UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the Fiscal Year Ended December 31, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
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 Identification Number)
Incorporation or Organization)
9404 Genesee Avenue, Suite 330, La Jolla, California 92037
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 619-587-8533
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period than the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 25, 1998 was $9,971,854, based on the closing price of the
Common Stock as provided by the American Stock Exchange on March 25, 1998.
As of March 25, 1998, there were outstanding 2,793,550 (1) shares of the
Registrant's Common Stock, par value $0.01 per share.
- --------
(1) Assumes full conversion of all remaining outstanding shares of Common Stock
and Preferred Stock of pre-reorganized I.C.H. Corporation. See Note 10 of Notes
To Consolidated Financial Statements.
<PAGE>
PART I
ITEM 1. BUSINESS
- ----------------
GENERAL
I.C.H. Corporation (the "Company"), a Delaware corporation, is the
post-reorganization successor to ICH Corporation ("Old ICH"). On October 10,
1995, Old ICH 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"). Old ICH's
First Amended Joint Plan of Reorganization under Chapter 11 (the "Reorganization
Plan") was confirmed by the Bankruptcy Court on February 7, 1997 and the Company
emerged from bankruptcy effective as of February 19, 1997.
On April 30, 1997, the Company acquired all of the outstanding capital stock of
Sybra, Inc. ("Sybra" and/or "Predecessor"), the second largest franchisee of
Arby's restaurants. The aggregate purchase price was approximately $39.8 million
which included the repayment of $23.7 million of Sybra indebtedness and an
additional $2 million of acquisition indebtedness due to the seller within two
years. Concurrently with the Company's acquisition of Sybra, Sybra entered into
a sale/leaseback transaction on 61 of its restaurant sites with U.S.
Restaurant Properties, Inc. ("USRP").
As of December 31, 1997, the Company, through its wholly-owned subsidiary Sybra,
owned and operated 149 Arby's restaurants clustered in four operating regions.
Those restaurants generated approximately $111.7 million in revenue during 1997.
Through another wholly-owned subsidiary, Perry Park Resorts, Inc., the Company
also owns and operates a planned real estate development consisting of
approximately 2,600 acres ("Perry Park") located in Owenton, Kentucky. Perry
Park includes an 18-hole golf course, clubhouse, restaurant, salable lots,
several lakes, additional platted but undeveloped lots and unimproved acreage.
I.C.H. Corporation and its subsidiaries are collectively referred to herein as
the "Company".
SYBRA, INC.
As of December 31, 1997, the Company owned and operated 149 Arby's restaurants
clustered in four regions in the United States: the Northern Region (45
restaurants), the Eastern Region (29 restaurants), the Southwestern Region (55
restaurants) and the Southeastern Region (20 restaurants).
Pursuant to a new Development Agreement entered into with Arby's, Inc. (the
"Franchisor") effective as of November 1, 1997, Sybra was granted the exclusive
right to develop Arby's restaurants in certain designated areas, including
certain counties in and around Philadelphia, Pennsylvania; Detroit, Michigan,
Dallas-Fort Worth, Texas, Washington, D.C. and Baltimore, Maryland. The
development schedule calls for Sybra to open 150 new Arby's restaurants over the
next ten years. See "Franchise and Development Agreements - Development
Agreement".
As of December 31, 1997, Sybra had 124 free-standing restaurants, with the
remaining 25 restaurants located in shopping malls or as part of a food court
within a mall. New restaurants are likely to be free-standing, which the Company
has found generally to yield a more stable rate of return on its investment.
Sybra has renovated over 20 of its Arby's units during the past five years.
2
<PAGE>
PERRY PARK RESORTS, INC.
The Perry Park real estate consists of an approximately 2,600 acre planned
development including an 18-hole golf course, clubhouse, restaurant, salable
lots, several lakes, additional platted but undeveloped lots and unimproved
acreage. The platted undeveloped lots and unimproved acreage are estimated to be
approximately 1,800 acres. The operations of Perry Park are not expected to be
material to the Company's future operations.
RECENT DEVELOPMENTS
Acquisitions
- ------------
On January 30, 1998, through its newly-formed, wholly-owned subsidiary Sybra of
California, Inc., the Company acquired eight Arby's restaurant units located in
Sacramento, California. The total purchase price of the acquisition, which
includes six leased properties, and fee ownership of two properties (and
management of one additional restaurant) was approximately $1.75 million, plus
warrants to purchase shares of the Company's common stock. The sources of funds
for the acquisition include a note for $325,000 to the sellers and $1.275
million through the sale/leaseback of two of the restaurant units through USRP,
which sale/leaseback transactions management expects to close by the end of the
second quarter of 1998.
New Store Development
- ---------------------
On November 17, 1997, Sybra executed a development agreement with Arby's, Inc.,
the franchisor of Arby's restaurants, which calls for the construction of 150
new Arby's restaurants by Sybra over the next ten years (the "Development
Agreement"). This agreement superseded a prior agreement which required the
development of 31 new stores over a six year period. The Development Agreement
grants Sybra the exclusive right to build Arby's restaurants, primarily in
certain northeast markets in and around Philadelphia, Harrisburg, Washington,
D.C. and Baltimore, as well as the exclusive right to build Arby's restaurants
in and around the Detroit and Dallas/Fort Worth markets.
During 1997 Sybra opened three new restaurants. Sybra opened one new restaurant
during the first quarter of 1998 and anticipates that it will, at a minimum,
meet its annual store opening requirement under the Development Agreement (four
additional restaurants) for 1998.
Financing
- ---------
On July 23, 1997, shares of the Company's common stock began trading on the
American Stock Exchange under the trading symbol "IH". Prior to July 23, 1997,
the Company's common stock traded on the Over-the-Counter Bulletin Board under
the trading symbol "ICHC".
On August 1, 1997, Sybra executed a loan commitment letter with Franchise
Finance Corporation of America ("FFCA") to finance the construction of up to 12
new Arby's restaurants during the next two years. Under the terms of that
commitment letter, FFCA has agreed to finance mortgage and equipment loans for
up to 12 new Arby's restaurants to be built by Sybra, to a maximum of $1.0
million per location. To date, FFCA has advanced total financing of $2.6 million
to Sybra pursuant to the commitment letter which Sybra has used to fund the
development and construction of three new Arby's restaurants.
3
<PAGE>
Management
- ----------
On September 18, 1997, the Company terminated the employment of Charles Hyslop,
the former President of Sybra, pursuant to the terms of Mr. Hyslop's employment
contract. Mr. Hyslop was the President of Sybra at the time Sybra was acquired
by the Company, and had also served as a director of the Company since that
time. In connection with his departure from Sybra, Mr. Hyslop also resigned from
the Company's board of directors. Under the terms of his employment agreement,
upon his departure from Sybra, Mr. Hyslop became entitled to receive severance
payments totaling approximately $400,000 to be paid over the following 24
months. The Company has recorded a corresponding liability for the full amount
of the severance obligation to Mr. Hyslop in its 1997 financial statements.
Following Mr. Hyslop's departure, James. R, Arabia, Chief Executive Officer of
the Company, was appointed President of Sybra.
On November 1, 1997, the Company promoted Ed Chappell to the position of Vice
President of Business Development for Sybra. Mr. Chappell has been with Sybra
since March 5, 1995 when he was hired as Director of Real Estate. Mr. Chappell
has over 25 years of real estate experience, including as Vice President of Real
Estate for Rite Aid Drug Stores, and Director of Development for Taco Bell
Corporation.
On December 8, 1997, the Company promoted David Fitnich to the position of
Senior Vice President and Chief Operating Officer for Sybra. Mr. Fitnich has
been with Sybra since 1981 in a variety of operating positions. Immediately
before his promotion to Chief Operating Officer, Mr. Fitnich served as the
regional manager for Sybra's Northern region, where he supervised the operation
of approximately 45 Arby's restaurants.
On February 2, 1998, the Company appointed two new directors, Robert H.
Drechsler and Raymond L. Steele, to its board of directors. Mr. Drechsler is a
corporate partner with the New York firm of Pryor, Cashman, Sherman & Flynn,
legal counsel to the Company. Mr. Steele is a retired executive with experience
in investment banking and investment management, who serves or has served as a
director of Robinson Humphrey, Classic Car Investments, Webcraft, Modernfold,
Orion, Emerson Radio, Pharmhouse, Video Services Corp. and GFTA, and is
currently retained as an outside consultant to Pizza Hut.
On February 24, 1998, the Company hired David A. Brainard as its Senior Vice
President and Chief Financial Officer. Mr. Brainard has previously served as the
Chief Financial Officer for Olan Mills, Inc., an 850 store retail photography
chain and for Ben Franklin Retail Stores, Inc., a franchisor, wholesaler and
retailer. Mr. Brainard is also a certified public accountant
On March 12, 1998, the Company hired John A. Bicks as its Senior Vice President
and General Counsel. Prior thereto, Mr. Bicks was an attorney with the law firm
of Pryor, Cashman, Sherman & Flynn and, in that capacity, represented the
official committee of equity security holders in the chapter 11 case of Old ICH.
Mr. Bicks has been a practicing attorney in New York since 1985, serving as an
Assistant District Attorney in the Manhattan District Attorney's Office from
1985 until 1991, and subsequently in private practice specializing in the areas
of chapter 11 business reorganization and restructuring. Pryor, Cashman, Sherman
& Flynn provides legal services to the Company and its subsidiaries. Mr. Bicks
also serves as Director of the Company.
4
<PAGE>
STRATEGY
The Company's primary business strategy is to expand its operations through the
acquisition and construction of additional Arby's restaurants while enhancing
the quality of operations and competitive position of its existing Arby's
restaurants. Sybra believes the size of the nationwide Arby's system will
continue to present opportunities for selective growth through acquisitions. In
addition, Sybra believes that most of the markets in which it currently operates
are underserved and will provide opportunities for construction of new
restaurants to further penetrate those existing markets, and markets in which
the Company has exclusive development rights.
Consistent with Sybra's strategy of expanding its operations through the
acquisition of existing Arby's restaurants, during the first quarter of 1998
Sybra closed on its acquisition of eight Arby's restaurants (and the management
of an additional Arby's restaurant) located in Sacramento, California.
To implement Sybra's strategy of expanding through the development and
construction of new Arby's restaurants, Sybra has entered into an agreement with
Arby's, Inc., the franchisor of Arby's restaurants, which calls for Sybra to
open and operate between six and eighteen additional restaurants in each of the
next ten calendar years, adding a total of 150 new restaurants by December 31,
2007. In addition, Sybra opened three new Arby's restaurants during 1997 and one
new restaurant during the first quarter of 1998. The number of restaurants
opened may vary depending upon general economic conditions, variability in the
time required to obtain local permits, the continued availability of financing
and the Company's ability to locate additional suitable restaurant sites.
However management currently believes that Sybra will meet or exceed its
development obligations under the Development Agreement with respect to 1998.
See "Recent Developments - New Store Development".
As part of Sybra's overall strategy of improving the quality of operations of
its existing Arby's units, the Company closely monitors factors affecting the
overall profitability of its restaurant operations as well as the profitability
of individual restaurants. During 1997, Sybra believes it has made improvements
in several factors bearing on the overall profitability of its operations,
including reductions in labor costs as a percentage of goods sold and increased
efficiencies in marketing and advertising. Sybra has also implemented a stock
option and bonus program which provides individual unit managers with economic
incentives to improve the operating profitability of their units. During 1997,
Sybra also closed four restaurants due to unprofitability.
RESTAURANT OPERATIONS
Menu
- ----
Each of Sybra's Arby's restaurants offers a diverse menu containing a variety of
food items including roast beef, chicken, turkey and ham sandwiches. Arby's
restaurants are generally known for their roast beef sandwiches, which are made
from thinly-sliced beef which is freshly-roasted at each restaurant. The Arby's
menu also typically includes potato products, salads and soft drinks. In
addition, the restaurants sell a variety of promotional products, normally on a
limited-time basis. A number of Sybra's Arby's restaurants also serve breakfast,
including eggs and breakfast meat selections.
Marketing and Promotions
- ------------------------
All franchisees of Arby's, Inc. must belong to AFA Service Corporation ("AFA"),
a non-profit association of Arby's restaurant operators, and must contribute a
specified portion (currently 0.7%) of their restaurant sales as dues to AFA. In
return, AFA provides franchisees with creative materials such as television and
radio commercials, ad mats for newspapers, point-of-purchase graphics and other
advertising materials. The direction and management of AFA is governed by its
board of directors, whose members are elected by the member franchisees. In
addition to the required payments to AFA, certain of Sybra's Arby's restaurants
also participate in advertising cooperatives composed of Arby's franchisees from
their local area. Member franchisees of the cooperative pay a percentage of
their restaurant sales, in an amount determined by the cooperative, to fund
local advertising and promotional campaigns and such other marketing activities
as the members deem to be in their best interests. Sybra participates in
advertising cooperatives in two of its regions (Northern and Southwestern).
5
<PAGE>
Site Selection
- --------------
Site selection for new restaurants is made by Sybra's real estate and
development department, subject to acceptance by the Franchisor, Arby's, Inc. A
typical market area will have a population base of at least 30,000 people within
a three-mile radius. Within the potential market area, Sybra evaluates major
retail and office concentrations and major traffic arteries to determine focal
points. Site specific factors which Sybra considers include visibility,
convenience of access, proximity to direct competition, access to utilities,
local zoning regulations and various other factors. Sybra's current business
strategy is to locate new restaurants, whenever possible, on the grounds of, or
nearby to, shopping centers.
Restaurant Layout and Operations
- --------------------------------
Sybra's Arby's restaurants (excluding mall and food court locations) typically
range from 2,100 to 3,200 square feet, with a seating capacity of between 60 and
90 people and are typically open from 10 a.m. to 11 p.m., with some restaurants
open for extended evening hours. Approximately 80% of Sybra's restaurants
feature drive-thru windows.
Raw Materials
- -------------
As an Arby's franchisee, the Company complies with recipe and ingredient
specifications provided by the Franchisor, and purchases all food and beverage
inventories and restaurant supplies from independent vendors approved by the
Franchisor. Arby's, Inc. does not sell food or supplies to its franchisees.
Sybra and all other Arby's franchisees are members of ARCOP, Inc. ("ARCOP"), a
non-profit cooperative purchasing organization. ARCOP facilitates negotiation of
national contracts for food and distribution, taking advantage of the large
purchasing requirements of the member franchisees. Since Arby's franchisees are
not required to purchase any food products or supplies from Arby's, Inc., ARCOP
facilitates control over food supply costs and avoids franchisor conflicts of
interest.
The Company purchases soft drink products from the Coca-Cola Company and its
affiliates. In the Southwestern region, Dr. Pepper products are also purchased.
Most other food items and supplies purchased by Sybra are warehoused and
distributed by AmeriServe, an independent distributor.
The Company has not experienced any significant shortages of food, equipment,
fixtures or other products which are necessary to restaurant operations. The
Company anticipates no such shortages and believes that alternate suppliers are
available in the event such shortages occur.
FRANCHISE AND DEVELOPMENT AGREEMENTS
General
- -------
Sybra's relationship with Arby's, inc. is governed by (1) the
Development Agreement, which grants the Company exclusive franchise
territories and (2) unit franchise and restaurant franchise agreements
(collectively, "Franchise Agreements"), one of which is executed in connection
with the opening of each of Sybra's restaurants. These agreements provide
Arby's, Inc. with significant rights regarding Sybra's business operations.
Any acquisition by Sybra of an existing Arby's restaurant, or the development by
Sybra of a new Arby's restaurant, requires the prior consent of Arby's, Inc.
Sybra is prohibited from operating, managing or having a controlling interest or
a fifteen percent (15%) or greater interest in any competing business offering
roast beef sandwiches for sale to consumers and located within the Protected
Area (as defined in the appropriate unit franchise agreement) for each and every
individual Arby's restaurant they franchise.
Sybra's agreements with Arby's, Inc. also restrict the sale, assignment or
transfer of any substantial portion of the assets of Sybra without the prior
written consent of Arby's, Inc. However those agreements do not require approval
of the assignment, transfer or pledge of all or any part of the assets of Sybra,
excluding the license agreements, or all or any part of the stock of Sybra to
banks or other lending institutions as collateral security for loans made
directly to or for the benefit of Sybra.
6
<PAGE>
Should Sybra fail to comply with the Development Agreement or the Franchise
Agreements for restaurants, Arby's, Inc. could terminate the exclusive nature of
Sybra's franchises in such covered territory. Certain events of default under a
Franchise Agreement give Arby's, Inc. the right to terminate the franchise
rights of the Sybra restaurant governed by such Franchise Agreement. Depending
upon the aggregate number of restaurants affected, a loss of franchise rights
could have a material adverse effect on the Company.
Sybra is also required to operate each of its Arby's restaurants in accordance
with certain standards contained in the Arby's, Inc. Operations Manual (the
"Operations Manual"). Arby's, Inc. periodically monitors the operations of
Sybra's restaurants and notifies Sybra of any failure to comply with any of the
Franchise Agreements, the Development Agreement or the Operations Manual.
Development Agreement
- ---------------------
Effective as of November 1, 1997, Sybra and Arby's, Inc. entered into a
Development Agreement covering nine counties in the
Harrisburg-Lancaster-Lebanon-York Dominant Marketing Area ("DMA"), two counties
in the Detroit DMA, twelve counties in the Philadelphia DMA, three counties in
the Dallas-Fort Worth DMA, seven counties in the Washington, D.C.-Hagerstown, MD
DMA, as well as portions of Baltimore County, MD and Burlington County, NJ.
Under the terms of the Development Agreement, Sybra has been granted exclusive
rights to develop and operate Arby's restaurants within the covered territories,
and is required to develop and commence construction of new Arby's restaurants
in accordance with development and performance schedules set out in the
Development Agreement. Pursuant to the Development Agreement, Sybra is required
to submit to Arby's, Inc. for its acceptance each proposed restaurant site and
the plans for each new restaurant. Under the Development Agreement, Sybra is
currently obligated to open or commence construction of a minimum of six
restaurants in 1998, nine restaurants in 1999, thirteen restaurants in 2000,
fifteen restaurants in 2001, seventeen restaurants in 2002 and eighteen
restaurants in each year 2003 through and including 2007. Although no assurances
can be given, Sybra currently anticipates meeting or exceeding all of the
development requirements under the Development Agreement.
Unit Franchise Agreements
- -------------------------
Sybra operates each of its Arby's restaurants under a Franchise Agreement with
Arby's, Inc. Each Franchise Agreement provides the Company the right to operate
an Arby's restaurant for a period of 20 years. The Franchise Agreements are
renewable by the Company, subject to certain conditions, generally for 20 years
(the financial terms of any renewal period may differ from those in effect
during the initial term). Each Unit Franchise Agreement gives Sybra the
exclusive right to operate an Arby's restaurant in a particular geographic area,
defined by either a radius restriction or specific boundaries. The Franchise
Agreements also require Sybra to make royalty payments to Arby's, Inc. equal to
a fixed or variable percentage of each restaurant's revenue. For stores opened
pursuant to the Development Agreement, those royalty payments are set at four
percent of sales.
Pursuant to the Unit Franchise Agreements, Arby's, Inc. prescribes the designs,
color schemes, signs and equipment to be utilized in each restaurant, and
determines the menu items as well as the formulas and ingredients for the
preparation of food and beverage products. Each new restaurant opened within an
area covered by the Development Agreement will be governed by a Unit Franchise
Agreement, with a license fee of $25,000. Of that license fee, $10,000 will be
deducted from monies already placed on deposit with Arby's, Inc. in accordance
with the Development Agreement.
7
<PAGE>
GOVERNMENT REGULATIONS
The restaurant business is subject to extensive federal, state and local
government regulations relating to the development and operation of restaurants,
including regulations relating to building, ingress and egress, zoning and the
preparation and sale of food. The Company is subject to federal and state
environmental regulations, but these have not historically had a material effect
on the Company's operations. The Company is also subject to laws governing
relationships with employees, such as minimum wage requirements, health
insurance coverage requirements and laws regulating overtime working conditions
and employee citizenship. On September 1, 1997, the balance of Congress's 1996
minimum wage increase to $5.15 per hour was put into effect. Further increases
in the minimum wage or mandatory health care coverage could adversely affect the
Company.
SEASONAL AND QUARTERLY RESULTS
Sybra's restaurant sales are moderately seasonal for each of its regions.
Historically, January, February and March generate the lowest sales volumes. As
a result, operating margins for the first quarter tend to be slightly lower than
those for the remaining quarters due to lower sales providing a smaller spread
to cover fixed costs.
TRADEMARKS AND SERVICE MARKS
The Franchise Agreement grants the Company the right to use certain registered
trademarks and service marks of Arby's, Inc. The names "Arby's," "Arby's
Restaurants" and "Arby's Roast Beef Restaurants" were adopted to identify and
promote Arby's. The Company believes that these marks are of material importance
to the Company's business.
COMPETITION
The restaurant business is highly competitive and is affected by changes in the
public's eating habits and preferences, population trends and traffic patterns,
as well as by local and national economic conditions affecting consumer spending
habits, many of which are beyond Sybra's control. Key competitive factors in the
industry are the quality and value of the food products offered, quality and
speed of service, attractiveness of facilities, advertising, name brand
awareness and image and restaurant location. A number of Sybra's significant
competitors are larger or more diversified and have substantially greater
resources than the Company.
Sybra's operations, as with the restaurant industry generally, can be
significantly affected by factors such as changes in local, regional or national
economic conditions, changes in consumer tastes, severe weather and consumer
concerns about nutritional quality of quick-service food. In addition, factors
such as changes in food, labor and energy costs, the availability and cost of
suitable restaurant sites and the availability of an adequate number of
hourly-paid employees can also affect the restaurant industry.
EMPLOYEES
As of December 31, 1997, Sybra employed approximately 3,800 persons in seven
states. Of these employees, approximately 68 held management and administrative
positions and the remainder were engaged in the operation of Sybra's
restaurants. None of Sybra's employees are covered by a collective bargaining
agreement. Sybra considers its employee relations to be generally good.
8
<PAGE>
ITEM 2. PROPERTIES
- ------------------
As of December 31, 1997, the Company operated 149 restaurants in the areas
listed below. Of the 149 restaurants, the Company owned the land and building
for two restaurants and held long-term leases covering land and/or buildings for
the remainder. The Company's land and building leases are most commonly written
for terms of twenty years with one or more five year renewal options. Certain
leases require the payment of additional rent equal to a percentage (usually
between 5% and 8%) of annual sales in excess of specified amounts.
The Company leases office space in Atlanta, Georgia; La Jolla, California;
Flint, Michigan; Sinking Spring, Pennsylvania; Plano, Texas and Tampa, Florida
for its Corporate, Executive, Northern, Eastern, Southwestern and Southeastern
operations centers, respectively.
The following lists the locations of the restaurants operated by the Company (by
region) as of December 31, 1997:
Northern Region:
Michigan 45
Eastern Region:
Pennsylvania 24
Virginia 3
Maryland 2
Southwestern Region:
Texas 55
Southeastern Region:
Florida 20
---
Total All Markets 149
===
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is not a party to any pending legal proceeding which, in
management's belief, will have a material adverse effect on the Company's
results of operations or financial condition, nor to any other pending legal
proceedings other than ordinary, routine litigation incidental to its business.
The Company also maintains commercial, general liability, workers' compensation
and directors and officers' insurance policies which cover most of the actions
brought against the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------
None
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
- -------
MARKET INFORMATION
The Company's common stock commenced trading on the American Stock Exchange on
July 23, 1997 under the symbol "IH."
The following tables set forth, for the periods indicated, the applicable range
of the high and low sales prices for the Company's common stock on the American
Stock Exchange.
1997
High Low
Third Quarter (for the period July 4-7/8 3-7/8
23, 1997 to September 30, 1997)
Fourth Quarter 4-7/16 3
NUMBER OF STOCKHOLDERS
The information available as of March 25, 1998 indicates that there were 2,823
holders of record of the Company's common stock.
DIVIDENDS
The Company has not paid any cash dividends on its common stock and does not
intend to pay cash dividends on its common stock for the foreseeable future. The
Company intends to retain future earnings to finance future development.
ITEM 6. SELECTED FINANCIAL INFORMATION
- --------------------------------------
Selected Historical Financial Data
Set forth below are selected historical data of the Company, which is the
post-reorganization successor to Old ICH. Until the Company's acquisition of
Sybra, Inc. (see Note 2 to Notes To Consolidated Financial Statements), the
Company had no significant business operations. Old ICH financial data is not
presented as its assets, liabilities and operations were dissolved or sold as
part of Old ICH's Reorganization Plan (see Note 1 to Notes To Consolidated
Financial Statements). For purposes of presentation, Sybra is considered to be a
Predecessor of the Company. Accordingly, the selected historical financial data
as of and for each of the four years ended December 28, 1996, and the four
months ended April 30, 1997, were derived from the Financial Statements of the
Predecessor. Due to required purchase accounting adjustments relating to the
acquisition and certain corporate administrative expenses that are necessary to
operate on a stand-alone basis, the consolidated financial and other data for
the period subsequent to the acquisition (the "Successor" period) is not
comparable to such data for the periods prior to the acquisition (the
"Predecessor" periods). Pro-forma net income (loss) was derived by retroactively
adjusting all prior years as if the acquisition had occurred on January 1, 1993.
As such, the effects of purchase accounting, including the impact of the
different capital structure of the Predecessor, has been reflected in arriving
at pro-forma net income (loss) for the prior periods. In addition, adjustments
reflecting the costs of operating a stand-alone company have been retroactively
included in arriving at pro-forma net income (loss) for the prior periods. Such
costs include, but are not limited to, administrative services, tax compliance,
treasury service, human resource administration and legal services. The
information contained in this table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and accompanying notes thereto included
herein.
10
<PAGE>
<TABLE>
<CAPTION>
Predecessor Successor
---------------------------------------------------------------- ----------------------
Combined
-------------------------------------
Four Eight
Months Months
Statement of Earnings Year ended Year ended Year ended Year ended Ended ended Year ended
Data (000's, except EPS) Dec. 25, Dec. 31, Dec. 30, Dec. 28, Apr. 30, Dec. 31, Dec. 31,
1993 1994 1995 1996 1997 1997(a) 1997
---- ---- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 111,952 $ 115,651 $ 115,531 $ 116,124 $ 37,916 $ 75,006 $ 112,922
Costs & expenses
Restaurant costs/
expenses 89,569 92,821 94,414 93,867 32,006 61,503 93,509
General & adm 5,945 6,586 6,643 6,179 2,212 5,087 7,299
Dep & amort 6,185 5,935 6,041 5,972 2,006 3,398 5,404
Non-recurring/
restructuring chrgs -- -- -- -- -- 1,497 1,497
Other 620 1,400 900 1,200 -- 977 977
Earnings from
operations 9,633 8,909 7,533 8,906 1,692 2,544 4,236
Interest expense 1,744 1,909 2,605 2,346 638 3,661 4,299
Earnings (loss)
before 7,889 7,000 4,928 6,560 1,054 (1,117) (63)
income taxes
Provision (benefit) for
income taxes 2,977 2,650 1,913 2,398 434 (253) 181
Net income (loss) - as
reported $ 4,912 $ 4,350 $ 3,015 $ 4,162 $ 620 $ (864) $ (244)
Basic and Diluted loss
per share -- -- -- -- -- $ (0.31) --
Pro-forma net income
(loss) (b) $ 1,697 $ 1,496 $ 206 $ 857 $ (791) $ 690 $ (101)
Other data:
EBITDA (d)$15,818 (d)$14,844 (d)$13,574 (d)$14,878 (d)$ 3,698 $ 5,942 $ 9,640
Balance sheet data: (c)
Working capital defecit $ (7,337) $ (9,460) $ (7,112) $ (8,455) n/a $ (5,006) n/a
Total assets $ 65,111 $ 68,789 $ 74,373 $ 75,601 n/a $ 75,264 n/a
Total long-term debt $ 22,561 $ 27,321 $ 31,152 $ 25,625 n/a $ 50,079 n/a
Shareholders' equity $ 28,615 $ 27,965 $ 30,980 $ 35,142 n/a $ 11,185 n/a
</TABLE>
NOTES: (a) Included in the results of operations for the eight months
ending December 31, 1997 are sales and operating loss of $164,000
and $(188,000), respectively, of the Company for the period from
February 19, 1997 to April 30, 1997.
(b) Pro-forma net income (loss) reflects 1) the effects of purchase
accounting for Sybra as if the purchase was effective on January
1, 1993; 2) increased interest expense for the Predecessor periods
as a result of a difference in capital structure; 3) increased
general and administrative expenses reflecting the costs of
operating as a stand-alone public company; and 4) has been tax
effected using a combined federal and state income rate of 40%.
(c) Balance sheet data are presented as of December 25, 1993, December
31, 1994, December 30, 1995, December 28, 1996 and December
31, 1997
(d) EBITDA on a pro-forma basis giving effect to the adjustments
discussed a in Note (b) above would have been $13,417, $13,082,
$10,932, $12,018, $2,212 and $8,209 respectively for the periods.
For the combined period, pro-forma EBITDA would have been $10,421.
Management believes that EBITDA is generally accepted as providing
useful information regarding a company's ability to service and/or
incur debt. EBITDA should not be considered in isolation or as a
substitute for net income, cash flows, or other consolidated
income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's
profitability or liquidity.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion should be read in conjunction with the "Selected
Historical Financial Data" and the Financial Statements of the Company and the
accompanying notes thereto included elsewhere herein. Certain information
discussed below may constitute forward-looking statements within the meaning of
the federal securities laws. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be achieved.
Forward-looking information is subject to certain risks, trends and
uncertainties that could cause actual results to differ materially from
projected results. Among those risks, trends and uncertainties are the general
economic climate, costs of food and labor, consumer demand, interest rate
levels, the availability of financing and other risks associated with the
acquisition, development and operation of new and existing restaurants.
GENERAL
The Company's revenues consist almost entirely of restaurant sales from its
wholly-owned subsidiary, Sybra, Inc.
Restaurant costs and expenses include all direct operating costs, including
direct labor, occupancy costs, advertising expenses, royalty payments,
expenditures for repairs and maintenance, and workers' compensation and casualty
and general liability insurance costs. Advertising fees paid to AFA to develop
and prepare advertising materials and to undertake marketing research are equal
to 0.7% of restaurant sales. In addition, the Company operates its restaurants
pursuant to licenses which require the Company to pay Arby's, Inc. a royalty
based upon percentages of its restaurant sales (presently an aggregate of
approximately 2.9% of the Company's restaurant sales). The royalty rate for new
restaurants (currently 4%) will result in an increase in the Company's aggregate
royalty rate as new restaurants are opened.
General and administrative expenses consist of corporate and regional office
expenses, including executive and administrative compensation, office expenses,
travel and professional fees.
RESULTS OF OPERATIONS
The following table sets forth, with respect to the Company and for the periods
indicated, the percentage of total revenues represented by certain expense and
income items.
For purposes of the discussion below, the results of operations for the year
ended December 31, 1997 represent the mathematical addition of the historical
amounts for the Predecessor period (December 29, 1996 to April 30, 1997) and the
Successor period (May 1, 1997 to December 31, 1997) and are not necessarily
indicative of the results that would actually have been obtained if the
acquisition had occurred on December 31, 1996. The Predecessor period does not
give effect to, among other items, corporate expenses necessary to operate on a
stand-alone basis. Such expenses include, but are not limited to, certain
administrative services, tax compliance, treasury service, human resource
administration and legal services. The discussion below does not include a
comparison of the year ended December 28, 1996 to the year ended December 30,
1995 as the results consisted only of the Predecessor operations and are not
comparable to the Company's current operations for the reasons mentioned above.
12
<PAGE>
Predecessor Successor
---------------------- ------------
Combined
---------------------------------------
Year Four Months Eight Months Year
Ended Ended Ended Ended
December 28, April 30, December 31, December 31,
1996 1997 1997 1997
----------- -------- ------------ ------------
Revenues 100.0% 100.0% 100.0% 100.0%
Expenses
Restaurant costs
& expenses 80.9% 84.4% 82.0% 82.8%
General & administrative 5.3% 5.8% 6.8% 6.5%
Depreciation &
amortization 5.1% 5.3% 4.5% 4.8%
Non-recurring/
restructuring charges -- -- 2.0% 1.3%
Other 1.0% -- 1.3% .9%
----- ----- ----- -----
Operating income (loss) 7.7% 4.5% 3.4% 3.7%
Interest expense 2.0% 1.7% 4.9% 3.8%
----- ----- ----- -----
Income (loss) before taxes 5.7% 2.8% (1.5)% (.1)%
Income taxes (benefit) 2.1% 1.1% (.3)% .1%
----- ----- ----- -----
Net income (loss) 3.6% 1.7% (1.2)% (.2)%
================== ===================
Comparison of the Years Ended December 31, 1997 and December 28, 1996
- --------------------------------------------------------------------
Revenues - Revenues were $112.9 million for FY 1997 as compared to $116.1
million for FY 1996, a decrease of $3.2 million primarily as a result of same
store sales being down 3% for the year due to a change in marketing strategy
emphasizing brand quality and fewer price promotions begun in the third quarter
of 1997.
Restaurant Costs & Expenses - Restaurant costs and expenses were $93.5 million,
or 82.8% of sales, for FY 1997 as compared to $93.9 million, or 80.9% of sales
for FY 1996. a decrease of $358,000 due to the sales decline explained above. As
a percent of sales, costs increased as a result of increases in rent expense
associated with the Company's sale/leaseback of 61 properties previously
classified as owned.
General and Administrative - General and administrative costs and expenses were
$7.3 million, or 6.5% of sales, for FY 1997 as compared to $6.2 million, or 5.3%
of sales for FY 1996, an increase as a percent of sales as a result of lower
sales and of costs and expenses associated with operating I.C.H. Corporation as
a stand-alone public company as explained above and increased expenses
associated with business development and real estate operations necessary to
achieve new store development requirements.
Depreciation and Amortization - Depreciation and amortization expense was $5.4
million, or 4.8% of sales in FY 1997 as compared to $6.0 million, or 5.1% of
sales in FY 1996, a decrease as a percent of sales as a result of the impact of
the sale/leaseback as explained above net of goodwill amortization as a result
of purchase accounting related to the Sybra acquisition.
Non-recurring and Restructuring Charges - Non-recurring and restructuring
charges were $1.5 million in FY 1997 as a result of the restructuring of Sybra's
operations, buy-out of an employment contract and non-recurring expenses related
to obtaining financing and maintaining Sybra's status as an Arby's franchisee.
Other - Other expenses were $1.0 million in FY 1997, as compared to $1.2 million
in FY 1996. Other expenses in FY 1997 relate primarily to the cost of operations
of Perry Park, and for FY 1996 relate primarily to store closings.
13
<PAGE>
Interest Expense - Interest expense was $4.3 million in FY 1997 as compared to
$2.4 million in FY 1996, an increase of $2.0 million as a result of debt
incurred in connection with the Company's acquisition of Sybra.
PERRY PARK RESORTS, INC.
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 unimproved
acreage which generates agriculturally based revenues. The platted undeveloped
lots and unimproved acreage are estimated to be approximately 1,800 acres. The
operations of the Perry Park development are seasonal in nature and are not
material to the operations of the Company.
IMPACT OF THE YEAR 2000 ISSUES
Based on a recent assessment, the Company has determined that it will not have
to modify or replace any of its software and that its computer systems will
properly utilize dates beyond December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs arise from debt service on indebtedness
incurred in connection with the Sybra acquisition and the funding of capital
expenditures. As of December 31, 1997, the Company had total outstanding
indebtedness for borrowed money of $43 million, comprised of a $34 million term
facility with Atherton Capital Incorporated ("Atherton") and a $9 million debt
obligation to USRP. The Atherton term facility has a weighted-average maturity
of 12.5 years and bears interest at 10.63%. The Atherton term facility requires
monthly payments of principal and interest, is collateralized by substantially
all of the Company's restaurant equipment, and imposes certain financial
restrictions and covenants. The $9 million obligation to USRP bears interest at
the rate of 14.5%.
The Company's primary source of liquidity during the period from February 19,
1997 through December 31, 1997 was funds from the operation of the restaurants
owned by Sybra and the proceeds of the sale of Bankers Multiple Line Insurance
Company ("BML") to the Lone Star Liquidating Trust.
In the future, the Company's liquidity and capital resources will primarily
depend on the operations of Sybra which, under the provisions of its loan
agreement with Atherton, would permit, under certain conditions, distributions
and dividends to the Company. Sybra, like most restaurant businesses, is able to
operate with nominal or deficit working capital because all sales are for cash
and inventory turnover is rapid. Renovation and/or remodeling of existing stores
is either funded directly by Sybra from available cash or, in some instances, is
financed through outside lenders. Construction or acquisition of new stores is
generally, although not always, financed by outside lenders. The Company
believes that it will continue to be able to secure adequate financing on
acceptable terms for new store construction and acquisitions and that cash
generated from operations will be adequate to meet its needs for the foreseeable
future, although no assurances can be given.
On August 7, 1997, Sybra executed a loan commitment letter with FFCA to finance
the construction of up to 12 new Arby's restaurants during the next two years.
Under the terms of the commitment letter, FFCA has agreed to finance mortgage
and equipment loans for up to 12 new Arby's restaurants to be built by Sybra, to
a maximum of $1 million per location.
The Company maintains, with a bank, a $150,000 letter of credit that
automatically renews in November of each year.
14
<PAGE>
CAPITAL LOSS CARRY FORWARD
On April 25, 1997, the Company sold its interest in the stock of BML which
generated a significant tax loss (see Note 11 of Notes To Consolidated Financial
Statements). Due to limitations pursuant to the Internal Revenue Code and
Treasury regulations thereunder, no deferred tax asset has been recorded for the
capital loss carry forward due to the uncertainty of its existance and
realizability.
CAPITAL EXPENDITURES
Sybra's total capital expenditures were $12.1 million, $6.3 million and $5.2
million in 1995, 1996 and 1997, respectively, which include new store
development, as well as store maintenance, store remodel and store renovation
capital expenditures. The Company anticipates that Sybra's store maintenance,
store remodel and store renovation capital expenditures for 1998 will
approximate $2.5 million. The level of capital expenditures for new store
development and acquisitions will be dependent upon several factors, including
the number of stores constructed and/or acquired as well as the capital
structure of any such transactions.
INFLATION
Certain of the Company's operating costs are subject to inflationary pressures,
of which the most significant are food and labor costs. As of December 31, 1997,
approximately 24% of the Company's employees were paid wages equal to or based
on the federal minimum hourly wage rate. Recent changes in the federal minimum
hourly wage rate will serve to increase labor costs in fiscal year 1998 and
beyond. Economic growth that would reduce unemployment or make more jobs
available in higher paying industries, would directly affect the Company's labor
costs.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The response to this item is submitted as a separate section of this Form 10-K.
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of stockholders to
be held May 29, 1998.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of stockholders to
be held May 29, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of stockholders to
be held May 29, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of stockholders to
be held May 29, 1998.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FROM 8-K
- ------------------------------------------------------------------------
(a) 1. Financial Statements
The financial statements filed as part of this report are listed in the
Index to Consolidated Financial Statements on page F-1.
Page(s)
-------
Independent Accountant's Opinion F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-17
Independant Accountant's Report F-18
Consolidated Balance Sheet of February 19, 1997 F-19
Notes to Consolidated Financial Statements F-20 - F-25
2. Financial Statement Schedules
Schedules have been omitted because the required information is shown in
the consolidated financial statements or notes thereto or they are not
applicable.
3. Exhibits
The exhibits to this Report are listed on the accompanying Index to
Exhibits and are incorporated herein by reference or are filed as part
of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
A Report on Form 8-K, dated February 10, 1998, was filed by the Company
during the quarter ended December 31, 1997. Items 5 and 7 were reported
thereon.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
I.C.H. Corporation
(Registrant)
Dated: March 27, 1998 /s/James R. Arabia
--------------------------
James R. Arabia
Chairman of the Board, President and
Chief Executive Officer
Dated: March 27, 1998 /s/David A. Brainard
--------------------------
David A. Brainard
Senior Vice President and
Chief Financial Officer
Dated: March 27, 1998 /s/John A. Bicks
--------------------------
John A. Bicks
Secretary and Director
Dated: March 27, 1998 /s/Michael D. Dunn
--------------------------
Michael D. Dunn
Director
Dated: March 27, 1998 /s/Kenneth E. Giddens
--------------------------
Kenneth E. Giddens
Director
Dated: March 27, 1998 /s/Carl D. Robinson
--------------------------
Carl D. Robinson
Director
Dated: March 27, 1998 /s/Raymond L. Steele
--------------------------
Raymond L. Steele
Director
Dated: March 27, 1998 /s/Robert H. Drechsler
--------------------------
Robert H. Drechsler
Director
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I.C.H. CORPORATION AND SUBSIDIARIES:
Independent Accountant's Report F-2
Consolidated Balance Sheets - Company as of December 31, 1997
and Predecessor as of December 28, 1996 F-3
Consolidated Statements of Operations - Company for the
eight-month period ended December 31, 1997 and Predecessor
for the four-month period ended April 30, 1997 and the
years ended December 28, 1996 and December 30, 1995 F-4
Consolidated Statements of Stockholders' Equity - Company for
the period from February 19, 1997 to December 31, 1997 and
Predecessor for the four-month period ended April 30, 1997
and the years ended December 28, 1996 and December 30, 1995 F-5
Consolidated Statements of Cash Flows - Company for the eight-
month period ended December 31, 1997 and Predecessor for
the four-month period ended April 30, 1997 and the years
ended December 28, 1996 and December 30, 1996 F-6
Notes to Consolidated Financial Statements F-7 - F-17
I.C.H. CORPORATION AND SUBSIDIARIES:
Independent Accountant's Report F-18
Consolidated Balance Sheet as of February 19, 1997 F-19
Notes to the Consolidated Financial Statements F-20 - F-25
</TABLE>
F-1
<PAGE>
[Coopers & Lybrand Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
I.C.H. Corporation
We have audited the accompanying consolidated balance sheets of Sybra, Inc.
