the aggregate amount of Cash and Inventories
as set forth in the Closing Balance Sheet, is greater than $6,895,000, the
Purchase Price shall be adjusted and the Seller shall make a cash payment in
immediately available funds to the Buyer in an amount (the "Payment Amount")
equal to the difference between U.S.$6,895,000 and the aggregate amount of
Accrued Expenses and Payables as set forth in the Closing Balance Sheet, net of
the aggregate of Cash and Inventories as set forth in the Closing Balance Sheet,
plus interest on the Payment Amount at the rate of eight percent (8%) per annum
calculated from the Closing Date through the date of such cash payment. Any
payment pursuant to the foregoing provisions shall be an adjustment (net of any
interest included in such payment) to the Purchase Price.
(g) Contingent Consideration. Buyer agrees to pay Seller
additional, contingent consideration computed in accordance with this
[section]2(g).
(i) Commencing on the Closing Date and continuing through
the date of payment in full of the amounts due under
[section]2(g)(ii) and/or [section]2(g)(iii), as applicable, Buyer
shall pay Seller an amount equal to 50% of the Monthly Free Cash Flow
of Unit #740 for each Fiscal Month, or portion thereof. Buyer shall
pay such amount to Seller by wire transfer or delivery of other
immediately available funds within 15 business days after the last
business day of each such Fiscal Month, or portion thereof.
(ii) In the event that, after the Closing Date, (a) Sybra
enters into a lease having a duration of one year or more for Unit
#740, (b) Sybra enters into a lease for another location at the Park
City Mall, Lancaster, Pennsylvania or (c) neither of the events
described in (a) or (b) has occurred and Sybra has not been forced by
the lessor to vacate Unit #740 on or before the second anniversary of
the Closing Date (the "Determination Date"), Buyer shall pay Seller
the sum of $2,000,000. At Buyer's option, the Determination Date may
be extended from the second anniversary of the Closing Date to the
third anniversary of the Closing Date, provided that Buyer shall
have given Seller written notice of such extension on or before 30
days prior to the second anniversary of the Closing Date, and
provided further that Buyer has paid and continues to pay all
amounts due pursuant to [section]2(g)(i). Buyer shall pay the amount
due pursuant to this [section]2(g)(ii) to Seller by wire transfer or
delivery of other immediately available funds within 5 business days
after the Determination Date. Upon and after the date of payment in
full of the amount due pursuant to this [section]2(g)(ii), Buyer
shall not be obligated to pay Seller any amounts pursuant to
[section]2(g)(iii) nor, pursuant to [section]2(g)(i), any amounts
for periods commencing after the date of such payment pursuant to
this [section]2(g)(ii).
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(iii) If, prior to the payment of amounts due pursuant to
[section]2(g)(ii), the lease for Unit #740 is terminated, Sybra is
forced by the lessor to vacate Unit #740 and Sybra has not entered
into a lease for another location at the Park City Mall, Lancaster,
Pennsylvania, Buyer shall pay Seller cash in an amount equal to 50%
of the cumulative Monthly Free Cash Flow of Unit #740 (in addition to
amounts payable pursuant to [section]2(g)(i)), calculated from the
Closing Date to the date upon which Sybra vacates Unit #740. Buyer
shall pay the amount due pursuant to this [section]2(g)(iii) to
Seller by wire transfer or delivery of other immediately available
funds, within 5 business days after the date Buyer vacates Unit #740.
Unless Buyer subsequently enters into a lease for another location at
the Park City Mall, Lancaster, Pennsylvania upon and after the date
of payment in full of the amount due pursuant to this
[section]2(g)(iii), Buyer shall not be obligated to pay Seller any
amounts pursuant to [section]2(g)(ii) nor, pursuant to
[section]2(g)(i), any amounts for periods commencing after the date
of such payment pursuant to this [section]2(g)(iii). In the event
that Buyer subsequently enters into a lease for another location at
the Park City Mall, Lancaster, Pennsylvania, Buyer shall be obligated
to pay the amounts due pursuant to [section]2(g)(ii) and, pursuant to
[section]2(g)(i), amounts due for all periods prior to payment in
full pursuant to [section]2(g)(ii).
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
[section]3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this [section]3(a)), except as set forth in the disclosure schedule
attached hereto as Exhibit B and incorporated in this Agreement by this
reference (the "Disclosure Schedule").
(i) Organization of the Seller. The Seller is a
corporation validly existing, and in good standing under the laws
of Delaware.
(ii) Authorization of Transaction. The Seller has the
corporate power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement and the execution
and delivery of this Agreement has been approved by the Seller's
Board of Directors. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its
terms and conditions.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated by this Agreement, will (A) violate any valid
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or any
provision of its charter or bylaws or (B) conflict with, result in a
breach of,
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constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a
party or by which it is bound or to which any of its assets is
subject, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to
give notice, or Security Interest would not have a material adverse
effect the ability of the Parties to consummate the transactions
contemplated by this Agreement. To the Knowledge of the Seller, and
other than in connection with the provisions of the Hart-Scott-Rodino
Act and those required notices, consents and approvals relating to
the Seller as described in the Disclosure Schedule (the "Required
Consents of Seller"), the Seller does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to
obtain any authorization, consent, or approval would not have a
material adverse effect on the financial condition of Sybra or on the
ability of the Parties to consummate the transactions contemplated by
this Agreement.
(iv) Brokers' Fees. The Seller has no liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
(v) Sybra Shares. The Seller holds of record and owns
beneficially the number of Sybra Shares set forth in the Disclosure
Schedule, free and clear of any restrictions on transfer (other than
restrictions on transfer imposed by the Securities Act and state
securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase
right, or other contract or commitment (other than this Agreement)
that could require the Seller to sell, transfer, or otherwise
dispose of any capital stock of Sybra. The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of Sybra that will exist
after the Closing.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this [section]3(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
[section]3(b)), except as set forth in the Disclosure Schedule.
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(i) Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has the
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and the execution and
delivery of this Agreement has been approved by the Buyer's Board of
Directors. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated by this Agreement, will (A) violate any valid
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is
subject. To the Knowledge of the Buyer, and other than in connection
with the provisions of the Hart-Scott-Rodino Act and those required
notices, consents and approvals relating to the Buyer or any of its
Subsidiaries as described in the Disclosure Schedule (the "Required
Consents of Buyer"), the Buyer does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to
obtain any authorization, consent, or approval would not have a
material adverse effect on the ability of the Parties to consummate
the transactions contemplated by this Agreement.
(iv) Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which any Seller could become liable or obligated.
(v) Investment. The Buyer is acquiring Sybra Shares for
investment and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(vi) Financing. Buyer will have, on the Closing Date, all
funds necessary to pay the Purchase Price and related fees and
expenses, and has, or will have on the Closing Date, the financial
capacity to perform all of its other obligations under this
Agreement.
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(vii) Due Diligence. Subject to Buyer's thirty-five (35)
day due diligence period following the execution of this Agreement,
Buyer acknowledges and agrees (A) that Buyer has had access to and
the opportunity to perform unrestricted due diligence with respect to
Sybra; (B) Buyer is acquiring the Sybra Shares without reliance on
any representations or warranties of Seller except as expressly set
forth in [section]4 of this Agreement, and subject to all of the
limitations provided in this Agreement.
4. Representations and Warranties Concerning Sybra. The Seller
represents and warrants to the Buyer that the statements contained in this
[section]4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
[section]4), except as set forth in Disclosure Schedule.
(a) Organization, Qualification, and Corporate Power. Sybra is a
corporation validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Sybra is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the financial condition or results of
operations of Sybra. Sybra has the corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. [section]4(a) of the Disclosure Schedule lists the directors and
executive officers of Sybra.
(b) Capitalization. The entire authorized capital stock of Sybra
consists of 200,000 Sybra Shares, all of which are common shares, par value $.50
per share. There are 55,199 Sybra Shares issued and outstanding. No Sybra Shares
are held in treasury. All of the issued and outstanding Sybra Shares have been
duly authorized, are validly issued, fully paid, and nonassessable, and are held
of record by the Seller. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Sybra to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Sybra.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (i) violate any valid constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Sybra is subject or any
provision of the charter or bylaws of Sybra or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Sybra is a party or by which it is bound or to which any of
its
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assets is subject (or result in the imposition of any Security Interest upon
any of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Security Interest would not have a material adverse effect on the financial
condition of Sybra or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. To the Knowledge of the Seller, and
other than in connection with the provisions of the Hart-Scott-Rodino Act and
the Required Consents of Seller, Sybra does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the financial condition or results of
operations of Sybra or on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. Sybra does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Tangible Assets Other than the Real Property Assets.
Sybra has good title to, or a valid leasehold interest in, the material tangible
assets they use regularly in the conduct of its businesses other than the Real
Property Assets.
(f) Subsidiaries. Sybra does not have any Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit C are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 25, 1993, December 31, 1994, and December 30, 1995 for Sybra; and (ii)
unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the nine months ended September 28, 1996 (the "Most Recent Fiscal
Quarter End") for Sybra. The Financial Statements (including the notes thereto)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and present fairly the financial
condition of Sybra as of such dates and the results of operations of Sybra for
such periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items.
(h) Events Subsequent to Most Recent Fiscal Quarter End. Since the
Most Recent Fiscal Quarter End, there has not been any material adverse change
in the financial condition or results of operations of Sybra except as
contemplated in the USRP Agreement and this Agreement. Without limiting the
generality of the foregoing and except as contemplated in the USRP Agreement and
in this Agreement, including in [section]2(c) of this Agreement, since that date
Sybra has not engaged in any practice, taken any action, or entered into any
transaction outside the Ordinary Course of
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Business the primary purpose or effect of which has been to generate or preserve
Cash.
(i) Legal Compliance. To the Knowledge of the Seller, Sybra has
complied with all applicable and valid laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), except where the failure to comply would not have a material adverse
effect upon the financial condition or results of operations of Sybra and except
that Seller makes no representation regarding Environmental Laws.
(j) Income Tax Matters.
(i) Sybra has filed, or its Affiliated Group Parent has
filed on behalf of Sybra, all Tax Returns that it was required to
file prior to the Closing, and has paid all Income Taxes due and
payable prior to Closing, except where the failure to file Tax
Returns or to pay Taxes would not have a material adverse effect on
the financial condition or results of operations of Sybra.
(ii) [section]4(j) of the Disclosure Schedule lists all
Income Tax Returns filed with respect to Sybra for taxable periods
ended on or after December 31, 1988, indicates those Income Tax
Returns that have been audited, and indicates those Income Tax
Returns that currently are the subject of audit. The Seller has
delivered to the Buyer correct and complete copies of all federal
Income Tax Returns of Sybra, examination reports relating to
Sybra, and statements of deficiencies assessed against or agreed to
by Sybra since December 31, 1988.
(iii) Sybra has not waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
(iv) Sybra is not a party or subject to any Income Tax
allocation or sharing agreement except with its Affiliated Group
Parent.
(v) To the Knowledge of the Seller, since October 1, 1987,
Sybra has not been a member of an Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common
parent of which was Contran).
(k) Intellectual Property. [section]4(k) of the Disclosure Schedule
identifies each patent or trademark registration which has been issued to Sybra
with respect to any of its intellectual property, identifies each pending patent
application or application for trademark registration which Sybra has made with
respect to any of its intellectual property, and, to the Knowledge of the
Seller, identifies each material license, agreement, or other permission which
Sybra has granted to any third party with respect to any of its intellectual
property.
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(l) Contracts. [section]4(l) of the Disclosure Schedule lists all
written contracts and other written agreements to which Sybra is a party the
performance of which will involve consideration in excess of $50,000 on an
annual basis. The Seller has delivered to the Buyer a correct and complete copy
of each contract or other agreement listed in [section]4(l) of the Disclosure
Schedule (as amended to date). To the Knowledge of Seller, no party to any of
such contracts has asserted that Sybra is in breach or default as to any such
contract. To the Knowledge of Seller, none of the parties (other than Sybra) to
any of such contracts is in breach or default as to any such contract.
(m) Litigation. [section]4(m) of the Disclosure Schedule sets forth
each instance in which Sybra or any Employee Benefit Plan or other arrangement
listed on [section]4(n) of the Disclosure Schedule (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, except where the injunction, judgment,
order, decree, ruling, action, suit, proceeding, hearing, or investigation would
not reasonably be expected to involve consideration in excess of $10,000.
(n) Employee Benefits.
(i) [section]4(n) of the Disclosure Schedule lists each
Employee Benefit Plan that Sybra maintains or to which Sybra
contributes and any employment agreements, collective bargaining
agreements, severance agreements or stock-based compensation or other
incentive, insurance or similar, programs which cover current or
former employees of Sybra.
(ii) To the Knowledge of the Seller, each such Employee
Benefit Plan or other arrangement listed on [section]4(n) of the
Disclosure Schedule (and each related trust, insurance contract, or
fund) complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code, except where the
failure to comply would not have a material adverse effect on the
financial condition or results of operations of Sybra, and there has
been no transaction or any act or omission which would subject an
Employee Benefit Plan or any party dealing with an Employee Benefit
Plan to a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax under Sections 4971 through 4980B of the Code, inclusive.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is either
an Employee Pension Benefit Plan or an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has received a post-Tax reform Act of 1986
determination letter
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from the Internal Revenue Service to the effect that it meets the
requirements of Code [section]401(a).
(v) Sybra does not currently contribute, not has Sybra
contributed to a Multiemployer Plan since 1990, and Sybra is not
currently responsible for any "withdrawal liability" as that term is
defined in Section 4201 of ERISA with respect to any Multiemployer
Plan.
(vi) The Sybra, Inc. Retirement Income Plan does not have
any "amount of unfunded benefit liabilities" as such term is
described in Section 4008(a)(18) of ERISA.
(vii) Except as required by applicable law, no Employee
Welfare Benefit Plan has any obligation for post-retirement or post
employment benefits that cannot be terminated upon no more than sixty
(60) days' notice without incurring a liability thereunder.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in [section]7
below).
(b) Notices and Consents. Each Party will give any notices (and cause
each of its Subsidiaries, if any, to give any notices) to third parties, and
each Party will use its reasonable efforts to obtain (and will cause each of its
Subsidiaries, if any, to use its reasonable efforts to obtain) any third party
consents including the Required Consents of Seller and the Required Consents of
Buyer, that the other Party reasonably may request in connection with the
matters referred to in [section]3(a)(iii), [section]3(b)(iii) and [section]4(c)
above and the related Disclosure Schedule. Each of the Parties will (and will
cause each of its Subsidiaries, if any, to) give any notices to, make any
filings with, and use its reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in [section]3(a)(iii), [section]3(b)(iii) and
[section]4(c) above and the related Disclosure Schedule. Without limiting the
generality of the foregoing, each of the Parties will file (and will cause each
of its Subsidiaries, if any, to file as applicable) any notification and report
forms and related material that it may be required to file with the Internal
Revenue Service, the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the Hart-Scott-Rodino Act or
otherwise, will use its reasonable efforts to obtain (and will cause each of its
Subsidiaries, if any, to use its reasonable efforts to obtain) early termination
of the applicable waiting period, and will make (and will cause each of its
Subsidiaries, if any, to use its reasonable efforts to obtain) any further
filings pursuant thereto that may be necessary.
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(c) Operation of Business. The Seller will not permit Sybra to engage
in any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business except (i) as contemplated in the USRP Agreement or
this Agreement, (ii) Sybra may pay dividends or make other distributions to
Valcor as permitted by Sybra's bank credit agreements, (iii) Sybra may repay
intercompany loans from Valcor, and (iv) Sybra may make the dividends and
distributions contemplated by [section]2(c).
(d) Access. The Seller will permit representatives of the Buyer to
have access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of Sybra, to all premises, properties, personnel,
books, records (including tax records), contracts, and documents of or
pertaining to Sybra as Buyer may reasonably request from time to time solely for
the purpose of confirming Seller's compliance with [section]5(c) above. The
Buyer will treat and hold in confidence any Confidential Information it receives
or has received from the Seller or Sybra in the course of due diligence review
or the reviews contemplated by this [section]5(d), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Seller and
or destroy, at Seller's or Sybra's request, all tangible embodiments (and all
copies) including, without limitation, all electronic media, of the Confidential
Information which are in its possession.
(e) Notice of Developments.
(i) The Seller may elect at any time to notify the Buyer of
any development causing a breach of any of its representations and
warranties in [section]4 above. Unless the Buyer has the right to
terminate this Agreement pursuant to [section]9(a)(ii) below by
reason of the development and exercises that right within the period
of ten (10) business days referred to in [section]9(a)(ii) below, the
written notice pursuant to this [section]5(e)(i) will be deemed to
have amended the Disclosure Schedule, to have qualified the
representations and warranties contained in [section]4 above, and to
have cured any misrepresentation or breach of warranty that otherwise
might have existed hereunder by reason of the development.
(ii) Each Party will give prompt written notice to the
other Party of any material adverse development causing a breach of
any of its own representations and warranties in [section]3 above. No
disclosure by any Party pursuant to this [section]5(e)(ii), however,
shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation or breach of warranty.
(f) Other Transactions. Prior to the expiration of the time periods
specified in [section]7(a)( x) and (xi), the Seller agrees, on behalf of itself
and each of its Affiliates, that, prior to Closing it will not, and will cause
each of its officers, directors, representatives and agents not to, directly or
indirectly, take any action to solicit, encourage, initiate or facilitate
(including by way of making available or furnishing information) any inquiries,
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proposals or offers with respect to any merger or consolidation involving Sybra,
the acquisition of Sybra Shares or the acquisition of all or substantially all
of the assets of Sybra other than the Real Property Assets by any person other
than the Buyer or its permitted assigns. After the expiration of the time
periods specified in [section]7(a)( x) and (xi), Seller shall no longer be
subject to the limitations of the foregoing sentence unless Buyer has provided
evidence reasonably satisfactory to Seller that Buyer has obtained the formal
commitment letters specified in [section]7(a)(xi).
(g) Estoppel Certificates.
(i) By no later than five (5) business days following the
date of this Agreement, Seller shall cause Sybra to send out for
execution estoppel certificates, in the form of Exhibit D, to each
of its lessors or sublessors, as the case may be.
(ii) Seller agrees to cause Sybra to use commercially
reasonable efforts, without incurring any additional expenses to any
lessor or sublessor unless such expenditure is required by the terms
of a particular lease (a "Consent Fee"), to obtain the maximum number
of estoppel certificates prior to the Closing Date. Buyer agrees to
pay to Seller, prior to expenditure by Seller, an amount equal to
each Consent Fee. At Closing, Seller shall credit Buyer against the
Purchase Price an amount equal to the aggregate amount paid by Buyer
to Seller in respect of Consent Fees.
(iii) Seller agrees to cause Sybra to promptly deliver to
Buyer copies of the executed estoppel certificates as they are
received by Sybra prior to and on the Closing Date.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as the other Party reasonably may request,
all at the sole cost and expense of the requesting Party (except to the extent
that the requesting Party is entitled to indemnification therefor under
[section]8 below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Sybra, the other Party shall cooperate with it and
its counsel in the defense or contest, make available its personnel, and provide
such
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testimony and access to its books and records as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (except to the extent that the contesting or
defending Party is entitled to indemnification therefor under [section]8 below).
(c) Employee Benefits Matters. The Buyer will adopt and assume at and
as of the Closing each of the Employee Benefit Plans identified in [section]4(n)
of the Disclosure Schedule that Sybra maintains and each trust, insurance
contract, annuity contract, or other funding arrangement that the Seller has
established with respect thereto. The Buyer will ensure that on and after the
Closing Date the Employee Benefit Plans credit employment with Sybra in the same
manner that employment with Sybra prior to the Closing Date was credited for
purposes of eligibility, vesting, and benefit accrual. The Seller will transfer
(or cause the plan administrators to transfer) at and as of the Closing all of
the corresponding assets associated with the Employee Benefit Plans that the
Buyer is adopting and assuming, with such transfers to occur at or as soon as
administratively possible after the Closing without imposition of any
conditions.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
[section]3(a) and [section]4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in [section]7(a)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Buyer shall have received the
Required Consents of Buyer and all other authorizations, consents,
and approvals of governments and governmental agencies referred to in
[section]3(a)(iii), [section]3(b)(iii), and [section]4(c) above;
(vi) all conditions have been satisfied or waived to the
obligations of the parties to the USRP Agreement and the Units
Purchase Agreement and the
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closings of the transactions contemplated in the USRP Agreement shall
occur simultaneously with the Closing;
(vii) all conditions have been satisfied to the
obligations of the parties to the Lease and the closings of the
transactions contemplated in the Lease shall occur simultaneously
with the Closing;
(viii) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyer;
(ix) Passage of the Effective Date of the First Amended
Joint Plan of Reorganization under Chapter 11, filed in the Chapter
11 cases of I.C.H. Corporation and its related debtors, pending in
the United States Bankruptcy Court for the Northern District of Texas
as Jointly Administered Case Number 395-36351-RCM-11;
(x) Buyer shall have completed a satisfactory business and
due diligence review of Sybra; provided, however, that the condition
to closing set forth in this clause (x) shall expire on the
thirty-fifth day following the date of this Agreement;
(xi) Buyer shall have obtained formal commitment letters
for the financing of at least $31,000,000, which commitment letters
shall be on terms and conditions that are reasonably satisfactory to
Buyer from a commercial point of view; provided, however, that the
condition to closing set forth in this clause (xi) shall expire on
the thirty-fifth day following the date of this Agreement; and
(xii) Buyer shall have received the 1996 audited financial
statements of Sybra, including the unqualified opinion of Sybra's
independent public accountants.
The Buyer may waive any condition specified in this [section]7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
[section]3(b) above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
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(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in [section]7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Seller and Sybra shall have
received the Required Consents of Seller and all other
authorizations, consents, and approvals of governments and
governmental agencies referred to in [section]3(a)(ii),
[section]3(b)(ii), and [section]4(c) above;
(vi) all conditions have been satisfied to the obligations
of the parties to the USRP Agreement and the Units Purchase Agreement
and the closings of the transactions contemplated in the USRP
Agreement and the Units Purchase Agreement shall occur simultaneously
with the Closing;
(vii) all conditions have been satisfied to the
obligations of the parties to the Lease and the closings of the
transactions contemplated in the Lease shall occur simultaneously
with the Closing; and
(viii) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby, which may include any instruments
or documents required by Arby's, Inc. to be executed by the Buyer,
will be reasonably satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this [section]7(b) if it
executes a writing so stating at or prior to the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. Except with respect
to the representations and warranties of the Seller contained in
[section][section]4(b), (j), (m) and (n), which shall survive for the applicable
statute of limitations, none of the representations and warranties of the Seller
contained in [section]4 above shall survive the Closing. All of the
representations and warranties of the Parties contained in [section]3 above
shall survive the Closing (unless the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty contained in [section]3 above at
the time of Closing) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
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(b) Indemnification Provisions for Benefit of the Buyer. In the event
the Seller breaches any of its representations and warranties contained in
[section]3(a) and [section]4 of this Agreement, any covenants contained in this
Agreement or any representations and warranties contained in any stock transfer
or other conveyance executed pursuant to this Agreement, and, if there is an
applicable survival period pursuant to [section]8(a) above, provided that the
Buyer makes a written claim for indemnification against the Seller pursuant to
[section]11(g) below within such survival period, then the Seller agrees to
indemnify the Buyer from and against any Adverse Consequences the Buyer shall
suffer through and after the date of the claim for indemnification (but
excluding any Adverse Consequences the Buyer shall suffer after the end of any
applicable survival period) caused proximately by the breach; provided, however,
that the Seller shall not have any obligation to indemnify the Buyer from and
against any Adverse Consequences caused by the breach of any representation or
warranty of the Seller contained in [section]4 of this Agreement other than
those contained in [section]4(j), (m) and (n). Seller's indemnification
obligation to the Buyer pursuant to this Subsection and [section]10 (other than
with respect to breaches of the representations and warranties of Seller
contained in [section][section]3(a) and 4(b)) together with Valcor's
indemnification obligations under the USRP Agreement shall not exceed $4,000,000
in the aggregate, determined, as of any relevant date, based upon claims
actually paid as of such date by Valcor to Buyer or USRP. Buyer agrees that it
will not seek indemnification for any claim under this Subsection unless the
aggregate of all claims under this Subsection together with all claims under the
USRP Agreement , determined as of the date any claim is made, will result in
loss to Buyer and/or USRP in excess of $250,000 in the aggregate, and then only
to the extent of such excess, up to and subject to the $4,000,000 limitation
specified above.
(c) Indemnification Provisions for Benefit of the Seller. In the
event the Buyer breaches any of its representations in [section]3 above or any
of its covenants contained in this Agreement, the Buyer agrees to indemnify the
Seller from and against any Adverse Consequences the Seller shall suffer through
and after the date of the claim for indemnification caused proximately by the
breach.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party") under this [section]8,
then the Indemnified Party shall promptly (and in any event within
ten (10) business days after receiving notice of the Third Party
Claim) notify the Indemnifying Party thereof in writing.
(ii) The Indemnifying Party will have the right to assume
and thereafter conduct the defense of the Third Party Claim with
counsel of its choice; provided, however, that the Indemnifying Party
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim
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without the prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed settlement
involves only the payment of money damages and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in [section]8(d)(ii)
above, however, the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party except to the extent that the Indemnified Party
elects to waive its right to indemnification hereunder with respect
to such claim.
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage and take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this [section]8. All
indemnification payments under this [section]8 shall be deemed adjustments to
the Purchase Price.
(f) Other Indemnification Provisions. The indemnification provisions
in this [section]8 are the sole remedy any Party may have after the Closing for
breach of representation or warranty in this Agreement, any covenant in this
Agreement (excluding those set forth in [section]6 of this Agreement) or any
representations and warranties contained in any stock transfer or other
conveyance executed pursuant to this Agreement; provided, however, that the
Buyer acknowledges and agrees that it shall not have any remedy after the
Closing for any breach of the representations and warranties in [section]4 above
(other than [section]4(j), (m) and (n)); and provided further, either Party
shall be entitled to specific performance of all covenants.
9. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the
event (A) the Seller has within the then previous ten (10) business
days given the Buyer any notice pursuant to [section]5(e)(i) above
and (B) the development that is the subject of the notice has had
22
<PAGE>
or is reasonably expected to have a material adverse effect upon the
financial condition or results of operations of Sybra;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A) in
the event the Seller has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of thirty (30) days after the
notice of breach, or (B) if the Closing shall not have occurred on or
before April 14, 1997, by reason of the failure of any condition
precedent under [section]7(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement);
(iv) the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in
the event the Buyer has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of thirty (30) days after the
notice of breach or (B) if the Closing shall not have occurred on or
before April 14, 1997, by reason of the failure of any condition
precedent under [section]7(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(v) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the expiration of
the time periods provided in [section]7(a)(x) and (xi) if Buyer is
not satisfied with its business and due diligence review of Sybra as
provided in [section]7(a)(x) or Buyer has not obtained formal
commitment letters as provided in [section]7(a)(xi).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to [section]9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in [section]5(d) above shall survive
termination.
10. Income Tax Matters.
(a) Income Tax Sharing Agreements. Any Income Tax sharing agreement
between Affiliated Group Parent or any of its Subsidiaries and Sybra is
terminated as of the Closing Date and will have no further effect for any future
taxable year.
(b) Income Taxes of Other Persons. The Seller agrees to indemnify the
Buyer from and against any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any Liability
of Sybra for Income
23
<PAGE>
Taxes of any Person other than Sybra under (i) Reg. [section]1.1502-6 (or any
similar provision of state, local or foreign law), or (ii) any Income Tax
sharing agreement.
(c) Returns for Periods Through the Closing Date. Affiliated Group
Parent will include the income of Sybra (including any deferred income triggered
into income by Reg. [section]1.1502-13 and Reg. [section]1. 1502-14 and any
excess loss accounts taken into income under Reg. [section]1.1502-19) on the
Affiliated Group Parent consolidated federal Income Tax Returns for all periods
through the Closing Date and pay any Income Taxes attributable to such income,
including without limitation any Income Tax on any income or gain Sybra may
realize in respect of the transactions contemplated by the USRP Agreement. Sybra
will furnish Income Tax information to Affiliated Group Parent for inclusion in
Affiliated Group Parent's federal consolidated Income Tax Return for the period
which includes the Closing Date and will pay to Affiliated Group Parent its
separate company Income Tax liability for such period, computed in accordance
with the Affiliated Group Parent tax sharing agreement in effect through the
Closing Date in accordance with Sybra's past custom and practice, including
without limitation any Income Tax on any income or gain Sybra may realize in
respect of the transactions contemplated by the USRP Agreement. The income of
Sybra for the period up to and including the Closing Date and for the period
after the Closing Date shall be determined by closing the books of Sybra as of
the end of the Closing Date.
(d) Audits. Affiliated Group Parent will allow Sybra and its counsel
to participate at its own expense in any audits of Affiliated Group Parent
consolidated Income Tax Returns to the extent that such returns relate to Sybra
tax periods ending on or prior to the Closing Date. Affiliated Group Parent will
cooperate with Sybra and its counsel and provide access to books and records
relating to Sybra reasonably related to such audit. Affiliated Group Parent will
not settle any such audit in a manner which would adversely affect Sybra after
the Closing Date without the prior written consent of the Buyer or Sybra, which
consent shall not unreasonably be withheld.
(e) Carrybacks. Affiliated Group Parent will immediately pay to the
Buyer any Income Tax refund (or reduction in Income Tax liability) resulting
from a carryback of a post-Closing Date Income Tax attribute of Sybra into the
Affiliated Group Parent consolidated Income Tax return, when such refund or
reduction is realized by the Affiliated Group Parent group. Affiliated Group
Parent will cooperate with Sybra in obtaining such refunds (or reduction in
Income Tax liability), including through the filing of amended Income Tax
returns or refund claims. The Buyer agrees to indemnify Affiliated Group Parent
for any Income Taxes resulting from the disallowance of such post-Closing Date
Income Tax attribute on audit or otherwise.
(f) Post-Closing Elections. At Affiliated Group Parent's request, the
Buyer will cause Sybra to make and/or join with Affiliated Group Parent in
making certain tax return elections after Closing, as required under the
Affiliated Group Parent tax sharing agreement in effect through the Closing
Date. At Affiliated Group Parent's request, the Buyer will cause Sybra to make
or join with Affiliated Group Parent in making any other
24
<PAGE>
election if the making of such election does not have a material adverse impact
on the Buyer (or Sybra) for any postacquisition Income Tax period. Seller agrees
to indemnify Buyer for any liability resulting from such elections.
(g) Indemnification for Post-Closing Transactions. Buyer agrees to
indemnify Seller and Affiliated Group Parent for any additional Income Tax owed
by Seller and/or Affiliated Group Parent (including Income Tax owed by Seller
and/or Affiliated Group Parent due to this indemnification payment) resulting
from any transaction not in the ordinary course of business occurring on or
after the Closing Date following Buyer's purchase of Seller's Sybra Shares.
(h) Post-Closing Transactions not in the Ordinary Course. Buyer and
Seller agree to report all transactions not in the Ordinary Course of Business
occurring on the Closing Date after Buyer's purchase of Seller's Sybra Shares on
Buyer's Income Tax Return to the extent permitted by Reg.
[section]1.1502-76(b)(1)(B).
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party or any affiliate of such Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the Party which intends, or which has
an affiliate that intends, to issue such press release or make such public
announcement will advise the other Party prior to making the disclosure and
provide the other Party opportunity to comment upon the release or
announcement).
(b) No Third Party Beneficiaries Other than Affiliated Group Parent.
This Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns, and as
otherwise set forth in this [section]11(b). The Buyer acknowledges and agrees
that Affiliated Group Parent is intended to be and shall be a beneficiary of
Buyer's representations, warranties, covenants and indemnification obligations
in [section]10 of this Agreement.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided however, that (i) Buyer may collaterally
assign its rights, interests and
25
<PAGE>
obligations hereunder to its lenders providing the financing to complete the
transactions contemplated by this Agreement, and (ii) after the Closing, Seller
may assign its rights, interests, or obligations under this Agreement to any
successor of Seller's business or any affiliate of Seller, provided that,
concurrently with such assignment Valhi, Inc. enters into an assumption
agreement with respect to Seller's obligations under this Agreement in form and
substance reasonably satisfactory to Buyer.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Valcor, Inc.
---------------- Three Lincoln Centre, Suite 1700
5430 LBJ Freeway
Dallas, TX 75240-2697
Attention: Bobby D. O'Brien
Tel: 972-233-1700
Fax: 972-239-0142
Copy to: James L. Palenchar
------- Bartlit Beck Herman Palenchar & Scott
511 16th Street, Suite 500
Denver, Colorado 80202
Tel: 303-592-3100
Fax: 303-592-3140
If to the Buyer: I.C.H. Corporation
--------------- c/o James R. Arabia
9404 Genesee Avenue, Suite 330
La Jolla, CA 92037
Tel: 619-587-8533
Fax: 619-535-1687
26
<PAGE>
Copy to: Selig D. Sacks, Esq.
------- Pryor, Cashman, Sherman & Flynn
410 Park Avenue, 10th floor
New, York, NY 10022
Tel: 212-421-4100
Fax: 212-326-0806
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited (next-day) courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient; provided, however, that any such notice sent by expedited (next-day)
courier shall be deemed to have been duly given when delivered to the address
set forth above for the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications hereunder are
to be delivered by giving the other Party notice in the manner herein set forth.
(h) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware. Any judicial proceeding brought by or against any party to this
Agreement in respect of claims arising under or relating to this Agreement shall
be brought only in a court of competent jurisdiction located in the State of
Delaware, United States of America. By execution and delivery of this Agreement,
each party accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts.
Each party to this Agreement waives any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. Nothing in this
subsection shall affect the right to serve process in any manner permitted by
law.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any such prior or subsequent occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or
27
<PAGE>
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
(k) Expenses. Each of the Buyer and the Seller will bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing sentence, Buyer shall bear the costs of any and all transfer
taxes, including without limitation any use or sales taxes, associated with or
related to the sale of the Sybra Shares.
(l) Construction. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation.
(m) Incorporation of Exhibits. The Exhibits and any annexes and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
I.C.H. CORPORATION
By: ________________________________
Title: _____________________________
VALCOR, INC., a Delaware corporation
By: ________________________________
Title: _____________________________
20815.d9
28
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
VALCOR, INC. AND I.C.H. CORPORATION
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT BETWEEN VALCOR, INC. AND
I.C.H. CORPORATION dated and effective as of April 18, 1997 (the "Amendment") is
by and between I.C.H. CORPORATION, a Delaware corporation (the "Buyer"), and
VALCOR, INC., a Delaware corporation (the "Seller").
RECITALS
--------
WHEREAS, Seller and Buyer entered into a Stock Purchase Agreement dated as
of February 7, 1997 (the "Purchase Agreement"); and
WHEREAS, Seller and Buyer desire to amend certain provisions of the
Purchase Agreement as set forth in this Amendment;
COVENANTS
---------
NOW, THEREFORE, in consideration of the foregoing, and in further
consideration of the mutual covenants and considerations herein contained,
Seller and Buyer hereby agree as follows:
1. Exhibit A. Exhibit A attached to the Agreement is hereby deleted and
Exhibit A attached hereto is substituted for the original Exhibit A and
incorporated into the Agreement as if attached thereto. For all purposes related
to the Agreement, the term "Agreed Value" shall mean and refer to such
information as set forth on Exhibit A attached hereto.
2. Exhibit B. Exhibit B attached to the Agreement is hereby amended by
deleting the existing Section 2(b) and substituting the following:
"List of Sybra indebtedness to be repaid in full on the Closing date by
Buyer:
Valcor Credit Facility $20,000,000
Such Sybra indebtedness may be increased on or prior to the Closing date
and shall be repaid in full on the Closing Date by Buyer in an aggregate
amount of $23,772,000."
<PAGE>
Exhibit B attached to the Agreement is further amended by inserting under
Section 4(c) thereof the following:
Consents required for assignment and sublease of sandwich leases:
Unit 518 Unit 995
Unit 630 Unit 1172
Unit 785 Unit 5711"
Unit 984
Exhibit B attached to the Agreement is further amended by deleting existing
Schedule B-3 and substituting new Schedule B-3 attached hereto.
3. Section 2(d). Section 2(d) of the Agreement is amended by deleting the
phrase "April 14, 1997" and substituting the phrase "April 30, 1997."
4. Section 2(g). Section 2(g) of the Agreement is amended and restated as
follows:
"(g) Contingent Consideration. Buyer agrees to pay Seller additional,
contingent consideration computed in accordance with this ss.2(g).
(i) Subject to the other provisions of this ss.2(g)(i), commencing on
the Closing Date and continuing through the earliest of (a) the date Sybra
enters into a lease for Unit #740 or for another location at the Park City
Mall, Lancaster, Pennsylvania, which lease is for a term of one year or
more and requires Sybra to make expenditures for tenant improvements in an
amount in excess of $350,000 (a "Qualifying Lease"), (b) the date upon
which Buyer pays in full all of the amounts due under ss.2(g)(ii) and/or
ss.2(g)(iii), as applicable, Buyer shall pay Seller an amount equal to 50%
of the Monthly Free Cash Flow of Unit #740 for each Fiscal Month, or
portion thereof (the "Monthly Contingent Consideration"). Buyer shall pay
all amounts due to Seller for Monthly Contingent Consideration under this
ss.2(g)(i) by wire transfer or delivery of other immediately available
funds within 15 business days after the last business day of each such
Fiscal Month, or portion thereof; provided however, that with respect to
the period commencing on the Closing Date and ending on July 31, 1997 (the
"Initial Period"), no payments shall be due and payable until August 15,
1997 and, provided further, if Sybra enters into a Qualifying Lease within
the Initial Period, no payments of Monthly Contingent Consideration under
this ss.2(g)(i) shall be due or payable. If Sybra does not enter into a
Qualifying Lease during the Initial Period, Buyer shall pay Seller on
August 15, 1997 an aggregate amount equal to the Monthly Contingent
Consideration for each Fiscal Month during the Initial Period. If Sybra
enters into a Qualifying Lease after the Initial Period, then any Monthly
Contingent Consideration previously paid shall be reimbursed to Buyer by
Seller by wire transfer or delivery of other immediately available funds
within 15 business days after Buyer notifies Seller that Sybra has entered
into a Qualifying Lease.
-2-
<PAGE>
(ii) In the event that, after the Closing Date, (a) Sybra enters into
a lease for Unit #740 or for another location at the Park City Mall,
Lancaster, Pennsylvania, or (b) Sybra has not been forced by the lessor to
vacate Unit #740 on or before the second anniversary of the Closing Date,
Buyer shall pay Seller the sum of $2,000,000 (the "Lump Sum Contingent
Consideration") on the second anniversary of the Closing Date (the
"Determination Date"). At Buyer's option, if Sybra has not entered into a
lease for Unit #740 or for another location at the Park City Mall,
Lancaster, Pennsylvania and Sybra has not been forced by the lessor to
vacate Unit #740 on or before the second anniversary of the Closing Date,
the Determination Date may be extended from the second anniversary of the
Closing Date to the third anniversary of the Closing Date, provided that
Buyer shall have given Seller written notice of such extension on or before
30 days prior to the second anniversary of the Closing Date, and, provided
further, that Buyer shall pay Seller an amount equal to 50% of the Monthly
Free Cash Flow of Unit #740 for each Fiscal Month, or portion thereof (the
"Additional Monthly Contingent Consideration"), during the period from the
second anniversary of the Closing Date to the date of payment in full of
the Lump Sum Contingent Consideration. In the event Buyer makes payments of
Additional Monthly Contingent Consideration in respect of a Fiscal Month,
no amounts shall be due from Buyer to Seller for Monthly Contingent
Consideration for the same Fiscal Month. Buyer shall pay the Lump Sum
Contingent Consideration to Seller by wire transfer or delivery of other
immediately available funds within 5 business days after the Determination
Date. Buyer shall pay all amounts due to Seller for Additional Monthly
Contingent Consideration under this ss.2(g)(ii) by wire transfer or
delivery of other immediately available funds within 15 business days after
the last business day of each applicable Fiscal Month. Upon and after the
date of payment in full of all amounts due pursuant to this ss.2(g)(ii),
Buyer shall not be obligated to pay Seller any amounts pursuant to
ss.2(g)(iii).
(iii) If, prior to the payment of the Lump Sum Contingent
Consideration due pursuant to ss.2(g)(ii), (a) the lease in effect as of
the Closing Date for Unit #740 is terminated and, as a result, Sybra is
forced by the lessor to vacate Unit #740, and (b) Sybra has not entered
into a lease for another location at the Park City Mall, Lancaster,
Pennsylvania, Buyer shall pay Seller cash in an amount equal to 50% of the
cumulative Monthly Free Cash Flow of Unit #740, calculated from the Closing
Date to the date upon which Sybra vacates Unit #740 (the "Supplemental
Consideration"). Buyer shall pay the amount due for Supplemental
Consideration pursuant to this ss.2(g)(iii) to Seller by wire transfer or
delivery of other immediately available funds, within 5 business days after
the date Buyer vacates Unit #740. Unless Buyer subsequently enters into a
lease for another location at the Park City Mall, Lancaster, Pennsylvania
upon and after the date of payment in full of the Supplemental
Consideration due pursuant to this ss.2(g)(iii), Buyer shall not be
obligated to pay Seller the Lump Sum Contingent Consideration pursuant to
ss.2(g)(ii) nor, pursuant to ss.2(g)(i) and (ii), any amounts for Monthly
Contingent Consideration or Additional Monthly Contingent Consideration for
periods commencing after the date of such
-3-
<PAGE>
payment in full of the Supplemental Consideration due pursuant to this
ss.2(g)(iii). In the event that Buyer subsequently enters into a lease for
another location at the Park City Mall, Lancaster, Pennsylvania, Buyer
shall be obligated to pay the Lump Sum Contingent Consideration due
pursuant to ss.2(g)(ii) and, pursuant to ss.2(g)(i) and (ii), amounts due
for Monthly Contingent Consideration or Additional Monthly Contingent
Consideration for all periods prior to payment in full of the Lump Sum
Contingent Consideration pursuant to ss.2(g)(ii).
(iv) The foregoing notwithstanding, in the event that Sybra's lease
with respect to Unit #5666 is terminated as a result of Seller's failure to
obtain the consent of the landlord for Unit #5666 with respect to the
transactions contemplated by this Agreement, the Lump Sum Contingent
Consideration, if and when due and payable to Seller, shall be reduced by
$158,000."
5. Section 11(d). Section 11(d) of the Agreement is hereby amended by
deleting the word "and" on the seventh line and inserting the following language
at the end thereof:
"and (iii) Buyer may assign its right to purchase the Sybra Shares
pursuant to Section 2 to any wholly-owned subsidiary of Buyer;
provided, however, that any such assignment shall not in any way
affect (a) Buyer's right to receive, under certain circumstances,
certain post-closing payments from Seller pursuant to Section 2(f),
(b) Buyer's obligation, under certain circumstances, to make certain
post-closing payments to Seller pursuant to Section 2(g) or (c) any
other rights or obligations of Buyer under this Agreement."
6. Except as amended, modified or supplemented by this Amendment, the
parties confirm and ratify the terms and provisions of the Purchase Agreement.
* * * * *
IN WITNESS WHEREOF, this Amendment is entered into by the duly
authorized representatives of the parties hereto as of the date first above
written.
I.C.H. CORPORATION
By: ________________________________
Title: _____________________________
VALCOR, INC., a Delaware corporation
By: ________________________________
Title: _____________________________
-4-
<PAGE>
23152.d7
-5-
[EXECUTION COPY]
LOAN AGREEMENT
between
SYBRA, INC.
and
ATHERTON CAPITAL INCORPORATED
Dated as of ____________________, 1997
LOAN TRANCHE A
ARBY'S RESTAURANTS
<PAGE>
LOAN AGREEMENT
Table of Contents
<TABLE>
<S> <C> <C>
SECTION I. INTERPRETATION..................................................................... 1
--------------
1.01. Definitions........................................................................ 1
-----------
1.02. GAAP............................................................................... 1
----
1.03. Governing Law...................................................................... 1
-------------
1.04. Construction....................................................................... 1
------------
1.05. Entire Agreement................................................................... 1
----------------
1.06. Other Interpretive Provisions...................................................... 1
-----------------------------
SECTION II. CREDIT FACILITY.................................................................... 1
---------------
2.01. Term Loan.......................................................................... 1
---------
(a) Loan..................................................................... 1
----
(b) Interest Rate............................................................ 2
-------------
(c) Scheduled Payments....................................................... 2
------------------
(d) Maximum Interest Rate.................................................... 2
---------------------
2.02. Origination Fee.................................................................... 2
---------------
2.03. Prepayments........................................................................ 2
-----------
(a) Prepayment in Whole...................................................... 2
-------------------
(b) Borrower Acknowledgement................................................. 2
------------------------
2.04. Other Payment Terms................................................................ 3
-------------------
(a) Place and Manner......................................................... 3
----------------
(b) Date..................................................................... 3
----
(c) Late Payments............................................................ 3
-------------
(d) Application of Payments.................................................. 3
-----------------------
2.05. Note(s)............................................................................ 3
-------
2.06. Taxes on Payments.................................................................. 3
-----------------
2.07. Credit Support..................................................................... 3
--------------
(a) Security................................................................. 3
--------
(b) Further Assurances....................................................... 3
------------------
(c) Partial Release of Security Interest against Primary Collateral.......... 4
---------------------------------------------------------------
(d) Release of Negative Pledge Agreement - Secondary Collateral.............. 5
-----------------------------------------------------------
2.08. Loan Assignment and Assumption..................................................... 5
------------------------------
SECTION III. CONDITIONS PRECEDENT............................................................... 5
--------------------
3.01. Documentary and Related Conditions Precedent....................................... 6
--------------------------------------------
SECTION IV. REPRESENTATIONS AND WARRANTIES..................................................... 6
------------------------------
4.01. Borrower's Representations and Warranties.......................................... 6
-----------------------------------------
(a) Legal Status............................................................. 6
------------
(b) Authorization and Validity............................................... 6
--------------------------
(c) Formation and Organizational Documents................................... 6
--------------------------------------
(d) No Violation............................................................. 6
------------
(e) Permits and Licenses..................................................... 6
--------------------
(f) Litigation............................................................... 6
----------
(g) Title.................................................................... 6
-----
(h) Financial Statements..................................................... 7
--------------------
(i) Solvency, Etc............................................................ 7
-------------
(j) Franchise Agreement and Lease............................................ 7
-----------------------------
(k) Leasehold Mortgage....................................................... 7
------------------
(l) Taxes.................................................................... 8
-----
(m) Compliance with Laws..................................................... 8
--------------------
i
<PAGE>
(n) ERISA.................................................................... 8
-----
(o) Accuracy of Information Furnished........................................ 8
---------------------------------
SECTION V. COVENANTS.......................................................................... 8
---------
5.01. Affirmative Covenants.............................................................. 8
---------------------
(a) Compliance Certificates.................................................. 8
-----------------------
(b) Communications with Franchisor........................................... 9
------------------------------
(c) Other Documents.......................................................... 9
---------------
(d) Books and Records........................................................ 9
-----------------
(e) Inspections.............................................................. 9
-----------
(f) Insurance................................................................ 9
---------
(g) Governmental Charges and Other Indebtedness.............................. 10
-------------------------------------------
(h) Use of Proceeds.......................................................... 10
---------------
(i) General Business Operations.............................................. 10
---------------------------
(j) Additional Debt.......................................................... 10
---------------
(k) Notices.................................................................. 11
-------
(l) Loan Documents........................................................... 11
--------------
(m) Permitted Contests....................................................... 11
------------------
(n) Performance by Lender.................................................... 11
---------------------
(o) Casualty and Condemnation................................................ 11
-------------------------
(p) Extension and Renewal of Franchise Agreements and Lease Agreement........ 12
-----------------------------------------------------------------
(q) Financial Statements and Reports......................................... 12
--------------------------------
(r) ERISA.................................................................... 13
-----
(s) Minimum Liquidity Level.................................................. 13
-----------------------
(t) Capital Expenditures..................................................... 13
--------------------
(u) Landlord Estoppel Agreements; Leasehold Mortgages........................ 13
-------------------------------------------------
(v) Mortgage Non-Disturbance Agreements...................................... 13
-----------------------------------
5.02. Negative Covenants................................................................. 13
------------------
(a) Liens.................................................................... 13
-----
(b) Asset Dispositions....................................................... 13
------------------
(c) Franchise Agreements; Leases & Material Contracts........................ 14
-------------------------------------------------
(d) Change in Control........................................................ 14
-----------------
(e) Merger and Purchase Transactions......................................... 14
--------------------------------
(f) Transactions with Affiliates............................................. 14
----------------------------
(g) Contingent Liabilities................................................... 14
----------------------
(h) Restrictions on Dividends & Distributions................................ 14
-----------------------------------------
(i) Investment Limitation.................................................... 15
---------------------
(j) Change in Nature of Business............................................. 15
----------------------------
(k) Pre Distribution Fixed Charge Ratio...................................... 15
-----------------------------------
SECTION VI. DEFAULT............................................................................ 15
-------
6.01. Events of Default.................................................................. 15
-----------------
(a) Monetary................................................................. 15
--------
(b) Performance of Obligations............................................... 15
--------------------------
(c) Representations and Warranties........................................... 16
------------------------------
(d) Liens, Attachment; Condemnation.......................................... 16
-------------------------------
(e) ......................................................................... 16
(f) Transfer of Property or Interest in Borrower............................. 16
--------------------------------------------
(g) Adverse Financial Condition.............................................. 16
---------------------------
(h) Termination or Revocation of Guaranty.................................... 16
-------------------------------------
(i) Default under Franchise Agreements....................................... 16
----------------------------------
(j) Default under Lease...................................................... 16
-------------------
(k) Default under Other Material Restaurant Agreements....................... 16
--------------------------------------------------
(l) Voluntary Bankruptcy; Insolvency; Dissolution............................ 17
---------------------------------------------
(m) Involuntary Bankruptcy................................................... 17
----------------------
ii
<PAGE>
6.02. Remedies........................................................................... 17
--------
SECTION VII. MISCELLANEOUS...................................................................... 17
-------------
7.01. Notices............................................................................ 17
-------
7.02. Expenses........................................................................... 18
--------
7.03. Indemnification.................................................................... 18
---------------
7.04. Waivers; Amendments................................................................ 18
-------------------
7.05. Successors and Assigns............................................................. 19
----------------------
(a) Binding Effect........................................................... 19
--------------
(b) Loan Sales and Participation; Disclosure of Information.................. 19
-------------------------------------------------------
7.06. Setoff............................................................................. 19
------
7.07. No Third Party Rights.............................................................. 19
---------------------
7.08. Partial Invalidity................................................................. 19
------------------
7.09. JURY TRIAL......................................................................... 20
----------
7.10. Counterparts....................................................................... 20
------------
7.11. Recourse........................................................................... 20
--------
7.12. Cumulative Rights.................................................................. 20
-----------------
7.13. Survival........................................................................... 20
--------
7.14. Lender Discussions with the Franchisor............................................. 20
--------------------------------------
SCHEDULES:
1.01 Definitions
2.01 Liens Existing on the Closing Date
3.01 Initial Conditions Precedent
4.01(f) Litigation
4.01(j) List of Affiliates, Subsidiaries and Other Franchise Ownership Interests
5.01(h) Use of Proceeds
5.02(g) Contingent Obligations
EXHIBITS:
A Note
B Matters to be Covered by Opinion of Borrower's Counsel
C Compliance Certificate
D Calculation of Adjusted Free Cash Flow
E Lease Summary
F Leasehold/Deed of Trust Mortgage
G Security Agreement
H Negative Pledge Agreement
I Mortgage Non-Disturbance Agreement
J Environmental Indemnity
K Guaranty Agreement
L Solvency Certificate
M Escrow Agreement
ATTACHMENTS:
1 List of Restaurants
2 Primary Collateral
3 Secondary Collateral
4 USRP Restaurant Leases
5 Franchise Agreements to be Extended
6 Illustration of Pre Distribution Fixed Charge Ratio
iii
<PAGE>
7 Illustration of Post Distribution Fixed Charge Ratio
8 Restaurants which may be closed/Restaurants Where Consent to Merger Not Obtained
9 Salary, Wage and Bonus
</TABLE>
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of _________________, 1997 (this
"Agreement"), is entered into by and between:
(1) SYBRA, INC., a Michigan corporation, being the surviving entity of
a merger with Newco ("Borrower"); and
(2) ATHERTON CAPITAL INCORPORATED, a Delaware corporation (together
with its successors and assigns, "Lender").
AGREEMENT
In consideration of the mutual covenants herein contained, Borrower
and Lender hereby agree as follows:
SECTION I. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Loan Document, each term set forth in Schedule 1.01, when used in this
Agreement or any other Loan Document, shall have the respective meaning given to
that term in Schedule 1.01 or in the provision of this Agreement or other Loan
Document referenced in Schedule 1.01, and terms defined in the singular shall
have the same meaning when used in the plural and vice versa.
1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Loan Document, all accounting terms used in this Agreement or any other Loan
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP.
1.03. Governing Law. This Agreement and each of the other Loan
Documents shall be governed by and construed in accordance with the laws of the
State of California without reference to conflicts of law rules.
1.04. Construction. Each of this Agreement and the other Loan
Documents is the result of negotiations among, and has been reviewed by,
Borrower, Lender and their respective counsel. Accordingly, this Agreement and
the other Loan Documents shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.05. Entire Agreement. This Agreement and each of the other Loan
Documents, taken together, constitute and contain the entire agreement of
Borrower and Lender and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
1.06. Other Interpretive Provisions. References in this Agreement and
each of the other Loan Documents to any document, instrument or agreement (a)
shall include all exhibits, schedules and other attachments thereto, (b) shall
include all documents, instruments or agreements issued or executed in
replacement thereof, and (c) shall mean such document, instrument or agreement,
or replacement or predecessor thereto, as amended, modified and supplemented
from time to time and in effect at any given time. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement or any
other Loan Document shall refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Loan Document shall not be construed to be limiting or exclusive.
SECTION II. CREDIT FACILITY.
2.01. Term Loan.
(a) Loan. Subject to the terms and conditions of the Loan Documents,
Lender agrees to advance to Borrower on the Closing Date a term loan in the
principal amount of FOUR MILLION SEVEN HUNDRED FOUR THOUSAND AND NO/100'S
<PAGE>
Dollars and No/100 ($4,704,000) (the "Loan"). Lender shall advance the Loan to
Borrower in a single advance. Borrower may not reborrow the principal amount of
the Loan after repayment or prepayment thereof.
(b) Interest Rate. Borrower shall pay interest on the unpaid principal
amount of the Loan from the Closing Date until the Loan Maturity Date (as
defined below), at the rate of _________________________________________ percent
(______._____%) per annum. All computations of interest shall be based upon a
360-day year of twelve 30-day months and, in the case of any partial month, on
the actual number of days elapsed in such month.
(c) Scheduled Payments. Principal and interest payments shall be
payable in accordance with the terms of each Note, and on the loan maturity date
(each as a "Loan Maturity Date" as such term is defined in each Note).
(d) Maximum Interest Rate. In the event that the applicable interest
rate on the Loan is determined to be in excess of the legal maximum rate, the
portion of any interest payments made by Borrower representing the amount in
excess of the applicable legal maximum rate shall be deemed a payment of
principal and applied against the principal of the Loan. Neither this Agreement
nor any other Loan Document shall require the payment or permit the collection
of interest or any late payment charge in excess of the maximum rate permitted
by law. If herein or any other Loan Document any excess of interest or late
payment charge in such respect is provided for or shall be adjudicated to be so
provided for, neither Borrower, nor its successors or assigns shall be obligated
to pay such interest or late payment charge in excess of the maximum amount
permitted by law, and the right to demand the payment of any such excess shall
be and hereby is waived, and this provision shall control any other provision of
this Agreement or any other Loan Document.
2.02. Origination Fee. In connection with the Loan, Borrower shall
pay to Lender an origination fee (the "Origination Fee") equal to one point
seven five percent (1.75%) of the principal amount of the Loan. Borrower shall
be credited with the application deposit and commitment fee previously paid to
Lender with Borrower's loan application.
2.03. Prepayments.
(a) Prepayment in Whole. Borrower acknowledges that any prepayment of
the Loan under this Agreement will cause Lender to lose its interest rate yield
on the Loan and will possibly require that Lender reinvest any such prepayment
amount in loans of a lesser interest rate yield. As a consequence, Lender and
Borrower agree as an integral part of the consideration for Lender making the
Loan under this Agreement, that Borrower may prepay the principal balance of a
Note in full but not in part on a Payment Date, provided that Borrower is not in
default of any term, condition or provision of any Loan Documents. Borrower
understands that any prepayment shall require payment of the Yield Maintenance
Amount on such Payment Date and, if Borrower elects to prepay, Borrower agrees
to pay such Yield Maintenance Amount. In the event that Borrower elects to
prepay the principal balance of a Note, Borrower will notify Lender in writing
of Borrower's election to prepay such Note in full and agrees to specify in such
notice the proposed Payment Date (for purposes of being a date on which
prepayment occurs, the "Prepayment Date") for prepayment (which date shall not
be less than thirty (30) days nor more than sixty (60) days from the date of
said notice). Lender will notify Borrower within twenty (20) days of its receipt
of such notice from Borrower in respect of the Note to be prepaid: the estimated
total amount of accrued and unpaid interest, the unpaid principal balance, and
Yield Maintenance Amount payable on the proposed Prepayment Date, subject to
adjustment in the event of changes in the Treasury Rate, all of which shall be
paid by Borrower to Lender on the Prepayment Date.
(b) Borrower Acknowledgement. Borrower hereby acknowledges that the
Lender would not have agreed to make the Loan without the prepayment provisions
set forth in Section 2.03(a) and hereby waives any right or claim to the
prepayment of the Loan (whether such prepayment is any optional prepayment under
Section 2.03(a) or a mandatory prepayment required by any other provision of
this Agreement or the other Loan Documents, including, without limitation, a
prepayment upon acceleration) other than as set forth in this Section 2.03.
Borrower hereby acknowledges that the inclusion of this waiver of prepayment
rights and agreement to pay the Yield Maintenance Amount for voluntary or
involuntary prepayment was separately negotiated with Lender, that the economic
value of the various elements of this waiver and agreement was discussed, that
the consideration given by Borrower for the Loan was adjusted to reflect the
specific waiver and agreement negotiated between Borrower and Lender and
contained herein.
Borrower's Initials ____
2.04. Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due to Lender
hereunder, without setoff or counterclaim as against Lender, by payments at
Lender's office, located at the address specified in Section 7.01, or at such
other office designated in
2
<PAGE>
writing by Lender, in lawful money of the United States not later than 12:00
noon, San Francisco, California time, on the date due. Following an Event of
Default, Lender shall have the right, at Lender's sole option, to require
Borrower to make payment by means of the ACH System or other similar electronic
funds transfer system.
(b) Date. Whenever any payment due hereunder shall fall due on a day
other than 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
interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by Borrower
under this Agreement or the other Loan Documents (including, without limitation,
principal or interest payable on the Loan, any Yield Maintenance Amount, any
fees or other amounts) remain unpaid for five (5) calendar days after such
amounts are due, Borrower shall pay interest on the aggregate, outstanding
balance of such amounts from the date due until those amounts are paid in full
at a per annum rate equal to the Default Rate. In addition, Borrower shall pay
promptly to Lender, as liquidated damages, a late payment charge of five percent
(5%) of the amount of any such late payment. Borrower acknowledges that Lender
will incur additional expenses as a result of any late payments hereunder, which
expenses would be impracticable to quantify, and that Borrower payments under
this Section 2.04(c) are a reasonable estimate of such expenses.
(d) Application of Payments. All payments hereunder shall be applied
first to unpaid fees, costs and expenses then due and payable under this
Agreement or the other Loan Documents, second to accrued interest and the Yield
Maintenance Amount, if any, then due and payable under this Agreement or the
other Loan Documents, and finally to reduce the principal amount outstanding of
the Loan in inverse order of maturity.
2.05. Note. The obligation of Borrower to repay the Loan and to pay
interest thereon at the rate provided herein shall be evidenced by those certain
promissory notes, each in the form of Exhibit A (individually a "Note" and
collectively a "Note") and each such Note shall be collectively (a) in an
aggregate amount equal to the amount of the Loan, (b) dated the date hereof, and
(c) otherwise appropriately completed.
2.06. Taxes on Payments. All payments made by Borrower under this
Agreement and the other Loan Documents shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any governmental authority (collectively called "Taxes"). If
Borrower fails to pay any Taxes when due to the appropriate taxing authority,
Borrower shall indemnify Lender for any incremental taxes, interest or penalties
that may become payable by Lender as a result of any such failure. The
agreements in this Section 2.06 shall survive the termination of this Agreement.
2.07. Credit Support.
(a) Security. The Obligations shall be secured by the following:
(i) The Security Agreement;
(ii) Each Leasehold Mortgage;
(iii) The Guaranty; and
(iv) Each of the other documents, agreements and
certificates listed on Schedule 3.01 which shall be delivered by Borrower to
Lender on or prior to the Closing Date of the Loan.
(b) Further Assurances. Borrower shall execute and deliver, or cause
to be executed and delivered, to Lender such additional security agreements,
pledge agreements and other instruments, agreements, certificates, opinions and
documents (including, without limitation, Uniform Commercial Code financing
statements and fixture filings and landlord waivers and estoppel) as Lender may
reasonably request to establish, maintain, perfect, protect and evidence the
rights provided to Lender pursuant to the Loan Documents.
(c) Partial Release of Security Interest against Primary Collateral.
Lender agrees to release from the lien of its Security Agreement and its
Leasehold Mortgage a Restaurant which is Primary Collateral, upon satisfaction
in full of all of the following conditions:
3
<PAGE>
(i) Borrower requests such release in writing at least thirty
(30) days in advance;
(ii) Borrower has paid and satisfied all of its obligations under
the Note corresponding to such Primary Collateral location
in full;
(iii) Borrower has paid the applicable Yield Maintenance Amount
under Section 2.03 in connection with such Note (if no
indebtedness has been allocated to such location then
Borrower shall have paid to Lender a processing fee equal to
$750 for each Primary Collateral location to be released);
(iv) No Event of Default has occurred and is continuing under any
of the Loan Documents;
(v) The Pre Distribution Fixed Charge Ratio, as applied to the
remaining Restaurants hereunder, for the 12 month period
immediately preceding the Prepayment Date is equal to or
greater than 1.30x and with such calculation, however,
excluding payments in respect of the Note(s) being prepaid;
(vi) In giving effect to the release of any such Primary
Collateral (including any Indebtedness to be incurred by
Borrower), the ratio of the remaining principal balance and
interest balance of the Loan to the appraised value of the
remaining Restaurants, as evidenced by an appraisal of
Deloitte & Touche (or its successors or another accounting
firm approved by Lender) delivered to Lender utilizing the
valuation methodology used in connection with the
origination of the Loan, does not exceed the percent
indicated on Attachment 2; it being agreed, however, that
Borrower may use the ------------ appraisal of Deloitte &
Touche which was delivered to Lender in connection with the
funding of the Loan under this Agreement for purposes of
this Section 2.07(c)(vi) for any Primary Collateral location
to be released by ------------------- Lender on a date
during the period from the Closing Date through December 31,
1997, and thereafter, the Borrower shall deliver to Lender a
new/updated appraisal in conformity with the requirements of
this Section ------- 2.07(c)(vi) which in all cases shall be
dated of a date no earlier than ----------- sixty (60) days
prior to a Prepayment Date if a Note is required to be
prepaid under this Section 2.07(c) or the date that Borrower
requests a --------------- Primary Collateral location be
released if no Note is required to be prepaid under this
Section 2.07(c); ---------------
(vii) Subject to Section 5.02(b), that no more than two (2)
Primary Collateral --------------- locations have been or
are requested by Borrower to be released in any given
calendar year which release may be cumulated by Borrower
from year to year; provided, that any request by Borrower
for the release of more than two (2) such Primary Collateral
locations would be subject to approval by Lender in its sole
discretion; it being the understanding and agreement,
however, that Borrower may prepay in full at any time the
outstanding principal balance and interest balance of each
Note (subject to the provisions of Section 2.03) and that
upon the payment in full of ------------ such obligation(s)
then the Primary Collateral attendant with each Note will be
released by Lender; and
(viii) In the event that any such prepayment and release of Primary
Collateral would result in less than five (5) Primary
Collateral locations remaining as security for the Notes,
then Borrower shall prepay all obligations under any and all
remaining Notes hereunder in full (subject to the provisions
of Section 2.03), and Lender's liens against all such
remaining Primary Collateral locations will be released; and
(ix) Borrower has paid all of Lender's expenses and costs
incident to any such release, including, without limitation,
filing fees for UCC termination statements, filing fees in
respect of the release (or partial release of any lien under
a Leasehold Mortgage) and reasonable attorney's fees.
(d) Release of Negative Pledge Agreement - Secondary Collateral. On or
after a date which is two (2) years from the Closing Date the Lender shall upon
the written request of Borrower release the Borrower from the terms and
conditions of the Negative Pledge Agreement if:
(i) No Event of Default has occurred and is continuing under any
of the Loan Documents; and
(ii) During any two (2) year period immediately prior to such
written request (a) the Borrower has not failed to make any
payment to Lender when due and payable, whether under or in
connection with this Agreement or a Loan Document, or any
other agreement, document or instrument between Lender and
Borrower, and (b)
4
<PAGE>
no Event of Default has occurred in respect of Sections
5.01(s) or (t) or Sections 5.02(h) or (k) of this Agreement.
2.08. Loan Assignment and Assumption. The obligations of Borrower
under this Agreement and the other Loan Documents may not be assigned by
Borrower or assumed by any third party. The receipt of loan payments, the
cashing of such payment checks, or such similar acts by Lender shall not
constitute a waiver of this prohibition. Notwithstanding the foregoing, however,
Lender shall, one time only, consent to the assumption of the Loan by a new
borrower provided that each of the following conditions are met:
(a) Borrower shall provide Lender with thirty (30) Business Days
advance written notice of the proposed assumption of the Loan.
(b) The new borrower or Borrower and any new guarantor, if any, shall
provide to Lender, at the expense of the new borrower or Borrower, as
applicable, evidence satisfactory to Lender, in its reasonable discretion, that
the new borrower and any new guarantor, if any, and the Loan upon assumption
meet Lender's current underwriting standards at such time. Such obligation shall
include providing to Lender appraisals, credit reports, environmental reports
and such other documentation as Lender shall reasonably request.
(c) The new borrower must purchase all of the Collateral and all of
Borrower's interest in the Restaurants and be a franchisee in good standing of
the Franchisor authorized to operate the Restaurant.
(d) No Default or Event of Default shall exist under any Loan Document
or occur as a result of any assumption.
(e) The new borrower or Borrower shall pay to Lender a fixed
administrative fee equal to $5,000.
(f) Either (i) final U.S. Treasury Regulations in substantially the
form of Section 1.1001-3 of the proposed U.S. Treasury Regulations, as published
on the date hereof, shall have become effective and, under such final U.S.
Treasury Regulations, effecting a substitution of liabilities upon the
satisfaction of the conditions to assumption set forth in this Section 2.08 will
not constitute a "modification" of the Loans or (ii) Borrower and Guarantor
shall not be released from their respective obligations under the Loan
Documents.
(g) The new borrower shall assume all the obligations of Borrower
under the Loan Documents pursuant to an agreement approved by Lender, which
approval shall not be unreasonably withheld, and a new guarantor shall assume
all the obligations of the Guarantor under the Guaranty Agreement pursuant to an
agreement approved by Lender, which approval shall not be unreasonably withheld.
(h) Borrower shall obtain the written consent of Lender to the
assumption, which consent shall be granted in Lender's sole discretion but shall
not be unreasonably withheld upon the satisfaction of each of the conditions set
forth in this Section 2.08.
(i) Borrower shall pay any and all costs incurred by Lender in
connection with such assumption, whether or not such assumption is consummated,
including, without limitation, title insurance fees, legal fees, appraisal fees,
and environmental consulting fees.
SECTION III. CONDITIONS PRECEDENT.
3.01. Documentary and Related Conditions Precedent. The obligation of
Lender to make the Loan is subject to receipt by Lender, on or prior to the
Closing Date, of an original of each item listed in Schedule 3.01, each duly
authorized, executed and delivered by the parties thereto, as applicable (other
than the Lender), and further subject to all of the other matters and
transactions required to be performed on or prior to the Closing Date, and with
all of the foregoing being in form and substance satisfactory to Lender in its
sole discretion.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. Borrower's Representations and Warranties. To induce Lender to
enter into this Agreement and to make the Loan hereunder, Borrower represents
and warrants to Lender that the following matters are true and correct on the
Closing Date:
5
<PAGE>
(a) Legal Status. Borrower (i) is duly organized and existing and in
good standing under the laws of the state in which it is organized, (ii) has the
power and authority to own, lease and operate its properties and conduct its
business as now conducted, and (iii) is duly qualified, licensed to do business
and in good standing in all jurisdictions in which such qualification or
licensing is required.
(b) Authorization and Validity. All of the Loan Documents have been
duly authorized, and upon their execution and delivery will constitute legal,
valid and binding agreements and obligations of the Borrower and of the
Guarantor which executes the same, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights generally.
(c) Formation and Organizational Documents. Borrower has delivered to
Lender all formation and organizational documents of Borrower and of the
Guarantor, and all such formation and organizational documents remain in full
force and effect and have not been amended or modified since they were delivered
to Lender. Borrower shall promptly provide Lender with copies of any amendments
or modifications to such formation or organizational documents.
(d) No Violation. The execution, delivery and performance by Borrower
and by Guarantor of each of the Loan Documents to which it is a party do not:
(i) require any consent or approval not heretofore obtained under Borrower's or
Guarantor's articles of incorporation or bylaws; (ii) to Borrower's knowledge,
violate any governmental requirement applicable to a Restaurant or any other
statute, law, regulation or ordinance or any order or ruling of any court or
governmental entity; (iii) subject to Sections 5.01(u) and (v), conflict with,
or constitute a breach or default or permit the acceleration of obligations
under any material agreement, contract, lease, or other document by which
Borrower, the Collateral or any Restaurant are bound or regulated; or (d) to
Borrower's knowledge, violate any statute, law, regulation or ordinance, or any
order of any court or governmental entity with jurisdiction over Borrower, the
Collateral, or any Restaurant.
(e) Permits and Licenses. Borrower has, and at all times shall have
obtained, all material permits, licenses, exemptions and approvals necessary to
construct, occupy and operate each Restaurant, and shall maintain compliance in
all material respects with all governmental requirements applicable to the
Restaurant and all other applicable statutes, laws, regulations and ordinances
necessary for the transaction of its business.
(f) Litigation. Except as set forth (with estimates of the dollar
amounts involved) in Schedule 4.01(f), there are no actions (including, without
limitation, derivative actions), suits, proceedings or investigations pending
or, to the knowledge of Borrower, threatened against Borrower, at law or in
equity in any court or before any other governmental authority. Except as set
forth (with estimates of the dollar amounts involved) in Schedule 4.01(f), there
are no actions (including, without limitation, derivative actions), suits,
proceedings or investigations pending or, to the knowledge of Borrower,
threatened against any Related Person, at law or in equity in any court or
before any other governmental authority which (i) could (alone or in the
aggregate) have a Material Adverse Effect or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance by Borrower of
the Loan Documents or the transactions contemplated thereby.
(g) Title. Borrower owns and has good and marketable title in fee
simple absolute to, or a valid leasehold interest in, each Restaurant and all
its other respective real properties and good title to its other assets and
properties constituting Collateral hereunder as reflected in the most recent
Financial Statements delivered to Lender (except those assets and properties
disposed of in the ordinary course of business or otherwise in compliance with
this Agreement since the date of such Financial Statements) and all assets and
properties constituting Collateral hereunder acquired by Borrower since such
date (except those disposed of in the ordinary course of business or otherwise
in compliance with this Agreement). Such assets and properties are subject to no
Lien, except for Permitted Liens.
(h) Financial Statements. The audited annual Financial Statements of
Sybra, Inc. and the Restaurants which have been delivered to Lender by Borrower
dated December 28, 1996, are true, complete and correct and were prepared
according to GAAP, and fairly and accurately present the financial condition and
assets and liabilities (whether accrued, absolute or contingent as required to
be disclosed by GAAP and if not required to be disclosed then as set forth on
Schedule 5.02(g)) of Sybra, Inc. as of such date, and the results of operations
of Sybra, Inc. for the period then ended. The audited balance sheet of Guarantor
which was delivered to Lender by Borrower dated on or about February 19, 1997,
is true, complete and correct and was prepared according to GAAP, and fairly and
accurately presents the financial condition and assets and liabilities (whether
accrued, absolute or contingent as required to be disclosed by GAAP and if not
required to be disclosed then also as set forth on Schedule 5.02(g)) of
Guarantor as of such date. All other interim Financial Statements of Borrower
and Sybra, Inc. delivered to Lender by Borrower or its agents are true, complete
and correct and have been prepared according to GAAP, without footnotes and
disclosures which customarily accompany audited financial statements and subject
to normal year-end adjustments not material in an aggregate amount, and the
other financial information (excluding projections)
6
<PAGE>
delivered to Lender by Borrower or its agents, fairly and accurately present the
financial condition and assets and liabilities of Sybra, Inc. or the Borrower as
of such date or for the proforma periods indicated, and the results of
operations of Sybra, Inc. or anticipated results of operations for the Borrower
for the period then ended or indicated. None of Sybra, Inc., the Borrower, or
the Guarantor has any contingent obligations, liability for taxes or other
outstanding obligations which are material in the aggregate, except as disclosed
in the Financial Statements furnished by Borrower to Lender or as set forth on
Schedule 5.02(g). There has been no material adverse change in the condition,
financial or otherwise, of Sybra, Inc., the Borrower or of any Restaurant since
the date of the last Financial Statements or the date of any other financial
information submitted to Lender. Except as disclosed in such Financial
Statements, there are no accruing franchise royalty payments or other
obligations owed to Franchisor except for current and ordinary royalty payments
and expenses, and all such royalty payments or other obligations owed to
Franchisor as of the Closing Date are current in payment and not in arrears.
(i) Solvency, Etc. None of the transactions contemplated by the Loan
Documents will be or have been made with an actual intent to hinder, delay or
defraud any present or future creditors of Borrower. Borrower acknowledges that
it will have received fair and reasonably equivalent value in good faith for the
grant of the lien or security interest effected by the Loan Documents. The fair
saleable value of the assets of Borrower will, immediately following the
consummation of all of the transactions contemplated under the Loan Documents
(debt, liens and merger), exceed the amount of the existing debts and other
liabilities (including contingent liabilities) of the Borrower. The Borrower
does not and will not have, immediately following the consummation of all of the
transactions contemplated under the Loan Documents (debt, liens and merger),
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. After giving effect to all of the transactions contemplated
under the Loan Documents (debt, liens and merger) the Borrower is and will be
able to pay its debts as they become due.
(j) Franchise Agreement and Lease. Borrower is an authorized
franchisee under the Franchise Agreement. All Arby's franchisees who are under
common control with Borrower, control Borrower, are controlled by Borrower, or
in which Borrower has an ownership interest of 25% or more, are listed on
Schedule 4.01(j) attached hereto. Each Franchise Agreement and each Lease, a
true, correct and complete copy of each of which were provided to Lender with
Borrower's loan application, constitute the legal, valid and binding obligation
of the parties thereto. Subject to Section 5.01(u), no party is in default
under, and no circumstance exists which with the passage of time could give rise
to a default under, any Franchise Agreement or under any Lease. There are no
amendments, modifications or supplements to any Franchise Agreement or any Lease
other than those already provided to Lender. Borrower has not received any
notices under any Franchise Agreement or under any Lease with respect to
Borrower's compliance with either, other than notices, copies of which have been
furnished to Lender. Each Loan Maturity Date for each Note will occur prior to
the expiration dates of each applicable and corresponding Franchise Agreement
and each Lease, including any lessee option to extend such term. The information
set forth in Exhibit E (Lease Summary) is true, complete and correct. Borrower
acknowledges and agrees that no claim or defense which Borrower may at any time
have against Franchisor or any affiliate of Franchisor shall relieve Borrower of
its obligations under this Agreement or under the other Loan Documents.
(k) Leasehold Mortgage. With respect to any portion of the Loan which
is secured by a Leasehold Mortgage constituting a lien on an interest of
Borrower as tenant under a Lease of the related property, but not by the related
fee interest in such property, Borrower represents that:
(i) Subject to Section 5.01(u), each Lease is valid, legal and
binding and enforceable in accordance with its terms; such Lease or a memorandum
thereof has been duly recorded to the extent required under Schedule 3.01(a)(5);
and except as noted on Exhibit E as to each Lease, each such Lease does not
prohibit the interest of the tenant thereunder to be encumbered by the related
Leasehold Mortgage and does not restrict the use of the underlying property and
related improvements thereon by such tenant, or its successors and assigns; and
(ii) Such Lease has an original term (or an original term plus
one or more optional renewal terms which under all circumstances may be
exercised by Borrower and can be enforced by Lender on behalf of Borrower) which
extends not less than two (2) months beyond the stated maturity of the related
Note.
(l) Taxes. The Borrower has filed all federal, state and local tax
returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property and all other taxes, fees and
other charges imposed on it or any of its property by any governmental authority
(other than taxes, fees or charges the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books
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of the Borrower). No tax liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges. The charges, accruals
and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate and the Borrower knows of no proposed material
tax assessment against it or any basis therefor.
(m) Compliance with Laws. The Borrower has complied with all
applicable statutes, rules, regulations, orders and restrictions of any domestic
or foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of its business, its employees or the ownership of
its properties, except where such non-compliance and failure would not have a
Material Adverse Effect.
(n) ERISA. Each Plan is in substantial compliance with all applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements, except where such non- compliance and failure would not have
a Material Adverse Effect. No Reportable Event has occurred and is continuing
with respect to any Plan. All of the minimum funding standards applicable to
such Plans have been satisfied and there exists no event or condition which
would reasonably be expected to result in the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. With respect to each Plan
subject to Title IV of ERISA, as of the most recent valuation date for such
Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan) of such Plan's projected
benefit obligations did not exceed the fair market value of such Plan's assets.
(o) Accuracy of Information Furnished. The information set forth in
the Schedules and Exhibits to this Agreement, as well as such other information
(excluding projections delivered to Lender prior to the Closing Date and which
are not attached to an Exhibit or Schedule to this Agreement or any Loan
Document) that was provided to Lender in connection with Borrower's loan
request, is true, complete and correct, subject to the next sentence. None of
the Loan Documents and none of the other certificates, statements or information
(to the extent such certificates, statements or information was updated and
delivered to Lender on or prior to the Closing Date) furnished to Lender by or
on behalf of Borrower in connection with the Loan Documents or the transactions
contemplated thereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION V. COVENANTS.
5.01. Affirmative Covenants. Until the termination of this Agreement
and the satisfaction in full by Borrower of all Obligations, Borrower shall
comply, and shall cause compliance, with the following affirmative covenants
unless Lender shall otherwise consent in writing:
(a) Compliance Certificates. Borrower shall provide to Lender by
February 15 and August 15 of each year a compliance certificate executed by an
authorized officer of Borrower for the twelve-month periods ended December 31
and June 30, respectively, or 45 days after Borrower's fiscal year end, in the
form attached hereto as Exhibit C. Following any Event of Default , at Lender's
option and upon Lender's request, Borrower agrees that it shall provide to
Lender a compliance certificate in the form attached hereto as Exhibit C within
fifteen (15) days of the end of each calendar quarter while any Event of Default
is continuing and within fifteen (15) days after the end of the first calander
quarter period following any cure of such Event of Default, along with an income
statement and balance sheet for the 12-month period ending with such calendar
quarter, until such time as Lender shall determine, in its sole discretion.
(b) Communications with Franchisor. Borrower shall provide to Lender
(i) copies of annual Restaurant reports (and such other reports as Lender may
from time to time reasonably request) required under the Franchise Agreement at
the same time it provides such reports to the Franchisor, and (ii) complete
copies of any communications from Franchisor material to Borrower, the
Restaurant or the Collateral (in the aggregate as to the Collateral), including,
without limitation, any notices of an event of default or other event or
condition which could have a Material Adverse Effect, promptly following receipt
by Borrower, provided that such disclosure would not create a breach of the
Franchise Agreement. If, and to the extent, that any disclosure required under
clauses (i) or (ii) of the preceding sentence is not made because of the
provision in the last clause of the preceding sentence, notice of such
nondisclosure and the categories of information not disclosed shall be provided
to Lender at the time such disclosure would have been required to be made.
(c) Other Documents. Borrower shall provide copies of such other
instruments, agreements, certificates, opinions, statements, documents and
information relating to the operations or condition (financial or otherwise) of
Borrower, and compliance by Borrower with the terms of this Agreement and the
other Loan Documents as Lender may from time to time reasonably request.
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(d) Books and Records. Borrower shall at all times keep proper books
of record and account in which full, true and correct entries will be made of
their dealings and transactions, in accordance with GAAP if required by
Franchisor, and otherwise in accordance with good business practice and in a
manner that will enable Borrower to provide Lender with Financial Statements
which fairly present the financial positions of Borrower and each Restaurant as
of Borrower's fiscal year end.
(e) Inspections. Borrower shall permit any Person designated by
Lender, upon reasonable notice and during normal business hours, to visit and
inspect a Restaurant and the offices of Borrower, to examine and make abstracts
from the record and books of account of Borrower and to discuss the affairs,
finances and accounts of Borrower with, and to be advised as to the same by,
their officers, auditors and accountants (and by this provision Borrower
authorize said auditors and accountants to so discuss the affairs, finances,
business, operations, properties and accounts of Borrower), all at such times
and intervals as Lender may reasonably request.
(f) Insurance. At Borrower's sole cost and expense, Borrower shall:
(i) Subject to Schedule 3.01(c)(6), keep the Collateral and each
Restaurant insured as may be required by the Franchisor or Lender, including,
without limitation, fire, extended coverage, business interruption, , and peril,
and against any other risks or hazards which, in the opinion of Lender should be
insured against, in an amount not less than the full insurable value thereof on
a full replacement cost basis, with an inflation guard endorsement, but in no
event less than the minimum amount required to prevent the imposition of any
coinsurance requirement on the insured. If the Restaurant is in an area
identified in Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available),
Borrower shall carry a flood insurance policy meeting the requirements of the
current guidelines of the Federal Insurance Administration with an insurance
carrier generally acceptable, in an amount representation coverage equal to the
full insurable value of the Restaurant. Borrower shall also carry comprehensive
general public liability insurance providing coverage not less than $1,000,000
per occurrence for bodily injury and $500,000 per occurrence for property
damage, and business interruption insurance in an amount equal to twelve (12)
months of operating income including financing costs;
(ii) Cause all insurance policies insuring the Collateral and
each Restaurant (1) to contain a standard lender's loss payable endorsement or
mortgagee's endorsement providing for payment directly to Lender and/or its
designees, (2) to provide for a minimum of thirty (30) day's notice to Lender
prior to cancellation or modification or nonrenewal, (3) to provide that timely
payment of the premium will otherwise cause the policy to remain in force, (4)
to provide coverage on all restaurants, detached buildings, or other structures,
by direct mention or allowance in the policy, (5) to contain loan number,
property address and insured names, and (6) to be issued by companies authorized
to issue such policies in the state in which the Restaurant is located having a
General Policy Rating of "A-8" or better in Best's Key Rating Guide;
(iii) Timely pay all premiums, fees and charges required in
connection with all of its insurance policies and otherwise continue to maintain
such policies (or conforming replacement policies) in full force and effect; and
(iv) Promptly deliver copies of the insurance policies,
certificates (and renewals) thereof or other evidence of compliance herewith to
Lender.
Borrower hereby (A) pledges and assigns to Lender and agrees to transfer and
deliver to Lender all moneys which may become due and payable with respect to
the Collateral and each Restaurant under any policy insuring the Collateral and
a Restaurant, including return of unearned premium, provided that if no Loss or
Event of Default has occurred and is continuing the Borrower may use any
unearned premium in the operation of its business, subject, however, to the
compliance with the terms and conditions of this Section 5.01(f), (B) directs
any such insurance company to make payment directly to Lender and (C) authorizes
Lender, in its sole discretion, to apply the same as set forth in Section
5.01(o) hereof. If Borrower fails to insure the Collateral and each Restaurant
or to take any other action as required by this Section 5.01(f), Lender may, in
addition to its other rights and remedies, and in its sole discretion (and
without any obligation) obtain such insurance or take such other action.
Borrower shall immediately reimburse Lender for all costs and expenses incurred
by Lender in obtaining such insurance or taking such action.
(g) Governmental Charges and Other Indebtedness. Subject to Borrower's
right of contest set forth in Section 5.01(m), Borrower shall promptly pay and
discharge when due (i) all taxes and other Governmental Charges prior to the
date upon which penalties accrue thereon and (ii) all Indebtedness.
(h) Use of Proceeds. Borrower shall use the proceeds of the Loan only
for the purposes indicated in Schedule 5.01(h), which are not primarily for
personal, family or household purposes.
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(i) General Business Operations. Borrower shall (i) preserve and
maintain its organizational existence and all of its rights, privileges and
franchises reasonably necessary to the conduct of its business, (ii) conduct its
business activities and maintain each Restaurant and the Collateral in
substantially the same manner as it is being conducted and maintained at the
date of this Agreement, except for any Released Restaurants, (iii) maintain and
be in compliance with all Legal Requirements, except where non-compliance and
failure would not have a Material Adverse Effect, and maintain and be in
compliance with all Contractual Obligations applicable to each Restaurant or the
Collateral, except for Contractual Obligations in respect of a Released
Restaurant: (a) where the Borrower has been consensually released from its
Contractual Obligations with respect to such Released Restaurant by the other
Person who is party to such Contractual Obligations or (b) where non-compliance
by the Borrower of such Contractual Obligation (other than non-compliance under
a Lease or Franchise Agreement) would not (b1) have a Material Adverse Effect,
(b2) cause an event of default or default under any Lease or any Franchise
Agreement, (b3) create a Lien upon any Collateral, and (b4) in any manner effect
or impair the operation of a Restaurant which is Primary Collateral, (iv) keep
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, except for property located at a
Released Restaurant, (v) maintain its chief executive office and principal place
of business in the state and county specified in Section 7.01, provided that
Borrower may change the location of its chief executive office and principal
place of business upon thirty (30) days advance written notice to Lender
specifying the address for any such new location and upon Borrower's full
compliance in executing any documents or instruments, at Borrower's expense, as
may be reasonably requested by Lender, to maintain Lender's first priority
security interest in the Collateral and to maintain Lender's interest in the
Secondary Collateral, (vi) comply with all applicable laws, statutes, rules and
regulations of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of its business, its
employees or the ownership of its properties, except where non-compliance and
failure would not have a Material Adverse Effect, and (vii) file all tax returns
and reports which are required by law to be filed by Borrower. Borrower shall be
and remain an Arby's franchisee in good standing under each Franchise Agreement,
except for the consensual termination of a Franchise Agreement by Arby's and the
Borrower in respect of a Released Restaurant.
(j) Additional Debt. During the first two (2) years after the Closing
Date the Borrower shall not incur any Additional Debt in excess of $1,000,000
per year without the Lender's prior written consent which consent shall not be
unreasonably withheld, except that no limitation shall apply for the following
Additional Debt if the Pre Distribution Fixed Charge Ratio of Borrower
calculated on a Proforma Basis is not less than 1.30x: (i) Additional Debt
arising as result of Capital Leases after the Closing Date, and (ii) Additional
Debt secured solely by purchase money security interests against real and
personal property purchased by Borrower (which property may include any real or
personal property purchased by Borrower in connection with the acquisition of an
Arby's restaurant) after the Closing Date. Borrower may incur Additional Debt on
a date which is two (2) years after the Closing Date without the prior written
consent of Lender if the Pre Distribution Fixed Charge Ratio of Borrower
calculated on a Proforma Basis is not less than 1.30x.
(k) Notices. Borrower shall give prompt written notice to Lender of
(a) any claims, proceedings or disputes (whether or not purportedly on behalf of
Borrower) against, or to Borrower's knowledge, threatened or affecting Borrower
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect or which involve in the aggregate monetary amounts or claims in
excess of $10,000 not fully covered by insurance; (b) any proposal by any public
authority to acquire a Restaurant or any portion thereof; (c) the occurrence of
any Default or Event of Default hereunder; and (d) any Permitted Contests under
Section 5.01(m).
(l) Loan Documents. Borrower shall comply with and observe all terms
and conditions of the Loan Documents.