("Predecessor") as of December 28, 1996 and of I.C.H. Corporation and
Subsidiaries ("Company") as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity and cash
flows--Predecessor for the years ended December 30, 1995 and December 28, 1996
and for the four-month period ended April 30, 1997 and--Company for the
eight-month period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sybra, Inc. as of
December 28, 1996 and--I.C.H. Corporation and Subsidiaries as of December 31,
1997, and the consolidated results of their operations and their cash
flows--Predecessor for the years ended December 30, 1995 and December 28, 1996
and for the four-month period ended April 30, 1997 and--Company for the
eight-month period ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
March 28, 1998
F-2
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
December 28, December 31,
1996 1997
(Predecessor) (Company)
------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,294 $ 4,418
Accounts receivable 299 530
Inventories 1,499 1,372
Deferred income taxes 1,225 1,257
Other current assets 655 1,565
------- --------
Total current assets 5,972 9,142
Property and equipment, net 53,582 24,696
Intangible assets, net 15,848 39,470
Other assets 199 1,956
------- --------
Total assets $75,601 $ 75,264
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,277 $ 2,741
Accrued liabilities 8,253 8,745
Current portion of long-term debt 4 1,714
Current portion of capital
lease obligations 893 948
------- --------
Total current liabilities 14,427 14,148
Noncurrent liabilities:
Long-term debt 1,081 44,718
Long-term capital lease obligations 3,647 2,699
Debt to former parent 20,000 --
Deferred income taxes 14 1,908
Other liabilities 1,290 606
------- --------
Total liabilities 40,459 64,079
------- --------
Stockholders' equity:
Predecessor common stock, $.50 par value;
200,000 authorized, 55,199 issued and 28
outstanding
Preferred stock, $0.01 par value; 1,000,000
authorized; none issued and outstanding
Common stock, $0.01 par value; 9,000,000
authorized; 2,414,495 outstanding
(see note 10) 24
Paid-in-capital 21,398 12,025
Retained earnings (deficit) 13,716 (864)
------- --------
Total stockholders' equity 35,142 11,185
------- --------
Total liabilities and stockholder's equity $75,601 $ 75,264
======= ========
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share amounts)
Predecessor Company
------------------------------------ ------------
For the For the
four eight
For the For the months months
year ended year ended ended ended
December 30, December 28, April 30, December 31,
1995 1996 1997 1997
----------- ----------- -------- ------------
Revenues and other income:
Restaurant sales $115,370 $115,973 $37,868 $ 73,787
Real estate operations and 161 151 48 1,219
other
-------- -------- ------- --------
115,531 116,124 37,916 75,006
Costs and expenses:
Restaurant costs and
expenses 94,414 93,867 32,006 61,503
General and administrative 6,643 6,179 2,212 5,087
Depreciation and
amortization 6,041 5,972 2,006 3,398
Non-recurring/restructuring
charges -- -- -- 1,497
Other 900 1,200 -- 977
-------- -------- ------- --------
Operating income 7,533 8,906 1,692 2,544
Interest expense 2,605 2,346 638 3,661
-------- -------- ------- --------
Income (loss) before income
taxes 4,928 6,560 1,054 (1,117)
Provision (benefit) for
income taxes 1,913 2,398 434 (253)
-------- -------- ------- --------
Net income (loss) $ 3,015 $ 4,162 $ 620 $ (864)
======== ======== ======= ========
Net loss per share
Basic ($0.31)
Diluted ($0.31)
Weighted-average common shares
outstanding (See note 10) 2,793,550
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands except share amounts)
<TABLE>
<CAPTION>
TOTAL
PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS EQUITY
-------------------- -------- -------- --------
Shares Amount
<S> <C> <C> <C> <C> <C>
Predecessor
Balance at December 31, 1994 55,199 $28 $ 21,398 $ 6,539 $ 27,965
Net income -- -- -- 3,015 3,015
--------- ------- -------- -------- --------
Balance at December 30, 1995 55,199 28 21,398 9,554 30,980
Net income -- -- -- 4,162 4,162
--------- ------- -------- -------- --------
Balance at December 28, 1996 55,199 28 21,398 13,716 35,142
Net income for period -- -- -- 620 620
Distributions:
Land parcel -- -- -- (845) (845)
Cash -- -- -- (46,079) (46,079)
========= ======= ======== ======== ========
Balance at April 30, 1997 55,199 $28 $ 21,398 $(32,588) $(11,162)
========= ======= ======== ======== ========
Company
Balance at February 19, 1997 -- $ -- $ 12,190 $ -- $ 12,190
Issuance of common stock 2,414,495 24 (24) --
Cash paid for shares
redeemed -- -- (141) -- (141)
Net loss (see Note 1) -- -- -- (864) (864)
========= ======= ======== ======== ========
Balance at December 31, 1997 2,414,495 $ 24 $ 12,025 $ (864) $ 11,185
========= ======= ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands except share amounts)
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------------------- -----------------
For the four
For the year For the year months For the eight
ended ended ended months
December 30, December 28, April 30, ended December 31,
1995 1996 1997 1997
----------- ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,015 $ 4,162 $ 620 $ (864)
Adjustments to reconcile net income
to cash from operating activities:
Depreciation and amortization 6,041 5,972 2,006 3,398
Deferred income taxes (benefit) (239) (645) 480 (68)
Accrued rent -- -- -- 332
Provision for store closings and other 900 1,200 -- 462
non-recurring/restructuring charges
Changes in current assets and liabilities:
Accounts receivable -- -- -- (231)
Inventories 37 (16) 38 89
Payable to (due from) former parent 290 64 (741) (370)
Accounts payable and accrued expenses (1,109) 2,761 (3,173) 880
Other, net (485) (596) 168 (1,334)
-------- -------- -------- --------
Net cash provided by operating
activities 8,450 12,902 (602) 2,294
-------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures (11,976) (6,095) (1,763) (3,336)
Proceeds from disposition of property
and equipment -- -- 35,655 232
Acquisition of Sybra, Inc, net of $886
cash acquired -- -- -- (13,614)
Sale of subsidiary -- -- -- 5,000
Proceeds from Old ICH liquidating trust -- -- -- 2,790
(see Note 3)
Other, net 190 (94) -- (65)
-------- -------- -------- --------
Net cash provided (used) by
investing activities (11,786) (6,189) 33,892 (8,993)
-------- -------- -------- --------
Cash flows from financing activities:
Borrowings on credit agreement 43,677 28,758 9,299 --
Repayment on credit agreement (33,346) (45,285) (10,384) --
Proceeds from issuance of long-term
debt, net of expenses -- -- -- 36,448
Proceeds from debt to former parent -- 11,000 3,772 --
Repayment of debt to former owner
of Sybra (7,000) -- -- (23,772)
Repayment of long-term debt and
capital lease obligations -- -- (306) (1,603)
Distribution to former owner of Sybra -- -- (46,079) --
Loan element of sale/leaseback
financing -- -- 9,000 --
Other, net -- -- -- (456)
-------- -------- -------- --------
Net cash provided (used) by
financing activities 3,331 (5,527) (34,698) 10,617
-------- -------- -------- --------
Net change in cash and cash equivalents (5) 1,186 (1,408) 3,918
Cash and cash equivalents at beginning
of period 1,113 1,108 2,294 500
======== ======== ======== ========
Cash and cash equivalents at end of period $ 1,108 $ 2,294 $ 886 $ 4,418
======== ======== ======== ========
Supplemental non-cash disclosures:
Cash paid for
Income taxes 1,845 3,335 1,029 1,085
Interest 2,578 2,368 606 3,622
Note issued in acquisition of Sybra,
Inc. 2,000
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
1. Organization, Business and Summary of Significant Accounting Policies:
Organization
I.C.H. Corporation (the "Company") is the post-reorganization successor
to ICH Corporation ("Old ICH"). Old ICH, together with its subsidiaries,
filed voluntary petitions for relief under Chapter 11 bankruptcy on
October 10, 1995. The Company's plan of reorganization was confirmed
February 7, 1997 and became effective on February 19, 1997 (the
"Effective Date"). Until its acquisition of Sybra, Inc. (see Note 2),
the Company had no significant business operations.
On the Effective Date, all of the outstanding equity securities ("Old
ICH Common Stock" and "Old ICH Preferred Stock", collectively the "Old
ICH Stock") of Old ICH were canceled. The Company's Restated Certificate
of Incorporation authorized the issuance of 9,000,000 shares of common
stock and 1,000,000 shares of preferred stock. Holders of Old ICH Stock
have two years from the Effective Date in which to exchange their
canceled shares for the Company's common stock. Generally, holders of
the canceled Old ICH shares are entitled to receive 0.0269 shares of the
Company's common stock for each share of Old ICH Common Stock and 0.2
shares of the Company's common stock for each share of Old ICH Preferred
Stock and, for a period of 40 days from the Effective Date, certain
holders could elect to exchange canceled shares for a single de minimis
cash payment. An aggregate of $141 was paid for shares exchanged during
this period.
Business and Presentation
The accompanying Consolidated Financial Statements labeled "Company"
include the accounts of the Company and its wholly-owned subsidiaries,
principally Sybra, Inc. ("Sybra"). All significant intercompany accounts
and transaction have been eliminated. Included in the results of
operations for the eight months ended December 31, 1997 are revenues and
operating loss of $164 and $(188), respectively, for the period from
February 19, 1997 to April 30, 1997 (period prior to the acquisition of
Sybra). In addition, cash flows for the period prior to the acquisition
of Sybra consisting principally of cash from the sale of a subsidiary
and from the Lone Star Liquidating Trust (see Note 3) and are included
in cash flows for the eight months ended December 31, 1997. Sybra
currently operates a chain of 149 fast food restaurants clustered in
four regions, primarily Texas, Michigan, Pennsylvania and Florida, as a
franchisee of Arby's, Inc. d/b/a Triarc Restaurant Group ("Arby's").
Another subsidiary owns and operates a golf course and planned
residential development in Kentucky.
Sybra is considered to be a Predecessor of the Company and, accordingly,
the historical financial statements of Sybra, prior to its acquisition
by the Company on April 30, 1997, are presented with the accompanying
financial statements of the Company. The acquisition of Sybra resulted
in changes in the cost basis of Sybra's assets and liabilities, use of
estimated lives for certain of the intangibles that are different from
those used by the Predecessor and a different capital structure. These
factors significantly affect the comparability of the Predecessor's
financial information.
Significant Accounting Policies
Fiscal Year. The Company operates on a calendar year basis. Sybra,
however, uses a 52/53 week fiscal year ending on the last Saturday of
the year. Accordingly, the accompanying financial statements include
Sybra's results for the periods ended December 30, 1995, December 28,
1996 and April 30, 1997 and December 27, 1997.
F-7
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
Cash and Cash Equivalents. The Company considers all highly liquid
investments with an original maturity of three months or less when
purchased to be cash equivalents. Interest income on cash equivalents
was $1, $1, $1 and $99 for the periods ended December 30, 1995, December
28, 1996, April 30, 1997, and December 31, 1997, respectively.
Food and Supplies Inventories. Food and supplies inventories are stated
at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
Property and Equipment. Property and equipment is stated at cost less
accumulated depreciation and amortization. Normal repairs and
maintenance costs are expensed as incurred. Depreciation is being
recorded on a straight-line basis over the following estimated useful
lives:
Buildings 40 years
Restaurant equipment 5-10 years
Buildings under capitalized leases and leasehold improvements are
amortized on a straight-line basis over the lesser of the lease term or
the estimated useful lives of the assets.
Intangibles. Franchise agreements with Arby's require the Company to pay
a franchise fee for each new restaurant developed and de minimis renewal
fees for franchises that have expired. Each franchise agreement provides
the Company the right to operate an Arby's restaurant for a period of 20
years and is renewable by the Company, subject to certain conditions,
for varying terms of up to 20 years. Franchise fees are capitalized and
amortized using the straight-line method over 40 years.
Acquired royalty rights, representing the fair value of royalty rates of
acquired franchises, are capitalized and amortized on a straight-line
basis over 20 years or the remaining life of the franchise agreement,
whichever is less.
Equity in operating leases, representing the estimated fair value of
base rental rates, less the actual rental obligation, is amortized on a
straight-line basis over 20 years or the remaining life of the lease
including option periods, whichever is less.
Goodwill is amortized using the straight-line method over 40 years. At
each balance sheet date, the Company evaluates the realizability of
goodwill based upon expectations of operating income for the restaurants
as a group. The Company believes that no material impairment of goodwill
exists at December 28, 1996 and December 31, 1997.
Income Taxes. Deferred income taxes are computed using the liability
method, which provides that deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes
(see Note 11).
Advertising Expenses. All advertising costs are expensed as incurred.
Advertising expenses were approximately $9,200, $9,400, $3,400 and
$5,000 for the periods ended December 30, 1995, December 28, 1996, April
30, 1997 and December 31, 1997, respectively.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses in the financial statements
and in the disclosure of contingent assets and liabilities. While actual
results could differ from those estimates, management believes that
actual results will not be materially different from amounts provided in
the accompanying consolidated financial statements.
F-8
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
Earnings Per Share. In 1997, the Company adopted SFAS No. 128, "Earnings
Per Share," which requires presentation of both basic and diluted
earnings per share. Basic net loss per share is computed based on the
weighted-average number of common shares outstanding during the year
(see Note 10). Because the results for the eight months ended December
31, 1997 reflect a net loss from continuing operations, basic and
diluted loss per share are calculated based on the same weighted average
number of shares outstanding.
Net earnings per common share for the Predecessor is not presented as
the per share results are not meaningful due to the changes resulting
from the acquisition of Sybra (see Note 2).
New Accounting Standards. In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
superseding SFAS No. 14, "Financial Reporting of Segments of a Business
Enterprise." SFAS No. 131 establishes new standards for reporting
operating segment information in annual and interim financial
statements. The Company does not believe this Statement will have any
impact on the financial statements.
2. Acquisition of Sybra
On April 30, 1997, the Company acquired all of the common stock of Sybra
for $15,614 including related expenses and net of cash acquired of $886.
The Company incurred $2,000 in acquisition indebtedness to the seller
and paid the remainder in cash. The acquisition was recorded under the
purchase method of accounting and, accordingly, the results of
operations of Sybra commencing May 1, 1997 are included in the
accompanying financial statements of the Company.
The purchase price was allocated to identifiable tangible and intangible
assets and liabilities based on their estimated fair values, with the
excess of the purchase price over the fair value of such net assets
acquired reflected as goodwill, as follows:
Current Assets $ 3,428
Franchise rights 3,865
Other intangibles, excluding goodwill 8,299
Goodwill 28,159
Tangible assets 20,342
Liabilities assumed (48,479)
-------
Purchase price $15,614
=======
3. Old ICH Transactions
On April 25, 1997, the Company exercised its option pursuant to the
Reorganization Plan, to sell all of the outstanding capital stock of
Bankers Multiple Line Insurance Company ("BML"), a property and casualty
insurer licensed in all fifty states, for its carrying value of $5,000.
In February 1997, the Company received $2,790 in satisfaction of a
receivable related to the Old ICH Reorganization Plan.
F-9
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
4. Other Current Assets
Other current assets consist of the following as of:
December 28, December 31,
1996 1997
(Predecessor) (Company)
-------------- ------------
Due from Sybra's former parent $ - $558
Prepaid rent 522 971
Other prepaid expenses 133 36
------------- ------------
Other current assets $655 $1,565
============= ============
5. Intangibles
Intangible assets, net, consist of the following as of:
December 28, December 31,
1996 1997
(Predecessor) (Company)
-------------- ------------
Franchise rights $4,548 $4,164
Other intangibles, excluding goodwill 15,840 8,024
Goodwill 2,630 28,159
-------------- ------------
Total 23,018 40,347
Less accumulated amortization 7,170 877
-------------- ------------
Intangible assets, net $15,848 $39,470
============== ============
6. Property and Equipment
Property and equipment, net, consist of the following as of:
December 28, December 31,
1996 1997
(Predecessor) (Company)
--------------- ------------
Land $17,830 $4,363
Buildings 21,631 1,890
Leasehold Improvements 19,013 11,752
Restaurant Equipment 22,688 11,539
Construction in Progress 660 726
--------------- ------------
Total 81,822 30,270
Less accumulated depreciation and
amortization 28,240 5,574
--------------- ------------
Property and equipment, net $53,582 $24,696
F-10
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
7. Leases
The Company leases substantially all of the land and buildings used in
its restaurant operations under noncancelable leases with remaining
lease terms of one to twenty years. In many cases, the leases provide
for one or more renewal options. The leases generally require the
Company to pay property taxes, insurance, maintenance and other
operating costs of the properties. Some also require contingent rent
payments based on a percentage of restaurant sales.
Base rent expense for operating leases for the periods ended December
30, 1995, December 28, 1996, April 30, 1997 and December 31, 1997 was
approximately $4,523, $4,149, $1,373 and $5,520, respectively.
Additional (contingent) rental payments were approximately $429, $437,
$130 and $240, for the same periods, respectively.
Immediately prior to its acquisition by the Company on April 30, 1997,
Sybra entered into a sale/leaseback transaction in which Sybra sold land
and buildings related to 61 restaurants for their fair value of $36,000
and leased them back under twenty-year base term leases (classified as
operating) with options that could, at Sybra's option, extend the leases
an additional 20 years. As part of the sale/leaseback transaction, Sybra
received an additional $9,000 in the form of a loan. Total proceeds of
the transaction were $44,200, net of related expenses. The proceeds were
distributed to Sybra's former parent. The lease payments escalate,
requiring the Company to straight-line the rent expense over the term of
the lease.
The Company's future minimum rental commitments as of December 31, 1997
for all noncancelable capital and operating leases are as follows:
Operating
Fiscal Year Capital Leases Leases
------------------------------------- --------------- -------------
1998 $1,375 $8,948
1999 685 8,641
2000 553 8,239
2001 533 7,957
2002 533 7,507
Thereafter 2,092 79,800
--------------- -------------
Total 5,771 $121,092
=============
Less amount representing interest 2,124
---------------
Present value of future minimum
lease payments $3,647
===============
8. Accrued Liabilities
Accrued liabilities consist of the following as of:
December 28, December 31,
1996 1997
(Predecessor) (Company)
----------------- ----------------
Employee related $2,840 $2,203
Property and other taxes 983 1,122
Insurance related 2,031 2,303
Other 2,399 3,117
----------------- ----------------
Total $8,253 $8,745
================= ================
F-11
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
9. Long-Term Debt
Long-term debt consists of the following as of:
December 28, December 31,
1996 1997
(Predecessor) (Company)
------------- -----------
Term loan, 10.63%, payable monthly
through 2012 $ -- $33,984
Loan, 14.50% -- 9,000
Acquisition indebtedness due in 1999 -- 2,000
Credit agreement 1,085 -
Other 1,448
------------- -----------
1,085 46,432
Less: current portion 4 1,714
------------- -----------
Total $ 1,081 $44,718
============= ===========
Concurrently with the acquisition of Sybra, the Company entered into a
loan agreement that provides, on an aggregate basis, a $35,000
fixed-rate term loan bearing interest at 10.63% with a weighted-average
maturity of 12.5 years. The term loan is collateralized by substantially
all of the restaurant equipment owned by Sybra. The proceeds of the term
loan were used to fund the acquisition of Sybra and retire debt payable
to Sybra's former parent assumed in the acquisition.
The loan agreement contains covenants which require, among other things,
the maintenance of a minimum fixed charge coverage ratio, restrictions
that limit the payment of dividends, and other provisions and
restrictive covenants.
As mentioned in Note 7, as an element of the sale/leaseback transaction
completed immediately before its acquisition by the Company, Sybra
received $9,000 as a loan. The loan element of the transaction carries
an interest rate of approximately 14.50% and may be repaid at any time
without penalty. If not repaid prior to December 31, 1999, the loan will
be repaid pursuant to a 20-year amortization schedule.
At December 31, 1997, long-term debt had a fair value that approximates
the carrying value.
The aggregate maturities of long-term debt at December 31, 1997 are as
follows:
Fiscal year
----------------------------------------------
1998 $1,714
1999 12,904
2000 2,116
2001 2,339
2002 2,537
Thereafter 24,822
-------------------
Total $46,432
===================
The Company maintains, with a bank, a $150 letter of credit that
automatically renews in November of each year.
On August 1, 1997, Sybra executed a loan commitment letter with
Franchise Finance Corporation of America ("FFCA") to finance the
construction of up to 12 new Arby's restaurants during the next two
years. Under the terms of the commitment letter, FFCA has agreed to
finance mortage and equipment loans for up to 12 new Arby's restaurants
to be built by Sybra, to a maximum of $1 million per location.
F-12
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
10. Equity and Earnings Per Common Share
Given the stock conversion provisions of the Reorganization Plan, the
Company has not determined and cannot currently determine, the ultimate
number of shares of common stock that will be issued upon completion of
the stock conversion. However, based on the number of outstanding shares
of Old ICH Stock on the Effective Date, and after considering nominal
shareholders of record who are not eligible to convert their shares into
shares of the Company's common stock and shares which were exchanged for
cash under the provisions of the Reorganization Plan, 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 if all shares are not exchanged prior to the end of the two-year
period.
Although conservative, the Company has used the maximum 2,793,550 shares
in computing loss per share. As of December 31, 1997, 2,414,495 shares
of common stock were outstanding.
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, as amended, have an exercise price of
$20.00 per right and are exercisable until February 19, 2007. 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.
F-13
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
11. Income Taxes
The provision (benefit) for income taxes consists of:
Predecessor Company
-------------------------------------------- -------------
For the For the
For the year For the year four months eight months
ended ended ended ended
December 30, December 28, April 30, December 31,
1995 1996 1997 1997
-------------------------------------------- -------------
Current $2,152 $3,043 $(46) $(185)
Deferred (239) (645) 480 (68)
-------------------------------------------- -------------
$1,913 $2,398 $434 $(253)
============================================ =============
Deferred taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
December 28, December 31,
1996 1997
(Predecessor) (Company)
--------------- --------------
Property and equipment $3,017 $3,388
Accrued liabilities and other 1,703 1,481
--------------- --------------
Deferred tax assets 4,720 4,869
Deferred tax liability - Intangible assets (3,509) (4,060)
Valuation allowance -- (1,460)
--------------- --------------
Net deferred tax asset $1,211 $(651)
=============== ==============
=============== ==============
Current deferred tax assets $1,225 $1,257
Non-current deferred tax liabilities (14) (1,908)
--------------- --------------
Net deferred tax liability $1,211 $(651)
=============== ==============
The Company's tax basis in real estate exceeds its book basis resulting
in a deferred tax asset of $1,460 using a 34% federal rate. The Company
recorded a full valuation allowance against this deferred tax asset due
to the uncertainty surrounding its realizability as of February 19,
1997.
On April 25, 1997, the Company sold its interest in the stock of BML
which generated a significant tax loss (see Note 3). Due to limitations
pursuant to the Internal Revenue Code and Treasury regulations
thereunder, no deferred tax asset has been recorded for the capital loss
carry forward due to the uncertainty of its existance and realizability.
F-14
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
A reconciliation of the Federal statutory income tax rate to the
Company's effective tax rate follows:
Predecessor Company
---------------------------------------------------
For the four For the
For the For the months eight months
year ended year ended ended ended
December December April 30, December 31,
30, 1995 28, 1996 1997 1997
----------- ---------- ---------- ------------
Expected tax expense, at
the federal statutory
rate of 35% $1,725 $2,296 $369 $(391)
State income taxes, net 192 39 53 (31)
Other, net (4) 63 12 169
----------- ---------- ---------- ------------
$1,913 $2,398 $434 $(253)
=========== ========== ========== ============
12. Stock Option Plans
The Company has two fixed option plans, the I.C.H. Corporation 1997
Employee Stock Option Plan (the "ESP") and the I.C.H. Corporation 1997
Director Stock Option Plan (the "DSP"). Under the ESP, the Company may
grant incentive stock options with specific vesting periods and
non-qualifying options to eligible officers and employees for the
purchase of up to an aggregate of 1,000,000 shares of common stock.
Under the DSP, the Company may grant non-qualifying options to eligible
directors for the purchase of up to an aggregate of 400,000 shares of
common stock. Under both plans, the exercise price of each option is
equal to the estimated fair value of the Company's stock on the date of
grant. Stock options granted under the ESP have 10-year terms and
generally vest ratably over four years. Options granted under the DSP
also have 10-year terms.
December 31, 1997
-----------------------------------------------------------
Options Outstanding Options Exercisable
----------------------------------- --------------------
Weighted-
Average Weighted-
Range of Remaining Average
Exercise Prices Contractual Exercise Weighted-
Shares Life Price Shares Average
- ------------------ --------- ------------ ---------- -------- ---------
$2.17 to $3.09 489,000 9.33 $2.68 94,000 $2.17
$3.62 to $3.80 362,000 9.63 3.76 47,000 3.80
$4.38 to $4.50 31,000 9.74 4.40 5,000 4.50
- ------------------ --------- ------------ ---------- -------- ---------
$2.17 to $4.50 882,000 9.47 $3.19 146.000 $2.85
================== ========= ============ ========== ======== =========
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost
has been recognized for grants of stock options. Had compensation cost
been determined in accordance with the provisions of SFAS No. 123,
"Accounting for Stock Based Compensation," the net loss per share would
have been changed to the pro forma amounts indicated below:
F-15
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
For the eight months
ended December 31, 1997
------------------------
Net loss--as reported $(864)
Net loss--pro forma $(1,047)
Basic and diluted loss per share--as reported $(0.31)
Basic and diluted loss per share--pro forma $(0.37)
The fair value of each option grant is estimated on the grant date using
the Black-Scholes option-pricing model with the following assumptions: a
risk-free interest rate range of 5.69%-6.35%; volatility factor of the
expected market price of the Company's common stock of 46.6%; expected
lives of 2-5 years; and a dividend yield of 0%.
13. Benefit plans
The Company maintains a defined contribution 401(k) plan known as the
Sybra, Inc. Retirement Income Plan (the "Retirement Plan"). The
Retirement Plan permits eligible employees to defer a portion of their
compensation (1% to 15%, up to certain maximum limitations established
by law) through payroll deductions. The Company may, at its discretion,
contribute to the Retirement Plan on behalf of participating employees
based on a matching formula or other method. No matching contributions
were made to the Retirement Plan for 1997. The Predecessor made
contributions of $283, $236 and $0 to the plan for the periods ended
December 30, 1995, December 28, 1996 and, April 30, 1997 respectively.
14. Commitments and contingencies
Franchise agreements with Arby's
The Arby's development agreement contains certain requirements regarding
the number of units to be opened in the future. Should the Company fail
to comply with the required development schedule or with the
requirements for restaurants within areas covered by the development
agreement, Arby's could terminate the exclusive nature of the Company's
franchise and the Company would forfeit prepaid fees. However, the
Company would no longer be obligated for any future unpaid fees required
by the development agreement. The development agreement also provides
Arby's with certain rights regarding the Company's business operations
and any transfer of significant portions of assets owned by the Company.
Commitments under the agreement require payments aggregating $1,000 over
the next six (6) years.
Legal proceedings
Various legal proceedings are pending against the Company, many
involving routine litigation incidental to the businesses.
The consequences of these matters are not presently determinable but, in
the opinion of the management of the Company after consulting with legal
counsel, the ultimate liability is not expected to have a material
effect on the results of operations, financial position, liquidity or
capital resources of the Company.
F-16
<PAGE>
I.C.H. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in 000's except share amounts)
15. Non-recurring and Restructuring Charges
During 1997, The Company recorded provisions totaling $1,497 related to
(1) restructuring Sybra's operations in the Texas region, (2) buy-out of
an employment contract with the former president of Sybra, and (3)
non-recurring expenses related to obtaining financing and maintaining
Sybra's status as an Arby's franchisee.
16. Subsequent Event
On January 30, 1998, Sybra purchased the assets of eight leased Arby's
restaurants and the option to acquire the land and buildings of two of
the eight leased restaurants and contracted to manage an additional
Arby's restaurant in and around Sacramento, California for $325 in cash,
a $325, ten-year note bearing interest of 10% and a grant of 20,000
seven-year warrants to acquire I.C.H. common stock at five dollars
($5.00) per share. The restaurants are subject to land and building
leases. In connection with the purchase, Sybra exercised the lessee's
option to purchase the land and buildings at both restaurant sites.
F-17
<PAGE>
[COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Board of Directors
I.C.H Corporation:
We have audited the accompanying consolidated balance sheet of ICH Corporation
(the "Company," the entity which emerged from Chapter 11 bankruptcy) as of
February 19, 1997. This consolidated balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures accompanying the consolidated balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the consolidated balance
sheet presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of I.C.H. Corporation
as of February 19, 1997, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
-----------------------------------
Dallas, Texas
April 17, 1997
F-18
<PAGE>
I.C.H. CORPORATION
CONSOLIDATED BALANCE SHEET
as of February 19, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 500,000
Other assets 200,000
Account receivable 2,790,203
Subsidiary held for sale 5,000,000
Real estate held for sale 3,700,000
-----------
Total assets $12,190,203
===========
STOCKHOLDERS' EQUITY
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 7) --
Paid-in capital 12,190,203
-----------
Total stockholders' equity $12,190,203
===========
The accompanying notes are an integral part of the consolidated balance sheet.
F-19
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET
1. Organization:
I.C.H. Corporation, referred to as Reorganized ICH Corporation (the
"Company"), is the 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"). 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. The Predecessor
Company sold seven of eight insurance subsidiaries and also sold all of
the business of Bankers Multiple Line Insurance Company ("BML"), its
remaining insurance subsidiary, through an assumption reinsurance
agreement. The Company's Joint Plan of Reorganization (the "Reorganization
Plan") was confirmed on February 7, 1997 by the Bankruptcy Court and
became effective on February 19, 1997 (the "Reorganization Date"). As of
the Reorganization Date, the Company had no significant business
operations.
Lone Star Liquidating Trust (the "Trust") was created on the
Reorganization Date as a vehicle to liquidate and distribute assets owned
by the Predecessor Company to the claimants. The Reorganization resulted
in the complete satisfaction, discharge and release of all claims against
and interests in the Company. The Company retained certain designated
assets and emerged from Chapter 11 owned by its existing preferred and
common stockholders. Existing shares of the Predecessor Company's
preferred and common stock were canceled, and the Company issued new
common stock. See Note 7.
Assets retained by the Trust and postpetition and other liabilities are
not reflected in this consolidated balance sheet as the Company does not
have legal title to the assets nor any obligations to satisfy the
liabilities.
2. Consolidation:
The consolidated balance sheet includes the accounts of the Company and
both of its wholly-owned subsidiaries, SWL Holding Corporation ("SWL
Holding") and Care Financial Corporation ("Care") which owns 100% of BML.
The Company and its wholly-owned subsidiaries currently have no ongoing
business operations.
F-20
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
3. Significant Accounting Policies:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
Fresh-Start Reporting
As 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 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 Reorganization Date.
In determining the applicability of fresh-start reporting, the
reorganization value of the Company was determined based on the
reorganization value of the Predecessor Company prior to the confirmation
of the Reorganization Plan. As the Company currently has no operations,
management did not anticipate future earnings in determining
reorganization value. Accordingly, reorganization value equals
management's estimates of the fair value of assets prior to the
confirmation 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 real
estate held for sale by $961,000.
F-21
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
4. Account Receivable:
Account receivable represents a receivable from the Trust in accordance
with the Reorganization Plan. The Company was to receive $2,500,000 in
cash, plus proceeds of $500,000 from the settlement of a claim with a
former affiliate, for a total of $3,000,000. This receivable balance
includes the total of $3,000,000, less approximately $200,000 in costs
related to the pending acquisition (see Note 10). The Company received the
balance in full within two days of the reorganization in accordance with
the Reorganization Plan.
5. Subsidiary Held for Sale:
BML is a property and casualty insurer domiciled in the state of Illinois
and licensed in all fifty states. As of February 19, 1997, BML has ceded
100% of its insurance operations and holds debt securities to maintain its
insurance licenses, as well as limited partnership investments, real
estate and affiliated common stock. Per the Reorganization Plan, the Trust
has legal title to net tangible assets of BML which, as of February 19,
1997, included total assets and total liabilities (unaudited) of
approximately $34,400,000 and $1,700,000, respectively, recorded in
accordance with statutory accounting principles.
Under the terms of the Reorganization Plan, the Company has the option
through May 22, 1997 to transfer to the Trust all of the outstanding
capital stock of BML in return for a payment of $5,000,000 from the Trust.
The Company plans to sell BML, effectively for the value of its insurance
licenses, prior to May 22, 1997 or exercise its option to the Trust for
$5,000,000.
6. Real Estate:
Real estate consists of Perry Park, a property located in Owen County,
Kentucky consisting of 2,397 acres, including an 18 hole golf course, club
house, restaurant, approximately 227 salable lots (232 have been sold and
developed), three lakes, additional platted but undeveloped lots, and
vacant acreage. As of March 6, 1997, the appraised value of the Perry Park
property established a value ranging from $3,700,000 to $4,300,000.
F-22
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
7. Equity:
On the Reorganization Date, all of the outstanding equity securities
("Predecessor common stock" and "Predecessor preferred 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 stocks have a two-year period in which to
exchange the canceled shares for the Company's common 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.
For a period 40 days from the Reorganization Date, holders of Predecessor
preferred stock could elect to receive a single cash payment of $0.36 per
share, to a maximum of $234, in lieu of receiving 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 the Company's common stock.
Holders of less than 101 shares of Predecessor common stock and 14 shares
of Predecessor preferred stock (collectively, the "nominal shareholders")
are excluded from the conversion into the Company's common stock and from
any cash payments.
Based on the number of outstanding shares of Predecessor common and
preferred stock on the Reorganization Date, after considering the nominal
shareholders, approximately 2,881,000 shares of the Company's common stock
could be issued. 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 and the likelihood that some Predecessor
shareholders may not exercise their conversion option during the two-year
period, management has not determined the ultimate number of shares of
common stock which will be issued upon conversion.
F-23
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
As of February 19, 1997, the Company declared a dividend of one right (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. One thousand shares of the Company's authorized
preferred stock have been reserved for issuance upon the exercise of the
Rights. 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 noncash 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.
8. Stock Options:
The Company has two stock option plans, the Employee Stock Option Plan
(the "ESP") and the Director Stock Option Plan (the "DSP", collectively
the "Option plans"). The ESP provides for the grant of incentive stock
options and nonqualifying options to eligible officers and employees. The
DSP authorizes annual grants of 5,000 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 and special grants to
eligible participants, at the discretion of the 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 1,000,000 shares
and 400,000 shares of the Company's common stock for the ESP and the DSP,
respectively.
Effective February 19, 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 19, 1997 with an exercise price of $2.17 per share.
F-24
<PAGE>
I.C.H. CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
9. 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 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 real estate held for sale 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 realizability as
of February 19, 1997.
10. Pending Acquisition:
Effective February 7, 1997, the Company entered into an agreement to
purchase all of the outstanding capital stock of Sybra, Inc. ("Sybra"), a
Michigan corporation. Sybra operates a chain of fast food restaurants (150
at September 28, 1996) clustered in four regions, primarily Texas,
Michigan, Pennsylvania and Florida, as a franchisee of Arby's, Inc. The
purchase price is approximately $40,000,000, and the expected closing date
of the acquisition is before April 30, 1997. As a condition to the
agreement, the Company must obtain formal commitment letters for the
financing of at least $31,000,000 to fund the acquisition.
F-25
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
Number Description Number
2.1 First Amended Joint Plan of Reorganization Under
Chapter 11 (incorporated by reference to Exhibit B to
Exhibit 99.1 to the Company's Form 8-K dated November
22, 1996)
2.2 First Nonmaterial Modification to the First Amended
Joint Plan of Reorganization Under Chapter 11
(incorporated by reference to Exhibit 2.2 to the
Company's Form 8-K dated February 18, 1997)
2.3 Letter to Robert T. Shaw, Henry W. Simon, Jr. and
Russell L. Munsch agreeing to nonmaterial
modification to the First Amended Joint Plan of
Reorganization Under Chapter 11, as filed with the
Bankruptcy Court (incorporated by reference to
Exhibit 2.3 to the Company's Form 8-K dated February
18, 1997)
2.4 Order confirming the First Amended Joint Plan of
Reorganization under Chapter 11, as entered by the
United States Bankruptcy Court for the Northern
District of Texas, Dallas Division, on February 7,
1997 (incorporated by reference to Exhibit 99.1 to
the Company's Form 8-K dated February 18, 1997)
2.5 Findings of Fact and Conclusions of Law in support of
Order Confirming First Amended Joint Plan of
Reorganization Under Chapter 11 (incorporated by
reference to Exhibit 99.2 to the Company's Form 8-K
dated February 18, 1997)
3.1 Amended and Restated Certificate of Incorporation of
I.C.H. Corporation (incorporated by reference to
Exhibit 99.5 to the Company's Form 8-K dated February
19, 1997)
3.2 Amendment No. 1 to Amended and Restated Certificate
of Incorporation of I.C.H. Corporation (incorporated
by reference to Exhibit 3.1 to the Company's Form 8-K
dated January 15, 1998)
3.3 Amended and Restated By-Laws of I.C.H. Corporation
(incorporated by reference to Exhibit 99.6 to the
Company's Form 8-K dated February 19, 1997)
<PAGE>
3.4 Amendment No. 1 to Amendment and Restated By-Laws of
I.C.H. Corporation (incorporated by reference to
Exhibit 3.1 to the Company's Form 8-K dated February
10, 1998)
10.1 Form of Rights Agreement between I.C.H. Corporation
and The Mid-America Bank of Louisville and Trust
Company, which includes as Exhibit B thereto the Form
of Rights Certificate (incorporated by reference to
Exhibit 1 to the Company's Registration Statement on
Form 8-A dated February 19, 1997)
10.2 Amendment No. 1 to Rights Agreement between I.C.H.
Corporation and The Mid-America Bank of Louisville
and Trust Company (incorporated by reference to
Exhibit 10.1 to the Company's Form 8-K dated February
10, 1998)
10.3 Stock Purchase Agreement, dated as of February 7,
1997, by and between I.C.H. Corporation and Valcor,
Inc. (incorporated by reference to Exhibit 10.02 to
the Company's Quarterly Report on Form 10-Q dated
March 31, 1997)
10.4 First Amendment to Stock Purchase Agreement, dated as
of April 18, 1997, by and between I.C.H. Corporation
and Valcor, Inc. (incorporated by reference to
Exhibit 10.03 to the Company's Quarterly Report on
Form 10-Q dated March 31, 1997)
10.5 Form of Loan Agreement by and between Sybra, Inc. and
Atherton Capital Incorporated (incorporated by
reference to Exhibit 10.04 to the Company's Quarterly
Report on Form 10-Q dated March 31, 1997)
10.6 Form of Promissory Note executed by Sybra, Inc. in
favor of Atherton Capital Incorporated (incorporated
by reference to Exhibit 10.05 to the Company's
Quarterly Report on Form 10-Q dated March 31, 1997)
10.7 Form of Leasehold/Deed of Trust Mortgage executed by
Sybra, Inc. in favor of Atherton Capital Incorporated
(incorporated by reference to Exhibit 10.06 to the
Company's Quarterly Report on Form 10-Q dated March
31, 1997)
10.8 Form of Security Agreement executed by Sybra, Inc. in
favor of Atherton Capital Incorporated (incorporated
by reference to Exhibit 10.07 to the Company's
Quarterly Report on Form 10-Q dated March 31, 1997)
10.9 Form of Master Lease by and between Sybra, Inc. and
U.S.
<PAGE>
Restaurant Properties Operating L.P. (incorporated by
reference to Exhibit 10.08 to the Company's Quarterly
Report on Form 10-Q dated March 31, 1997)
10.10 Employment Agreement, dated as of April 30, 1997, by
and between I.C.H. Corporation and Charles N. Hyslop
(incorporated by reference to Exhibit 10.09 to the
Company's Quarterly Report on Form 10-Q dated March
31, 1997)
10.11 Employment Agreement, dated as of April 30, 1978, by
and between I.C.H. Cooperation and Donald P. Zima
(incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q dated March
31, 1997)
10.12 Amended and Restated Employment Agreement, effective
as of January 1, 1998, by and between James R. Arabia
and I.C.H. Corporation
10.13 I.C.H. Corporation 1997 Employee Stock Option Plan
10.14 I.C.H. Corporation 1997 Director Stock Option Plan
10.15 Commitment Letter, dated July 25, 1997, between FFCA
Acquisition Corporation and Sybra, Inc.
10.16 Form of Loan Agreement between FFCA Acquisition
Corporation and Sybra, Inc.
10.17 Form of Promissory Note from Sybra, Inc. to FFCA
Acquisition Corporation
10.18 Form of Mortgage between Sybra, Inc. and FFCA
Acquisition Corporation
10.19 Asset Purchase Agreement, dated as of November 26,
1997, among Sybra of California, Inc., I.C.H.
Corporation, William Brusslan, 294, Inc., American
Food Concepts, Inc. and WEB Acquisition Company
L.L.C.
10.20 Development Agreement, dated as of October 30, 1997,
between Arby's, Inc. and Sybra, Inc.
27.1 Financial Data Schedule
ICH CORPORATION
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
JAMES R. ARABIA
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is entered
into as of this 1st day of January, 1998, by and between, I.C.H. Corporation
(the "Company"), a Delaware corporation with offices at 9404 Genesee Avenue,
Suite 330, LaJolla, CA 92037 and James R. Arabia, an individual residing at 4230
Arguello Street, San Diego, CA 92103 (the "Executive").
WHEREAS, the Executive has served as President and Chief Executive
Officer of the Company pursuant to his prior employment agreement dated as of
February 11, 1997 (the "Prior Agreement") and prior thereto and has recently
taken the position as President and Chief Executive Officer of Sybra, Inc., the
principal operating subsidiary 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
President and Chief Executive Officer and to have the Executive serve as
Chairman of the Board of Directors of the Company (the "Board") and President
and Chief Executive Officer of Sybra, Inc. and wishes to be assured of his
continued services on the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to continue to be employed by the Company
as its President and Chief Executive Officer and serve as Chairman of the Board
and to perform and to serve the Company on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, agreements and covenants set forth herein, the parties hereto agree as
follows:
1. Employment.
The Prior Agreement is hereby amended and restated in its entirety as of
the date of this Agreement.
(a) Duties. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, as the President and Chief
Executive Officer of the Company and agrees to serve as Chairman of the Board.
In his role as President and Chief Executive Officer of the Company, the
Executive shall be responsible for such duties and functions of a supervisory or
managerial nature as may be directed from time to time by the Board provided
that such duties are reasonable
<PAGE>
and customary for a President and Chief Executive Officer including his
managerial role with respect to the operations of Sybra, Inc. The Executive
agrees that he shall, during the term of this Agreement, except during
reasonable vacation periods, periods of illness and the like, devote
substantially all his business time, attention and ability to his duties and
responsibilities hereunder; provided, however, that nothing contained herein
shall be construed to prohibit or restrict the Executive from (i) serving as a
director of any corporation, with or without compensation therefor; (ii) serving
in various capacities in community, civic, religious or charitable organizations
or trade associations or leagues; (iii) attending to personal business including
conducting non-competing and non-conflicting business activities including
without limitation activities related to the maintenance and continuation of the
Executive's stock broker's license and related practice; provided, however, that
no such service or activity permitted in this Section 1(a) shall materially
interfere with the performance by the Executive of his duties hereunder. The
Executive shall report directly to the Board.
(b) Term.
(i) Except as otherwise provided in this Agreement to the
contrary, the terms and conditions of this Agreement shall be and remain in
effect during the period of employment (the "Employment Period") established
under this Section 1(b). The initial Employment Period shall be for a term
commencing on the date of this Agreement and ending on the third anniversary of
the date of this Agreement provided, however, that commencing on the first
anniversary of the date of this Agreement and on each anniversary thereafter,
the Employment Period shall be extended for one additional year, unless (A) the
Company or Executive elects not to extend the term of this Agreement by giving
written notice to the other party no more than ninety (90) days and no less than
thirty (30) days prior to the applicable anniversary date ("Notice of
Non-Renewal"), in which case, the term of this Agreement shall become fixed, or
(B) Executive's employment terminates hereunder.
(ii) Notwithstanding anything contained herein to the
contrary, (A) Executive's employment with the Company may be terminated by the
Company or Executive during the Employment Period, subject to the terms and
conditions of this Agreement; and (B) nothing in this Agreement shall mandate or
prohibit a continuation of Executive's employment following the expiration of
the Employment Period upon such terms and conditions as the Board and Executive
may mutually agree.
(iii) If Executive's employment with the Company is
terminated, for purposes of this Agreement the term "Unexpired Employment
Period" shall mean the period commencing on the date of such termination and
ending on the day the Employment Period would have terminated in the absence of
such employment termination and without further renewals.
2
<PAGE>
(c) Location/Travel. The Executive shall work at the Company's
headquarters in San Diego County, California. The Executive shall not be
required to relocate from the San Diego area during the Employment Period.
2. Compensation.
(a) Salary. The Executive shall receive an annual base salary of
$235,000 which shall be payable to the Executive in accordance with the
Company's regular payroll practices. The annual base salary payable to the
Executive pursuant to this Section 2(a), which may be increased but not
decreased by the Board or the Compensation Committee of the Board (the
"Compensation Committee"), as the case may be, shall be hereinafter referred to
as the "Annual Base Salary."
(b) Annual Bonus. The Executive shall be entitled to receive an
annual cash bonus based upon a formula and subject to certain performance goals
having been achieved (the "Formula"), determined by the Board, in its sole
discretion, by the end of the first quarter of each year.
The target bonus payable to the Executive for the 1998 fiscal
year based upon the Formula established by the Board shall be $100,000.
(c) Bonus Payment. The bonus shall be paid to the Executive no
later than one hundred and twenty (120) days following the end of the period for
which the bonus is being paid.
(d) Reimbursement of Business Expenses. The Company shall
reimburse the Executive for all reasonable out-of-pocket expenses incurred by
him during the Employment Period including without limitation expenses in
connection with the Company's headquarters in San Diego, California. Such
expenses may include, but shall not be limited to, expenses incurred in
connection with the leasing of office space and office equipment and the
purchase of all reasonable and necessary office supplies. The Company shall also
promptly reimburse the Executive for reasonable out-of-pocket expenses incurred
by him pursuant to his employment hereunder, including but not limited to all
reasonable travel and entertainment expenses. The Executive may only obtain
reimbursement under this Section 2(d) upon submission of such receipts and
records as may be initially required by the Board and, thereafter, as may be
required under the reimbursement policies established by the Company.
(e) Additional Benefits; General Rights. The Executive shall be
entitled to participate in all employee stock option, pension, savings, and
other benefit plans including other welfare plans established by the Company
such as life insurance, medical, disability, and business travel accident plans
and programs. Executive shall be entitled to a minimum $300.00 per month local
travel allowance. In addition, the Company shall reimburse Executive for any
premium costs Executive may incur with respect to the health insurance plan
currently maintained by the Company (and which
3
<PAGE>
may be maintained by the Company from time to time) in which Executive
participates. The Executive shall be entitled to four weeks paid vacation per
year and any other benefits provided by the Company to its executive officers.
(f) 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 Federal, State
or city laws, rules or regulations.
3. Option Grant.
(a) Upon execution of the Prior Agreement, Executive received
options issued pursuant to the Company's 1997 Employee Stock Option Plan (the
"Stock Option Plan"), to purchase up to 176,000 shares of common stock of the
Company, $0.01 par value (the "Common Stock"), at an exercise price per share
equal to $ 2.17 (such options plus any additional options granted to the
Executive in the future shall collectively be referred to herein as the
"Options"). Subject to Sections 3(b) and 6 below, such Options shall have vested
or vest, as applicable, and be exercisable as follows: 58,667 Options, effective
upon execution of the Prior Agreement; 58,667 Options, effective February 11th,
1998; and the balance 58,666, effective February 11th, 1999. The terms and
conditions of the Options granted to the Executive pursuant hereto are
memorialized in the written option grant agreement between the Company and
Executive dated February 11, 1997 ("Option Grant Agreement"), attached to the
Prior Agreement as Exhibit A. Such Options shall expire on February 11, 2007.
The Options granted to the Executive (as well as any which may be
granted to Executive) were and 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
either before or after exercise including, without limitation, disposition of
the underlying stock acquired by the exercise of Options prior to the requisite
hold period, then they shall be treated as non-qualified stock options.
(b) In the event that Executive incurs taxable income as a result
of any or all of his Options being treated as non-qualified options (i.e.,
Options have been exercised and the requirements of Section 422(b) of the Code
have not been or are no longer met) (the "Taxable Event") as soon as practicable
after a determination by the Company and the Executive that the Options are
non-qualified and a Taxable Event has occurred, the Company shall make an
additional single sum cash payment to the Executive in an amount equal to thirty
(30%) percent of Executive's taxable income resulting from the Taxable Event.