(m) Permitted Contests. Subject to Section 5.01(u), Borrower may
contest, by appropriate legal or other proceedings conducted in good faith and
with due diligence, the amount, validity or application, in whole or in part, of
any Imposition or lien therefor, any Legal Requirement, or any lien of any
laborer, mechanic, materialman, supplier or vendor, provided that (a) the
Collateral and any Restaurant, or any part thereof or estate or interest
therein, shall not be in any danger of being sold, forfeited or lost by reason
of such proceedings; (b) in the case of (i) liens of laborers, mechanics,
materialmen, suppliers or vendors or (ii) the Impositions, or liens therefor,
such proceedings shall suspend the foreclosure of any such lien or any other
collection thereof from the Collateral or any Restaurant; (c) in the case of a
Legal Requirement, Lender shall not be in any danger of any criminal liability
or, unless Borrower shall have furnished a bond or other security therefor
reasonably satisfactory to Lender, any additional civil liability for failure to
comply therewith, and the Collateral and any Restaurant, or any part thereof or
estate or interest therein, shall not be subject to the imposition of any lien
as a result of such failure which is not properly contested pursuant to this
Section 5.01(m); and (d) if reasonably required by Lender, Borrower shall have
furnished to Lender a bond or other security reasonably satisfactory to Lender.
(n) Performance by Lender. If Borrower shall fail to pay or perform
any of its obligations herein contained or under any other Loan Documents,
Lender upon five (5) business days prior written notice to Borrower (except as
otherwise expressly permitted by any Loan Document in the event of an emergency
when no notice need be given) may, but need not, make (or cause to be made) any
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such payment or perform (or cause to be performed) any such obligation of
Borrower hereunder or thereunder (provided Borrower is not contesting such
payment or performance as permitted by Section 5.01(m) and the failure to so
perform such obligation would have a Material Adverse Effect), in any form and
manner deemed reasonably expedient by Lender as agent or attorney-in-fact of
Borrower, and any amount so paid or expended (plus reasonable compensation to
Lender for its out-of-pocket and other expenses (including reasonable legal
expenses) for each matter for which it acts under this Agreement), with interest
thereon at the Default Rate, shall be added to the Obligations and shall be
repaid to Lender upon demand. No such action of Lender shall be considered as a
waiver of any right accruing to it on account of the occurrence of any default
on the part of Borrower under this Agreement, any Default, any Event of Default,
or any default or event of default under any other Loan Document.
(o) Casualty and Condemnation.
(i) In the event of any casualty or Condemnation (a "Loss"),
Borrower shall give prompt written notice thereof to Lender. Any Insurance
Proceeds or awards with respect to such Loss in an amount greater than $10,000
(the "Loss Proceeds") shall be payable to Lender. Borrower shall have no right
to settle or compromise, and shall not settle or compromise, any claim or
proceeding relating to such Loss or Loss Proceeds without Lender's reasonable
consent which shall not be unreasonably delayed. Borrower shall proceed promptly
and diligently to prosecute in good faith the settlement or compromise of any
and all claims or proceedings relating to such Loss or Loss Proceeds; provided,
however, any such settlement or compromise shall be subject to Lender's
reasonable consent which shall not be unreasonably delayed. Borrower hereby
authorizes and directs any affected insurance company and any affected
governmental body responsible for such Condemnation to make payment of the Loss
Proceeds directly to Lender. If Borrower receives any Loss Proceeds, Borrower
shall promptly pay over such Loss Proceeds to Lender. Borrower hereby covenants
that until such Loss Proceeds are so paid over to Lender, Borrower shall hold
such Loss Proceeds in trust for the benefit of Lender and shall not commingle
such Loss Proceeds with any other funds or assets of Borrower or any other
party.
(ii) Borrower hereby irrevocably assigns to Lender all Loss
Proceeds to which Borrower may become entitled by reason of its interests in
each Restaurant which is Primary Collateral if a Loss occurs. All Loss Proceeds
shall be paid to Lender and applied pursuant to this Section 5.01(o). Subject to
the last sentence of this Section 5.01(o), Borrower shall take all appropriate
action in connection with each such proceeding, settlement and adjustment and
shall pay all expenses thereof, including, if Lender shall elect to participate
therein, the cost of Lender's participation; provided, however, that any final
settlement or adjustment shall be subject to the prior written reasonable
consent of Lender which shall not be unreasonably delayed unless the Loss
Proceeds are sufficient to prepay the Note in full, together with the Yield
Maintenance Amount and all accrued and unpaid interest thereon. So long as an
Event of Default shall have occurred and be continuing, Lender may,
at its option and with respect to its interests as set forth herein, commence,
appear in and prosecute, in its own name, any such action or proceeding or make
any compromise or settlement in connection with such damage, destruction or
taking and obtain directly all Loss Proceeds.
(iii) So long as no Event of Default shall have occurred and be
continuing, if any Collateral or a Restaurant which is Primary Collateral
suffers a Loss, Borrower shall restore or replace items of Collateral and in all
events restore such a Restaurant (or, in the case of a taking, the remaining
Collateral and such a Restaurant) to the same condition, as nearly as possible,
as existed immediately prior to such casualty or taking, whether or not the Loss
Proceeds are sufficient therefor. If the cost of any restoration made by
Borrower pursuant to this Section 5.01(o) shall exceed the amount of the Loss
Proceeds, such deficiency shall be paid by Borrower. The Loss Proceeds shall be
held by Lender or its agent and shall be disbursed to Borrower as hereinafter
set forth, and Borrower shall be entitled to receive any accrued interest
thereon. Lender or its agent shall release such Loss Proceeds to Borrower,
subject to such reasonable procedural requirements as Lender or its agent may
prescribe, from time to time and provided that such amounts shall be disbursed
not more often than once monthly, as the restoration progresses, upon Borrower's
written request, accompanied by a certificate of the architect or engineer in
charge of the restoration or by an authorized officer or managing partner of
Borrower, stating that the sum then requested either has been paid by Borrower
or is justly due to the named persons (whose addresses shall also be stated) who
have rendered services or furnished materials for certain portions of the
restoration. The certificate shall give a brief description of such services and
materials, shall list the amounts so paid or owing to each of such persons,
shall state the estimated cost of the balance of the work yet to be performed,
and shall state that no part of such expenditures has been or is being made the
basis for any other request for payment. Upon compliance with the foregoing,
Lender or its agent shall pay out of the Loss Proceeds to the extent available
to the persons named in the certificate the respective amounts stated to be due
to them or shall pay to Borrower the amount stated to have been paid by Borrower
to such persons.
So long as an Event of Default shall have occurred and be continuing, then such
Loss Proceeds and any accrued interest thereon shall be applied at the option
and direction of Lender either to the restoration and replacement of the
Collateral and restoration of any such Restaurant which is Primary Collateral as
set forth above or, on the next Payment Date, to the prepayment of the
outstanding principal
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amount of the Loan, at a price equal to 100% of the unpaid principal amount to
be prepaid, plus accrued and unpaid interest thereon, and the Yield Maintenance
Amount.
(p) Extension and Renewal of Franchise Agreements and Lease
Agreements. Borrower shall exercise any option or other extension or renewal
right necessary to cause the term of each Franchise Agreement and of each Lease
Agreement to extend to a date beyond the Loan Maturity Date for each Note.
(q) Financial Statements and Reports. The Borrower will furnish to
Lender:
(i) Annual Financial Statements. As soon as available and in any
event within one hundred twenty (120) days after the end of each fiscal year of
the Borrower, the audited consolidated financial statements of the Borrower
(indicating consolidating entries) consisting of at least a balance sheet, and
statements of income, cash flow, changes in financial position and stockholders'
equity, as at the end of such year, prepared in accordance with GAAP, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by an independent certified public
accountant of recognized national standing selected by the Borrower and
reasonably acceptable to Lender, together with any management letters,
management reports or other supplementary comments or reports to the Borrower or
its board of directors furnished by such accountants.
(ii) Monthly Financial Statements. As soon as available and in
any event within thirty (30) days after the end of each fiscal month, unaudited
statements of income for the Borrower for such month and for the period from the
beginning of such fiscal year to the end of such month, and a balance sheet of
the Borrower as at the end of such month, setting forth in comparative form
figures for the corresponding period for the preceding fiscal year, accompanied
by a certificate signed by the chief financial officer of the Borrower stating
that such financial statements present fairly the financial condition of the
Borrower and that the same have been prepared in accordance with GAAP (subject
to normal year-end adjustments not material in an aggregate amount), except that
notes and disclosures need not accompany such financial statements as is
customary with audited financial statements, unless such a note or disclosure to
Bank is required by the terms and conditions of this Agreement.
(r) ERISA. The Borrower will maintain each Plan in compliance with
all applicable requirements of ERISA and of the Code and with all applicable
rulings and regulations issued under the provisions of ERISA and of the Code,
except where non-compliance and failure would not have a Material Adverse
Effect, and will not, and will not permit any of the ERISA Affiliates to, (a)
engage in any transaction in connection with which the Borrower or any of the
ERISA Affiliates would be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in either
case in an amount exceeding $10,000, (b) fail to make full payment when due of
all amounts which, under the provisions of any Plan, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency (as such term is defined in Section 302 of ERISA
an Section 412 of the Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $10,000 or (c) fail to make any payments in an
aggregate amount exceeding $10,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
(s) Minimum Liquidity Level. Borrower shall maintain through September
30, 1998 one of the following minimum liquidity levels (the "Minimum Liquidity
Level"): (a) the following cash on hand: at 9/30/97: $2,500,000; at 12/31/97:
$2,500,000; at 3/31/98: $2,000,000; at 6/30/98: $1,500,000; at 9/30/98 and
beyond: none; or (b) a Current Ratio of not less than 0.35:1 at any time,
notwithstanding that such Current Ratio will be tested by Lender on quarterly
basis during a calendar year. The failure of the Borrower to maintain compliance
with the Minimum Liquidity Level shall not constitute an Event of Default under
any Loan Document, provided, however, that if the Borrower is not in compliance
with the Minimum Liquidity Level, then Borrower shall not and will not permit
any Cash Payment to be made to, and will not make or permit to be made any
Investment to or in, any Affiliate or Guarantor until such time that Borrower is
in full compliance with the Minimum Liquidity Level.
(t) Capital Expenditures. Borrower shall reinvest a minimum of (i)
$1,135,000 in calendar year 1997 or $2,835,000 by the end of calendar year 1998,
and (ii) $2,000,000 in calendar year 1999 or $3,875,000 for the two calendar
years 1999 and 2000, and (iii) $1,875,000 in calendar year 2001, all in Capital
Expenditures for the Arby's restaurants owned by Borrower or remodels, repairs
and/or equipment replacement for such Arby's restaurants owned by Borrower.
(u) Landlord Estoppel Agreements; Leasehold Mortgages. Borrower shall
use its reasonable best efforts to obtain and deliver to Lender within twelve
(12) months after the Closing Date any Estoppel(s) which were not delivered on
the Closing Date. If the terms of a Lease are silent as to whether a Leasehold
Mortgage may be granted against the tenants interest thereunder and Lender files
a Leasehold Mortgage against such a Lease, then Lender agrees that no Default or
Event of Default will occur under this Agreement
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or any of the Loan Documents if the Landlord under such Lease asserts that an
event of default has occurred solely by reason of any such Leasehold Mortgage
being filed; provided, however, that the foregoing matters shall not be deemed
or construed to release Borrower from its obligation to use reasonable best
efforts to obtain each Estoppel which consents to the filing of a Leasehold
Mortgage by Lender against any such Lease.
(v) Mortgage Non-Disturbance Agreements. Borrower shall use its
reasonable best efforts to obtain and deliver to Lender within six (6) months
after the Closing Date the Mortgage Non-disturbance Agreements which were not
delivered on the Closing Date.
5.02. Negative Covenants. Until the termination of this Agreement and
the satisfaction in full by Borrower of all Obligations, Borrower shall comply,
and shall cause compliance, with the following negative covenants unless Lender
shall otherwise consent in writing:
(a) Liens. Borrower shall not directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to and of the following
property of Borrower, whether now owned or hereafter acquired, except for
Permitted Liens and a Liens incurred pursuant to and in compliance with Section
5.01(j): (i) any of the Collateral, (ii) any real, tangible or intangible
property involved in the operation of or related in any manner to a Restaurant
which is Primary Collateral, (iii) any real, tangible or intangible property
involved in the operation of or related in any manner to a Restaurant which is
Secondary Collateral until such time that Borrower is released from its
covenants under the Negative Pledge Agreement as set forth under Section
2.07(d), (iv) any capital stock of Borrower owned by Guarantor, or (v) a Lien
which is being contested by Borrower under Section 5.01(m).
(b) Asset Dispositions. Borrower shall not sell, assign, convey,
lease, transfer or otherwise dispose of or permit to be sold, assigned,
conveyed, leased, transferred or otherwise disposed of (i) any of the
Collateral, (ii) any real, tangible or intangible property involved in the
operation of or related in any manner to a Restaurant which is Primary
Collateral, (iii) any real, tangible or intangible property involved in the
operation of or related in any manner to a Restaurant which is Secondary
Collateral, or (iv) any capital stock of Borrower, whether any of the foregoing
is now owned or hereafter acquired, except for inventory of Borrower in the
ordinary course of Borrower's business or as expressly permitted by this
Agreement or any other Loan Document; provided, however, that Borrower may
replace a Restaurant's equipment or acquire new equipment and accessions to a
Restaurant's equipment in the ordinary course of Borrower's business subject to
the terms, conditions and provisions of this Agreement. Notwithstanding the
foregoing provisions of this Section 5.02(b) to the contrary, Borrower may (i)
sell a Restaurant which is Released Collateral or any item of property formerly
serving as Collateral in respect of the operation of such Released Restaurant
location, and (ii) sell all of its restaurants located in the State of Florida,
provided that (a) each Note allocated to any Restaurant located in the State of
Florida is prepaid in full and the applicable Yield Maintenance Amount
(calculated in accordance with Section 2.03 is received by Lender upon such
prepayment, and (b) Borrower has complied in full with the terms and conditions
of Section 2.07(c) for the release of Primary Collateral as if the Borrower was
requesting that such a Primary Collateral location be released, provided that
Borrower shall not be required to comply with the provisions of Section
2.07(c)(vii). Any sale by Borrower of less than all of its restaurants located
in the State of Florida shall be subject to all of the terms and conditions of
Section 2.03 and Section 2.07(c) of this Agreement.
(c) Franchise Agreements; Leases & Material Contracts. Subject to
Section 5.01(u), Borrower shall not (i) violate any of the provisions of any
Franchise Agreement, any Lease or other material contract to which Borrower is a
party, or otherwise cause or permit any default under any Franchise Agreement,
any Lease or other material contract; (ii) amend, modify or terminate, or permit
termination, material amendment or material modification of any Franchise
Agreement, any Lease or any other material contract to which it is a party;
(iii) transfer, assign or waive any of its rights under any Franchise Agreement,
any Lease or other material contract; or (iv) enter into any agreement with
Franchisor by which franchise royalty payments under any Franchise Agreement are
permitted to accrue. Notwithstanding the foregoing of this Section 5.02(c) to
the contrary, Borrower may terminate, amend or otherwise modify a Lease,
Franchise Agreement or other material contract, each only in respect of a
Released Restaurant, where such termination, amendment or other modification is
made on a consensual basis between each Person who is a party to such Lease,
Franchise Agreement or other such contract.
(d) Change in Control. Borrower will not permit any Person(s) (other
than the Guarantor) to own, either directly or beneficially, capital stock or
any other instrument in respect of Borrower which in the aggregate exceeds
forty-nine percent (49%) of the total outstanding voting (or power to vote) or
equity interest of Borrower, and Borrower will not permit, and at no time will,
the voting capital stock of Borrower which is owned by Guarantor be less than
fifty-one percent (51%).
(e) Merger and Purchase Transactions. The Borrower will not merge,
consolidate, purchase the assets of, or otherwise acquire any other business nor
enter into any joint venture or enter into any transaction with any Person with
respect thereto if the result
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or effect of such transaction exceeds the permissible Investment limitation set
forth in Section 5.01(i), or liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution).
(f) Transactions with Affiliates. The Borrower will not enter into or
continue in effect any transactions with any Affiliate nor with an officer or
employee thereof except transactions upon fair and reasonable terms no less
favorable to the Borrower than would be obtainable in a comparable arm's length
transaction with a Person not an Affiliate, subject in all cases, however, to
the terms and conditions of Section 5.02(h) and Section 5.02(i) .
(g) Contingent Liabilities. The Borrower will not be or become liable
on any Contingent Obligations except Contingent Obligations existing on the date
of this Agreement and described on Schedule 5.02(g).
(h) Restrictions on Dividends & Distributions. The Borrower will not,
without the Lender's prior written consent: (i) declare or pay any dividend or
make any other distributions on any shares of the Borrower's capital stock
(other than dividends payable in shares of the same class of capital stock), or
make any other Cash Payment to Guarantor or any Affiliate; or (ii) redeem,
purchase or otherwise acquire for value any shares of the Borrower's capital
stock or any warrants, rights or other options to purchase such capital stock.
Notwithstanding the foregoing of this Section 5.02(h) to the contrary, Borrower
may make a Cash Payment to Guarantor or to an Affiliate in each fiscal year of
Borrower (i) if no Default or Event of Default has occurred or is continuing
under any Loan Document; and (ii) if after the payment of any Cash Payment to an
Affiliate or the Guarantor or the amount of any Investment, the Post
Distribution Fixed Charge Ratio of Borrower, tested on a consolidated basis as
to all of the Borrower's Arby's restaurants, is equal to or greater than 1.30x
at any time, to be measured quarterly based on a year to date performance and
Cash Payments and Investments made year to date during the first twelve (12)
months following the Closing Date, and thereafter based upon a trailing 12
months of performance and Cash Payments and Investments made during such twelve
trailing month period.
(i) Investment Limitation. The Borrower will not, without the
Lender's prior written consent, acquire for value, make, have or hold, or permit
to made, any Investment in or to any Person, other than (i) travel advances to
management personnel and employees in the ordinary course of business; (ii)
Investments in readily marketable direct obligations issued or guaranteed by the
United States or any agency thereof and supported by the full faith and credit
of the United States; (iii) certificates of deposit or bankers' acceptances
issued by any commercial bank organized under the laws of the United States or
any State thereof which has (a) combined capital and surplus of at least
$100,000,000, and (b) a credit rating with respect to its unsecured indebtedness
from a nationally recognized rating service that is satisfactory to the Bank;
(iv) commercial paper given the highest rating by a nationally recognized rating
service; (v) repurchase agreements relating to securities issued or guaranteed
as to principal and interest by the United States of America; and (vi) other
readily marketable Investments in debt securities which are reasonably
acceptable to the Lender. Notwithstanding the foregoing of this Section 5.02(i)
to the contrary, Borrower may make an Investment in or to a Person (i) if no
Default or Event of Default has occurred or is continuing under any Loan
Document, and (ii) if after the making of such Investment the Post Distribution
Fixed Charge Ratio of Borrower, tested on a consolidated basis as to all of the
Borrower's Arby's restaurants, is equal to or greater than 1.30x at any time, to
be measured quarterly based on a year to date performance and Cash Payments and
Investments made year to date during the first twelve (12) months following the
Closing Date, and thereafter based upon a trailing 12 months of performance and
Cash Payments and Investments made during such twelve trailing month period.
(j) Change in Nature of Business. The Borrower will not make any
material change in the nature of the business of the Borrower, as carried on at
the date hereof.
(k) Pre Distribution Fixed Charge Ratio. Borrower will not permit its
Pre Distribution Fixed Charge Ratio, tested on a consolidated basis as to all of
Borrower's Arby's restaurants to be less than 1.30x, with such ratio to be
measured quarterly based on a year to date performance basis during the first
twelve (12) months following the Closing Date, and thereafter based on the
trailing 12 months of performance. Borrower or an Affiliate shall have the right
to cure any breach by Borrower of such required consolidated Pre Distribution
Fixed Charge Ratio within thirty (30) days of any such breach, by depositing
into the Escrow Account (i) if the consolidated Pre Distribution Fixed Charge
Ratio is less than 1.25x, then an amount in cash such that the interest income
thereon is sufficient in amount to cause the future consolidated Pre
Distribution Fixed Charge Ratio of Borrower to be equal to or greater than
1.30x, or (b) if the consolidated Pre Distribution Fixed Charge Ratio is equal
to or greater than 1.25x, then an amount equal to the difference between the
income of Borrower assuming a consolidated Pre Distribution Fixed Charge Ratio
of 1.25x and the income of Borrower assuming a consolidated Pre Distribution
Fixed Charge Ratio of 1.30x. The funds in such Escrow Account shall be
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pledged as collateral to Lender (with such pledge being a first priority
perfected lien in favor of Lender) to secure repayment of the Loan, pursuant to
a pledge agreement or similar agreement in form and substance acceptable to
Lender in its sole discretion, and with interest thereon being released to
Borrower and included in future calculations of the Pre Distribution Fixed
Charge Ratio. The funds in the Escrow Account shall be released by Lender to
Borrower after Borrower has complied for a period of two consecutive calendar
year quarters with the required consolidated Pre Distribution Fixed Charge
Ratio. In no event shall Borrower be required to maintain funds in the Escrow
Account in excess of the outstanding aggregate principal balance of the Loan.
Lender will agree that there shall be no restriction upon Guarantor or any other
Affiliate of Borrower to raise necessary funds to cure any violation by Borrower
of the consolidated fixed charge ratio.
SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence, existence or violation of any
one or more of the following shall constitute an "Event of Default" hereunder:
(a) Monetary. Borrower's failure to pay within five (5) calendar days
after the due date thereof any principal, interest, Yield Maintenance Amount or
other payment required under the terms of this Agreement or any of the other
Loan Documents; or Borrower shall fail to pay when due (but subject to any
applicable grace period) any other Indebtedness or obligation of Borrower to
Lender or any other Person;
(b) Performance of Obligations. (i) Borrower's failure (or
Guarantor's failure as to any Loan Document to which it is a party) to perform
or observe any term, covenant, condition or obligation contained in this
Agreement, any of the other Loan Documents other than those set forth in
subsection (a) above or as otherwise provided in this Section 6.01 within ten
(10) Business Days after receipt of written notice from Lender or such longer
cure period as may be provided herein or in the Loan Documents; provided,
however, if such default cannot be cured with such period, Borrower shall have
such longer period of time to cure such default provided, in Lender's sole
discretion, Borrower is proceeding with due diligence, but in no event shall
such period of time exceed thirty (30) Business Days; or (ii) Borrower's failure
to perform or observe any term, covenant, condition or obligation owed to Lender
contained in any other loan or credit agreement or other agreement, document or
instrument (other than this Agreement and the other Loan Documents), subject to
applicable grace periods;
(c) Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of Borrower or the Guarantor to Lender in or in connection with the
Loan or any of the Loan Documents, or as an inducement to Lender to make the
Loan, shall be false, incorrect, incomplete or misleading in any material
respect when made or furnished;
(d) Liens, Attachment; Condemnation. (i) The recording of any claim
of lien against any Restaurant or the Collateral which is not expressly
permitted under this Agreement or not being contested by Borrower as permitted
under Section 5.01(m) of this Agreement, excluding any Released Restaurant
location from the immediately preceding clause if such claim of lien does not
have a Material Adverse Effect determined in the sole discretion of Lender; (ii)
the Condemnation of, or occurrence of an uninsured casualty with respect to any
material portion of a Restaurant which is Primary Collateral; or (iii) the
sequestration or attachment of, or any levy or execution upon a Restaurant, the
Collateral, or any other collateral provided by Borrower under any of the Loan
Documents, which sequestration, attachment, levy or execution (iii-a) has a
Material Adverse Effect and (iii-b) is not released, expunged or dismissed
within thirty (30) days and before the sale of the assets affected thereby;
(e) Death; Withdrawal. The death, retirement, incapacity, withdrawal
or dissolution, as applicable, of: (i) Borrower; (ii) any Guarantor, or (iii)
the President or Chairman of the Board of Directors of Borrower if Borrower
fails to provide a substitute or replacement of any such individual with
requisite industry experience within thirty (30) days after the occurrence of
any such event;
(f) Transfer of Property or Interest in Borrower. Except as otherwise
permitted under this Agreement, Borrower shall not, without the prior written
consent of Lender, sell, transfer, mortgage, pledge, hypothecate, assign,
encumber or otherwise dispose of, whether voluntarily, involuntarily or by
operation of law (i) any of the Collateral, (ii) any real, tangible or
intangible property involved in the operation of or related in any manner to a
Restaurant which is Primary Collateral, or (iii) any real, tangible or
intangible property involved in the operation of or related in any manner to a
Restaurant which is Secondary Collateral, or sell, transfer, mortgage, pledge,
hypothecate, assign, encumber or otherwise dispose of, whether voluntarily,
involuntarily or by operation of law any capital stock of Borrower, except to
the extent expressly permitted under this Agreement;
(g) Adverse Financial Condition. Any change in the financial
condition of the Borrower or of the Guarantor from the condition shown on the
financial statement(s) submitted to Lender and relied upon by Lender in making
the Loan, which change has a
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Material Adverse Effect, or any other event or occurrence which has a Material
Adverse Effect and notwithstanding the terms and conditions of the last clause
of Section 6.01(i) and Section 6.01(j) to the contrary;
(h) Termination or Revocation of Guaranty. The Guarantor or any
guarantor shall terminate or revoke or attempt or purport to terminate or revoke
its guaranty of Borrower's obligations to Lender;
(i) Default under Franchise Agreements. Any failure by the Borrower
to perform any obligation under a Franchise Agreement with Franchisor, and such
failure shall not have been cured on or before the first date on which
Franchisor may terminate such Franchise Agreement by reason of such failure; or
any Franchise Agreement of Borrower is terminated or cancelled other than a
consensual termination by each Person who is a party to a Franchise Agreement in
respect of a Released Restaurant;
(j) Default under Lease. Subject to Section 5.01(u), any failure by
the Borrower to perform any obligation under a Lease, and such failure shall not
have been cured on or before the first date on which the Landlord may terminate
such Lease by reason of such failure; or any Lease of Borrower is terminated or
cancelled other than a consensual termination by each Person who is a party to a
Lease in respect of a Released Restaurant;
(k) Default under Other Material Restaurant Agreements. Any failure
of Borrower to perform its obligations under any other material contract
relating to or involving a Restaurant (including, without limitation, such as a
common area maintenance agreement or parking agreement), and such failure shall
not have been cured within thirty (30) Business Days after receipt of written
notice from Lender;
(l) Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of a
petition by Borrower or Guarantor for relief under the Bankruptcy Reform Act of
1978 (11 USC [section] 101-1330), or under any other present or future federal
or state law regarding bankruptcy, reorganization or other debtor relief (the
"Bankruptcy Code"); (ii) the filing of any pleading or an answer by Borrower or
by Guarantor in any involuntary proceeding under the Bankruptcy Code or other
debtor relief law which admits the jurisdiction of the court or the petition's
material allegations regarding Borrower's insolvency; (iii) a general assignment
by Borrower or by Guarantor for the benefit of creditors; (iv) Borrower or
Guarantor applying for, or the appointment of, a receiver, trustee, custodian or
liquidator of Borrower or Guarantor or any of their respective property; or (v)
the filing by or against Borrower or Guarantor of a petition seeking the
liquidation or dissolution of Borrower or Guarantor or the commencement of any
other procedure to liquidate or dissolve Borrower or Guarantor; provided,
however, that Borrower or Guarantor, as the case may be, shall have a period of
sixty (60) days to dismiss or vacate any action or matter commenced against it
or them.; or
(m) Involuntary Bankruptcy. The failure of Borrower or Guarantor to
effect a full dismissal of any involuntary petition under the Bankruptcy Code or
any other debtor relief law that is filed against Borrower or Guarantor or in
any way restrains or limits Borrower, Guarantor or Lender regarding the Loan, a
Restaurant, or the Collateral, prior to the earlier of the entry of any court
order granting relief sought in such involuntary petition, or sixty (60) days
after the date of filing of such involuntary petition.
6.02. Remedies. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Section 6.01(l) or
6.01(m)) and at any time thereafter during the continuance of such Event of
Default, Lender may, by written notice to Borrower, declare all outstanding
Obligations (including the Yield Maintenance Amount) payable by Borrower
hereunder, as well as all other obligations owed by Borrower to Lender under any
other loan or credit agreement, to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Section 6.01(l) or 6.01(m), immediately and without notice,
all outstanding Obligations (including the Yield Maintenance Amount) payable by
Borrower hereunder, as well as all other obligations owed by Borrower to Lender
under any other loan or credit agreement, shall automatically become immediately
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note to the contrary notwithstanding. In addition to the foregoing remedies,
upon the occurrence or existence of any Event of Default, Lender may exercise
any other right, power or remedy granted to it by the Loan Documents or
otherwise permitted to it by law, either by suit in equity or by action at law,
or both.
SECTION VII. MISCELLANEOUS.
7.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lender or Borrower under this Agreement or the other Loan Documents shall be in
writing and telecopied, mailed or delivered to each party at its telecopier
number or address set forth below (or to such other telecopier number or address
for
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any party as indicated in any notice given by that party to the other
party). All such notices and communications shall be effective (a) when sent by
Federal Express or other overnight service of recognized standing, on the
Business Day following the deposit with such service; (b) when mailed,
certified, return receipt requested, postage prepaid and addressed as aforesaid
through the United States Postal Service, upon receipt; (c) when delivered by
hand, upon delivery; and (d) when telecopied, upon confirmation of receipt.
Lender: Atherton Capital Incorporated
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attention: David L. Elder
Telephone: (415) 827-7800
Telecopier: (415) 827-7950
with a copy to Bankers Trust Company
Loan Servicer: Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: Karla Leonffu
Telephone: (212) 250-4984
Telecopier: (212) 250-6151
Borrower: Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, Georgia 30350
Attention: Charles N. Hyslop
Telephone: (770) 587-0290
Telecopier: (770) 594-7044
with copy to I.C.H. Corporation
9404 Genesse Avenue
Suite 33
La Jolla, California 92037
Attention: James R. Arabia
Telephone: (619) 587-8533
Telecopier: (619) 535-1634
with copy to Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks
Telephone: (212) 326-0879
Telecopier: (212) 326-0806
In any case where this Agreement authorizes notices, requests, demands or other
communications by Borrower to Lender to be made by telephone or telecopy, Lender
may conclusively presume that anyone purporting to be a person designated in any
borrowing resolution, incumbency certificate or in any other such document
delivered by Borrower to Lender, is such a person.
7.02. Expenses. Borrower shall pay on demand, (a) all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred by
Lender in connection with the preparation, execution and delivery of, and the
exercise of its duties under, this Agreement and the other Loan Documents, and
the preparation, execution and delivery of amendments, consents and waivers
hereunder and thereunder; and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Lender in the enforcement
or attempted enforcement of any of the Obligations or in preserving any of
Lender's rights and remedies.
7.03. Indemnification. To the fullest extent permitted by law,
Borrower agrees to protect, indemnify, defend and hold harmless Lender and its
respective shareholders, members, beneficial owners, directors, partners,
managers, officers, employees, agents,
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attorneys, successors, assigns and any affiliate thereof ("Indemnitees") from
and against any and all liabilities, losses, damages (whether direct or
consequential), obligations, claims, penalties, causes of action, fines,
injunctions, costs or expenses of any kind or nature (including, without
limitation, those arising out of, in respect of, as a consequence of or in
connection with any violation or failure to comply with any Environmental Law)
and from any and all suits, claims or demands (including, without limitation, in
respect of or for reasonable attorney's fees and other expenses whether incurred
within or outside the judicial process) arising on account of or in connection
with any matter or thing or action or failure to act by Indemnitees, or any of
them, arising out of or relating to Borrower, a Restaurant or the Loan
Documents, whether prior to or after the date of this Agreement and whether
prior to or after Borrower became the owner of the Restaurant including, without
limitation, any use by Borrower of any proceeds of the Loans, except to the
extent such liability arises from the willful misconduct or gross negligence of
the Indemnitees. LENDER SHALL HAVE NO LIABILITY FOR ITS OWN NEGLIGENCE, EXCEPT
FOR LIABILITY ARISING FROM ITS WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. Upon
receiving knowledge of any suit, claim or demand asserted by a third party that
Lender believes is covered by this indemnity, Lender shall give Borrower notice
of the matter and an opportunity to defend it, at Borrower's sole cost and
expense, with legal counsel satisfactory to Lender. Any failure or delay of
Lender to notify Borrower of any such suit, claim or demand shall not relieve
Borrower of its obligations under this Section 7.03. The obligations of Borrower
under this Section 7.03 shall survive the payment and performance of the
Obligations and the exercise of any rights or remedies by Lender.
7.04. Waivers; Amendments. Any term, covenant, agreement or condition
of this Agreement or any other Loan Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and Lender provided,
however, that if the Loan is sold to a trust, no such amendment or waiver may be
made unless Borrower has provided to Lender an opinion of counsel satisfactory
to Lender that such amendment or waiver will not affect the tax treatment of the
trust. No failure or delay by Lender in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
7.05. Successors and Assigns.
(a) Binding Effect; Conflict Between Loan Documents. This Agreement
and the other Loan Documents shall be binding upon and inure to the benefit of
Borrower, Lender, all future holders of the Notes and their respective
successors and permitted assigns, except that Borrower may not assign or
transfer any of its rights or obligations under any Loan Document without the
prior written consent of Lender and the full compliance of the terms of Section
2.08. All references in this Agreement to any Person shall be deemed to include
all successors and assigns of such Person. In the event that the terms,
conditions and provisions of this Agreement are in conflict with the terms,
conditions and provisions of any of the other Loan Documents, then the terms,
conditions and provisions of this Agreement shall prevail.
(b) Loan Sales and Participation; Disclosure of Information. Borrower
agrees that Lender may elect, at any time, to sell, assign, securitize or grant
a participation in all or any portion of Lender's rights and obligations under
the Loan Documents, and that any such sale, assignment, securitization or
participation may be to one or more financial institutions, private investors,
public securities marketplace, trust and/or other entities, at Lender's sole
discretion. Borrower further agrees that Lender may disseminate to any such
actual or potential purchaser(s), assignee(s), trustee(s), participant(s) or
such other party(s), including any servicer of the Loan or any governmental
authority regulating any of the foregoing or as may be required by any
governmental authority or any other authority having jurisdiction over Lender,
all documents and information (including, without limitation, all financial
information) which has been or is hereafter provided to or known to Lender with
respect to: (a) the Property, the Collateral, and the Restaurant's operation;
(b) any party connected with the Loan (including, without limitation, the
Borrower, any partner of Borrower, any constituent partner or member of
Borrower, any Related Person, and any guarantor); and/or (c) any lending
relationship other than the Loan which Lender may have with any party connected
with the Loan. In the event of any such sale, assignment, securitization or
participation, Lender and the parties to such transaction shall share in the
rights and obligations of Lender as set forth in the Loan Documents only as and
to the extent they agree among themselves. In connection with any such sale,
assignment, securitization or participation, Borrower further agrees that the
Loan Documents shall be sufficient evidence of the obligations of Borrower to
each purchaser, assignee, trustee, participant or such other party, and upon
written request by Lender, Borrower shall, within fifteen (15) days after
request by Lender, deliver an estoppel certificate verifying for the benefit of
Lender and to any other party designated by Lender the status and the terms and
provisions of the Loan in form and substance acceptable to Lender. The indemnity
obligations of Borrower under the Loan Documents shall also apply with respect
to any purchaser, assignee, trustee, participant or such other party.
7.06. Setoff. In addition to any rights and remedies of Lender
provided by law, Lender shall have the right, without prior notice to Borrower,
any such notice being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence
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and during the continuance of an Event of Default, to set-off and apply against
any indebtedness, whether matured or unmatured, of Borrower to Lender
(including, without limitation, the Obligations), any amount owing from Lender
to Borrower. The aforesaid right of set-off may be exercised by Lender against
Borrower or against any trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, receiver or execution, judgment or attachment
creditor of Borrower or against anyone else claiming through or against Borrower
or such trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by Lender prior to the occurrence of an Event of Default. Lender
agrees promptly to notify Borrower after any such set-off and application made
by Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be implied
from this Agreement or any other Loan Document is intended to give, or shall be
construed to give, any Person, other than the parties hereto and thereto and
their permitted successors and assigns, any benefit or legal or equitable right,
remedy or claim under or by virtue of this Agreement or any other Loan Document.
7.08. Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
7.09. JURY TRIAL. EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AS TO ANY ISSUE RELATING TO ANY LOAN DOCUMENT IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT.
7.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
7.11. Recourse. Except as otherwise expressly set forth in this
Section 7.11, Lender shall have no recourse against any shareholder, owner,
partner, officer, director, agent or employee of or in Borrower or of or in any
partner in or shareholder of Borrower (all such Persons, except to the extent
any such Person is obligated under a Guaranty, referred to collectively as
"Exculpated Persons") for the repayment of the Loan. Notwithstanding the
provisions of this Section 7.11, nothing herein or in this Agreement, the Loan,
or in any other Loan Document shall: (i) prevent Lender's recourse to Borrower,
the Restaurant, the Collateral or the Property or against any Guarantor under a
Guaranty; (ii) constitute a waiver, release or discharge of any Indebtedness or
Obligation evidenced by the Loan or arising under or secured by this Agreement
or any of the other Loan Documents, but the same shall continue until fully paid
or discharged; (iii) affect or in any way limit the rights and remedies of
Lender under this Agreement or under any other Loan Document; or (iv) limit the
personal liability of any Exculpated Person for misappropriation or
misallocation of any funds, fraud, misrepresentation or willful damage to a
Restaurant, the Property or any portion thereof or for any environmental
indemnity pursuant to Section 7.03.
7.12. Cumulative Rights. The rights, powers and remedies of Lender
hereunder are cumulative and in addition to all rights, powers and remedies
provided under any and all agreements between Borrower and Lender relating
hereto, at law, in equity or otherwise.
7.13. Survival. All representations, warranties, covenants and
agreements herein contained on the part of Borrower shall be effective until the
Loan is paid and performed in full, or longer as expressly provided herein.
7.14. Lender Discussions with the Franchisor. Borrower hereby
authorizes Lender to discuss with the Franchisor Borrower's financial condition,
operations and any other matters relating to Borrower, any Franchise Agreement,
any Restaurant or any property. Borrower further (a) consents to the release to
Lender by the Franchisor of any information relating to the foregoing matters
and (b) instructs the Franchisor to release any information relating to the
foregoing matters upon the request of Lender.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed as of the day and year first above written.
SYBRA, INC. (as the surviving entity of a merger
with Newco), a Michigan corporation
19
<PAGE>
By: ______________________________________
Name:
Title:
ATHERTON CAPITAL INCORPORATED,
a Delaware corporation
By: ______________________________________
Name:
Title:
20
<PAGE>
LOAN TRANCHE _____
SCHEDULE 1.01
DEFINITIONS
"Additional Debt" means (i) any indebtedness or liability for borrowed
money, whether or not subordinated to other Indebtedness of Borrower or the
payment of the Obligations; (ii) obligations evidenced by bonds, debentures,
notes, or other similar instruments; (iii) obligations for the deferred purchase
price of property or services (excluding trade payables incurred in the ordinary
course of business of Borrower); (iv) obligations as lessee under Capital
Leases; (v) non-current liabilities in respect of unfunded vested benefits under
any Plan; (vi) obligations under letters of credit; (vii) obligations under
acceptance facilities; (viii) any Contingent Obligation (other than for
collection or deposit in the ordinary course of business), including contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person; and (ix) obligations secured by any Liens, whether or not the
obligations have been assumed.
"Adjusted Free Cash Flow" means, for any specified period, the net
income (loss) for the Arby's restaurant(s) specified, determined in accordance
with GAAP:
(a) plus, to the extent previously deducted in calculating net
income (loss): (i) income taxes; (ii) interest expense;
(iii) all non-cash charges including depreciation and
amortization; (iv) the amount of expenses paid for regional
and corporate overhead, including but not limited to
automobiles, administrative fees, legal, accounting and
other professional services, office supplies, travel and
entertainment; and (v) non-recurring expenses, including
those required by the Franchisor;
(b) minus a standard management fee of 2.0% of gross sales for
any 12-month period.
"Affiliate" shall mean (a) any entity which Borrower or Guarantor,
directly or indirectly, owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, five (5%) percent or more of any class of stock or
partnership interest of such entity, or (b) any Person that controls, is
controlled by or is under common control with Borrower or Guarantor. For the
purpose of this definition, "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, partnership
interest, by contract or otherwise.
"Agreement" shall mean this Loan Agreement.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
dated as of December 23, 1996, by and among Sybra, Inc., Valcor, Inc. and USRP
(as assigned to USRP by U. S. Restaurant Properties, MLP, a master limited
partnership under the laws of the State of Delaware), as amended.
"Borrower" shall have the meaning given to that term in clause (1) of
the introductory paragraph, being the surviving entity of a merger between
Sybra, Inc. and Newco, together with any other Person succeeding thereto by
merger, consolidation or acquisition of Borrower's assets substantially as an
entirety or any legal representative, heir, estate, successor or assignee
thereof.
"Business Day" shall mean any day other than a Saturday, Sunday or
legal holiday or other day on which commercial banks in California are
authorized or required by law to close. All references in this Agreement to a
"day" or a "date" shall be to a calendar day unless specifically referenced as a
Business Day.
"Capital Expenditures" shall mean, for any specified period, the
aggregate of all gross expenditures during such period for any assets, or for
improvements, replacements, substitutions or additions therefor or thereto,
which are required to be capitalized on the balance sheet of the Borrower,
including the balance sheet amount of any capitalized lease obligations incurred
during such period.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the Borrower in accordance with GAAP.
"Cash Payment" shall mean with respect to any Person identified, a
payment or distribution by Borrower of or on account of (i) a cash dividend or
distribution in respect of Borrower's capital stock, (ii) Indebtedness or any
other loan or advance of
1.01-1
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money, (iii) an operating or true lease, (iv) real, tangible or intangible
property, or (v) cash for any reason of any kind or nature whatsoever, other
than a payment by Borrower of cash in respect of (v-1) a reasonable salary, wage
and bonus commensurate with employment experience which is paid by Borrower to
its officers and employees, and reasonable director's fees which are paid by
Borrower to its directors in the ordinary course of Borrower's business and
consistent with the reasonable business plans of Borrower for the acquisition,
development and operation of Arby's restaurants, subject, however, to the terms
and conditions of Attachment 9 as to each Person/position noted thereon which
employment relationship is acceptable to Lender, (v-2) reimbursing the
directors, officers and employees of Borrower for travel, entertainment and
miscellaneous expenses (miscellaneous expenses as construed under GAAP) incurred
by such director, officer or employee on behalf of Borrower, (v-3) reimbursing
Guarantor for the reasonable legal, accounting, tax and insurance expenses and
fees incurred and paid by Guarantor on behalf of Borrower, along with
reimbursement to the Guarantor for any payment made by Guarantor, for
administrative convenience purposes, of any salary set forth on Attachment 9,
and (v-4) reimbursing Guarantor on a one time basis for commitment fees,
application deposit, Deloitte & Touche expenses and closing costs incurred and
paid by Guarantor on behalf of Borrower in connection with this Agreement and
the transactions contemplated hereby, but not to exceed in any event the
aggregate sum of $500,000 as evidenced by a reasonably detailed accounting
delivered by Guarantor to Lender; provided that upon reimbursement of such sums
by Borrower to Guarantor, Borrower shall have as of the Closing Date a collected
cash bank account balance equal to or greater than $3,000,000 after payment of
such reimbursement as if such reimbursement was paid on the Closing Date.
"Closing Date" shall mean April 30, 1997, or such other date as may be
agreed to by Lender and Borrower, provided that such other date is not later
than May 16, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean the meaning given to that term in the Security
Agreement.
"Condemnation" means any condemnation or other taking or temporary or
permanent requisition of any Collateral or a Restaurant, any interest therein or
right appurtenant thereto, or any change of grade affecting the Collateral or
any Restaurant, or any part thereof, as the result of the exercise of any right
of condemnation or eminent domain. A transfer in lieu or anticipation of
Condemnation shall be deemed to be a Condemnation.
"Contingent Obligation" means with respect to any Person at the time
of any determination, without duplication, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or otherwise: (a) 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 direct or indirect
security therefor, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness, (c) to maintain working capital, equity capital or other financial
statement condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or otherwise to protect the owner thereof against loss
in respect thereof, or (d) entered into for the purpose of assuring in any
manner the owner of such Indebtedness of the payment of such Indebtedness or to
protect the owner against loss in respect thereof; provided, that the term
"Contingent Obligation" shall not include endorsements for collection or
deposit, in each case in the ordinary course of business.
"Contractual Obligation" of any Person shall mean, any indenture,
note, security, deed of trust, mortgage, security agreement, lease, guaranty,
instrument, contract, agreement or other form of obligation or undertaking to
which such Person is a party or by which such Person or any of its property is
bound, and shall include, in the case of Borrower, without limitation, each
Franchise Agreement and each Lease.
"Current Assets" means as of any date, the current assets of the
Borrower determined in accordance with GAAP.
"Current Liabilities" means as of any date, the current liabilities of
the Borrower determined in accordance with GAAP.
"Current Ratio" means as of any date (i) the sum total of Borrower's
Current Assets less: (a) all accounts receivable other than those arising
through credit card sales; (b) receivables from Guarantor or any Affiliate; and
(c) cash in the Escrow Account, with such foregoing sum, divided by (ii) the sum
total of Borrower's Current Liabilities less the current payment portion of
Indebtedness, each as determined in accordance with GAAP.
1.01-2
<PAGE>
"Default" shall mean any event or circumstance not yet constituting an
Event of Default but which, with the giving of any notice or the lapse of any
period of time or both, would become an Event of Default.
"Default Rate" shall mean the higher of (i) the rate specified in
Section 2.01(b) plus two percent (2%) or (ii) the reference rate publicly
announced by Bank of America, NT&SA, San Francisco, California, as it may change
from time to time, plus two percent (2%).
"Determination Date" shall also mean the date of the Prepayment Date.
"Environmental Indemnity Agreement" shall mean that certain
Environmental Indemnity Agreement substantially in the form of Exhibit J and to
be dated of even date herewith.
"Environmental Laws" means all present and future Legal Requirements
relating to the protection of human health and safety or the environment,
including, without limitation, (a) all Legal Requirements, pertaining to
reporting, licensing, permitting, investigation, and remediation of emissions,
discharges, releases, or threatened releases of hazardous materials, chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials or wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the presence, generation,
discharge, release, removal, manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical substances,
pollutants, emissions, contaminants, or hazardous, radioactive or toxic
substances, materials, or wastes, whether solid, liquid, or gaseous in nature;
and (b) all Legal Requirements pertaining to the protection of the health and
safety of employees or the public.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"Escrow Account" shall mean an interest bearing deposit, savings or
money market account in the name of Borrower which, is maintained at a financial
institution and with the terms of such account each being acceptable to Lender
in its sole discretion.
"Estoppel" shall mean an estoppel agreement to be executed and
delivered by a Landlord for each Lease in respect of a Restaurant which is
Primary Collateral, in form and substance acceptable to Lender; provided that in
no event shall the term Estoppel mean any Lease for any such Restaurant which is
located in a "mall."
"Event of Default" shall have the meaning given to that term in
Paragraph 6.01.
"Exculpated Person" shall the meaning indicated in Section 7.11.
"Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of income and of changes in cash flow of such
Person for such period, and balance sheets of such Person as of the end of such
period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual financial review, all prepared in reasonable detail.
"Franchise Agreement" shall mean each License, License Agreement,
Franchise Agreement or similar agreement between Franchisor and Borrower with
respect to the operation of a Restaurant.
"Franchisor" shall mean Arby's, Inc., a __________________
corporation, or its successors or assigns under the Franchise Agreement.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently followed.
1.01-3
<PAGE>
"Governmental Charges" shall mean all levies, assessments, fees,
claims or other charges imposed by any governmental authority upon or relating
to (i) Borrower, (ii) the Loan, (iii) employees, payroll, income or gross
receipts of Borrower, or (iv) the ownership or use of any of its assets by
Borrower.
"Guarantor" shall mean I.C.H. Corporation, a Delaware corporation.
"Guaranty Agreement" shall mean that certain Guaranty Agreement
substantially in the form of Exhibit K and to be dated of even date herewith.
"Impositions" shall mean all taxes, assessments and other governmental
charges, ground rents, or other rents, rates and charges, excises, levies, fees
and other charges (public or private) which may be assessed, levied, confirmed
or imposed on, or in respect of or be a lien upon the Collateral or the
Restaurant or any part thereof or any interest therein.
"Indebtedness" shall mean and include (i) with respect to any Person,
(a) all items of indebtedness and liabilities which, in accordance with GAAP,
would be included in determining liabilities that are shown on the liability
side of the balance sheet of such Person, including, without limitation,
Additional Debt and Capital Leases, (b) all indebtedness and liabilities of
other Persons assumed or guaranteed by such Person or in respect to which such
Person is secondarily or contingently liable whether by any agreement to acquire
indebtedness and liabilities or to supply or advance funds or otherwise, and (c)
all indebtedness and liabilities of other Persons secured by any Lien in any
property of such Person; and, (ii) with respect to any Restaurant, (a) all items
of indebtedness and liabilities which, in accordance with GAAP, would be
included in determining liabilities that are shown on the liability side of the
balance sheet of such Restaurant, (b), to the extent such indebtedness or
liability specifically relates to the Restaurant or depends on Restaurant cash
flow for repayment (as provided in an assumption of debt, guaranty or other
agreement), all indebtedness and liabilities of other Persons assumed or
guaranteed by any Person or in respect of which such Person is secondarily or
contingently liable whether by any agreement to acquire indebtedness and
liabilities or to supply or advance funds or otherwise and (c) all indebtedness
and liabilities secured by any Lien on any property used in the operation of
such Restaurant, to the extent not included pursuant to clauses (a) and (b).
"Insurance Proceeds" means, at any time, all insurance proceeds or
payments to which Borrower may be or become entitled by reason of any casualty
under the insurance policies with respect to a Restaurant required to be
maintained pursuant to this Agreement plus (i) if Borrower fails to maintain any
of the insurance policies required under this Agreement, the amounts which would
have been available with respect to such casualty had Borrower maintained such
insurance policies; and (ii) all insurance proceeds and payments to which
Borrower may be or become entitled, including, without limitation, pursuant to
title insurance or by reason of any casualty under any other insurance policies
coverage maintained by Borrower with respect to the Restaurant.
"Intercreditor Agreement (USRP)" shall mean that certain Intercreditor
Agreement by and among the USRP, the Borrower and the Lender.
"Investment" shall mean (i) the acquisition, purchase, making or
holding of any stock or other security, any loan, advance, contribution to
capital, extension of credit (except for trade and customer accounts receivable
for inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), (ii) any acquisitions of real
or personal property (other than real and personal property acquired in the
ordinary course of business for the operation of an Arby's restaurant), (iii)
any purchase or commitment or option to purchase stock or other debt or equity
securities or instrument of or any interest in another Person, or other form of
infusion of capital into a Person, or any integral part of any business or the
assets comprising such business or part thereof, and (iv) any loan, extension of
credit or advance of money to a Person. The amount of any Investment shall be
the original cost or amount of such Investment plus the cost or amount 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.
"Landlord" shall mean each landlord, lessor or similar person in
respect of a Lease.
"Lease" shall mean each Lease Agreement, Ground Lease Agreement or
similar agreement covering real property upon which a Restaurant is located.
"Leasehold Mortgage" shall mean that certain Leasehold Mortgage (or
Leasehold Deed of Trust or Deed to Secure Debt), Assignment of Leases and Rents
and Fixture Filing, in respect of each Lease for a Restaurant which is Primary
Collateral, substantially in the form of Exhibit F (or in such form as required
by local law); provided that in no event shall the term Leasehold Mortgage apply
to any Lease for any such Restaurant which is located in a "mall."
1.01-4
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"Legal Requirements" shall mean all laws, rules, regulations,
judgments, orders, permits, licenses, authorizations and other requirements of
and agreements with all governments, department agencies, courts and officials,
which now or hereafter shall be applicable to the Collateral or the Restaurant
or any part thereof or any use or condition thereof including, without
limitation, all Environmental Laws.
"Lender" shall have the meaning given to that term in clause (2) of
the introductory paragraph hereof.
"Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction.
"Loan" shall have the meaning given to that term in Section 2.01(a).
"Loan Documents" shall mean and include this Agreement, each Note, the
Security Agreement, each Leasehold Mortgage (or Leasehold Deed of Trust), each
Estoppel, each Mortgage Non-Disturbance Agreement, the Negative Pledge
Agreement, the Environmental Indemnity Agreement, the Guaranty Agreement, the
Intercreditor Agreement (USRP), the Solvency Certificate and all other
documents, instruments and agreements delivered to Lender in connection with
this Agreement.
"Loan Maturity Date" shall have the meaning given to that term in
Section 2.01(c).
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of a
Restaurant which is Primary Collateral; (b) the ability of Borrower to pay or
perform the Obligations in accordance with the terms of this Agreement and the
other Loan Documents; (c) the rights and remedies of Lender under this
Agreement, the other Loan Documents or any related document, instrument or
agreement; or (d) the value or use of the Collateral as to a Restaurant which is
Primary Collateral, Lender's Liens in such Collateral or the perfection or
priority of such Liens; or (e) any Franchise Agreement or any Lease, excluding a
Franchise Agreement or a Lease which has been consensually terminated in respect
of a Released Restaurant where such consensual termination does not create,
cause or constitute a Material Adverse Effect under sub-paragraphs (a), (b), (c)
or (d) set forth above in this Definition.
"Merger" shall mean the merger of Newco with and into Sybra, Inc.
"Memorandum of Lease" means a memorandum of lease which set forth the
material terms of a Lease in respect of a Restaurant which is part of the
Primary Collateral.
"Minimum Liquidity Level" shall have the meaning given to that term in
Section 5.01(s).
"Mortgage Non-Disturbance Agreement" shall mean the Mortgage
Non-Disturbance Agreement to be executed and delivered by any Person who holds a
Lien against the real property upon which any Primary Collateral is located,
substantially in the form of Exhibit I (or in such form as required by local
law); provided that in no event shall the term Mortgage Non-Disturbance
Agreement apply to any Lease for any such Primary Collateral which is located in
a "mall."
"Multiemployer Plan": means a multiemployer plan, as such term is
defined in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing
Date, within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"Note" shall have the meaning given to that term in Section 2.05.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement covering the property described therein in respect of the Secondary
Collateral, substantially in the form of Exhibit H and to be dated of even date
herewith.
"Negative Rate Movement" shall mean with respect to any Note being
prepaid and any Determination Date, an amount equal to the greater of (i) the
difference of (x) the Treasury Rate on the Closing Date minus (y) the Treasury
Rate on such Determination Date, and (ii) zero.
1.01-5
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"Newco" shall mean SY Acquisition Corp., a Delaware corporation, which
is the wholly owned subsidiary corporation of Guarantor.
"Obligations" shall mean and include all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by Borrower to Lender of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising pursuant to
the terms of this Agreement or any of the other Loan Documents, including,
without limitation, all interest, Yield Maintenance Amount, fees, charges,
expenses, attorneys' fees and accountants' fees chargeable to Borrower or
payable by Borrower hereunder or thereunder.
"Origination Fee" shall have the meaning given to that term in
Paragraph 2.02.
"Payment Date" shall mean with respect to any Note being prepaid, each
date after the Determination Date on which the Borrower is required to make a
payment of principal under such Note.
"PBGC" means the Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"Permitted Liens" shall mean and include:
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith, as provided in Subparagraph 5.01(m);
(b) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for
sums not overdue or being contested in good faith, as provided in
Subparagraph 5.01(m);
(c) Deposits under workers' compensation, unemployment insurance
and social security laws or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations of surety or appeal bonds
or to secure indemnity, performance or other similar bonds in the
ordinary course of business;
(d) The Liens described in Schedule 2.01, but only to the extent
that the amount of the Indebtedness secured by any such Lien does not
at any time exceed the amount of such Indebtedness so secured by such
Lien on the date of this Agreement or at any time after the date of
this Agreement; and
(e) Liens securing the Obligations.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a joint venture or other entity or a governmental
authority.
"Plan" means each employee benefit plan (whether in existence on the
Closing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate.
"Post Distribution Fixed Charge Ratio" shall mean the Pre Distribution
Fixed Charge Ratio adjusted to take into account the amount of any Cash
Payment(s) and the amount of any Investment, as illustrated on Attachment 7
hereto.
"Pre Distribution Fixed Charge Ratio" shall mean (i) the sum of the
Adjusted Free Cash Flow and all rent expense (defined as building and ground
operating lease expense plus percent rent plus capitalized building lease
expense for any Arby's restaurants specified (net of principal and interest),
minus rent on regional and corporate offices and inactive units) during any
period in determination, divided by (ii) the sum of all payments required to be
made by Borrower during any period in determination (a) with respect to all of
its Indebtedness including any payments pursuant to any lease(s) required to be
capitalized in accordance with GAAP for, related in any manner to or in respect
of the Arby's restaurants specified and (b) pursuant to any real property leases
for the Arby's restaurants specified, as the foregoing calculation is
illustrated for example purposes on Attachment 6 hereto; it being the purposes
and
1.01-6
<PAGE>
intent of Lender and Borrower in regard to the term "specified restaurants" that
the Pre Distribution Fixed Charge Ratio at times may be applied to only the
Restaurants as noted in Section 2.07(c) or all of the Arby's restaurants of
Borrower on a consolidated basis.
"Prepayment Date" shall have the meaning given to that term in
Paragraph 2.03(a).
"Primary Collateral" means each Restaurant described on Attachment 2.
"Principal Amount(s)" shall mean, with respect to any Note being
prepaid, the amount of principal due on a Payment Date
"Proforma Basis" shall mean the calculation of the Pre Distribution
Fixed Charge Ratio over the required prior monthly period and with giving full
effect to any contemplated Indebtedness and payments thereon as if the same had
been incurred by Borrower on the first calendar day on which such required prior
monthly period began.
"Property" shall mean the real property described in a Lease.
"Related Persons" shall mean collectively, all Affiliates and
Subsidiaries of Borrower.
"Released Restaurant": shall mean (i) each Primary Collateral location
were the liens against which are required to be released by Lender under Section
2.07(c) if Borrower has fully complied with the terms and conditions of Section
2.07(c), (ii) the Secondary Collateral on the date that Lender is required to
release Borrower from the terms and conditions of the Negative Pledge Agreement
in accordance with Section 2.07(d), (iii) each Restaurant set forth on
Attachment 8 which is denoted as being a Resturant that may be closed, and (iv)
a Restaurant of Borrower located in the State of Florida which was sold by
Borrower if Borrower has fully complied with the terms and conditions of Section
2.07(c) to the extent required under Section 5.02(b) with respect to a such
Restaurant located in the Sate of Florida.
"Remaining Average Life" shall mean, with respect to any Note being
prepaid and the Closing Date, the number of years (calculated to the nearest
one-twelfth) obtained by dividing (i) the sum of the Remaining Principal
Payments for such Note into (ii) the sum of the products obtained by multiplying
(a) each Remaining Principal Payment by (b) the number of years (calculated to
the nearest one-twelfth) which will elapse between the first day of the month
following the date of such Note (or the date of the Note, if such date is the
first day of the month) and the Payment Date for such Remaining Principal
Payment.
"Remaining Principal Payment(s)" shall mean with respect to any Note
being prepaid and any Determination Date, the Principal Amount(s) with respect
to such Note that would be or become due on or after such Determination Date.
"Restaurant" shall mean each Arby's restaurant listed on Attachment 1.
"Secondary Collateral" means each Restaurant described on Attachment
3.
"Security Agreement" shall mean the Security Agreement covering the
property described therein in respect of the Primary Collateral, substantially
in the form of Exhibit G (or in such form as required by local law) and to be
dated of even date herewith.
"Solvency Certificate" shall mean the Solvency Certificate in the form
of Exhibit L and to be dated of even date herewith.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of February 7, 1997, by and between Valcor, Inc., a Delaware
corporation, and Newco (as the successor in interest through assignment by
Guarantor to Newco), as amended.
"Subsidiary" shall mean with respect to any Person (including
Borrower) in determination (a) any corporation of which more than 50% of the
issued and outstanding stock having ordinary voting power to elect a majority of
the Board of Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned or controlled by such Person, by such Person and
one or more of its other Subsidiaries or by one or more of such a Person's other
Subsidiaries, (b) any partnership, joint venture, or other association of which
more than 50% of the equity interest having the power to vote, direct or control
the management of such
1.01-7
<PAGE>
partnership, joint venture or other association is at the time owned and
controlled by such a Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other subsidiaries, and (c) any
other entity included in the Financial Statements of such Person on a
consolidated basis.
"Taxes" shall have the meaning given to such term in Section 2.06.
"Treasury Rate" shall mean, as of any Determination Date with respect
to a Note being prepaid, the yield to maturity implied by the monthly equivalent
of either (i) the yield reported as of 10:00 a.m. (New York City time) on the
business day next preceding the Determination Date on the display designated at
"Page 678" on the Telerate Service (or such other display as may replace Page
678 on the Telerate Service) for actively traded U.S. Treasury Securities having
a constant maturity equal to the Remaining Average Life of such Note, or (ii) if
such yields have not been reported as of such time or yields reported at such
time shall not be ascertainable, the Treasury Constant Maturity Series yield
reported for the latest day for which such yields have been so reported as of
the business day next preceding the Determination Date in the Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury Securities having a constant maturity equal to the
Remaining Average Life of such Note.
"USRP" means U. S. Restaurant Properties Operating L.P., a Delaware
limited partnership or its Affiliates.
"USRP Properties" means any real property and improvements thereon
purchased by USRP from Borrower under the Asset Purchase Agreement.
"USRP Lease Agreement" means each Master Lease Agreement, Lease
Agreement or similar agreement, between Borrower and USRP under which USRP is
leasing to Borrower any USRP Properties.
"Yield Maintenance Amount" means, at any Determination Date with
respect to any Note being prepaid, an amount equal to the sum of:
(1) the greater of:
(x) the sum of the amounts obtained by discounting to the
Determination Date, in accordance with accepted financial
practice and at a discount factor equal to the Treasury
Rate, for each scheduled Payment Date an amount equal to the
product of (i) the Remaining Principal Payments on such
Payment Date and (ii) one-twelfth of the Negative Rate
Movement; and
(y) One percent (1%) of the unpaid principal balance of such
Note;
plus (2) the sum of the amounts obtained by discounting to the
Determination Date, in accordance with accepted financial
practice and at a discount factor equal to a rate of ten percent
(10%) per annum, for each future scheduled Payment Date an amount
equal to the product of (x) the Remaining Principal Payments on
such Payment Date and (y) 0.133333% (13.3333 basis points).
1.01-8
LOAN TRANCHE ____
EXHIBIT A
NOTE
$[ ],000.00 ___________, 1997
FOR VALUE RECEIVED, SYBRA, INC., a Michigan corporation, as the
surviving entity of a merger with Newco (together with its permitted successors
and assigns, "Borrower"), hereby promises to pay to the order of ATHERTON
CAPITAL INCORPORATED, a Delaware corporation, and its successors and assigns
("Lender"), the principal sum of [ ] DOLLARS AND NO/100 ($[ ],000.00) and all
other amounts advanced by Lender to or on behalf of Borrower pursuant to the
Loan Agreement (as hereinafter defined) or any other Loan Document, and interest
thereon from the date hereof until the maturity hereof, at the rate of
__________________________ percent ([_______.______]%) per annum, plus interest
on any overdue principal, the Yield Maintenance Amount, if any, and interest at
the lesser of the Default Rate, or the maximum rate allowed under applicable
law. All computations of interest shall be based upon a 360-day year of twelve
30-day months, and, in the case of any partial month, on the actual number of
days elapsed in such month.
Borrower shall pay to Lender monthly principal and interest payments
on this Note on the first day of the second calendar month subsequent to the
date on which the loan proceeds are funded into escrow in connection with the
closing of the loan (the "Disbursement Date") and shall continue on the first
day of each calendar month thereafter (a "Loan Installment Date") for a period
of ______ (____) months through ______________________________, _____ (the "Loan
Maturity Date"). All subsequent monthly payments shall consist of a combined
principal and interest installment of $_________________; provided , however,
that the payment due on the Loan Maturity Date shall be in the amount necessary
to pay all remaining unpaid accrued interest due on the Loan.
Borrower shall make all payments hereunder in lawful money of the
United States and in same day or immediately available funds.
This Note is the Note referred to in the Loan Agreement, dated as of
June __, 1996, between Borrower and Lender (together with all supplements and
amendments thereto, the "Loan Agreement") which is incorporated herein by
reference and is subject to the provisions of and entitled to the benefits of
the Loan Agreement, including, without limitation, the provisions regarding the
interest rate, Default Rate, Yield Maintenance Amount and principal payments;
restrictions on and requirements for prepayment; and rights of acceleration.
This Note also is subject to, secured by, and has the benefit of the other Loan
Documents. Terms used herein have the meanings assigned to those terms in the
Loan Agreement, unless otherwise defined herein.
Should the indebtedness represented by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceeding, or should this Note be placed in the hands of attorneys for
collection after default, the Borrower agrees to pay, in addition to the
principal, Yield Maintenance Amount, if any, interest due and payable hereon and
any other sums due and payable hereon, all costs of collecting or attempting to
collect this Note, including reasonable attorneys' fees and expenses (including
those incurred in connection with any appeal).
Borrower and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice, protest, stay of execution, and all other defenses
to payment generally, assent to the terms hereof, and agree that any renewal,
extension, or postponement of the time for payment or any other indulgence or
any substitution, exchange, or release of collateral or the additional release
of any person or entity primarily or secondarily liable, may be affected without
notice to and without releasing Borrower, any endorser or any guarantor from any
liability hereunder or under any related guaranty.
Neither this Note, the Loan Agreement nor any other Loan Document
shall require the payment or permit the collection of interest or any late
payment charge in excess of the maximum rate permitted by law. If herein or in
the Loan Agreement or any other Loan Document any excess of interest or late
payment charge in such respect is provided for or shall be adjudicated to be so
provided for, neither the Borrower, nor its successors or assigns shall be
obligated to pay such interest or late payment charge in excess of the maximum
amount permitted by law, and the right to demand the payment of any such excess
shall be and hereby is waived, and this provision shall control any other
provision of this Note or the Loan Agreement or any other Loan Document.
This Note, the Loan Agreement and the other Loan Documents are not
subject to any valid right of rescission, set-off, abatement, diminution,
counterclaim or defense as against Lender, including the defense of usury, and
the operation of any of the terms
A-1
<PAGE>
of the loan, or the exercise of any right thereunder, will not render the Loan
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, abatement, diminution, counterclaim or defense, including the defense
of usury, and Lender has not taken any action which would give rise to the
assertion of any of the foregoing and no such right of rescission, set-off,
abatement, diminution, counterclaim or defense, including the defense of usury,
has been asserted with respect thereto.
Borrower shall pay fees and expenses of Lender as provided in the Loan
Agreement. This Note shall be governed by and construed in accordance with the
laws of the State of California without reference to conflicts of law rules.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note as of the date and year first above written.
SYBRA, INC.,
a Michigan corporation
By: ____________________________
Name:
Title:
A-2
LOAN TRANCHE ____
This instrument was prepared by and, when recorded, should be returned to:
ATHERTON CAPITAL INCORPORATED
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attention: David L. Elder
================================================================================
LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
dated as of _________________, 1997
from
SYBRA, INC.
a Michigan corporation,
as Mortgagor,
to
ATHERTON CAPITAL INCORPORATED
a Delaware corporation
as Mortgagee
================================================================================
Property: [ ] County, __________________(Restaurant No. ____)
<PAGE>
LOAN TRANCHE ___
LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING
THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE
FILING (herein called this "Leasehold Mortgage") dated as of
___________________, 1997, is executed by SYBRA, INC., a Michigan corporation,
as the surviving entity of a merger with Newco, as the mortgagor (herein,
together with its successors and assigns, called the "Mortgagor"), with a
mailing address at [ ], Michigan _________, to ATHERTON CAPITAL INCORPORATED, a
Delaware corporation, as the mortgagee (herein, together with its successors and
assigns, called the "Mortgagee"), with a mailing address at 1001 Bayhill Drive,
Suite 155, San Bruno, California 94066.
RECITALS:
A. Loan Agreement. Reference is hereby made to that certain Loan
Agreement (the "Loan Agreement") dated as of the date hereof by and between
Mortgagor, as borrower, and Mortgagee, as lender. Pursuant to the Loan
Agreement, Mortgagee has agreed to loan certain funds to Mortgagor (the "Loan")
and Mortgagor has executed and delivered to Mortgagee those certain promissory
notes evidencing Mortgagor's obligation to repay the Loan (individually a "Note"
and collectively as the "Note").
B. Secured Obligations. The obligations secured by this Leasehold
Mortgage (the "Obligations") are comprised at any time of the following:
(i) the full and punctual payment by Mortgagor when due of (a) all
principal of and interest on the Loan and the Note, the aggregate principal
amount as of the date hereof is [ ] Dollars and No/100 ($[ ],000.00); and (b)
all other amounts payable by Mortgagor pursuant to the Loan Agreement, the Note
or any other Loan Document;
(ii) the full and punctual payment when due of all amounts payable by
Mortgagor under this Leasehold Mortgage, including, without limitation,
indemnification obligations and advances made to protect the Subject Property;
(iii) the performance and observance by Mortgagor of each other term,
covenant, agreement, requirement, condition and other provision to be performed
or observed by Mortgagor under any Loan Document; and
(iv) the performance and observance by Mortgagor of each other term,
covenant, agreement, requirement, condition and other provision to be performed
or observed by Mortgagor under all amendments, supplements, consolidations,
replacements, renewals, extensions or other modifications of the foregoing, in
each case whether now existing or hereafter arising.
The Obligations shall include, without limitation, any interest, Yield
Maintenance Amount, costs, fees and expenses which accrue on or with respect to
any of the foregoing, whether before or after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of Mortgagor.
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, for the purpose of securing the due and punctual payment,
performance and observance of the Obligations and intending to be bound hereby,
Mortgagor hereby grants, conveys, mortgages, transfers and assigns to Mortgagee
as expressly set forth below, and for the purpose and upon the terms and
conditions hereinafter set forth, with power of sale and right of entry and
possession, subject to the provisions of Section 6.15, all of the property and
rights described in the following Granting Clauses (all of which property and
rights are herein collectively called the "Subject Property"), to wit:
GRANTING CLAUSE I.
Land. All estate, right, title and interest of Mortgagor, if any, in,
to, under or derived from those certain lots, pieces, tracts or parcels of land
located in certain cities and/or counties in the State of ____________________,
more particularly described
<PAGE>
in Exhibit A, Part I attached hereto and incorporated herein by this reference
(the "Real Estate"; together with the Leasehold Estate, herein called the
"Land").
Leasehold Estate. All estate, right, title and interest of Mortgagor
in, to, under or derived from the lease described in Exhibit A, Part II (the
"Site Lease") affecting the Real Estate (the "Leasehold Estate"); together with
all amendments, supplements, consolidations, extensions, renewals and other
modifications of the Site Lease now or hereafter entered into in accordance with
the provisions thereof; together with all other, further, additional or greater
estate, right, title or interest of Mortgagor in, to, under or derived from the
Real Estate, the Leasehold Estate and the Improvements now or hereafter located
thereon which may at any time be acquired by Mortgagor by the terms of the Site
Lease by reason of the exercise of any option thereunder or otherwise.
GRANTING CLAUSE II.
Improvements. All right, title and interest of Mortgagor, if any, in,
to, under or derived from all buildings, structures, facilities and other
improvements of every kind and description now or hereafter located on the Land
or attached to the improvements which by the nature of their location thereon or
attachment thereto are real property under applicable law (the foregoing being
collectively the "Improvements"; and the Land with the Improvements thereon and
Equipment therein and Appurtenant Rights thereto being collectively called the
"Property").
GRANTING CLAUSE III.
Equipment. All estate, right, title and interest of Mortgagor in, to,
under or derived from all machinery, equipment, fixtures and accessions thereof
and renewals, replacements thereof and substitutions therefor, and all other
customary franchise fast food restaurant equipment and other tangible property
of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor
has or shall have an interest, now or hereafter located upon the Land, or usable
exclusively in connection with the present or future operation and occupancy of
the Land or the Improvements (hereinafter collectively called the "Equipment").
GRANTING CLAUSE IV.
Appurtenant Rights. All estate, right, title and interest of
Mortgagor, if any, in, to, under or derived from all tenements, hereditaments
and appurtenances now or hereafter relating to the Property; all development,
operating or similar rights appurtenant to the Land (including, without
limitation, all rights arising from reciprocal access agreements, use or
development agreements, and parking agreements); and all easements, licenses and
rights of way now or hereafter appertaining to the Property (hereinafter
collectively called "Appurtenant Rights").
GRANTING CLAUSE V.
General Intangibles, Payment Rights and Agreements. All estate, right,
title and interest of Mortgagor in, to, under or derived from all contract
rights, chattel paper, instruments, general intangibles, accounts, guaranties
and warranties, letters of credit, and documents, in each case relating to the
Property or to the present or future operation or occupancy of the Property, and
all plans, specifications, maps, surveys, studies, records, insurance policies,
guarantees and warranties, all relating to the Property or to the present or
future operation or occupancy of the Property, all management contracts, all
supply and service contracts for water, sanitary and storm sewer, drainage,
electricity, steam, gas, telephone and other utilities relating to the Property
(the foregoing being herein collectively called the "Agreements") and all other
agreements affecting or relating to the use, enjoyment or occupancy of the Land
or the Equipment.
GRANTING CLAUSE VI.
Leases. All estate, right, title and interest of Mortgagor in, to,
under and derived from any lease, tenancy, subtenancy, license, concession or
other occupancy agreement relating to the Property (together with all
amendments, supplements, consolidations, replacements, restatements, extensions,
renewals and other modifications of any thereof) (the "Leases"), other than the
Site Lease assigned under Granting Clause I, now or hereafter in effect, whether
or not of record; and the right to bring actions and proceedings under the Lease
or for the enforcement thereof and to do anything which Mortgagor or any lessor
is or may become entitled to do under the Lease.
GRANTING CLAUSE VII.
2
<PAGE>
Rents, Issues and Profits. All estate, right, title and interest of
Mortgagor in, to, under or derived from all rents, royalties, issues, profits,
receipts, revenue, income, earnings and other benefits now or hereafter accruing
with respect to all or any portion of the Property, including all rents and
other sums now or hereafter payable pursuant to the Leases; and all other
claims, rights and remedies now or hereafter belonging or accruing with respect
to the Property, including oil, gas and mineral royalties (herein collectively
called the "Rents"), all of which Mortgagor hereby irrevocably directs be paid
to Mortgagee, subject to the license granted to Mortgagor pursuant to Section
5.07, to be held, applied and disbursed as provided herein.
GRANTING CLAUSE VIII.
Permits. All estate, right, title and interest of Mortgagor in, to,
under or derived from all licenses, certificates, variances, consents and other
permits now or hereafter pertaining to the Property and all estate, right, title
and interest of Mortgagor in, to, under or derived from all tradenames or
business names relating to the Property or the present or future operation or
occupancy of the Property (herein collectively called the "Permits"), excluding,
however, from the grant under this Granting Clause (but not the definition of
the term "Permits" for the other purposes hereof) any Permits which cannot be
transferred or encumbered by Mortgagor without causing a default thereunder or a
termination thereof.
GRANTING CLAUSE IX.
Proceeds and Awards. All estate, right, title and interest of
Mortgagor in, to, under or derived from all proceeds of any sale, transfer,
taking by Condemnation (or any proceeding or purchase in lieu thereof), whether
voluntary or involuntary, of any of the Subject Property described above,
including all Insurance Proceeds and awards and title insurance proceeds, now or
hereafter relating to any of the Subject Property, all of which Mortgagor hereby
irrevocably directs be paid to Mortgagee to the extent provided hereunder, to be
held, applied and disbursed as provided in this Leasehold Mortgage.
TO HAVE AND TO HOLD the Subject Property unto Mortgagee, its
successors and assigns, under and subject to the terms and conditions of this
Leasehold Mortgage, including, but not limited to, Section 6.15, and for the
security and enforcement of the prompt and complete payment and performance when
due of all of the Obligations and the performance and observance by Mortgagor of
all covenants, obligations and conditions to be performed or observed by
Mortgagor pursuant to the Loan Agreement, the Note, and the other Loan
Documents.
PROVIDED, HOWEVER, that this Leasehold Mortgage is upon the condition
that, if Mortgagor shall pay in full all of the Obligations and perform and
observe all such covenants, obligations and conditions, this Leasehold Mortgage
shall cease, terminate pursuant to and in accordance with Section 6.02 and,
thereafter, be of no further force effect (except as provided in Sections 4.01,
4.02 and 5.06 hereof); otherwise this Leasehold Mortgage shall, subject to the
provisions of Section 6.15, remain and be in full force and effect.
FURTHER PROVIDED, that Mortgagee may from time to time release or
reconvey all or a portion of the Subject Property, in accordance with the terms
and conditions of the Loan Agreement and applicable law.
MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used, but not otherwise
defined herein, are defined in, or by reference to the Loan Agreement and have
the same meanings herein as therein.
ARTICLE II
CERTAIN WARRANTIES AND COVENANTS
OF MORTGAGOR
SECTION 2.01. Authority and Effectiveness. (a) Mortgagor represents,
warrants and covenants that (i) Mortgagor is and shall be a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation or organization, and qualified to do business and in good standing
in the state in which the Property is located and has and will have all
3
<PAGE>
governmental licenses, authorizations, consents and other qualifications
required to carry on its business as now conducted, and, subject to the
provisions of Section 6.15, to execute, deliver and perform this Leasehold
Mortgage; (ii) the execution, delivery and performance by Mortgagor of this
Leasehold Mortgage are within Mortgagor's corporate power, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not and,
subject to the provisions of Section 6.15, will not contravene, or constitute a
default under, any provision of the organizational documents of Mortgagor or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon Mortgagor or relating to the Property; and (iii) subject to the provisions
of Section 6.15, this Leasehold Mortgage constitutes a legal, valid, binding and
enforceable agreement of Mortgagor.
(b) Mortgagor shall cause the representations and warranties in
subsection (a) of this Section to continue to be true in each and every respect
at all times prior to the termination of this Leasehold Mortgage.
SECTION 2.02. Title and Further Assurances. (a) Subject to the
provisions of Section 6.15, Mortgagor hereby represents and warrants to
Mortgagee that:
(i) Mortgagor is the owner of a valid and subsisting leasehold
interest in the Land and the Improvements and holds good and
marketable title to the Improvements, the Equipment and the other
Subject Property, free from all liens, security interests, Leases,
charges or encumbrances whatsoever, except for such liens as are
permitted under the Loan Agreement. Notwithstanding anything else
herein to the contrary, Mortgagor makes no representation or warranty
with respect to any interest in the fee to the real property upon
which the Subject Property is located (the "Fee Interest") or to any
rents or income arising therefrom;
(ii) Mortgagor has good and lawful right to mortgage the Subject
Property to Mortgagee without the consent of any Person other than
those consents which have been obtained;
(iii) the lien created by this Leasehold Mortgage constitutes a
valid, binding and enforceable lien on the Subject Property; and
(iv) the Site Lease creates and constitutes in the tenant
thereunder a valid and subsisting leasehold interest in the Leasehold
Estate; the Site Lease has not been modified or amended, except as
disclosed to Mortgagee in writing; there is no default under the Site
Lease, all rents due have been paid in full; no action has commenced
and is pending to terminate the Site Lease; and Mortgagor is the owner
of the leasehold interest under the Site Lease and Mortgagor is the
owner of the Improvements, in each case subject to the provisions of
the Site Lease.
(b) Subject to the provisions of Section 6.15, Mortgagor shall (i)
cause the representations and warranties in subsection (a) of this Section to
continue to be true in each and every respect at all times prior to the
termination of this Leasehold Mortgage; and (ii) preserve, protect, warrant and
defend (A) the estate, right, title and interest of Mortgagor in and to its
Subject Property (B) the validity, enforceability and priority of the lien this
Leasehold Mortgage, and (C) the right, title and interest of Mortgagee and any
purchaser at any sale of the Subject Property hereunder or relating hereto.
(c) Upon the recording of this Leasehold Mortgage in the county
recording office of the county in which the Land is located, the lien of this
Leasehold Mortgage shall be a perfected mortgage lien and fixture filing on the
Subject Property.
(d) Subject to the provisions of Section 6.15, Mortgagor shall perform
all acts that may be necessary to continue, maintain, preserve, protect and
perfect the Subject Property, the lien granted to Mortgagee therein and the
perfected priority of such lien. Upon request by Mortgagee, Mortgagor shall at
its sole cost and expense (i) promptly correct any defect or error which may be
discovered in this Leasehold Mortgage or any financing statement or other
document relating hereto; and (ii) promptly execute, acknowledge, deliver,
record, and re-record, register and re-register, and file and re-file this
Leasehold Mortgage and any fixture filings, financing statements or other
documents which Mortgagee may reasonably require from time to time (all in form
and substance reasonably satisfactory to Mortgagee) in order (A) to effectuate,
complete, perfect, continue or preserve the lien of this Leasehold Mortgage on
the Subject Property, whether now owned or hereafter acquired, (B) to correct or
change the name of Mortgagor following any change in its identity, sale of the
Subject Property, or assumption of the Loan pursuant to Section 2.07(b), or (C)
to effectuate, complete, perfect, continue or preserve any right, power or
privilege granted or intended to be granted to Mortgagee hereunder.
SECTION 2.03. Secured Obligations. Mortgagor shall duly and punctually
pay, perform and observe the Obligations binding upon Mortgagor.
4
<PAGE>
SECTION 2.04. Impositions. Subject to Section 2.06 and Section 2.09,
Mortgagor shall (i) duly and punctually pay all Impositions before any fine,
penalty, interest or cost may be added for nonpayment; and (ii) promptly notify
Mortgagee of the receipt by Mortgagor of any notice of default in the payment of
any Imposition. The term "Impositions" means all taxes, assessments and other
governmental charges, ground rents, or other rents, charges, excises, levies,
fees and other charges (public or private) which may be assessed, levied or
imposed on, or in respect of or be a lien upon the Subject Property or any part
thereof or any interest therein.
SECTION 2.05. Compliance with Legal and Insurance Requirements. (a)
Mortgagor represents and warrants that (i) as of the date hereof, the Property
and the use and operation thereof comply with all Legal Requirements (as defined
below), Insurance Requirements (as defined below) and Contractual Obligations
except for any failure to comply therewith which could not have a Material
Adverse Effect; (ii) there is no material default under any Legal Requirement,
Insurance Requirement and Contractual Obligation; and (iii) subject to the
provisions of Section 6.15, the execution, delivery and performance of this
Leasehold Mortgage does not require any consent the failure of which to obtain
would contravene any provision of and constitute a material default under, any
Legal Requirement, Insurance Requirement or Contractual Obligation.
Notwithstanding the limitations set forth in the preceding sentence, Mortgagor
represents and warrants that as of the date hereof, the Property and the use
thereof comply with all Environmental Laws and that Mortgagor has complied and
shall comply with all Environmental Laws.
(b) Subject to Section 2.06 and Section 2.09, Mortgagor shall promptly
perform and observe, or cause to be performed and observed and cause the
Property to comply with, if the failure to so perform and observe would have a
Material Adverse Effect, (i) all laws, rules, regulations, judgments, orders,
permits, licenses, authorizations and other requirements of and agreements with
all governments, department agencies, courts and officials, which now or
hereafter shall be applicable to the Subject Property or any part thereof or any
use or condition thereof including, without limitation, all Environmental Laws
(herein collectively called the "Legal Requirements"); (ii) all terms of any
insurance policy covering or applicable to the Subject Property or any part
thereof as required by the Loan Agreement, all requirements of the issuer of any
such policy, and all orders, rules, regulations and other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions) applicable to the Subject Property or any part thereof or any use or
condition thereof (herein collectively called the "Insurance Requirements"); and
(iii) all Permits required for any construction, reconstruction, repair,
alteration, addition, improvement, maintenance, use and operation of the
Property.
(c) Mortgagor shall promptly notify Mortgagee of the receipt by
Mortgagor of any notice of default under any Legal Requirement, Insurance
Requirement, Contractual Obligation or Permit or of the receipt by Mortgagor of
any notice of any threatened or actual termination of any Permit or Insurance
Policy, Franchise Agreement or Site Lease and furnish to Mortgagee a copy of
such notice of default or termination.
SECTION 2.06. Impound and Security Account. At Mortgagee's option and
upon its demand and except where and to the degree prohibited by law, Mortgagor
shall, until all Obligations have been paid in full, pay to Mortgagee each month
an amount estimated by Mortgagee to be equal to (i) the Impositions, (ii) all
payments and premiums with respect to the Insurance Requirements, and (iii) all
lease payments under the Site Lease next due. Estimated payments of Impositions,
Insurance Requirements and Site Lease payments shall be calculated by dividing
the amount next due by, in each instance, the number of months to lapse
preceding the month in which the same, respectively, will become due. All sums
so paid shall not bear interest, except to the extent and in the minimum amount
required by law, and Mortgagee shall, unless Mortgagor is otherwise in default
hereunder or under any obligation secured hereby, apply said funds to the
payment of, or at the sole option of Mortgagee timely release said funds to
Mortgagor for timely application to and payment of, such Impositions, Insurance
Requirements and Site Lease payments. However, upon the occurrence of an Event
of Default by Mortgagor hereunder or under any obligation secured hereby,
Mortgagee may, at its sole option, apply all or any part of said sums to any
Obligations or to advance sums to pay such Imposition, Insurance Requirement or
Site Lease payment, which advance shall not cure Mortgagor's Default hereunder.
SECTION 2.07. Sale; Liens. (a) Except as otherwise provided in the
Loan Agreement, Mortgagor shall not sell, assign, transfer, convey, lease or
permit to be sold, assigned, transferred, conveyed, leased or otherwise disposed
of, the Subject Property (other than Inventory sold in the normal course of
business) or any part thereof or interest therein (for the purposes of this
Section, a "Transfer"), and shall not create, suffer or permit to be created or
exist any lien attaching to the Subject Property or any part thereof or interest
therein, except as permitted by the Loan Agreement. In the event of any Transfer
or the creation, suffering, permitting to be created of any lien attaching to
the Subject Property or any part thereof, that is not expressly permitted
hereunder or under the terms of the Loan Agreement and is without the prior
written consent of Mortgagee, Mortgagee shall have the absolute right at its
option, without prior demand or notice, to declare all of the Obligations
immediately due and payable and pursue its rights and remedies under Article 5.
Consent to one such Transfer or lien shall not be deemed to be a waiver of the
right to require the consent to future or successive Transfers or liens.
Mortgagee shall have the right to grant or deny such consent in its absolute
discretion. If
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consent should be given to a Transfer and if this Leasehold Mortgage is not
released to the extent of the Subject Property transferred or subjected to a
lien by a writing signed by Mortgagee and recorded in the proper city, town,
county or parish records, then any such Transfer or lien shall be subject to
this Leasehold Mortgage and any such transferee shall assume all obligations
hereunder and agree to be bound by all of the provisions contained hereunder.
(b) The Loan may be assumed by a new borrower provided each of the
conditions set forth in Section 2.08 of the Loan Agreement are met.
SECTION 2.08. Status and Care of the Property.
(a) Mortgagor represents and warrants that (i) the Property is served
by all necessary water, sanitary and storm sewer, electric, gas, telephone and
other utility facilities which facilities have capacities which are sufficient
to serve the current and anticipated future use and occupancy of the Property as
presently constructed; (ii) the Property has legal access to public streets or
roads sufficient to serve the current and anticipated future use and operation
of the Property as presently constructed; (iii) to the extent that the Property
is located in an area identified by the Secretary of Housing and Urban
Development or a successor thereto as an area having special flood hazards or as
an area designated as "flood prone" or a "flood risk area" pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, and any amendments or supplements thereto or substitutions therefor,
Mortgagor has purchased flood insurance to the extent available; and (iv) all
activities and conditions on the Property are currently in compliance with all
Legal Requirements.