Such payment shall only be made in the event Executive's employment with the
Company has not terminated for Cause within the meaning of Section 5(a)(i) of
this Agreement.
4
<PAGE>
(c) Executive shall have thirty-six (36) months from the date of
termination of his employment to exercise Options; provided, however, that such
period does not extend beyond February 11, 2007. 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
a 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) shall be to cause
such incentive stock options to be treated as non-qualified stock options.
(d) To the extent any Options are not vested upon a "Change in
Control" of the Company, such unvested Options shall become fully vested and
immediately exercisable upon a "Change in Control" of the Company. A "Change in
Control" of the Company shall be deemed to have occurred upon the happening of
any of the following events:
(i) approval by the Board of Directors or stockholders of
the Company of a transaction that would result in the
reorganization, merger, or consolidation of the Company
with one or more other "Persons" within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 ("Exchange Act"), other than a transaction
following which:
(A) at least 71% of the equity ownership interests
of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by
Persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least
71% of the outstanding equity ownership interests
in the Company; and
(B) at least 71% of the securities entitled to vote
generally in the election of directors of the
entity resulting from such transaction are
beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by
Persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least
71% of the securities entitled to vote generally in
the election of directors of the Company;
(ii) the acquisition of all or substantially all of the
assets of the Company;
5
<PAGE>
(iii) a complete liquidation or dissolution of the
Company, or approval by the stockholders of the Company of
a plan for such liquidation or dissolution;
(iv) the occurrence of any event in the nature of an event
described in this Section 3(d) if, immediately following
such event, at least seventy-five (75%) percent of the
members of the Board do not belong to any of the following
groups:
(A) individuals who were members of the Company's
Board on the date of this Agreement; or
(B) individuals who first became members of the
Board after the date of this Agreement either:
(I) upon election to serve as a member of
the Board by affirmative vote of
three-quarters of the members of such Board,
or of a nominating committee thereof, in
office at the time of such first election;
or
(II) upon election by the stockholders of
the Company to serve as a member of the
Board, but only if nominated for election by
affirmative vote of three-quarters of the
members of the Board, or of a nominating
committee thereof, in office at the time of
such first nomination; provided, however,
that such individual's election or
nomination did not result from an actual or
threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies
or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under
the Exchange Act) other than by or on behalf
of the Board.
(v) one or more other "Persons" within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Exchange Act, other
than an employee benefit plan sponsored by the Company,
becomes the "beneficial owner," as such term is used in
Section 13 of the Exchange Act, of thirty (30%) percent or
more of the Common Stock of the Company issued and
outstanding prior to such acquisition.
4. Loan. The Company hereby agrees to make a loan to Executive at such
time as Executive elects during the Employment Period in a principal amount of
$100,000 for the purchase of a principal residence (the "Loan"). The Loan shall
accrue
6
<PAGE>
interest at an annual rate of eight and one-half (8.5%) percent with interest
only payable quarterly in arrears through payroll deduction in years one (1)
through seven (7). Principal plus interest shall be repayable on a
self-amortizing basis in years eight (8) through ten (10). All payments owed by
Executive shall be deducted from Executive's salary on a quarterly basis. To the
extent such salary payments are insufficient, the Executive shall pay any
balance owed on a timely basis after receipt of written notification from the
Company. The Executive shall be required to execute such evidences of
indebtedness and other documents as are reasonably necessary to effectuate the
Loan.
5. Termination of Employment; Events of Termination.
(a) Executive's employment hereunder may be terminated during the
Employment Period under the following circumstances:
(i) Cause. Executive's employment hereunder shall
terminate for "Cause" ten days after the date the Company
shall have given the Executive notice of the termination
of his employment for "Cause". For purposes of this
Agreement, "Cause" shall mean (A) the commission by the
Executive of fraud, embezzlement or an act of serious,
criminal moral turpitude; (B) the commission of an act by
the Executive constituting material financial dishonesty
against the Company; or (C) the Executive's gross neglect
in carrying out his material duties and responsibilities
under this Agreement which has a material adverse effect
on the Company and which is not cured within thirty (30)
days subsequent to written notice from the Company to the
Executive of such breach.
(ii) Death. Executive's employment hereunder shall
terminate upon his death.
(iii) Disability. Executive's employment hereunder shall
terminate ten days after the date on which the Company
shall have given the Executive notice of the termination
of his employment by reason of his physical or mental
incapacity or disability on a permanent basis. For
purposes of this Agreement, the Executive shall be deemed
to be physically or mentally incapacitated or disabled on
a permanent basis if the Board determines he is unable to
perform his duties hereunder for a period exceeding six
(6) months in any twelve (12) month period.
(iv) Good Reason. Executive shall have the right to
terminate his employment for "Good Reason." This Agreement
shall terminate effective immediately on the date the
Executive terminates his employment with the Company for
"Good Reason." For purposes
7
<PAGE>
of this Agreement, "Good Reason" shall mean (A) any
material and substantial breach of this Agreement by the
Company, (B) a diminution of Executive's responsibilities,
loss of title, failure to reelect Executive to the Board
or reappoint Executive Chairman of the Board, (C) a Change
in Control occurs and the Executive voluntarily quits at
any time within the six (6) month period on or immediately
following the Change in Control, (D) the Company issues a
Notice of Non-Renewal to the Executive, (E) a reduction in
the Executive's Annual Base Salary or a material reduction
in other benefits (except for bonuses or similar
discretionary payments) as in effect at the time in
question, or any other failure by the Company to comply
with Sections 2 and 3, hereof, (F) the relocation of the
Executive's office outside the San Diego area, or (G) this
Agreement is not assumed by a successor to the Company.
(v) Without Cause. The Company shall have the right to
terminate the Executive's employment hereunder without
Cause subject to the terms and conditions of this
Agreement. In such event, this Agreement shall terminate,
effective immediately upon the date as of which the
Company terminates the Executive's employment for reasons
other than for Cause.
(vi) Without Good Reason. The Executive shall have the
right to terminate his employment hereunder without Good
Reason subject to the terms and conditions of this
Agreement. This Agreement shall terminate, effective
immediately upon the date as of which the Executive shall
have given the Board of Directors notice of his
termination without Good Reason.
(b) Notice of Termination. Any termination of Executive's
employment by the Company or any such termination by Executive (other than on
account of death) shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated. In the event of the termination of
Executive's employment on account of death, written Notice of Termination shall
be deemed to have been provided on the date of death.
6. Payments Upon Termination.
(a) Death, Disability, Without Cause or for Good Reason. If the
Executive's employment is terminated due to death or disability of the Executive
(pursuant to Section 5(a)(ii) or (iii)), by the Company without Cause (pursuant
to Section 5(a)(v)), or by the Executive for Good Reason (pursuant to
8
<PAGE>
Section 5(a)(iv)), the Executive (or, in the event of his death, his estate or
beneficiaries) shall be entitled to a payment in the amount of four hundred and
seventy thousand ($470,000) dollars payable in equal monthly installments over a
period of twelve (12) months beginning on the first day of the month next
following the date of termination of employment unless Executive makes an
election prior to receipt of the first installment hereunder to increase the
duration of such period up to a maximum of thirty-six (36) months; provided
however, that if such termination occurs pursuant to the provisions of Section
5(a)(iv)(C) above such payment shall be made in a single sum on the date of
termination without discount for early payment (the "Severance Period"). In
addition, any outstanding balance of the Loan (principal and interest) shall
become due on the date of such termination and shall be payable in equal
installments over the Severance Period with all repayments owed by Executive
being deducted from Executive's monthly installments or single sum payment as
the case may be or alternatively, on such other terms as Executive and the
Company may agree. Executive shall also be entitled to any bonuses which have
been earned but not been paid prior to such termination. Executive shall not be
entitled to any other bonuses. Executive's health insurance benefits specified
in Section 2(e) shall terminate on the last day of the Unexpired Employment
Period. Executive shall be entitled to COBRA continuation coverage thereafter,
at his cost. Additionally, all outstanding Options which are not vested as of
the date of termination, if any, shall upon such date of termination vest and
become immediately exercisable in accordance with the terms of the Option grant
agreement.
In the event the Executive is terminated by the Company without
Cause, or Executive terminates his employment with the Company for Good Reason,
the Executive shall have no duty to mitigate the amount of the payment received
pursuant to this Section 6(a), it being understood that the Executive's
acceptance of other employment shall not reduce the Company's obligations
hereunder.
(b) Termination With Cause or Voluntary Quit. If the Company
terminates the Executive's employment for Cause (pursuant to Section 5(a)(i)) or
in the event the Executive voluntarily terminates his employment without Good
Reason (pursuant to Section 5(a)(vi)), the Executive shall be entitled to his
Annual Base Salary through the date of the termination of his employment and the
Executive shall be entitled to any bonuses which have been earned but not paid
prior to such termination. The Executive shall not be entitled to any other
bonuses. The Executive's additional benefits specified in Section 2(e) shall
terminate at the time of such termination and the entire outstanding balance of
the Loan (principal and interest) shall be due and owing on date of termination.
Additionally, the Executive shall be entitled to all Options that have vested as
of the date of termination. All outstanding Options, which have not vested, if
any, as of date of termination shall be forfeited, and if the termination is for
Cause, no further payments pursuant to Section 3(b) shall be made to the
Executive.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns. The Company
shall
9
<PAGE>
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all 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 the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representative.
8. Governing Law. This Agreement shall be construed in accordance with,
and its validity, interpretation, performance and enforcement and shall be
governed by, the laws of the State of California without regard to conflicts of
law principles thereof.
9. Entire Agreement.
(a) This instrument contains the entire understanding and
agreement among the parties relating to the subject matter hereof, except as
otherwise referred to herein, and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof. The parties recognize that the Prior Agreement has been
amended and restated in its entirety by this Agreement and the terms of the
Prior Agreement are of no further force and effect.
(b) Neither this Agreement nor any provisions hereof may be
waived or modified, except by an agreement in writing signed by the party
against whom enforcement of any waiver or modification is sought.
10. Provisions Severable. In case any one or more of the provisions of
this 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.
11. Notices. Any notice required or permitted to be given under the
provisions of this Agreement shall be in writing and delivered by courier or
personal delivery, facsimile transmission (to be followed promptly by written
confirmation mailed by certified mail as provided below) or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
ICH Corporation
9404 Genesee Avenue
Suite 330
LaJolla, California 92037
Attention: Corporate Secretary
Facsimile Number: (619) 535-1634
10
<PAGE>
With a copy to:
Michael D. Dunn
1409 Weller Boulevard
Fort Worth, Texas 76112
If to the Executive:
Mr. James Arabia
4230 Arguello Street
San Diego, California 92103
Facsimile Number: (619) 298-3212
If delivered personally, by courier or facsimile transmission (confirmed as
aforesaid and provided written confirmation and receipt is obtained by the
sender), the date on which a notice is delivered or transmitted shall be the
date on which such delivery is made. Notices given by mail as aforesaid shall be
effective and deemed received upon the date of actual receipt or upon the third
business day subsequent to deposit in the U.S. mail, whichever is earlier.
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.
12. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and both of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
EXECUTIVE ICH CORPORATION
/s/ James R. Arabia /s/ Michael D. Dunn
- ------------------- --------------------
James R. Arabia Name: Michael D. Dunn
Title: President
11
ICH CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
ARTICLE I
Purpose
The ICH Corporation 1997 Employee Stock Option Plan is intended to advance the
best interests of the Company and its stockholders by providing executives and
other key employees possessing substantial responsibility for the management and
development of the Company and its subsidiaries with additional incentives to
contribute to its growth and prosperity by allowing such executives and key
employees to acquire an ownership interest in the Company. It is believed that
the availability and granting of stock option awards increases the Company's
ability to attract and retain key personnel with exceptional skills and
outstanding experience.
ARTICLE II
Definitions
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 Board: The Board of Directors of ICH Corporation.
2.2 Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
2.3 Committee: The Compensation Committee of the Board; provided, however,
the Compensation Committee shall not take any action under this Plan
unless it is at all times composed solely of not less than three
"Non-Employee Directors" within the meaning of Rule 16b-3, as
promulgated under the Securities Exchange Act of 1934, as amended. In
the event the Compensation Committee is unable to act, the Board shall
take any and all actions required or permitted to be taken by the
Committee under this Plan.
2.4 Common Stock: The common stock, par value $0.01, of ICH Corporation.
2.5 Company: ICH Corporation and any of its Subsidiaries.
<PAGE>
2.6 Disability: Disability within the meaning of Section 22(e)(3) of the
Code, as determined by the Committee or as defined in the Optionee's
Employment Agreement, if any.
2.7 Effective Date: February 7, 1997.
2.8 Employer: The corporation that employs the employee or Optionee.
2.9 Fair Market Value: Fair Market Value shall mean with respect to a share
of Common Stock the value determined on any relevant date in accordance
with the following provisions:
(i) if the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price
is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists, or
(ii) if the Common Stock is at the time listed on any national
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the national
Stock Exchange determined by the Committee to be the primary market for
the Common Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists, or
(iii) if shares of the Common Stock are not then traded on a
national market (e.g., the over the counter dealers market) or are not
then publicly traded, Fair Market Value shall be determined by the
Committee after taking into account such factors as the Committee shall
deem appropriate.
2.10 ISO: An "incentive stock option" within the meaning of Section 422 of
the Code.
2.11 Non-Employee Director: A director who: (i) is not currently an officer
or employee of ICH Corporation or of any Subsidiary; (ii) (A) does not
receive compensation, either directly or indirectly, for any
non-director service in an amount that would be required to be disclosed
under Item 404(a) of Regulation S-K or (B) possess an interest in any
other transaction requiring disclosure
2
<PAGE>
under such Item; and (iii) is not engaged in a business relationship
disclosable under Item 404(b) of Regulation S-K.
2.12 Non-ISO: A stock option that is not an ISO.
2.13 Option: A stock option granted under the Plan.
2.14 Option Price: The purchase price of a share of Common Stock under an
Option.
2.15 Optionee: An employee of the Company who has been granted one or more
Options under this Plan.
2.16 Retirement: Retirement on or after age sixty-five, or, with the advance
consent of the Company, at an earlier age.
2.17 Subsidiary: A subsidiary corporation, as defined in Section 424(f) of
the Code.
2.18 Termination Date: A date fixed by the Committee but not later, with
respect to an ISO, than the day preceding the tenth anniversary of the
date on which the Option is granted or, with respect to a Non-ISO, than
the day following the tenth anniversary of the date on which the Option
is granted.
ARTICLE III
Administration
3.1 Except as otherwise provided in the Plan, the Committee shall administer
the Plan and shall have full power to grant Options, construe and
interpret the Plan, establish and amend rules and regulations for its
administration, and perform all other acts relating to the Plan,
including the delegation of administrative responsibilities, which it
believes reasonable and proper.
3.2 The Committee shall consist of not less than three members of the Board,
all of whom shall be Non-Employee Directors, and appointed by the Board.
The members of the Committee shall serve at the pleasure of the Board,
which shall have the power, at any time and from time to time, to remove
members from the Committee or to add members thereto. Vacancies on the
Committee, however caused, shall be filled by the Board. The Board shall
take all steps necessary to assure that the Committee is composed of
Non-Employee Directors within the meaning of Rule 16b-3 as promulgated
under the Securities Exchange Act of
3
<PAGE>
1934, as amended, and that Options granted under this Plan comply in all
respects with the requirements of Rule 16b-3. Options granted hereunder
shall be approved by the Committee. However, if the Committee, for
whatever reason, is unable to act, then Options granted under this Plan
shall be approved by the Board.
3.3 Subject to the provisions of the Plan, the Committee shall establish the
policies and criteria pursuant to which it shall grant Options and
administer the Plan. Subject to the provisions of the Plan, the
Committee shall, in its discretion, determine which employees of the
Company shall be granted Options, the number of shares subject to any
such Options, the dates after which Options may be exercised, in whole
or in part, and the terms and conditions of the Options. This shall
include Options granted with terms and conditions that will permit their
designation as ISOs or Non-ISOs.
3.4 The Committee may at any time, with the consent of the Optionee, in its
sole discretion, cancel any Option and issue to the Optionee a new
Option for an equivalent or lesser number of Common Stock shares, and at
a lesser Option Price.
3.5 Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and
administration of the Plan shall be final and conclusive.
ARTICLE IV
Shares Subject to the Plan
4.1 The total number of shares of Common Stock available for grants of
Options under the Plan shall be 1,000,000, subject to adjustment in
accordance with Article VIII of the Plan. These shares may be either
authorized but unissued shares or treasury shares. If an Option or
portion thereof shall expire, terminate or be cancelled for any reason
without having been exercised in full, the unpurchased shares covered by
such Option shall be available for future grants of Options.
4
<PAGE>
ARTICLE V
Eligibility
5.1 Options may be granted to employees of the Company or, with respect to
Non-ISO's, to persons who have been engaged to become employees of the
Company, provided however, that in the latter case, the effective date
of the grant shall be the commencement date of employment. Members of
the Board who are not employees of the Company shall not be eligible for
Option grants hereunder.
ARTICLE VI
Terms of Options
6.1 Option Agreements. All Options shall be evidenced by written agreements
executed by the Company and the Optionee. Such Options shall be subject
to the applicable provisions of the Plan, and shall contain such
provisions as are required by the Plan and any other provisions the
Committee may prescribe. All agreements evidencing Options shall specify
the total number of shares subject to each grant, the Option Price and
the Termination Date. Those Options that comply with the requirements
for an ISO set forth in Section 422 of the Code at the discretion of the
Committee shall be designated ISOs, and all other Options shall be
designated Non-ISOs.
6.2 Option Price. The Option Price, regardless of whether the Option is
intended to be an ISO or Non-ISO shall not be less than the Fair Market
Value of a share of Common Stock on the date the Option is granted.
6.3 Vesting. Unless otherwise determined by the Committee (which
determination shall be evidenced by specification in a written grant
agreement), all Options granted pursuant to this Plan shall vest over a
period of four (4) years, with twenty five (25) percent of the Option
vesting on each of the first, second, third and fourth anniversaries of
the date the Option is granted, subject to accelerated vesting upon
certain events as may be determined by the Committee.
6.4 Period of Exercise. The Committee shall determine the dates after which
Options may be exercised in whole or in part for any reason whatsoever.
If Options are exercisable in installments, installments or portions
thereof that are exercisable and not exercised shall accumulate and
remain exercisable. The Committee may also amend an Option to accelerate
the dates after which
5
<PAGE>
Options may be exercised in whole or in part. However, no Option or
portion thereof shall be exercisable after the Termination Date; in
addition, unless the Committee determines otherwise (which determination
shall be evidenced by specification in a written grant agreement), no
Option or portion thereof granted to any Optionee subject to the
restrictions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, shall be made exercisable during the six month period beginning
on the date such Option was granted.
6.5 Special Rules Regarding ISOs Granted to Certain Employees.
Notwithstanding any contrary provisions of Section 6.2 and 6.4 of the
Plan, no ISO shall be granted to any employee who, at the time the
Option is granted, owns (directly, or within the meaning of Section
424(d) of the Code) more than ten percent of the total combined voting
power of all classes of stock of the Employer or of any Subsidiary or
Parent Corporation thereof, unless (a) the Option Price under such
Option is at least one hundred and ten percent (110%) of the Fair Market
Value of a share of Common Stock on the date the Option is granted and
(b) the Termination Date of such Option is a date not later than the day
preceding the fifth anniversary of the date on which the Option is
granted.
6.6 Manner of Exercise and Payment. An Option, or portion thereof, shall be
exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the
full number of shares for which the Option may then be exercised, but an
Optionee must exercise the Option in full shares of Common Stock. The
price of Common Stock purchased pursuant to an Option, or portion
thereof, may be paid in United States dollars in cash or by check, bank
draft or money order payable to the order of the Company, or, if
specifically permitted under the terms of the Option, through the
delivery of shares of Common Stock with an aggregate Fair Market Value
on the date of exercise equal to the Option Price, or by any combination
of the above methods of payment. The Committee shall determine
acceptable methods for tendering Common Stock as payment upon exercise
of an Option and may impose such limitations and prohibitions on the use
of Common Stock to exercise an Option as it deems appropriate,
including, without limitation, any limitation or prohibition designed to
avoid certain accounting consequences which may result from the use of
Common Stock as payment upon exercise of an option. The Committee may in
its discretion allow an Optionee to exercise his Options through a
special sale and remittance procedure. To the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Company designated brokerage
firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the
6
<PAGE>
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchase shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Company by reason of such exercise and
(b) the Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale. Except to
the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the exercise
date.
6.7 Withholding Taxes. The Company may, in its discretion, require an
Optionee to pay to the Company the amount, or make such other
arrangements, at the time of exercise or thereafter, that the Company
deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise.
6.8 Nontransferability of Options. Each Option shall, during the Optionee's
lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will, the laws
of descent and distribution, or, solely with respect to Non-ISO's, a
qualified domestic relations order (as defined in the Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder)
nor will any Option granted hereunder be subject to attachment,
execution or other similar process. In the event of any attempt by the
Optionee to alienate, assign, pledge, hypothecate or otherwise dispose
of an Option or of any right hereunder, except as provided for herein,
or in the event of any levy or any attachment, execution or similar
process upon the rights of interests hereby conferred, the Company may
terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.
6.9 Cessation of Employment of Optionee.
Unless otherwise determined by the Committee (which determination shall
be evidenced by specification in a written grant agreement), the
following provisions shall apply upon cessation of employment of the
Optionee.
(a) Cessation of Employment other than by Reason of Retirement,
Disability, or Death. If an Optionee shall cease to be employed
by the Company otherwise than by reason of Retirement,
Disability, or death, unless otherwise determined by the
Committee (which determination shall be evidenced by
specification in a written grant agreement) each Option held by
the Optionee, together with all rights hereunder, shall be
exercisable only to the extent exercisable on the date of the
cessation of employment, and shall terminate on the earlier of
the Termination Date or
7
<PAGE>
ninety (90) days following the date of cessation of employment,
to the extent not previously exercised; provided, however, that
in the event the Optionee's employment with the Company is
terminated due to his gross misconduct, the Options granted to
such Optionee hereunder shall be null and void after such
termination occurs or such determination is made by the
Committee. In the event any Options are exercised more than
ninety (90) days after an Optionee's Termination Date, and those
Options had previously been designated as ISO's, such Options
shall automatically convert to non-ISO's.
(b) Cessation of Employment by Reason of Retirement or Disability. If
an Optionee shall cease to be employed by the Company by reason
of Retirement or Disability, each Option held by the Optionee
shall remain exercisable, to the extent it was exercisable at the
time of cessation of employment, until the earliest of:
i. the Termination Date;
ii. the death of the Optionee, or such later date not more
than one year after the death of the Optionee as the
Committee, in its discretion, may provide pursuant to
section 6.9(c) of the Plan; or
iii. ninety (90) days following the date of the cessation of
the Optionee's employment by reason of Retirement; or
iv. one year after the date of cessation of the Optionee's
employment by reason of Disability;
and thereafter all such Options shall terminate together with all
rights hereunder, to the extent not previously exercised.
(c) Cessation of Employment by Reason of Death. In the event of the
death of the Optionee, while employed by the Company, an Option
may be exercised at any time or from time to time prior to the
earlier of the Termination Date or the first anniversary of the
date of the Optionee's death, by the person or persons to whom
the Optionee's rights under each Option shall pass by will or by
the applicable laws of descent and distribution, to the extent
that the Optionee was entitled to exercise it on the Optionee's
date of death. In the event of the death of the Optionee while
entitled to exercise an option pursuant to Section 6.9(b), the
Committee, in its discretion, may permit such Option to be
exercised at any time or from time to time prior to the
Termination Date during a period
8
<PAGE>
of up to one year from the death of the Optionee, as determined
by the Committee, by the person or persons to whom the Optionee's
rights under each Option shall pass by will or by the applicable
laws of descent and distribution; provided, that, such Option
shall be exercisable only to the extent that the Option was
exercisable under Section 6.9(b) above and that the Optionee's
rights under an Option have passed by will or by the applicable
laws of descent and distribution; and further provided that the
Option and any exercise thereof by any person shall be subject to
all terms and conditions of the Plan and the Option applicable to
the Optionee.
6.10 Notification of Sales of Common Stock. Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO: (a) within
two years after date of the grant of the ISO under which the shares were
acquired; (b) within one year after the transfer of such shares to the
Optionee; or (c) more than ninety (90) days after his termination of
employment with the Company, shall notify the Company of such
disposition and of the amount realized upon such disposition. In the
event an Optionee terminates employment with the Company due to
Disability, the words "ninety (90) days" in this Section 6.10 shall be
replaced with the words "one year."
ARTICLES VII
Limitation on Grants of ISOs
7.1 The aggregate Fair Market Value (determined as of the date the Option is
granted) of the Common Stock which any employee may exercise for the
first time in any calendar year under this or any other stock option
plan maintained by the Employer or by any Subsidiary as an ISO shall be
limited to $100,000 or such higher amount as may be permitted from time
to time under the Code.
ARTICLE VIII
Adjustments
8.1 If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall
declare a dividend payable in, or shall subdivide or combine, its Common
Stock; or (c) any other event shall occur which in the judgment of the
Committee necessitates action by way of adjusting the terms of the
outstanding Options, the Committee shall take any such action, including
price adjustment, as in its judgment shall be
9
<PAGE>
necessary to preserve the Optionee's rights substantially proportionate
to the rights existing prior to such event, and to the extent that such
action shall include an increase or decrease in the number of shares of
Common Stock subject to outstanding Options, the number of shares
available under Article IV above shall be increased or decreased, as the
case may be, proportionately. The judgment of the Committee with respect
to any matter referred to in this Article shall be conclusive and
binding upon each Optionee.
ARTICLE IX
Amendment and Termination of Plan
9.1 The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate.
9.2 No amendment, suspension or termination of this Plan shall, without the
Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.
9.3 The Board may amend this Plan, subject to the limitations cited above,
in such matter as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if
any, to the Code and Rule 16b-3.
ARTICLE X
Government and Other Regulations
10.1 The obligation of the Company to issue, or transfer and deliver shares
for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in
effect and required by governmental entities and any stock exchanges on
which Common Stock is traded.
10.2 In addition to, and without limiting the Company's rights and
obligations under the preceding paragraph, the Committee may postpone
any exercise of an Option for such time as the Committee in its
discretion may deem necessary in order to permit the Company with
reasonable diligence (i) to effect or maintain the listing of the Common
Stock in the New York Stock Exchange or to effect or
10
<PAGE>
maintain registration under the Securities Act of 1933, as amended, of
the Plan or the shares issuable upon the exercise of the Option; (ii) to
determine that such shares and Plan are exempt from registration; or
(iii) to comply with any applicable laws, regulations, rules, orders, or
approval requirements then in effect and required by governmental
entities or any stock exchange on which the Common Stock is traded. Any
such postponement shall not extend the term of an Option, and neither
the Company nor its directors or officers shall have any obligation or
liability to any Optionee or Optionee's successor with respect to any
shares subject to an Option that lapses unexercised because of such
postponement.
ARTICLE XI
Miscellaneous Provisions
11.1 Plan Does Not Confer Employment or Stockholder Rights. The right of the
Company to terminate (whether by dismissal or otherwise) the Optionee's
employment with it at any time at will, or as otherwise provided by any
agreement between the Company and the Optionee, is specifically
reserved. Neither the Optionee nor any person entitled to exercise the
Optionee's rights in the event of the Optionee's death shall have any
rights of a stockholder with respect to the shares subject to each
Option, except to the extent that, and until, such shares shall have
been issued upon the exercise of each Option.
11.2 Plan Expenses. Any expenses of administering this Plan shall be borne by
the Company.
11.3 Use of Exercise Proceeds. Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of
the Company, except that any Common Stock received in payment may be
retired, or retained in the Company's treasury and reissued.
ARTICLE XII
Effective Date and Shareholder Approval
12.1 The Effective Date of the Plan is February 7, 1997. The Plan has been
approved by Shareholders pursuant to the First Amended Joint Plan of
Reorganization under Chapter 11 (Dated: November 15, 1996), filed in the
United States Bankruptcy Court for the Northern District of Texas,
Dallas
11
<PAGE>
Division and the applicable disclosure statement filed in such Court
with respect thereto. The Bankruptcy Court authorized and approved the
adoption of the Plan.
12
ICH CORPORATION
1997 DIRECTOR STOCK OPTION PLAN
ARTICLE I
Purpose
The ICH Corporation 1997 Director Stock Option Plan is intended to encourage
outside directors and others selected for participation in the Plan to continue
their association with the Company by providing them with incentives designed to
enable them to acquire an ownership interest in the Company. It is believed that
the availability and granting of stock option awards increases the Company's
ability to attract and retain individuals with outstanding qualifications and
experience.
ARTICLE II
Definitions
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 Board: The Board of Directors of ICH Corporation.
2.2 Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
2.3 Committee: The Compensation Committee of the Board; provided, however,
the Compensation Committee shall not take any action under this Plan
unless it is at all times composed solely of not less than three
"Non-Employee Directors" within the meaning of Rule 16b-3, as
promulgated under the Securities Exchange Act of 1934, as amended. In
the event the Compensation Committee is unable to act, the Board shall
take any and all actions required or permitted to be taken by the
Committee under this Plan. For purposes of this Section a "Non-Employee
Director" shall be a director who: (i) is not currently an officer or
employee of ICH Corporation or of any Subsidiary; (ii) (A) does not
receive compensation, either directly or indirectly, for any
non-director service in an amount that would be required to be disclosed
under Item 404(a) of Regulation S-K or (B) possess an interest in any
other transaction requiring disclosure
<PAGE>
under such Item; and (iii) is not engaged in a business relationship
disclosable under Item 404(b) of Regulation S-K.
2.4 Common Stock: The common stock, par value $0.01, of ICH Corporation.
2.5 Company: ICH Corporation and any of its Subsidiaries.
2.6 Disability: Disability within the meaning of Section 22(e)(3) of the
Code, as determined by the Committee.
2.7 Effective Date: February 7, 1997
2.8 Eligible Director: A non-employee member of the Board of Directors.
2.9 Eligible Participant: An Eligible Director or consultant selected by the
Committee to participate in the Plan.
2.10 Fair Market Value: Fair Market Value shall mean with respect to a share
of Common Stock the value determined on any relevant date in accordance
with the following provisions:
(i) if the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price
is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists, or
(ii) if the Common Stock is at the time listed on any national
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the national
Stock Exchange determined by the Committee to be the primary market for
the Common Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists, or
(iii) if shares of the Common Stock are not then traded on a
national market (e.g., the over the counter dealers market) or are not
then publicly traded, Fair Market Value shall be determined by the
Committee after taking into account such factors as the Committee shall
deem appropriate.
2.11 Option: A stock option granted under the Plan that does not qualify as
an
2
<PAGE>
"incentive stock option" under Section 422 of the Code.
2.12 Option Price: The purchase price of a share of Common Stock under an
Option.
2.13 Optionee: An Eligible Participant who has been granted one or more
Options under this Plan.
2.14 Plan: The ICH Corporation 1997 Director Stock Option Stock Plan, as from
time to time amended.
2.15 Subsidiary: A subsidiary corporation, as defined in Section 424(f) of
the Code.
2.16 Termination Date: A date fixed by the Committee but not later than the
day following the tenth anniversary of the date on which the Option is
granted.
ARTICLE III
Administration
3.1 Except as otherwise provided in the Plan, the Committee shall administer
the Plan and shall have full power to grant Options, construe and
interpret the Plan, establish and amend rules and regulations for its
administration, and perform all other acts relating to the Plan,
including the delegation of administrative responsibilities, which it
believes reasonable and proper.
3.2 The Committee shall consist of not less than three members of the Board.
The members of the Committee shall serve at the pleasure of the Board,
which shall have the power, at any time and from time to time, to remove
members from the Committee or to add members thereto. Vacancies on the
Committee, however caused, shall be filled by the Board.
3.3 Subject to the provisions of the Plan, the Committee shall establish the
policies and criteria pursuant to which it shall grant Options and
administer the Plan. Subject to the provisions of the Plan, the
Committee shall, in its discretion, determine which Eligible
Participants shall be granted discretionary Options, the number of
shares subject to any such Options, the dates after which Options may be
exercised, in whole or in part, and the terms and conditions of the
Options.
3.4 The Committee may at any time, with the consent of the Optionee, in its
sole discretion, cancel any Option and issue to the Optionee a new
Option for an equivalent or lesser number of Common Stock shares, and at
a lesser Option Price.
3
<PAGE>
3.5 Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and
administration of the Plan shall be final and conclusive.
ARTICLE IV
Shares Subject to the Plan
4.1 The total number of shares of Common Stock available for grants of
Options under the Plan shall be 400,000 subject to adjustment in
accordance with Article IXof the Plan. These shares may be either
authorized but unissued shares or treasury shares. If an Option or
portion thereof shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options.
ARTICLE V
Automatic Grant of Options
5.1 Options granted pursuant to this Article V shall only be granted to
Eligible Directors.
5.2 Grant Dates. Option grants shall be made on the dates specified below:
a) Each Eligible Director, as of the date of adoption of the Plan by the
Board or, if later, the date such Director is first elected or appointed
as a non employee Director, shall be granted an Option to purchase 5,000
shares of Common Stock provided, however, that such Options shall be
exercisable only after the date of the approval of the Plan by the
shareholders of the Company.
b) On each anniversary date of such grant thereafter, each Eligible
Director shall automatically be granted an Option to purchase 5,000
shares of Common Stock; provided, however, Options shall not be granted
under this Section 5.2 of the Plan if such grant or grants would cause
any Eligible Director, individually, to accumulate Options to purchase
more than an aggregate of 40,000 shares of Common Stock under the Plan
or if such grant or grants would cause all Eligible Directors, together
as a group, to accumulate Options to purchase more that an aggregate of
280,000 shares of Common Stock under the Plan.
ARTICLE VI
DISCRETIONARY GRANT OF OPTION
4
<PAGE>
6.1 Options granted pursuant to this Article VI may be granted to any
Eligible Participant.
6.2 The Committee may, from time to time select one or more Eligible
Directors who may be granted Options at such time an in such amounts as
the Committee may determine in its discretion, provided, however, no
Options shall not be granted under this Section 6.2 of the Plan if such
grant or grants would cause any Eligible Director, individually, to
accumulate Options to purchase more than an aggregate of 40,000 shares
of Common Stock under the Plan or if such grant or grants would cause
all Eligible Directors, together as a group, to accumulate Options to
purchase more that an aggregate of 280,000 shares of Common Stock under
the Plan.
6.3 The Committee may, from time to time select one or more consultants who
are neither non-employee members of the Board nor employees of the
Company to participate in the Plan. A person so selected shall become an
"Eligible Participant". The Committee may grant Options to such Eligible
Participants at such time and in such amounts as the Committee may
determine in its discretion, subject to any maximum limitation the Board
of Directors may institute with respect to the aggregate amount of
shares of Common Stock that may be subject to Options held by such
Optionee or Optionees, either individually or together as a group, under
the Plan.
ARTICLE VII
Terms of Options
7.1 Option Agreements: All Options shall be evidenced by written agreements
executed by the Company and the Optionee. Such Options shall be subject
to the applicable provisions of the Plan, and shall contain such
provisions as are required by the Plan and any other provisions the
Committee may prescribe. All agreements evidencing Options shall specify
the total number of shares subject to each grant, the Option Price and
the Termination Date.
7.2 Option Price: The Option Price shall not be less than the Fair Market
Value of a share of Common Stock on the date the Option is granted.
7.3 Vesting: Unless otherwise determined by the Committee (which
determination shall be evidenced by specification in a written grant
agreement), all Options granted pursuant Sections 5.2 and 6.2 of this
Plan shall be fully vested upon the date such Option is granted and all
Options granted pursuant to Section 6.3 of this Plan shall vest over a
period of four (4) years, with twenty-five (25%) percent of the Option
vesting on each of the first, second, third and fourth anniversaries
5
<PAGE>
of the date the Option is granted, subject to accelerated vesting upon
certain events as may be determined by the Committee.
7.4 Period of Exercise: Unless the Committee provides otherwise in an
Optionee's written agreement, Options, to the extent vested, shall be
exercisable at any time after the date of the Option grant. However, no
Option or portion thereof shall be exercisable after the Termination
Date which, unless the Committee provides otherwise in an Optionee's
written agreement, shall be the day following the tenth anniversary of
the date on which the Option is granted.
7.5 Manner of Exercise and Payment: An option, or portion thereof, shall be
exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the
full number of shares for which the Option may then be exercised, but an
Optionee must exercise the Option in full shares of Common Stock. The
price of Common Stock purchased pursuant to an Option, or portion
thereof, may be paid:
(a) in United States dollars in cash or by check, bank draft
or money order payable to the order of the Company;
(b) through the delivery of shares of Common Stock with an
aggregate Fair Market Value on the date of exercise equal
to the Option Price, if so specified in the relevant
Option agreement; or
(c) by any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common
Stock as payment upon exercise of an Option and may impose such
limitations and prohibitions on the use of Common Stock to exercise an
Option as it deems appropriate, including, without limitation, any
limitation or prohibition designed to avoid certain accounting
consequences which may result from the use of Common Stock as payment
upon exercise of an Option. The Committee may in its discretion allow an
Optionee to exercise his Options through a special sale and remittance
procedure. To the extent the option is exercised for vested shares
through a special sale and remittance procedure the Optionee shall
concurrently provide irrevocable written instructions to (a) a Company
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchase shares plus all applicable Federal, state
and local income required to be withheld by the Company by reason of
such exercise and (b) the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares
6
<PAGE>
must be made on the exercise date.
7.6 Nontransferability of Options: Each Option shall, during the Optionee's
lifetime, be exercisable only by the Optionee, and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws
of descent and distribution or be subject to attachment, execution or
other similar process. In the event of any attempt by the Optionee to
alienate, assign, pledge, hypothecate or otherwise dispose of an Option
or of any right hereunder, except as provided for herein, or in the
event of any levy or any attachment, execution or similar process upon
the rights or interests hereby conferred, the Company may terminate the
Option by notice to the Optionee and the Option shall thereupon become
null and void.
7.7 Termination of the Optionee's Services: If an Optionee's service on the
Board or for the Company as applicable, shall cease for any reason, each
Option held by the Optionee, to the extent vested on the date the
Optionee's service ceases, shall remain exercisable until the earlier
of:
i. the Option's Termination Date;
ii. the first anniversary of the date of the cessation of the
Optionee's service for any reason including due to death
or Disability;
and thereafter, all such Options to the extent not previously exercised
shall terminate together with all rights hereunder. All Options not
vested as of the date of termination of Optionee's service shall be
forfeited.
ARTICLE VIII
Adjustments
8.1 If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall
declare a dividend payable in, or shall subdivide or combine, its Common
Stock; or (c) any other event shall occur which in the judgment of the
Committee necessitates action by way of adjusting the terms of the
outstanding Options, the Committee shall take any such action, including
price adjustment, as in its judgment shall be necessary to preserve the
Optionee's rights substantially proportionate to the rights existing
prior to such event, and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Article IV
above shall be increased or decreased, as the case may be,
proportionately. The judgment of the Committee with respect to any
matter referred to in this Article VIII shall be conclusive and binding
upon each Optionee.
7
<PAGE>
ARTICLE IX
Amendment and Termination of Plan
9.1 The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part, or amend it in such respects as the Board
may deem appropriate.
9.2 No amendment, suspension or termination of this Plan shall, without the
Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.
9.3 The Board may amend this Plan, subject to the limitations cited above,
in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if
any, to the Code and to Rule 16b-3, promulgated under the Securities
Exchange Act of 1934, as amended.
ARTICLE X
Government and Other Regulations
10.1 The obligation of the Company to issue, or transfer and deliver shares
for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in
effect and required by governmental entities and any stock exchanges on
which Common Stock is traded.
10.2 In addition to, and without limiting, the Company's rights and
obligations under the preceding paragraph, the Committee may postpone
any exercise of an Option for such time as the Committee in its
discretion may deem necessary in order to permit the Company with
reasonable diligence (i) to effect or maintain the listing of the Common
Stock on the New York Stock Exchange or to effect or maintain
registration under the Securities Act of 1933, as amended, of the Plan
or the shares issuable upon the exercise of the Option; (ii) to
determine that such shares and Plan are exempt from registration; or
(iii) to comply with any applicable laws, regulations, rules, orders or
approval requirements then in effect and required by governmental
entities or any stock exchange on which the Common Stock is traded. Any
such postponement shall not extend the term of an Option, and neither
the Company nor its directors or officers shall have any obligation or
liability to any Optionee or Optionee's successor with respect to any
shares subject to an Option that lapses unexercised because of such
8
<PAGE>
postponement.
ARTICLE XI
Miscellaneous Provisions
11.1 Plan Does Not Confer Stockholder Rights: Neither the Optionee nor any
person entitled to exercise the Optionee's rights in the event of the
Optionee's death shall have any rights as a stockholder with respect to
the shares subject to each Option, except to the extent that, and until,
such shares shall have been issued as soon as practicable after the
exercise of each Option.
11.2 Plan Expenses: Any expenses of administering this Plan shall be borne by
the Company.
11.3 Use of Exercise Proceeds: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of
the Company, except that any Common Stock received in payment may be
retired, or retained in the Company's treasury and reissued.
ARTICLE XII
Effective Date and Shareholder Approval of Plan
12.1 The Effective Date of the Plan is February 7, 1997. The Plan has been
approved by shareholders pursuant to the First Amended Joint Plan of
Reorganization under Chapter 11 (Dated: November 15, 1996), filed in the
United States Bankruptcy Court for the Northern District of Texas,
Dallas Division and the applicable disclosure statement filed in such
Bankruptcy Court with respect thereto. The Bankruptcy Court authorized
and approved the adoption of the Plan.
9
[FRANCHISE FINANCE CORPORATION OF AMERICA Letterhead]
July 25, 1997
VIA TELECOPY AND
AIRBORNE EXPRESS
Mr. James R. Arabia
Sybra, Inc.
9404 Genesee Avenue
Suite 330
La Jolla, California 92037
Dear Jim:
Sybra, Inc. ("Borrower") has advised FFCA Acquisition Corporation ("FFCA")
that Borrower desires to obtain mortgage financing for up to twelve (12) new
Arby's restaurants (individually, a "Property" and collectively, the
"Properties") during the next twenty-four (24) months. For each Property,
Borrower desires to obtain a construction/long term mortgage loan secured by a
first lien mortgage or deed of trust, as determined by FFCA (individually, the
"Mortgage Loan" and collectively the "Mortgage Loans"). Up to one (1) of the
Mortgage Loans may involve land (the "Land") which shall be leased by Borrower
pursuant to a long term ground lease (the "Ground Lease Site") and shall be
secured by a first lien mortgage or deed of trust on the Improvements and
Borrower's leasehold interest in the Land. Each of the remaining Mortgage Loans
shall be secured by a first lien mortgage or deed of trust on the land, building
and other improvements (collectively, the "Improvements") at a Property which
shall be owned by Borrower in fee simple (individually, a "Fee Site" and
collectively, the "Fee Sites"). At the time of the final construction draw of
each Mortgage Loan, Borrower also desires to obtain an equipment loan
(individually an "Equipment Loan" and collectively, the "Equipment Loans")
secured by a first lien security interest in the new furniture, equipment and
other trade fixtures at the Property (collectively, the "Equipment").
Upon the acceptance of this commitment letter (the "Commitment") by
Borrower, FFCA commits to make to Borrower (i) up to twelve (12) Mortgage Loans,
and (ii) up to twelve (12) Equipment Loans, all on the terms set forth in this
Commitment (individually, a "Transaction" and collectively, the "Transactions").
<PAGE>
A. Basic Commitment Terms.
Background: This Commitment outlines certain basic terms and
conditions of the Transactions; however, it is not meant
to define all of the terms and conditions of the
Transactions, which will be set forth more fully in a
separate term sheet (the "Term Sheet") and the final
documentation for each Transaction. The Transactions are
subject to, among other things, the approval by FFCA's
in-house site review and valuation department of the
Properties and the Loan Amount (as defined below),
Borrower's compliance with all of the requirements set
forth in this Commitment and the receipt by FFCA of all
documents and other information reasonably requested by
FFCA and its counsel.
Acceptance: Borrower may accept this Commitment by signing and
returning a copy of this Commitment, together with a
check for the Fee (as defined below), to FFCA within 10
days of the date hereof.
Fee: Borrower shall pay FFCA a $24,000.00 fee for this
Commitment.
Refundability of Fee: Although the Fee shall be nonrefundable and fully earned
when received by FFCA, all or part of the Fee may be
applied to the Property Commitment Fees as described in
the Property Commitment Fee Section below. If Borrower
and FFCA are unable to agree upon loan documents for use
in connection with this Transaction, the Fee shall be
refunded to _______________________.
Loan Amount Cap: Notwithstanding anything herein to the contrary, the sum
of the Loan Amount and the Equipment Loan Amount for any
Fee Site shall not exceed $1,000,000.00 (including
financed soft costs and closing costs); and the sum of
the Loan Amount and the Equipment Loan Amount for the
Ground Lease Site shall not exceed $1,000,000 minus the
base annual rental under the ground lease during the
first year of the term of the Mortgage Loan times 10
(including financed soft costs and closing costs).