(b) Subject to the terms, conditions and provisions of the Loan
Agreement, the Mortgagor (i) shall use and operate the Property, or cause the
same to be used and operated, pursuant to the terms and provisions of a
Franchise Agreement with Arby's, Inc., a true and correct copy of which has been
previously delivered to Mortgagee, and Mortgagor shall continue to operate the
Property as a Arby's restaurant and shall not permit or suffer any default to
occur under said Franchise Agreement; (ii) agrees that all activities on the
Property shall at all times comply with all Legal Requirements; (iii) shall
operate and maintain the Property, or cause the same to be operated and
maintained, in good order, repair and condition except (subject to the
provisions of this Section) for reasonable wear and tear; (iv) subject to the
provisions of Section 3.02, shall promptly make, or cause to be made, all
repairs, replacements, alterations, additions and improvements of and to the
Property necessary or appropriate to keep the Property in good order, repair and
condition; (v) shall not initiate or affirmatively support any change in the
applicable zoning adversely affecting the Property, seek any variance (or any
change in any variance), under the zoning adversely affecting the Property; and
(vi) shall, promptly after receiving notice or obtaining knowledge of any
proposed or threatened change in the zoning affecting the Property which would
result in the current use of the Property being a non-conforming use, notify
Mortgagee thereof and diligently contest the same at Mortgagor's expense by any
action or proceeding deemed appropriate by Mortgagor or requested by Mortgagee.
SECTION 2.09. Permitted Contests. After prior notice to Mortgagee,
Mortgagor may contest at Mortgagor's expense, by appropriate legal or other
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or lien therefor, any
Legal Requirement, or any lien of any laborer, mechanic, materialman, supplier
or vendor, provided that (a) the Subject Property, or any part thereof or estate
or interest therein, shall not be in any danger of being sold, forfeited or lost
by reason of such proceedings; (b) in the case of (i) liens of laborers,
mechanics, materialmen, suppliers or vendors or (ii) the Impositions, or liens
therefor, such proceedings shall suspend the foreclosure of any such lien or any
other collection thereof from the Subject Property; (c) in the case of a Legal
Requirement, Mortgagee shall not be in any danger of any criminal liability or,
unless Mortgagor shall have furnished a bond or other security therefor
reasonably satisfactory to Mortgagee, any additional civil liability for failure
to comply therewith, and the Subject Property, or any part thereof or estate or
interest therein, shall not be subject to the imposition of any lien as a result
of such failure which is not properly contested pursuant to this Section 2.09;
and (d) if reasonably required by Mortgagee, Mortgagor shall have furnished to
Mortgagee a bond or other security reasonably satisfactory to Mortgagee.
SECTION 2.10. Inspection. Mortgagee and its authorized agents and
employees and any person designated by Mortgagee shall have the right to enter
on and into the Property at all reasonable times and, except in the event of an
emergency, after reasonable notice for the purpose of inspecting the same,
provided such inspection shall not unreasonably disturb business activities at
the Property.
SECTION 2.11. Compliance with Instruments. Mortgagor shall promptly
perform and observe, or cause to be performed and observed, all of the terms,
covenants and conditions of all other instruments affecting the Property if the
failure to so perform or observe would have a Material Adverse Effect and shall
do or cause to be done all things necessary to preserve intact and unimpaired
any and all easements, appurtenances and other interests and rights in favor of
or constituting any portion of the Subject Property if the failure so to do
would have a Material Adverse Effect.
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SECTION 2.12. Improvements. All improvements on the Land lie wholly
within the boundary and building restriction lines of the Land and no
improvements on adjoining properties encroach upon the Land in any respect so as
to have a Material Adverse Effect on the use, operation or value of the
Property.
SECTION 2.13. Casualty; Condemnation. The Subject Property is free of
material damage and waste and, to Mortgagor's knowledge, there is no proceeding
pending or threatened for the total or partial Condemnation thereof.
SECTION 2.14. Zoning and Other Laws. The Property and the use thereof,
separate and apart from any other properties, constitute a legal and conforming
use in compliance with the zoning regulations for which the Property is located.
The Property complies with all applicable subdivision laws, ordinances and
regulations, such that failure to comply would not have a Material Adverse
Effect. All inspections, licenses and certificates required, whether by law,
ordinance, regulation or insurance standards, to be made or issued with respect
to the Property have been made by or issued by appropriate authorities, such
that a failure to obtain such inspections, licenses or certificates would not
have a Material Adverse Effect.
SECTION 2.15. Site Lease. (a) Mortgagor represents and warrants that
(i) Exhibit A contains a description of the Site Lease; (ii) Mortgagor has
furnished to Mortgagee a copy of the Site Lease certified as true and correct by
Mortgagor; (iii) except as described in Exhibit A, the Site Lease has not been
modified, assigned by Mortgagor or, to the knowledge of Mortgagor, assigned by
the landlord thereunder; (iv) the Site Lease is in full force and effect and, to
the knowledge of Mortgagor, there is no default, or existing condition which
with the giving of notice or passage of time or both would cause a default under
the Site Lease; and (v) subject to the provisions of Section 6.15, the
execution, delivery and performance of this Leasehold Mortgage do not require
any consent under, and will not contravene any provision of or cause a default
under, the Site Lease.
(b) Mortgagor (i) shall duly and punctually pay, perform and observe
(unless being paid pursuant to Section 2.06 or being contested pursuant to
Section 2.09) all of its obligations under the Site Lease; (ii) shall do all
things reasonably necessary or appropriate to enforce, preserve and keep
unimpaired the rights of Mortgagor; (iii) shall not enter into any amendment or
other agreement or take any other action or fail to take any action that would
modify or terminate any rights or obligations of Mortgagor or of the landlord
under the Site Lease or subordinate any right of Mortgagor under the Site Lease
to any lien; (iv) shall notify Mortgagee in writing not later than ninety (90)
days prior to the last date on which Mortgagor can exercise (A) any right to
extend the term of the Site Lease or (B) any option to purchase or otherwise
acquire the interest of the landlord under the Site Lease, of the existence of
such right or option; (v) to the extent the current term of the Site Lease does
not extend beyond the maturity date of the Loan, shall exercise (not later than
thirty (30) days prior to the last date on which Mortgagor may timely do so)
each right or option of Mortgagor under the Site Lease to extend the term
thereof; (vi) shall notify Mortgagee (promptly after receipt or
contemporaneously when given, as the case may be) of the receipt or giving by
Mortgagor of any notice of default under, or any notice of the possible or
actual termination of, the Site Lease, accompanied by a copy of such notice (the
failure of Mortgagor to comply with this subclause (vi) shall constitute an
Event of Default hereunder); and (vii) shall promptly notify Mortgagee, upon
Mortgagor's acquisition of knowledge thereof, of the occurrence of any event or
condition which with the passage of time or giving of notice would constitute a
default under the Site Lease. Mortgagee is hereby irrevocably appointed the true
and lawful attorney of Mortgagor and any subsequent owner of the Property to
exercise, in its own name and stead or in the name of Mortgagor, each right or
option of Mortgagor under the Site Lease to extend the term thereof or to
purchase or otherwise acquire the interest of the landlord under the Site Lease,
and for that purpose Mortgagee may execute all necessary documents and
instruments to exercise each option and may substitute Persons with like power,
Mortgagor or any subsequent owner of the Property hereby ratifying and
confirming all that their said attorney or such substitutes shall lawfully do by
virtue hereof. Nevertheless, Mortgagor or any subsequent owner of the Property,
if so requested in writing by Mortgagee shall ratify and confirm the exercise of
any such option by executing and delivering to Mortgagee or to such purchasers
any instrument which, in the judgment of Mortgagee, is suitable or appropriate
therefor. Mortgagor acknowledges (i) that this power of attorney is given to
Mortgagee in consideration for Mortgagee's (A) making of the Loan and (B) not
requiring Mortgagor to exercise the option to extend the term of the Site Lease
or exercise any purchase option before the Closing Date, (ii) that it is
reasonable for Mortgagee to require the leasehold term to extend beyond the
maturity of the Note; (iii) that if any option is exercised by Mortgagee,
Mortgagor agrees it is and shall remain solely liable with respect thereto as
tenant under the Site Lease and releases Mortgagee from any and all liability
with respect thereto or claims relating thereto.
(c) So long as any portion of the Obligations shall remain unpaid,
unless Mortgagee shall otherwise consent, the fee title to the Land and the
leasehold estate therein created pursuant to the provisions of the Site Lease
shall not merge but shall always be kept separate and distinct, notwithstanding
the union of such estates in Mortgagor, the owner, or in any other person by
purchase, operation of law or otherwise. Mortgagee reserves the right, at any
time, to release portions of the Subject Property, including, but not limited
to, the leasehold estate created by the Site Lease, with or without
consideration, at Mortgagee's election, without waiving or
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affecting any of its rights hereunder or under the Loan Documents and any such
release shall not affect Mortgagee's rights in connection with the portion of
the Subject Property not so released.
(d) So long as any portion of the Obligations remains unpaid, if
Mortgagor shall become the owner and holder of the fee title to the Land, the
lien of this Leasehold Mortgage shall be spread to cover Mortgagor's fee title
to the Land and said fee title shall be deemed to be included in the Subject
Property. Mortgagor agrees to execute any and all documents or instruments
necessary to subject its fee title to the Land to the lien of this Leasehold
Mortgage, in form and substance satisfactory to Mortgagee.
(e) Mortgagor hereby unconditionally assigns, transfers and sets over
to Mortgagee all of Mortgagor's claims and rights to the payment of damages
arising from any rejection by the owner of the Site Lease under the Bankruptcy
Code. Mortgagee shall have the right to proceed in its own name or in the name
of Mortgagor in respect of any claim, suit, action or proceeding relating to the
rejection of the Site Lease, including, without limitation, the right to file
and prosecute, to the exclusion of Mortgagor, any proofs of claim, complaints,
motions, applications, notices and other documents, in any case in respect of
the owner under the Bankruptcy Code. Subject to the provisions of Section 6.15,
this assignment constitutes a present, irrevocable and unconditional assignment
of the foregoing claims, rights and remedies, and shall continue in effect until
all of the Obligations shall have been satisfied and discharged in full. Any
amounts received by Mortgagee as damages arising out of the rejection of the
Site Lease as aforesaid shall be applied first to all reasonable costs and
expenses of Mortgagee (including, without limitation, reasonable attorneys' fees
and disbursements) incurred in connection with the exercise of any of its rights
or remedies under this Section 2.15(e).
(f) Mortgagor shall not, without Mortgagee's prior written consent,
elect to treat the Site Lease as terminated under Section 365(h)(1) of the
Bankruptcy Code. Any such election made without Mortgagee's prior written
consent shall be void.
(g) If pursuant to Section 365(h)(1) of the Bankruptcy Code, Mortgagor
seeks to offset against the Rent reserved in the Site Lease the amount of any
damages caused by the non-performance by the owner of any of the owner's
obligations under the Site Lease after the rejection by the owner of the Site
Lease under the Bankruptcy Code, Mortgagor shall, prior to effecting such
offset, notify Mortgagee of its intention to do so, setting forth the amounts
proposed to be so offset and the basis therefor. Mortgagee shall have the right,
within (10) days after receipt of such notice from Mortgagor, to reasonably
object to all or any part of such offset, and, in the event of such reasonable
objection, Mortgagor shall not effect any offset of the amounts so objected to
by Mortgagee for a period of thirty (30) days after Mortgagee has delivered its
objection notice to Mortgagor during which time Mortgagee shall have the right
to bring its objections to the attention of any court supervising the bankruptcy
of the owner of the Site Lease and both Mortgagee and Mortgagor agree to abide
by the decision of any such court. If (A) Mortgagee has failed to object as
aforesaid within ten (10) days after notice from Mortgagor or (B) the court
fails to render its decision within the above-mentioned thirty (30) day period,
Mortgagor may proceed to effect such offset in the amounts set forth in
Mortgagor's notice. Neither Mortgagee's failure to object as aforesaid nor any
objection or other communication between Mortgagee and Mortgagor relating to
such offset shall constitute an approval of any such offset by Mortgagee.
(h) If any action, proceeding, motion or notice shall be commenced or
filed in respect of Mortgagor or the Subject Property in connection with any
case under the Bankruptcy Code (other than a case under the Bankruptcy Code
commenced with respect to Mortgagor), Mortgagee shall have the option, to the
exclusion of Mortgagor, exercisable upon notice from Mortgagee to Mortgagor, to
conduct and control any such litigation with counsel of Mortgagee's choice.
Mortgagee may proceed in its own name or in the name of Mortgagor in connection
with any such litigation, and Mortgagor agrees to execute any and all powers,
authorizations, consents and other documents required by Mortgagee in connection
therewith. Mortgagor shall pay to Mortgagee all reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
paid or incurred by Mortgagee in connection with the prosecution or conduct of
any such proceedings within five (5) days after notice from Mortgagee setting
forth such costs and expenses in reasonable detail. Any such costs or expenses
not paid by Mortgagor as aforesaid shall be secured by the lien of this
Leasehold Mortgage and shall be added to the principal amount of the
indebtedness secured hereby. Mortgagor shall not commence any action, suit,
proceeding or case, or file any application or make any motion, in respect of
the Site Lease in any such case under the Bankruptcy Code (other than a case
under the Bankruptcy Code commenced with respect to Mortgagor) without the prior
written consent of Mortgagee, which consent shall not be unreasonably withheld.
(i) Mortgagor shall promptly, after obtaining knowledge thereof,
notify Mortgagee of any filing by or against the owner of the Land of a petition
under the Bankruptcy Code, setting forth any information available to Mortgagor
as to the date of such filing, the court in which such petition was filed, and
the relief sought therein. Mortgagor shall promptly deliver to Mortgagee
following receipt any and all notices, summonses, pleadings, applications and
other documents received by Mortgagor in connection with any such petition and
any proceedings relating thereto.
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(j) If there shall be filed by or against Mortgagor a petition under
the Bankruptcy Code, and Mortgagor, as the tenant under the Site Lease, shall
determine to reject the Site Lease pursuant to Section 365(a) of the Bankruptcy
Code, then Mortgagor shall give Mortgagee not less than ten (10) days' prior
notice of the date on which Mortgagor shall apply to the bankruptcy court for
authority to reject the Site Lease. Mortgagee shall have the right, but not the
obligation, to serve upon Mortgagor within such 10-day period a notice stating
that (i) Mortgagee demands that Mortgagor assume and assign the Site Lease to
Mortgagee pursuant to Section 365 of the Bankruptcy Code and (ii) Mortgagee
covenants to cure or provide adequate assurance of prompt cure of all defaults
and provide adequate assurance of future performance of Mortgagor's obligations
under the Site Lease. If Mortgagee serves upon Mortgagor the notice described in
the preceding sentence, Mortgagor shall not seek to reject the Site Lease and
shall seek court approval to comply with the demand provided for in clause (i)
of the preceding sentence within thirty (30) days after the notice shall have
been given, subject to the performance by Mortgagee of the covenant provided for
in clause (ii) of the preceding sentence.
(k) Effective upon the entry of an order for relief in respect of
Mortgagor under the Bankruptcy Code, Mortgagor hereby assigns and transfers to
Mortgagee a non-exclusive right to apply to the bankruptcy court under Section
365(d)(4) of the Bankruptcy Code for an order extending the period during which
the Site Lease may be rejected or assumed.
ARTICLE III
INSURANCE, CASUALTY AND CONDEMNATION
SECTION 3.01. Insurance. Mortgagor shall comply with all of the terms
and provisions and shall maintain, or cause to be maintained, with respect to
the Property the insurance required by the Loan Agreement. If Mortgagor fails to
maintain the insurance policies required to be maintained under this Section,
Mortgagee shall have the right (but not the obligation) to obtain such insurance
policies and pay the premiums therefor. If Mortgagee obtains such insurance
policies or pays the premiums therefor, upon demand, Mortgagor shall reimburse
Mortgagee for its expenses in connection therewith, together with interest
thereon, pursuant to Section 4.03.
SECTION 3.02. Casualty and Condemnation. Mortgagor's right to collect
or use any Insurance Proceeds or awards resulting from any casualty loss or
Condemnation shall be subject to, and applied in accordance with, the terms and
provisions of the Loan Agreement. Mortgagor hereby authorizes and directs any
affected insurance company and any affected governmental body responsible for
such Condemnation to make payment of the Insurance Proceeds or awards directly
to Mortgagee. Mortgagor hereby irrevocably assigns to Mortgagee all Insurance
Proceeds and awards to which Mortgagor may become entitled by reason of its
interests in the Property if a loss occurs.
ARTICLE IV
EXPENSES AND INDEMNIFICATION
SECTION 4.01. Expenses. Upon written demand, Mortgagor (a) shall
reimburse Mortgagee for all reasonable out-of-pocket expenses, including
reasonable attorneys' fees and expenses, paid or incurred by Mortgagee in
connection with (i) any Default or alleged Default, (ii) the perfection,
protection, exercise or enforcement of any right or remedy under or with respect
to this Leasehold Mortgage or any other Loan Document, and (iii) the execution,
delivery, administration or performance of this Leasehold Mortgage or any other
Loan Document and any consent or waiver thereunder and any amendment thereof, or
(b) if an Event of Default occurs, shall reimburse Mortgagee for all reasonable
out-of-pocket expenses, including reasonable attorneys' fees and expenses, (i)
paid or incurred by Mortgagee in connection with (A) such Event of Default and
collection, bankruptcy, insolvency and enforcement proceedings resulting
therefrom or (B) the exercise or enforcement of any right or remedy under or
with respect to this Leasehold Mortgage or any other Loan Document or (ii)
otherwise paid or incurred with respect to this Leasehold Mortgage or any other
Loan Document, together, in each case, with interest thereon at the Default Rate
from the date paid by Mortgagee through the date repaid to Mortgagee, as the
case may be. All such funds advanced in the reasonable exercise of Mortgagee's
judgment that the same are needed to protect the Subject Property, the lien of
this Leasehold Mortgage, or the Obligations are to be deemed obligatory advances
hereunder and shall constitute additional indebtedness secured by this Leasehold
Mortgage. The obligations of Mortgagor under this Section shall be part of the
Obligations and shall survive any foreclosure or transfer in lieu of foreclosure
of this Leasehold Mortgage and the release of this Leasehold Mortgage.
SECTION 4.02. Indemnification. To the fullest extent permitted by law,
Mortgagor shall protect, defend, indemnify and save harmless Mortgagee, and its
stockholders, directors, officers, employees, beneficial owners, attorneys,
agents and other representatives or affiliates of, and partners in, Mortgagee
(each an "Indemnified Person") from and against any and all liabilities, losses,
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actions, fines, injunctions, obligations, claims, damages (whether direct or
consequential), penalties, causes of action, costs and expenses of any kind or
nature (including, without limitation, in respect of or for reasonable
attorneys' fees and expenses whether incurred within or outside the judicial
process), imposed upon or incurred by or asserted against any such Indemnified
Person including, without limitation, by reason of (i) this Leasehold Mortgage
or the Subject Property or any interest therein or receipt of any Rents; (ii)
any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Subject Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (iii) any failure on the part of Mortgagor to perform or comply with
any of the terms of this Leasehold Mortgage; (iv) any violation or failure to
comply with any Legal Requirement by Mortgagor or the Property in any way; and
(v) performance of any labor or services or the furnishing of any materials or
other property in respect of the Subject Property or any part thereof, provided
that any claims arising out of the willful misconduct or gross negligence of any
Indemnified Person or act of any Indemnified Person after taking title to the
Property shall be excluded from the foregoing indemnification of such
Indemnified Person. Any amounts payable to Mortgagee by reason of the
application of this Section 4.02 shall be secured by this Leasehold Mortgage as
an Obligation and shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by
Mortgagee until paid. The obligations and liabilities of Mortgagor under this
Section 4.02 shall survive any termination, satisfaction, assignment, entry of a
judgment of foreclosure or delivery of a deed in lieu of foreclosure of this
Leasehold Mortgage and the exercise of any rights or remedies by Mortgagee.
SECTION 4.03. Interest. If any Obligation arising hereunder
(including, to the extent permitted under applicable law, any interest
obligation) shall not be paid when due, such Obligation shall bear interest at
the Default Rate commencing from the due date through the date paid. Such
interest shall be part of the Obligations and shall be secured by this Leasehold
Mortgage.
SECTION 4.04. Increased Costs. In the event of the enactment after the
date hereof of any applicable law deducting from the value of the Property for
the purpose of taxation of any lien thereon or changing in any way the
applicable taxation of mortgages, deeds of trust or other liens or obligations
secured thereby, or the manner of collection of such taxes, so as to affect this
Leasehold Mortgage, the Obligations or Mortgagee, upon demand by Mortgagee, to
the extent permitted under applicable law, Mortgagor shall pay or reimburse
Mortgagee for all taxes, assessments or other charges which Mortgagee is
obligated to pay as a result thereof. Such taxes, assessments or other charges
shall be part of the Obligations and shall be secured by this Leasehold
Mortgage.
ARTICLE V
DEFAULTS, REMEDIES AND RIGHTS
SECTION 5.01. Events of Default. The occurrence of any of the
following events shall be deemed an event of default ("Event of Default")
hereunder and shall, at the option of Mortgagee make all amounts then remaining
unpaid on the Obligations immediately due and payable, all without further
demand, presentment, notice or other requirements of any kind, all of which are
expressly waived by Mortgagor, and the lien, encumbrance and security
interest evidenced or created hereby shall be subject to foreclosure in any
manner provided for herein or provided for by law and all other remedies
available at law or in equity:
(a) The occurrence of any Event of Default (as defined in the Loan
Agreement) under the Loan Agreement; or
(b) Mortgagor shall default in the performance or observance of any
term, covenant or condition required to be observed by Mortgagor under this
Leasehold Mortgage which remains uncured for a period of ten (10) business days
after receipt of written notice from Mortgagee; provided, however, if such
default cannot be cured with such period, Mortgagor shall have such longer
period of time to cure such default provided, in Mortgagee's sole discretion,
Mortgagor is proceeding with due diligence, but in no event shall such period of
time exceed thirty (30) Business Days; provided, further, that the cure periods
set forth in this Section 5.01(b) are subject in all cases to the terms,
conditions and provisions of the Loan Agreement;
SECTION 5.02. Fixtures. Upon the occurrence of any Event of Default,
or at any time thereafter, Mortgagee may, to the extent permitted under
applicable law, elect to treat the fixtures included in the Subject Property
either as real property or personal property, or both, and proceed to exercise
such rights as apply thereto. With respect to any sale of real property included
in the Subject Property made under the power of sale herein granted and
conferred, Mortgagee may, to the extent permitted by applicable law, include in
such sale any personal property and fixtures included in the Subject Property
relating to such real property.
SECTION 5.03. Remedies Cumulative. All notice and cure periods
provided in this Leasehold Mortgage, the Loan Agreement or any other Loan
Document shall run concurrently with any notice or cure periods provided under
applicable law. No remedy or right of Mortgagee hereunder, under the Loan
Agreement and any other Loan Document or otherwise, or available under
applicable law, shall be exclusive of any other right or remedy, but each such
remedy or right shall be in addition to every other remedy
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or right now or hereafter existing at law or in equity under any such document
or under applicable law. No failure or delay by Mortgagee in exercising any
right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right. Unless otherwise specified in
such waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.
Every such remedy or right may be exercised concurrently or independently, and
when and as often as may be deemed expedient by Mortgagee. All obligations of
Mortgagor, and all rights, powers and remedies of Mortgagee expressed herein
shall be in addition to, and not in limitation of, those provided by law, equity
or in the Loan Agreement and any other Loan Document.
SECTION 5.04. Possession of Property. Mortgagor hereby waives, while
any Event of Default exists, all right to the possession, income, earnings,
revenues, issues, profits and Rents of the Property. Mortgagee or a Receiver (as
the case may be as the Person exercising the rights under this Section) is
hereby expressly authorized and empowered to the extent permitted by applicable
law, but not obligated, while any Event of Default exists, (i) to enter into and
upon and take possession of, and operate all facilities on, the Property or any
part thereof, personally, or by its agents or attorneys, and exclude Mortgagor
therefrom without liability for trespass, damages or otherwise; (ii) to enter
upon and take and maintain possession of all of the documents, books, records,
papers and accounts of Mortgagor relating to the possession and operation of the
Subject Property; (iii) to conduct, either personally or by its agents, the
business of the Property; (iv) to exercise all rights of Mortgagor with respect
to the Subject Property, including, without limitation, the right to sue for or
otherwise collect the Rents, including those that are unpaid; (v) to complete
any Alteration or Restoration in progress on the Property at the expense of
Mortgagor at reasonable and customary cost or at such cost previously agreed to
by Mortgagor, and (vi) to apply all income of the Property, to the extent
Mortgagor has any right to such income, less the necessary or appropriate
expenses of collection thereof, either for the operation, care and preservation
of the Property, or, at the election of the Person exercising the rights under
this Section in its sole discretion, as provided in Section 5.09 hereof. The
Person exercising the rights under this Section is also hereby granted full and
complete authority while any Default exists (vii) to employ watchmen to protect
the Subject Property; (viii) to continue any and all outstanding contracts for
the erection and completion of Improvements to the Property; (ix) to make all
necessary and proper repairs, renewals, replacements, alterations, additions,
betterments and improvements to the Property that, in its sole discretion, it
may deem appropriate; (x) to insure and reinsure the Property for all risks
incidental to Mortgagee's possession, operation and management thereof; (xi) to
make and enter into any contracts obligations wherever necessary in its own name
for the operation, care and preservation of the Subject Property, and (xii) to
pay and discharge all debts, obligations and liabilities incurred thereby, all
at the expense of Mortgagor. The Person exercising the rights under this Section
shall not be liable to account for any action taken hereunder, and shall not be
liable for any loss sustained by Mortgagor resulting from any act or omission of
such Person, except to the extent such loss is caused by such Person's willful
misconduct or gross negligence. All such expenditures by the Person exercising
the rights under this Section shall be Obligations hereunder.
SECTION 5.05. Foreclosure; Receiver. While any Event of Default
exists, Mortgagee with or without entry, shall also have the following rights:
(a) to institute a proceeding or proceedings, by advertisement,
judicial process or otherwise, as provided under applicable law, for the
complete or partial foreclosure of this Leasehold Mortgage or the complete or
partial sale of the Subject Property under the power of sale hereunder or under
any applicable provision of law;
(b) to sell the Subject Property and all estate, right, title and
interest of Mortgagor therein as a whole or in separate parcels, at one or more
sales, at such time and place and upon such terms and conditions as may be
required by applicable law;
(c) to take such steps to protect and enforce rights, whether by
action, suit or proceeding in equity or at law, for the specific performance of
any provision in the Loan Documents, or in aid of the execution of any power
herein granted, or for any foreclosure hereunder, or for the enforcement of any
other appropriate legal or equitable remedy Mortgagee shall elect;
(d) to apply for the appointment of a receiver, supervisor, trustee,
liquidator, conservator or other custodian (a "Receiver") of the Subject
Property or any part thereof and all earnings, revenues, Rents, issues, profits
and income thereof, to the extent permitted by law without giving notice to any
other party and without regard to the adequacy or inadequacy of the security of
the Subject Property or the solvency of either Mortgagor or any other Person and
Mortgagor agrees that it shall not oppose the appointment of a Receiver; and
(e) to take all such other steps and to assert all such other rights
and remedies as shall be permitted by applicable law.
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(f) Mortgagee understands and acknowledges that, on the date hereof,
Mortgagor has no present right, title or interest whatsoever in the Fee Interest
or to any rents or income arising therefrom, and therefore, until such time as
Mortgagor does own the Fee Interest, Mortgagee has no rights or power to sell or
offer for sale, or to force the sale of the Fee Interest.
The purchase money, proceeds or avails of any foreclosure or sale after default
and any other sums which then may be held by Mortgagee under this Leasehold
Mortgage shall be applied as provided in Section 5.09 hereof.
SECTION 5.06. No Liability on Mortgagee. Notwithstanding anything
contained herein, this Leasehold Mortgage is only intended as security for the
Obligations and Mortgagee shall not be obligated to perform or discharge, and
Mortgagee need not perform or discharge, any obligation, duty or liability of
Mortgagor with respect to any of the Subject Property. Mortgagee shall not have
responsibility for the control, care, management or repair of the Property nor
shall Mortgagee be responsible or liable for any negligence in the management,
operation, upkeep, repair or control of the Subject Property resulting in loss
or injury or death to any licensee, employee, tenant or stranger, unless
Mortgagee takes physical possession and occupancy of the Subject Property and
such loss, injury or death is not a result of the direct action by Mortgagee. No
liability shall be enforced or asserted against Mortgagee in its exercise of the
powers herein granted to it, and Mortgagor expressly waives and releases any
such liability. Should Mortgagee or any Person exercising rights on its behalf
incur any such liability, loss or damage, under or by reason hereof, or in the
defense of any claims or demands, Mortgagor agrees to reimburse Mortgagee and
such Person, immediately upon demand (provided such demand is accompanied by an
itemized statement) for the amount thereof, including costs, expenses and
reasonable attorneys' fees, and any such obligations of Mortgagor shall be
Obligations hereunder and shall survive any foreclosure or transfer in lieu of
foreclosure of this Leasehold Mortgage and the release of this Leasehold
Mortgage.
SECTION 5.07. Assignment of Leases. (a) Subject to paragraph (d) below
and the provisions of Section 6.15, the assignments of the Leases and the Rent
under Granting Clauses VI and VII are and shall be present, absolute and
irrevocable assignments by Mortgagor to Mortgagee and, subject to the license to
Mortgagor under Section 5.07(b), Mortgagee or a Receiver appointed pursuant to
Section 5.05(d) (as the case may be as the Person exercising the rights under
this Section) shall have the absolute, immediate and continuing right to collect
and receive all Rents now or hereafter, including during any period of
redemption, accruing with respect to the Property. At the request of Mortgagee
or such Receiver, Mortgagor shall promptly execute, acknowledge, deliver,
record, register and file any additional general assignment of the Leases or
specific assignment of any Lease which Mortgagee or such Receiver may require
from time to time (all in form and substance reasonably satisfactory to
Mortgagee of such Receiver) to effectuate, complete, perfect, continue or
preserve the assignments of the Leases and the Rents under Granting Clauses VI
and VII.
(b) As long as no Event of Default exists, Mortgagor shall have the
right under a license granted hereby, subject to Section 5.07(c), to collect all
Rents upon, but not prior to fifteen (15) days before, the due date thereof.
(c) If any Event of Default exists, Mortgagee or Receiver appointed
pursuant to Section 5.05(d) (as the case may be as the Person exercising the
rights under this Section) shall have the right to do any of the following: (i)
terminate the license granted under Section 5.07(b) by notice to Mortgagor (ii)
exercise the rights and remedies provided to Mortgagor under the Site Lease;
(iii) exercise the rights and remedies provided under Section 5.04, Section 5.05
or under applicable law; (iv) as attorney in-fact or agent of Mortgagor, or in
its own name as the Person exercising the rights under this Section and under
the powers herein granted, hold, operate, manage and control the Property and
all other Subject Property, either personally or by its agents, contractors or
nominees, with full power to use such measures, legal or equitable, as in its
discretion may be deemed proper and necessary to enforce the payment of any
Rents, the Leases and other Subject Property relating thereto (including actions
for the recovery of Rent, actions in forcible detainer and actions in distress
of Rent); (v) cancel or terminate any Lease or sublease for any cause or on any
ground which would entitle Mortgagor to cancel the same; (vi) elect to disaffirm
any Lease or sublease made subsequent hereto or subordinated to the lien hereof;
and (vii) perform such other acts in connection with the management and
operation of the Subject Property as the Person exercising the rights under this
Section in its discretion may deem proper, Mortgagor hereby granting full power
and authority to exercise each and every one of the rights, privileges and
powers contained herein at any and all times while an Event of Default exists
without notice to Mortgagor.
(d) Nothing in this Section 5.07 shall be construed to be an
assumption by the Person exercising the rights under this Section, or to
otherwise make such Person liable for the performance, of any of the obligations
of Mortgagor under the Leases.
SECTION 5.08. Sales. Except as otherwise provided herein, to the
extent permitted under applicable law, at the election of Mortgagee, the
following provisions shall apply to any sale of the Subject Property hereunder,
whether made pursuant to the power of sale hereunder, any judicial proceeding,
or any judgment or decree of foreclosure or sale or otherwise;
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(a) Mortgagee or the court officer (as the case may be as the Person
conducting any sale) may conduct any number of sales as Mortgagee may direct
from time to time. The power of sale hereunder or with respect hereto shall not
be exhausted by any sale as to any part or parcel of the Subject Property which
is not sold, unless and until the Obligations shall have been paid in full, and
shall not be exhausted or impaired by any sale which is not completed or is
defective. A sale may be as a whole or in part or parcels and Mortgagor hereby
waives its right to direct the order in which the Subject Property or any part
or parcel thereof is sold.
(b) Any sale may be postponed or adjourned by public announcement at
the time and place appointed for such sale or such postponed or adjourned sale
without further notice.
(c) Any statement of fact or other recital made in any instrument
given by the Person conducting any sale as to the nonpayment of any Obligation,
the existence of an Event of Default, the amount of the Obligations due and
payable, the request to Mortgagee to sell, the notice of the time, place and
terms of sale and of the Subject Property to be sold having been duly given, or
any other act or thing having been duly done or not done by Mortgagor,
Mortgagee, or any other Person, shall be taken as conclusive and binding against
all other Persons as evidence of the truth of the facts so stated or recited.
(d) Any sale shall operate to divest all of the estate, right, title,
interest, claim and demand whatsoever, whether at law or in equity, of Mortgagor
in and to the Subject Property sold, and (to the extent permitted under
applicable law) shall be a perpetual bar both at law and in equity against
Mortgagor and any and all Persons claiming such Subject Property or any interest
therein by, through or under Mortgagor. Mortgagee understands and acknowledges
that on the date hereof, Mortgagor has no present estate, right, title or
interest whatsoever in the Fee Interest or to any rents or income arising
therefrom.
(e) At any sale, Mortgagee may bid for and acquire the Subject
Property sold and, in lieu of paying cash therefor may make settlement for the
purchase price by causing the Secured Parties to credit against the Obligations,
including the expenses of the sale and the cost of any enforcement proceeding
hereunder, the amount of the bid made therefor to the extent necessary to
satisfy such bid.
(f) In the event that Mortgagor or any Person claiming by, through or
under Mortgagor shall transfer or fail to surrender possession of the Subject
Property after any sale thereof, then Mortgagor or such Person shall be deemed
tenant at sufferance of the purchaser at such sale, subject to eviction by means
of forcible entry and unlawful detainer proceedings, or subject to any other
right or remedy available, hereunder or under applicable law.
(g) Upon any sale, it shall not be necessary for the Person conducting
such sale to have any Subject Property being sold present or constructively in
its possession.
(h) To the extent permitted under applicable law, in the event that a
foreclosure hereunder shall be commenced by Mortgagee, Mortgagee may at any time
before the sale abandon the sale, and may institute suit for the collection of
the Obligations or for the foreclosure of this Leasehold Mortgage; or in the
event that Mortgagee should institute a suit for collection of the Obligations
or the foreclosure of this Leasehold Mortgage, Mortgagee may at any time before
the entry of final judgment in said suit dismiss the same and sell the Subject
Property in accordance with the provisions of this Leasehold Mortgage.
SECTION 5.09. Application of Proceeds. The proceeds of any sale of any
of the Subject Property made pursuant to this Article V shall be applied as
follows:
(a) First, to the payment of all reasonable costs and expenses
incident to the enforcement of this Leasehold Mortgage paid or incurred by
Mortgagee or the agent for enforcement, protection or collection, including,
without limitation, reasonable costs, attorneys' fees, stenographers' fees,
costs of advertising, costs of documentary evidence of title (including title
search and insurance), all other related charges and costs, and a reasonable
compensation to the agents and attorneys of Mortgagee and of agent;
(b) Second, to the payment or prepayment of the Obligations, in such
order as Mortgagee shall elect; and
(c) Third, the remainder, if any, shall be paid to Mortgagor or such
other person or persons as may be entitled thereto by law;
provided, however, if applicable law requires such proceeds to be paid or
applied in a manner other than as set forth above in this Section 5.09, then
such proceeds shall be paid or applied in accordance with such applicable law.
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ARTICLE VI
GENERAL
SECTION 6.01. Fixture Filing. To the extent that the Subject Property
includes items of personal property which are or are to become fixtures under
applicable law, and to the extent permitted under applicable law, the filing of
this Leasehold Mortgage in the real estate records of the county in which such
Subject Property is located shall also operate from the time of filing as a
fixture filing with respect to such Subject Property, and the following
information is applicable for the purpose of such fixture filing, to wit:
(a) Name and Address of the Debtor:
Attention:
(b) Name and Address of the Secured Party:
Atherton Capital Incorporated
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attention: David L. Elder
(c) This financing statement covers goods or items of
personal property which are or are to become
fixtures upon the Property.
(d) Name and address of record owners:
Attention:
SECTION 6.02. Defeasance. If all of the Obligations shall have been
paid in full, and if Mortgagor shall have performed and observed all the
covenants, obligations and conditions to be performed by Mortgagor pursuant to
the Loan Documents, and each of the Loan Documents shall have been terminated,
then this Leasehold Mortgage shall cease, terminate and, thereafter, be of no
further force or effect (except as provided in Sections 4.01, 4.02 and 5.06).
Upon such termination and Mortgagor's request, appropriate release shall
promptly be made by Mortgagee to the Person or Persons legally entitled thereto
at Mortgagor's reasonable expense.
SECTION 6.03. Notices. Each notice, demand or other communication
given to Mortgagor or Mortgagee in connection with this Leasehold Mortgage shall
be given in the manner set forth in the Loan Agreement and shall be sent to the
addresses shown below or such other addresses which the parties may provide to
one another in accordance with the Loan Agreement.
To Mortgagee: Atherton Capital Incorporated
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attention: David L. Elder
Telephone: (415) 827-7800
Telecopier: (415) 827-7950
with a copy to Bankers Trust Company
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Loan Servicer: Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: Christopher Pohl
Telephone: (212) 250-4984
Telecopier: (212) 250-6151
To Mortgagor:
Attention:
Telephone:
Telecopier:
SECTION 6.04. Amendments in Writing. No amendment, consent, waiver or
supplement in any way affecting Mortgagor's obligations or Mortgagee's rights
under this Leasehold Mortgage shall in any event be effective unless contained
in a writing signed by Mortgagee.
SECTION 6.05. Governing Law; Construction. This Leasehold Mortgage
shall be governed by the law of the state in which the Land is situated.
SECTION 6.06. Successors and Assigns. Subject to the provisions of
Section 6.15, the covenants and agreements of Mortgagor hereunder, and the
provisions hereof affecting Mortgagor, shall bind Mortgagor hereunder, its
successors and assigns and all Persons claiming by, through or under Mortgagor
and shall inure to the benefit of Mortgagor and its successors and permitted
assigns. The rights and privileges of Mortgagee hereunder, and the provisions
hereof affecting Mortgagee, shall inure to the benefit of Mortgagee hereunder
and its successors and assigns.
SECTION 6.07. Waiver. Mortgagor waives, on behalf of itself and all
Persons now or hereafter interested in the Property or the other Subject
Property, to the fullest extent permitted by applicable law, (i) all rights
under all appraisement, homestead, moratorium, valuation, exemption, stay,
extension, redemption, single action, election of remedies and marshalling
statutes, laws or equities now or hereafter existing, (ii) any benefit of any
law providing for the valuation or appraisal of the Property or the other
Subject Property or any part thereof prior to any sale thereof; (iii) after any
such sale, claim or exercise any right to redeem the property so sold or any
part thereof; (iv) all benefit or advantage of any such law and covenants not to
hinder, delay or impede the execution by Mortgagee of any power or remedy herein
granted or available at law or in equity, but to suffer and permit the execution
of every power and remedy as though no such law existed and (v) any and all
requirements that at any time any action may be taken against any other Person.
Mortgagor hereby acknowledges and agrees that no defense based on any of the
foregoing will be asserted in any action enforcing this Leasehold Mortgage.
SECTION 6.08. WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LEASEHOLD MORTGAGE, THE NOTE OR ANY OTHER LOAN
DOCUMENT OR FOR ANY COUNTERCLAIM THEREIN.
SECTION 6.09. No Redemption. Mortgagor hereby waives, to the fullest
extent permitted by applicable law, any and all rights of redemption from sale
under any order or decree of foreclosure of this Leasehold Mortgage or under any
power contained herein on its own behalf and on behalf of each and every Person
acquiring any interest in or title to the Property subsequent to the date of
this Leasehold Mortgage.
SECTION 6.10. Limitation by Law. All rights, remedies and powers
provided in this Leasehold Mortgage may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Leasehold Mortgage are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Leasehold
Mortgage illegal, invalid, unenforceable, in whole or in part, or not entitled
to be recorded, registered, or filed under the provisions of any applicable law.
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SECTION 6.11. Mortgagee's Performance. If Mortgagor shall fail to pay
or perform any of its obligations herein contained (including, without
limitation, payment of expenses of foreclosure and court costs) or under the
Loan Documents each with respect to the Subject Property, Mortgagee upon ten
(10) business days prior written notice to Mortgagor (except as otherwise
expressly permitted by any Loan Document in the event of an emergency when no
notice need be given) may, but need not, make (or cause to be made) any such
payment or perform (or cause to be performed) any such obligation of Mortgagor
hereunder or thereunder (provided Mortgagor is not contesting such payment or
performance in accordance with Section 2.09 and the failure to so perform such
obligation would have a Material Adverse Effect), in any form and manner deemed
reasonably expedient by Mortgagee as agent or attorney-in-fact of Mortgagor, and
any amount so paid or expended (plus reasonable compensation to Mortgagee for
its out-of-pocket and other expenses (including legal expenses) for each matter
for which it acts under this Leasehold Mortgage), with interest thereon at
the Default Rate, shall be added to the Obligations and shall be repaid to
Mortgagee upon demand. No such action of Mortgagee shall be considered as a
waiver of any right accruing to it on account of the occurrence of any default
on the part of Mortgagor under this Leasehold Mortgage, any Default, any Event
of Default, or any default or event of default under any other Loan Document.
SECTION 6.12. Subrogation. To the extent that Mortgagee, after the
date hereof, pays pursuant to the terms of this Leasehold Mortgage any sum due
under any provision of law or any instrument or documents creating any lien
prior or superior to the lien of this Leasehold Mortgage, Mortgagee shall have
and be entitled to a lien on the Subject Property equal in priority to that
discharged, and Mortgagee shall be subrogated to, and receive and enjoy all
rights and liens possessed, held or enjoyed by, the holder of such lien, which
shall remain in existence for the benefit of Mortgagee to secure the amount
expended by Mortgagee on account of or in connection with such lien.
SECTION 6.13. Conflicting Provisions. To the extent there exists any
conflict or inconsistency between the terms of this Leasehold Mortgage and the
terms of the Loan Agreement, the terms of the Loan Agreement shall govern.
SECTION 6.14. Counterparts. This Leasehold Mortgage may be executed in
any number of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.
SECTION 6.15. Effectiveness of Document. Notwithstanding any other
provision of this Leasehold Mortgage to the contrary, in the event that this
Leasehold Mortgage or the execution and delivery hereof would cause Mortgagor to
be in default under any Site Lease by reason of the failure of Mortgagor to
obtain the prior consent of the landlord under the Site Lease to this Leasehold
Mortgage or the execution and delivery hereof, Mortgagee hereby agrees, solely
for the purpose of avoiding any such default by Mortgagor, that this Leasehold
Mortgage shall not be effective, and that Mortgagee will not record this
Leasehold Mortgage or otherwise exercise any of its remedies hereunder, unless
and until such required consent (if any) of the landlord under the Site Lease
shall have been obtained. Mortgagor hereby agrees that if an Event of Default
shall have occurred and be continuing, then, upon the request of Mortgagee,
Mortgagor shall obtain the consent of the landlord under the Site Lease to this
Leasehold Mortgage and the exercise of remedies hereunder and take whatever
action shall be necessary to record the Site Lease or a memorandum thereof and
this Leasehold Mortgage as a mortgage lien on the leasehold estate created by
the Site Lease. Mortgagor irrevocably constitutes and appoints Mortgagee the
true and lawful attorney-in-fact of Mortgagor, so long as any such Event of
Default has occurred and is continuing, to execute, acknowledge, swear to and
file any documents in the name of Mortgagor necessary to record the Site Lease
or a memorandum thereof and this Leasehold Mortgage as a mortgage lien on the
leasehold estate created by the Site Lease; it being expressly acknowledged that
the foregoing power of attorney is coupled with an interest and shall survive
the dissolution of Mortgagor or assignment by Mortgagor of its rights hereunder.