Transaction Processing: Borrower will notify FFCA as soon as Borrower has
identified a Property. Such notice shall include a copy
of the proposed purchase agreement or ground lease, as
the case may be, a description of the Property,
including the proposed Improvements, a budget for the
proposed
2
<PAGE>
Improvements, a description and cost estimate for the
Equipment and any other documents and information
available regarding the Property (the "Property
Notice"). Upon receipt of the Property Notice, FFCA's
in-house site review and inspection department will
inspect the Property identified by Borrower. If the
identified Property is approved by FFCA, FFCA will
prepare a Term Sheet in the form attached hereto as
Exhibit A outlining the specific terms and conditions
upon which FFCA would be willing to enter into the
Transaction. FFCA will not order a title insurance
commitment and phase I environmental report or instruct
its counsel to begin preparing any of the documentation,
until Borrower has accepted the Term Sheet and returned
it to FFCA.
Commitment Term: The term of this Commitment shall commence on the date
this Commitment is accepted and automatically expire and
be of no further force or effect 24 months after the
date it is accepted by Borrower. Any Property Notice
received by FFCA after such date shall be ineffective.
Property Locations: Each of the Properties shall be located in one of the
following states: (i) Florida, (ii) Michigan, (iii)
Pennsylvania, or (iv) Texas.
B. Basic Mortgage Loan Terms
Property Commitment For each Transaction Borrower shall pay FFCA an
Fee: underwriting and processing fee equal to the sum of one
percent (1%) of the sum of the Loan Amount and the
Equipment Loan Amount. Borrower shall be entitled to a
$2,000.00 credit towards the Property Commitment Fee
owing under each Term Sheet. One-half of the balance of
the Property Commitment Fee shall be due upon Borrower's
acceptance of a Term Sheet; the balance of the Property
Commitment Fee shall be due at the Closing.
Documentation: FFCA shall provide Borrower with FFCA's proposed form of
promissory note ("Note"), loan agreement ("Loan
Agreement"), mortgage or deed of trust, as determined by
FFCA, and security agreement (Deed of Trust"),
assignment of leases and rents, UCC-1 financing
statements and such other documents as may be reasonably
required by FFCA or the title company. The
3
<PAGE>
ground lease involved in any Transaction shall be
satisfactory to FFCA in its sole and absolute
discretion.
Loan Amount: In the case of the Mortgage Loan involving the Ground
Lease Site the sum of (i) the actual and reasonable cost
to construct the Improvements, as determined by FFCA's
in-house site inspection and review department, (ii) the
Property Commitment Fee, and (iii) such soft costs and
closing costs as FFCA may approve in its sole
discretion. In the case of a Mortgage Loan involving a
Fee Site, the sum of (a) the fair market value of the
land as determined by FFCA's in-house site inspection
and review department, (b) the actual and reasonable
cost to construct the Improvements, as determined by
FFCA's in-house site inspection and review department,
(c) the Property Commitment Fee, and (d) such soft costs
and closing costs as FFCA may approve in its sole
discretion. Loan Amounts on all of the Properties shall
not exceed the sum of $9,600,000.00 (inclusive of the
cost of the Land, the Development Price (as defined
below), and all financed soft costs and closing costs.
Development Price: After Borrower purchases the Land, FFCA will fund the
sum of (i) the actual and reasonable hard costs incurred
to construct the improvements at the Property as
determined by FFCA's in-house site inspection and
valuation department and (ii) Borrower's actual and
reasonable out-of-pocket soft costs relating to the
construction of the Improvements as may be approved as
to category and amount by FFCA, in its sole discretion.
Basic Construction The disbursement agreement shall provide that FFCA will
Funding Terms: agree to fund the Development Price in progress payments
through the title company, and Borrower will agree to
complete the Improvements as provided therein.
Note Terms: During the construction period, interest shall accrue at
a variable rate equal to the 30-day LIBOR Rate then in
effect plus 3.00%; thereafter, interest shall accrue at
an annual rate equal to the 10-year U.S. Treasury Note
Rate in effect 10 days prior to final disbursement of
the Development Price plus 3.00%. Principal and interest
shall be paid in equal monthly installments due on the
first day of each month based on a twenty (20) year
amortization schedule.
4
<PAGE>
Prepayment: Subject to the terms of the Fixed Charge Coverage
paragraph below, the Note may not be prepaid in whole or
in part during the first five years of the term of the
Note. Thereafter, Borrower may prepay the Note, in whole
but not in part, on any regularly scheduled payment
date; provided, however, any prepayment during the sixth
year of the term of the Mortgage Loan shall include a
prepayment premium equal to 5% of the then outstanding
amount of the loan; any prepayment during the seventh
year of the term of the Mortgage Loan shall include a
prepayment premium equal to 4% of the then outstanding
amount of the loan; any prepayment during the eighth
year of the term of the Mortgage Loan shall include a
prepayment premium equal to 3% of the then outstanding
amount of the loan; any prepayment during the ninth year
of the term of the Mortgage Loan shall include a
prepayment premium equal to 2% of the then outstanding
amount of the loan; and any prepayment during the tenth
year of the term of the Mortgage Loan shall include a
prepayment premium equal to 1% of the then outstanding
amount of the loan.
Fixed Charge Coverage Prior to the securitization (as defined below) of any of
Ratio: the Mortgage Loans, Borrower will maintain an annual
fixed charge ratio, tested on a consolidated basis as to
all of the Properties subject to the Mortgage Loans that
are being securitized equal to or greater than 1.3:1
(the "SFCCR"). FFCA will notify Borrower as to the
actual date for the calculation of the SFCCR (the "SFCCR
Calculation Date") at least 60 days prior to the SFCCR
Calculation Date. The SFCCR Calculation Date shall be no
more than 30 days prior to the anticipated date of the
Securitization. In calculating the SFCCR, FFCA will use
actual performance data for any Properties that have
been operated for more than 4 months as of the SFCCR
Calculation Date. For any Properties that have been
operated for less than 4 months as of the SFCCR
Calculation Date, FFCA shall use pro forma data to
calculate the SFCCR. FFCA will not exclude from any
Securitization any of the fully funded Mortgage Loans in
FFCA's inventory if the exclusion of the Mortgage Loan
causes the SFCCR on the remaining Mortgage Loans to be
lower than 1.30:1. Furthermore, the FCCR Calculation
Date for any Property shall be no more than one year
after the date that the Mortgage Loan for such Property
was fully funded. The Loan
5
<PAGE>
Documents shall further provide that after the Mortgage
Loan has been securitized, Borrower shall maintain an
annual fixed charge coverage ratio, tested on a
consolidated basis as to all of Borrower's Arby's
restaurants, equal to or greater than 1.3:1, with such
ratio to be calculated as of each fiscal year end of
Borrower ("FCCR") (any annual FCCR calculation below
1.3:1 shall be subject to cure, consistent with
provisions in the loan documents between Sybra and the
Atherton Group). Borrower's fiscal year 1997 year end
will be based on a year to date performance as there are
less than 12 full months of operation from April 30,
1997, the acquisition date of Borrower by ICH. Both the
SFCCR and the FCCR shall be calculated in accordance
with the following formula:
The ratio of the sum of:
1. Net income according to GAAP (after income
tax); plus
2. Income tax; plus
3. Interest expense, plus
4. All non-cash charges including depreciation
and amortization; plus
5. All corporate and regional overhead (defined
as non-store level general and
administrative expense consistent with the
method of accounting used for Borrower's
1996 audited report, including, but not
limited to, expenses related to automobiles,
administrative fees, legal, accounting and
other professional services, office
supplies, travel and entertainment; plus
6. Non-recurring expenses; minus
7. A standardized management fee representing
2.0% of gross sales for any 12 month period;
plus
8. Rent expense (defined as building and ground
operating lease expense, plus percent rent,
plus capitalized building lease expense (net
of principal and interest), minus rent on
regional and corporate offices and inactive
units);
6
<PAGE>
To the sum of:
1. All corporate debt service for the period
being measured (interest and required
principal payments during such period); plus
2. Rent expense as defined above in number 8
above; plus
3. Interest and required principal payments on
all Capital Lease obligations during such
period.
If Borrower does not achieve either the required SFCCR
or the FCCR, within 30 days following notice from FFCA,
Borrower shall be required to cure such failure through
one of the following remedies: (i) pay off the Mortgage
Loan(s) on the poorest performing Property or
Properties, (ii) prepay the Mortgage Loan(s) on the
poorest performing Property or Properties by an amount
sufficient to raise the ratio to the required level and
the corresponding Note or Notes shall be amended to
reamortize the remaining payments due thereunder, (iii)
substitute the poorest performing Properties with
similar Properties upon terms that are mutually
acceptable to the parties, or (iv) pay off the Notes on
the poorest performing Properties and enter into a
sale-leaseback transaction with FFCA on terms and
conditions that are mutually satisfactory to the
parties.
Closing Costs: Borrower shall pay its attorneys' fees, the cost of
FFCA's in-house site inspection expenses, FFCA's
reasonable attorneys' fees, the cost of the phase I
environmental report, and all other Mortgage Loan
closing costs, including, without limitation, all
mortgage and stamp taxes, construction consultant fees,
soil report expenses, disbursement agent costs, survey
expenses, and title insurance premiums, and escrow,
filing and recording fees.
Basic Construction The Loan Agreement shall provide that FFCA will agree to
Funding Terms: fund the Loan Amount in progress payments through the
title company and Borrower will agree to complete the
Improvements as provided therein.
7
<PAGE>
C. Basic Equipment Loan Terms:
Documentation: FFCA's counsel will prepare and submit to Borrower the
form of equipment note (the "Equipment Note"), equipment
loan agreement (the "Equipment Loan Agreement"),
security agreement (the "Security Agreement") and UCC-1
Financing Statements previously agreed upon by FFCA and
Borrower. The Security Agreement shall grant FFCA a
first priority purchase money security interest in the
Equipment, and the Equipment Loan Agreement shall (i)
contain such representations, warranties, covenants and
agreements as are customary in loan transactions of this
type, and (ii) provide that Borrower will indemnify FFCA
against all claims, suits and costs whatsoever relating
to any breach of Borrower's representations and
warranties. At the Equipment Loan closing, Borrower
shall (i) provide FFCA with proof of insurance and
copies of all bills of sale, invoices and purchase
agreements relating to the Equipment, and (ii) execute
the Equipment Note, the Equipment Loan Agreement, the
Security Agreement, the UCC-1 financing statements and
such other documents as may be reasonably required by
FFCA or the title company (collectively, the "Equipment
Loan Documents").
Equipment The actual and reasonable cost of the Equipment at each
Loan Amount: Property, but in no event shall the cost of the
Equipment at all of the Properties exceed the sum of
$2,400,000.00 in the aggregate or the cost of the
Equipment at any Property exceed $200,000.00.
Note Terms: Interest shall accrue at the rate per annum equal to the
10-year U.S. Treasury Note Rate in affect 10 days prior
to closing plus 3.00%. Principal and interest shall be
paid in equal monthly installments due on the first day
of each month based on a seven (7) year amortization
schedule.
Prepayment: Borrower may not prepay any Note in whole or in part
during the first four (4) years thereof; thereafter,
Borrower may prepay the Note in whole only on any
regularly scheduled payment date; provided, however, any
prepayment during the fifth year of the term of the
Equipment Loan shall include a prepayment premium equal
to 3% of the then outstanding amount of the
8
<PAGE>
Equipment Loan; any prepayment during the sixth year of
the term of the Equipment Loan shall include a
prepayment premium equal to 2% of the then outstanding
amount of the Equipment Loan; and any prepayment during
the seventh year of the term Equipment Loan shall
include a prepayment premium equal to 1% of the then
outstanding amount of the Equipment Loan.
Equipment Loan The date of the final funding of the Loan Amount.
Closing Date:
D. Other Material Transaction Terms.
Ground Lease Approval: Prior to the closing of any Transaction involving a
Ground Lease Site, FFCA's Legal Department shall have
received and approved the related ground lease.
Financial Statements: Within forty-five days following the end of each quarter
during the Commitment Term, Borrower shall provide FFCA
with Borrower's financial statements for the preceding
quarter.
Securitization: The Loan Documents shall provide that FFCA may, at any
time, sell, transfer or assign any Note, Deed of Trust
and any of the other Loan Documents and Equipment Loan
Documents, and any or all servicing rights with respect
thereto (each, a "Transfer"), or grant participations
therein (each, a "Participation"), or complete an asset
securitization vehicle selected by FFCA, in accordance
with all requirements which may be imposed by the
investors or the rating agencies involved in such
securitized financing transaction, as selected by FFCA,
or which may be imposed by applicable securities, tax or
other laws or regulations, including, without
limitation, laws relating to FFCA's status as a real
estate investment trust (each, a "Securitization").
Borrower agrees to reasonably cooperate in good faith
with FFCA in connection with any Transfer, Participation
and/or Securitization, including, without limitation,
(i) providing such documents, financial and other data,
and other information and materials (the "Disclosures")
which would typically be required with respect to
Borrower by a purchaser, transferee, assignee, servicer,
participant, investor or rating agency involved with
respect to such Transfer, Participation and/or the
Securitization, as applicable; provided, however,
Borrower shall not be required to make Disclosures of
any
9
<PAGE>
confidential information or any information which has
not previously been made public unless required by
applicable federal or state securities laws; and (ii)
amending the terms of the transactions evidenced by the
Loan Documents to the extent necessary so as to satisfy
the requirements of purchasers, transferees, assignees,
servicers, participants, investors or selected rating
agencies involved in any such Transfers, Participations
or Securitization, so long as such amendments would not
have a material adverse effect upon Borrower or the
transactions contemplated by this Commitment or make any
of the mortgage and equipment loan repayment or
covenants more burdensome on the Borrower. Borrower
consents to FFCA providing the Disclosures, as well as
any other information which FFCA may now have or
hereafter acquire with respect to the Property or the
financial condition of Borrower, to each purchaser,
transferee, assignee, servicer, participant, investor or
rating agency involved with respect to each Transfer,
Participation and/or Securitization, as applicable. FFCA
shall pay the reasonable and customary expenses incurred
in connection with the performance of the obligations
under this Paragraph.
Cross-Default and The Mortgage Loan Documents and Equipment Loan Documents
Cross- between FFCA and Borrower with respect to the Mortgage
Collateralization: Loans and the Equipment Loans shall be cross-defaulted
and cross-collateralized with all other loan agreements,
notes, mortgages, deeds of trust and other agreements in
connection with the Transactions now or hereafter
entered into between (or, in the case of notes and
guaranties, in favor of) (i) FFCA, Franchise Finance
Corporation of America or any of its other subsidiaries
and affiliates, on the one hand, and (ii) Borrower, on
the other hand.
Contingencies: Prior to the Closing, FFCA shall have received a
satisfactory post acquisition balance sheet and 1997
pro-forma income statement for Sybra, Inc.
E. Other Matters.
THE FOREGOING SUMMARY OF BASIC TERMS AND CONDITIONS IS NOT MEANT TO BE NOR
SHOULD IT BE CONSTRUED AS AN ATTEMPT TO DEFINE ALL OF THE TERMS AND CONDITIONS
REGARDING THE TRANSACTIONS AND THE EQUIPMENT LOANS. INSTEAD, IT IS INTENDED ONLY
TO OUTLINE
10
<PAGE>
CERTAIN BASIC POINTS OF THE BUSINESS UNDERSTANDING AROUND WHICH LEGAL
DOCUMENTATION WILL BE STRUCTURED. THE OUTLINED TERMS AND CONDITIONS ARE SUBJECT
TO FINAL DOCUMENTATION SATISFACTORY TO ALL PARTIES AND COMPLETE LEGAL REVIEW AND
APPROVAL OF ALL PERTINENT MATTERS.
This Commitment and the Transactions and the Equipment Loans contemplated
hereby (i) shall be subject to, in FFCA's judgment, there being no adverse
material change in Borrower's financial condition, (ii) shall not be assignable
by Borrower or relied upon by any third party without the prior written consent
of FFCA, and (iii) shall be governed by the internal laws of the State of
Arizona, without giving effect to conflict of law principles. This Commitment
may be assigned by FFCA without the consent of Borrower. This Commitment (i)
supersedes any previous discussions, agreements and/or proposal/commitment
letters relating to the Transactions, and the Equipment Loans, and (ii) may only
be amended by a written agreement executed by FFCA and Borrower. FFCA reserves
the right to cancel this Commitment in the event Borrower has made any
misrepresentations or has withheld any information with regard to the
Transactions.
ANY ACTION ARISING OUT OF THIS COMMITMENT SHALL BE PROSECUTED ONLY IN THE
STATE OR FEDERAL COURTS LOCATED IN THE STATE OF ARIZONA. FFCA AND BORROWER
WAIVES ANY RIGHT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION ARISING
OUT OF THIS COMMITMENT. BORROWER WAIVES ANY RIGHT BORROWER HAS OR MAY HAVE TO
SEEK OR RECOVER FROM FFCA OR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS AND
EMPLOYEES ANY AWARD OF SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH ANY DEFAULT BY FFCA UNDER THIS COMMITMENT.
Please indicate your acceptance of this Commitment by having a copy of
this Commitment signed and returned to FFCA to the attention of Maggie Craft,
FFCA Acquisition Corporation, 17207 North Perimeter Drive, Scottsdale, Arizona
85255, together with a check in the sum of $24,000.00 payable to "FFCA
Acquisition Corporation", within ten (10) days from the date hereof or this
Commitment will automatically expire.
FFCA Acquisition Corporation,
a Delaware corporation
/s/ Rob Roach
Rob Roach
Senior Vice President
Corporate Finance
11
<PAGE>
cc: Mr. Charles Hyslop
ACCEPTED AND AGREED TO on this 1st day of August, 1997.
Sybra, Inc.,
a Michigan corporation
By /s/ James R. Arabia
-------------------
Printed Name James R. Arabia
Title Chairman
<PAGE>
EXHIBIT A
---------
TERM SHEET
----------
This Term Sheet is subject to the terms and conditions of that certain
commitment letter dated July 15, 1997, between FFCA Acquisition Corporation
("FFCA"), as lender, and Sybra, Inc. ("Borrower"), as borrower (the "Commitment
Letter"). In the event of any conflict between the provisions of the Commitment
Letter and the terms of this Term Sheet, the terms of the Commitment Letter
shall prevail. Any capitalized terms used herein without definition shall have
the same meaning given in the Commitment Letter.
Date:
--------------------------------------
Lender: FFCA.
Borrower: Borrower.
Property Location:
--------------------------------------
FFCA Store Number:
--------------------------------------
Property Legal Description: See attached Exhibit "A"
Property Type: Fee Site Ground Lease Site
---- ----
Loan Amount:
--------------------------------------
Property Commitment Fee:
--------------------------------------
Interest Rate: During the construction period,
interest shall accrue at a variable
rate equal to the 30-day LIBOR Rate
then in effect plus 3.00%; thereafter,
interest shall accrue at an annual
rate equal to the 10-year U.S.
Treasury Note Rate in effect 10 days
prior to final disbursement of the
Development Price plus 3.00%.
Principal and interest shall be paid
in equal monthly installments due on
the first day of each month based on a
twenty (20) year amortization
schedule.
Equipment Loan Amount:
--------------------------------------
Interest Rate: Interest shall accrue at an annual
rate equal to the 10-year U.S.
Treasury Note Rate in effect 10 days
prior to final disbursement of the
Development Price plus 3.00%.
Principal and interest shall be paid
in equal monthly installments due on
the first day of each month based on a
seven (7) year amortization schedule.
<PAGE>
It is expressly acknowledged that the Transaction is subject to Borrower
satisfying all of the conditions and requirements contained in the Commitment
Letter.
ACCEPTED AND AGREED TO this _ day of _______________________, 1997.
FFCA: BORROWER:
FFCA ACQUISITION CORPORATION, SYBRA, INC.
a Delaware corporation a Michigan corporation
By By
----------------------------------- -------------------------------------
Printed Name: Printed Name:
------------------------ --------------------------
Title Title
-------------------------------- ----------------------------------
FORM OF
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of , 1997, by
and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose
address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and SYBRA,
INC., a Michigan corporation ("Debtor"), whose address is 8300 Dunwoody Place,
Suite 300, Atlanta, Georgia 30350-1296.
PRELIMINARY STATEMENT:
Unless otherwise expressly provided herein, all defined terms used in this
Agreement shall have the meanings set forth in Section 1. Debtor has requested
from FFCA, and applied for, the Loan to provide long-term financing for the
Premises, and for no other purpose whatsoever. The Loan will be evidenced by the
Note and secured by a first priority security interest in the Premises pursuant
to the Deed of Trust. FFCA has committed to make the Loan pursuant to the terms
and conditions of the Commitment, this Agreement and the other Loan Documents.
AGREEMENT:
In consideration of the mutual covenants and provisions of this Agreement,
the parties agree as follows:
1. Definitions. The following terms shall have the following meanings for
all purposes of this Agreement:
"Affiliate" means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership or voting securities or otherwise.
"Closing" shall have the meaning set forth in Section 4.
"Closing Date" means the date specified as the closing date in Section 4.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"Commitment" means that certain Commitment Letter dated July 25, 1997,
between FFCA and Debtor, and any amendments or supplements thereto.
"Counsel" means legal counsel to Debtor licensed in the state in which the
Premises are located, and legal counsel to Debtor licensed in the state in which
Debtor is incorporated, as selected, in each case, by Debtor and approved by
FFCA in its reasonable discretion.
"Deed of Trust" means the deed of trust or mortgage, assignment of rents
and leases, security agreement and fixture filing to be executed for the
Premises substantially in the form of
<PAGE>
Exhibit C attached to this Agreement.
"DeMinimis Amounts" means quantities of chemicals and products containing
Hazardous Materials in quantities customary and necessary for the intended use
of the Premises (including but not limited to cleaning supplies, insecticides,
paints, paint removers, toner for copiers, etc.) provided such use, storage or
handling of such DeMinimis Amounts of Hazardous Materials are in compliance with
Environmental Laws.
"Environmental Condition" means any condition with respect to soil,
surface waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Premises, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order or liability to or against
Debtor or FFCA by any third party (including, without limitation, any government
entity), including, without limitation, any condition resulting from the
operation of Debtor's business and/or the operation of the business of any other
property owner or operator in the vicinity of the Premises and/or any activity
or operation formerly conducted by any person or entity on or off the Premises.
"Environmental Indemnity Agreement" means that certain Environmental
Indemnity Agreement to be executed by Debtor for the benefit of FFCA for the
Premises substantially in the form of Exhibit F attached to this Agreement.
"Environmental Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like relating to
protection of human health or the environment, relating to Hazardous Materials,
relating to liability for or costs of Remediation or prevention of Releases or
relating to liability for or costs of other actual or threatened danger to human
health or the environment. "Environmental Laws" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the
Resource Conservation and Recovery Act (including but not limited to Subtitle I
relating to underground storage tanks); the Solid Waste Disposal Act; the Clean
Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe
Drinking Water Act; the Occupational Safety and Health Act; the Federal Water
Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act;
the Endangered Species Act; the National Environmental Policy Act; and the River
and Harbors Appropriation Act. "Environmental Laws" also includes, but is not
limited to, any present and future federal, state and local laws, statutes,
ordinances, rules, regulations and the like: conditioning transfer of property
upon a negative declaration or other approval of a governmental authority of the
environmental condition of the property; requiring notification or disclosure of
Releases or other environmental condition of the Premises to any governmental
authority or other person or entity, whether or not in connection with transfer
of title to or interest in property; imposing conditions or requirements in
connection with permits or other authorization for lawful activity.
<PAGE>
"Equipment Loan" means that certain equipment loan described in the
Equipment Loan Agreement.
"Equipment Loan Agreement" means that certain Equipment Loan Agreement
dated as of the date of this Agreement between FFCA and Debtor.
"Equipment Loan Amount" shall have the meaning set forth in the Equipment
Loan Agreement.
"Event of Default" has the meaning set forth in Section 10.
"Fee" means an underwriting, site assessment, valuation, processing and
commitment fee equal to one percent (1%) of the Loan Amount, which Fee shall be
payable as set forth in Section 3.
"Hazardous Materials" means (a) any toxic substance or hazardous waste,
substance or related material, or any pollutant or contaminant; (b) radon gas,
asbestos in any form which is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment which contains dielectric fluid
containing levels of polychlorinated biphenyls in excess of federal, state or
local safety guidelines, whichever are more stringent, or any petroleum product;
(c) any other substance, gas, material or chemical which is or may be defined as
or included in the definition of "hazardous substances," "toxic substances,"
"hazardous materials," hazardous wastes" or words of similar import under any
Environmental Laws.
"Licensor" means ARBY'S, INC., a Delaware corporation, and its successors.
"Loan" means the loan described in Section 2. The Loan will be evidenced
by the Note and secured by the Deed of Trust.
"Loan Amount" means the amount set forth in Section 2. The sum of the Loan
Amount and the Equipment Loan Amount shall not exceed $1,000,000.00.
"Loan Documents" means, collectively, this Agreement, the Note, the Deed
of Trust, the Environmental Indemnity Agreement, the UCC-1 Financing Statements,
the Commitment and all other documents executed in connection therewith or
contemplated thereby.
"Note" means the promissory note substantially in the form of Exhibit B
attached to this Agreement to be executed by Debtor in favor of FFCA. The Note
will be executed in the Loan Amount.
"Other Note" or "Other Notes" means, as the context requires, any one or
all promissory notes (other than the Note) or debt instruments executed by
Debtor and payable to FFCA or any
<PAGE>
FFCA Affiliate.
"Other Property" or "Other Properties" means, as the context requires, any
one or all parcels of real estate, owned or leased by Debtor, wherever located
(other than the Premises), that are encumbered by one or more deeds of trust,
mortgages or other lien instruments in favor of FFCA or any FFCA Affiliate to
secure payment of the Other Note or Other Notes.
"Permitted Exceptions" means real estates taxes, not then due or payable,
and such other exceptions to title as may be approved in writing by FFCA in its
reasonable discretion.
"Person" or "Persons" means, as the context requires, any individual,
corporation, trust, partnership, limited liability company, unincorporated
organization, governmental authority or any other form of entity.
"Premises" means the parcel or parcels of real estate described in Exhibit
A attached hereto, and all rights, privileges and appurtenances associated
therewith, and all buildings, fixtures and other improvements now or hereafter
located thereon (whether or not affixed to such real estate).
"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
"Remediation" means any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Material, any actions to prevent, cure or mitigate any Release,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or any evaluation
relating to any Hazardous Materials.
"Securitization" shall have the meaning set forth in Section 13.P hereof.
"Securitized Loan Pool" means any pool or group of loans that are part of
any Securitization transaction.
"Soft Costs" means certain fees, costs and expenses relating to the
transaction contemplated by this Agreement, including, without limitation, the
cost of title insurance, the reasonable attorneys' fees of Debtor, the cost of
surveys, stamp taxes, transfer taxes, and escrow and recording fees, which shall
be approved as to category and amount by FFCA in its (i) reasonable discretion
to the extent such fees, costs and expenses do not exceed $10,000.00, and (ii)
sole discretion to the extent such fees, costs and expenses exceed $10,000.00.
"Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or
<PAGE>
surrounding the Premises which may result from such Release.
"Title Company" means the title insurance company described in Section 4.
"UCC-1 Financing Statements" means such UCC-1 Financing Statements as FFCA
shall require to be executed and delivered by Debtor.
2. Transaction. On the terms and subject to the conditions set forth in
the Loan Documents, FFCA shall make the Loan. The Loan will be evidenced by the
Note and secured by the Deed of Trust. Debtor shall repay the outstanding
principal amount of the Loan together with interest thereon in the manner and in
accordance with the terms and conditions of the Note and the other Loan
Documents. The Note will mature on the twentieth anniversary of the Note. The
Loan Amount shall be $803,019.00, inclusive of Soft Costs. The Loan shall be
advanced at the Closing in cash or its equivalent subject to any prorations and
adjustments required by this Agreement.
3. Fee. Debtor paid FFCA a portion of the Fee in the amount of $2,000.00
pursuant to the Commitment, and such portion was deemed nonrefundable and fully
earned when received. The remainder of the Fee shall be paid at the Closing and
shall be deemed nonrefundable and fully earned upon the Closing. The Fee
constitutes FFCA's underwriting, valuation, processing and commitment fee. In
the event the transaction set forth in this Agreement fails to close due to a
breach or default by Debtor under this Agreement, FFCA shall retain the portion
of the Fee received by FFCA (without affecting or limiting FFCA's remedies set
forth in this Agreement).
4. Closing. (a) The Loan shall be closed (the "Closing") within 30 days
following the satisfaction of all of the terms and conditions contained in this
Agreement, but in no event shall the date of the Closing be extended beyond
November 26, 1997 (the "Closing Date"), unless such extension shall be approved
by FFCA in its sole discretion.
(b) FFCA has ordered a title insurance commitment for the Premises from
Lawyers Title Insurance Corporation or an alternative title company approved by
FFCA ("Title Company"). Prior to the Closing Date, the parties hereto shall
deposit with Title Company all documents and moneys necessary to comply with
their obligations under this Agreement. Title Company shall not cause the
transaction to close unless and until it has received written instructions from
FFCA to do so. All costs of such transaction shall be borne by Debtor,
including, without limitation, FFCA's reasonable and actual in-house site
inspection costs and expenses, the cost of the environmental reports to be
delivered pursuant to Section 9.E, the reasonable fees and expenses of FFCA's
attorneys, the cost of title insurance, the attorneys' fees of Debtor, the cost
of the surveys, stamp taxes, transfer fees, escrow and recording fees and
reasonable and actual site inspection fees for the Premises. All real and
personal property and other applicable taxes and assessments and other charges
relating to the Premises which are due and payable on or prior to the Closing
Date as well as taxes and assessments due and payable subsequent to the Closing
Date but which Title Company requires to be paid at Closing as a condition to
the issuance of the title insurance policy described in Section 9.C, shall be
paid by Debtor at or prior to the Closing, and all other taxes and assessments
shall be paid by Debtor. The closing documents shall be dated as of the Closing
Date.
<PAGE>
Debtor and FFCA hereby employ Title Company to act as escrow agent in
connection with this transaction. Debtor and FFCA will deliver to Title Company
all documents, pay to Title Company all reasonable sums and do or cause to be
done all other things reasonably necessary or required by this Agreement, in the
reasonable judgment of Title Company, to enable Title Company to comply herewith
and to enable any title insurance policy provided for herein to be issued. Title
Company is authorized to pay, from any funds held by it for FFCA's or Debtor's
respective credit all amounts necessary to procure the delivery of such
documents and to pay, on behalf of FFCA and Debtor, all charges and obligations
payable by them, respectively. Debtor will pay all charges payable by it to
Title Company. Title Company is authorized, in the event any conflicting demand
is made upon it concerning these instructions or the escrow, at its election, to
hold any documents and/or funds deposited hereunder until an action shall be
brought in a court of competent jurisdiction to determine the rights of Debtor
and FFCA or to interplead such documents and/or funds in an action brought in
any such court. Deposit by Title Company of such documents and funds, after
deducting therefrom its charges and its reasonable and actual expenses and
attorneys' fees incurred in connection with any such court action, shall relieve
Title Company of all further liability and responsibility for such documents and
funds. Title Company's receipt of this Agreement and opening of an escrow
pursuant to this Agreement shall be deemed to constitute conclusive evidence of
Title Company's agreement to be bound by the terms and conditions of this
Agreement pertaining to Title Company. Disbursement of any funds shall be made
by check, certified check or wire transfer, as directed by FFCA. Title Company
shall be under no obligation to disburse any funds represented by check or
draft, and no check or draft shall be payment to Title Company in compliance
with any of the requirements hereof, until it is advised by the bank in which
such check or draft is deposited that such check or draft has been honored. The
employment of Title Company as escrow agent shall not affect any rights of
subrogation under the terms of any title insurance policy issued pursuant to the
provisions thereof.
5. Representations and Warranties of FFCA. The representations and
warranties of FFCA contained in this Section are being made to induce Debtor to
enter into this Agreement and consummate the transactions contemplated herein,
and Debtor has relied, and will continue to rely, upon such representations and
warranties from and after the execution of this Agreement and the Closing. FFCA
represents and warrants to Debtor as follows:
A. Organization of FFCA. FFCA has been duly formed, is validly
existing and has taken all necessary action to authorize the execution,
delivery and performance by FFCA of this Agreement.
B. Authority of FFCA. The person who has executed this Agreement on
behalf of FFCA is duly authorized so to do.
C. Enforceability. Upon execution by FFCA, this Agreement shall
constitute the legal, valid and binding obligation of FFCA, enforceable
against FFCA in accordance with its terms.
<PAGE>
D. Action by FFCA. All necessary corporate action has been taken by
FFCA to authorize the execution, delivery and performance of this
Agreement by FFCA and of the other documents, instruments and agreements
provided for herein by FFCA.
All representations and warranties of FFCA made in this Agreement shall be
and will remain true and complete as of the Closing Date as if made and restated
in full as of such date, and shall survive the Closing.
6. Representations and Warranties of Debtor. The representations and
warranties of Debtor contained in this Section are being made to induce FFCA to
enter into this Agreement and consummate the transactions contemplated herein,
and FFCA has relied, and will continue to rely, upon such representations and
warranties from and after the execution of this Agreement and the Closing.
Debtor represents and warrants to FFCA as follows:
A. Information and Financial Statements. Debtor has delivered to FFCA
financial statements (either audited financial statements or, if Debtor
does not have audited financial statements, certified financial
statements) and certain other written information concerning its financial
condition and the Premises, which financial statements and other written
information are true, correct and complete in all material respects; and
no material adverse change has occurred with respect to any such financial
statements or other written information provided to FFCA since the date of
such financial statements and other written information, except as
otherwise disclosed in writing to FFCA. Debtor understands that FFCA is
relying upon such financial statements and other written information and
Debtor represents that such reliance is reasonable. All such financial
statements were prepared in all material respects in accordance with
generally accepted accounting principles consistently applied and
accurately reflect as of the date of such financial statements the
financial condition of each individual or entity to which they pertain.
B. Organization and Authority of Debtor. (1) Debtor is duly
incorporated, validly existing and in good standing under the laws of its
state of incorporation and qualified as a foreign corporation to do
business in any jurisdiction where such qualification is required. All
necessary corporate action has been taken to authorize the execution,
delivery and performance of this Agreement and of the other documents,
instruments and agreements provided for herein.
(2) The persons who have executed this Agreement on behalf of Debtor
are duly authorized so to do.
C. Enforceability of Documents. Upon execution by Debtor, the Loan
Documents shall constitute the legal, valid and binding obligations of
Debtor, enforceable against Debtor in accordance with their respective
terms, subject to limitations imposed by law in connection with
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization
or similar laws affecting creditors' rights generally and general
equitable principles.
<PAGE>
D. Litigation. There are no suits, actions, proceedings or
investigations pending or, to Debtor's knowledge, threatened against or
involving Debtor or the Land before any court, arbitrator, or
administrative or governmental body which might reasonably result in any
material adverse change in the contemplated business, condition, worth or
operations of Debtor or the Premises.
E. Absence of Breaches or Defaults. Debtor is not, and the
authorization, execution, delivery and performance of the Loan Documents
by Debtor will not result, in any breach or default under any other
document, instrument or agreement to which Debtor is a party or by which
Debtor, the Land or any of the property of Debtor is subject or bound,
where such breach or default might reasonably be expected to result in a
material adverse effect on the business, operations, assets or financial
condition of Debtor. The authorization, execution, delivery and
performance of this Agreement and the documents, instruments and
agreements provided for herein will not violate any applicable law,
statute, regulation, rule, ordinance, code, rule or order, where such
violation might reasonably be expected to result in a material adverse
effect on the business, operations, assets or financial condition of
Debtor.
F. Utilities. At the Closing Date, all utility services and easements
necessary for the use and occupancy of the Premises and the operation
thereof for their intended purpose are available at the Premises and at
the improvements located thereon, including water supply, storm and
sanitary sewer facilities, gas, electric and telephone facilities.
G. Intended Use and Zoning; Compliance With Laws. Debtor intends to
use the Premises solely for the operation of a Licensor restaurant, and
related ingress, egress and parking, and for no other purposes. Such
intended use will not violate any zoning or other governmental requirement
applicable to the Premises. The Premises comply in all material respects
with all applicable statutes, regulations, rules, ordinances, codes,
licenses, permits, orders and approvals of any governmental agencies,
departments, commissions, bureaus, boards or instrumentalities of the
United States, the state in which the Premises are located and all
political subdivisions thereof, including, without limitation, all health,
building, fire, safety and other codes, ordinances and requirements, all
applicable standards of the National Board of Fire Underwriters and the
Americans With Disabilities Act of 1990, where such failure to so comply
might reasonably be expected to result in a material adverse effect on the
business, operations, assets or financial condition of Debtor.
H. Area Development; Wetlands. No condemnation or eminent domain
proceedings affecting the Premises have been commenced or, to Debtor's
knowledge, are contemplated. To Debtor's knowledge, the area where the
Premises are located has not been declared blighted by any governmental
authority. To Debtor's knowledge, the Premises and/or the real property
bordering the Premises is not designated by any applicable federal, state
and/or local governmental authority as a wetlands.
<PAGE>
I. Licenses and Permits; Access. Prior to the Closing Date, Debtor
shall have obtained all required licenses and permits, both governmental
and private, to use and operate the Premises in the intended manner, where
the failure to obtain such licenses and permits might reasonably be
expected to result in a material adverse effect on the Premises or on
Debtor's ability to use or operate the Premises in the manner set forth in
the Loan Documents. There are adequate rights of access to public roads
and ways available to the Premises to permit full utilization of the
Premises for their intended purposes and all such public roads and ways
have been completed and dedicated to public use.
J. Condition of Premises. As of the Closing Date, the Premises will
be in good condition and repair, free from structural defects and
well-maintained.
K. Environmental. To Debtor's knowledge, and except as set forth in
Exhibit D attached hereto: (i) no Hazardous Materials have been disposed
of or otherwise Released on or about the Premises causing or resulting in
an Environmental Condition; (ii) the Premises does not contain Hazardous
Materials or underground storage tanks except in compliance with
Environmental Laws; (iii) there is no Release migrating to the Premises
from adjacent properties that would cause or result in an Environmental
Condition; (iv) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection
with the Premises; (v) Debtor does not know of, and has not received, any
written or oral notice or other communication from any person or entity
(including but not limited to a governmental entity) relating to Hazardous
Materials or Remediation thereof, of possible liability of any person or
entity pursuant to any Environmental Law, other Environmental Conditions
in connection with the Premises, or any actual or potential administrative
or judicial proceedings in connection with any of the foregoing; and (vi)
Debtor has truthfully and fully provided to FFCA, in writing, any and all
information relating to Environmental Conditions in, on, under or from the
Premises that is known to Debtor and that is contained in Debtor's files
and records, including but not limited to any reports relating to
Hazardous Materials in, on, under or from the Premises and/or to
Environmental Conditions of the Premises.
L. Title to Premises; First Priority Lien. Upon Closing, title to the
Premises will be vested in Debtor, free and clear of all liens,
encumbrances, charges and security interests of any nature whatsoever,
except the Permitted Exceptions. Upon Closing, FFCA shall have a first
priority lien on the Premises pursuant to the Deed of Trust and the UCC-1
Financing Statements.
M. No Other Agreements and Options. Neither Debtor nor the Premises
are subject to any commitment, obligation, or agreement, including,
without limitation, any right of first refusal, option to purchase or
lease granted to a third party, which could or would prevent or hinder
FFCA in making the Loan or prevent or hinder Debtor from fulfilling its
obligations under this Agreement or the other Loan Documents.
<PAGE>
N. No Mechanics' Liens. Other than Permitted Exceptions, there are no
outstanding accounts payable, mechanics' liens, or rights to claim a
mechanics' lien in favor of any materialman, laborer, or any other person
or entity in connection with labor or materials furnished to or performed
on any portion of the Premises; no work has been performed or is in
progress nor have materials been supplied to the Premises or agreements
entered into for work to be performed or materials to be supplied to the
Premises prior to the date hereof, which will not have been fully paid for
on or before the Closing Date or which might provide the basis for the
filing of such liens against the Premises or any portion thereof; Debtor
shall be responsible for any and all claims for mechanics' liens and
accounts payable that have arisen or may subsequently arise due to
agreements entered into for and/or any work performed on, or materials
supplied to the Premises prior to the Closing Date; Debtor has made no
contract or arrangement of any kind the performance of which by the other
party thereto would give rise to a lien on the Premises except as
permitted by the Disbursement Agreement; and (except for mechanic's liens
or accounts payable relating to work performed at the Premises pursuant to
the express written request of FFCA, the performance of which was not
otherwise required under any of the Loan Documents) Debtor shall and does
hereby agree to defend, indemnify and forever hold FFCA and FFCA's
designees harmless from and against any and all such mechanics' lien
claims, accounts payable or other commitments relating to the Premises.
O. No Reliance. Debtor acknowledges that FFCA is not affiliated with,
and has no business relationship with, Licensor, other than
landlord/tenant and/or creditor/debtor relationships unrelated to the
transaction set forth in this Agreement, and that FFCA did not prepare or
assist in the preparation of any of the projected financial information
used by Debtor in analyzing the economic viability and feasibility of the
transaction contemplated by this Agreement. Furthermore, Debtor
acknowledges that it has not relied upon, nor may it hereafter rely upon,
the analysis undertaken by FFCA in determining the amount of the Loan, and
such analysis will not be made available to Debtor.
P. Licensor Provisions. Prior to the Closing Date, Debtor will have
entered into a license agreement with Licensor for the conduct of business
at the Premises. Such license agreement will be in full force and effect,
will permit Debtor to operate the Premises as a Licensor restaurant, and
will have a term which will not expire before the scheduled maturity date
of the Note.
All representations and warranties of Debtor made in this Agreement shall
be and will remain true and complete as of the Closing Date as if made and
restated in full as of such Closing Date and shall survive the Closing.
7. Covenants. Debtor covenants to FFCA from and after the Closing Date as
follows:
A. Inspections. Debtor shall, at all reasonable times upon reasonable
notice to
<PAGE>
Debtor (except in cases of emergency), (i) provide FFCA and FFCA's
officers, employees, agents, advisors, attorneys, accountants, architects,
and engineers (collectively, "FFCA's Representatives") with access to the
Premises, all drawings, plans, and specifications for the improvements
located on the Premises in possession of Debtor, all engineering reports
relating to the Premises in the possession of Debtor, the files and
correspondence relating to the ownership of the Premises, and (ii) allow
such persons to make such inspections or tests (other than an inspection
or test of any Environmental Conditions), copies, and verifications as
FFCA considers reasonably necessary; provided, however, that (except as
otherwise provided in any of the Loan Documents, including the
Environmental Indemnity Agreement) prior to an Event of Default, FFCA may
not, without the prior written consent of Debtor, which consent shall not
be unreasonably withheld, (aa) seek any information relative to Debtor
from any of Debtor's vendors or suppliers (other than Licensor); or (bb)
contract with any third parties to make inspections or tests at the
Premises. Notwithstanding the foregoing, in the event that FFCA has reason
to believe that an Environmental Condition may exist on the Premises, or,
upon and following an Event of Default hereunder (after the expiration of
any applicable cure or grace periods), if FFCA shall have another
reasonable basis for requiring or performing it, FFCA may perform or cause
Debtor to perform any environmental site assessment or other investigation
of such Environmental Condition in accordance with the terms of the Deed
of Trust. In each case, FFCA shall be responsible at its sole cost and
expense for restoring the Premises, if applicable, following completion of
any such inspection by FFCA and FFCA's Representatives, to substantially
the same condition that existed prior to FFCA's inspection. In each case,
any inspection of the Premises by FFCA and FFCA's Representatives shall be
done in a manner that minimizes the disruption to Debtor's business.
B. Fixed Charge Coverage Ratio. (i) Fixed Charge Coverage Ratio.
Until such time as all of Debtor's obligations under the Note and the
Other Notes are paid, satisfied and discharged in full, Debtor shall
maintain a Fixed Charge Coverage Ratio at the Premises and at all of the
Other Properties of at least 1.3:1, provided that the Note (and the
Premises) shall only be included in the Fixed Charge Coverage Ratio
determination hereunder if the term of the Note (at the time of a
Determination Date, as defined hereinbelow) shall not have reached the
first anniversary of the date of such Note (to be counted from the
Closing) and if the Note, at the time of a Determination Date, shall not
have been placed in a Securitization, and only those Other Notes (and
corresponding premises) that have not been placed in a Securitization
whose terms thereof (at the time of a Determination Date) shall not have
reached the first anniversary of the dates of such Other Notes (to be
counted from the date of the closing in the case of a mortgage loan or
from the date of the final disbursement in the case of a construction loan
under such Other Notes) shall be included in the Fixed Charge Coverage
Ratio to be determined pursuant to this Subsection 7.B(i). For purposes of
this Subsection 7.B, the term "Fixed Charge Coverage Ratio" shall mean,
with respect to the twelve month period of time (a "Twelve Month Period")
preceding the
<PAGE>
date of determination (which date of determination shall be selected by
FFCA)(a "Determination Date") the ratio calculated for such Twelve Month
Period (a) the sum of Net Income, Debtor's income tax, Interest Expense,
all non-cash charges, including, without limitation, Depreciation and
Amortization, Debtor's Overhead, Debtor's non-recurring expenses
determined in accordance with generally accepted accounting principles and
Rent Expenses, less the Management Fee, to (b) the sum of Debtor's
corporate debt service (interest and required principal) for such Twelve
Month Period (including, without limitation, the FFCA Payments, Ground
Lease Expense, and Equipment Payment Amount), Rent Expense and interest
and required principal payments under all Capital Leases for such Twelve
Month Period. FFCA shall notify Debtor of a Determination Date no later
than that date that is 60 days prior to such Determination Date. A
Determination Date shall occur no more frequently than once per calendar
year, unless FFCA, or an Affiliate of FFCA, and Debtor, or an Affiliate of
Debtor, shall have consummated a transaction evidenced by one or more
Other Notes since the previous Determination Date; provided, however, that
a Determination Date may occur more frequently than once per calendar year
if made in connection with a Securitization. For purposes of determining
the Fixed Charge Coverage Ratio pursuant to this Subsection 7.B(i) only, a
Determination Date shall be no later than that date that is 30 days prior
to the anticipated date of a Securitization.
In calculating the Fixed Charge Coverage Ratio, FFCA shall use actual
performance data for such of the Other Properties and the Premises that
have been operated for more than four (4) months as of a Determination
Date. For such of the Other Properties and the Premises that have been
operated for less than four (4) months as of the Determination Date, FFCA
shall use pro forma data to calculate the Fixed Charge Coverage Ratio.
Notwithstanding the foregoing, a Fixed Charge Coverage Ratio determination
made as of Debtor's 1997 fiscal year will be based on a year-to-date
performance since there are less than 12 full months of operation from
April 30, 1997, the date of Debtor's acquisition by I.C.H. Corporation.
Furthermore, FFCA agrees not to exclude the Premises or any of the Other
Properties from a Securitization if the Fixed Charge Coverage Ratio
calculated, in the aggregate, on the properties that are not to be
included in such Securitization will be lower than 1.3:1 as a result of
such exclusion.
For purposes of this Subsection 7.B, the following terms shall be defined
as set forth below:
"Capital Lease" shall mean any lease of any property (whether real,
personal or mixed) by Debtor with respect to the Premises and all of the Other
Properties, which lease or leases would, in conformity with generally accepted
accounting principles consistently applied, be required to be accounted for as a
capital lease or capital leases on the balance sheet of Debtor. The term
"Capital Lease" shall not include any operating lease.
"Debt" shall mean as directly related to the Premises and all of the Other
Properties
<PAGE>
and the Twelve Month Period (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, indentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services,
(iv) obligations under leases which shall have been or should be, in accordance
with generally accepted accounting principles consistently applied, recorded as
Capital Leases, (v) obligations under direct or indirect guarantees in respect
of, and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) any other liability required by generally accepted accounting
principles to be reported on Debtor's balance sheet.
"Debtor's Overhead" shall mean all non-store level general and
administrative expenses of Debtor on a corporate- and regional-wide basis
allocated on a fair and reasonable basis to the Premises and all of the Other
Properties consistent with the method of accounting employed by Debtor in
preparing Debtor's 1996 audited financial statements and report, including,
without limitation, expenses related to automobiles, administrative fees and
costs, legal fees and costs, accounting and other professional fees and costs,
office supplies, and travel and entertainment costs and expenses.
"Depreciation and Amortization" shall mean the depreciation and
amortization accruing during the Twelve Month Period with respect to the
Premises and all of the Other Properties as determined in accordance with
generally accepted accounting principles consistently applied.
"Equipment Payment Amount" shall mean for any Twelve Month Period the sum
of all amounts payable during such Twelve Month Period under (i) all equipment
leases for equipment located at the Premises and all of the Other Properties,
and (ii) all loans secured by equipment located at the Premises and all of the
Other Properties.
"FFCA Payments" shall mean for any Twelve Month Period, the sum of all
amounts due and payable under the Note and all of the Other Notes during such
Twelve Month Period.
"Gross Sales" shall mean all sales or other income arising from all
business conducted on the Premises and all of the Other Properties during the
Twelve Month Period, less sales tax and any amounts received from not-for-profit
sales of all non-food items approved for use in connection with promotional
campaigns, if any, pursuant to the license agreement with Licensor.
"Ground Lease Expense" shall mean for any Twelve Month Period, the sum of
all amounts payable under any ground lease with respect to the Premises and the
Other Properties.
"Interest Expense" shall mean for any Twelve Month Period, the sum of all
interest accrued or which should be accrued in respect of all Debt of Debtor
allocable to the
<PAGE>
Premises and all of the Other Properties and all business operations thereon
during such period (including interest attributable to Capital Leases), as
determined in accordance with generally accepted accounting principles
consistently applied.
"Management Fee" shall mean a standardized management fee representing two
percent (2%) of Gross Sales relative to the Premises and the Other Properties
for any Twelve Month Period.
"Net Income" shall mean with respect to the Twelve Month Period, the net
income or net loss of Debtor allocable to the Premises and all of the Other
Properties. In determining the amount of Net Income, (i) adjustments shall be
made for nonrecurring gains and losses allocable to such Twelve Month Period,
(ii) deductions shall be made for, among other things, Depreciation and
Amortization, Interest Expense and Operating Lease Expense allocable to such
Twelve Month Period, and (iii) no deductions shall be made for income taxes or
charges equivalent to income taxes allocable to such Twelve Month Period, as
determined in accordance with generally accepted accounting principles
consistently applied.
"Operating Lease Expense" shall mean for any Twelve Month Period, the sum
of all amounts payable by Debtor under any operating leases with respect to the
Premises and the Other Properties and/or the business operations thereon as
determined in accordance with generally accepted accounting principles
consistently applied.
"Rent Expense" shall mean the sum of building and ground Operating Lease
Expense, any percentage rents, amounts of capitalized building lease expenses
(net of principal and interest) relative to the Premises and the Other
Properties, less rent payable on regional and corporate offices and restaurants
constituting the Premises and the Other Properties that are not then open and
operating for business.
(ii) Other Arby's Restaurants. Notwithstanding any provision of this
Subsection 7.B to the contrary, until such time as all of Debtor's obligations
under the Note are paid, satisfied and discharged in full, Debtor shall maintain
a Fixed Charge Coverage Ratio of at least 1.3:1 at the Premises, the Other
Properties, and all of the parcels of real estate owned or leased by Debtor,
wherever located, that are used or operated by Debtor or Debtor's Affiliates (or
their respective tenants or subtenants) as a Licensor restaurant (collectively,
the "Other Arby's Restaurants). For purposes of determining whether the Fixed
Charge Coverage Ratio requirement contained in this Subsection 7.B(ii) has been
satisfied, the definitions relating to the Fixed Charge Coverage Ratio shall be
deemed to be modified, as applicable, to provide for the calculation of the
Fixed Charge Coverage Ratio relative to the Premises, the Other Properties, and
to all of the Other Arby's Restaurants rather than a calculation of the Fixed
Charge Coverage Ratio for the Premises and all of the Other Properties. For
purposes of this Subsection 7.B(ii), the Note (and the Premises) shall be
included in the Fixed Charge Coverage Ratio to be determined pursuant to this
Subsection 7.B(ii) only if the Note, at the time of a Determination Date, shall
have been placed in a Securitization or if the term of the Note
<PAGE>
shall have reached the first anniversary of the date thereof, and only those
Other Notes that have either been placed in a Securitization or whose terms
thereof (at the time of a Determination Date) shall have reached the first
anniversary of the dates of such Other Notes (to be counted from the date of the
closing in the case of a mortgage loan or from the date of the final
disbursement in the case of a construction loan under such Other Notes) shall be
included in the Fixed Charge Coverage Ratio to be determined pursuant to this
Subsection 7.B(ii).
C. Lost Note. Debtor shall, if the Note or any Other Note is mutilated,
destroyed, lost or stolen (a "Lost Note"), promptly deliver to FFCA, upon
receipt of an affidavit from FFCA stipulating that such Note has been mutilated,
destroyed, lost or stolen, in substitution therefor, a new promissory note
containing the same terms and conditions as such Lost Note with a notation
thereon of the unpaid principal and accrued and unpaid interest. Debtor shall
provide fifteen (15) days' prior notice to FFCA before making any payments to
third parties (other than the servicer of any Securitized Loan Pool) in
connection with a Lost Note.
8. Transaction Characterization. This Agreement is a contract to extend a
financial accommodation (as such term is used in the Code) for the benefit of
Debtor. It is the intent of the parties hereto that the business relationship
created by this Agreement, the Note, the Deed of Trust and the other Loan
Documents is solely that of creditor and debtor and has been entered into by
both parties in reliance upon the economic and legal bargains contained in the
Loan Documents. None of the agreements contained in the Loan Documents is
intended, nor shall the same be deemed or construed, to create a partnership
between Debtor and FFCA, to make them joint venturers, to make Debtor an agent,
legal representative, partner, subsidiary or employee of FFCA, nor to make FFCA
in any way responsible for the debts, obligations or losses of Debtor.
9. Conditions of Closing. The obligation of FFCA to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions:
A. Title. Title to the Premises shall be vested in Debtor, free of
all liens, encumbrances, restrictions, encroachments and easements, except
Permitted Exceptions. Upon Closing, FFCA will obtain a valid and perfected
first priority lien upon and security interest in the Premises.
B. Condition of Premises. FFCA shall have inspected and approved the
Premises, the Premises shall be in good condition and repair, and the
Premises shall have a suitable location, all as determined by FFCA in its
sole discretion.
C. Evidence of Title. FFCA shall have received for the Premises a
preliminary title report and irrevocable commitment to insure title by
means of a mortgagee's ALTA extended coverage policy of title insurance
(or its equivalent, in the event such form is not issued in the
jurisdiction where the Premises is located) issued by Title Company
showing good and marketable title in the Premises in Debtor, committing to
insure FFCA's first
<PAGE>
priority lien upon and security interest in the Premises subject only to
Permitted Exceptions and containing such endorsements as FFCA may
reasonably require.
D. Survey. FFCA shall have received a current ALTA survey of the
Premises, the form and substance of which shall be satisfactory to FFCA in
its sole discretion. Debtor shall have provided FFCA with evidence
satisfactory to FFCA that the location of the Premises is not within the
100-year flood plain or identified as a special flood hazard area as
defined by the Federal Insurance Administration.
E. Environmental. FFCA shall have received a Phase I environmental
report (and a Phase II environmental report, if necessary, as determined
by FFCA in its sole discretion) for the Premises, the form, substance and
conclusions of which shall be satisfactory to FFCA in its sole discretion.
F. Compliance With Representations, Warranties and Covenants;
Certification. All obligations of Debtor under this Agreement shall have
been fully performed and complied with, and no event shall have occurred
or condition shall exist which would, upon the Closing Date, or, upon the
giving of notice and/or passage of time, constitute a breach or default
hereunder or under the Loan Documents, the franchise, license and/or area
development agreement with Licensor or any other agreement between or
among FFCA, Debtor or Licensor pertaining to the subject matter hereof,
and no event shall have occurred or condition shall exist or information
shall have been disclosed by Debtor or discovered by FFCA which has had or
would have a material adverse effect on the Land or Debtor, as determined
by FFCA in its sole and absolute discretion.
G. Proof of Insurance. Debtor shall have delivered to FFCA copies of
insurance policies, showing that all insurance required by the Loan
Documents and providing coverage and limits satisfactory to FFCA are in
full force and effect.
H. Opinion of Counsel to Debtor. Debtor shall have caused Counsel to
prepare and deliver an opinion substantially in the form and as indicated
in the attached Exhibit E.
I. License Agreement. FFCA shall have received a certificate from
Licensor in form and substance reasonably acceptable to FFCA that the
license agreement between Debtor and Licensor with respect to the Premises
is valid, binding and in full force and effect, with a term that will not
expire before the scheduled maturity date of the Note, no events have
occurred which could constitute a default under the Loan Documents, and
Licensor waives all rights of first refusal set forth in such agreement as
to FFCA and its successors and assigns.
J. Closing of Equipment Loan Agreement. All of the transactions
described in the Equipment Loan Agreement shall have closed prior to or
concurrently with the Closing of the transaction described in this
Agreement.
K. Closing Documents. At or prior to the Closing Date, FFCA and/or
Debtor,
<PAGE>
as may be appropriate, shall execute and deliver or cause to be executed
and delivered to Title Company or FFCA, as may be appropriate, all
documents required to be delivered by this Agreement, and such other
documents, payments, instruments and certificates, as FFCA may require in
form reasonably acceptable to FFCA, including, without limitation, the
following:
(1) Note;
(2) Deed of Trust;
(3) Environmental Indemnity Agreement;
(4) Licensor's Certificate;
(5) Proof of Insurance;
(6) Opinion of Counsel to Debtor; and
(7) UCC-1 Financing Statements.
Upon fulfillment or waiver of all of the above conditions, FFCA shall deposit
funds necessary to close this transaction with the Title Company and this
transaction shall close in accordance with the terms and conditions of this
Agreement.
10. Default and Remedies. A. Each of the following shall be deemed an
event of default by Debtor (an "Event of Default"):
(1) If any representation or warranty of Debtor is false in any
material respect when made or becomes false in any material respect prior to the
Closing Date, or, in the event any such representation or warranty is continuing
after the Closing, if any such representation or warranty becomes false in any
material respect at any time, or if Debtor renders any written statement to FFCA
relative to the Premises, the Loan or the financial condition of Debtor which at
the time of such written statement was false in any material respect;
(2) If any principal, interest or other monetary sum due under the
Note, the Deed of Trust or any other Loan Document is not paid within five days
after the date when due;
(3) If Debtor fails to observe or perform any of the other covenants,
conditions, or obligations of this Agreement or any other Loan Document within
the applicable grace or cure period;
(4) If Debtor:
(A) becomes insolvent within the meaning of the Code,
(B) files or notifies FFCA that it intends to file a petition
under the Code,
(C) initiates a proceeding under any similar law or statute
relating to bankruptcy, insolvency, reorganization, winding up or
<PAGE>
adjustment of debts (collectively, hereinafter, an "Action"),
(D) is not generally paying its debts as the same become due,
and/or
(E) becomes the subject of an involuntary petition under the Code
or other similar involuntary Action (in which case Debtor shall be
required to provide FFCA with immediate notice of the commencement or
filing of such involuntary proceeding, petition or Action), and any of the
following shall have occurred: (i) the involuntary petition or involuntary
Action shall not have been dismissed within sixty (60) days of the date on
which it was filed or otherwise commenced, (ii) an order for relief under
the Code (or similar order) shall have been entered by the court in the
involuntary proceeding, or (iii) the court having jurisdiction over such
involuntary proceeding (at Debtor's motion or request for relief) shall
not have granted FFCA full and final relief from the automatic stay of
Section 362 of the Code and from any stay issued under Section 105 of the
Code (or any similar stays or injunctions) within sixty (60) days of the
filing or commencement of such involuntary petition or involuntary Action
so that FFCA is thereafter free to exercise any and all of its rights and
remedies under the Loan Documents, and FFCA hereby agrees not to exercise
any of its rights or remedies under the Loan Documents until such time as
an Event of Default (other than the filing of an involuntary petition
under the Code or other similar involuntary Action) shall have occurred;
(5) If there is an event of default (after the expiration of any
applicable grace and cure period) under the Equipment Loan Agreement or a
breach or default (after the expiration of any applicable grace and cure
period) under any other agreement or instrument, including, without
limitation, promissory notes and guaranties, between, among or by (1)
Debtor, and, or for the benefit of, (2) FFCA or any corporation,
partnership, joint venture, limited liability company, association or
other form of entity affiliated with FFCA;
(6) If any event occurs or condition exists on the Closing Date which
constitutes a material breach or default under any of the Loan Documents
or any other agreement between Debtor and FFCA pertaining to the subject
matter hereof.
B. If any Event of Default occurs pursuant to subsection A(2) above,
FFCA shall not be entitled to exercise its remedies set forth in
subsection D below unless and until FFCA shall have given Debtor notice
thereof and a period of five days from the delivery of such notice shall
have elapsed without such Event of Default being cured.
C. If any event occurs pursuant to subsection A(3) subsequent to the
Closing and does
<PAGE>
not involve the payment of any monetary sum to FFCA, is not willful,
intentional or being contested in good faith in accordance with the terms
of the Deed of Trust, does not place any material rights, collateral or
property of FFCA in immediate jeopardy in any material respect, and is
within the reasonable power of Debtor to promptly cure after receipt of
notice thereof, all as determined by FFCA in its reasonable discretion,
then such event shall not constitute an Event of Default hereunder, unless
otherwise expressly provided herein, unless and until FFCA shall have
given Debtor notice thereof and a period of 30 days shall have elapsed,
during which period Debtor may correct or cure such event, upon failure of
which an Event of Default shall be deemed to have occurred hereunder
without further notice or demand of any kind. If such event cannot
reasonably be cured within such 30-day period, as determined by FFCA in
its reasonable discretion, and Debtor is diligently pursuing a cure of
such event, then Debtor shall have a reasonable period to cure such event,
which shall not exceed 90 days after receiving notice of the event from
FFCA. If Debtor shall fail to correct or cure such event within such
90-day period, an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind.
D. Upon the occurrence of an Event of Default, subject to the limitation
set forth in subsection B and C, FFCA shall be entitled to exercise, at its
option, concurrently, successively or in any combination, all remedies set forth
in the Loan Documents and otherwise available at law or in equity, including
without limitation any one or more of the following (provided, however, the
remedies set forth in subitem (1) shall only be applicable to any such breach or
default occurring prior to the Closing):
(1) To terminate this Agreement by giving written notice to
Debtor, in which case neither party shall have any further obligation or
liability, except such liabilities as Debtor may have for such Event of
Default;
(2) To bring an action for damages against Debtor;
(3) To bring an action to require Debtor specifically to perform
its obligations hereunder; and/or
(4) To recover from Debtor all sums loaned and/or advanced by
FFCA to Debtor pursuant to the Loan Documents and all expenses, including
attorneys' fees, paid or incurred by FFCA as a result of such Event of
Default.
E. If a default occurs pursuant to subsection A(3) above as a result of
the failure of Debtor to maintain the Fixed Charge Coverage Ratio covenants set
forth in Subsection 7.B, such default shall not constitute an Event of Default
if Debtor, within 30 days from the delivery of a notice from FFCA to Debtor of
such failure, at Debtor's election, performs any one of the following:
(i) Pay the FCCR Amount. Pays to FFCA (without prepayment premium
or penalty) the FCCR Amount (as defined below) relative to any one or more
of the Other Notes (and/or the Note, if applicable) that cause or
contribute to cause the
<PAGE>
Fixed Charge Coverage Ratio to be less than 1.3:1. If Debtor elects to pay
the FCCR Amount, promptly after Debtor's payment of the FCCR Amount,
Debtor and FFCA agree to execute an amendment to the Note and/or Other
Note or Other Notes to which the FCCR Amount relates, as the case may be,
in form and substance acceptable to FFCA reducing the principal amount
payable to FFCA thereunder and reamortizing the principal amount
thereunder over the then remaining term of the Note and/or Other Note or
Other Notes, as the case may be. Debtor shall be responsible for the
payment of FFCA's out-of-pocket attorneys' fees incurred in connection
with the preparation of such amendments. As used herein, the phrase "FCCR
Amount" shall mean that sum of money which, when subtracted from the
outstanding principal amount of the Note (and/or the Other Note or Other
Notes that cause or contribute to cause the Fixed Charge Coverage Ratio to
be less than 1.3:1, as the case may be), and assuming the reamortization
of the adjusted principal amount of the Note (and/or Other Note or Other
Notes, as the case may be) over the then remaining term of the Note
(and/or Other Note or Other Notes), will result in an adjusted Fixed
Charge Coverage Ratio of at least 1.3:1.
(ii) Pay the Entire Amount Owing. Pays to FFCA (without
prepayment premium or penalty) the entire amount owing under any one or
more of the Other Notes (and/or the Note, if applicable) that cause or
contribute to cause the Fixed Charge Coverage Ratio to be less than 1.3:1,
but only to the extent necessary to achieve a Fixed Charge Coverage Ratio
of not less than 1.3:1;
(iii) Substitution. Delivers to FFCA Debtor's notice of election
to substitute (in accordance with this Subsection) the Other Properties
(and/or the Premises, if applicable) that cause or contribute to cause the
Fixed Charge Coverage Ratio to be less than 1.3:1 with a Substitute Site
or Substitute Sites, as the case may be (as those terms are defined
below), to serve as FFCA's replacement collateral for repayment of the
obligations evidenced by the Other Notes (and/or the Note, if applicable)
that are secured by such Other Properties, including the Premises, if
applicable, and thereafter performs in the exercise of reasonable
diligence all of the duties and obligations of Debtor and satisfies or
cause to be satisfied all of the conditions set forth in this Subsection
10.E(iii). For purposes of this Subsection 10.E(iii), the following terms
shall have the following meanings:
"Substitute Site" or "Substitute Sites" means, as the context requires,
one or more parcels of real property substituted for the Other Properties and/or
the Premises, as applicable, in accordance with the requirements of Subsection
10.E(iii), together with all rights, privileges and appurtenances associated
therewith, and buildings, fixtures and other improvements located thereon
(whether or not affixed to such real estate).
"Substitute Site Permitted Exceptions" means real estates taxes, not then
due or payable, relating to the Substitute Site, and such other exceptions to
title affecting the Substitute Site as may be approved in writing by FFCA in its
reasonable discretion.
<PAGE>
1. Conditions. Debtor may substitute a Substitute Site for such of the
Other Properties (including the Premises, if applicable) that cause or
contribute to cause the Fixed Charge Coverage Ratio to be less than 1.3:1,
subject to the restrictions set forth in this Subsection and the fulfillment of
the following conditions:
i. Debtor shall establish a proposed date for the consummation of such
substitution and shall provide FFCA with notice of such date at least 45 days
before the proposed date of such substitution; provided however, such notice may
not be delivered more than 90 days before the date proposed in such notice for
the substitution. Consummation of the substitution shall take place no later
than the proposed date of such substitution and in the event the substitution is
not consummated by such proposed date, an Event of Default shall be deemed to
have occurred under this Agreement;
ii. Debtor shall identify a proposed Substitute Site and the proposed
Substitute Site must:
(1) be improved with a building and other structures and
improvements to permit its use and operation as a Licensor restaurant. The
building and other improvements must be of good workmanship and in good
condition and repair;
(2) be owned by and vested in Debtor, free and clear of all liens
and encumbrances, except the Substitute Site Permitted Exceptions; and
(3) have a fair market value equal to or greater than the fair
market value of the Other Property (or the Premises, if applicable) being
substituted as of the date of consummation of the substitution, as such fair
market value shall be determined by FFCA in its reasonable discretion.
iii. Debtor shall have reimbursed FFCA, in addition to all costs
applicable to the proposed substitution, for FFCA's third-party and/or in-house
site inspectors' reasonable and actual costs and expenses, including reasonable
and actual attorneys' fees, with respect to the proposed substitution and
Substitute Site;
iv. FFCA shall have received a preliminary title report and
irrevocable commitment (subject only to payment of premium) to insure title by
means of a mortgagee's ALTA extended coverage policy of title insurance (or its
equivalent, in the event such form is not issued in the jurisdiction where the
proposed Substitute Site is located) for such proposed Substitute Site issued by
a nationally recognized title company acceptable to FFCA, showing good and
marketable title in Debtor and committing to insure the lien of FFCA's mortgage
or deed of trust, as applicable, as a first-priority lien on the proposed
Substitute Site, subject only to the Substitute Site Permitted Exceptions and
containing such title endorsements as FFCA may reasonably require;
<PAGE>
v. FFCA shall have received a current ALTA survey of such proposed
Substitute Site, the form and substance of which shall be reasonably acceptable
to FFCA and to the title company;
vi. FFCA shall have received a Phase I environmental site assessment
performed in accordance with the requirements of ASTM 1527 which is acceptable
to FFCA in its discretion (and, if reasonably necessary based on the result of
the Phase I report, a Phase II environmental report) with respect to such
proposed Substitute Site;
vii. Debtor shall deliver, or cause to be delivered, opinions of
counsel in form and substance reasonably acceptable to FFCA issued by legal
counsel reasonably approved by FFCA;
viii. there shall be no Event of Default (other than Debtor's
failure to maintain the Fixed Charge Coverage Ratio which the substitution
pursuant to this Subsection 10.E(iii) is intended to cure);
ix. Debtor shall have executed such documents as are comparable to
the Loan Documents, including, without limitation, a loan agreement, a deed of
trust, a promissory note, an environmental indemnity agreement, and uniform
commercial code financing statements (the "Substitute Documents"), to provide
FFCA with a first priority lien on the proposed Substitute Site, subject only to
the Substitute Site Permitted Exceptions, and all other rights, remedies and
benefits with respect to the proposed Substitute Site, all of which documents
shall be in form and substance reasonably satisfactory to FFCA;
x. the representations, warranties and covenants set forth in the
Substitute Documents shall be substantially similar to the representations,
warranties and covenants contained in this Agreement relative to the Premises
and shall all be true and correct in all material respects as of the date of
consummation of the substitution;
xi. Debtor shall have delivered to FFCA certificates of insurance
showing that insurance required by the Substitute Documents is in full force and
effect; and
xii. Debtor shall have entered into (and delivered a copy thereof to
FFCA) a license agreement with Licensor for the conduct of Debtor's business at
the Substitute Site that will permit Debtor to operate a Licensor restaurant at
the Substitute Site having a term that will not expire before the scheduled
maturity date of the promissory note associated with the Substitute Site.
FFCA shall order the uniform commercial code financing statement
searches, title commitment, ALTA survey and Phase I environmental report
described above, and, upon receipt of such items, FFCA agrees to exercise
reasonable diligence in completing its review and analysis of the proposed
Substitute Site.
<PAGE>
2. Effect of Substitution. Upon satisfaction of the foregoing
conditions with respect to a proposed Substitute Site:
i. the Substitute Site shall be deemed substituted for the
Other Property (or the Premises, if applicable) that is
being replaced;
ii. the Substitute Documents shall be dated as of the date of
consummation of the substitution; and
iii. FFCA will release, or cause to be released, the Deed of
Trust encumbering the substituted Other Property (or the
Premises, if applicable) and promptly deliver documents,
including, without limitation, UCC-3 termination statements,
reasonably requested by Debtor to effect such release.
3. Costs. Debtor shall be solely responsible for the payment of all
reasonable and actual costs and expenses relating to any substitution
contemplated by this Subsection (whether incurred by Debtor or FFCA) at or prior
to the consummation of such substitution (and regardless of whether consummation
of such substitution occurs).
(iv) Sale-Leaseback Transaction. Pays to FFCA (without prepayment
premium or penalty) the entire amount owing under any one or more of the
Other Notes (and/or the Note, if applicable) that are secured by such of
the Other Properties (including the Premises, if applicable) that cause or
contribute to cause the Fixed Charge Coverage Ratio to be less than 1.3:1,
but only to the extent necessary to achieve an Fixed Charge Coverage Ratio
of not less than 1.3:1, and enters into a sale-leaseback transaction with
FFCA, as buyer and lessor, and Debtor, as seller and lessee, relative to
such Other Properties (including the Premises, if applicable), all on
terms and conditions (including written documentation) acceptable to
Debtor and FFCA; or
(v) Escrow Account. Deposits into an interest-bearing, federally
insured escrow account (reasonably acceptable to FFCA) established by
Debtor at Debtor's sole cost with a title or escrow company acceptable to
FFCA an amount in cash such that the interest income thereon (less all
escrow fees, costs and expenses) will be sufficient in amount to cause the
Fixed Charge Coverage Ratio for the next period of determination to be
equal to or greater than 1.3:1 based upon the current Fixed Charge
Coverage Ratio calculation. The funds in such escrow account shall, upon
their deposit therein, be pledged to FFCA (with such pledge being a
first-priority perfected lien and security interest in favor of FFCA) to
secure payment of all loans made by FFCA or an FFCA Affiliate to Debtor or
an Affiliate of Debtor, including, without limitation, the Loan, as FFCA
shall determine in FFCA's sole discretion, pursuant to a pledge agreement
or similar agreement in form and substance
<PAGE>
acceptable to FFCA in its sole discretion. Debtor agrees to execute and
deliver (and cause escrow agent to execute and deliver) such other
documents and agreements as are reasonably necessary to perfect FFCA's
lien and security interest in such escrow account and funds. The funds in
the escrow account shall be released to Debtor no later than 10 days after
Debtor demonstrates to FFCA's reasonable satisfaction that the Fixed
Charge Coverage Ratio (calculated without taking into account the funds in
the escrow account) for the next period of determination is no less than
1.3:1. In the event the Fixed Charge Coverage Ratio for the next period of
determination is less than 1.3:1, the funds in the escrow account shall be
released to FFCA for application in accordance with either Subsection
10.E(i) or 10.E(ii), in order to cure Debtor's failure to maintain the
Fixed Charge Coverage Ratio, as FFCA shall determine in its reasonable
discretion, and in such event, Debtor agrees to authorize and instruct the
escrow agent to immediately release and pay the funds to FFCA in
accordance with this Subsection. In no event shall Debtor be required to
maintain funds in the escrow account in excess of the outstanding
aggregate principal balance of the loans made by FFCA or its Affiliate to
Debtor or its Affiliate, including, without limitation, the Loan.
Without limiting any of the foregoing provisions, Debtor agrees that, in
the event more than one of the Other Properties (and/or the Premises, if
applicable) causes or contributes to cause the Fixed Charge Coverage Ratio to be
less than 1.3:1, Debtor will select and identify (for purposes of performing
Debtor's duties and obligations in accordance with Subsections 10.E(i),
10.E(ii), 10.E(iii) and/or 10.E(iv)) that Other Property or those Other
Properties (including the Premises, if applicable) whose Fixed Charge Coverage
Ratio, calculated on an individual store/restaurant basis, is or are, as the
case may be, most significantly below (or less than) 1.3:1.
11. Assignments. A. FFCA may assign in whole or in part its rights under
this Agreement, including, without limitation, any Transfer, Participation
and/or Securitization (all as defined in Section 13.P hereof). In the event of
any unconditional assignment of FFCA's entire right and interest hereunder, and
execution and delivery to Debtor of an assumption of FFCA's duties and
obligations hereunder by such assignee, FFCA shall automatically be relieved,
from and after the date of such assignment, of liability for the performance of
any obligation of FFCA contained herein.
B. Debtor shall not, without the prior written consent of FFCA, sell,
assign, transfer, mortgage, convey, encumber or grant any easements or other
rights or interests of any kind in the Premises (other than the Permitted
Exceptions and except, subsequent to the Closing, as expressly permitted by the
Deed of Trust), any of Debtor's rights under this Agreement or any interest in
Debtor, whether voluntarily, involuntarily or by operation of law or otherwise,
including, without limitation, by merger, consolidation, dissolution or
otherwise, except, subsequent to the Closing, as expressly permitted by the Deed
of Trust.
12. Indemnity. Debtor agrees to indemnify, hold harmless and defend FFCA
and its directors, officers, shareholders, employees, successors, assigns,
agents, contractors,
<PAGE>
subcontractors, affiliates, and trustees, as applicable (collectively, the
"Indemnified Parties"), from and against any and all losses, costs, claims,
liabilities, damages and expenses, including, without limitation, reasonable
attorneys' fees, arising as the result of an Environmental Condition and/or a
breach of any of the representations, warranties, covenants, agreements or
obligations of Debtor set forth in this Agreement and the Development Documents,
except to the extent such liability, loss, cost, claim, damages and expenses
arise as a result of the gross negligence or willful misconduct of an
Indemnified Party. Without limiting the generality of the foregoing, such
indemnity shall include, without limitation, any engineering, governmental
inspection and reasonable attorneys' fees and expenses that the Indemnified
Parties may incur by reason of any representation set forth in this Agreement
being false, or by reason of any investigation or claim of any governmental
agency in connection therewith.
13. Miscellaneous Provisions.
A. Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this
Agreement shall be in writing and given by (i) hand delivery, (ii)
facsimile followed by a copy sent by mail in accordance with clause (iv)
hereof, (iii) express overnight delivery service or (iv) certified or
registered mail, return receipt requested, postage prepaid, and shall be
deemed to have been delivered upon (a) receipt, if hand delivered, (b)
transmission, if delivered by facsimile, (c) the next business day, if
delivered by express overnight delivery service, or (d) the fifth business
day following the day of deposit of such notice with the United States
Postal Service, if sent by certified or registered mail, return receipt
requested, postage prepaid. Notices shall be provided to the parties and
addresses (or facsimile numbers, as applicable) specified below:
If to Debtor: Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, Georgia 30350-1296
Attention: President
Telephone: (770) 587-0290
Telecopy: (770) 594-7044
<PAGE>
With a copy to: Robert H. Drechsler, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10016
Telephone: (212) 421-4100
Telecopy: (212) 326-0806
If to FFCA: Robin L. Roach
Senior Vice President, Corporate Finance
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2228
With a copy to: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
B. Real Estate Commission. FFCA and Debtor represent and warrant to
each other that they have dealt with no real estate or mortgage broker,
agent, finder or other intermediary in connection with the transactions
contemplated by this Agreement (other than a real estate broker, agent or
finder employed by Debtor ("Debtor's Broker") pursuant to a written
agreement between Debtor and Debtor's Broker. Debtor shall be solely
responsible for payment of any and all commissions, charges and fees owing
to Debtor's Broker). FFCA and Debtor shall indemnify and hold each other
harmless from and against any costs, claims or expenses, including
attorneys' fees, arising out of the breach of their respective
representations and warranties contained within this Section, and Debtor
shall indemnify and hold FFCA and the Premises harmless from and against
any costs, claims or expenses arising out of any commission, charge, fee
or other amounts owing to Debtor's Broker.
C. Waiver and Amendment. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument unambiguously
setting forth the matter waived or amended and signed by the party against
which enforcement of such waiver or amendment is sought. Waiver of any
matter shall not be deemed a waiver of the same or any other matter on any
future occasion unless otherwise specifically stated therein.
D. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any manner in
the construction or interpretation hereof.
<PAGE>
E. Liability. (i) Notwithstanding anything to the contrary provided in
this Agreement, it is specifically understood and agreed, such agreement
being a primary consideration for the execution of this Agreement by FFCA,
that (i) there shall be absolutely no personal liability on the part of
any shareholder, director, officer or employee of FFCA, with respect to
any of the terms, covenants and conditions of this Agreement or the other
Loan Documents, (ii) Debtor waives all claims, demands and causes of
action against FFCA's officers, directors, employees and agents in the
event of any breach by FFCA of any of the terms, covenants and conditions
of this Agreement or the other Loan Documents to be performed by FFCA and
(iii) Debtor shall look solely to the assets of FFCA for the satisfaction
of each and every remedy of Debtor in the event of any breach by FFCA of
any of the terms, covenants and conditions of this Agreement or the other
Loan Documents to be performed by FFCA, such exculpation of liability to
be absolute and without any exception whatsoever.
(ii) Notwithstanding anything to the contrary provided in this
Agreement, it is specifically understood and agreed, such agreement being
a primary consideration for the execution of this Agreement by Debtor,
that (i) there shall be absolutely no personal liability on the part of
any shareholder, director, officer or employee of Debtor, with respect to
any of the terms, covenants and conditions of this Agreement or the other
Loan Documents (other than liability arising out of the gross negligence
or wilful misconduct of any shareholder, director, officer or employee of
Debtor), (ii) FFCA waives all claims, demands and causes of action against
Debtor's officers, directors, employees and agents in the event of any
breach by Debtor of any of the terms, covenants and conditions of this
Agreement or the other Loan Documents to be performed by Debtor (other
than claims, demands and causes of action arising out of the gross
negligence or wilful misconduct of any shareholder, director, officer or
employee of Debtor), and (iii) FFCA shall look solely to the assets of
Debtor for the satisfaction of each and every remedy of FFCA in the event
of any breach by Debtor of any of the terms, covenants and conditions of
this Agreement or the other Loan Documents to be performed by Debtor
(except as otherwise provided in this subsection 13.E(ii) with respect to
liabilities, claims, demands and causes of action arising out of the gross
negligence or wilful misconduct of any shareholder, director, officer or
employee of Debtor), such exculpation of liability to be absolute and
without any exception whatsoever. Nothing in this subsection 13.E(ii) or
elsewhere in the Loan Documents shall limit, restrict or impair FFCA's
rights to look to any and all assets of Debtor for the satisfaction of
each and every remedy of FFCA in the event of any breach by Debtor of any
of the terms, covenants and conditions of this Agreement or the other Loan
Documents to be performed by Debtor.
F. Severability. The provisions of this Agreement shall be deemed
severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provision shall be reformed by such court so as to give maximum legal
effect to the intention of the parties as expressed therein.
G. Construction Generally. This is an agreement between parties who
are
<PAGE>
experienced in sophisticated and complex matters similar to the
transaction contemplated by this Agreement and is entered into by both
parties in reliance upon the economic and legal bargains contained herein
and shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument,
the relative bargaining powers of the parties or the domicile of any
party. Debtor and FFCA were each represented by legal counsel competent in
advising them of their obligations and liabilities hereunder.
H. Other Documents. Each of the parties agrees to sign such other and
further documents as may be necessary to carry out the intentions
expressed in this Agreement.
I. Attorneys' Fees. In the event of any judicial or other adversarial
proceeding between the parties concerning this Agreement, the prevailing
party shall be entitled to recover its reasonable and actual attorneys'
fees and other costs in addition to any other relief to which it may be
entitled. References in this Agreement to the attorneys' fees and/or costs
of FFCA shall mean only the fees and costs of independent outside counsel
retained by FFCA with respect to this transaction and not the fees and
costs of FFCA's in-house counsel incurred in connection with this
transaction.
J. Entire Agreement. This Agreement and the other Loan Documents,
together with any other certificates, instruments or agreements to be
delivered in connection therewith, constitute the entire agreement between
the parties with respect to the subject matter hereof, and there are no
other representations, warranties or agreements, written or oral, between
Debtor and FFCA with respect to the subject matter of this Agreement.
Notwithstanding anything in this Agreement to the contrary, upon the
execution and delivery of this Agreement by Debtor and FFCA, the
Commitment shall be deemed null and void and of no further force and
effect (with respect to the Premises only) and the terms and conditions of
this Agreement shall control notwithstanding that such terms may be
inconsistent with or vary from those set forth in the Commitment.
K. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Agreement was substantially negotiated in the State
of Arizona, the Agreement was signed by FFCA in the State of Arizona and
delivered by Debtor in the State of Arizona, all payments under the Note
will be delivered in the State of Arizona and there are substantial
contacts between the parties and the transactions contemplated herein and
the State of Arizona. For purposes of any action or proceeding arising out
of this Agreement, the parties hereto hereby expressly submit to the
jurisdiction of all federal and state courts located in the State of
Arizona and Debtor consents that it may be served with any process or
paper by registered mail or by personal service within or without the
State of Arizona in accordance with applicable law. Furthermore, Debtor
waives and agrees not to assert in any such action, suit or proceeding
that it is not personally subject to the jurisdiction of such courts, that
the action, suit or proceeding is brought in an inconvenient forum or that
venue of the action, suit or proceeding is improper. It is the intent of
the parties hereto that all provisions of this Agreement shall be governed
by and construed under the laws of the State
<PAGE>
of Arizona. To the extent that a court of competent jurisdiction finds
Arizona law inapplicable with respect to any provisions hereof, then, as
to those provisions only, the laws of the states where the Premises are
located shall be deemed to apply. Nothing in this Section shall limit or
restrict the right of FFCA to commence any proceeding in the federal or
state courts located in the states in which the Premises are located to
the extent FFCA deems such proceeding necessary or advisable to exercise
remedies available under this Agreement or the other Loan Documents.
L. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
M. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Debtor and FFCA and their respective successors and
permitted assigns, including, without limitation, any United States
trustee, any debtor in possession or any trustee appointed from a private
panel.
N. Survival. Except for the conditions of Closing set forth in
Sections 2 and 9, which shall be satisfied or waived as of the Closing
Date, all representations, warranties, agreements, obligations and
indemnities of Debtor and FFCA set forth in this Agreement shall survive
the Closing.
O. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM
OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER
OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR
RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF
THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM FFCA WITH RESPECT TO ANY
AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY DEBTOR AGAINST FFCA OR ITS SUCCESSORS WITH RESPECT TO ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT
CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT
IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES
HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF
THEIR BARGAIN.
<PAGE>
P. Transfers, Participations and Securitization. A material inducement
to FFCA's willingness to complete the transactions contemplated by the
Loan Documents is Debtor's agreement that FFCA may, at any time, sell,
transfer or assign the Note, the Deed of Trust and the other Loan
Documents, and any or all servicing rights with respect thereto (each, a
"Transfer"), or grant participations therein (each, a "Participation"), or
complete an asset securitization vehicle selected by FFCA, in accordance
with all requirements which may be imposed by the investors or the rating
agencies involved in such securitized financing transaction, as selected
by FFCA, or which may be imposed by applicable securities, tax or other
laws or regulations, including, without limitation, laws relating to
FFCA's status as a real estate investment trust (each, a
"Securitization").
Debtor agrees to reasonably cooperate in good faith with FFCA in
connection with any Transfer, Participation and/or Securitization,
including, without limitation, (i) providing such documents, financial and
other data, and other information and materials (the "Disclosures") which
would typically be required with respect to Debtor by a purchaser,
transferee, assignee, servicer, participant, investor or rating agency
involved with respect to such Transfer, Participation and/or the
Securitization, as applicable; provided, however, Debtor shall not be
required to make Disclosures of any confidential information or any
information which has not previously been made public unless required by
applicable federal or state securities laws; and (ii) amending the terms
of the transactions evidenced by the Loan Documents to the extent
necessary so as to satisfy the requirements of purchasers, transferees,
assignees, servicers, participants, investors or selected rating agencies
involved in any such Transfers, Participations or Securitization, so long
as such amendments would not have a material adverse effect upon Debtor or
the transactions contemplated hereunder or make any of the covenants of
Debtor or repayment terms contained in any of the Loan Documents more
burdensome on Debtor.
Debtor consents to FFCA providing the Disclosures, as well as any
other information which FFCA may now have or hereafter acquire with
respect to the Premises or the financial condition of Debtor, to each
purchaser, transferee, assignee, servicer, participant, investor or rating
agency involved with respect to each Transfer, Participation and/or
Securitization, as applicable. FFCA shall pay the reasonable and customary
out-of-pocket expenses incurred in connection with the performance of the
obligations under this Section.
IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as of
the date first above written.
FFCA:
FFCA ACQUISITION CORPORATION,
a Delaware corporation
<PAGE>
By:_________________________________________
Name: Robin L. Roach
Its: Senior Vice President
Corporate Finance
DEBTOR:
SYBRA, INC., a Michigan corporation
By:__________________________________________
Name:________________________________________
Its:_________________________________________
<PAGE>
STATE OF ARIZONA ]
] SS.
COUNTY OF MARICOPA ]
The foregoing instrument was acknowledged before me on , 1997,
by Robin L. Roach, Senior Vice President, Corporate Finance of FFCA Acquisition
Corporation, a Delaware corporation, on behalf of the corporation.
----------------------------------------------
Notary Public
My Commission Expires:
- -----------------------------
<PAGE>
STATE OF ]
] SS.
COUNTY OF ]
The foregoing instrument was acknowledged before me on , 1997, by
_______________________________________, the ___________________________ of
SYBRA, INC., a Michigan corporation, on behalf of the corporation.
----------------------------------------------
Notary Public
My Commission Expires:
- -----------------------------
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
<PAGE>
EXHIBIT B
NOTE
<PAGE>
EXHIBIT C
DEED OF TRUST
<PAGE>
EXHIBIT D
ENVIRONMENTAL DISCLOSURE
<PAGE>
EXHIBIT E
OPINION
<PAGE>
EXHIBIT F
ENVIRONMENTAL INDEMNITY AGREEMENT
FORM OF PROMISSORY NOTE
Dated as of November , 1997
$803,019.00 Scottsdale, Arizona
SYBRA, INC., a Michigan corporation ("Debtor"), for value received, hereby
promises to pay to FFCA ACQUISITION CORPORATION, a Delaware corporation
("FFCA"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona
85255, or order, on or before December 1, 2017, as herein provided, the
principal sum of EIGHT HUNDRED THREE THOUSAND NINETEEN AND NO/100 DOLLARS
($803,019.00), and to pay interest on the unpaid principal amount of this Note
from the date hereof to maturity at the rate of 8.822% per annum ("Base Interest
Rate") on the basis of a 360-day year of twelve 30-day months, such principal
and interest to be paid in immediately available funds and in lawful money of
the United States.
Interest on the principal amount of this Note for the period commencing
with the date set forth above through the last day in the month in which this
Note is dated shall be due and payable upon execution of this Note. Thereafter,
principal and interest shall be payable in consecutive monthly installments of
Seven Thousand One Hundred Thirty-Three and 30/100 DOLLARS ($7,133.30)
commencing on January 1, 1998, and continuing on the first day of each month
thereafter until maturity of this Note on December 1, 2017, at which time, the
outstanding principal and unpaid accrued interest shall be due and payable.
Prior to the fifth anniversary of this Note Debtor may not prepay this
Note, except as otherwise specifically provided in the Loan Agreement between
Debtor and FFCA of even date herewith (the "Loan Agreement") relative to a
payment from Debtor to FFCA in order to maintain the Fixed Charge Coverage Ratio
(as defined in the Loan Agreement). From and after the fifth anniversary of this
Note, Debtor may prepay this Note in full, but not in part, including all
accrued but unpaid interest hereunder and all sums advanced by FFCA pursuant to
any of the Loan Documents (as defined below), provided that (i) any such
prepayment shall only be made on a regularly scheduled payment date upon 30
days' prior written notice from the Debtor to FFCA; and (ii) any such prepayment
shall be made together with payment of a prepayment premium equal to:
(a) 5% of the amount prepaid if the prepayment is made on or
following the fifth anniversary of this Note but prior to the sixth
anniversary of this Note;
(b) 4% of the amount prepaid if the prepayment is made on or
following the sixth anniversary of this Note but prior to the seventh
anniversary of this Note;
(c) 3% of the amount prepaid if the prepayment is made on or
following the seventh anniversary of this Note but prior to the eighth
anniversary of this Note;
(d) 2% of the amount prepaid if the prepayment is made on or
following the eighth anniversary of this Note but prior to the ninth
anniversary of this Note; and
<PAGE>
(e) 1% of the amount prepaid if the prepayment is made on or
following the ninth anniversary of this Note but prior to the tenth
anniversary of this Note.