SECTION 6.16. Recourse. Except as otherwise expressly set forth in
this Section 6.16, Mortgagee shall have no recourse against any shareholder,
owner, partner, officer, director, agent or employee of or in Mortgagor or of or
in any partner in or shareholder of Mortgagor (all such Persons, except to the
extent any such Person is obligated under a Guaranty, referred to collectively
as "Exculpated Persons") for the repayment of the Loan. Notwithstanding the
provisions of this Section 6.16, nothing herein or in any other Loan Document
shall: (i) prevent Mortgagee's recourse to Mortgagor, the Restaurant, the
Collateral or the Property or against any Guarantor under a Guaranty; (ii)
constitute a waiver, release or discharge of any Indebtedness or Obligation
evidenced by the Loan or arising under or secured by this Mortgage or any of the
other Loan Documents, but the same shall continue until fully paid or
discharged; (iii) affect or in any way limit the rights and remedies of
Mortgagee under this Mortgage or under any other Loan Document; or (iv) limit
the personal liability of any Exculpated Person for misappropriation or
misallocation of any funds, fraud, misrepresentation or willful damage to the
Restaurant, the Property or any portion thereof or for any environmental
indemnity under the Loan Documents.
[Signature Page Next]
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IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this
Leasehold Mortgage as of the date first written above.
SYBRA, INC.,
a Michigan corporation
By: _______________________
Name:
Title:
[Corporate Seal]
Attest:
By: __________________________
Name:
By: __________________________
Name:
This instrument was prepared
by and when recorded should
be returned to:
ATHERTON CAPITAL INCORPORATED
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attention: David L. Elder
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ACKNOWLEDGEMENT FOR MORTGAGOR
STATE OF ________________________
COUNTY OF ________________________
The foregoing instrument was acknowledged before me this ____ day of
___________, 19__, by _______________________, the _______________________ of
Sybra, Inc., a Michigan corporation.
NOTARY PUBLIC:
Name:
Notary Public
My commission expires on ___________ ___, 19__.
[Notary Seal]
LOAN TRANCHE ____
EXHIBIT G
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of
________________________, 19__, is executed by SYBRA, INC., a Michigan
corporation, as the surviving entity of a merger with Newco ("Borrower"), in
favor of ATHERTON CAPITAL INCORPORATED, a Delaware corporation (together with
its successors and assigns, "Lender").
RECITALS
A. Pursuant to a Loan Agreement, dated as of the date hereof (the
"Loan Agreement"), between Borrower and Lender, Lender has agreed to extend a
loan in the aggregate principal amount of $__________________________ (the
"Loan") to Borrower upon the terms and subject to the conditions set forth
therein.
B. Lender's obligation to extend the loan to Borrower under the
Loan Agreement is subject, among other conditions, to receipt by Lender of this
Security Agreement duly executed and delivered by Borrower.
C. Following the execution of this Security Agreement, Lender
expects to eventually sell the Loan to one or more trusts or other entities.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Lender as follows:
1. Definitions and Interpretation. When used in this Security
Agreement, the following terms shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in paragraph 2
hereof.
"Equipment" shall have the meaning given to that term in Attachment 1
hereto.
"Inventory" shall have the meaning given to that term in Attachment 1
hereto.
"Loan Agreement" shall have the meaning given to that term in Recital
A hereof.
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to Lender of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising pursuant to
the terms of the Loan Agreement or any of the other Loan Documents including,
without limitation, all interest, Yield Maintenance Amount, fees, charges,
expenses, attorneys' fees and accountants' fees chargeable to and payable by
Borrower hereunder or thereunder.
"Receivables" shall have the meaning given to that term in Attachment
1 hereto.
"Related Contracts" shall have the meaning given to that term in
Attachment 1 hereto.
"Restaurant" shall mean each of the Arby's restaurants described on
Attachment 2.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time. Unless otherwise defined herein, all other
capitalized terms used herein and defined in the Loan Agreement shall have the
respective meanings given to those terms in the Loan Agreement, and all terms
defined in the UCC shall have the respective meanings given to those terms in
the UCC. The rules of construction set forth in Section I of the Loan Agreement
shall, to the extent not inconsistent with the terms of this Security Agreement,
apply to this Security Agreement and are hereby incorporated by reference.
<PAGE>
2. Grant of Security Interest. As collateral security for the
Obligations, Borrower hereby pledges and assigns to Lender and grants to Lender
a security interest in all right, title and interest of Borrower in and to the
property described in Attachment 1 hereto, whether now owned or hereafter
acquired (collectively and severally, the "Collateral"), which Attachment 1 is
incorporated herein by this reference.
3. Representations and Warranties. Borrower represents and warrants to
Lender as follows:
(a) Borrower is the legal and beneficial owner of the Collateral (or,
in the case of after-acquired Collateral, at the time Borrower acquires rights
in the Collateral, will be the legal and beneficial owner thereof). No other
Person has (or, in the case of after-acquired Collateral, at the time Borrower
acquires rights therein, will have) any right, title, claim or interest (by way
of Lien or otherwise) in, against or to the Collateral, other than Permitted
Liens pertaining to personal property.
(b) Lender has (or in the case of after-acquired Collateral, at the
time Borrower acquires rights therein, will have) a first priority perfected
security interest in the Collateral, other than Permitted Liens pertaining to
personal property.
(c) All Equipment and Inventory are located at the Restaurant.
Borrower has exclusive possession and control of the Inventory and Equipment.
(d) Borrower keeps all records concerning the Receivables and the
originals of all Related Contracts at the Restaurant or at its chief executive
office.
4. Covenants. Borrower hereby agrees as follows:
(a) Upon the written request of Lender at any time and from time to
time, Borrower shall perform all acts that may be reasonably deemed necessary or
appropriate by Lender to maintain, continue, preserve, protect and perfect the
Collateral (ordinary wear and tear excepted), the Lien granted to Lender therein
and the first perfected priority of such Lien.
(b) Borrower shall not use or permit any Collateral to be used in
violation of any provision of the Loan Agreement, this Security Agreement or any
other Loan Document.
(c) Borrower shall pay promptly when due all taxes and other
Governmental Charges, all Liens and all other charges now or hereafter imposed
upon or affecting any Collateral (other than any such taxes, Governmental
Charges, Liens or other charges which are being contested by Borrower in good
faith and by appropriate proceedings and for which Borrower has established
adequate reserves.
(d) Without 30 days' prior written notice to Lender, Borrower shall
not (i) change Borrower's name or place of business (or, if Borrower has more
than one place of business, its chief executive office), or the office in which
Borrower's records relating to Receivables or the originals of Related Contracts
are kept, (ii) keep Collateral consisting of chattel paper at any location other
than at the Restaurant or its chief executive office, or (iii) keep Collateral
consisting of Equipment, Inventory or other goods at any location other than at
the Restaurant.
(e) Borrower shall procure, execute and deliver from time to time any
endorsements, assignments, financing statements and other writings reasonably
deemed necessary or appropriate by Lender to perfect, maintain and protect its
Lien hereunder and the priority thereof and to assure compliance by Borrower
with the terms of this Security Agreement and the other Loan Documents as Lender
may from time to time reasonably request and shall deliver promptly to Lender
all originals of Collateral consisting of instruments, documents and chattel
paper.
(f) Borrower shall appear in and defend any action or proceeding which
may affect its title to or Lender's interest in the Collateral.
(g) If Lender gives value to enable Borrower to acquire rights in or
the use of any Collateral, Borrower shall use such value for such purpose.
(h) Borrower shall keep separate, accurate and complete records of the
Collateral and shall provide Lender with such records and such other reports and
information relating to the Collateral as Lender may reasonably request from
time to time.
2
<PAGE>
(i) Borrower shall not surrender or lose possession of (other than to
Lender), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein except as permitted in the Loan
Agreement, and, notwithstanding any provision of the Loan Agreement, Borrower
shall keep the Collateral free of all Liens except Permitted Liens pertaining to
personal property.
(j) Borrower shall comply with all material Legal Requirements
applicable to Borrower which relate to the production, possession, operation,
maintenance and control of the Collateral (including, without limitation, the
Fair Labor Standards Act).
5. Authorized Action by Agent. Borrower hereby irrevocably appoints
Lender as its attorney-in-fact and agrees that Lender may perform (but Lender
shall not be obligated to and shall incur no liability to Borrower or any third
party for failure so to do) any act which Borrower is obligated by this Security
Agreement to perform, and to exercise such rights and powers as Borrower might
exercise with respect to the Collateral, including, without limitation, the
right to (a) collect by legal proceedings or otherwise and endorse and receive
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (b) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral; (c) insure, protect, preserve and enforce the
Collateral; (d) make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any Indebtedness of Borrower
relating to the Collateral; and (f) execute UCC financing statements and other
documents, instruments and agreements required hereunder. Borrower agrees to
reimburse Lender upon demand for any reasonable costs and expenses, including
reasonable attorneys' fees, Lender may incur while acting as Borrower's
attorney-in-fact hereunder, all of which costs and expenses are included in the
Obligations. Borrower agrees that such care as Lender gives to the safekeeping
of its own property of like kind shall constitute reasonable care of the
Collateral when in Lender's possession; provided, however, that Lender shall not
be required to make any presentment, demand or protest, or give any notice and
need not take any action to preserve any rights against any prior party or any
other Person in connection with the Obligations or with respect to the
Collateral.
6. Performance by Lender. If Borrower shall fail to pay or perform
any of its obligations herein contained or under any other Loan Documents,
Lender upon five (5) days prior written notice to Borrower (except as otherwise
expressly permitted by any Loan Document in the event of an emergency when no
notice need be given) may, but need not, make (or cause to be made) any such
payment or perform (or cause to be performed) any such obligation of Borrower
hereunder or thereunder (provided Borrower is not contesting such payment or
performance as permitted by the Loan Agreement and the failure to so perform
such obligation would have a Material Adverse Effect), in any form and manner
deemed commercially reasonable by Lender as agent or attorney-in-fact of
Borrower, and any amount so paid or expended (plus reasonable compensation to
Lender for its out-of-pocket and other expenses (including legal expenses) for
each matter for which it acts under this Security Agreement), with interest
thereon at the Default Rate, shall be added to the Obligations and shall be
repaid to Lender upon demand. No such action of Lender shall be considered as a
waiver of any right accruing to it on account of the occurrence of any default
on the part of Borrower under this Security Agreement, any Default, any Event of
Default, or any default or event of default under any other Loan Document.
7. Default and Remedies. Borrower shall be deemed in default under
this Security Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Loan Agreement. In addition to
all other rights and remedies granted to Lender by this Security Agreement, the
Loan Agreement, the other Loan Documents, the UCC and other applicable
governmental regulations, Lender may, upon the occurrence and during the
continuance of any such Event of Default, exercise any one or more of the
following rights and remedies: (a) foreclose or otherwise enforce Lender's
security interests in any or all Collateral in any manner permitted by
applicable law or in this Security Agreement; (b) notify any or all account
debtors to make payments on Receivables directly to Lender; (c) sell or
otherwise dispose of any or all Collateral at one or more public or private
sales, whether or not such Collateral is present at the place of sale, for cash
or credit or future delivery, on such terms and in such manner as Lender may
determine; (d) require Borrower to assemble the Collateral and make it available
to Lender at a place to be designated by Lender; (e) enter onto any property
where any Collateral is located and take possession thereof with or without
judicial process; and (f) prior to the disposition of the Collateral, store,
process, repair or recondition any Collateral consisting of goods, perform any
obligations and enforce any rights of Borrower under any Related Contracts or
otherwise prepare and preserve Collateral for disposition in any manner and to
the extent Lender deems reasonably appropriate. In furtherance of Lender's
rights hereunder, Borrower hereby grants to Lender an irrevocable, non-exclusive
license (exercisable without royalty or other payment by Lender) to use, license
or sublicense any patent, trademark, tradename, copyright or other intellectual
property in which Borrower now or hereafter has any right, title or interest,
together with the right of access to all media in which any of the foregoing may
be recorded or stored. Borrower hereby agrees that ten (10) days notice of any
intended sale or disposition of any Collateral is reasonable.
8. Miscellaneous.
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<PAGE>
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower or Lender under this Security Agreement shall be in writing and
telecopied, mailed or delivered to each party at its telecopier number or
address set forth below (or to such other telecopier number or address for
any party as indicated in any notice given by that party to the other party).
All such notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the Business Day
following the deposit with such service; (b) when mailed, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when
telecopied, upon confirmation of receipt.
Lender: Atherton Capital Incorporated
1001 Bayhill Drive, Suite 155
San Bruno, California 94066
Attn: David L. Elder
Telephone No.: (415) 827-7800
Telecopier No.: (415) 827-7950
with a copy to _____________________________________
Loan Servicer: _____________________________________
_____________________________________
Attention:___________________________
Telephone No.:_______________________
Telecopy No._________________________
Borrower: Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, GA 30350
Attn: Charles N. Hyslop, President
Telephone No.: (770) 587-0290
Telecopier No.: (770) 594-7044
(b) Expenses. Borrower shall pay on demand (i) all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred by
Lender in connection with the preparation, execution and delivery of, and the
exercise of its rights and duties under, this Security Agreement, and the
preparation, execution and delivery of amendments, consents and waivers
hereunder; and (ii) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Lender in connection with the custody,
preservation, preparation or sale of, or other realization on, any of the
Collateral or the enforcement or attempted enforcement of any of the Obligations
or in preserving any of Lender's rights and remedies (including, without
limitation, all such fees and expenses incurred in connection with any "workout"
or restructuring affecting the Loan Documents or the Obligations or any
bankruptcy or similar proceeding affecting Borrower or Guarantor). As used
herein, the term "reasonable attorneys' fees and expenses" shall include,
without limitation, allocable costs and expenses of Lender's in-house legal
counsel and staff.
(c) Waivers; Amendments. Any term, covenant, agreement or condition of
this Security Agreement may be amended or waived if such amendment or waiver is
in writing and is signed by Borrower and Lender. No failure or delay by Lender
in exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right preclude
any other further exercise thereof or of any other right. Unless otherwise
specified in any such waiver or consent, a waiver or consent given hereunder
shall be effective only in the specific instance and for the specific purpose
for which given.
(d) Successors and Assignments. This Security Agreement shall be
binding upon and inure to the benefit of Lender and Borrower and their
respective successors and assigns; provided, however, that Borrower and Lender
may sell, assign and delegate their respective rights and obligations hereunder
only as permitted by the Loan Agreement. Lender may disclose this Security
Agreement, any other Loan Documents and any financial or other information
relating to Borrower to any assignee or potential assignee.
(e) Partial Invalidity. If at any time any provision of this Security
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Security Agreement nor the legality, validity
or enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.
4
<PAGE>
(f) Jury Trial. EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT.
(g) Cumulative Rights, etc. The rights, powers and remedies of Lender
under this Security Agreement shall be in addition to all rights, powers and
remedies given to Lender by applicable law, the Loan Agreement, any other Loan
Document or any other agreement, all of which rights, powers, and remedies shall
be cumulative and may be exercised successively or concurrently without
impairing Lender's rights hereunder. Borrower waives to the fullest extent
permitted by applicable law any right to require Lender to proceed against any
Person or to exhaust any Collateral or to pursue any remedy in Lender's power.
(h) Payments Free of Taxes, Etc. All payments made by Borrower under
this Security Agreement shall be made by Borrower free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, Borrower shall pay upon demand any stamp or other
taxes, levies or charges of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Security Agreement.
Upon request by Lender, Borrower shall furnish evidence satisfactory to Lender
that all requisite authorizations and approvals by, and notices to and filings
with, governmental authorities and regulatory bodies have been obtained and made
and that all requisite taxes, levies and charges have been paid.
(i) Borrower's Continuing Liability. Notwithstanding any provision of
this Security Agreement or any other Loan Document or any exercise by Lender of
any of its rights hereunder or thereunder (including, without limitation, any
right to collect or enforce any Collateral), (i) Borrower shall remain liable to
perform its obligations and duties in connection with the Collateral (including,
without limitation, the Related Contracts and all other agreements relating to
the Collateral) and (ii) Lender shall not assume any liability to perform such
obligations and duties or to enforce any of Borrower's rights in connection with
the Collateral (including, without limitation, the Related Contracts and all
other agreements relating to the Collateral).
(j) Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of California.
(k) Release of Collateral and Termination. Upon the indefeasible
payment in full of all of the Obligations, Lender shall release its security
interest in the Collateral and this Security Agreement shall be terminated.
5
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be
executed as of the day and year first above written.
SYBRA, INC.,
a Michigan corporation
By: ________________________________
Name: ______________________________
Title: _____________________________
6
<PAGE>
ATTACHMENT 1
TO SECURITY AGREEMENT
(a) All equipment and fixtures held or maintained at the Restaurant or otherwise
used in the ownership or operation of the Restaurant (including, without
limitation, food preparation equipment, decorations, seating, booths, awnings,
refrigeration equipment not involving roof penetration, signage, menus,
furniture, playground equipment, vehicles and other machinery and office
equipment), together with all additions and accessions thereto and replacements
therefor (collectively, the "Equipment");
(b) All inventory held or maintained at the Restaurant or otherwise
used in the ownership or operation of the Restaurant (including, without
limitation, (i) all food and paper inventory and all other raw materials, work
in process and finished goods and (ii) all such goods which are returned to or
repossessed by Borrower), together with all additions and accessions thereto,
replacements therefor, products thereof and documents therefor (collectively,
the "Inventory");
(c) All accounts, chattel paper, instruments, deposit accounts and
other rights to the payment of money (including, without limitation, general
intangibles and contract rights) arising as a result of any activities conducted
by, through or at the Restaurant (including, without limitation, payments
received with respect to termination, arbitration or litigation under the
Franchise Agreement) (collectively, the "Receivables") and all contracts,
security agreements, leases, guaranties and other agreements evidencing,
securing or otherwise relating to the Receivables (collectively, the "Related
Contracts");
(d) All other general intangibles and contract rights not otherwise
described above acquired, held, used, sold or consumed in connection with the
Restaurant or relating to or arising out of the Restaurant or the operation
thereof (including, without limitation, (i) customer and supplier lists and
contracts, books and records, computer programs and other intellectual property,
insurance policies, tax refunds, contracts for the purchase and/or lease of real
or personal property, subject to the terms of Section 5.01(u) of the Loan
Agreement, (ii) all patents, copyrights, trademarks, tradenames and service
marks, (iii) to the extent permitted by the terms thereof, all licenses to use,
applications for, and other rights to, such patents, copyrights, trademarks,
tradenames and service marks, (iv) all goodwill of Borrower (including the
ongoing enterprise value of the Restaurants), (v) the Franchise Agreement(s) in
respect of each Restaurant and all rights thereunder, including, without
limitation, the right to operate each Restaurant, the right to receive any
payment from the Franchisor, and the right to receive any payment from any other
Person in connection with, or related to, or arising out of or from any such
Franchise Agreement, all to the fullest extent permitted by Arby's, Inc. or
applicable law, and (vi) to the extent permitted by the terms thereof, any other
agreement between Borrower and Franchisor;
(e) All other property not otherwise described above acquired, held,
used, sold or consumed in connection with the Restaurant or relating to the
Restaurant or the management thereof (including, without limitation, all money,
certificated securities, uncertificated securities, documents and goods); and
(f) All cash and non-cash proceeds and products of the foregoing
(including, without limitation, whatever is receivable or received when
Collateral or proceeds is sold, collected, exchanged, returned, substituted or
otherwise disposed of, whether such disposition is voluntary or involuntary,
including rights to payment and return premiums and insurance proceeds under
insurance with respect to any Collateral, and all rights to payment with respect
to any cause of action affecting or relating to the Collateral).
[1]-1
<PAGE>
LOAN TRANCHE ___
ATTACHMENT 2
TO SECURITY AGREEMENT
Restaurant No. Location
[1]-2
RESTAURANT LEASE
TRANCHE C
U. S. RESTAURANT PROPERTIES OPERATING L. P.
("Landlord")
and
SYBRA, INC.
("Tenant")
<PAGE>
RESTAURANT LEASE
SYBRA, INC.
TRANCHE C
THIS LEASE (the "Lease") is made and entered into this ________ day of
___, 1997, by and between U. S. RESTAURANT PROPERTIES OPERATING L. P., a
Delaware limited partnership (hereinafter called "Landlord"), and SYBRA, INC., a
Michigan corporation (hereinafter called "Tenant"). For and in consideration of
the rental and of the covenants and agreements hereinafter set forth to be kept
and performed by Tenant, Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, the Building or Buildings and the Premises as defined
below, for the term and at the rental amount, and subject to and upon all of the
terms, covenants, and agreements hereinafter set forth.
1.0 DEFINITIONS
-----------
1.1 Building and Buildings. The word "Building or "Buildings" as used
in this Lease shall mean the forty (40) one-story restaurant buildings located
on the sites more particularly described on Exhibit A.
1.2 Personal Property. The furniture, fixtures and equipment owned by
Landlord and used by Tenant at the Premises, more particularly described on
Exhibit B.
1.3 Premises. The word "Premises" as used in this Lease shall mean the
fee or leasehold interest in the underlying ground and driveways and parking
areas outside of each Building as shown on Exhibit A.
1.4 Leased Property. The word "Leased Property" as used in this Lease
shall mean collectively, the Buildings, the Premises and the Personal Property
with respect to each Building.
1.5 Equipment. The word "Equipment" as used in this Lease shall mean
collectively, the furniture, fixtures and equipment owned by Tenant and located
in any Building or on any Premises, including, but not limited to, kitchen
equipment, signage, canopies, menus, seating, counter tops and refrigeration
equipment.
1.6 Operations. Intentionally deleted.
1.7 Taxes. The real property taxes and personal property taxes
applicable to the Leased Property and restaurant operations pursuant to Sections
5.2 and 5.3.
1.8 Franchise Agreement. The Franchise Agreement between Tenant and
Arby's Inc. d/b/a Triarc Restaurant Group, a Delaware corporation, dated
_____________________________, with respect to the restaurant operations at each
Building. The Franchise Agreements are attached hereto as Exhibit G.
1.9 Purchase Price. The purchase price for the Buildings shall be
$18,128,100.00. The Purchase Price shall be allocated to individual Buildings in
accordance with Exhibit C hereto.
<PAGE>
1.10 Rent Reduction Amount. The product of (i) total Base Rent payable
hereunder prior to such reduction multiplied by (ii) the ratio of (A) the
portion of the Purchase Price allocated to the Building pursuant to Exhibit C
with respect to which the Rent Reduction Amount is calculated, divided by (B)
the Purchase Price.
2.0 TERM
----
2.1 The Term of this Lease shall be for a period of twenty (20) years,
commencing on the 30th day of April, 1997 (the "Rent Commencement Date") and
ending on the 30th day of April, 2017. A "Lease Year" shall commence on the Rent
Commencement Date and end 12 months thereafter.
2.2 Option to Renew Lease. Tenant shall have the option to renew the
Lease for three (3) renewal terms, with the first renewal term being for a ten
(10) year period and the next two (2) renewal terms being for periods of five
(5) years each, on the same terms and conditions as herein set forth. Tenant
shall exercise each renewal option by delivery of written notice of exercise of
such option to Landlord on or before the date six (6) months preceding the
scheduled termination date of the Lease or the current renewal period as the
case may be. If Tenant fails to exercise any renewal option, Tenant's right to
exercise any further renewal options will expire.
2.3 Acknowledgment of Commencement Date. In the event the commencement
date of the term of this Lease is other than provided for in Section 2.1, then
the Landlord and Tenant shall execute a written acknowledgment of commencement
and shall attach it hereto as Exhibit D.
3.0 RENT.
-----
Tenant shall pay to Landlord as rent for the Leased Property the sums
shown on Exhibit E, payable in advance, without deduction, offset, prior notice
or demand, in lawful monies of the United States of America.
4.0 FINANCIAL COVENANTS AND STATEMENTS.
-----------------------------------
4.1 Liquidity. Tenant represents and warrants that, as of the Rent
Commencement Date, it shall have Unencumbered Liquidity of at least
$2,750,000.00. For purposes hereof, Unencumbered Liquidity shall mean, as of the
Rent Commencement Date, the sum of (i) 75% of the cash and cash equivalents of
Tenant, plus (ii) 100% of the cash and cash equivalents of ICH Corporation
which, in either case, are not collaterally assigned in connection with any loan
in which such cash or cash equivalent represents substantially all of the
collateral for such loan. Tenant shall deliver a certificate to Landlord as of
the Rent Commencement Date evidencing compliance with this Section, which
certificate is a condition precedent to the effectiveness of this Lease.
4.2 Guaranty. ICH Corporation ("Guarantor") shall irrevocably and
unconditionally guaranty all obligations of Tenant under this Lease, and shall
execute a Guaranty Agreement in the form attached hereto as Exhibit F. If
Guarantor sells fifty-one percent (51.0%) or more of its ownership interest in
Tenant to a party ("Substitute Guarantor") which agrees to execute a guaranty
agreement substantially in the form attached hereto as Exhibit F, Guarantor
shall be released from any further liability with respect to the Guaranty
Agreement provided that (i) there is at such time no default under the Lease
beyond any applicable notice and cure period, and (ii) the Substitute Guarantor
has financial strength and payment
2
<PAGE>
ability as of the date of the request for such substitution reasonably
acceptable to Landlord, based on the financial statements of the Substitute
Guarantor in form reasonably acceptable to Landlord.
4.3 Dividend Restriction. Guarantor (or any Substitute Guarantor) shall
not pay any dividends on its capital stock, redeem any capital stock, or engage
in any recapitalization requiring Guarantor to pay dividends or redeem its
capital stock (i) at any time prior to two (2) years after the Rent Commencement
Date, and thereafter (ii) only if, immediately after any such transaction, the
Unencumbered Liquidity is more than $2,750,000.00.
4.4 Financial Statements. During the term of this Lease, including any
renewal terms, Tenant and Guarantor (including any Substitute Guarantor) shall
deliver to Landlord annual financial statements of Tenant and Guarantor,
prepared in accordance with generally accepted accounting principles, certified
by the chief executive officer or chief financial officer of Tenant within
ninety (90) days following the close of such year. If Tenant or Guarantor has
audited financial statements available, it shall deliver such audited financial
statements to Landlord. Additionally, Tenant shall prepare and deliver to
Landlord monthly sales reports separately identifying the gross sales from each
Building subject to this Lease.
5.0 TAXES.
------
5.1 Payment of Taxes. Tenant shall pay, as additional rent hereunder,
all real property taxes applicable to the Leased Property during the term of the
Lease. Payment of taxes shall be made directly to the taxing authority prior to
the due date for such taxes (provided Tenant receives a copy of the tax bill at
least thirty (30) days prior to the due date), with a copy to Landlord of the
remittance within five (5) days after payment by Tenant. In the event such real
property taxes required to be paid by Tenant cover any period of time before or
after expiration of the term of this Lease, Tenant's share of such taxes shall
be equitably prorated to cover only the period of time within the fiscal tax
year during which this Lease is in effect. Landlord shall forward copies of all
tax bills within fifteen (15) days after Landlord's receipt thereof.
5.2 Definition of "Real Property Taxes". As used herein, the term "real
property tax" shall include any form of assessment, license fee, rent tax, sales
tax on rental receipts, levy, or tax imposed by any authority having the direct
or indirect power to tax, including any city, county, state, or federal
government, or any school, agricultural, lighting, drainage, or other
improvement district thereof, as against any legal or equitable interest of
Landlord in any Leased Property or in the real property of which any Premises is
a part, as against Landlord's right to rent or other income therefrom.
5.3 Personal Property Tax.
(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon leasehold improvements, fixtures, furnishings, Personal
Property and Equipment.
(b) If any Equipment shall be assessed with Landlord's real
property, Tenant shall pay to Landlord the taxes attributable to such Equipment
within ten (10) days after receipt of a written statement setting forth the
taxes applicable to the Equipment.
5.4 If Tenant should fail to pay any taxes, assessments or governmental
charges required to be paid by it hereunder, in addition to any other remedies
provided herein, Landlord may, in its sole discretion, after ten (10) days'
prior written notice to Tenant, pay such taxes, assessments and governmental
charges.
3
<PAGE>
Any sums so paid by Landlord shall be deemed to be additional rental owing by
Tenant to Landlord and due and payable upon demand as additional rent with
interest at the rate of twelve percent (12.00%) from the date of the payment by
Landlord.
5.5 If at any time during the term of the Lease the present method of
taxation shall be changed so that, in lieu of the whole or any part of any
taxes, assessments, levies or charges levied, assessed or imposed on real estate
and the improvements thereon there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received from Tenant
and/or any assessment, levy or charge measured by or based in whole or in part,
upon such rents, then all such taxes, assessments, levies or charges, or the
part thereof so measured or based, shall be deemed to be included with the term
taxes for the purposes hereof and shall be paid by Tenant.
5.6 Tenant may contest the amount, validity or application of any taxes
by appropriate proceedings diligently conducted in good faith provided that (a)
such proceedings shall suspend the collection thereof, (b) no part of the Leased
Property or of any rent would be subject to loss, sale or forfeiture before
determination of any contest, (c) Landlord would not be subject to any criminal
liability for failure to pay, (d) such proceedings shall not affect the payment
of rent hereunder or prevent Tenant from using any Leased Property for its
intended purposes, and (e) Tenant shall notify Landlord of any such proceedings
at which the amount of contest exceeds $10,000.00 within 20 days after the
commencement thereof, and shall describe such proceedings in reasonable detail.
Tenant will conduct all such contests in good faith and with due diligence and
will, promptly after the determination of such contest, pay and discharge all
amounts which shall be determined to be payable therein. In the event Tenant
elects to dispute and contest any taxes, it shall provide Landlord with a surety
bond in the amount of taxes in dispute.
5.7 Landlord covenants and agrees that if there shall be any refunds or
rebates of the Taxes paid by Tenant, such refunds or rebates shall belong to
Tenant. Any refunds received by Landlord shall be deemed trust funds and as such
are to be received by Landlord in trust and paid to Tenant forthwith. Tenant
will, upon the request of Landlord, sign any receipts which may be necessary to
secure the payment of any such refunds or rebates. The obligations set forth in
this Section 5.7 shall survive any termination of this Lease. Landlord will
cooperate in the execution of any documents Tenant may reasonably request in
connection with such proceedings.
6.0 USE
---
6.1 Use. The Leased Property shall be used and occupied by Tenant as an
Arby's restaurant pursuant to the Franchise Agreement, and may be used for any
other lawful purpose with Landlord's prior written consent, which shall not
unreasonably be withheld or delayed (and which may be conditioned, for
non-restaurant uses, on such use not causing any violation of a loan agreement
or other contractual commitment to which Landlord is a party). Tenant will not
do or permit any act or thing that is contrary to any legal requirement or
insurance requirement, or that impairs the value of any Leased Property or any
part thereof or that materially increases the dangers, or poses unreasonable
risk of harm, to third parties (in, on or off any Leased Property) arising from
activities thereon, or that constitutes a public or private nuisance or waste to
any Leased Property or any part thereof. Tenant shall not conduct any activity
on any Premises or use any Leased Property in any manner (i) which would cause
any Leased Property to become a hazardous waste treatment, storage or disposal
facility within the meaning of, or otherwise bring any Leased Property within
the ambit of, the Resource Confirmation and Recovery Act of 1976, 42 U.S.C. ss.
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6901, et seq., or any similar state law or local ordinance; (ii) so as to cause
a release or threat of release of hazardous waste from any Leased Property
within the meaning of, or otherwise bring any Leased Property within the ambit
of, the Comprehensive Environmental Response Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601-57, or any similar state law or local ordinance or any
other environmental law; or (iii) so as to cause a discharge of pollutants or
effluents into any water source or system, or the discharge into the air of any
emissions, which would require a permit under the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1251, et seq., or the Clean Air Act, 42 U.S.C. ss.
741, et seq., or any similar state or local ordinance.
6.2 Compliance with the Law. Tenant shall, at Tenant's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders,
and requirements in effect during the term hereof, regulating the use by Tenant
of any Leased Property. Tenant shall not use or permit the use of any Leased
Property in any manner that will tend to create waste or a nuisance, or,
otherwise expose Landlord or any Leased Property to any liability.
6.3 Condition of Leased Property. Tenant hereby accepts all of the
Leased Property in their condition as of the date of the possession hereunder,
subject to all applicable zoning, municipal, county, and state laws, ordinances,
and regulations governing and regulating the use of any Leased Property, and
accepts this Lease subject thereto and to all matters disclosed thereby, and by
any exhibits attached hereto. Tenant acknowledges that neither Landlord nor
Landlord's agent has made any representation or warranty as to the suitability
of any Leased Property for the conduct of the Tenant's business.
6.4 Tenant's Covenants and Indemnity. Tenant shall not dispose of or
otherwise allow the release of any hazardous waste or materials in, on, or under
the Premises, or any adjacent property or in any improvements placed on the
Premises (other than in full compliance with all environmental laws). Tenant
represents and warrants to Landlord that Tenant's intended use of any Leased
Property does not involve the use, production, disposal or bringing onto any
Premises of any hazardous waste or materials. Tenant shall promptly comply with
all statutes, regulations and ordinances, and with all orders, decrees or
judgments of governmental authorities or courts having jurisdiction, relating to
the use, collection, treatment, disposal, storage, control, removal or clean up
of hazardous waste or materials, in, on or under any Leased Property or any
adjacent property, or incorporated in any improvements, at Tenant's expense.
After notice to Tenant and reasonable opportunity for Tenant to effect
such compliance, Landlord may, but is not obligated to, enter upon any Leased
Property and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable to protect its interest in any Leased Property;
provided, however, that Landlord shall not be obligated to give Tenant notice
and an opportunity to effect such compliance if (i) such delay might result in
material adverse harm to Landlord or any Leased Property, (ii) Tenant has
already had actual knowledge of the situation and a reasonable opportunity to
effect such compliance, or (iii) an emergency exists. Whether or not Tenant has
actual knowledge of the release of hazardous waste or materials in, on or under
any Leased Property or any adjacent property as the result of Tenant's use of
any Leased Property, Tenant shall reimburse Landlord for the full amount of all
costs and expenses reasonably incurred by Landlord in connection with such
compliance activities, and such obligation shall continue even after the
termination of this Lease. Tenant shall notify Landlord immediately after Tenant
learns of any release of any hazardous waste or materials in, on or under any
Leased Property.
Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all
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environmental claims, damages, demands, losses, liens, liabilities, obligations,
fines, penalties, charges, judgments, clean up costs, remedial actions and other
proceedings and costs and expenses (including, without limitation, attorneys'
fees and disbursements) which may be imposed on, incurred or paid by, or
asserted against Landlord or any Leased Property by reason of, or in connection
with (i) any misrepresentation or breach of warranty by Tenant, or (ii) the acts
or omissions of Tenant, or any sublessee or other person for whom Tenant would
otherwise be liable, resulting in the release of any hazardous waste or
materials, or (iii) arising directly or indirectly from or out of or in any way
connected to Tenant's use, storage, ownership, possession, or control of
hazardous substances in, on or under any Leased Property which directly or
indirectly result in the Leased Property or any other property becoming
contaminated with hazardous substances. Tenant hereby agrees upon notification
to clean up from any Leased Property or any other property any contamination
caused by its activity, including, without limitation, use, storage, ownership,
possession or control of hazardous substances in, on or under any Leased
Property, including, without limitations, any remedial action required by
applicable governmental authorities. Tenant further acknowledges that it will be
solely responsible for all costs and expenses relating to the clean up of
hazardous substances from any Leased Property or any other properties which
become contaminated with hazardous substances as a result of Tenant's activities
in, on or under any Leased Property.
The term "hazardous substances" and "hazardous waste or materials"
shall mean: Any substance or material defined or designated as a hazardous or
toxic waste, hazardous or toxic material, a dangerous, hazardous, toxic, or
radioactive substance, or other similar term, by any federal, state, or local
environmental statute, regulation, or ordinance presently in effect or that may
be promulgated in the future, as such statutes, regulations, and ordinances may
be amended from time to time including, but not limited to, the statutes listed
below:
Federal Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq.
Federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 49 U.S.C. ss. 1801, et seq.
Federal Clean Air Act, 42 U.S.C. ss. 7401-7626.
Federal Water Pollution Control Act, Federal Clean Water Act
of 1977, 33 U.S.C. ss. 1251, et seq.
Federal Insecticide, Fungicide, and Rodenticide Act, Federal
Pesticide Act of 1978, 7 U.S.C., Paragraph 13, et seq.
Federal Toxic Substances Control Act, 15 U.S.C. ss. 2601, et
seq.
Federal Safe Drinking Water Act, 42 U.S.C. ss. 300 (f), et
seq.
6.5 Insurance Cancellation. Notwithstanding the provisions of Section
6.1 above, no use shall be made or permitted to be made of any Leased Property
nor acts done which will cause the cancellation of any insurance policy obtained
by Tenant covering any Leased Property or any other property of which any
Premises may be a part.
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7.0 UTILITIES.
----------
Tenant shall pay prior to delinquency for all water, gas, heat, light,
power, telephone, sewage and city assessments, air conditioning, ventilation,
janitorial, landscaping, fire protection monitoring service, and all other
materials and utilities supplied to any Leased Property. Landlord has no
responsibility to maintain or pay for any utilities on any Leased Property.
8.0 MAINTENANCE AND REPAIRS; ALTERATIONS AND ADDITIONS
--------------------------------------------------
8.1 Tenant shall at its sole cost and expense keep and maintain all
Leased Property, including sidewalks, landscaping and driveways located on the
Premises, in good order and condition and repair, and shall suffer no waste with
respect thereto. Tenant shall at all times comply with the image standard
required under the Franchise Agreement. Tenant shall at its sole cost and
expense make all needed repairs to and replacements of the Leased Property,
interior and exterior, structural and nonstructural, ordinary and extraordinary,
including but not limited to any roof, air conditioning and heating systems,
replacements of cracked or broken grass, repair of parking areas and driveways,
and shall keep the plumbing units, pipes and connections free from obstruction
and protected against ice and freezing. Landlord has no responsibility to
maintain or pay for any part of the maintenance or replacement of the Leased
Property.
8.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Leased Property to Landlord in good
condition, broom clean, ordinary wear and tear excepted. Tenant shall repair any
damage to the Leased Property caused by the removal of Tenant's Equipment
pursuant to Section 8.4 below, which repairs shall include the patching and
filling of holes thereof, the repair of structural damage of any kind or type,
the repair or replacement of all damaged mechanical equipment and all heating,
air conditioning, and ventilating equipment.
8.3 Landlord's Rights. If Tenant fails to perform Tenant's obligations
under any of the provisions of this Section 8, Landlord shall give Tenant
written notice to do such acts as are reasonably required to maintain any Leased
Property in good order and condition. If, within thirty (30) days of such
notice, Tenant fails to commence to do the work and diligently prosecute it to
completion, or, with respect to items which are not reasonably susceptible to
being remedied within such thirty (30) day period, within the period during
which the work may reasonably be completed, then Landlord shall have the right,
(but not the obligation) to do such acts and expend such funds at the expense of
Tenant as are reasonably required to perform such work satisfactorily. Any
amount so expended by Landlord shall be paid by Tenant within ten (10) days
after billing for same, with interest at twelve percent (12.00%) per annum from
the date of such work. Landlord shall have no liability to Tenant for any
damage, inconvenience, or interference with the use of any Leased Property by
Tenant as a result of performing any such work.
8.4 Alterations and Additions.
(a) Tenant shall not make any alterations to any structural
component of any Building (including, but not limited to exterior walls,
foundations, roof and ceilings), or utility installations on or about any
Premises without the express written consent of the Landlord; provided, however,
that the Landlord will not unreasonably delay or withhold consent. As used in
this section, the term "utility installations" shall include ducting, power
plants, space heaters, conduit, and wiring.
(b) Tenant shall provide Landlord with written notice of each
contractor or
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subcontractor performing work on any Leased Property. Landlord's consent to the
selection of such contractors or subcontractors shall not be required for
construction on the Leased Property not exceeding $100,000.00. Landlord shall
have the right to approve any contractors or sub-contractors for work on any
Leased Property which is reasonably expected to exceed $100,000.00, which
approval shall not be unreasonably withheld or delayed.
(c) All alterations, changes, additions, improvements, and
utility installations (whether or not such utility installations constitute
trade fixtures of Tenant) which may be made to any Leased Property, shall at the
expiration or earlier termination of this Lease, become the property of the
Landlord and remain upon and be surrendered with the Leased Property. The
Equipment, inventory and any other personal property, to the extent owned by
Tenant, other than that which is affixed to any Building or Premises so that it
cannot be removed without material damage to such Building or Premises, shall
remain the property of the Tenant, and may be removed by the Tenant subject to
the provisions of Section 8.23, at any time during the term of this Lease when
Tenant is not in default of any of the provisions of this Lease beyond any
applicable notice and cure period.
9.0 ENTRY BY LANDLORD.
------------------
Landlord and Landlord's agents, shall have the right on reasonable
prior notice during normal business hours to enter any Building or Premises to
inspect the same or to maintain or repair the Leased Property or any portion
thereof or to show any Leased Property to prospective purchasers or lenders, or
during the last three (3) months of the term of the Lease to any prospective
Tenant. Landlord shall have the right to use any and all means which Landlord
may deem proper to open the door to any Building in an emergency of any type.
10.0 LIENS.
------
Tenant shall keep all Leased Property free from any and all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant and shall indemnify and hold harmless and defend the Landlord from any
and all liens and/or encumbrances arising out of any work performed or materials
furnished by or at the direction to the Tenant. In the event that any such lien
is imposed, Tenant shall have thirty (30) days from the date it is notified of
such imposition to cause the lien to be released of record or bonded around.
Failure to do so by Tenant shall allow Landlord, in addition to all other
remedies provided herein by law, the right, but by no means the obligation, to
cause the lien to be released by such means as it shall deem proper, including
payment of the claim giving rise to the lien. All such sums reasonably paid by
Landlord and all expenses reasonably incurred by it in connection therewith,
including attorney's fees and costs, shall be payable to Landlord by Tenant on
demand with interest at twelve percent (12.00%) per annum. Landlord shall have
the right at all times to post and keep posted on any Leased Property any
notices permitted or required by law, or which the Landlord shall deem proper,
for the protection of the Landlord and any Leased Property, and/or any other
party having an interest therein, from mechanic's and materialman's liens. The
Tenant shall give to Landlord at least ten (10) days written notice of the
expected date of commencement of any work relating to alterations and/or
additions to the Leased Property exceeding $100,000.00.
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11.0 INDEMNITY
---------
11.1 Indemnity. Tenant shall defend, indemnify, and hold harmless
Landlord from and against any and all claims arising from Tenant's use of any
Leased Property or the conduct of its business or from any activity, work, or
thing done, permitted, or suffered by Tenant in or about any Leased Property and
shall further defend, indemnify, and hold harmless Landlord from and against any
and all claims arising from any breach, or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act or negligence of Tenant, or any of its agents, contractors,
or employees, and from and against any and all costs, attorneys fees, expenses,
and liabilities reasonably incurred in connection with such claim or any action
or proceeding brought thereon. In case any action or proceeding be brought
against Landlord by reason of any such claim whatsoever, Tenant, upon notice
from Landlord, shall defend same at Tenant's expense by counsel reasonably
satisfactory to Landlord. However, Tenant shall not be liable for any damage or
injury occasioned by the negligence or intentional acts of Landlord or its
designated agents, contractors or employees or for consequential damages.
11.2 Exemption of Landlord from Liability. Except for intentional acts
or gross negligence of the Landlord, its agents, contractors and employees,
Landlord shall not be held liable for injury or damage which may be sustained by
the person, goods, wares, merchandise, or property of Tenant, or by any agent or
other person claiming by or under Tenant which might be caused by or resulting
from fire, steam, electricity, gas, water, or rain, which may leak or flow from
or into any part of any Leased Property, or from breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, heating,
air conditioning, ventilating, or lighting fixtures of the same, whether the
said damage or injury results from conditions arising in, on, or under any
Building or Premises or upon other portions of the Property of which the
Premises are a part or from other sources. Landlord shall not be liable for any
damages arising from any act or neglect of any other tenant (if any) of any
Building or Premises, or property of which any Premises is a part. Tenant shall
defend, indemnify and hold harmless Landlord from and against any and all claims
by any person which may arise from the matters mentioned in this Section 11.2
except for intentional acts or negligence of the Landlord, its agents,
contractors and employees.
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12.0 INSURANCE
---------
12.1 Liability Insurance. Tenant shall, at Tenant's expense, procure
and maintain at all times during the term of this Lease, a policy of
comprehensive public liability insurance insuring Landlord and Tenant against
any liability arising out of the ownership, use, occupancy, or maintenance of
any Leased Property. Such insurance shall at all times be in an amount of not
less than $3,000,000.00. The limits of such insurance shall not limit the
liability of the Tenant. All insurance required under this Section 12 shall be
with companies rated A or better in Best's Insurance Guide. Tenant shall deliver
to Landlord certificates of insurance evidencing the existence and amounts of
such insurance with loss payable clauses reasonably satisfactory to Landlord,
provided that in the event Tenant fails to procure and maintain such insurance,
Landlord may (but shall not be required to), procure same at Tenant's expense
after ten (10) days prior written notice. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after thirty (30)
days prior written notice to Landlord by the insurer. All such policies shall be
written as primary policies, not contributing with and not in excess of
coverages which the Landlord may carry. Tenant shall, within twenty (20) days
prior to the expiration of such policies, furnish Landlord with renewals or
binders or Landlord, after ten (10) days' written notice, may order such
insurance and charge the cost to the Tenant, which amounts shall be payable by
Tenant on demand. Tenant shall have the right to provide such insurance coverage
pursuant to blanket policies which the Tenant may have in force, provided such
blanket policies expressly afford coverage of any Leased Property and to
Landlord as is required by this Lease.
12.2 Property Insurance. Tenant shall, at Tenant's expense, procure and
maintain at all times during the term of this Lease, the policy or policies of
insurance covering loss or damage to any Leased Property in the amount of the
full replacement value thereof, and providing protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, sprinkler leakage, flood and special extended peril (all
risk). Tenant shall pay the entire amount of such annual insurance premiums and
shall deliver to Landlord certificates of insurance evidencing such insurance
with loss payable clauses reasonably satisfactory to Landlord, provided that in
the event Tenant fails to provide and maintain such insurance, Landlord may (but
shall not be required to) procure same at Tenant's expense after ten (10) days
prior written notice. No such policy shall be cancelable or subject to reduction
of coverage or other modification except after thirty (30) days prior written
notice to Landlord by the insurer. All such policies shall be written as primary
policies, not contributing with and not in excess of coverages which the
Landlord may carry. Tenant shall, within twenty (20) days prior to the
expiration of such policies, furnish Landlord with renewals or binders or
Landlord, after ten (10) days' written notice, may order such insurance and
charge the cost to the Tenant, which amounts shall be payable by Tenant on
demand. Such insurance shall provide for payment of losses thereunder to
Landlord or the holder of a first mortgage or deed of trust on any of the Leased
Property. Any loss proceeds shall be made available for the purposes of
replacing or rebuilding the pertinent Leased Property if required under Section
13 and in which event, such funds shall be segregated from the general funds of
Landlord and any mortgagee of Landlord's interest in the Leased Property.
12.3 Waiver of Subrogation. Landlord and Tenant shall waive any and all
rights of recovery against the other or against the officers, employees, agents
and representatives of the other, on account of loss or damage occasioned to
such waiving party or its property or the property of others under its control
caused by fire or any of the extended coverage risks described above to the
extent that such loss or damage is insured. Landlord and/or Tenant shall give
notice to the insurance carrier or carriers involved that the
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foregoing mutual Waiver of Subrogation option is contained in this Lease. The
waivers provided for in this Section 12.3 shall be applicable and effective only
in the event such waivers are obtainable from the insurance carriers concerned.
13.0 DAMAGE TO PREMISES
------------------
13.1 Partial or Total Damage-Insurance Available. In the event of
damage causing a partial or total destruction of a Building during the term of
this Lease and there is made available to the Landlord, or to any mortgagee of
Landlord's interest in the Leased Property, pursuant to Section 12.0 above,
insurance proceeds for such damage, Landlord shall repair or rebuild the damaged
Building to the condition existing immediately prior to such damage, with this
Lease to continue in full force and effect with respect to such damaged
Building. Tenant shall deposit with Landlord or make available to Landlord the
amount reasonably estimated by Landlord to be required in addition to any
available insurance proceeds to complete the repairs or reconstruction ("Tenant
Repair Deposit") within thirty (30) days after notice to Tenant by Landlord. The
amount of the Tenant Repair Deposit shall not limit Tenant's liability if
insufficient insurance is available to reconstruct the damaged Building, and
Tenant shall pay any such deficiency to Landlord within thirty (30) days after
written notice; conversely if after such reconstruction there is any balance in
the Tenant Repair Deposit, such excess will promptly be refunded to Tenant
within ten (10) days after reconstruction is completed. Provided, however, if
Landlord has not begun reconstruction or repairs within thirty (30) days after
the later of (i) receipt of available insurance proceeds or (ii) receipt of the
Tenant Repair Deposit, if any, or it is not reasonably anticipated that such
repair or reconstruction can be completed within a 180-day period after
commencement of reconstruction, Tenant may, by written notice to Landlord,
terminate this Lease as to such damaged Building, with a reduction in rent due
hereunder as provided in Section 13.4, provided that Tenant has indemnified
Landlord against any deficiency in insurance proceeds.
13.2 Repair Not Permitted. In the event that a Building may not be
repaired as required herein under applicable laws and regulations
notwithstanding the availability of insurance proceeds and any Tenant Repair
Deposit, this Lease shall be terminated as to such Building effective with the
date of the damage occurrence, with a reduction in rent due hereunder as
provided in Section 13.4, and Landlord shall be entitled to retain the insurance
proceeds and the Tenant Repair Deposit pertaining to the damaged Building.
13.3 Damage to Building or Personal Property During Last Twelve Months
of Term. In the event of any total or partial destruction to a Building
occurring during the last twelve (12) month period of the term of this Lease (or
any extension thereof), and notwithstanding the provisions of Sections 13.1
above, Landlord or Tenant shall have the right for the longer of (i) a period of
sixty (60) days following the event giving rise to the casualty or damage, or
(ii) the period fifteen (15) days following the receipt of insurance proceeds
and any Tenant Repair Deposit to elect to retain all insurance proceeds and any
Tenant Repair Deposit and to terminate this Lease as to such Building, with a
reduction in rent due hereunder as provided in Section 13.4. Provided, however,
if Tenant has properly exercised any option that it may have to renew the Lease
Term, this Section 13.3 shall be applicable to the option period.
13.4 Abatement of Rent. In the event that casualty to a Building
results in Tenant ceasing business operations at the Building, and/or in the
event of termination of this Lease with respect to a Building, the rent payable
by Tenant under this Lease shall be reduced by the Rent Reduction Amount from
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the date of the event giving rise to such damage or casualty. If only a portion
of the Premises are affected by the casualty, but Tenant continues restaurant
operations at such damaged Building, Tenant shall be entitled to an equitable
reduction (not to exceed the Rent Reduction Amount) in rent in direct proportion
to the area of the Building which is unusable bears to the area of improvements
at such damaged Building. Tenant's obligation to resume the payment of rent and
other charges with respect to a damaged Building shall recommence on the earlier
of sixty (60) days after completion of any required construction of the Building
or the date on which Tenant first reopens for business to the public. This right
to a partial abatement of rent shall be Tenant's sole remedy as a result of any
such damage or repair. Landlord shall not be required to make any repair or
restoration of injury or damage to any Equipment or any improvement or property
installed on the Premises by or at the expense of Tenant. Such items shall be
replaced by Tenant at Tenant's sole cost and expense.
13.5 Continuation of Lease After Casualty or Condemnation.
Notwithstanding any partial or complete termination of this Lease with respect
to a damaged or condemned Building pursuant to Section 13 or 14 hereof, this
Lease shall continue in full force and effect with respect to the remaining
Leased Property, with such reduction in rent attributable to such damaged or
condemned Building as provided in Section 13 or 14 hereof.
14.0 CONDEMNATION.
-------------
14.1 Total Taking. If all, or a substantial portion of any Building or
the Premises of which such Building is located shall be taken or appropriated
for public or quasi-public use by the right of eminent domain, (with or without
litigation), or transferred by agreement in connection with such public or
quasi-public use, either Landlord or Tenant shall have the right at its option
(exercisable within thirty (30) day of the receipt of notice of such taking), to
terminate this Lease as to such Building as of the date possession is taken by
the condemning authority. A substantial portion of the Building shall be deemed
to be taken or appropriated if such taking shall have a materially adverse
effect upon the present use and operation of the affected Building or the
economic feasibility of operation thereof, or shall result in the elimination of
necessary ingress and/or egress from such Building to public roads ("Total
Taking"). In the event of a Total Taking in which this Lease is terminated with
respect to the condemned Building, the rent due under this Lease shall be
reduced by the Rent Reduction Amount from the date of such taking. In the event
of a taking which does not constitute a Total Taking ("Partial Taking"), Tenant
shall be entitled to an equitable reduction in rent (not to exceed the Rent
Reduction Amount) in direct proportion to the area of the Premises so taken
bears to the total area of the Premises leased to Tenant.
14.2 Award. No award for any Total Taking or Partial Taking shall be
apportioned, and except as provided in the next sentence, Tenant hereby assigns
to Landlord any award which may be made in such taking appropriation, or
condemnation, together with any and all rights of Tenant now or hereafter
arising in such award. Landlord has no interest, however, in any award made to
Tenant for the taking of Equipment belonging to Tenant or moving expenses; or
for the interruption of or damage to Tenant's business, or to Tenant's
unamortized cost of leasehold improvements. Any award to the Landlord by reason
of a Partial Taking (or Total Taking, if the Lease is not terminated with
respect to such condemned Building as set forth above) shall be made available
for reconstruction, and shall be segregated from the Landlord's general funds.
No temporary taking of any Building and/or of the Tenant's rights therein, or
under this Lease, shall terminate this Lease as to such Building or give Tenant
any right to any abatement of rent. Any award made for such temporary taking
shall belong entirely to Tenant.
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15.0 ASSIGNMENT AND SUBLETTING
-------------------------
15.1 Landlord's Consent Required. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate, or encumber this Lease or any interest therein,
nor permit such assignment by operation of law, and shall not sublet any Leased
Property or any part thereof, without the prior express written consent of the
Landlord, which consent shall not be unreasonably withheld or delayed. Landlord
may condition such consent upon any assignee or subtenant providing Landlord
with evidence of financial capability and restaurant operating experience
reasonably satisfactory to Landlord. Any attempt to do so without such consent
being in hand, shall be wholly void and shall constitute a breach of this Lease.
Notwithstanding the foregoing to the contrary, Tenant shall have the right to
assign this Lease with prior written notice to Landlord but without Landlord's
consent, provided that there then exists no default under this Lease, beyond any
applicable notice and cure period, to any person which is acquiring all or
substantially all of the assets of Tenant, whether by merger, sale or otherwise.
In connection with Tenant's assignment of its interest in this Lease
with respect to less than all of the Buildings in a transaction satisfying the
requirement of this Section 15.1, Landlord will cooperate with Tenant in
executing an individual lease agreement with such assignee, provided that: (i)
Tenant pays Landlord's reasonable legal fees in connection with the preparation
of such individual lease; (ii) the individual lease has identical terms to the
provisions of this Lease except for (A) the rental rate, which will be
determined by Tenant in its reasonable discretion, and which will reduce the
rental payments due hereunder by the same amount, (B) the assignee shall have no
right to purchase a Building pursuant to Section 18.22 hereof, (C) the Assignee
shall have no right to further assign or sublet the Leased Property without
Landlord's prior written consent, which consent will not be unreasonably
withheld or delayed, and (iii) Tenant shall guaranty, in form and content
reasonably satisfactory to Landlord, the assignee's payment and performance
obligation under such individual lease. Upon execution of such individual lease,
the Leased Property which is the subject of such individual lease shall no
longer be part of the Leased Property demised under this Lease or be governed by
this Lease. Concurrently with the execution of such individual lease, the
parties shall enter into an amendment to this Lease evidencing the removal of
such Leased Property from the Leased Property demised hereunder and the
corresponding reduction of the Base Rent payable hereunder, as provided above.
15.2 No Release of Tenant. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligations to be performed by
Tenant under this Lease, whether occurring before or after such assignment or
subletting. The consent by Landlord to any assignment or subletting shall not
relieve Tenant from the obligation to obtain Landlord's express written consent
to any other assignment or subletting, which consent will not be unreasonably
withheld or delayed. The acceptance of any rent by Landlord from any person
shall not be deemed to be a waiver by Landlord of any provision of this Lease,
or to be consent to any assignment, subletting, or other transfer.
15.3 By Landlord. This Lease shall be fully assignable by Landlord or
its assigns.
15.4 Leasehold Mortgages. Tenant and its successors and assigns are
hereby given the right by Landlord in addition to any other rights herein
granted, without Landlord's prior written consent, to mortgage its interests in
this Lease and any sublease(s) under one or more first leasehold mortgages, and
assign this Lease, and any sublease(s) as collateral security for such
Mortgage(s), upon the condition that all rights acquired under such Mortgage(s)
shall be subject to each and all of the covenants, conditions and
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restrictions set forth in this Lease, and to all rights and interests of
Landlord herein, none of which covenants, conditions or restrictions is or shall
be waived by Landlord by reason of the right given to mortgage such interest in
this Lease, except as expressly provided herein. If Tenant or its successors and
assigns shall mortgage this leasehold, and if the holder(s) of such Mortgage(s)
shall send to Landlord a true copy thereof, together with written notice
specifying the name and address of the Mortgagee and the pertinent recording
date, if any, with respect to such Mortgage(s) (which notice provision may be
satisfied by a letter from the leasehold Mortgagee to Landlord specifying each
Building location subject to such mortgage, and that a true and correct form of
such leasehold Mortgage is attached to such letter), Landlord agrees that so
long as any such leasehold Mortgage(s) shall remain unsatisfied of record or
until written notice of satisfaction is given by the holder(s) to Landlord, the
following provisions shall apply:
(a) There shall be no cancellation, surrender or modification
of this Lease by joint action of Landlord and Tenant without the prior consent
in writing of the leasehold Mortgagee(s).
(b) Landlord shall, upon serving Tenant with any notice of
default, simultaneously serve a copy of such notice upon the holder(s) of such
leasehold Mortgage(s). The leasehold Mortgagee(s) shall thereupon have the same
period (plus an additional fifteen (15) days), after service of such notice upon
it, to remedy or cause to be remedied the default complained of, and Landlord
shall accept such performance by or at the instigation of such leasehold
Mortgagee(s) as if the same had been done by Tenant.
(c) Anything herein contained notwithstanding, while such
leasehold Mortgage(s) remains unsatisfied of record, or until written notice of
satisfaction is given by the holder(s) to Landlord, if any default shall occur
which, pursuant to any provision of this Lease, entitles Landlord to terminate
this Lease, and if, before the expiration of thirty (30) days from the date of
service of notice of termination upon such leasehold Mortgagee(s) such leasehold
Mortgagee(s) shall have notified Landlord of its desire to nullify such notice
and shall have paid to Landlord all rent and additional rent and other payments
herein provided for which are then in default, and shall have complied or shall
commence the work of complying with all of the other requirements of this Lease,
which are then in default and which are capable of cure by such leasehold
Mortgagee(s), and shall prosecute the same to completion with due diligence,
then in such event Landlord shall not be entitled to terminate this Lease and
any notice of termination theretofore given shall be void and of no effect.
(d) Landlord agrees that the name of the leasehold
Mortgagee(s) may be added to the "Loss Payable Endorsement" of any and all
insurance policies required to be carried by Tenant hereunder on condition that
the insurance proceeds are to be applied in the manner specified in this Lease.
(e) Landlord agrees that, in the event of termination of this
Lease by reason of any default by Tenant or rejection in bankruptcy, Landlord
will enter into a new lease of the Leased Property with the leasehold
Mortgagee(s) or its nominee(s), for the remainder of the term, effective as of
the date of such termination, at the rent and additional rent and upon the
terms, provisions, covenants and agreements as herein contained, and to the
rights, if any, of any parties then in possession of any part of the Leased
Property, provided:
(i) Said Mortgagee(s) or its nominee shall make
written request upon Landlord for such new lease within thirty (30)
days after the date of such termination and such written request is
accompanied by payment to Landlord of sums then due to Landlord under
this Lease;
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(ii) Said Mortgagee(s) or its nominee(s) shall
thereafter pay to Landlord at the time of the execution and delivery of
said new lease, any and all sums which would at the time of the
execution and delivery thereof, be due pursuant to this Lease but for
such termination, and in addition thereto, any expenses, including
reasonable attorneys' fees, to which Landlord shall have been subjected
by reason of such default (after Landlord has applied any security held
hereunder);
(iii) Said Mortgagee(s) or its nominee(s) shall
thereafter perform and observe all covenants herein contained on
Tenant's part to be performed and shall further remedy any other
conditions which Tenant under the terminated lease was obligated to
perform under the terms of this Lease;
(iv) Such new lease shall be expressly made subject
to the rights, if any, of Tenant under the terminated lease;
(v) The tenant under such new lease shall have the
same right, title and interest in and to the buildings and improvements
on the Leased Property as Tenant had under the terminated lease.
16.0 SUBORDINATION
-------------
16.1 Subordination. At Landlord's option, this Lease shall be subject
and subordinate to all ground or underlying leases hereinafter executed
affecting any Leased Property, and to the lien of any mortgages or deeds of
trust in any amount or amounts whatsoever now or hereafter placed on or against
the land or improvements or either thereof, of which the Premises are a part,
without the necessity of the execution and delivery of any further instruments,
on the part of the Tenant, to effectuate such subordination. If any mortgagee,
trustee, or ground lessor shall elect to have this Lease prior to the lien of
its mortgage deed of trust or ground lease, and shall give written notice
thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of
trust or ground lease, on the date of the recording thereof.
16.2 Subordination Agreements. Tenant covenants and agrees to execute
and deliver upon demand, without charge, such reasonable further instruments
evidencing such subordination of this Lease to such ground or underlying leases
and to the lien of any such mortgages or deeds of trust as may be required by
Landlord.
16.3 Quiet Enjoyment. Landlord covenants and agrees with Tenant that
upon Tenant paying rent and other monetary sums due under this Lease, performing
its covenants and conditions of the Lease and upon recognizing any subsequent
lessor under a ground or underlying lease or any purchaser as Landlord, Tenant
shall and may peaceably and quietly have, hold, and enjoy the Leased Property
for the term of the Lease as against any adverse claim of Landlord or any party
subject, however, to the terms of the Lease.
16.4 Attornment. In the event any proceedings are brought for default
under any ground or underlying lease, or in the event of foreclosure or the
exercise of a power of sale under any mortgage or deed or trust made by Landlord
covering any Leased Property, the Tenant shall attorn to the lessor under the
ground or underlying lease or the purchaser upon any such foreclosure, or sale,
and recognize such lessor or purchaser as the Landlord under this Lease,
provided said lessor or purchaser expressly agrees in writing to be bound by the
terms of this Lease.
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16.5 Non-Disturbance. Tenant's agreement to subordinate or attorn
pursuant to Section 16.1, 16.2, and 16.4 is expressly contingent upon Tenant
receiving from such ground lessor or holder of such mortgage or deed of trust a
commercially reasonable and acceptable non-disturbance agreement at no cost
to Tenant which nondisturbance agreement shall provide, among other things, that
(i) Tenant shall get the same notice, if any, given to Landlord of any default
or acceleration of any obligation or any sale in foreclosure, (ii) Tenant shall
be permitted to cure any such default on Landlord's behalf within any applicable
cure period, and Tenant shall be reimbursed by Landlord for any and all costs
incurred in effecting such cure, including without limitation out-of-pocket
costs incurred to effect any such cure (including reasonable attorneys' fees)
and (iii) so long as Tenant is not in default hereunder, Tenant shall not be
named in any foreclosure action or sale and this Lease shall not be terminated
and Tenant shall be recognized as the tenant under all of the terms of this
Lease. Landlord shall obtain from the holder of the mortgage or deed of trust
encumbering the Leased Property on the Rent Commencement Date a non-disturbance
agreement satisfying the requirements of this Section.
17.0 DEFAULT, REMEDIES
-----------------
17.1 Default. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:
(a) Any failure by Tenant to pay the rent or any other monetary
sums required to be paid hereunder (where such failure continues for ten (10)
days after written notice by Landlord to Tenant);
(b) The abandonment or vacation of more than five (5) Buildings at
any one time by the Tenant or the sale by Tenant of all or a part of the
restaurant operations, unless pursuant to a permitted assignment or sublease
pursuant to Section 15;
(c) A failure by Tenant to observe and perform any other provision
of this Lease to be observed or performed by Tenant, where such failure
continues for thirty (30) days after written notice thereof by the Landlord to
the Tenant. However, if the nature of the default is such that the default
cannot be reasonably cured within the thirty (30) day period, Tenant shall not
be deemed to be in default if Tenant shall within such period of time commence
such cure and thereafter diligently prosecute the same to completion;
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt, or of a petition for reorganization
or arrangement under any law relating to bankruptcy, which is not dismissed
within ninety (90) days; the appointment of a trustee or receiver to take
possession of substantially all of the Tenant's assets located at any Premises
or of Tenant's interest in this Lease where possession is not restored to Tenant
within ninety (90) days; or the attachment, execution or other judicial seizure
of substantially all of Tenant's assets located at any Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within ninety (90)
days;
(e) The default by Tenant under any Franchise Agreement beyond any
applicable notice and cure period;
(f) The default by Tenant under any leasehold Mortgage beyond any
applicable notice and cure period; and
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(g) The default by Guarantor or any Substitute Guarantor under
Section 4.0 hereof.
17.2 Remedies. In the event of any such material default or breach by
Tenant, Landlord may, at any time thereafter, without limiting Landlord in the
exercise of any right or remedy at law or in equity which Landlord may have by
reason of such default or breach:
(a) Maintain this Lease in full force and effect and recover the
rent and other monetary charges as they become due, without terminating Tenant's
right to possession irrespective of whether Tenant shall have abandoned any
Leased Property. In the event Landlord elects not to terminate the Lease,
Landlord shall have the right to attempt to relet all or any portion of any
Leased Property at such rent and upon such conditions and for such a term, and
to do all acts necessary to maintain or preserve any Leased Property as Landlord
deems reasonable and necessary without electing to terminate the Lease,
including removal of all persons and property from each Leased Property;
(b) Terminate Tenant's right to possession of one or more
(including all) of all Leased Property by any lawful means, in which case this
Lease shall terminate with respect to such Leased Property (collectively the
"Terminated Leased Property") and Tenant shall immediately surrender possession
of the Terminated Leased Property to the Landlord. In such event Landlord shall
be entitled to recover possession of the Terminated Leased Property from Tenant
and those claiming through or under Tenant, and Landlord may continue the
restaurant operations itself or through an affiliate, and Tenant hereby assigns
to Landlord its right, title and interest in the following properties as
security for Landlord's remedies under this Section 17.2: (i) The Franchise
Agreement and (ii) the Equipment. In the event that Landlord or its affiliates
continue the restaurant operations with respect to any Building after a default
by Tenant hereunder, the rent due under this Lease shall be reduced by the Rent
Reduction Amount with respect to the Building or Buildings in which Landlord or
its affiliate is conducting such restaurant operations; provided, however, that
Landlord may at any time abandon such restaurant operations with respect to any
Building by delivery of thirty (30) days' written notice to Tenant, in which
event Tenant's rental obligation with respect to such Building shall be restored
in full.
Any termination of this Lease and repossession of the Terminated Leased
Property shall be without prejudice to any remedies which Landlord might
otherwise have for arrears of rent or for a prior breach of the provisions of
this Lease. In case of such termination, Tenant shall indemnify Landlord against
all costs and expenses and loss of rent (loss of rent for the Terminated Leased
Property shall be determined in accordance with Exhibit E). Items of expense for
which Tenant shall indemnify Landlord shall include the costs and expenses
reasonably incurred in collecting amounts due from Tenant under this Lease
(including attorneys' fees, litigation expenses and the like); the damages
incurred by Landlord by reason of Tenant's default, including, the cost of
recovering possession of the Terminated Leased Property, expenses of reletting
including necessary repairs of the Leased Property, excluding consequential
damages. All sums due in respect of the foregoing shall be due and payable
immediately upon notice from Landlord that a cost or expense has been incurred
without regard to whether the cost or expense was incurred before or after the
termination of this Lease. In the event proceedings are brought under the
Bankruptcy Code, including proceedings brought by Landlord which relate in any
way to this Lease including, without limitation, proceedings for the
termination, assumption or assignment thereof, or proceedings to secure adequate
protection for Landlord or proceedings involving objections to the allowance of
Landlord's claim, then Landlord shall be paid, in addition to any and all
amounts due Landlord pursuant to the terms of this Lease, such further amount as
shall be sufficient to cover all costs and expenses actually incurred by
Landlord
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with respect to the proceeding, which costs and expenses shall include the
reasonable compensation, costs, expenses, disbursements and advances of
Landlord, its agents and attorneys.
Landlord may elect by written notice to Tenant within 60 days following
such termination to be indemnified for loss of rent by a lump sum payment
representing the difference between the amount of rent which would have been
paid in accordance with this Lease for the Terminated Leased Property for the
remainder of the Lease term (loss of rent for the Terminated Leased Property
shall be based on the Rent Reduction Amount for the Terminated Leased Property,
including all escalations of Base Rent pursuant to Exhibit E, and all taxes and
other amounts required to be paid by Tenant hereunder) and the aggregate fair
market rent of the Terminated Leased Property for the remainder of the Lease
term, estimated as of the date of the termination, both of which amounts shall
be discounted using a discount rate equal to Treasury Securities with maturity
date approximately equal to the remaining term of the Lease.
Should Landlord fail to make the election provided for above, Tenant
shall indemnify Landlord for the loss of rent by a payment at the end of each
month during the remaining Lease term representing the difference between the
rent which would have been paid in accordance with this Lease and the rent
actually received by Landlord with respect to the Premises (loss of rent for the
Terminated Leased Property shall be based on the Rent Reduction Amount for the
Terminated Leased Property, including all escalations of Base Rent pursuant to
Exhibit E, and all taxes and other amounts required to be paid by Tenant
hereunder). Without any previous notice or demand separate actions may be
maintained by Landlord against Tenant from time to time to recover any damages
which, at the commencement of any action, have then or theretofore become due
and payable to Landlord under this Article without waiting until the end of the
original term of this Lease.
In the event that this Lease shall be terminated as hereinabove
provided or by summary proceedings or otherwise, Landlord may at any time and
from time to time relet the Terminated Leased Property in whole or in part
either in its own name or as agent of Tenant for any period equal to or greater
or less than the remainder of the then current term of this Lease for any rental
which it may deem reasonable to any tenant it may deem suitable and satisfactory
and for any use and purpose which it may deem appropriate. Landlord shall use
reasonable commercial efforts to mitigate Tenant's damages hereunder on any
breach of this Lease. Upon each reletting all rentals received by Landlord from
such reletting shall be applied first to the payment of any indebtedness other
than rent due hereunder from Tenant to Landlord; second, to the payment of any
reasonable costs and expenses of such reletting and of such alterations and
repairs as are reasonably necessary for the reletting; third to the payment of
rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rent as the same may become due and
payable hereunder. Upon a reletting of the Terminated Leased Property, Landlord
shall not in any event be required to pay Tenant any surplus of any sums
received by the Landlord in excess of the rent payable in accordance with this
Lease. Unpaid installments of rent or other monies due shall bear interest from
the date due at the rate of twelve percent (12.00%) per annum.
17.3 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering any Leased Property.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
three percent (3.00%) of such
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overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the cost Landlord will incur by reason of late
payment by Tenant.
17.4 Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than ten (10) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed of trust covering the
Premises, whose name and address shall have been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligation, provided,
however, that if the nature of Landlord's obligation is such that more than ten
(10) days are required for performance, then Landlord shall not be in default if
Landlord commences performance within such ten (10) day period and thereafter
diligently prosecutes same to completion. Tenant agrees that any such mortgagee
or deed of trust holder shall have the right to cure such default on behalf of
Landlord within ten (10) calendar days after receipt of such notice. Tenant
further agrees not to invoke any of its remedies under this Lease until said ten
(10) days have elapsed.
18.0 MISCELLANEOUS
-------------
18.1 Estoppel Certificate.
(a) Tenant shall at any time upon not less than twenty (20) days
prior written notice from Landlord, execute, and deliver to Landlord a statement
in writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect), and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of any Leased Property.
(b) Landlord shall at any time upon not less than twenty (20) days
prior written notice from Tenant, execute, and deliver to Tenant a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect), and the date to
which the rent and other charges are paid in advance, if any, (ii) acknowledging
that there are not, to Landlord's knowledge, any uncured defaults on the part of
Tenant hereunder, or specifying such defaults if any are claimed, and (iii)
containing such additional information as is set forth in Exhibit H hereto. Any
such statement may be conclusively relied upon by any prospective leasehold
Mortgagee or prospective purchaser or assignee.
(c) Either party's failure to deliver the statement referenced in
Section 18.1 within such time shall be conclusive upon such party (i) that this
Lease is in full force and effect, without modification, (ii) that it has no
knowledge of any uncured defaults in the other party's performance, and (iii)
that not more than one month's rent has been paid in advance.
18.2 Transfer of Landlord's Interest. In the event of a bona fide sale
or conveyance by Landlord of Landlord's interest in any Leased Property or in
any other property in which any Premises may be a part, other than a transfer
for security purposes only, if Landlord is not in default under any provision of
this Lease, Landlord shall be relieved from and after the date specified in any
such notice of transfer of all obligations and liabilities accruing thereafter
on the part of the Landlord with respect to the transferred
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Leased Property, provided that any funds in the hands of Landlord at the time of
transfer in which Tenant has an interest, shall be delivered to the successor of
the Landlord and provided Landlord's assignee assumes all such obligations. This
Lease shall not be affected by any such sale and Tenant agrees to attorn to the
purchaser or assignee provided all Landlord's obligations hereunder are assumed
in writing by the transferee.
In the event that less than all of the Leased Properties are sold to a
single purchaser, as a condition to such sale, the purchaser and Tenant shall
concurrently with each sale, execute and deliver to each other a new lease for
such Leased Property, which new lease shall be for the remaining term of this
Lease and shall be in the form of this Lease (each, an "Individual Lease"). The
Base Rent payable by Tenant under each Individual Lease shall be an allocable
portion of the Base Rent payable by Tenant under this Lease, as determined by
Landlord in its reasonable discretion. Landlord shall provide Tenant with no
less than thirty (30) days prior written notice of the anticipated closing date
of the sale of a Leased Property, which notice shall be accompanied by a draft
of the Individual Lease.
Subject to and effective immediately upon the transfer of title to any
Leased Property to a purchaser and the execution and delivery by such purchaser
and Tenant of the Individual Lease, such Leased Property shall thereafter no
longer be part of the Leased Property demised under this Lease or be governed by
this Lease and the Base Rent payable under this Lease shall be reduced by an
amount equal to the Base Rent payable by Tenant under the Individual Lease for
such Leased Property.
Concurrently with the sale of each Leased Property and the execution of
an Individual Lease, the parties shall enter into an amendment to this Lease
evidencing the removal of such Leased Property from the Leased Property demised
hereunder and the corresponding reduction of the Base Rent payable hereunder, as
provided above.
18.3 Captions; Attachment; Defined Terms.
(a) Captions of the paragraphs of this Lease are for convenience
only and shall not be deemed to be relevant in resolving any question of
interpretation or construction of any section of this Lease.
(b) Exhibits attached hereto, and addendums and schedules
initialed by the parties, are deemed by attachment to constitute part of this
Lease and are incorporated herein.
18.4 Entire Agreement. This instrument along with any exhibits and
attachments hereto constitutes the entire agreement between Landlord and Tenant
relative to the Leased Property. This agreement and the exhibits and attachments
may be altered, amended, or revoked only by an instrument in writing signed by
both Landlord and Tenant. Landlord and Tenant hereby agree that all prior or
contemporaneous oral agreements between and among themselves and their agents or
representatives relating to the leasing of any Leased Property are merged into
or revoked by this agreement.
18.5 Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
18.6 Time; Joint and Several Liability. Time is of the essence of this
Lease in each and every provision hereof. All the terms, covenants, and
conditions contained in this Lease to be performed by
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either party, if such party shall consist of more than one person or
organization, shall be deemed to be joint and several, and all rights and
remedies of the parties shall be cumulative and non-exclusive of any other
remedy at law or in equity.
18.7 Waiver. No waiver by Landlord or Tenant of any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant or Landlord of the same or any other provision. Landlord's or
Tenant's consent to or approval of any act shall not be deemed to render
unnecessary the obtaining of Landlord's or Tenant's express written consent to
or approval of any subsequent act by the Tenant or Landlord. The acceptance of
rent hereunder by Landlord shall not be a waiver of any succeeding breach by
Tenant of any provision hereof, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord's knowledge of such
succeeding breach at the time of acceptance of such rent.
18.8 Surrender of Premises. The voluntary or other surrender of this
Lease by the Tenant, or mutual cancellation thereof, shall not work a merger,
and shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
or any or all such subleases or subtenancies.
18.9 Holding Over. If Tenant remains in possession of all or any part
of any Leased Property after the expiration of the term of this Lease, with or
without the express or implied consent of the Landlord, such tenancy shall be
from month to month only, and not a renewal of this Lease or an extension for
any further term. In such case, rent and other monetary sums due hereunder shall
be payable in the amount and at the time specified in this Lease and such
month-to-month tenancy shall be subject to every other term, covenant, and
agreement contained herein.
18.10 Signs.
(a) Tenant shall have the right to erect such signs as it shall
elect, all in accordance with legal requirements.
(b) Any such signs described above shall be removed at the
expiration or earlier termination of the Lease at Tenant's expense and Tenant
shall repair any damage to any Leased Property resulting from such removal. If
Tenant fails to do so, Landlord may cause such removal and repair on Tenant's
behalf at Tenant's reasonable expense.
18.11 Reasonable Consent. Except as specifically limited elsewhere in
this Lease, wherever in this Lease Landlord and/or Tenant is required to give
its consent or approval to any action on the part of the other, such consent or
approval shall not be unreasonably withheld, delayed, conditioned or charged
for. In the event of failure to give any such consent, the other party shall be
entitled to specific performance of law and shall have such other remedies as
are reserved to it under this Lease, but in no event shall Landlord or Tenant be
responsible in monetary damages for failure to give consent unless consent is
withheld maliciously or in bad faith.
18.12 Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at
twelve percent (12.00%) per annum from the due date. Payment of such interest
shall not excuse or cure any default by Tenant under this Lease. Payment of such
interest is in addition to the late charge specified in section 17.3 of this
Lease.
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18.13 Recording. Tenant shall not record this Lease without Landlord's
prior express written consent. Landlord and Tenant shall, at Tenant's expense,
execute and record a short form or memo of Lease promptly following the Rent
Commencement Date.
18.14 Costs of Suit.
(a) If Tenant or Landlord shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of any
Leased Property, the prevailing party shall be entitled to an award of its
reasonable attorneys' fees and costs. Such fees and costs shall include those
fees and costs incurred at trial, on appeal, or in any bankruptcy proceeding.
(b) Should Landlord, without fault on Landlord's part, be made a
party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using any Leased Property
by license of Tenant, or for the foreclosure of any lien for labor, material
furnished to or for Tenant or any such other person or otherwise arising out of
or resulting from any act or transaction of Tenant, or of any such person,
Tenant covenants to defend, indemnify, and hold Landlord harmless from any
judgement rendered against Landlord or any Leased Property, or any part thereof,
and all costs and expenses, including reasonable attorney fees, incurred by
Landlord in or in connection with such litigation.
18.15 Binding Effect; Choice of Law. The parties hereto agree that all
provisions hereof are to be construed as both covenants, and conditions as
though the words importing such covenants and conditions were used in each
separate paragraph hereof. Subject to any provisions hereof restricting
assignment or subletting by the Tenant, all of the provisions hereof shall bind
and inure to the benefit of the parties hereto, their respective heirs, legal
representative, assigns, and successors. This Lease shall be governed by the
laws of the State of Texas.
18.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
LEASE OR ANY EXHIBIT HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR
STATEMENTS (WHETHER VERBAL OR WRITTEN) MADE BY THE PARTIES HEREIN.
18.17 Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms.
18.18 Representation of Landlord. Landlord represents and warrants that
(i) it holds fee or leasehold title to the Leased Property subject to the Lease
and has full power and authority to enter into this Lease; and (ii) each
individual executing this Lease on behalf of Landlord represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of the
corporate general partner of Landlord in accordance with a duly adopted
resolution of the Board of Directors of said corporation, and that this Lease is
binding upon Landlord in accordance with its terms.
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18.19 Triple Net Lease. It is the intent of Landlord and Tenant that
this Lease shall be an absolute triple-net lease, and that all costs, expenses
or charges (including all ground lease rental payments with respect to Leased
Properties) with respect to the Leased Property are the responsibility of
Tenant.
18.20 Notices. Any notice provided or permitted to be given under this
Lease must be in writing and may be served by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
certified, with return receipt requested, by delivering the same in person to
such party, by overnight delivery or by delivering the same by confirmed
facsimile. Notice given in accordance herewith shall be effective upon the
earlier of receipt at the address of the addressee or on the third (3rd) day
following deposit of same in the United States mail as provided for herein,
regardless of whether same is actually received. For purposes of notice, the
addresses of the parties shall be as follows:
If to Tenant: Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, Georgia 30350
Telephone No. 770-587-0290
Facsimile No. 770-594-7044
Attn: Charles N. Hyslop
Copies To: James R. Arabia
9404 Genesee Avenue, Suite 330
La Jolla, California 92037
Telephone No. 619-587-8533
Facsimile No. 619-535-1634
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attn: Robert H. Dreschler, Esq.
Telephone No. 212-326-0156
Facsimile No. 212-326-0806
If to Landlord: U. S. Restaurant Properties Operating L. P.
5310 Harvest Hill Road, Suite 270, Lock Box 168
Dallas, Texas 73230
Telephone No. 972-387-1487
Facsimile No. 972-490-9119
Either party may change its address for notice by giving ten (10) days prior
written notice thereof to the other party.
18.21 Primary Leases for Subleased Properties Controlling.
Notwithstanding anything contained herein to the contrary, with respect to
Buildings 785, 995, 899, 984, 1172, 1253, 1254, 1313, 1330, and 1434, as
designated on Exhibit C, Landlord's and Tenant's rights and obligations with
respect to such Building shall be governed by the primary lease ("Primary
Lease") of such Building between the fee owner thereof and Landlord or its
designated affiliate (as lessee), and such Primary Lease shall control over any
inconsistent provision in this Lease (other than, in case of default by Tenant
hereunder, Section 17 of this
23
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Lease). Tenant shall pay to Landlord, or its designated affiliate, as additional
rent thereunder (and in addition to any amounts required to be paid pursuant to
Exhibit E) the rent required to be paid by Landlord under such Primary Lease,
plus, with respect to each such Primary Lease, $1.00 per month. Landlord shall
remit to the lessor under such Primary Lease the rental and additional rental
required thereunder, to the extent received from Tenant, but shall have no other
obligation thereunder, provided, however, Landlord shall, upon written request
of Tenant, use its best efforts (provided Tenant has indemnified Landlord
against all costs and expenses incurred in connection therewith) to cause the
landlord under such Primary Lease to comply with all covenants and
responsibilities of such landlord under the Primary Lease. Landlord agrees to
subordinate its lease with respect to Building 785 to a leasehold mortgagee, and
further agrees that if Tenant desires to engage in a sale-leaseback financing of
Building 785, it will amend the provisions of this lease as it affects Building
785 only to reasonably accommodate the requirements of such sale-leaseback
financing; provided, however, Tenant shall give Landlord thirty (30) days'
written notice of the terms of such sale-leaseback financing, and Landlord shall
have the right of first refusal to provide such sale-leaseback financing.
18.22 Purchase Option. During the initial two (2) years of this Lease,
Tenant shall have the option, by delivery of thirty (30) days written notice to
Landlord, to purchase the following Buildings: 1707, 5906, 5943, 6285, 6055,
6056, 6253, 6185, 6309, 6420 (the "Option Buildings"). The purchase option is
available only if Tenant agrees to acquire each of the Buildings subject to such
option. The purchase price shall be payable in cash in an amount equal to 102%
of the Purchase Price allocated to such Buildings on Exhibit C, with Tenant
paying all closing costs (i.e., title insurance premiums, transfer taxes,
recording costs, etc.) of acquiring the Buildings. Landlord shall convey the
Buildings by special warranty deed, subject only to such title exceptions
substantially similar to those existing upon Landlord's acquisition of the
Buildings. At closing, the Base Rent due hereunder shall be reduced by the Rent
Reduction Amount attributable to the Buildings purchased by Tenant. In the event
that Tenant does not exercise its option and Landlord receives an offer to
purchase the Option Buildings (or any one or more of such Option Buildings) that
is acceptable to Landlord, Landlord shall provide Tenant with written notice
("Notice") of all of the material terms and conditions of such offer, and shall
provide Tenant with a fifteen (15) day period from receipt of the Notice to
agree to purchase the Option Building(s) pursuant to the terms set forth in the
Notice. If Tenant does not accept such offer in the fifteen (15) day period from
receipt of the Notice, Landlord shall be entitled to sell the Option Buildings
pursuant to the terms set forth in the Notice at any time prior to the closing
date as set forth in the Notice, or as may be extended by the parties for a
period not exceeding ninety (90) days. This right of first refusal shall not
apply, however, to (i) sales of the Option Buildings to affiliates of Landlord,
(ii) consideration not payable in substantial part (i.e., more than 40%) in
cash, or (iii) sales where the Option Buildings are part of a portfolio of
properties where the Option Buildings constitute seventy-five percent (75%) or
less (in value) of the total assets transferred.
18.23 Landlord's Lien. As security for the performance of Tenant's
obligations under this Lease, Tenant grants to Landlord a lien upon and security
interest in Tenant's existing or hereafter acquired Equipment; provided,
however, that Landlord hereby does and shall continue to subordinate such lien
and security interest to any existing or future lien or security interest
granted by Tenant in or to any of the Equipment as security for indebtedness
provided by an institutional lender if (i) all or a part of such indebtedness is
used for the benefit of the business conducted by Tenant at the Leased Property
or to refinance such indebtedness existing, and (ii) such lender enters into an
Inter-Creditor Agreement with Landlord in form attached hereto as Exhibit I.
Landlord shall be entitled to exercise any and all rights and remedies at law
and in equity in connection with any rights of Landlord under this Section.
Subject to the rights of any lender described above, Tenant shall not, except in
the ordinary course of business, sell,
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transfer or remove from the Leased Property the Equipment, unless the restaurant
location is closed, abandoned, assigned or sublet in compliance with the terms
of this Lease. Landlord shall prepare and Tenant shall execute a financing
statement to perfect the Landlord's lien and security interest.
LANDLORD:
U. S. RESTAURANT PROPERTIES OPERATING L. P.
By: U. S. RESTAURANT PROPERTIES, INC.
By: ___________________________________________
Name/Title: ___________________________________
TENANT:
SYBRA, INC.
By: ___________________________________________
Name/Title: ___________________________________
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared _______________________________________,
______________________ of U. S. RESTAURANT PROPERTIES, INC., general partner of
U. S. RESTAURANT PROPERTIES OPERATING L. P., a Delaware limited partnership,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said limited partnership.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of _____________,
1997.
___________________________________
[SEAL] Notary Public, State of Texas
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STATE OF ss.
ss.
COUNTY OF ss.
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared _______________________________________,
______________________ of SYBRA, INC., a Michigan corporation, known to me to be
the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as the act and deed of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of _____________,
1997.
___________________________________
[SEAL] Notary Public, State of
26
CHARLES N. HYSLOP
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the ___ day of
_________, 1997 between Sybra, Inc. (the "Company"), a Michigan corporation,
with offices at 8300 Dunwoody Place, Suite 300, Atlanta, Georgia 30350-1296 and
Charles N. Hyslop, an individual residing at 4385 Bancroft Valley Court,
Alpharetta, Georgia 30202 (the "Executive").
RECITALS
WHEREAS, I.C.H. Corporation ("ICH") is purchasing all of the
outstanding capital stock of the Company from Valcor, Inc. pursuant to the Stock
Purchase Agreement dated February 7, 1997 (the "Stock Purchase Agreement")
effective on the date of the closing of the transactions contemplated by the
Stock Purchase Agreement (the "Closing Date"); and
WHEREAS, the Executive has served as a key executive of the Company
and, through such service, has acquired special and unique knowledge, abilities
and expertise; and
WHEREAS, the Company desires to continue to employ the Executive as its
Chief Executive Officer after the Closing Date, and the Executive desires to be
employed by the Company, pursuant to the terms set forth herein.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive as
Chief Executive Officer of the Company, and the Executive accepts such
employment for the term of employment specified in Section 3 below (the
"Employment Term"). During the Employment Term, the Executive shall, subject to
the direction of the Board of Directors of the Company and the Board of
Directors of ICH, render such services to the Company as are customarily
rendered by the Chief Executive Officer and perform such other duties befitting
the office of Chief Executive Officer of the Company. On the Closing Date, the
Executive shall be named a Director on the Board of Directors of ICH.