If this Note is prepaid on or following the tenth anniversary of this Note there
shall be no prepayment premium.
The foregoing prepayment premium shall be due and payable if this Note is
prepaid prior to the tenth anniversary of this Note regardless of whether such
prepayment is the result of a voluntary prepayment by Debtor or as a result of
FFCA declaring the unpaid principal balance of this Note, accrued interest and
all other sums due under this Note, the Mortgage (as defined below), the other
Loan Documents and any other document further securing this Note, due and
payable as contemplated below (the "Acceleration"); provided, however, such
prepayment premium shall not be payable if this Note is prepaid as a result of
the application of casualty or condemnation proceeds as contemplated by the
Mortgage. If this Note is prepaid as a result of an Acceleration prior to the
fifth anniversary of this Note, a prepayment premium of 5% of the principal
amount prepaid shall be due and payable to FFCA by Debtor at the time of such
prepayment.
Upon execution of this Note, Debtor shall establish arrangements whereby
all payments of principal and interest hereunder are transferred by wire or
other means directly from Debtor's bank account to such account as FFCA may
designate or as FFCA may otherwise designate. Each payment of principal and
interest hereunder shall be applied first toward any past due payments under
this Note (including payment of all Costs (as herein defined)), then to accrued
interest, and the balance, after the payment of such accrued interest, if any,
shall be applied to the unpaid principal balance of this Note; provided,
however, each payment hereunder while a default under this Note has occurred and
is continuing shall be applied as FFCA in its sole discretion may determine.
This Note is secured by that certain Deed of Trust or Mortgage, Assignment
of Rents and Leases, Security Agreement and Fixture Filing dated of even date
herewith executed by Debtor for the benefit of FFCA (the "Mortgage"). If any
installment or payment due under this Note remains unpaid for five (5) days
after written notice thereof to Debtor, or upon the occurrence and continuation
of an event of default (after the expiration of any applicable grace and cure
period) under (i) the Loan Agreement, (ii) the Mortgage, (iii) any of the other
Loan Documents (as defined in the Loan Agreement), or (iv) any other document
further securing this Note, then, in any of such event, time being of the
essence hereof, FFCA may declare the entire unpaid principal balance of this
Note, accrued interest, if any, and all other sums due under this Note, the Loan
Agreement, the other Loan Documents and any other document further securing this
Note, due and payable at once without written notice to Debtor.
All past-due principal and/or interest shall bear interest at the lesser
of the highest rate for which the undersigned may legally contract, or the rate
of 4% per annum above the Base Interest Rate (the "Default Rate"), and such
Default Rate shall continue to apply following a judgment in favor of FFCA under
this Note. If Debtor fails to make any payment or installment due under this
Note within five days of its due date, Debtor shall pay to FFCA in addition to
any other sum due
<PAGE>
FFCA under this Note or any other Loan Document a late charge equal to 5% of
such past-due payment or installment.
All payments of principal and interest due hereunder shall be made (i)
without deduction of any present and future taxes, levies, imposts, deductions,
charges or withholdings, which amounts shall be paid by Debtor, and (ii) without
any other right of abatement, reduction, setoff, defense, counterclaim,
interruption, deferment or recoupment for any reason whatsoever. Debtor will pay
the amounts necessary such that the gross amount of the principal and interest
received by FFCA is not less than that required by this Note.
No delay or omission on the part of FFCA in exercising any remedy, right
or option under this Note shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any one occasion shall not be construed as a
waiver or bar to any such remedy, right or option on a future occasion.
Debtor hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with delivery, acceptance, performance, default or endorsement of this Note.
All notices, consents, approvals or other instruments required or
permitted to be given by either party pursuant to this Note shall be in writing
and given by (i) hand delivery, (ii) facsimile followed by a copy sent by mail
in accordance with clause (iv) hereof, (iii) express overnight delivery service
or (iv) certified or registered mail, return receipt requested, postage prepaid,
and shall be deemed to have been delivered upon (a) receipt, if hand delivered,
(b) transmission, if delivered by facsimile, (c) the next business day, if
delivered by express overnight delivery service, or (d) the fifth business day
following the day of deposit of such notice with the United States Postal
Service, if sent by certified or registered mail, return receipt requested,
postage prepaid. Notices shall be provided to the parties and addresses (or
facsimile numbers, as applicable) specified below:
<PAGE>
If to Debtor: Sybra, Inc.
8300 Dunwoody Place
Suite 300
Atlanta, Georgia 30350-1296
Attention: President
Telephone: (770) 587-0290
Telecopy: (770) 594-7044
With a copy to: Robert H. Drechsler, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10016
Telephone: (212) 421-4100
Telecopy: (212) 326-0806
If to FFCA: Robin L. Roach
Senior Vice President, Corporate Finance
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2228
With a copy to: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceeding, or should this Note be placed in
the hands of attorneys for collection after default, Debtor shall pay, in
addition to the principal and interest due and payable hereon, all reasonable
costs of collecting or attempting to collect this Note (the "Costs"), including
reasonable attorneys' fees and expenses of FFCA (including those fees and
expenses incurred in connection with any appeal) whether or not a judicial
action is commenced by FFCA.
This Note may not be amended or modified except by a written agreement
duly executed by Debtor and FFCA.
Notwithstanding anything to the contrary contained in any of the Loan
Documents, the
<PAGE>
obligations of Debtor to FFCA under this Note and any other Loan Documents are
subject to the limitation that payments of interest and late charges to FFCA
shall not be required to the extent that receipt of any such payment by FFCA
would be contrary to provisions of applicable law limiting the maximum rate of
interest that may be charged or collected by FFCA. The portion of any such
payment received by FFCA that is in excess of the maximum interest permitted by
such provisions of law shall be credited to the principal balance of this Note
or if such excess portion exceeds the outstanding principal balance of this
Note, then such excess portion shall be refunded to Debtor. All interest paid or
agreed to be paid to FFCA shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and/or spread throughout the full term of this
Note (including, without limitation, the period of any renewal or extension
thereof) so that interest for such full term shall not exceed the maximum amount
permitted by applicable law.
It is the intent of the parties hereto that the business relationship
created by this Note and the other Loan Documents is solely that of creditor and
debtor and has been entered into by both parties in reliance upon the economic
and legal bargains contained in the Loan Documents. None of the agreements
contained in the Loan Documents, is intended, nor shall the same be deemed or
construed, to create a partnership between FFCA and Debtor, to make them joint
venturers, to make Debtor an agent, legal representative, partner, subsidiary or
employee of FFCA, nor to make FFCA in any way responsible for the debts,
obligations or losses of Debtor. Debtor acknowledges that FFCA (or any partner
of FFCA) and Licensor (as defined in the Mortgage) are not affiliates, agents,
partners or joint venturers, nor do they have any other legal, representative or
fiduciary relationship.
FFCA, by accepting this Note, and Debtor acknowledge and warrant to each
other that each has been represented by independent counsel and Debtor has
executed this Note after being fully advised by said counsel as to its effect
and significance. This Note shall be interpreted and construed in a fair and
impartial manner without regard to such factors as the party which prepared the
instrument, the relative bargaining powers of the parties or the domicile of any
party.
Debtor acknowledges that this Note was substantially negotiated in the
State of Arizona, the executed Note was delivered in the State of Arizona, all
payments under this Note will be delivered in the State of Arizona and there are
substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Note, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Debtor consents that it may be served with any process or paper by registered
mail or by personal service within or without the State of Arizona in accordance
with applicable law. Furthermore, Debtor waives and agrees not to assert in any
such action, suit or proceeding that it is not personally subject to the
jurisdiction of such courts, that the action, suit or proceeding is brought in
an inconvenient forum or that venue of the action, suit or proceeding is
improper. It is the intent of Debtor and FFCA that all provisions of this Note
shall be governed by and construed under the laws of the State of Arizona.
Nothing contained in this paragraph shall limit or restrict the right of FFCA to
commence any proceeding in the federal or state courts located in the state in
which the Premises is located to the extent FFCA deems such proceeding necessary
or advisable to exercise remedies available under the Loan Documents.
<PAGE>
FFCA, BY ACCEPTING THIS NOTE, AND DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, THE
RELATIONSHIP OF FFCA AND DEBTOR, DEBTOR'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.
THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY
JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES
FROM FFCA WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
NOTE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR
OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF
THEIR BARGAIN.
All obligations, covenants and duties of Debtor relating to the
indemnification or defense of FFCA as contained in the Loan Documents shall
survive the repayment of the obligations of Debtor to FFCA under this Note.
This obligation shall bind Debtor and its successors and assigns, and the
benefits hereof shall inure to FFCA and its successors and assigns. FFCA may
assign its rights under this Note as set forth in Section 13.P of the Loan
Agreement.
<PAGE>
IN WITNESS WHEREOF, Debtor has executed and delivered this Note as of the
date first set forth above.
DEBTOR:
SYBRA, INC., a Michigan corporation
By__________________________________________
Name________________________________________
Its_________________________________________
FORM OF MORTGAGE
THIS MORTGAGE, containing an Assignment of Rents and Leases, Security
Agreement and Fixture Filing ("Mortgage"), is made as of , 1997,
by and between SYBRA, INC., a Michigan corporation ("Debtor"), whose address is
8300 Dunwoody Place, Suite 300, Atlanta, Georgia 30350-1296, and FFCA
ACQUISITION CORPORATION, a Delaware corporation ("Mortgagee"), whose address is
17207 North Perimeter Drive, Scottsdale, Arizona 85255.
PRELIMINARY STATEMENT:
The capitalized terms used in this Mortgage, if not elsewhere defined
herein, have the meanings set forth in Article I. Debtor holds a fee simple
interest in the Premises, subject to Permitted Exceptions. Debtor is executing
this Mortgage for the purpose of granting the interest of Debtor in and to the
Mortgaged Property (as defined in the Granting Clauses below) as security for
the payment of the Obligations. The Mortgaged Property shall be and remain
subject to the lien of this Mortgage and shall constitute security for the
Obligations so long as the Obligations shall remain outstanding.
GRANTING CLAUSES:
Debtor, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, by
these presents does hereby create a security interest in, mortgage, grant,
bargain, sell, assign, pledge, give, transfer, set over and convey unto
Mortgagee and to its successors and assigns WITH POWER OF SALE, for the benefit
of Mortgagee, all of Debtor's estate, right, title and interest in, to and under
any and all of the following property (the "Mortgaged Property"), subject only
to Permitted Exceptions:
Premises, Rents and Derivative Interests
The Premises; all rents, issues, profits, royalties, income and other
benefits derived from the Premises (collectively the "Rents"); all estate,
right, title and interest of Debtor in and to all leases or subleases covering
the Premises or any portion thereof now or hereafter existing or entered into,
including, without limitation, all cash or security deposits, advance rentals
and deposits or payments of similar nature; all right, title and interest of
Debtor in and to all options to purchase or lease the Premises or any portion
thereof or interest therein, and any greater estate in the Premises owned or
hereafter acquired; all interests, estate or other claims, both in law and in
equity, which Debtor now has or may hereafter acquire in the Premises; all
easements, rights-of-way and rights used in connection therewith or as a means
of access thereto, and all tenements, hereditaments and appurtenances thereof
and thereto, and all water rights and shares of stock evidencing the same; all
right, title and interest of Debtor, now owned or hereafter acquired,
<PAGE>
in and to any land lying within the right-of-way of any street, open or
proposed, adjoining the Premises and any and all sidewalks, alleys and strips
and gores of land adjacent to or used in connection with the Premises;
Personal Property
All right, title and interest of Debtor in and to all tangible personal
property now owned or hereafter acquired by Debtor and now or at any time
hereafter located on or at the Premises or used in connection therewith,
including, without limitation, all goods, machinery, tools, equipment, lobby and
all other indoor and outdoor furniture, copies of books, copies of records,
manuals, computer systems (other than license rights and agreements owned by
third parties relating to the software programs used in connection with such
computer systems), furnishings, inventory, rugs, and maintenance and other
supplies (the "Personal Property");
Intangibles
All of Debtor's interest in all existing and future accounts, contract
rights, general intangibles, copies of files, copies of books of account,
agreements, permits, licenses (other than franchise, license or area development
agreements with Licensor) and certificates necessary or desirable in connection
with the acquisition, ownership, leasing, construction, operation, servicing or
management of the Mortgaged Property, whether now existing or entered into or
obtained after the date hereof, and all existing and future telephone numbers
and listings, advertising and marketing materials and good will in any way
relating to the Mortgaged Property or any portion thereof; and
Claims and Awards
All the estate, interest, right, title, other claim or demand, including
claims or demands with respect to the proceeds of insurance in effect with
respect thereto, which Debtor now has or may hereafter acquire in the Mortgaged
Property, and any and all awards made for the taking by eminent domain, or by
any proceeding or purchase in lieu thereof, of the whole or any part of the
Mortgaged Property, including, without limitation, any awards resulting from a
change of grade of streets and awards for severance damages, and Debtor hereby
authorizes, directs and empowers Mortgagee, at its option, on Debtor's behalf,
or on behalf of the successors or assigns of Debtor, to adjust, compromise,
claim, collect and receive such proceeds and to give proper receipts and
acquittances therefor, subject to the terms hereof.
TO HAVE AND TO HOLD the Mortgaged Property hereby granted or mortgaged or
intended to be granted or mortgaged, unto Mortgagee, and its successors, heirs
and assigns, upon the terms, provisions and conditions set forth herein.
THIS MORTGAGE SHALL SECURE THE FOLLOWING INDEBTEDNESS AND
OBLIGATIONS (the "Obligations"):
<PAGE>
(i) Payment of indebtedness evidenced by the Note together with all
extensions, renewals, amendments and modifications thereof;
(ii) Payment of all other indebtedness and performance of all other
obligations and covenants of Debtor contained in any Loan Document,
together with any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby or thereby;
(iii) Payment of all indebtedness and performance of all other
obligations and covenants under any other agreement or instrument,
including, without limitation, promissory notes and guaranties, between,
among or by (1) Debtor (the "Debtor Entities"), and, or for the benefit
of, (2) Mortgagee or any corporation, partnership, joint venture, limited
liability company, association or other form of entity affiliated with
Mortgagee (the "Mortgagee Entities"); provided, however, Obligations shall
not include the payment of the indebtedness and the performance of the
other obligations of Debtor pursuant to the Equipment Loan Agreement; and
(iv) Payment of all other sums, with interest thereon, which may
hereafter be owed by Debtor or its successors or assigns pursuant to the
Loan Documents to Mortgagee or its successors or assigns.
This Mortgage is a "Future Advance Mortgage" under Act No. 348 of Public
Acts of Michigan 1990. It is the intention of the parties hereto that the
Mortgaged Property shall secure all of the Obligations presently or hereafter
owed, and that the priority of the security interest created by this Mortgage
for all such Obligations shall be controlled by the time of proper recording of
this Mortgage. In addition, this Mortgage shall also secure unpaid balances of
advances made with respect to the Mortgaged Property for the payment of taxes,
assessments, insurance premiums, costs or any other advances incurred for the
protection of the Mortgaged Property, together with interest thereon until paid
at the rate provided for in Section 2.15 hereof, all as contemplated in this
Mortgage, all of which shall constitute a part of the Obligations. This
paragraph shall serve as notice to all persons who may seek or obtain a lien on
the Mortgaged Property subsequent to the date of recording of this Mortgage,
that until this Mortgage is released, any debt owed Mortgagee by Debtor,
including advances made subsequent to the recording of this Mortgage, shall be
secured with the priority afforded this Mortgage as recorded.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Note and the other
Loan Documents are to be executed, delivered and secured and that the Mortgaged
Property is to be held and disposed of by Mortgagee, upon and subject to the
provisions of this Mortgage.
<PAGE>
ARTICLE I
DEFINED TERMS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified (such definitions to be applicable equally to
singular and plural nouns and verbs of any tense):
"Affiliate" means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership or voting securities or otherwise.
"Code" means the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101 et
seq., as amended.
"De Minimis Amounts" shall mean quantities of chemicals and products
containing Hazardous Materials in quantities customary and necessary for the
intended use of the Premises including but not limited to cleaning supplies,
insecticides, paints, paint removers, toner for copiers, etc.) provided such
use, storage or handling of such DeMinimis Amounts of Hazardous Materials are in
compliance with Environmental Laws.
"Environmental Condition" means any condition with respect to soil,
surface waters, groundwaters, Premises, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Premises, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order or liability to or against
Debtor or FFCA by any third party (including, without limitation, any government
entity), including, without limitation, any condition resulting from the
operation of Debtor's business and/or the operation of the business of any other
property owner or operator in the vicinity of the Premises and/or any activity
or operation formerly conducted by any person or entity on or off the Premises.
"Environmental Indemnity Agreement" means that certain Environmental
Indemnity Agreement dated as of the date of this Mortgage executed by Debtor for
the benefit of Mortgagee with respect to the Premises.
"Environmental Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, relating to
protection of human health or the environment, relating to Hazardous Materials,
relating to liability for or costs of Remediation or prevention of Releases or
relating to liability for or costs of other actual or threatened danger to human
health or the environment. "Environmental Laws" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar
<PAGE>
issues: the Comprehensive Environmental Response, Compensation and Liability
Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous
Materials Transportation Act; the Resource Conservation and Recovery Act
(including but not limited to Subtitle I relating to underground storage tanks);
the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic
Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and
Health Act; the Federal Water Pollution Control Act; the Federal Insecticide,
Fungicide and Rodenticide Act; the Endangered Species Act; the National
Environmental Policy Act; and the River and Harbors Appropriation Act.
"Environmental Laws" also includes, but is not limited to, any present and
future federal, state and local laws, statutes, ordinances, rules, regulations
and the like: conditioning transfer of property upon a negative declaration or
other approval of a governmental authority of the environmental condition of the
property; requiring notification or disclosure of Releases or other
environmental condition of the Mortgaged Property to any governmental authority
or other person or entity, whether or not in connection with transfer of title
to or interest in property; imposing conditions or requirements in connection
with permits or other authorization for lawful activity.
"Equipment Loan Agreement" means that certain Equipment Loan Agreement
dated as of the date of this Mortgage between Debtor and Mortgagee.
"Hazardous Materials" means (i) any toxic substance or hazardous waste,
substance or related material, or any pollutant or contaminant; (ii) radon gas,
asbestos in any form which is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment which contains dielectric fluid
containing levels of polychlorinated biphenyls in excess of federal, state or
local safety guidelines, whichever are more stringent, or any petroleum product;
(iii) any other substance, gas, material or chemical which is or may be defined
as or included in the definition of "hazardous substances," "toxic substances,"
"hazardous materials," hazardous wastes" or words of similar import under any
Environmental Laws.
"Indemnified Parties" means Mortgagee and any person or entity who is or
will have been involved in the origination of the loan evidenced by the Note
(the "Loan"), any person or entity who is or will have been involved in the
servicing of the Loan, any person or entity in whose name the encumbrance
created by this Mortgage is or will have been recorded, persons and entities who
may hold or acquire or will have held a full or partial interest in the Loan
(including, but not limited to, investors in the securities contemplated by
Section 5.18, as well as custodians, trustees and other fiduciaries who hold or
have held a full or partial interest in the Loan for the benefit of third
parties), as well as the respective directors, officers, shareholders, partners,
members, employees, agents, servants, representatives, contractors,
subcontractors, affiliates, subsidiaries, participants, successors and assigns
of any and all of the foregoing (including but not limited to any other person
or entity who holds or acquires or will have held a participation or other full
or partial interest in the Loan or the Mortgaged Property, whether during the
term of the Loan or as a part of or following a foreclosure of the Loan and
including, but not limited to, any successors by merger, consolidation or
acquisition of all or a substantial portion of Mortgagee's assets and business).
"Licensor" means Arby's, Inc., a Delaware corporation, or its successors.
<PAGE>
"Loan Agreement" means the Loan Agreement dated as of even date herewith
between Debtor and Mortgagee.
"Loan Documents" means this Mortgage, the Note, the Loan Agreement, the
Environmental Indemnity Agreement and such other notes, deeds of trust or
mortgages and other documents or instruments contemplated thereby, all as
amended and supplemented.
"Losses" means any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees and other costs of defense).
"Note" means the promissory note dated as of even date herewith in the
amount of $803,019.00 executed by Debtor and payable to Mortgagee which is
secured by this Mortgage and any amendments, extensions or modifications
thereof.
"Permitted Exceptions" shall have the meaning set forth in the Loan
Agreement, subject to the terms and provisions of Section 2.12 hereof.
"Person" or "Persons" means, as the context requires, any individual,
corporation, trust, partnership, limited liability company, unincorporated
organization, governmental authority or any other form of entity.
"Premises" means the parcel or parcels of real estate legally described on
Exhibit A attached hereto, and all buildings, fixtures and other improvements
now or hereafter located on the Land (whether or not affixed to the real
estate).
"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
"Remediation" means any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Material, any actions to prevent, cure or mitigate any Release,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or any evaluation
relating to any Hazardous Materials.
"Restoration" means the restoration, replacement or rebuilding of the
Premises, or any part thereof, as nearly as possible to its value, condition and
character immediately prior to any damage, destruction or Taking (as defined in
Section 3.01 hereof).
<PAGE>
"State" means the State of Michigan.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF DEBTOR
Debtor hereby represents, warrants, covenants and agrees as follows until
this Mortgage has been discharged:
Section 2.01. Payment of the Note. Debtor shall punctually pay, or cause
to be paid, the principal, interest and all other sums to become due in respect
of the Note and the Loan Documents in accordance with the Note and the Loan
Documents.
Section 2.02. Title to the Mortgaged Property. Debtor has good and
marketable fee simple title to the Mortgaged Property, free and clear of all
liens, encumbrances, charges and other exceptions to title, except Permitted
Exceptions. Debtor has and shall have full power and lawful authority to grant
the Mortgaged Property to Mortgagee in the manner and form herein done or
intended, preserve its title to its interest in the Mortgaged Property, subject
only to Permitted Exceptions, and forever warrant and defend the same to
Mortgagee against the claims of all persons. This Mortgage constitutes a valid
first lien upon and security interest in the Mortgaged Property.
Section 2.03. Organization and Status of Debtor; Enforceability. (a)
Debtor has been duly incorporated, is validly existing and in good standing
under the laws of its state of incorporation and is qualified as a foreign
corporation to do business in any jurisdiction where such qualification is
required. Debtor is not a "foreign corporation", "foreign partnership", "foreign
trust" or "foreign estate", as those terms are defined in the Internal Revenue
Code and the regulations promulgated thereunder. Debtor's United States tax
identification number is correctly set forth on the signature page of this
Mortgage. The persons who have executed this Mortgage on behalf of Debtor are
duly authorized to do so.
(b) This Mortgage constitutes the legal, valid and binding obligation of
Debtor, enforceable against Debtor in accordance with its terms.
Section 2.04. Litigation; Absence of Breaches or Defaults. (a) There are
no suits, actions, proceedings or investigations pending, or to Debtor's
knowledge, threatened against or involving Debtor before any court, arbitrator,
or administrative or governmental body which might reasonably result in any
material adverse change in the contemplated business, condition, worth or
operations of Debtor or the Mortgaged Property.
(b) Debtor is not, and the execution, delivery and performance of this
Mortgage and the documents, instruments and agreements provided for herein will
not result, in any breach of or default under any other document, instrument or
agreement to which Debtor is a party or by which
<PAGE>
Debtor, the Mortgaged Property or any of Debtor's property is subject or bound.
Section 2.05. Licensor Provisions; Licenses and Permits. (a) Debtor has
entered into a franchise or license agreement with Licensor for conduct of the
business at the Mortgaged Property. Such franchise or license agreement is
valid, binding and in full force and effect, permits Debtor to operate a
Licensor's restaurant on the Mortgaged Property and has a term which will not
expire prior to the scheduled maturity date of the Note.
(b) Debtor has obtained all required licenses and permits, both
governmental and private, to use and operate the Mortgaged Property in the
intended manner.
Section 2.06. Financial Condition; Information Provided to Mortgagee. The
financial statements, all financial data and all other documents and information
heretofore delivered to Mortgagee by or with respect to Debtor and/or the
Mortgaged Property in connection with this Mortgage and/or relating to Debtor
and/or the Mortgaged Property are true, correct and complete in all material
respects, and there have been no amendments to such financial statements,
financial data and other documents and information since the date such financial
statements, financial data, documents and other information were prepared or
delivered to Mortgagee, and no material adverse change has occurred to any such
financial statements, financial data, documents and other information not
disclosed in writing to Mortgagee.
Section 2.07. Recording. Debtor shall, upon the execution and delivery
hereof and thereafter from time to time, take such actions as Mortgagee may
reasonably request to cause this Mortgage, each supplement and amendment to such
instrument and financing statements with respect thereto and each instrument of
further assurance (collectively, the "Recordable Documents") to be filed,
registered and recorded as may be required by law to publish notice and maintain
the first security interest hereof upon the Mortgaged Property and to publish
notice of and protect the validity of the Recordable Documents. Debtor shall,
from time to time, perform or cause to be performed any other act and shall
execute or cause to be executed any and all further instruments (including
financing statements, continuation statements and similar statements with
respect to any of said documents) requested by Mortgagee for carrying out the
intention of, or facilitating the performance of, this Mortgage. If Debtor shall
fail to comply with this Section, Mortgagee shall be and is hereby irrevocably
appointed the agent and attorney-in-fact of Debtor to comply therewith
(including the execution, delivery and filing of such financing statements and
other instruments), which appointment is coupled with an interest, but this
sentence shall not prevent any default in the observance of this Section from
constituting an Event of Default. To the extent permitted by law, Debtor shall
pay or cause to be paid recording taxes and fees incident thereto and all
expenses, taxes and other governmental charges incident to or in connection with
the preparation, execution, delivery or acknowledgment of the Recordable
Documents, any instruments of further assurance and the Note.
Section 2.08. Use; Maintenance and Repair. (a) Except as otherwise may be
permitted by the terms of Subsection 2.16.C below, Debtor shall use the
Mortgaged Property solely for the operation of a restaurant in accordance with a
license agreement with Licensor and for no other
<PAGE>
purpose. Except as set forth below, Debtor shall at all times while this
Mortgage is in effect occupy the Mortgaged Property and diligently operate its
business on the Mortgaged Property. Debtor may cease diligent operation of
business for a period not to exceed 90 days and may do so only once within any
five-year period while this Mortgage is in effect. If Debtor does discontinue
operation pursuant to this Section, Debtor shall (i) give written notice to
Mortgagee 60 days prior to the day Debtor ceases operation, (ii) provide
adequate protection and maintenance of the Mortgaged Property during any period
of vacancy and (iii) pay all costs necessary to restore the Mortgaged Property
to their condition on the day operation of the business ceased at such time as
the Mortgaged Property is reopened for Debtor's business operations or other
substituted use. Notwithstanding anything herein to the contrary, Debtor shall
pay monthly the principal and interest due under the Note during any period in
which Debtor discontinues operation.
Debtor shall not, by itself or through any lease or other type of
transfer, convert the Premises to an alternative use while this Mortgage is in
effect without Mortgagee's consent, which consent shall not be unreasonably
withheld or delayed. Mortgagee may consider any or all of the following in
determining whether to grant its consent, without being deemed to be
unreasonable: (i) whether the converted use will be consistent with the highest
and best use of the Mortgaged Property, and (ii) whether the converted use will
increase Mortgagee's risks or decrease the value of the Mortgaged Property.
(b) Debtor shall (i) maintain the Mortgaged Property in good condition and
repair, subject to reasonable and ordinary wear and tear, free from actual or
constructive waste, (ii) operate, remodel, update and modernize the Mortgaged
Property in accordance with those standards adopted from time to time by
Licensor on a system-wide basis for Licensor restaurants, with such remodeling
and modernizing being undertaken in accordance with Licensor's system-wide
timing schedules for such activities, and (iii) pay all operating costs of the
Premises in the ordinary course of business.
Section 2.09. Compliance With Laws. (a) Debtor's use and occupation of the
Mortgaged Property, and the condition thereof, including, without limitation,
any Restoration, shall, at Debtor's sole cost and expense, comply in all
material respects with all applicable statutes, regulations, rules, ordinances,
codes, licenses, permits, orders and approvals of any governmental agencies,
departments, commissions, bureaus, boards or instrumentalities of the United
States, the State and all political subdivisions thereof, including, without
limitation, all health, building, fire, safety and other codes, ordinances and
requirements and all applicable standards of the National Board of Fire
Underwriters ("Applicable Regulations"), where the failure to so comply might
reasonably be expected to result in a material adverse effect on the Mortgaged
Property or the business, operations, assets or financial condition of Debtor.
(b) Without limiting the generality of the other provisions of this
Section, Debtor agrees that it shall be responsible for complying in all
material respects with the Americans with Disabilities Act of 1990, as such act
may be amended from time to time, and all regulations promulgated thereunder
(collectively, the "ADA"), as it affects the Mortgaged Property, including,
without limitation, making required "readily achievable" changes to remove any
architectural or
<PAGE>
communications barriers, and providing auxiliary aides and services within the
Mortgaged Property, where the failure to so comply might reasonably be expected
to result in a material adverse effect on the Mortgaged Property or the
business, operations, assets or financial condition of Debtor. Debtor further
agrees that any and all alterations made to the Mortgaged Property while this
Mortgage is in effect will comply in all material respects with the requirements
of the ADA, where the failure to so comply might reasonably be expected to
result in a material adverse effect on the Mortgaged Property or the business,
operations, assets or financial condition of Debtor. All plans for alterations
which must be submitted to Mortgagee under the provisions of Section 2.10 must
include a statement from a licensed Architect or Engineer certifying that they
have reviewed the plans, and that the plans comply in all material respects with
all applicable provisions of the ADA. Any subsequent approval or consent to the
plans by the Mortgagee shall not be deemed to be a representation on Mortgagee's
part that the plans comply with the ADA, which obligation shall remain with
Debtor. Debtor agrees that it will defend, indemnify and hold harmless Mortgagee
and Mortgagee's shareholders, directors, officers, agents, attorneys and
employees from and against any and all claims, demands, causes of action, suits,
proceedings, liabilities, damages (including consequential and punitive
damages), losses, costs and expenses, including attorneys' fees, caused by,
incurred or resulting from Debtor's failure to comply with its obligations under
this Section.
(c) In addition to the other requirements of this Section, Debtor shall,
at all times while this Mortgage is in effect, comply with all federal, state or
local statutes, laws, rules, regulations, ordinances, codes, policies or rules
of common law now or hereafter in effect and in each case, as amended, and any
judicial or administrative interpretation thereof, including any judicial order,
consent, decree or judgment, applicable to Debtor relating to the Mortgaged
Property and the use thereof.
(d) To Debtor's knowledge, the Mortgaged Property and Debtor are not in
violation of or subject to any existing, pending or threatened investigation or
inquiry by any governmental authority or to any remedial obligations under any
Environmental Laws, where such violation, investigation, inquiry or obligations
might reasonably be expected to result in a material adverse effect on Debtor or
the Mortgaged Property, or any portion thereof, and this representation and
warranty would continue to be true and correct following disclosure to the
applicable governmental authorities of all relevant facts, conditions and
circumstances, if any, pertaining to the Mortgaged Property. If any such
investigation or inquiry is subsequently initiated, Debtor will promptly notify
Mortgagee.
(e) Debtor has obtained any permits, licenses or similar authorizations
that are necessary to construct, occupy, operate or use any buildings,
improvements, fixtures and equipment forming a part of the Mortgaged Property in
compliance with Environmental Laws.
(f) To Debtor's knowledge, and except as set forth in Exhibit D of the
Loan Agreement: (i) no Hazardous Materials have been disposed of or otherwise
Released on or about the Mortgaged Property causing or resulting in an
Environmental Condition; (ii) the Mortgaged Property does not contain Hazardous
Materials or underground storage tanks except in compliance
<PAGE>
with Environmental Laws; (iii) there is no Release migrating to the Mortgaged
Property from adjacent properties that would cause or result in an Environmental
Condition; (iv) there is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with the Mortgaged
Property; (v) Debtor does not know of, and has not received, any written or oral
notice or other communication from any person or entity (including but not
limited to a governmental entity) relating to Hazardous Materials or Remediation
thereof, of possible liability of any person or entity pursuant to any
Environmental Law, other Environmental Conditions in connection with the
Mortgaged Property, or any actual or potential administrative or judicial
proceedings in connection with any of the foregoing; and (vi) Debtor has
truthfully and fully provided to Mortgagee, in writing, any and all information
relating to Environmental Conditions in, on, under or from the Mortgaged
Property that is known to Debtor and that is contained in Debtor's files and
records, including but not limited to any reports relating to Hazardous
Materials in, on, under or from the Mortgaged Property and/or to Environmental
Conditions of the Mortgaged Property.
(g) Debtor covenants and agrees that: (i) all uses and operations on or of
the Mortgaged Property, whether by Debtor or any other person or entity, shall
be in material compliance with all Environmental Laws and permits issued
pursuant thereto; (ii) Debtor shall immediately notify Mortgagee of any Release
that exceeds a reportable quantity and shall take Remedial Action required by
Environmental Law to abate such Release; (iii) Debtor shall not use, store,
generate, transport or otherwise handle any Hazardous Materials at the Mortgaged
Property, except in De Minimis Amounts; (iv) Debtor shall keep the Mortgaged
Property free and clear of all liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of Debtor or any other
person or entity (the "Environmental Liens") provided, however, that Debtor
shall have the right, at its own cost and expense, to contest, object or appeal
by appropriate legal proceeding the validity of such liens. The commencement of
such legal proceedings shall suspend Debtor's obligation to eliminate the
Environmental Lien, provided Debtor shall have furnished Mortgagee with such
financial assurances and protections in favor of Mortgagee and the Mortgaged
Property as Mortgagee shall request, including, without limitation, the posting
of bonds in form and amount acceptable to Mortgagee; (v) Debtor shall, at its
sole cost and expense, fully and expeditiously cooperate in all activities
pursuant to subsection (h) below, including but not limited to providing all
relevant information and making knowledgeable persons available for interviews;
(vi) in the event that Mortgagee has reason to believe that an Environmental
Condition may exist on the Mortgaged Property, or, upon and following an Event
of Default hereunder, if Mortgagee shall have another reasonable basis for
requiring it, Debtor shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of such Environmental
Condition, pursuant to any reasonable written request of Mortgagee (including
but not limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas), and
share with Mortgagee the reports and other results thereof, and Mortgagee and
other Indemnified Parties (as defined below) shall be entitled to rely on such
reports and other results thereof provided Mortgagee and other Indemnified
Parties shall not disclose the results of such assessment or investigation to
any governmental authority or third party except where required by law and, in
such event, shall give Debtor prior written notice of its intent to disclose the
results and shall consult with Debtor
<PAGE>
regarding the form, substance and timing of any such disclosure; (vii) Debtor
shall, at its sole cost and expense, comply with all reasonable written requests
of Mortgagee to (1) reasonably effectuate Remediation of any condition
(including but not limited to a Release) in, on, under or from the Mortgaged
Property; (2) comply with any Environmental Law; (3) comply with any directive
from any governmental authority; and (4) take any other reasonable action
necessary or appropriate for protection of human health or the environment;
(viii) Debtor shall not do or allow any tenant or other user of the Mortgaged
Property to do any act that materially increases the dangers to human health or
the environment, poses an unreasonable risk of harm to any person or entity
(whether on or off the Mortgaged Property), impairs or may impair the value of
the Mortgaged Property, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, constitutes waste, or violates any
covenant, condition, agreement or easement applicable to the Mortgaged Property;
and (ix) Debtor shall immediately notify Mortgagee in writing of (A) any
presence of Releases or threatened Releases that exceed a reportable quantity at
the Mortgaged Property; (B) any material non-compliance with any Environmental
Laws related in any way to the Mortgaged Property; (C) any actual or potential
Environmental Lien; (D) any required or proposed Remediation of Environmental
Conditions relating to the Mortgaged Property; and (E) any written or oral
notice or other communication which Debtor becomes aware from any source
whatsoever (including but not limited to a governmental entity) relating in any
way to Hazardous Materials or Remediation thereof, possible liability of any
person or entity pursuant to any Environmental Law, other Environmental
Conditions in connection with the Mortgaged Property, or any actual or potential
administrative or judicial proceedings in connection with anything referred to
in this Section.
(h) In the event that Mortgagee has reason to believe that an
Environmental Condition may exist on the Mortgaged Property, or, upon and
following an Event of Default hereunder (after the expiration of any applicable
cure or grace period), if Mortgagee shall have another reasonable basis for
requiring or performing it, Mortgagee and any other person or entity designated
by Mortgagee, including but not limited to any receiver and any environmental
consultant, shall have the right, but not the obligation, to enter upon the
Mortgaged Property at all reasonable times and after reasonable notice (except
in emergencies, in which case entry may be made at any time) to assess any and
all aspects of any Environmental Condition, including but not limited to
conducting any environmental assessment or audit (the scope of which shall be
determined in Mortgagee's sole and absolute discretion) and taking samples of
soil, groundwater or other water or air samples, and conducting other invasive
testing ("Inspection"); provided, however, that Mortgagee shall be responsible
at its sole cost and expense for restoring the Mortgaged Property following
completion of the Inspection to substantially the same condition that existed
before Mortgagee's entry and that the Inspection is done in a manner that
minimizes the disruption to Debtor's business. Debtor shall have the right to
have a representative accompany the environmental consultant performing the
Inspection and shall have the right to receive split samples of any soil samples
collected as part of the Inspection. Mortgagee agrees that the results of the
environmental assessment shall not be disclosed to any governmental authority or
third party except where required by law. Mortgagee shall give Debtor prior
written notice of its intent to disclose the results of any Inspection to a
governmental authority or third party and shall consult with Debtor regarding
the form, substance and timing of any such disclosure. Debtor shall cooperate
with and provide access to Mortgagee
<PAGE>
and any such person or entity designated by Mortgagee.
(i) Debtor shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses (excluding Losses arising out of Mortgagee's gross negligence
or wilful misconduct) and costs of Remediation (whether or not performed
voluntarily), reasonable engineers' fees and environmental consultants' fees,
and costs of investigation (including but not limited to sampling, testing, and
analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas) imposed upon or incurred by or asserted
against any Indemnified Parties, and directly or indirectly arising out of or in
any way relating to any one or more of the following: (i) any presence of any
Hazardous Materials in, on, above, or under the Mortgaged Property in excess of
DeMinimis Amounts; (ii) any past, present or threatened Release in, on, above,
under or from the Mortgaged Property; (iii) any activity by Debtor, any person
or entity affiliated with Debtor or any tenant or other user of the Mortgaged
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transportation to or from the Mortgaged Property of any
Hazardous Materials at any time located in, under, on or above the Mortgaged
Property; (iv) any activity by Debtor, any person or entity affiliated with
Debtor or any tenant or other user of the Mortgaged Property in connection with
any actual or proposed Remediation of any Hazardous Materials at any time
located in, under, on or above the Mortgaged Property, whether or not such
Remediation is voluntary or pursuant to court or administrative order, including
but not limited to any removal, remedial or corrective action; (v) any past,
present or threatened non-compliance or violations of any Environmental Laws (or
permits issued pursuant to any Environmental Laws) in connection with the
Mortgaged Property or operations thereon, including but not limited to any
failure by Debtor, any person or entity affiliated with Debtor or any tenant or
other user of the Mortgaged Property to comply with any order of any
governmental authority in connection with any Environmental Laws; (vi) the
imposition, recording or filing or the threatened imposition, recording or
filing of any Environmental Lien encumbering the Mortgaged Property; (vii) any
administrative processes or proceedings or judicial proceedings in any way
connected with any matter addressed in this Section; (viii) any past, present or
threatened injury to, destruction of or loss of natural resources in any way
connected with the Mortgaged Property, including but not limited to costs to
investigate and assess such injury, destruction or loss; (ix) any acts of Debtor
or other users of the Mortgaged Property in arranging for disposal or treatment,
or arranging with a transporter for transport for disposal or treatment, of
Hazardous Materials owned or possessed by such Debtor or other users, at any
facility or incineration vessel owned or operated by another person or entity
and containing such or similar Hazardous Materials; (x) any acts of Debtor or
other users of the Mortgaged Property, in accepting any Hazardous Materials for
transport to disposal or treatment facilities, incineration vessels or sites
selected by Debtor or such other users, from which there is a Release, or a
threatened Release of any Hazardous Material which causes the incurrence of
costs for Remediation; (xi) any personal injury, wrongful death, or property
damage arising under any statutory or common law or tort law theory caused by or
resulting from an Environmental Condition, including but not limited to damages
assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Mortgaged
Property; and (xii) any material misrepresentation or inaccuracy
<PAGE>
in any representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to this Section.
(j) The obligations of Debtor and the rights and remedies of Mortgagee set
forth in this Section are independent from those of Debtor pursuant to the
Environmental Indemnity Agreement. Furthermore, such obligations of Debtor and
rights and remedies of Mortgagee shall survive the termination, expiration
and/or release of the Loan Agreement, the Note, the other Loan Documents, the
Environmental Indemnity Agreement and/or the judicial or nonjudicial foreclosure
of this Mortgage by Mortgagee or the delivery of a deed-in-lieu of foreclosure
for the Premises by Debtor to Mortgagee.
Section 2.10. Alterations and Improvements. Debtor shall not alter the
exterior, structural, plumbing or electrical elements of the Mortgaged Property
in any manner without the consent of Mortgagee, which consent shall not be
unreasonably withheld, delayed or conditioned; provided, however, Debtor may
undertake nonstructural alterations to the Mortgaged Property costing less than
$100,000.00 without Mortgagee's consent. If Mortgagee consents to the making of
any such alterations, the same shall be made by Debtor at Debtor's sole expense
by a licensed contractor and according to plans and specifications approved by
Mortgagee and subject to such other reasonable conditions as Mortgagee shall
require. Any work at any time commenced by Debtor on the Mortgaged Property
shall be prosecuted diligently to completion, shall be of good workmanship and
materials and shall comply fully with all the terms of this Mortgage. Upon
completion of any alterations or any Restoration, Debtor shall promptly provide
Mortgagee with (i) reasonable evidence of full payment to all laborers and
materialmen contributing to the alterations, (ii) a certificate from Debtor
certifying that the alterations have been completed in conformity with the plans
and specifications, (iii) a certificate of occupancy, if required by applicable
law, and (iv) any other documents or information reasonably requested by
Mortgagee.
Section 2.11. After-Acquired Property. All right, title and interest of
Debtor in and to all improvements, alterations, substitutions, restorations and
replacements of, and all additions and appurtenances to, the Mortgaged Property,
hereafter acquired by or released to Debtor, immediately upon such acquisition
or release and without any further granting by Debtor, shall become part of the
Mortgaged Property and shall be subject to the lien hereof fully, completely and
with the same effect as though now owned by Debtor and specifically described in
the Granting Clauses hereof. Debtor shall execute and deliver to Mortgagee any
further assurances, mortgages, grants, conveyances or assignments thereof as the
Mortgagee may reasonably require to subject the same to the lien hereof.
Section 2.12. Taxes. (a) Debtor shall do or cause to be done everything
necessary to preserve the lien hereof without expense to Mortgagee, including,
without limitation, paying and discharging or causing to be paid and discharged,
whether or not payable directly by Debtor or subject to withholding at the
source, (i) all taxes, assessments, levies, fees, water and sewer rents and
charges and all other governmental charges, general, special, ordinary or
extraordinary, and all charges for utility or communications services, which may
at any time be assessed, levied or imposed upon Debtor, the Mortgaged Property,
this Mortgage, the Obligations or the revenues,
<PAGE>
rents, issues, income and profits of the Mortgaged Property or which may arise
in respect of the occupancy, use, possession or operation thereof, (ii) all
income, excess profits, sales, gross receipts and other taxes, duties or
imposts, whether similar or not in nature, assessed, levied or imposed by any
governmental authority on Debtor, the Mortgaged Property or the revenues, rents,
issues, income and profits of the Mortgaged Property (iii) all lawful claims and
demands of mechanics, laborers, materialmen and others which, if unpaid, might
create a lien on the Mortgaged Property, or on the revenues, rents, issues,
income and profits of the Mortgaged Property, unless Debtor shall contest the
amount or validity thereof in accordance with subsection (b). Notwithstanding
the foregoing, Debtor shall not be in breach or default under this Subsection
2.12 for failing or refusing to pay or discharge any claims or liens of
mechanics, laborers, materialmen and others where (and only where) such
claimants have a legal right under applicable laws to assert or impose a claim
or lien against the Mortgaged Property prior to the time that amounts owing to
such claimants become due or payable, so long as Debtor shall pay and discharge
any and all such claims or liens (AA) no later than the date on which the
amounts owing relative to such claims and liens become due and payable (and in
any event before such amounts become past due or are declared to be past due by
such claimants), and (BB) before such claimants commence legal proceedings (in
any form or forum) to foreclose such claims or liens or to otherwise enforce
such claimants' rights and remedies with respect to such claims or liens.
(b) Debtor may, at its own expense, contest or cause to be contested (in
the case of any item involving more than $1000.00, upon written notice to
Mortgagee), by appropriate legal proceedings conducted in good faith and with
due diligence, the amount or validity or application, in whole or in part, of
any item specified in subsection (a) or lien therefor, provided that (i) neither
the Mortgaged Property nor any interest therein would be in any danger of being
sold, forfeited or lost by reason of such proceedings, (ii) Debtor shall have
adequate reserves for the payment of the taxes, together with all interest and
penalties thereon, unless paid in full under protest, and (iii) Debtor shall
have furnished the security as may be required in the proceeding to insure
payment of any contested taxes.
Section 2.13. Insurance. (a) Debtor shall maintain with respect to the
Mortgaged Property, at its sole expense, the following types and amounts of
insurance (which may be included under a blanket insurance policy if all the
other terms hereof are satisfied), in addition to such other insurance as
Mortgagee may reasonably require from time to time:
(i) Insurance against loss, damage or destruction by fire and other
casualty, including theft, vandalism and malicious mischief, flood (if the
Premises are in a location designated by the Federal Secretary of Housing
and Urban Development as a flood hazard area), earthquake (if the Premises
are in an area subject to destructive earthquakes within recorded
history), boiler explosion (if there is any boiler upon the Premises),
plate glass breakage, sprinkler damage (if the Premises have a sprinkler
system), all matters covered by a standard extended coverage endorsement,
special coverage endorsement commonly known as an "all risk" endorsement
and such other risks as Mortgagee may reasonably require, insuring the
Mortgaged Property for not less than 100% of their full insurable
replacement cost.
<PAGE>
(ii) Comprehensive general liability and property damage insurance,
including a products liability clause, covering Mortgagee and Debtor
against bodily injury liability, property damage liability and automobile
bodily injury and property damage liability, including without limitation
any liability arising out of the ownership, maintenance, repair, condition
or operation of the Mortgaged Property or adjoining ways, streets or
sidewalks and, if applicable, insurance covering Mortgagee, against
liability arising from the sale of liquor, beer or wine on the Premises.
Such insurance policy or policies shall contain a broad form contractual
liability endorsement under which the insurer agrees to insure Debtor's
obligations under Section 5.16 hereof to the extent insurable, and a
"severability of interest" clause or endorsement which precludes the
insurer from denying the claim of either Debtor or Mortgagee because of
the negligence or other acts of the other, shall be in amounts of not less
than $1,000,000.00 per injury and occurrence with respect to any insured
liability, for personal injury and not less than $500,000.00 per
occurrence for property damage, or such higher limits as Mortgagee may
reasonably require from time to time, and shall be of form and substance
satisfactory to Mortgagee.
(b) Business interruption insurance equal to 100% of the principal and
interest payable under the Note for a period of not less than six months.
(c) State Worker's compensation insurance in the statutorily mandated
limits, employer's liability insurance with limits not less than $500,000 or
such greater amount as Mortgagee may from time to time reasonably require and
such other insurance as may be necessary to comply with applicable laws.
All insurance policies shall:
(i) Provide for a waiver of subrogation by the insurer as to claims
against Mortgagee, its employees and agents;
(ii) Provide that such insurance cannot be unreasonably cancelled,
invalidated or suspended on account of the negligence of Debtor, its
officers, directors, employees or agents;
(iii) Provide that any "no other insurance" clause in the insurance
policy shall exclude any policies of insurance maintained by Mortgagee and
that the insurance policy shall not be brought into contribution with
insurance maintained by Mortgagee;
(iv) Contain a standard without contribution mortgage clause
endorsement in favor of Mortgagee and any other lender designated by
Mortgagee;
(v) Provide that the policy of insurance shall not be terminated,
cancelled or substantially modified without at least thirty (30) days'
prior written notice to Mortgagee and to any lender covered by any
standard mortgage clause endorsement;
<PAGE>
(vi) Provide that the insurer shall not have the option to restore
the Premises if Mortgagee elects to terminate this Mortgage in accordance
with the terms hereof;
(vii) Be issued by insurance companies licensed to do business in
the state in which the Premises is located and which are rated A:VI or
better by Best's Insurance Guide or otherwise approved by Mortgagee; and
(viii) Provide that the insurer shall not deny a claim because of
the negligence of Debtor.
It is expressly understood and agreed that the foregoing minimum limits of
insurance coverage shall not limit the liability of Debtor for its acts or
omissions as provided in this Mortgage. All insurance policies (with the
exception of worker's compensation insurance to the extent not available under
statutory law) shall designate Mortgagee as additional insured as its interests
may appear and shall be payable as set forth in Article III hereof. All such
policies shall be written as primary policies, with deductibles not to exceed
10% of the amount of coverage. Any other policies, including any policy now or
hereafter carried by Mortgagee, shall serve as excess coverage. Debtor shall
procure policies for all insurance for periods of not less than one year and
shall provide to Mortgagee certificates of insurance or, upon Mortgagee's
request, duplicate originals of insurance policies evidencing that insurance
satisfying the requirements of this Mortgage is in effect at all times.
Section 2.14. Impound Account. Nonpayment of any taxes or other sums to be
paid by Debtor pursuant to Section 2.12 (after taking into consideration
Debtor's right to contest as set forth in Section 2.12(b)) and nonpayment of any
insurance premium to be paid by Debtor pursuant to Section 2.13 shall constitute
waste, and shall entitle Mortgagee to exercise the remedies afforded by Section
600.2927 of the Michigan Revised Judicature Act of 1961, as now or hereafter
amended, and by any other statute of law now or hereafter in effect, including
appointment of a receiver, to which appointment Debtor consents. Upon the
occurrence of an Event of Default (after the expiration of any applicable grace
and cure period) under this Mortgage or any other Loan Document, Mortgagee may
require Debtor to pay to Mortgagee sums which will provide an impound account
(which shall not be deemed a trust fund) for paying up to the next one year of
taxes, assessments and/or insurance premiums. Upon such requirement, Mortgagee
will estimate the amounts needed for such purposes and will notify Debtor to pay
the same to Mortgagee in equal monthly installments, as nearly as practicable,
in addition to all other sums due under this Mortgage. Should additional funds
be required at any time, Debtor shall pay the same to Mortgagee on demand.
Debtor shall advise Mortgagee of all taxes and insurance bills which are due and
shall cooperate fully with Mortgagee in assuring that the same are paid.
Mortgagee may deposit all impounded funds in accounts insured by any federal or
state agency and may commingle such funds with other funds and accounts of
Mortgagee. Interest or other gains from such funds, if any, shall be the sole
property of Mortgagee. In the event of any default by Debtor, Mortgagee may
apply all impounded funds against any sums due from Debtor to Mortgagee.
Mortgagee shall give to Debtor an annual accounting (or, upon reasonable request
of Debtor from time to time)
<PAGE>
showing all credits and debits to and from such impounded funds received from
Debtor.
Section 2.15. Advances by Mortgagee. Upon the occurrence of an Event of
Default (after the expiration of any applicable grace and cure period),
Mortgagee may make advances to perform any of the covenants contained in this
Mortgage on Debtor's behalf, and all sums so advanced shall be secured hereby
prior to the Note. Debtor shall repay on demand all sums so advanced with
interest thereon at the rate of 4% per annum above the rate of interest stated
in the Note (or the highest rate permitted by law, whichever is less), such
interest to be computed from and including the date of the making of such
advance to and including the date of such repayment.
Section 2.16. Negative Covenants. A. Debtor agrees that Debtor shall not,
without the prior written consent of Mortgagee, which consent shall not be
unreasonably withheld or delayed, sell, convey, mortgage, grant, bargain,
encumber (other than the Permitted Exceptions), pledge, assign, or otherwise
transfer the Mortgaged Property or any part thereof or permit the Mortgaged
Property or any part thereof to be sold, conveyed, mortgaged, granted,
bargained, encumbered (other than the Permitted Exceptions), pledged, assigned,
or otherwise transferred. A sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer within the meaning of this Section
shall be deemed to include, but not limited to, (a) an installment sales
agreement wherein Debtor agrees to sell the Mortgaged Property or any part
thereof for a price to be paid in installments; (b) except as otherwise
specifically provided in this Section 2.16, an agreement by Debtor leasing all
or any part of the Mortgaged Property or a sale, assignment or other transfer
of, or the grant of a security interest (other than the Permitted Exceptions)
in, Debtor's right, title and interest in and to any Leases or any Rents; or (c)
if Debtor is a corporation, any merger, by or with such corporation (where the
surviving corporation is not Debtor), or the voluntary or involuntary sale or
transfer of such corporation's stock where such stock is sold or transferred at
less than the fair market value of such stock, or the repurchase by Debtor of
its corporation's stock from I.C.H. Corporation, or any transferee of or
successor to I.C.H. Corporation. For purposes of the preceding sentence, the
fair market value of such stock shall be determined by a regionally- or
nationally-recognized investment banking firm selected by Debtor and reasonably
acceptable to Mortgagee. Notwithstanding the foregoing, a transfer by devise or
descent or by operation of law upon the death of a stockholder of Debtor shall
not be deemed to be a sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer within the meaning of this Section.
B. Notwithstanding the foregoing, Debtor shall have the right to sell,
convey or otherwise transfer the Mortgaged Property to an Affiliate of Debtor
after prior notice of such transfer is given to Mortgagee, provided that (i) the
use and occupancy of the Mortgaged Property by such transferee shall be in
compliance with the terms and conditions of this Mortgage, (ii) Debtor shall not
be released from or of any of Debtor's duties, obligations or liabilities
arising under this Mortgage, (iii) Debtor shall cause such transferee to provide
Mortgagee with such information as Mortgagee shall reasonably require in order
to determine compliance with the Fixed Charge Coverage Ratio requirements set
forth in the Loan Agreement, and (iv) Debtor (at Debtor's cost) shall provide
Mortgagee with a title endorsement (in form and substance reasonably acceptable
to Mortgagee) to Mortgagee's lender's policy issued in connection with the
consummation of the
<PAGE>
transaction contemplated by the Loan Agreement, insuring that the lien,
including the priority of the lien, of this Mortgage shall not be affected by
such transfer.
C. Mortgagee shall not unreasonably withhold its consent to the leasing of
the Mortgaged Property by Debtor to a franchisee or licensee approved by
Licensor, or to a franchisee or franchisor of a nationally- or
regionally-recognized franchised restaurant chain, provided that (i) the use and
occupancy of the Mortgaged Property by such lessee shall be in compliance with
the terms and conditions of this Mortgage and in compliance with all covenants,
conditions and restrictions of record affecting the Mortgaged Property, (ii)
Debtor shall not be released from or of any of Debtor's duties, obligations or
liabilities arising under this Mortgage, (iii) Mortgagee shall have approved the
form and substance of the lease between Debtor and such lessee, which consent
shall not be unreasonably withheld or delayed, and (iv) Debtor shall cause such
lessee to provide Mortgagee with such information as Mortgagee shall reasonably
require in order to determine compliance with the Fixed Charge Coverage Ratio
requirements set forth in the Loan Agreement.
D. Mortgagee reserves the right to condition the consent required
hereunder upon a modification of the terms hereof and on assumption of the Note,
this Mortgage and the other Loan Documents as so modified by the proposed
transferee, payment of all of Mortgagee's reasonable and actual expenses
incurred in connection with such transfer, the proposed transferee's continued
compliance with the covenants set forth in this Mortgage, or such other
conditions as Mortgagee shall determine in its sole discretion to be in the
interest of Mortgagee. Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon Debtor's sale,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Mortgaged Property without Mortgagee's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Mortgaged Property regardless of whether
voluntary or not, or whether or not Mortgagee has consented to any previous
sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Mortgaged Property.
Section 2.17. Financial Statements. Within 45 days after the end of each
fiscal quarter and within 120 days after the end of each fiscal year of Debtor,
Debtor shall deliver to Mortgagee (i) complete financial statements of Debtor
including a balance sheet, profit and loss statement, statement of changes in
financial condition and all other related schedules for the fiscal period then
ended; and (ii) income statements for the business at the Mortgaged Property.
All such financial statements shall be prepared in all material respects in
accordance with generally accepted accounting principles, consistently applied
from period to period, and shall be certified to be accurate and complete by
Debtor (or the Treasurer or other appropriate officer of Debtor). Debtor
understands that Mortgagee is relying upon such financial statements and Debtor
represents that such reliance is reasonable. The financial statements delivered
to Mortgagee need not be audited, but Debtor shall deliver to Mortgagee copies
of any audited financial statements of Debtor which may be prepared, as soon as
they are available.
Section 2.18. Licensor Requirements. In addition to the requirements set
forth in this
<PAGE>
Mortgage, Debtor, in its ownership, use, occupancy and maintenance of the
Mortgaged Property shall comply in all material respects with all requirements
of its license agreement with Licensor. Debtor hereby consents to Mortgagee
providing information it obtains to Licensor and to Mortgagee obtaining from
Licensor information which Licensor receives relating to Debtor's operation of
its business on the Premises.
Section 2.19. Incorporation of Representations and Warranties. The
representations and warranties of Debtor set forth in the Loan Agreement are
incorporated by reference into this Mortgage as if stated in full in this
Mortgage.
ARTICLE III
POSSESSION, USE AND RELEASE OF THE MORTGAGED PROPERTY
Section 3.01. Casualty or Condemnation. Debtor, immediately upon obtaining
knowledge of any casualty to any portion of the Mortgaged Property or of any
proceeding or negotiation for the taking of all or any portion of the Mortgaged
Property in condemnation or other eminent domain proceedings, shall notify
Mortgagee of such casualty, proceeding or negotiation. Any award, compensation
or other payment resulting from such casualty or condemnation or eminent domain
proceeding, as applicable, shall be applied as set forth below. Mortgagee may
participate in any condemnation or eminent domain proceeding, and Debtor will
deliver or cause to be delivered to Mortgagee all instruments requested by
Mortgagee to permit such participation.
(a) Casualty. (i) In the event of any material damage to or
destruction of the Mortgaged Property or any part thereof, Debtor will
promptly give written notice to Mortgagee, generally describing the nature
and extent of such damage or destruction. No damage to or destruction of
the Mortgaged Property shall relieve Debtor of its obligation to pay any
monetary sum due under the Loan Documents at the time and in the manner
provided in the Loan Documents.
(ii) In the event of any damage to or destruction of the Mortgaged
Property or any part thereof, Debtor, whether or not the insurance
proceeds, if any, on account of such damage or destruction shall be
sufficient for the purpose, at its expense, shall promptly commence and
complete the Restoration.
(iii) Insurance proceeds received by Mortgagee and Debtor on account
of any occurrence of damage to or destruction of the Mortgaged Property or
any part thereof, less the costs, fees and expenses incurred by Mortgagee
and Debtor in the collection thereof, including, without limitation,
adjuster's fees and expenses and attorneys' fees and expenses (the "Net
Insurance Proceeds"), shall be paid to (1) Debtor if the amount of such
Net Insurance Proceeds is less than $100,000 and applied by Debtor toward
the cost of the Restoration, and (2) Mortgagee if the amount of such Net
Insurance Proceeds is $100,000 or greater. Net Insurance Proceeds paid to
Mortgagee shall be held and disbursed by Mortgagee, or as Mortgagee may
from time to time direct, as the Restoration progresses, to
<PAGE>
pay or reimburse Debtor for the cost of the Restoration, upon written
request of Debtor accompanied by evidence, satisfactory to Mortgagee, that
(v) the Restoration is in full compliance with all applicable laws,
regulations, restrictions and requirements, whether governmental or
private, (w) the amount requested has been paid or is then due and payable
and is properly a part of such cost, (x) there are no mechanics' or
similar liens for labor or materials theretofore supplied in connection
with the Restoration, (y) if the estimated cost of the Restoration exceeds
the Net Insurance Proceeds, Debtor has deposited into an escrow
satisfactory to Mortgagee such excess amount, which sum will be disbursed
pursuant to escrow instructions satisfactory to Mortgagee, and (z) the
balance of such Net Insurance Proceeds, together with the funds deposited
into escrow, if any, pursuant to the preceding subsection (y), after
making the payment requested will be sufficient to pay the balance of the
cost of the Restoration. Upon receipt by Mortgagee of evidence
satisfactory to it that the Restoration has been completed and the cost
thereof paid in full, and that there are no mechanics' or similar liens
for labor or materials supplied in connection therewith, the balance, if
any, of such Net Insurance Proceeds shall be paid to Debtor. If an Event
of Default has occurred and is continuing (after the expiration of any
applicable grace or cure period) at the time of the damage or destruction
to the Mortgaged Property, all Net Insurance Proceeds shall be paid to
Mortgagee, and Mortgagee may retain and apply the Net Insurance Proceeds
toward the Obligations whether or not then due and payable, in such order,
priority and proportions as Mortgagee in its discretion shall deem proper,
or to cure such Event of Default, or, in Mortgagee's discretion, Mortgagee
may pay such Net Insurance Proceeds in whole or in part to Debtor to be
applied toward the cost of the Restoration. If Mortgagee shall receive and
retain Net Insurance Proceeds, the lien of this Mortgage shall be reduced
only by the amount received and retained by Mortgagee and actually applied
by Mortgagee in reduction of the Obligations.
(iv) In the event that the casualty is not caused by Debtor, or its
agents, employees, representatives, contractors or subcontractors, and the
cost of the Restoration exceeds fifty percent (50%) of the value of the
Premises, excluding the value of the real estate, Debtor shall have the
right, to be exercised by notice to Mortgagee no later than 20 days after
the occurrence of a casualty, to either (aa) pay to Mortgagee (without
prepayment premium or penalty) the entire amount owing under the Note, or
(bb) substitute the Mortgaged Property with a substitute site in
accordance with Subsection 10.E(iii) of the Loan Agreement, provided that
Debtor shall continue to pay all sums and amounts due and payable under
the Note until such time as a new promissory note is executed and
delivered by Debtor to Mortgagee in connection with the consummation of
such substitution. Notwithstanding the foregoing, the option to pay the
entire amount owing under the Note as provided in subsection
3.01(a)(iv)(aa) hereof shall not be available to Debtor prior to the fifth
(5th) anniversary of the Note.
(b) Eminent Domain. (i) In case of a taking of all or any part of
the Mortgaged Property or the commencement of any proceedings or
negotiations which might result in a taking, for any public or
quasi-public purpose by any lawful power or authority by exercise of the
right of condemnation or eminent domain or by agreement between Mortgagee,
<PAGE>
Debtor and those authorized to exercise such right ("Taking"), Debtor will
promptly give written notice thereof to Mortgagee, generally describing
the nature and extent of such Taking. Mortgagee shall file and prosecute
on behalf of Mortgagee and Debtor any and all claims for an award, and all
awards and other payments on account of a Taking shall be paid to
Mortgagee.
(ii) In case of a Taking of the whole of the Mortgaged Property,
other than for temporary use ("Total Taking"), or in case of a Taking of
less than all of the Mortgaged Property ("Partial Taking"), these Loan
Documents shall remain in full force and effect. Debtor, whether or not
the awards or payments, if any, on account of such Partial Taking shall be
sufficient for the purpose (but provided they are made available by
Mortgagee for such purpose), at its own cost and expense, will promptly
commence and complete the Restoration. In case of a Partial Taking, other
than a temporary use, of such a substantial part of the Mortgaged Property
as shall result in the Mortgaged Property remaining after such Partial
Taking being unsuitable for use, such Taking shall be deemed a Total
Taking.
(iii) In case of a temporary use of the whole or any part of the
Mortgaged Property by a Taking, these Loan Documents shall remain in full
force and effect without any reduction of any monetary sum payable under
these Loan Documents. Subject to the application provisions below, Debtor
shall be entitled to the entire award for such Taking, whether paid by
damages, rent or otherwise. In any proceeding for such Taking, Mortgagee
shall have the right to intervene and participate; provided that, if such
intervention shall not be permitted, Debtor shall consult with Mortgagee,
its attorneys and experts, and make all reasonable efforts to cooperate
with Mortgagee in the prosecution or defense of such proceeding. At the
termination of any such use or occupation of the Mortgaged Property,
Debtor will, at its own cost and expense, promptly commence and complete
the Restoration.
(iv) Awards and other payments on account of a Taking, less the
costs, fees and expenses incurred by Mortgagee and Debtor in connection
with the collection thereof, including, without limitation, attorneys'
fees and expenses, shall be applied as follows:
(x) Net awards and payments received on account of a Total
Taking shall be allocated as follows:
(aa) There shall be paid to the Mortgagee (without
prepayment premium or penalty) an amount up to the sum of the
outstanding principal, including all sums advanced by
Mortgagee hereunder, and interest under the Note, all as of
the date on which such payment is made, such amount shall be
applied first against all sums advanced by Mortgagee under
this Mortgage, second against the accrued but unpaid interest
on the Note, and third to the remaining unpaid principal
amount of the Note.
(bb) Any remaining balance shall be paid to Debtor.
<PAGE>
(y) Net awards and payments received on account of a Partial
Taking shall be held and allocated as follows: (i) toward the cost
of the Restoration, such application of net awards and other
payments to be made substantially in the manner provided in Section
3.01(a)(iii) of this Mortgage; (ii) to Mortgagee to cure any default
first, in the Note and second, in this Mortgage; (iii) there shall
be paid to Mortgagee, as the holder of this Mortgage, an amount
equal to that portion of any unpaid principal amount of the Note,
and any interest accrued thereon, bearing the same relationship to
the total unpaid principal amount of the Note, and any interest
accrued thereon, all as of the date on which such payment is made,
as the square footage in the Mortgaged Property taken on account of
such Partial Taking, bears to the total square footage in the
Mortgaged Property prior to such Partial Taking, and such amount
shall be applied against the unpaid principal amount of the Note;
and (iv) any remaining balance shall be paid to Debtor.
(z) Net awards and payments received on account of a Taking for
temporary use shall be held and applied to the payment of the
monthly installments of combined interest and principal becoming due
under the Note, until such Taking for temporary use is terminated
and the Restoration, if any, has been completed; provided, however,
that, if any portion of any such award or payment is made by reason
of any damage to or destruction of the Mortgaged Property, such
portion shall be held and applied as provided in Section
3.01(a)(iii) hereof. The balance, if any, of such awards and
payments shall be paid to Debtor unless Debtor is in default under
the Loan Documents, in which event such awards and payments shall be
paid to Mortgagee to cure such default first, in the Note and
second, in this Mortgage.
(v) Notwithstanding the foregoing, if at the time of any Taking or
at any time thereafter an Event of Default shall have occurred and such
Event of Default shall be continuing (after the expiration of any
applicable grace and cure period), Mortgagee is hereby authorized and
empowered, in the name and on behalf of Debtor and otherwise, to file and
prosecute Debtor's claim, if any, for an award on account of any Taking
and to collect such award and apply the same, after deducting all costs,
fees and expenses incident to the collection thereof, to the curing of
such default and any other then existing default under the Loan Documents.
Section 3.02. Conveyance in Anticipation of Condemnation, Granting of
Easements, Etc. If no default shall have occurred and be continuing, Debtor may,
from time to time with respect to its interest in the Mortgaged Property, and
with Mortgagee's prior written consent, which consent shall not be unreasonably
withheld or delayed (i) sell, assign, convey or otherwise transfer any interest
therein to any person legally empowered to take such interest under the power of
eminent domain, (ii) grant easements and other rights in the nature of
easements, (iii) release existing easements or other rights in the nature of
easements which are for the benefit of the Mortgaged Property, (iv) dedicate or
transfer unimproved portions of the Mortgaged Property for
<PAGE>
road, highway or other public purposes, (v) execute petitions to have the
Mortgaged Property annexed to any municipal corporation or utility district, and
(vi) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers.
Section 3.03. Mortgagee's Power. At any time, or from time to time,
without liability therefor, Mortgagee, without affecting the personal liability
of any person for payment of the Obligations or the effect of this Mortgage upon
the remainder of said Mortgaged Property, may from time to time without notice
(i) release any part of said Mortgaged Property, (ii) consent in writing to the
making of any map or plat thereof, (iii) join in granting any easement thereon,
(iv) join in any extension agreement or any agreement subordinating the lien or
charge hereof, (v) release any person so liable, (vi) extend the maturity or
alter any of the terms of any Obligations, (vii) grant other indulgences, (viii)
take or release any other or additional security for any Obligations, (ix) make
compositions or other arrangements with debtors in relation thereto, or (x)
advance additional funds to protect the security hereof and pay or discharge the
Obligations, and all amounts so advanced shall be secured hereby and shall be
due and payable upon demand by Mortgagee.
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
Section 4.01. Events of Default. (a) Each of the following shall be an
event of default under this Mortgage (an "Event of Default"):
(i) If any representation or warranty of Debtor herein was false in
any material respect when made or, in the event that any such
representation or warranty is continuing, becomes false in any material
respect at any time, or if Debtor renders any statement to Mortgagee
relative to Mortgagee or the Mortgaged Property, or any portion thereof,
which at the time of such statement was false in any material respect;
(ii) If any principal, interest or other monetary sum due under the
Note, this Mortgage or any other Loan Document is not paid within five
days after the date when due, or if Debtor fails to pay, prior to
delinquency, any taxes, assessments or other charges the failure of which
to pay will result in the imposition of a lien against the Mortgaged
Property pursuant to Applicable Regulations, subject to the provisions of
Subsection 2.12(b) hereof;
(iii) If Debtor:
(A) becomes insolvent within the meaning of the Code,
(B) files or notifies Mortgagee that it intends to file a
petition for relief under any chapter or provision of the
Code,
(C) initiates a proceeding under any similar law or statute
relating to bankruptcy, insolvency, reorganization,
winding up, or adjustment of debts (collectively,
hereinafter, an "Action"),
<PAGE>
(D) is not generally paying its debts as the same become due,
and/or
(E) becomes the subject of an involuntary petition under the
Code or other similar involuntary Action (in which case
Debtor shall be required to provide Mortgagee with
immediate notice of the commencement or filing of such
involuntary proceeding, petition or Action), and any of
the following shall have occurred: (i) the involuntary
petition or involuntary Action shall not have been
dismissed within sixty (60) days of the date on which it
was filed or otherwise commenced, (ii) an order for
relief under the Code (or similar order) shall have been
entered by the court in the involuntary proceeding, or
(iii) the court having jurisdiction over such involuntary
proceeding (upon Debtor's motion or other request for
relief) shall not have granted Mortgagee full and final
relief from the automatic stay of Section 362 of the Code
and from any stay issued under Section 105 of the Code
(or any similar stays or injunctions) within sixty (60)
days of the filing or commencement of such involuntary
petition or involuntary Action so that Mortgagee is
thereafter free to exercise any and all of its rights and
remedies under the Loan Documents, and Mortgagee hereby
agrees not to exercise any of its rights or remedies
under the Loan Documents until such time as an Event of
Default (other than the filing of an involuntary petition
under the Code or other similar involuntary Action) shall
have occurred;
(iv) If Debtor fails to observe or perform any of the other
covenants, conditions, or obligations of this Mortgage or any other Loan
Document (after the expiration of any applicable grace and cure period);
or
(v) If there is a breach or default (after the expiration of any
applicable grace and cure period) under the Equipment Loan Agreement or a
breach or default (after the expiration of any applicable grace and cure
period) under (a) any license agreement permitting Debtor to operate the
Mortgaged Property in the manner authorized or if such license agreement
otherwise terminates or expires (without being renewed immediately upon or
prior to such expiration) prior to the scheduled maturity date of the
Note, which default, termination or expiration might reasonably be
expected to result in a material adverse effect on Debtor, Debtor's
business operations or the Mortgaged Property, or (b) any other agreement
or instrument, including, without limitation, promissory notes and
guaranties, between, among or by any of the Debtor Entities and, or for
the benefit of, any of the Mortgagee Entities.
(b) If any Event of Default occurs pursuant to subsection (a)(ii) above,
Mortgagee shall not be entitled to exercise its remedies set forth in Section
4.02 below unless and until Mortgagee shall have given Debtor notice thereof and
a period of five days from the delivery of such notice shall have elapsed
without such Event of Default being cured.
<PAGE>
(c) If any such event does not involve the payment of any principal,
interest or other monetary sum due under the Note to Mortgagee, is not willful,
intentional or being contested in good faith in accordance with the terms of
this Mortgage, does not place any material rights, collateral or property of
Mortgagee in immediate jeopardy in any material respect, and is within the
reasonable power of Debtor to promptly cure after receipt of notice thereof, all
as determined by Mortgagee in its reasonable discretion, then such event shall
not constitute an Event of Default hereunder, unless otherwise expressly
provided herein, unless and until Mortgagee shall have given Debtor notice
thereof and a period of 30 days shall have elapsed, during which period Debtor
may correct or cure such event, upon failure of which an Event of Default shall
be deemed to have occurred hereunder without further notice or demand of any
kind. If such event cannot reasonably be cured within such 30-day period, as
determined by Mortgagee in its reasonable discretion, and Debtor is diligently
pursuing a cure of such event, then Debtor shall have a reasonable period to
cure such event, which shall in no event exceed 90 days after receiving notice
of the event from Mortgagee. If Debtor shall fail to correct or cure such event
within such 90-day period, an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind.
Section 4.02. Remedies. Upon the occurrence of any Event of Default,
subject to the limitation set forth in Section 4.01(b) or (c), Mortgagee may
declare all Obligations to be due and payable, and the same shall thereupon
become due and payable without any presentment, demand, protest or notice
(including notice of intent to accelerate) of any kind except as otherwise
provided herein. Furthermore, upon the occurrence of any Event of Default,
Mortgagee may:
(i) Either in person or by agent, with or without bringing any
action or proceeding, or by a receiver appointed by a court, and without
regard to the adequacy of its security, enter upon and take possession of
the Mortgaged Property or any part thereof and do any acts which it deems
necessary or desirable to preserve the value, marketability or rentability
of the Mortgaged Property, or part thereof or interest therein, increase
the income therefrom or protect the security hereof and, with or without
taking possession of the Mortgaged Property, take any action described
herein, sue for or otherwise collect the Rents, issues and profits
thereof, including those past due and unpaid, and apply the same, less
costs and expenses of operation and collection including reasonable
attorneys' fees, upon any Obligations, all in such order as Mortgagee may
determine. The entering upon and taking possession of the Mortgaged
Property, the taking of any action described herein, the collection of
such Rents, issues and profits and the application thereof as aforesaid,
shall not cure or waive any Event of Default or notice of default or
invalidate any act done in response to such Event of Default or pursuant
to such notice of default and, notwithstanding the continuance in
possession of the Mortgaged Property or the collection, receipt and
application of rents, issues or profits, Mortgagee shall be entitled to
exercise every right provided for in any of the Loan Documents or by law
upon any Event of Default, including the right to exercise the power of
sale herein conferred;
(ii) Commence an action to foreclose this Mortgage pursuant to this
Mortgage in
<PAGE>
a single parcel or in several parcels, appoint a receiver,
specifically enforce any of the covenants hereof or sell the
Mortgaged Property pursuant to the power of sale herein
conferred;
(iii) Exercise any or all of the remedies available to a secured
party under the Uniform Commercial Code as adopted in the
State ("UCC"), and
(iv) Apply any sums then deposited in the impound account described
in Section 2.14 toward payment of the taxes, assessment and
insurance premiums for the Mortgaged Property and/or as a
credit on the Obligations in such priority and proportion as
Mortgagee may determine in its sole discretion.
If Mortgagee elects to sell Debtor's interest in the Mortgaged Property by
exercise of the power of sale herein contained, Mortgagee shall cause such sale
to be performed in the manner then required by law.
(a) Mortgagee may sell the Mortgaged Property. The power is hereby
granted to Mortgagee to sell the Mortgaged Property or any part thereof at
public auction, after all notices required by applicable law, if any, and
to convey the same to the purchaser after notice if required by the
statutes of the Sate of Michigan for foreclosure of mortgages by
advertisement, being Sections 600.3201 et. seq., Michigan Compiled Laws,
as amended.
CAUTION: This Section contains a waiver of important legal rights.
This Mortgage contains a power of sale which permits the Mortgagee to
cause the Mortgaged Property to be sold upon the occurrence of an Event of
Default. The Mortgagee may elect to cause the Mortgaged Property to be
sold by advertisement rather than pursuant to court action, and Debtor
hereby voluntarily and knowingly waives any right Debtor may have by
virtue of any applicable constitutional provision or statute to any notice
or court hearing prior to the exercise of the power of sale, except as may
be expressly required by the Michigan statute governing foreclosures by
advertisement. By execution of this Mortgage, Debtor represents and
acknowledges that the meaning and consequences of this Section have been
discussed as fully desired by Debtor with its legal counsel.
(b) As may be permitted by law, Mortgagee shall apply the proceeds
of sale to payment of (i) first, to payment of all costs, fees and
expenses, including attorneys' fees and expenses incurred by the Mortgagee
in exercising the power of sale or foreclosing this Mortgage, and (ii)
second, as directed by Mortgagee or as may be required by law.
(c) Mortgagee may in the manner provided by law postpone sale of all
or any portion of the Mortgaged Property.
Section 4.03. Appointment of Receiver. If an Event of Default shall have
occurred, Mortgagee, as a matter of right and without notice to Debtor or anyone
claiming under Debtor, and
<PAGE>
without regard to the then value of the Mortgaged Property or the interest of
Debtor therein, or the insolvency of Debtor or the then-owner of the Mortgaged
Property, may seek the appointment of a receiver for the Mortgaged Property upon
ex parte application to any court of the competent jurisdiction. Debtor waives
any right to any hearing or notice of hearing prior to the appointment of a
receiver. Such receiver shall be empowered (a) to take possession of the
Mortgaged Property and any businesses conducted by Debtor thereon and any
business assets used in connection therewith, (b) to exclude Debtor and Debtor's
agents, servants and employees from the Mortgaged Property, or, at the option of
the receiver, in lieu of such exclusion, to collect a fair market rental from
any such persons occupying any part of the Mortgaged Property, (c) to collect
the rents, issues, profits and income therefrom, (d) to complete any
construction that may be in progress, (e) to continue the development, marketing
and sale of the Mortgaged Property, (f) to do such maintenance and make such
repairs and alterations as the receiver deems necessary, (g) to use all stores
of materials, supplies and maintenance equipment on the Mortgaged Property and
replace such items at the expense of the receivership estate, (h) to pay all
taxes and assessments against the Mortgaged Property, all premiums for insurance
thereon, all utility and other operating expenses, and all sums due under any
prior or subsequent encumbrance, (i) to request that Mortgagee advance such
funds as may reasonably be necessary to the effective exercise of the receiver's
powers, on such terms as may be agreed upon by the receiver and Mortgagee, but
not in excess of the Default Rate (as defined in the Note), and (j) generally to
do anything that Debtor could legally do if Debtor were in possession of the
Mortgaged Property. All expenses incurred by the receiver or his agents,
including obligations to repay funds borrowed by the receiver, shall constitute
a part of the Obligations. Any revenues collected by the receiver shall be
applied first to the expenses of the receivership, including reasonable
attorneys' fees incurred by the receiver and by Mortgagee, together with
interest thereon at the highest rate of interest applicable in the Note from the
date incurred until repaid, and the balance shall be applied toward the
Obligations or in such other manner as the court may direct.
Section 4.04. Remedies Not Exclusive. Mortgagee shall be entitled to
enforce payment and performance of any Obligations and to exercise all rights
and powers under this Mortgage or under any Loan Documents or other agreement or
any laws now or hereafter in force, notwithstanding some or all of the
Obligations may now or hereafter be otherwise secured, whether by mortgage, deed
of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, whether by court action or pursuant to the power
of sale or other powers herein contained, shall prejudice or in any manner
affect Mortgagee's right to realize upon or enforce any other security now or
hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled to
enforce this Mortgage and any other security now or hereafter held by Mortgagee
in such order and manner as it may in its absolute discretion determine. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Mortgagee, or to which Mortgagee may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee. Mortgagee may pursue inconsistent remedies.
The acceptance by Mortgagee of any sum after the same is due shall not
constitute a waiver
<PAGE>
of the right either to require prompt payment, when due, of all other sums
hereby secured or to declare a subsequent Event of Default as herein provided.
The acceptance by Mortgagee of any sum in an amount less than the sum then due
shall be deemed an acceptance on account only and upon condition that it shall
not constitute a waiver of the obligation of Debtor to pay the entire sum then
due, and failure of Debtor to pay such entire sum then due as contemplated by
Section 4.01(b) shall be an Event of Default, notwithstanding such acceptance of
such amount on account, as aforesaid. Mortgagee shall be, at all times
thereafter and until the entire sum then due shall have been paid, and
notwithstanding the acceptance by Mortgagee thereafter of further sums on
account, or otherwise, entitled to exercise all rights in this instrument
conferred upon them or either of them, and the right to proceed with a sale
under any notice of default, or an election to sell, or the right to exercise
any other rights or remedies hereunder, shall in no way be impaired, whether any
of such amounts are received prior or subsequent to such proceeding, election or
exercise. Consent by Mortgagee to any action or inaction of Debtor which is
subject to consent or approval of Mortgagee hereunder shall not be deemed a
waiver of the right to require such consent or approval to future or successive
actions or inactions, unless otherwise specifically provided therein.
Section 4.05. Possession of Mortgaged Property. In the event of a
trustee's sale or foreclosure sale hereunder and after the time of such sale,
Debtor occupies the portion of the Mortgaged Property so sold, or any part
thereof, Debtor shall immediately become the tenant of the purchaser at such
sale, which tenancy shall be a tenancy from day to day, terminable at the will
of either tenant or landlord, at a reasonable rental per day based upon the
value of the portion of the Mortgaged Property so occupied, such rental to be
due and payable daily to the purchaser. An action of unlawful detainer shall lie
if the tenant holds over after a demand in writing for possession of such
Mortgaged Property; and this agreement and a trustee's or sheriff's deed shall
constitute a lease and agreement under which the tenant's possession arose and
continued. Nothing contained in this Mortgage shall be construed to constitute
Mortgagee as a "mortgagee in possession" in the absence of its taking actual
possession of the Mortgaged Property pursuant to the powers granted herein.
Section 4.06. Waiver of Rights. To the extent permitted by law, Debtor
waives the benefit of all laws now existing or that hereafter may be enacted (i)
providing for any appraisement before sale of any portion of the Mortgaged
Property, or (ii) in any way extending the time for the enforcement of the
collection of the Obligations or creating or extending a period of redemption
from any sale made in collecting the Obligations. To the full extent Debtor may
do so under applicable law, Debtor agrees that Debtor will not at any time
insist upon, plea, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension,
redemption or homestead exemption, and Debtor, for Debtor, Debtor's
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement,
stay of execution, homestead exemption, notice of election to mature or declare
due the whole of the Obligations and marshaling in the event of foreclosure of
the liens hereby created. If any law referred to in this Section and now in
force, of which Debtor, Debtor's heirs, devisees, representatives, successors
and assigns or other person might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not
<PAGE>
thereafter be deemed to preclude the application of this Section. Debtor
expressly waives and relinquishes any and all rights, remedies and defenses that
Debtor may have or be able to assert by reason of the laws of the State
pertaining to the rights, remedies and defenses of sureties.
Section 4.07. Relief From Stay. In the event that Debtor commences a case
under the Code or is the subject of an involuntary case that results in an order
for relief under the Code, subject to court approval, Mortgagee shall thereupon
be entitled and Debtor irrevocably consents to relief from any stay imposed by
Section 362 of the Code on or against the exercise of the rights and remedies
otherwise available to Mortgagee as provided in the Loan Documents and Debtor
hereby irrevocably waives its rights to object to such relief. In the event
Debtor shall commence a case under the Code or is the subject of an involuntary
case that results in an order for relief under the Code, Debtor hereby agrees
that no injunctive relief against Mortgagee shall be sought under Section 105 or
other provisions of the Code by Debtor or other person or entity claiming
through Debtor, nor shall any extension be sought of the stay provided by
Section 362 of the Code.
Section 4.08. Cash Collateral. To the fullest extent allowed by applicable
law, Debtor hereby acknowledges and agrees that in the event that Debtor
commences a case under the Code or is the subject of an involuntary case that
results in an order for relief under the Code: (i) that all of the Rents are,
and shall for purposes be deemed to be, "proceeds, product, offspring, rents, or
profits" of the Premises covered by the lien of this Mortgage, as such quoted
terms are used in Section 552(b) of the Code; (ii) that in no event shall Debtor
assert, claim or contend that any portion of the Rents are, or should be deemed
to be, "accounts" or "accounts receivable" within the meaning of the Code and/or
applicable state law; (iii) that the Rents are and shall be deemed to be in any
such bankruptcy proceeding "cash collateral" of Mortgagee as that term is
defined in Section 363 of the Code; and (iv) that Mortgagee has valid,
effective, perfected, enforceable and "choate" rights in and to the Rents
without any further action required on the part of Mortgagee to enforce or
perfect its rights in and to such cash collateral, including, without
limitation, providing notice to Debtor under Section 546(b) of the Code.
Section 4.09. Assignment of Rents and Leases. (a) Debtor hereby assigns,
transfers, conveys and sets over to Mortgagee all of Debtor's estate, right,
title and interest in, to and under all leases, whether existing on the date
hereof or hereafter entered into (including any extensions, modifications or
amendments thereto) relating to the Premises (the "Leases"), together with all
rights, powers, privileges, options and other benefits of Debtor as the lessor
or lessee under the Leases regarding the current tenants and any future tenants,
and all the rents, revenues, profits and income from the Leases with respect to
the Premises, excluding Debtor's accounts receivable and those of its tenants
and subtenants, including those now due, past due or to become due. Debtor
irrevocably appoints Mortgagee its true and lawful attorney-in-fact, at the
option of Mortgagee, at any time and from time to time upon an Event of Default,
to take possession and control of the Premises, pursuant to Debtor's rights as
lessor under the Leases, and to demand, receive and enforce payment, to give
receipts, releases and satisfaction and to sue, in the name of Debtor or
Mortgagee, for all of the rents, revenues, profits and income thereof. It is
intended by Debtor and Mortgagee that the assignment set forth herein
constitutes an absolute assignment and not merely an assignment for additional
security. The consideration received by Debtor to execute and deliver
<PAGE>
this assignment and the liens and security interests created herein is legally
sufficient and will provide a direct economic benefit to Debtor. Notwithstanding
the foregoing, however, so long as there is no Event of Default (taking into
consideration the expiration of any applicable cure period), Debtor shall have a
license, revocable upon such Event of Default, to possess and control the
Premises and collect and receive all rents, revenues, profits and income. Upon
an Event of Default (after the expiration of any applicable grace and cure
period), such license shall be automatically revoked.
(b) Upon any Event of Default (after the expiration of any applicable
grace and cure period), Mortgagee may, at any time without notice (except if
required by applicable law), either in person, by agent or by a court-appointed
receiver, regardless of the adequacy of Mortgagee's security, and at its sole
election (without any obligation to do so), enter upon and take possession and
control of the Premises, or any part thereof, to perform all acts necessary and
appropriate to operate and maintain the Premises, including, but not limited to,
execute, cancel or modify the Leases, make repairs to the Premises, execute or
terminate contracts providing for the management or maintenance of the Premises,
all on such terms as are deemed best to protect the security of this assignment,
and in Mortgagee's or Debtor's name, sue or otherwise collect such rents,
revenues, profits and income from the Premises as specified in this Mortgage as
the same become due and payable, including, but not limited to, rents then due
and unpaid. Mortgagee may so sue for or otherwise collect such rents, revenues,
profits and income with or without taking possession of the Premises. All rents
collected shall be held by Debtor as trustee for the benefit of Mortgagee only.
Debtor agrees that upon an Event of Default, each tenant of the Premises shall
make its rent payable to and pay such rent to Mortgagee (or Mortgagee's agents)
on Mortgagee's written demand therefor, delivered to such tenant personally, by
mail, or by delivering such demand to each rental unit, without any liability on
the part of said tenant to inquire further as to the existence of an Event of
Default by Debtor.
(c) All rents, revenues, profits and income collected subsequent to any
Event of Default shall be applied at the direction of, and in such order as
determined by, Mortgagee to the costs, if any, of taking possession and control
of and managing the Premises and collecting such amounts, including, but not
limited to, reasonable attorney's fees, actual receiver's fees, actual premiums
on receiver's bonds, actual costs of repairs to the Premises, actual premiums on
insurance policies, taxes, assessments and other charges on the Premises, and
the actual costs of discharging any obligation or liability of Debtor as lessor
or landlord of the Premises and to the sums secured by this assignment.
Mortgagee or the receiver shall have access to the books and records used in the
operation and maintenance of the Premises and shall be liable to account only
for those rents actually received. Mortgagee shall not be liable to Debtor,
anyone claiming under or through Debtor or anyone having an interest in the
Premises by reason of anything done or left undone by Mortgagee hereunder,
except to the extent of Mortgagee's gross negligence or willful misconduct.
Any entering upon and taking possession and control of the Premises by
Mortgagee or the receiver and any application of rents, revenues, profits and
income as provided herein shall not cure or waive any Event of Default hereunder
or invalidate any other right or remedy of Mortgagee under applicable law or
provided therein.