2. Performance. The Executive agrees to devote his best efforts and
substantially all of his business time to the performance of his duties
hereunder during the Employment Term, except for: (a) time spent in managing his
personal, financial, and legal affairs and serving on corporate (subject to the
written consent of the Company which shall not be unreasonably withheld), civic
or charitable boards or committees, in each case only if and to the extent such
activities do not interfere with
<PAGE>
the performance of Executive's responsibilities, and (b) periods of vacation to
which he is entitled. Executive's service on the corporate boards or committees
set forth in Exhibit A, attached hereto, is hereby deemed to be consented to by
the Company.
3. Employment Term. The Employment Term shall begin on the date of this
Agreement, _____________ __, 1997 and continue until the second anniversary of
the date of this Agreement, _____________ __, 1999 unless terminated sooner
pursuant to the provisions of this Agreement. On the first anniversary of the
date of this Agreement (the "Renewal Date"), the term of this Agreement shall be
extended for a period of one (1) year unless either the Executive or the Company
elects not to renew this Agreement by providing written notice to the other
party on or within five (5) business days prior to the Renewal Date with such
notice deemed to be given on the Renewal Date. In the event the Company elects
not to renew this Agreement, the Executive shall be deemed to be terminated
without Cause (as defined in Section 8(c)) as of the applicable Renewal Date and
in the event the Executive elects not to renew this Agreement, the Executive
shall be deemed to have Voluntarily Quit (as defined in Section 8(d)) as of the
Renewal Date. In the event this Agreement is extended as of the Renewal Date,
commencing with the day immediately following the Renewal Date and thereafter,
this Agreement shall be extended for one day each day until a termination occurs
pursuant to the provisions of Section 8 hereof, whereupon all extensions shall
end.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Executive an annual base salary of two hundred thousand dollars ($200,000),
payable in accordance with the normal payroll practices of the Company which
amount may be increased, but not decreased, as the Board of Directors of the
Company may determine.
(b) Bonus. Executive shall be entitled to an annual bonus in the
event certain performance targets are met. The bonus shall be determined based
on Actual EBITDA (as defined below) as a percentage of Target EBITDA (as defined
below). If Actual EBITDA is equal to one hundred percent (100%) of Target
EBITDA, Executive shall receive a bonus of forty thousand dollars ($40,000). If
Actual EBITDA is 105% of Target EBITDA or greater, Executive shall be entitled
to receive a bonus of eighty thousand dollars ($80,000). If Actual EBITDA is
more than one hundred percent (100%) but less than one hundred and five percent
(105%) of Target EBITDA, Executive shall receive a bonus equal to an
interpolated amount between $40,000 and $80,000.
"Target EBITDA" for the 1997 fiscal year shall be the amount set
forth on Exhibit B attached hereto. "Target EBITDA" for the 1998 fiscal year
shall be determined by the Board of Directors of ICH and agreed to by Executive
prior to the commencement of such fiscal year to be a reasonable target for
EBITDA performance of the Company for such fiscal year and shall be calculated
in a manner similar to the that used to calculate Target EBITDA for the 1997
fiscal year as set forth in Exhibit C
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<PAGE>
attached hereto. "Actual EBITDA" shall be calculated in the same manner as
Target EBITDA except that the calculation shall be made using actual dollars as
determined by the Company's independent certified public accounting firm for
purposes of financial reporting, provided, however, that in calculating Actual
EBITDA, management fees and overhead allocations paid or accrued with respect to
ICH or its affiliates and administrative overhead associated with individuals
who were not employed by the Company prior to its acquisition by ICH, but are
now employed by the Company and ICH, or sit on the Board of Directors of ICH
shall be capped at $240,000. All of the aforementioned calculations shall be
determined in accordance with generally accepted accounting principles, applied
in a consistent manner with prior periods.
(c) Bonus Calculation and Payment. The bonus shall be paid to the
Executive no later than ninety (90) days following the end of the period for
which the bonus is being paid.
(d) Additional Benefits. In addition to the other compensation
payable to the Executive hereunder, during the Employment Term the Executive
shall be entitled to the following benefits: (i) participation in the ICH
Corporation 1997 Employee Stock Option Plan (the "Stock Option Plan") and other
benefit plans made generally available to executives of the Company with such
participation to be consistent with reasonable Company guidelines; (ii)
participation in any health insurance, disability insurance, group life
insurance or other welfare benefit program made generally available to all
executives of the Company; (iii) vacation and other benefits as applicable to
executives of the Company and in accordance with Company policies; and (iv)
reimbursement for reasonable business expenses incurred by the Executive in
furtherance of the interests of the Company.
In the event that ICH adopts an employee benefit plan in which the
Executive is eligible to participate, the Executive shall receive credit for any
service performed for the Company prior to its acquisition by ICH as if such
service were performed for ICH for vesting and eligibility purposes only. This
paragraph shall not be construed to confer any right upon the Executive to
participate in any of ICH's employee benefit plans.
(e) Withholding. The Company shall deduct from all compensation paid
to the Executive under this Agreement, any Federal, state or city withholding
taxes, social security contributions and any other amounts which may be required
to be deducted or withheld by the Company pursuant to any Federal, state or city
laws, rules or regulations.
5. Option Grant. Upon execution of this Agreement, or as soon as
administratively possible thereafter, Executive shall receive options (the
"Options") issued pursuant to the Stock Option Plan to purchase shares of common
stock of ICH, par value $0.01 ("Common Stock") in an amount equal to five
percent (5%) of the Common Stock which is then outstanding on the Closing Date
at an exercise price equal to its "Fair Market Value" (as defined in the Stock
Option Plan) as of the Closing Date which shall be the date of grant of the
Options. The Options are granted pursuant
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<PAGE>
to the terms and conditions of the Stock Option Plan and shall expire ten (10)
years from the date of the grant. Subject to Section 9 below, the Options shall
vest and become immediately exercisable during the Employment Term as follows:
one-third on date of this Agreement, one-third on the first anniversary of the
date of this Agreement, one-third on the second anniversary of the date of this
Agreement; provided, however, that in the event of a Change in Control, as
defined below, all outstanding Options which have not vested as of the date of
the Change in Control shall upon the date of the Change in Control fully vest
and become immediately exercisable in accordance with the terms and conditions
of the Option Grant Agreement.
The terms and conditions of the Options are memorialized in the written
option grant agreement between the Company and the Executive ("Option Grant
Agreement"), attached hereto as Exhibit D, which shall be executed by the
Company and the Executive at the same time this Agreement is executed. The
Options granted to the Executive are intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that to the extent that any of
such Options do not satisfy the requirements of Section 422(b) of the Code, then
they shall be treated as non-qualified stock options.
In the event that Executive's employment with the Company is terminated
for any reason prior to the expiration of this Agreement, vested Options may be
exercised through a minimum period of thirty-nine (39) months following the date
of this Agreement. The Executive understands that the effect of exercising any
incentive stock options on a day that is more than ninety (90) days after the
date of termination of employment (or, in the case of termination of employment
on account of death or disability, on a day that is more than one (1) year after
the date of such termination) will be to cause such incentive stock options to
be treated as non-qualified stock options.
For purposes of this Section, Change in Control shall mean that any of
the following events has occurred: (a) any "person" or "group" of persons, as
such terms are used in Sections 13 and 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than any employee benefit plan
sponsored by ICH, becomes the "beneficial owner", as such term is used in
Section 13 of the Exchange Act, of equity securities of ICH representing at
least thirty percent (30%) of the voting power of all equity securities of ICH
issued and outstanding immediately prior to such acquisition; (b) the
dissolution or liquidation of ICH, the consummation of any merger or
consolidation of ICH or any sale or other disposition of all or substantially
all of its assets, if the shareholders of ICH immediately before such
transaction own, immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the voting power of the surviving
or acquiring company; (c) ICH and its wholly owned subsidiaries fail to own
equity securities representing more than fifty percent (50%) of the voting power
of the Company or any subsidiary of ICH into which the business of the Company
has been merged or transferred; or (d) substantially all of the assets of the
Company, or any other subsidiary of ICH into which the business of the Company
has been merged or transferred, are sold or transferred to any entity in which
4
<PAGE>
ICH, directly or indirectly, does not own equity securities representing at
least fifty percent (50%) of the voting power.
6. Covenant Not to Compete.
(a) That Executive agrees that during the Non-Competition Period (as
such term is defined below) he will not in any capacity, either separately,
jointly, or in association with others, directly or indirectly, as an officer,
director, consultant, agent, employee, owner, partner, shareholder, beneficial
owner or otherwise engage or have a financial interest in any business which is
or becomes a Material Competitor (as such term is defined below) of the Company
or any subsidiary of the Company in the continental United States (excepting
only the ownership of not more than one (1%) percent of the outstanding
securities of any class listed on an exchange or regularly traded in the
over-the-counter market). The "Non-Competition Period" the longer of (i) the
period during which the Executive is employed hereunder, or is receiving
compensation following a termination of employment during the Employment Term,
as applicable, or (ii) the period during which the Executive is employed
hereunder through the last day of the six (6) month period following the Date of
Termination. "Material Competitor" during the first six (6) months following the
Executive's applicable Date of Termination shall mean any fast food franchisor
or franchisee in the continental United States, thereafter "Material Competitor"
shall mean any Arby's franchisee within 20 miles of any Company locations.
(b) That Executive agrees that during the Employment Period and for
a eighteen (18) month period following the applicable Date of Termination where
the Executive terminates employment with the Company for any reason he will not
in any capacity, either separately, jointly, or in association with others,
directly or indirectly, as an officer, director, consultant, agent, employee,
owner, partner, shareholder, beneficial owner or otherwise solicit or employ any
person, who was employed by the Company, or any subsidiary of the Company within
six (6) months prior to the termination of the Executive' s employment with the
Company, in any business in which the Executive has an interest either
separately, jointly or in association with others, directly or indirectly, as an
officer, director, consultant, agent, employee, owner, partner, shareholder,
beneficial owner or otherwise.
(c) If a court determines that the restrictions set forth in
Sections 6(a) and 6(b) above are too broad or otherwise unreasonable under
applicable law, including with respect to time or space, the court is hereby
requested and authorized by the parties hereto to revise the restrictions in
Section 6(a) and 6(b) to include the maximum restrictions allowed under the
applicable law.
The Executive expressly agrees that breach of either this Section 6
or Section 7 below would result in irreparable injuries to the Company, that the
remedy at law for any such breach will be inadequate and that upon (i) breach of
the provisions of Section 7, (ii) breach of the provisions of Section 6(a)
during the first six (6) months following the Executive's applicable Date of
Termination with the Company, or (iii) breach of the provisions of Section 6(b)
during the eighteen (18) month period following
5
<PAGE>
the Executive's applicable Date of Termination, the Company, in addition to all
other available remedies, shall be entitled as a matter of right to injunctive
relief in any court of competent jurisdiction without the necessity of proving
the actual damages to the Company and such violation shall result in the
forfeiture of any other entitlements Executive may have had under this Agreement
as if the Executive had been terminated for Cause (as defined below). In the
event that a breach of the provisions of Section 6(a) occurs after the six (6)
month period following the Executive's applicable Date of Termination , the
Company's sole and exclusive remedy for such breach shall be to cease any
payments the Company is obligated to make pursuant to Section 9 hereof with such
payments being automatically discontinued, and the Company shall not be entitled
to further injunctive relief.
The Executive hereby affirmatively represents that he has the skill
and ability to earn a living without competing with the Company or ICH during
the non-competition period.
7. Confidential Information. For the Employment Term and thereafter,
(i) the Executive will not divulge, directly or indirectly, other than in the
regular and proper course of business of the Company, any confidential knowledge
or information with respect to the operation or finances of ICH, the Company,
and any subsidiaries of ICH or the Company and (ii) the Executive will not use,
directly or indirectly, any confidential information for the benefit of anyone
other than the Company or ICH; provided, however, that the Executive has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Executive.
8. Termination.
(a) Termination by the Company With Cause. The Company shall have
the right at any time to terminate the Executive's employment hereunder without
prior notice upon the occurrence of any of the following (any such termination
being referred to as a termination for "Cause"):
(i) the commission by the Executive of any deliberate and
premeditated act against the interest of the Company or ICH in
contravention of the directives of the Board of Directors of the Company as
communicated to the Executive;
(ii) the habitual drug addiction or intoxication of the
Executive;
(iii) the conviction by the Executive of a felony;
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<PAGE>
(iv) the willful failure or refusal of the Executive to perform
his duties hereunder if such failure or refusal is not cured within ten
(10) days subsequent to notice from the Company of the failure or refusal;
or
(v) the material breach by the Executive of any terms of this
Agreement not cured within thirty (30) days subsequent to notice from the
Company to the Executive of the breach.
(b) Termination for Death or by Company for Disability. The Company
shall have the right at any time to terminate the Executive's employment
hereunder without prior notice upon the Executive's inability to perform his
duties hereunder by reason of any mental, physical or other disability for a
period of at least six (6) successive months, or an aggregate period of at least
six (6) months during any twelve (12) month period. For purposes of this
Agreement, the term "disability" is defined to mean any physical or mental
disability suffered by the Executive which renders the Executive unable to
perform his duties. Any determination of disability shall be made by the Company
in consultation with a qualified physician or physicians selected by the Company
and reasonably acceptable to the Executive. The Executive's employment hereunder
shall also terminate upon the death of the Executive.
(c) Termination by Company Without Cause. The Company shall have the
right at any time to terminate the Executive's employment without prior notice
for any other reason without Cause.
(d) Voluntary Quit. The Executive shall have the right at any time
to terminate his employment without prior notice for any reason (any such
termination being referred to as a "Voluntary Quit " by Executive).
(e) Termination for Good Reason. The Executive shall have the right
at any time to terminate his employment hereunder, subject to the notice
provisions of Section 8(g), within one hundred and eighty (180) days after the
Executive has notice of the occurrence of any of the following, provided that
the Company does not cure such event to the extent possible on a retroactive
basis within ten (10) days following receipt of the Executive's Notice of
Termination (as defined in Section 8(f) below) (any such termination being
referred to as a termination for "Good Reason"):
(i) The Executive's title, position, authority or
responsibilities (including reporting responsibilities and authority) are
changed in materially adverse manner.
(ii) The Executive's base salary is reduced for any reason other
than in connection with the termination of his employment hereunder.
(iii) For any reason other than in connection with the
termination of the Executive's employment, the Company materially reduces
any benefit provided under a welfare benefit plan to the Executive below
the
7
<PAGE>
level of such benefit provided generally to other actively employed and
similarly situated executives of the Company.
(iv) A change of over fifty (50) miles in either the Executive's
principal place of employment or the headquarters of the Company (other
than a change to the Metropolitan Atlanta, Georgia area) pursuant to which
the Executive is required to relocate.
(v) The Company refuses or is unable to perform its obligations
under this Agreement
(vi) Executive is not elected or reelected to the Board of
Directors of the Company, or once elected, is removed from the Board of
Directors of the Company for reasons other than Cause.
(f) Notice of Termination. Any termination of the Executive's
employment by the Company hereunder, or by the Executive other than termination
upon the Executive's death, shall be communicated by written notice to the other
party ("Notice of Termination").
(g) Date of Termination. "Date of Termination" shall mean any of the
following:
(i) If the Executive's employment is terminated by his death,
the date of his death.
(ii) If the Executive's employment is terminated by the Company
as a result of Disability pursuant to Section 8(b), the date that is thirty
(30) days after the Notice of Termination is given; provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such thirty (30) days period.
(iii) If the Executive terminates employment for Good Reason
pursuant to Section 8(e), the date that is ten (10) days after Notice of
Termination is given, provided, that the Company does not cure such event
during the ten (10) day period.
(iv) If the Executive Voluntarily Quits pursuant to Section
8(d), the date that is fourteen (14) days after Notice of Termination is
given, provided, that in the sole discretion of the Company, such date may
be any earlier date after Notice of Termination is given.
(v) If the Executive's employment is terminated by the Company
with or without Cause pursuant to Sections 8(a) and 8(c), the date on which
the Notice of Termination is given.
9. Effect of Termination of Employment Prior to End of Employment
Period.
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(a) With Cause / Voluntary Quit. If the Executive's employment is
terminated with Cause (pursuant to Section 8(a)) or Executive Voluntary Quits
(pursuant to Section 8(d)), the Executive's salary and other benefits specified
in Section 4(a) and 4(d) shall cease on the Date of Termination, and the
Executive shall not be entitled to any bonuses specified in Section 4(b) which
have not been paid prior to such termination; provided, however, that in the
event the Executive Voluntarily Quits on the Renewal Date, the Executive shall
continue to receive his salary for a period of twenty-four (24) months following
his Date of Termination; further, provided, that the Executive shall be entitled
to continue to participate in the Company's medical benefit plans but only to
the extent required by law, and on the same basis applicable to other employees.
Additionally, all outstanding Options not vested as of the Date of Termination
shall be forfeited, provided, however, that in the event the Executive
Voluntarily Quits on the Renewal Date, the Executive shall be vested in
two-thirds (2/3) of the Options granted to him on the date of this Agreement
pursuant to Section 5 hereof.
(b) Without Cause or Good Reason. If the Executive's employment is
terminated by the Company without Cause (pursuant to Section (c)) or by the
Executive for Good Reason (pursuant to Section 8(e)), the Executive's annual
base salary then in effect pursuant to Section 4(a) shall continue to be paid to
the Executive for a period of twenty-four (24) months after the Date of
Termination. The Executive shall be entitled to any bonuses specified in Section
4(b) which are applicable to the most recently completed fiscal year of the
Company and which have been earned but not been paid prior to such termination
and the Executive shall not be entitled to any additional bonuses. The
Executive's additional benefits specified in Section 4(d) shall terminate at the
time of such termination; provided, however, that the Executive shall be
entitled to continue to participate in the Company's medical benefit plans but
only to the extent required by law, and on the same basis applicable to other
employees. Additionally, all outstanding Options not vested as of the Date of
Termination shall be forfeited.
(c) Death or Disability. If the Executive's employment is terminated
due to the Executive's death or Disability (pursuant to Section 8(b)), the
Executive's salary set forth in Section 4(a) shall cease on the Date of
Termination. The Executive shall be entitled to any bonuses specified in Section
4(b) which are applicable to the most recently completed fiscal year of the
Company and which have been earned but not been paid prior to such termination
and the Executive shall not be entitled to any additional bonuses. The
Executive's additional benefits specified in Section 4(d) shall terminate at the
time of such termination; provided, however, that the Executive shall be
entitled to continue to participate in the Company's medical benefit plans but
only to the extent required by law, and on the same basis applicable to other
employees. Additionally, all outstanding Options not vested as of the Date of
Termination shall be forfeited.
(d) No Duty to Mitigate. After any Date of Termination, the
Executive shall have no obligation to seek other employment, but shall, subject
to the provisions of Section 6, have the right to be otherwise employed, and any
compensation of any
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type whatsoever received by the Executive in connection with such employment
shall not be offset by the Company against any of the obligations of the Company
under this Agreement.
10. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered, or
when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Executive:
Charles N. Hyslop
4385 Bancroft Valley Court
Alpharetta, Georgia 30202
With a copy to:
Powell, Goldstein, Frazer & Murphy LLP
16th Floor
191 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attention: Steven G. Schaffer, Esq.
If to the Company:
Sybra, Inc.
8300 Dunwoody Place
Suite 300
Atlanta, Georgia 30350-1296
Attention: James Arabia
With a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
Either party hereto may change its or his address specified for notices herein
by designating a new address by notice in accordance with this Section 10.
11. Nonexclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any incentive,
fringe benefit, deferred compensation, or other plan or program provided by the
Company and for which the Executive may qualify, nor shall anything herein limit
or otherwise affect such rights as the Executive may have under any other
agreements with the Company. Amounts that are vested benefits or that the
Executive is otherwise entitled to receive under any plan or program of the
Company at or after the Date of Termination, shall be payable in accordance with
such plan or program.
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12. Indemnification. The Executive shall be indemnified in the same
manner as actively employed and similarly situated executives of the Company and
to the maximum extent as permitted for such executives under the by-laws of the
Company for any acts or omission taken or omitted to be taken by the Executive
in good faith and such indemnification shall survive the termination or
expiration of this Agreement and the termination of the Executive's employment
with the Company.
13. Arbitration. Any claim for damages arising out of or related to
this Agreement except for any claims arising out of or related to Sections 6 and
7 hereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, provided, however,
that the arbitration shall take place in Delaware and the arbitrators shall
apply Delaware law. Each party to the Agreement may select one arbitrator. The
selected arbitrators shall in turn appoint a third arbitrator, and the three so
chosen shall comprise the arbitration panel. All arbitrators shall be
independent third parties. The decision of the arbitration panel shall be final
and binding on the parties, and judgment upon the award rendered by the
arbitration panel may be entered by any court having jurisdiction thereof. This
Section shall not be construed to prevent the Company from seeking injunctive
relief as provided in Section 6 hereof and any and all disputes arising out of
or related to Sections 6 and 7 shall be adjudicated by a court of competent
jurisdiction.
14. General.
(a) Governing Law. The terms of this Agreement shall be governed by
the laws of the State of Delaware.
(b) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its assets to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent the Company would be required to perform if no such succession
had taken place. Executive agrees that this Agreement is personal to him and may
not be assigned by him other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representative.
(c) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof, supersedes in its entirety any prior agreement between the Company and
the Executive, and may not be modified or amended in any way except in writing
by the parties hereto.
(d) Provisions Severable. In case any one or more of the provisions
of this Employment Agreement shall be invalid, illegal or unenforceable in any
respect, or to any extent, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
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(e) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
SYBRA, INC.
Attest:
_____________________________ By: _______________________________
Secretary Name:
Title:
Witness: EXECUTIVE
_____________________________ ___________________________________
Charles N. Hyslop
13
DONALD P. ZIMA
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the ___ day of
_________, 1997 between Sybra, Inc. (the "Company"), a Michigan corporation,
with offices at 8300 Dunwoody Place, Suite 300, Atlanta, Georgia 30350-1296 and
Donald P. Zima, an individual residing at 6851 Roswell Road, Unit G-11, Atlanta,
Georgia 30328 (the "Executive").
RECITALS
WHEREAS, I.C.H. Corporation ("ICH") is purchasing all of the
outstanding capital stock of the Company from Valcor, Inc. pursuant to the Stock
Purchase Agreement dated February 7, 1997 (the "Stock Purchase Agreement")
effective on the date of the closing of the transactions contemplated by the
Stock Purchase Agreement (the "Closing Date"); and
WHEREAS, the Executive has served as a key executive of the Company
and, through such service, has acquired special and unique knowledge, abilities
and expertise; and
WHEREAS, the Company desires to continue to employ the Executive as its
Chief Financial Officer after the Closing Date, and the Executive desires to be
employed by the Company, pursuant to the terms set forth herein.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive as
Chief Financial Officer of the Company, and the Executive accepts such
employment for the term of employment specified in Section 3 below (the
"Employment Term"). During the Employment Term, the Executive shall, subject to
the direction of the Chief Executive Officer, and the Board of Directors of the
Company render such services to the Company as are customarily rendered by the
Chief Financial Officer and perform such other duties befitting the office of
Chief Financial Officer of the Company.
2. Performance. The Executive agrees to devote his best efforts and
substantially all of his business time to the performance of his duties
hereunder during the Employment Term, except for: (a) time spent in managing his
personal, financial, and legal affairs and serving on corporate (subject to the
written consent of the Company which shall not be unreasonably withheld), civic
or charitable boards or committees, in each case only if and to the extent such
activities do not interfere with the performance of Executive's
responsibilities, and (b) periods of vacation to which he
<PAGE>
is entitled. Executive's service on the corporate boards or committees set forth
in Exhibit A, attached hereto, is hereby deemed to be consented to by the
Company.
3. Employment Term. The Employment Term shall begin on the date of this
Agreement, ____________________ __, 1997 and continue until the second
anniversary of the date of this Agreement, ____________________ __, 1999 unless
terminated sooner pursuant to the provisions of this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the
Executive an annual base salary of one hundred thousand dollars ($100,000),
payable in accordance with the normal payroll practices of the Company which
amount may be increased, but not decreased, as the Board of Directors of the
Company may determine.
(b) Bonus. Executive shall be entitled to an annual bonus in the
event certain performance targets are met. The bonus shall be determined based
on Actual EBITDA (as defined below) as a percentage of Target EBITDA (as defined
below). If Actual EBITDA is equal to one hundred percent (100%) of Target
EBITDA, Executive shall receive a bonus of seventeen thousand ($17,000) dollars.
If Actual EBITDA is 105% of Target EBITDA or greater, Executive shall be
entitled to receive a bonus equal to forty percent (40%) of the Executive's
annual base salary. If Actual EBITDA is more than one hundred percent (100%) but
less than one hundred and five percent (105%) of Target EBITDA, Executive shall
receive a bonus equal to an interpolated amount between $17,000 and forty
percent (40%) of his annual base salary.
"Target EBITDA" for the 1997 fiscal year shall be the amount set
forth on Exhibit B attached hereto. "Target EBITDA" for the 1998 fiscal year
shall be determined by the Board of Directors of ICH and agreed to by Executive
prior to the commencement of such fiscal year to be a reasonable target for
EBITDA performance of the Company for such fiscal year and shall be calculated
in a manner similar to the that used to calculate Target EBITDA for the 1997
fiscal year as set forth in Exhibit C attached hereto. "Actual EBITDA" shall be
calculated in the same manner as Target EBITDA except that the calculation shall
be made using actual dollars as determined by the Company's independent
certified public accounting firm for purposes of financial reporting, provided,
however, that in calculating Actual EBITDA, management fees and overhead
allocations paid or accrued with respect to ICH or its affiliates and
administrative overhead associated with individuals who were not employed by the
Company prior to its acquisition by ICH, but are now employed by the Company and
ICH, or sit on the Board of Directors of ICH shall be capped at $240,000. All of
the aforementioned calculations shall be determined in accordance with generally
accepted accounting principles, applied in a consistent manner with prior
periods.
(c) Bonus Calculation and Payment. The bonus shall be paid to the
Executive no later than ninety (90) days following the end of the period for
which the bonus is being paid.
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<PAGE>
(d) Additional Benefits. In addition to the other compensation
payable to the Executive hereunder, during the Employment Term the Executive
shall be entitled to the following benefits: (i) participation in the ICH
Corporation 1997 Employee Stock Option Plan (the "Stock Option Plan") and other
benefit plans made generally available to executives of the Company with such
participation to be consistent with reasonable Company guidelines; (ii)
participation in any health insurance, disability insurance, group life
insurance or other welfare benefit program made generally available to all
executives of the Company; (iii) vacation and other benefits as applicable to
executives of the Company and in accordance with Company policies; and (iv)
reimbursement for reasonable business expenses incurred by the Executive in
furtherance of the interests of the Company.
In the event that ICH adopts an employee benefit plan in which the
Executive is eligible to participate, the Executive shall receive credit for any
service performed for the Company prior to its acquisition by ICH as if such
service were performed for ICH for vesting and eligibility purposes only. This
paragraph shall not be construed to confer any right upon the Executive to
participate in any of ICH's employee benefit plans.
(e) Withholding. The Company shall deduct from all compensation paid
to the Executive under this Agreement, any Federal, state or city withholding
taxes, social security contributions and any other amounts which may be required
to be deducted or withheld by the Company pursuant to any Federal, state or city
laws, rules or regulations.
5. Option Grant. Upon execution of this Agreement, or as soon as
administratively possible thereafter, Executive shall receive options (the
"Options") issued pursuant to the Stock Option Plan to purchase shares of common
stock of ICH, par value $0.01 ("Common Stock") in an amount equal to one and one
quarter percent (1.25%) of the Common Stock which is then outstanding on the
Closing Date at an exercise price equal to its "Fair Market Value" (as defined
in the Stock Option Plan) as of the Closing Date which shall be the date of
grant of the Options. The Options are granted pursuant to the terms and
conditions of the Stock Option Plan and shall expire ten (10) years from the
date of the grant. Subject to Section 9 below, the Options shall vest and become
immediately exercisable during the Employment Term as follows: one-fourth on the
first anniversary of the date of this Agreement, one-fourth on the second
anniversary of the date of this Agreement, one-fourth on the third anniversary
of the date of this Agreement and one-fourth on the fourth anniversary of the
date of this Agreement; provided, however, that in the event of a Change in
Control, as defined below, of the then outstanding Options which have not vested
prior to the date of the Change in Control, an amount of such Options equal to
one-half (1/2) of the original amount of Options granted less the amount of
Options vested prior to the date of the Change in Control shall upon the date of
the Change in Control fully vest and become immediately exercisable in
accordance with the terms and conditions of the Option Grant Agreement.
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<PAGE>
The terms and conditions of the Options are memorialized in the written
option grant agreement between the Company and the Executive ("Option Grant
Agreement"), attached hereto as Exhibit D, which shall be executed by the
Company and the Executive at the same time this Agreement is executed. The
Options granted to the Executive are intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that to the extent that any of
such Options do not satisfy the requirements of Section 422(b) of the Code, then
they shall be treated as non-qualified stock options.
In the event that Executive's employment with the Company is terminated
for any reason prior to the expiration of this Agreement, vested Options may be
exercised through a minimum period of twenty-seven (27) months following the
date of this Agreement. The Executive understands that the effect of exercising
any incentive stock options on a day that is more than ninety (90) days after
the date of termination of employment (or, in the case of termination of
employment on account of death or disability, on a day that is more than one (1)
year after the date of such termination) will be to cause such incentive stock
options to be treated as non-qualified stock options.
For purposes of this Section, Change in Control shall mean that any of
the following events has occurred: (a) any "person" or "group" of persons, as
such terms are used in Sections 13 and 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than any employee benefit plan
sponsored by ICH, becomes the "beneficial owner", as such term is used in
Section 13 of the Exchange Act, of equity securities of ICH representing at
least thirty percent (30%) of the voting power of all equity securities of ICH
issued and outstanding immediately prior to such acquisition; (b) the
dissolution or liquidation of ICH, the consummation of any merger or
consolidation of ICH or any sale or other disposition of all or substantially
all of its assets, if the shareholders of ICH immediately before such
transaction own, immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the voting power of the surviving
or acquiring company; (c) ICH and its wholly owned subsidiaries fail to own
equity securities representing more than fifty percent (50%) of the voting power
of the Company or any subsidiary of ICH into which the business of the Company
has been merged or transferred; or (d) substantially all of the assets of the
Company, or any other subsidiary of ICH into which the business of the Company
has been merged or transferred, are sold or transferred to any entity in which
ICH, directly or indirectly, does not own equity securities representing at
least fifty percent (50%) of the voting power.
6. Covenant Not to Compete.
(a) That Executive agrees that during the Non-Competition Period (as
such term is defined below) he will not in any capacity, either separately,
jointly, or in association with others, directly or indirectly, as an officer,
director, consultant, agent, employee, owner, partner, shareholder, beneficial
owner or otherwise engage or have a financial interest in any business which
competes in a material way with or becomes a
4
<PAGE>
material competitor of the Company or any subsidiary of the Company in the
continental United States (excepting only the ownership of not more than one
(1%) percent of the outstanding securities of any class listed on an exchange or
regularly traded in the over-the-counter market). The "Non-Competition Period"
the longer of (i) the period during which the Executive is employed hereunder,
or is receiving compensation following a termination of employment during the
Employment Term, as applicable, or (ii) the period during which the Executive is
employed hereunder through the last day of the six (6) month period following
the applicable Date of Termination.
(b) That Executive agrees that during the Employment Period and for
a one (1) year period following the applicable Date of Termination where the
Executive terminates employment with the Company for any reason he will not in
any capacity, either separately, jointly, or in association with others,
directly or indirectly, as an officer, director, consultant, agent, employee,
owner, partner, shareholder, beneficial owner or otherwise solicit or employ any
person, who was employed by the Company, or any subsidiary of the Company within
six (6) months prior to the termination of the Executive' s employment with the
Company, in any business in which the Executive has an interest either
separately, jointly or in association with others, directly or indirectly, as an
officer, director, consultant, agent, employee, owner, partner, shareholder,
beneficial owner or otherwise.
(c) If a court determines that the restrictions set forth in
Sections 6(a) and 6(b) above are too broad or otherwise unreasonable under
applicable law, including with respect to time or space, the court is hereby
requested and authorized by the parties hereto to revise the restrictions in
Section 6(a) and 6(b) to include the maximum restrictions allowed under the
applicable law.
The Executive expressly agrees that breach of either this Section 6
or Section 7 below would result in irreparable injuries to the Company, that the
remedy at law for any such breach will be inadequate and that upon (i) breach of
the provisions of Section 7, (ii) breach of the provisions of Section 6(a)
during the first six (6) months following the Executive's applicable Date of
Termination with the Company, or (iii) breach of the provisions of Section 6(b)
during the one (1) year period following the Executive's applicable Date of
Termination, the Company, in addition to all other available remedies, shall be
entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damages to the Company
and such violation shall result in the forfeiture of any other entitlements
Executive may have had under this Agreement as if the Executive had been
terminated for Cause (as defined below). In the event that a breach of the
provisions of Section 6(a) occurs after the six (6) month period following the
Executive's applicable Date of Termination , the Company's sole and exclusive
remedy for such breach shall be to cease any payments the Company is obligated
to make pursuant to Section 9 hereof with such payments being automatically
discontinued, and the Company shall not be entitled to further injunctive
relief.
5
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The Executive hereby affirmatively represents that he has the skill
and ability to earn a living without competing with the Company or ICH during
the non-competition period.
7. Confidential Information. For the Employment Term and thereafter,
(i) the Executive will not divulge, directly or indirectly, other than in the
regular and proper course of business of the Company, any confidential knowledge
or information with respect to the operation or finances of ICH, the Company,
and any subsidiaries of ICH or the Company and (ii) the Executive will not use,
directly or indirectly, any confidential information for the benefit of anyone
other than the Company or ICH; provided, however, that the Executive has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the public other than through disclosure by the Executive.
8. Termination.
(a) Termination at End of Employment Term. This Agreement shall
terminate at the end of the Employment Term. The Executive and the Company may
mutually agree to extend the Executive's employment beyond the Employment Term
on terms and conditions mutually satisfactory to both parties.
(b) Termination by the Company With Cause. The Company shall have
the right at any time to terminate the Executive's employment hereunder without
prior notice upon the occurrence of any of the following (any such termination
being referred to as a termination for "Cause"):
(i) the commission by the Executive of any deliberate and
premeditated act against the interest of the Company or ICH in
contravention of the directives of the Chief Executive Officer of the
Company or the Board of Directors of the Company as communicated to the
Executive;
(ii) the habitual drug addiction or intoxication of the
Executive;
(iii) the conviction by the Executive of a felony;
(iv) the willful failure or refusal of the Executive to perform
his duties hereunder if such failure or refusal is not cured within ten
(10) days subsequent to notice from the Company of the failure or refusal;
or
(v) the material breach by the Executive of any terms of this
Agreement not cured within thirty (30) days subsequent to notice from the
Company to the Executive of the breach.
(c) Termination for Death or by Company for Disability. The Company
shall have the right at any time to terminate the Executive's employment
hereunder without prior notice upon the Executive's inability to perform his
duties hereunder by
6
<PAGE>
reason of any mental, physical or other disability for a period of at least six
(6) successive months, or an aggregate period of at least six (6) months during
any twelve (12) month period. For purposes of this Agreement, the term
"disability" is defined to mean any physical or mental disability suffered by
the Executive which renders the Executive unable to perform his duties. Any
determination of disability shall be made by the Company in consultation with a
qualified physician or physicians selected by the Company and reasonably
acceptable to the Executive. The Executive's employment hereunder shall also
terminate upon the death of the Executive.
(d) Termination by Company Without Cause. The Company shall have the
right at any time to terminate the Executive's employment without prior notice
for any other reason without Cause.
(e) Voluntary Quit. The Executive shall have the right at any time
to terminate his employment without prior notice for any reason (any such
termination being referred to as a "Voluntary Quit " by Executive).
(f) Termination for Good Reason. The Executive shall have the right
at any time to terminate his employment hereunder, subject to the notice
provisions of Section 8(h), within one hundred and eighty (180) days after the
Executive has notice of the occurrence of any of the following, provided that
the Company does not cure such event to the extent possible on a retroactive
basis within ten (10) days following receipt of the Executive's Notice of
Termination (as defined in Section 8(g) below) (any such termination being
referred to as a termination for "Good Reason"):
(i) The Executive's title, position, authority or
responsibilities (including reporting responsibilities and authority) are
changed in materially adverse manner.
(ii) The Executive's base salary is reduced for any reason other
than in connection with the termination of his employment hereunder.
(iii) For any reason other than in connection with the
termination of the Executive's employment, the Company materially reduces
any benefit provided under a welfare benefit plan to the Executive below
the level of such benefit provided generally to other actively employed and
similarly situated executives of the Company.
(iv) A change of over fifty (50) miles in either the Executive's
principal place of employment or the headquarters of the Company (other
than a change to the Metropolitan Atlanta, Georgia area) pursuant to which
the Executive is required to relocate.
(v) The Company refuses or is unable to perform its obligations
under this Agreement.
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(g) Notice of Termination. Any termination of the Executive's
employment by the Company hereunder, or by the Executive other than
termination upon the Executive's death, shall be communicated by written
notice to the other party ("Notice of Termination").
(h) Date of Termination. "Date of Termination" shall mean any of
the following:
(i) If the Executive's employment is terminated by his
death, the date of his death.
(ii) If the Executive's employment is terminated by the
Company as a result of Disability pursuant to Section 8(c), the
date that is thirty (30) days after the Notice of Termination is
given; provided that Executive shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) days period.
(iii) If the Executive terminates employment for Good Reason
pursuant to Section 8(f), the date that is ten (10) days after
Notice of Termination is given, provided, that the Company does
not cure such event during the ten (10) day period.
(iv) If the Executive Voluntarily Quits pursuant to Section
8(e), the date that is fourteen (14) days after Notice of
Termination is given, provided, that in the sole discretion of
the Company, such date may be any earlier date after Notice of
Termination is given.
(v) If the Executive's employment is terminated by the
Company with or without Cause pursuant to Sections 8(b) and
8(d), the date on which the Notice of Termination is given.
9. Effect of Termination of Employment Prior to End of Employment
Period.
(a) With Cause / Voluntary Quit. If the Executive's employment is
terminated with Cause (pursuant to Section 8(b)) or Executive Voluntary Quits
(pursuant to Section 8(e)), the Executive's salary and other benefits specified
in Section 4(a) and 4(d) shall cease on the Date of Termination, and the
Executive shall not be entitled to any bonuses specified in Section 4(b) which
have not been paid prior to such termination; provided, however, that the
Executive shall be entitled to continue to participate in the Company's medical
benefit plans but only to the extent required by law, and on the same basis
applicable to other employees. Additionally, all outstanding Options not vested
as of the Date of Termination shall be forfeited.
(b) Death, Disability, Without Cause or Good Reason. If the
Executive's employment is terminated by the death or disability of the Executive
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(pursuant to Section 8(c)), by the Company without Cause (pursuant to Section
(d)) or by the Executive for Good Reason (pursuant to Section 8(f)), the
Executive's annual base salary then in effect pursuant to Section 4(a) shall
continue to be paid to the Executive or, in the event of the death of the
Executive, the Executive's estate, through the end of the Employment Term as if
no such termination had occurred. The Executive shall be entitled to any bonuses
specified in Section 4(b) which are applicable to the most recently completed
fiscal year of the Company and which have been earned but not been paid prior to
such termination and the Executive shall not be entitled to any additional
bonuses. The Executive's additional benefits specified in Section 4(d) shall
terminate at the time of such termination; provided, however, that the Executive
shall be entitled to continue to participate in the Company's medical benefit
plans but only to the extent required by law, and on the same basis applicable
to other employees. Additionally, of the then outstanding Options which have not
vested prior to the date of termination, an amount of such Options equal to
one-half (1/2) of the original amount of Options granted less the amount of
Options vested prior to the date of termination shall upon the date of
termination fully vest and become immediately exercisable in accordance with the
terms and conditions of the Option Grant Agreement.
(c) No Duty to Mitigate. After any Date of Termination, the
Executive shall have no obligation to seek other employment, but shall, subject
to the provisions of Section 6, have the right to be otherwise employed, and any
compensation of any type whatsoever received by the Executive in connection with
such employment shall not be offset by the Company against any of the
obligations of the Company under this Agreement.
10. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered, or
when mailed, certified or registered mail, postage prepaid, to the following
addresses:
If to the Executive:
Donald P. Zima
6851 Roswell Road
Unit G-11
Atlanta, Georgia 30328
With a copy to:
Powell, Goldstein, Frazer & Murphy LLP
16th Floor
191 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attention: Steven G. Schaffer, Esq.
9
<PAGE>
If to the Company:
Sybra, Inc.
8300 Dunwoody Place
Suite 300
Atlanta, Georgia 30350-1296
Attention: James Arabia
With a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
Either party hereto may change its or his address specified for notices herein
by designating a new address by notice in accordance with this Section 10.
11. Nonexclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing future participation in any incentive,
fringe benefit, deferred compensation, or other plan or program provided by the
Company and for which the Executive may qualify, nor shall anything herein limit
or otherwise affect such rights as the Executive may have under any other
agreements with the Company. Amounts that are vested benefits or that the
Executive is otherwise entitled to receive under any plan or program of the
Company at or after the Date of Termination, shall be payable in accordance with
such plan or program.
12. Indemnification. The Executive shall be indemnified in the same
manner as actively employed and similarly situated executives of the Company and
to the maximum extent as permitted for such executives under the by-laws of the
Company for any acts or omission taken or omitted to be taken by the Executive
in good faith and such indemnification shall survive the termination or
expiration of this Agreement and the termination of the Executive's employment
with the Company.
13. Arbitration. Any claim for damages arising out of or related to
this Agreement except for any claims arising out of or related to Sections 6 and
7 hereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, provided, however,
that the arbitration shall take place in Delaware and the arbitrators shall
apply Delaware law. Each party to the Agreement may select one arbitrator. The
selected arbitrators shall in turn appoint a third arbitrator, and the three so
chosen shall comprise the arbitration panel. All arbitrators shall be
independent third parties. The decision of the arbitration panel shall be final
and binding on the parties, and judgment upon the award rendered by the
arbitration panel may be entered by any court having jurisdiction thereof. This
Section shall not be construed to prevent the Company from seeking injunctive
relief as provided in Section 6 hereof and any and all disputes arising out of
or related to Sections 6 and 7 shall be adjudicated by a court of competent
jurisdiction.
10
<PAGE>
14. General.
(a) Governing Law. The terms of this Agreement shall be governed by
the laws of the State of Delaware.
(b) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its assets to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent the Company would be required to perform if no such succession
had taken place. Executive agrees that this Agreement is personal to him and may
not be assigned by him other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representative.
(c) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof, supersedes in its entirety any prior agreement between the Company and
the Executive, and may not be modified or amended in any way except in writing
by the parties hereto.
(d) Provisions Severable. In case any one or more of the provisions
of this Employment Agreement shall be invalid, illegal or unenforceable in any
respect, or to any extent, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
(e) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto executed this Agreement the day and year first written above.
SYBRA, INC.
Attest:
_____________________________ By: __________________________
Secretary Name:
Title:
Witness: EXECUTIVE
______________________________ ________________________________
Donald P. Zima
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049588
<NAME> I.C.H. Corporation Financial Data Schedule
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 881,455
<SECURITIES> 0
<RECEIVABLES> 45,385
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,980,917
<PP&E> 3,766,242
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,747,159
<CURRENT-LIABILITIES> 659,184
<BONDS> 0
<COMMON> 12,190,203
0
0
<OTHER-SE> (102,228)
<TOTAL-LIABILITY-AND-EQUITY> 12,747,159
<SALES> 40,706
<TOTAL-REVENUES> 40,706
<CGS> 100,144
<TOTAL-COSTS> 196,934
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (156,228)
<INCOME-TAX> (54,000)
<INCOME-CONTINUING> (156,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,228)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