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.01. Satisfaction. If and when the Note shall have become due and
payable (whether by lapse of time or by acceleration or by the exercise of the
privilege of prepayment), and Debtor shall pay or cause to be paid (provided
such payment is permitted or required hereby) the full amount thereof and shall
also pay or cause to be paid all other sums then due and payable by Debtor to
Mortgagee with respect to the Note and the Mortgaged Property, including,
without limitation, all sums advanced by Mortgagee pursuant to this Mortgage,
and provided no Event of Default shall have occurred or is continuing with
respect to the Obligations, then this Mortgage shall be void (otherwise it shall
remain in full force and effect in law and equity forever) and Mortgagee agrees
to execute an instrument evidencing the satisfaction of all obligations under
this Mortgage and releasing this Mortgage which shall be prepared and recorded
at Debtor's sole expense.
Section 5.02. Limitation of Rights of Others. Nothing in this Mortgage is
intended or shall be construed to give to any person, other than Debtor,
Mortgagee and the holder of the Note, any legal or equitable right, remedy or
claim under or in respect of this Mortgage or any covenant, condition or
provision herein contained.
Section 5.03. Severability. In case any one or more of the provisions
contained herein or in the Note shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Mortgage shall be
construed as if such provision had never been contained herein or therein.
Section 5.04. Notices; Amendments; Waiver. All notices, demands,
designations, certificates, requests, offers, consents, approvals, appointments
and other instruments given pursuant to this Mortgage (collectively called
"Notices") shall be in writing and given by (i) hand delivery, (ii) facsimile
followed by a copy sent by mail in accordance with clause (iv) hereof, (iii)
express overnight delivery service or (iv) certified or registered mail, return
receipt requested, postage prepaid, and shall be deemed to have been delivered
upon (a) receipt, if hand delivered, (b) transmission, if delivered by
facsimile, (c) the next business day, if delivered by express overnight delivery
service, or (d) the fifth business day following the day of deposit of such
notice with the United States Postal Service, if sent by certified or registered
mail, return receipt requested, postage prepaid. Notices shall be provided to
the parties and addresses (or facsimile numbers, as applicable) specified below:
<PAGE>
If to Debtor: Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, Georgia 30350-1296
Attention: President
Telephone: (770) 587-0290
Telecopy: (770) 594-7044
With a copy to: Robert H. Drechsler, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10016
Telephone: (212) 421-4100
Telecopy: (212) 326-0806
If to FFCA: Robin L. Roach
Senior Vice President, Corporate Finance
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2228
With a copy to: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. Whenever in this Mortgage the giving of Notice is required, the
giving thereof may be waived in writing at any time by the person or persons
entitled to receive such Notice. Except as in this Mortgage otherwise expressly
provided, (i) this Mortgage may not be modified except by an instrument in
writing executed by Debtor and Mortgagee and (ii) no requirement hereof may be
waived at any time except by a writing signed by the party against whom such
waiver is sought to be enforced, nor shall any waiver be deemed a waiver of any
subsequent breach or default.
Section 5.05. Counterparts. This Mortgage may be executed in any number of
counterparts and each thereof shall be deemed to be an original; and all such
counterparts shall constitute but one and the same instrument.
<PAGE>
Section 5.06. Successors and Assigns. All of the provisions herein
contained shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, to the same extent as if each such
successor and assign were in each case named as a party to this Mortgage.
Wherever used, the singular shall include the plural, the plural shall include
the singular and the use of any gender shall include all genders.
Section 5.07. Headings. The headings appearing in this Mortgage have been
inserted for convenient reference only and shall not modify, define, limit or
expand the express provisions of this Mortgage.
Section 5.08. Security Agreement. With respect to the Personal Property or
any portion of the Mortgaged Property which constitutes fixtures or other
property governed by the UCC, this Mortgage shall constitute a security
agreement between Debtor as the debtor and Mortgagee as the secured party, and
Debtor hereby grants to Mortgagee a security interest in such portion of the
Mortgaged Property. Cumulative of all other rights of Mortgagee hereunder,
Mortgagee shall have all of the rights conferred upon secured parties by the
UCC. Debtor will execute and deliver to Mortgagee all financing statements that
may from time to time be required by Mortgagee to establish and maintain the
validity and priority of the security interest of Mortgagee, or any modification
thereof, and all costs and expenses of any searches required by Mortgagee.
Mortgagee may exercise any or all of the remedies of a secured party available
to it under the UCC with respect to such property, and it is expressly agreed
that if upon an Event of Default (after the expiration of any applicable grace
and cure period) Mortgagee should proceed to dispose of such property in
accordance with the provisions of the UCC, 10 days' notice by Mortgagee to
Debtor shall be deemed to be reasonable notice under any provision of the UCC
requiring such notice; provided, however, that Mortgagee may at its option
dispose of such property in accordance with Mortgagee's rights and remedies with
respect to the real property pursuant to the provisions of this Mortgage, in
lieu of proceeding under the UCC.
Debtor shall give advance notice in writing to Mortgagee of any proposed
change in Debtor's name, identity, or business form or structure and will
execute and deliver to Mortgagee, prior to or concurrently with the occurrence
of any such change, all additional financing statements that Mortgagee may
require to establish and maintain the validity and priority of Mortgagee's
security interest with respect to any of the Mortgaged Property described or
referred to herein.
Section 5.09. Effective as a Financing Statement. This Mortgage shall be
effective as a financing statement filed as a fixture filing with respect to all
fixtures included within the Mortgaged Property and is to be filed for record in
the real estate records of each county where any part of the Mortgaged Property
(including said fixtures) is situated. This Mortgage shall also be effective as
a financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of Debtor
is the address of Debtor set forth in the introductory paragraph of this
Mortgage, and the address of the Mortgagee from which information concerning the
security interests hereunder may be obtained is the address of Mortgagee as set
forth in the introductory paragraph of this Mortgage. A carbon, photographic or
other reproduction of this Mortgage or of any financing statement relating to
this Mortgage shall be
<PAGE>
sufficient as a financing statement for any of the purposes referred to in this
Section.
Section 5.10. Characterization; Interpretation. It is the intent of the
parties hereto that the business relationship created by the Note, this Mortgage
and the other Loan Documents is solely that of creditor and debtor and has been
entered into by both parties in reliance upon the economic and legal bargains
contained in the Loan Documents. None of the agreements contained in the Loan
Documents is intended, nor shall the same be deemed or construed, to create a
partnership between Mortgagee and Debtor, to make them joint venturers, to make
Debtor an agent, legal representative, partner, subsidiary or employee of
Mortgagee, nor to make Mortgagee in any way responsible for the debts,
obligations or losses of Debtor. Debtor acknowledges that Mortgagee and Licensor
are not affiliates, agents, partners or joint venturers, nor do they have any
other legal, representative or fiduciary relationship.
Mortgagee and Debtor acknowledge and warrant to each other that each has
been represented by independent counsel and has executed this Mortgage after
being fully advised by said counsel as to its effect and significance. This
Mortgage shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument, the
relative bargaining powers of the parties or the domicile of any party.
Section 5.11. Time of the Essence. Time is of the essence in the
performance of each and every obligation under this Mortgage.
Section 5.12. Document Review. In the event Debtor makes any request upon
Mortgagee requiring Mortgagee or its attorneys to review and/or prepare (or
cause to be reviewed and/or prepared) any document or documents in connection
with or arising out of or as a result of this Mortgage, then, except as
expressly stated elsewhere herein, Debtor shall reimburse Mortgagee or its
designee promptly upon Mortgagee's demand therefor a reasonable processing and
reviewing fee in an amount not less than $500.00 for each such request.
Section 5.13. Estoppel Certificate. (a) At any time, and from time to
time, Debtor agrees, promptly and in no event later than 10 days after a request
from Mortgagee, to execute, acknowledge and deliver to Mortgagee a certificate
in the form supplied by Mortgagee, certifying: (1) the date to which principal
and interest have been paid under the Note and the amount thereof then payable;
(2) whether or not notice has been received by Debtor of any default under this
Mortgage which has not been cured, except as to defaults specified in the
certificate; (3) whether or not, to Debtor's knowledge, Debtor has any claims or
causes of action against Mortgagee or any claims or rights of setoff or any
defenses to the enforcement of any of the Loan Documents in accordance with
their respective terms; and (4) the capacity of the person executing such
certificate, and that such person is duly authorized to execute the same on
behalf of Debtor.
(b) If Debtor shall fail or refuse to sign a certificate in accordance
with the provisions of this Section within 10 Business Days following a request
by Mortgagee, Debtor irrevocably constitutes and appoints Mortgagee as its
attorney-in-fact to execute and deliver the certificate to any such third party,
it being stipulated that such power of attorney is coupled with an interest and
<PAGE>
is irrevocable and binding.
Section 5.14. Limitation of Interest. Notwithstanding anything to the
contrary contained in any of the Loan Documents, the obligations of Debtor to
Mortgagee under the Note, this Mortgage and any other Loan Documents are subject
to the limitation that payments of interest and late charges to Mortgagee shall
not be required to the extent that receipt of any such payment by Mortgagee
would be contrary to provisions of applicable law limiting the maximum rate of
interest that may be charged or collected by Mortgagee. The portion of any such
payment received by Mortgagee that is in excess of the maximum interest
permitted by such provisions of law shall be credited to the principal balance
of the Note or if such excess portion exceeds the outstanding principal balance
of the Note, then such excess portion shall be refunded to Debtor. All interest
paid or agreed to be paid to Mortgagee shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and/or spread throughout the
full term of the Note (including, without limitation, the period of any renewal
or extension thereof) so that interest for such full term shall not exceed the
maximum amount permitted by applicable law.
Section 5.15. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Mortgage was substantially negotiated in the State of
Arizona, the executed Mortgage was delivered in the State of Arizona, all
payments under the Loan Documents will be delivered in the State of Arizona and
there are substantial contacts between the parties and the transactions
contemplated herein and the State of Arizona. For purposes of any action or
proceeding arising out of this Mortgage, the parties hereto expressly submit to
the jurisdiction of all federal and state courts located in the State of
Arizona. Debtor consents that it may be served with any process or paper by
registered mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Debtor waives and agrees not to
assert in any such action, suit or proceeding that it is not personally subject
to the jurisdiction of such courts, that the action, suit or proceeding is
brought in an inconvenient forum or that venue of the action, suit or proceeding
is improper. The creation of this Mortgage and the rights and remedies of
Mortgagee with respect to the Mortgaged Property, as provided herein and by the
laws of the State, shall be governed by and construed in accordance with the
internal laws of the State without regard to principles of conflict of law. With
respect to other provisions of this Mortgage, this Mortgage shall be governed by
the internal laws of the State of Arizona. Nothing in this Section shall limit
or restrict the right of Mortgagee to commence any proceeding in the federal or
state courts located in the State to the extent Mortgagee deems such proceeding
necessary or advisable to exercise remedies available under the Mortgage or the
other Loan Documents.
Section 5.16. Indemnification. Except for the gross negligence or willful
misconduct of Mortgagee, Debtor shall indemnify and hold harmless Mortgagee and
Mortgagee's shareholders, directors, officers, agents, and employees from and
against any and all claims, demands, causes of action, suits, proceedings,
liabilities, damages, losses, costs and expenses, including attorneys' fees,
caused by, incurred or resulting from its operations of or relating in any
manner to the Mortgaged Property, whether relating to their original design or
construction, latent defects, alteration, maintenance, use by Debtor or any
person thereon, supervision or otherwise, or from any breach of, default under
or failure to perform any term or provision of this Mortgage by Debtor, its
<PAGE>
officers, employees, agents or other persons. It is expressly understood and
agreed that Debtor's obligations under this Section shall survive the expiration
or earlier termination of this Mortgage for any reason.
Section 5.17. Waiver of Jury Trial and Punitive, Consequential, Special
and Indirect Damages. MORTGAGEE, BY ACCEPTING THIS MORTGAGE, AND DEBTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR
IN CONNECTION WITH THIS MORTGAGE, THE RELATIONSHIP OF MORTGAGEE AND DEBTOR,
DEBTOR'S USE OR OCCUPANCY OF THE MORTGAGED PROPERTY, AND/OR ANY CLAIM FOR INJURY
OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES
HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND
IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM MORTGAGEE WITH RESPECT TO ANY
AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY DEBTOR AGAINST MORTGAGEE OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH THIS MORTGAGE OR ANY DOCUMENT CONTEMPLATED
HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE
PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
Section 5.18. Transfer of Loan. Mortgagee may, at any time, sell, transfer
or assign the Note, this Mortgage and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein or issue
mortgage pass-through certificates or other securities evidencing a beneficial
interest in a rated or unrated public offering or private placement as
contemplated by the Loan Agreement.
IN WITNESS WHEREOF, Debtor has caused this Mortgage to be executed and
delivered by its duly authorized officers as of the day and year first above
written.
DEBTOR:
SYBRA, INC., a Michigan corporation
- -------------------------- By
Signature of Witness -------------------------------------
Name
-----------------------------------
<PAGE>
Title
- ----------------------------------- ----------------------------------
TYPED Name of Witness in BLACK TYPE
Debtor's Tax Identification Number:
- ----------------------------------- 38-1844678
Signature of Witness
- ----------------------------------- [Corporate Seal]
TYPED Name of Witness in BLACK TYPE
<PAGE>
STATE OF ]
] SS.
COUNTY OF ]
The foregoing instrument was acknowledged before me on ___________________
_____________________, 1997, by __________________________________, the
___________________________ of SYBRA, INC., a Michigan corporation, on behalf of
the corporation.
IN WITNESS WHEREOF, I hereunder set my hand and official seal.
-----------------------------------------
Notary Public
Typed Name of Notary Public in Black Type:
-----------------------------------------
My Commission Expires: ____________________
Drafted by:
Kevin J. Morris, Esq.
Streich Lang
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004
When recorded return to:
Maggie Craft
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
November ___, 1997 by and among SYBRA OF CALIFORNIA, INC. a California
corporation, ("Buyer"), ICH CORPORATION, a Delaware corporation and the parent
corporation of Buyer ("ICH"), WILLIAM BRUSSLAN, an individual and 294, INC. a
California corporation ("294"), AMERICAN FOOD CONCEPTS, INC., a California
corporation ("AFC"), and WEB ACQUISITION COMPANY LLC, a California limited
liability company ("WEB")(294, AFC and WEB) are collectively referred to herein
as the "Sellers").
W I T N E S S E T H
A. WHEREAS, the Sellers currently own those certain Arby's restaurants set
forth on Schedule A attached hereto (the "Restaurants"); and
B. WHEREAS, Buyer desires to purchase from the Sellers, and the Seller
desires to sell to Buyer, substantially all of the assets used by the Sellers in
connection with the operation of the Restaurants, and the parties hereto desire
to enter into certain other agreements, all upon the terms and conditions set
forth in this Agreement and the attachments hereto.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
representations, warranties, covenants and agreements hereinafter contained, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Upon and subject to the terms and
conditions of this Agreement, each of the Sellers shall sell, transfer, convey,
assign and deliver to Purchaser, and Buyer shall purchase, acquire and accept
from each of them, all of the assets and properties which are owned or leased
and used by each of the Sellers in the operations of their respective
Restaurants (collectively, the "Assets"), excluding, however, all of the
excluded assets set forth on Schedule 1.1 ("Excluded Assets"). The Assets shall
consist of, among other things, the following:
(a) All of the furniture, fixtures, equipment, signs, cash
registers, uniforms and other personal property (collectively, the "FF&E") owned
and used by each of the Sellers in the operations of their respective
Restaurants and located on the premises thereof;
(b) All inventories of food, beverages, paper supplies and other
consumables (collectively, the "Inventory") located on the premises thereof;
(c) All of each Seller's right, title, and interest in and to the
Arby's License
1
<PAGE>
Agreement which are set forth on Schedule 1.1(c) attached hereto (the "License
Agreements"), and all rights for the use of the trademarks, tradenames, and
service marks arising from such agreements (subject to Arby's, Inc.'s ownership
of all identifying marks and logos);
(d) All of each Seller's right, title and interest in and to all of
the contracts, agreements, real property leases, personal property leases,
commitments and undertakings (the "Contracts") as identified in Schedule 1.1(d);
(e) Petty cash in the maximum amount of One Thousand Dollars
($1,000) on hand at each of the Restaurants as of the Closing Date (the "Petty
Cash") at Buyers option.
(f) All of the pre-paid rent, charges and other prepayments and all
of the security and other similar deposits (the "Deposits") which were
previously paid by each of the Sellers and which are held by third parties
pursuant to the Contracts as identified in Schedule 1.1(g); and
(g) All records, technical information, price lists, marketing
information, sales information, employee records, which are or have been
maintained by each of the Sellers in connection with the operation of their
respective Restaurants.
(h) To the extent assignable, all of each Sellers right, title and
interest in and to all permits, licenses, authorizations and approvals relating
to the operation of the Restaurants.
1.2 Assumption of Liabilities. Except as expressly provided in this
Section 1.2, Buyer shall not assume or be responsible for any liabilities,
obligations or debts of any of the Sellers under or by reason of this Agreement.
Upon and subject to the terms and conditions set forth in this Agreement, Buyer
shall assume, become fully and solely responsible for and shall indemnify and
hold Sellers harmless with respect to and shall to timely pay, perform and
discharge in full all of the following liabilities, obligations and debts of
each of the Sellers (collectively, the "Assumed Liabilities"):
(a) All of each Sellers' liabilities, obligations and debts under
the Contracts which come due or relate to time periods from and after the
Closing Date in accordance with the respective terms thereof;
(b) All of each Sellers' liabilities, obligations and debts in
respect of unpaid rent, charges or other payments for which a Purchase Price
adjustment is made pursuant to Section 1.5;
(c) Any utility and telephone bills and other similar liabilities,
obligations and debts arising in the ordinary course from the operations of the
Restaurants which relate to time periods from and after the Closing Date; and
(d) Any liabilities, expenses, or obligations relating to, based on
or arising out
2
<PAGE>
of the operations of the Restaurants by Buyer from and after the Closing Date
(it being understood that the Sellers shall remain fully and solely responsible
for, shall indemnify and hold Buyer harmless with respect to, and shall timely
pay, perform and discharge in full any and all liabilities, expenses or
obligations relating to, based upon or arising out of the operations of the
Restaurants prior to the Closing Date).
1.3 Purchase Price. Subject only to the adjustments specified in this
Agreement and upon and subject to all other terms and conditions set forth in
this Agreement, in consideration of the sale, assignment, transfer, conveyance
and delivery of the Assets pursuant to this Agreement, Buyer shall pay to the
Sellers the sum of the following amounts (collectively, the "Purchase Price"):
All sums payable in U.S.
Dollars.
(a) The sum of Six Hundred Fifty Thousand Dollars ($650,000) payable
pursuant to the terms of Section 1.4 below
(b) An amount equal to one-half the value (at each Seller's cost) of
the Inventory.
(c) An amount equal to the transferable Deposits, as set forth on
Schedule 1.1(g) attached hereto; and
(d) The amount equal to the value of the Petty Cash at Buyers
option.
(e) A grant by ICH of 20,000 Warrants (the "Warrants") to expire
seven (7) years from date of grant, to acquire ICH Common Stock at the greater
of Five Dollars ($5.00) or 110% of ICH's closing price as of the date of the
close of this proposed transaction. (Stock symbol IH listed on AMEX, which
Warrants shall be substantially in the form of Exhibit A attached hereto.
1.4 Payment of Purchase Price. The Purchase Price shall be payable by
Buyer to the Sellers as follows:
(a) On the Closing Date, Buyer will deposit the total amount of
Three Hundred Twenty Five Thousand Dollars ($325,000) ("Escrow Deposit") to the
Escrow Holder by bank cashier's check or by wire transfer of immediately
available funds;
(b) Upon the Closing Date, the amount payable for the Inventory and
the Petty Cash if and where applicable.
(c) On the Closing Date, Buyer shall deposit with the escrow holder
a fully executed promissory note (the "Note") in the amount of Three Hundred
Twenty-five Thousand Dollars ($325,000) with interest payable at a rate of ten
percent (10%) per annum from the Closing Date on the unpaid balance, which Note
shall be issued by Buyer and guaranteed (the "Guaranty") by ICH and the Note and
Guaranty shall be substantially in the form of Exhibit B attached hereto. The
Note shall be amortized over ten (10) years in one hundred twenty (120)
3
<PAGE>
equal monthly installments of Four Thousand Two Hundred Ninety-five Dollars and
53/100 ($4295.53).
Each of the Sellers acknowledges and agrees as evidenced by Sellers' letter of
direction which shall be deposited into Escrow by Sellers that Buyer shall pay
all amounts payable by Buyer under this Section 1.4 to William Brusslan, the
Sellers' designated payee, and that the allocation and distribution of all such
payments shall be the sole responsibility of the Sellers.
1.5 Purchase Price Adjustments. The Purchase Price shall be increased or
decreased, as the case may be, by the amount of rent, taxes, assessments and
other expenses prepaid or unpaid by the Sellers as of the Closing Date.
1.6 Taxes. All sales and use taxes arising out of the purchase and sale of
the Assets shall be paid through the Escrow at the Closing by, and shall be
exclusively the obligation of, Buyer.
1.7 License Transfer Fees. All license transfer and service or training
fees due and owing to Arby's Inc. arising out of the purchase and sale of the
Assets shall be paid through the Escrow at the Closing by, and be exclusively
the obligation of, Buyer.
1.8 Escrow Fees. All fees of the Escrow Holder arising out of the purchase
and sale of the Assets shall be paid one-half (1/2) by the Sellers and one-half
(1/2) by Buyer at the Closing.
1.9 Allocation of Purchase Price. The Purchase Price shall be allocated in
the Buyers sole discretion among the Assets in accordance with Schedule 1.9
attached hereto. The foregoing allocation shall be made in a manner consistent
with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code").
Each party hereby agrees that it will not make any return, filing, report or
other submission or take any position with or before any federal, state or local
tax agency or other authority which would conflict or be inconsistent with the
allocation provided in this Section 1.9.
1.10 Transfer of Employees. Each of the Sellers shall, effective as of the
Closing Date, terminate the employment of all of the employees who are then
employed by each of the Sellers at the premises of the Restaurants to be
transferred as of the Closing Date (collectively, the "Employees"). Buyer, at
its discretion, effective as the Closing Date, may hire any or all of the
terminated Employees.
1.11 Accrued Vacation Pay. Each of the Sellers shall pay in full the
amount of vacation pay owed to each of their respective Employees no later than
the Closing Date.
1.12 Closing; Closing Deliveries.
(a) The closing of the transactions contemplated by this Agreement
4
<PAGE>
("Closing") will take place at the offices of Capitol City Escrow, Inc. located
at 3838 Watt Avenue, Suite 610, Sacramento, California 95821-2665 ("Escrow
Holder") on or before December 31, 1997 ("Closing Date"), subject to such
extensions or sooner as may be mutually agreed upon by the Sellers and Buyer.
The Sellers and Buyer shall open an escrow (the "Escrow") with Escrow Holder
immediately upon the execution of this Agreement.
(b) At the Closing, each of the Sellers will deliver, or cause to be
delivered, to Escrow:
(i) the executed Bill of Sale substantially in the form of
Annex B attached hereto;
(ii) the executed Assignment and Assumption Agreement
substantially in the form of Annex C attached hereto (the "Assignment and
Assumption Agreement");
(iii) the executed Lease Assignment and Assumption Agreement
substantially in the form of Annex D attached hereto (the "Lease Assignment and
Assumption Agreement");
(iv) an Opinion of Counsel to the Sellers substantially in the
form of Exhibit C attached hereto;
(v) all other previously undelivered documents required to be
delivered by the Sellers to Buyer at or prior to the Closing in connection with
the transactions contemplated by this Agreement; and
(vi) anything required pursuant to section 1.13 hereof.
(c) At the Closing, Buyer will deliver or cause to be delivered to
Escrow:
(i) The Escrow Deposit by certified or cashier's check or by
wire transfer;
(ii) the Petty Cash and inventory amount, if applicable;
(iii) the executed Assignment and Assumption Agreement;
(iv) the executed Lease Assignment and Assumption Agreement;
(v) Note and Warrants;
(vi) all other previously undelivered documents required to be
delivered by Buyer to the Sellers at or prior to the Closing in connection with
the transactions contemplated by this Agreement and the other agreements
contemplated hereby; and
5
<PAGE>
(vii) anything required pursuant to section 1.13 hereof.
(d) At the Closing, ICH will deliver or cause to be delivered the
Guaranty to Escrow.
(e) At the Closing, William Brusslan will deliver or cause to be
delivered to Escrow anything required pursuant to section 1.13 hereof.
1.13 Concurrent Land Purchases. Buyer and Sellers hereby acknowledge that
as to Unit 5803 and Unit 1381, the respective Seller or William Brusslan is
attempting to purchase the fee interest in the Leased Property with respect to
each of these units. As to Unit 5803, Sellers have the right to acquire the fee
title to the real estate pursuant to a Right of First Refusal upon terms
acceptable to Buyer in Buyer's sole discretion. If Sellers are not able to
obtain the fee interest pursuant to the Right of First Refusal, then Sellers
shall assign the lease to Buyer as provided herein upon the existing terms and
conditions of the lease as a condition to Closing. If Sellers are not provided
with a notice pursuant to the Right of First Refusal prior to the Close of
Escrow, Sellers shall assign the Right of First Refusal to Buyer as provided
herein upon the existing terms and conditions of the Right of First Refusal as a
condition to Closing. If Sellers are successful in obtaining the fee pursuant to
the Right of First Refusal upon terms acceptable to Buyer, the purchase and
sales documentation shall become part of this Escrow and the respective parties
shall deposit such items as are reasonably required by Escrow Holder to effect
the transfer of the right to purchase the property from Sellers to Buyer and
complete the transaction as a condition to Closing, provided, however, if the
close of the real estate transaction cannot be completed by Closing, Buyer, in
Buyer's sole discretion, may waive the condition and Close Escrow. As to Unit
1381, William Brusslan intends to enter into a contract for the purchase of the
real estate substantially similar to the contract attached hereto as Schedule
1.13 and shall deliver said contract to Escrow and assign Sellers' right to
purchase pursuant to the contract to Buyer as a condition to Closing. If the
close of the real estate transaction cannot be completed by Closing, Buyer, in
Buyer's sole discretion, may waive the condition and Close Escrow.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Buyer to enter into this Agreement and to
perform its obligations hereunder, each of the Sellers hereby represents and
warrants to Buyer with respect to themselves and the Assets which they purport
to own as follows:
2.1 Organization of the Sellers. WEB is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
California. 294 and AFC are corporations duly organized, validly existing and in
good standing under the laws of the State of California. Each of the Sellers has
all necessary power and authority to own or lease and operate its properties and
to carry on its business as it is now being conducted.
6
<PAGE>
2.2 Authorization and Approvals. Each of the Sellers has all necessary
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly and validly authorized by
all necessary action on the part of each of the Sellers. This Agreement
constitutes the legal, valid and binding obligation of each of the Sellers,
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditors' rights and remedies
generally. No approvals or consents by any third party, other then Arby's Inc.
and each of the Landlords, or any governmental or administrative body or agency
or any court is required in connection with the Sellers' execution and delivery
of this Agreement or the performance of their respective obligations hereunder.
2.3 No Violations. Except for such items which would not have a materially
adverse effect upon the Assets or the operations of any of the Restaurants (a
"Material Adverse Effect"), neither the Sellers' execution and delivery of this
Agreement nor the performance of their respective obligations hereunder will, to
the knowledge of the Sellers, (a) result in a default under any of the terms,
conditions or provisions of any of the Contracts, or any of the respective
organizational documents of any of the Sellers, or (b) violate any existing
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority applicable to any of the Sellers or the Assets.
2.4 Title to Properties. Each of the Sellers has good, valid and
marketable title to all of the Assets that they each purport to own. The Assets
owned by each of the Sellers are free and clear of any title defects or
objections, liens, mechanic's liens, claims, charges, security interests or
other encumbrances of any kind or nature whatsoever, except for (a) minor
imperfections of title, none of which materially detract from the value or
impair the use of the Assets, (b) liens for current real or property taxes not
yet due and payable, and (c) the liens and encumbrances approved in writing by
Buyer.
2.5 Condition of FF&E. The FF&E (excluding facsimile machines) are, and as
of the Closing Date will be, in working condition and repair, normal wear and
tear excepted, and none of the FF&E (excluding facsimile machines) are in need
of repairs, except for ordinary, routine maintenance and repairs which are not
in the aggregate material in cost.
2.6 Inventory. The Inventory is of a quality usable and saleable in the
ordinary course of business of each of the Sellers in the operations of the
Restaurants, and there are no obsolete items or items of below standard quality
under the standards set forth in the Arby's License Agreements.
2.7 Contracts. To the knowledge of the Sellers, each of the Sellers has
delivered to Buyer complete, current and correct copies of the Contracts, and no
changes have been made thereto since date of delivery. Each of the Contracts is
valid, binding and enforceable in accordance with its respective terms with
respect to parties thereto, and is in full force and effect. To the knowledge of
the Sellers, there are no existing defaults by any of the Sellers thereunder
7
<PAGE>
which would have a Materially Adverse Effect.
2.8 Compliance with Laws. To the knowledge of the Sellers, the operations
of their respective Restaurants have been conducted in all material respects in
compliance with all applicable laws, statutes, ordinances, rules, regulations,
orders, decrees or ruling of all governmental authorities or agencies having
jurisdiction over each of the Sellers, except for items which would not have a
Materially Adverse Effect. All licenses, permits and authorization issued or
granted by Federal, State or local governmental authority or agency which are
necessary for the conduct of the Restaurants respective businesses are validly
held by the Sellers, it being understood by the Buyer that the city licenses,
health department permits and shake machine permits and Sellers permit are not
transferable and it shall be Buyers obligation to make the necessary
applications to obtain said permits.
2.9 Litigation. To the knowledge of the Sellers, there is no pending suit,
action, arbitration, proceeding, investigation or inquiry before any court or
governmental or administrative body or agency which would have a Materially
Adverse Effect. The Sellers are not in violation of or in default under or
subject to any order, judgment, writ, injunction or decree of any court or
governmental or administrative body or agency, which violation or default would
a Materially Adverse Effect.
2.10 Leases. Each of the Restaurants' real property leases (collectively,
the "Leases" and each a "Lease"), and all amendments, modifications and/or
extensions thereto or thereof are listed on Schedule 2.10 hereto. Schedule 2.10
hereto also lists, with respect to each Lease the name of the tenant(s) and
landlord(s). With respect to the Leases, (i) the Leases are in full force and
effect, are unmodified (other than listed on Schedule 2.10 hereto), (ii) all
rental and other charges payable pursuant to the terms and conditions of the
Leases have been paid as of the Closing Date, (iii) the Sellers have not
received any written notice of any defaults of any agreement, covenant or
condition on the part of or to be performed by or observed by Sellers pursuant
to the terms of the Leases, (iv) there are no actions or proceedings pending by
any lessor under any of the Leases, (v) except for the security deposits
identified on Schedule 1.1(g) hereto, no lessor holds any deposits for any
Seller's account on any Lease, (vi) there are no defaults by any of the
respective lessors of any agreement, covenant or condition on the part of or to
be performed by or observed by such lessors pursuant to the terms of the Leases
and (vii) each Lease (excluding Unit 5771) is a direct lease with the fee owner
of the real property. The current expiration dates and remaining options to
extend the Leases are as set forth on Schedule 2.10 hereto. Minimum monthly rent
and additional rent under the Leases are also set forth on Schedule 2.10 hereto.
2.11 Normal Use. To the knowledge of the Sellers, none of the Sellers
knows of any facts nor have any of the Sellers failed to disclose any fact which
would prevent any of the Leased Property from being used and operated after the
Closing as Arby's Restaurants in accordance in all material respects with the
operational terms of the license agreements with Arby's, Inc.
8
<PAGE>
2.12 Condemnation. None of the Sellers has received any written notice of
any pending exercise of eminent domain, condemnation, environmental, zoning,
other land-use regulations proceedings or any other similar action with respect
to any of the Leased Property and none of the Sellers has received any written
notice of any Federal, state, county, municipal or other governmental plans to
restrict or change access from any highway or road bounding any of the Leased
Property.
2.13 Copies. To the knowledge of the Sellers, all Leases, nondisturbance
agreements, landlord estoppel certificates, certificates of occupancy,
sale/leaseback agreements, leasehold mortgages and other leases in which the
Sellers are a lessee or sublessee and which have been delivered or made
available to Buyer pursuant to this Agreement or otherwise, in connection with
the execution hereof or in connection with Buyer's due diligence review of, are
true, complete and correct copies of the originals of the same documents in the
Sellers' possession, and same have not been modified or amended, except pursuant
to documents copies of which have been delivered to Buyer.
2.14 Violations. To the knowledge of the Sellers, all written notes or
notices of violations of law or municipal ordinances, orders or requirements
noted in or issued by the Department of Housing and Building, Fire, Labor,
Health or other State or municipal department having jurisdiction over the
Leased Property, against or affecting the Leased Property up until the date of
the Closing, shall be complied with by the Sellers and the Leased Property shall
be free of same, provided, however, that any applicable cure periods may extend
the time for Sellers' performance hereunder.
2.15 Environmental Protection.
(i) For purposes of this Section 2.15, the following definitions
shall apply:
(A) "Environmental Laws" shall mean all federal, state, local,
and foreign laws imposing liability or establishing standards of conduct for the
protection of the environment and human health;
(B) "Environmental Claim" shall mean any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgement, letter or other communication from any
governmental agency, department, bureau, office or other authority having
jurisdiction, or any third party, involving violations of Environmental Laws or
Releases of Hazardous Materials;
(C) "Environmental Liabilities" shall mean any monetary
obligations, losses, damages, costs and expenses (including all reasonable
out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket expert
and consulting fees and out-of-pocket costs for environmental site assessments,
remedial investigations and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any Environmental Claim filed by any
governmental authority or any third party which relate to any violations of
Environmental Laws, or Release of
9
<PAGE>
Hazardous Materials generated by any of the Restaurants;
(D) "Hazardous Materials" shall mean (A) any element,
compound, or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely
hazardous substance or chemical, hazardous waste, medical waste, biohazardous
waste or infectious waste, special waste, or solid waste under Environmental
Laws; (B) petroleum and its refined products; (C) polychlorinated biphenyls; (D)
any substance exhibiting a hazardous waste characteristic (as defined under
Environmental Laws), including, but not limited to, corrosivity, ignitability,
toxicity or reactivity as well as any radioactive or explosive materials; and
(E) asbestos-containing materials;
(E) "Release" shall mean any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment.
(ii) To the knowledge of the Sellers during Sellers ownership,
possession or leasehold interest in any of the Leased Properties, the Sellers
have obtained all permits, licenses or authorizations required by Environmental
Laws, except where the failure to obtain any such permit, license or
authorization would not have a Material Adverse Effect, and all such permits,
licenses or authorizations are in full force and effect, except for such
permits, licenses and authorizations which, if not in full force and effect,
would not constitute a Material Adverse Effect.
(iii) To the knowledge of the Sellers, the operations of the
Restaurants are in full compliance with all Environmental Laws, except where
such noncompliance would not have a Material Adverse Effect.
(iv) To the knowledge of the Sellers, there has been no Release at
any of the Leased Properties or at any disposal or treatment facility which has
received Hazardous Materials generated by any of the Restaurants which will
result in Environmental Liabilities that have a Material Adverse Effect.
(v) To the knowledge of the Sellers, there are no outstanding
Environmental Claims that have a Material Adverse Effect.
2.16 License Agreements. The Sellers have previously delivered or made
available to Buyer true, complete and correct copies of all License Agreements
and other agreements between Arby's, Inc. and any of the Sellers. Set forth on
Schedule 2.20 hereto is a list of all of the License Agreements, including the
license agreement number, location and date of termination of each License
Agreement. The Sellers have received no written notice of a violation with
respect to any of the License Agreements. All renewal notices, to the extent
required by the License Agreements, have been delivered by the Sellers to
Arby's, Inc. on a timely basis.
10
<PAGE>
2.17 Contracts for Improvements. At the time of Closing, there will be no
outstanding contracts made by any Seller for any improvements to any of the
Restaurants which have not been fully paid for, and the Sellers shall cause to
be discharged all validly filed mechanic's liens or materialman's liens, if any,
arising from any labor or materials furnished to the Restaurants prior to the
time of Closing.
2.18 Improvements and Structural Defects. To the knowledge of the Sellers,
the structural portions of the Restaurants and the plumbing, heating, air
conditioning, electrical, mechanical, life safety and other systems therein are
in sufficient operating condition and repair to allow them to operate as Arby's
restaurants.
2.19 Brokers and Finders. Neither the Sellers nor any of their respective
directors, officers, employees or other representatives has engaged or employed
any broker, finder or agent or incurred any liability or obligation to pay any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
2.20 Accuracy of Representations and Warranties. Subject to the
qualifications stated therein, no representation or warranty made by any of the
Sellers in this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements so
made, in light of the circumstances under which they are made, not misleading.
For all purposes within this Article 2, the phrase "to the knowledge of the
Sellers" shall mean the actual knowledge, without duty of independent
investigation or inquiry of William Brusslan, Anton Lufti and Doreen Weaver.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Sellers to enter into this Agreement and
to perform its obligations hereunder, Buyer hereby represents and warrants to
the Sellers as follows:
3.1 Authorization and Approvals. Buyer has all necessary power and
authority to deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, and except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or affecting the enforcement of creditors rights and remedies
generally. No approvals or consents by any third party or any governmental or
administrative body or agency or any court is required in connection with
Buyer's execution and delivery of this Agreement or Buyer's performance of its
obligations hereunder.
3.2 No Violation. Neither the execution and delivery of this Agreement nor
the performance of the obligations hereunder will (a) result in a material
default under any of the
11
<PAGE>
terms, conditions or provisions of any contract, agreement, instrument,
commitment or undertaking to which Buyer is a party or is subject, or (b) to
Buyer's knowledge, materially violate any existing order, writ, injunction,
decree, law, statute, rule or regulation of any court or governmental authority
applicable to Buyer.
3.3 Brokers and Finders. Neither Buyer nor any of its employees or
representatives has engaged or employed any broker, finder or agent or incurred
any liability or obligation to pay any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated by this Agreement.
3.4 Accuracy of Representations and Warranties. Subject to the
qualifications stated therein, to Buyer's actual knowledge, no representation or
warranty made by Buyer in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements so made, in light of the circumstances under which they are made, not
misleading.
ARTICLE 4
COVENANTS OF THE SELLERS AND BUYER
Pending the consummation of the transactions contemplated hereunder, the
Sellers and Buyer covenant and agree as follows:
4.1 Conduct of Business. Each of the Sellers shall conduct the operations
of the Restaurants in the ordinary course consistent with prior practices and
pursuant to the terms and provisions of the Arby's License Agreements, except as
may be consented to in writing by Buyer. Each of the Sellers shall maintain the
FF&E in working condition and repair, normal wear and tear excepted. Each of the
Sellers shall continue to meet the contractual obligations incurred by each of
them in the ordinary course and to pay all of each of their respective
obligations as they mature in the ordinary course of the operations of the
Restaurants. Each of the Sellers shall also use their respective commercially
reasonable efforts to keep available the services of the Employees, to maintain
the Contracts in full force and effect, and to preserve the good relations of
the suppliers, customers and others with whom each of the Sellers has business
dealings.
4.2 Access to Buyer. During the period prior to the Closing Date and upon
the prior written request of Buyer, each of the Sellers shall give Buyer, and
its counsel, accountants and other representatives reasonable access, during
each of the Sellers' normal business hours, to the Restaurant premises,
employees, customer books, contracts and records, and all other information
pertaining to the Assets and the operations of the Restaurants as Buyer may
reasonably request. Provided, however, that Buyer may not interrupt or interfere
with Sellers' business and Buyer hereby agrees to indemnify and hold Sellers
harmless from and against any Losses (as defined in Article 7 hereof) caused by
Buyers activities pursuant to this Section 4.2
4.3 Compliance with Laws; Preservation of Accuracy of Representations and
12
<PAGE>
Warranties, Etc. Each of the Sellers shall duly comply with all of the laws
applicable to it, the violation of which would have a Material Adverse Effect,
and each of the Sellers shall conduct the operations of their respective
Restaurants and use the Assets in such manner that on the Closing Date the
representations and warranties contained in this Agreement shall be true as
though such representations and warranties were made on and as of such date.
4.4 Consents and Approvals. Each of the Sellers and Buyer shall use their
respective commercially reasonable efforts to acquire all necessary consents,
approvals, authorizations and waivers of all third parties (including without
limitation, the consent of Arby's, Inc., and the lessors under the various
leases) or governmental agencies or authorities required to be respectively
obtained by them in connection with their respective execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereunder.
4.5 Closing Inventory. On or prior to the Closing Date, representatives of
each of the Sellers and Buyer shall jointly conduct an inventory of all the
Inventory and the Petty Cash on hand at each of the Restaurants and all
Inventory on order as of the Closing Date. The results of this inventory shall
be reasonably satisfactory to the parties and shall be attached hereto as
Schedule 4.5 as soon as practicable after the Closing Date. As of the Closing
Date, each of the Sellers shall cause all of the Inventory and the Petty Cash
for each of the Restaurants for operational purposes to remain at the
Restaurants.
4.6 Bulk Sale; Prorations. Each of the Sellers and Buyer shall comply with
the requirements of the California Commercial Code with respect to bulk sales.
Each of the Sellers and Buyer agree to enter into an escrow agreement with
Escrow Holder to instruct Escrow Holder to, among other things, comply with the
bulk sale requirements, obtain necessary employment, sales and franchise tax
releases, and make the necessary publications, prorations and payments.
4.7 Estoppel Certificates. By no later than two (2) business days
following the date hereof, the Sellers shall send out for execution estoppel
certificates, in the form of Exhibit D attached hereto, (the "Estoppel
Certificates"), to each of their respective lessors. Each of the Sellers agrees
to use its commercially reasonable efforts to obtain the return of the executed
Estoppel Certificates prior to the Closing Date. The Sellers each agree to
promptly deliver to Buyer copies of executed Estoppel Certificates as the
Sellers prior to the Closing Date receive them. Notwithstanding anything to the
contrary contained in this Agreement, the receipt of the Estoppel Certificates
by Buyer or Seller prior to or after the Closing Date shall not be a condition
to the Closing of this transaction.
4.8 Non-Disturbance Agreements. The Sellers shall each use their
respective commercially reasonable efforts to obtain for the benefit of Buyer
from any holder of a superior mortgage on any of the Leased Property, an
agreement which shall provide in substance that as long as the Lease is in
effect and Buyer is not in breach or default beyond applicable grace periods
thereunder: (i) Buyer shall not be joined as a party defendant in any
foreclosure action or
13
<PAGE>
proceeding which may be instituted or taken by the holder of such superior
mortgage, and (ii) Buyer shall not be evicted from the Leased Property nor shall
Buyer's leasehold estate under the Lease be terminated or disturbed, nor shall
any of Buyer's rights under the Lease be affected, by reason of any default
under such superior mortgage or any disaffirmance of such superior mortgage or
other termination of such superior mortgage (the "Non-Disturbance Agreements").
4.9 Other Transactions. Unless and until the Agreement is terminated
pursuant to Section 8.1 hereof, the Sellers will not, and each of the Sellers
will cause its respective directors, officers, employees, agents and affiliates
not to, directly or indirectly, solicit or initiate the submission of proposals
of offers from, or solicit, encourage, entertain or enter into any agreement,
arrangement or understanding with, or engage in any discussions with, or furnish
any information to, any person or entity, other than Buyer or a representative
thereof, with respect to the acquisition of all or any part of any of the
Sellers, or any of their respective restaurants.
4.10 Supplemental Disclosure. Each of the Sellers agrees that, with
respect to the representations and warranties made by it in this Agreement, it
shall have the continuing obligation, between the date hereof and the Closing
Date, to promptly supplement or amend the Schedules to this Agreement with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules to this Agreement.
4.11 Real Estate Purchase Transactions. Buyer and Seller each agree that
Buyer and Seller shall perform all obligations with respect to Section 1.13.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligation of each of the Sellers to consummate the transactions
contemplated by this Agreement is subject to the satisfaction, or waiver by each
of the Sellers, on or prior to Closing of the following conditions:
5.1 Representations and Warranties. The representations and warranties
made by Buyer herein shall be true and correct in all material respects on and
as of the date hereof and as of the Closing with the same force and effect as
though all such representations and warranties had been made on and as of the
Closing.
5.2 Covenants and Agreements. All of the covenants and agreements of this
Agreement to be complied with and performed by Buyer on or before Closing will
have been complied with and performed in all material respects.
5.3 Consents. Each of the Sellers shall have obtained the consent from
Arby's, Inc. to convey, transfer or assign the Arby's License Agreements to
Buyer.
5.4 Litigation. No action, suit, proceeding, or investigation by or before
any court,
14
<PAGE>
administrative agency or other governmental authority shall have been instituted
to restrain, prohibit or invalidate any of the transactions contemplated by this
Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, or waiver by Buyer, on or prior
to Closing of the following conditions:
6.1 Representations and Warranties. The representations and warranties
made by each of the Sellers herein shall be true and correct in all material
respects on and as of the date hereof and as of the Closing with the same force
and effect as though all such representations and warranties had been made on
and as of the Closing.
6.2 Covenants and Agreements. All of the covenants and agreements of this
Agreement to be complied with and performed by each of the Sellers on or before
Closing will have been complied with and performed in all material respects.
6.3 Consents. Each of the Sellers will have obtained the consent of Arby's
Inc. to convey, transfer or assign the Arby's License Agreements to Buyer and
each of the Sellers shall have obtained all other necessary consents, approvals,
authorizations and waivers of all third parties (including without limitation,
the consents, to the extent required, of the lessors under the various Leases)
or governmental agencies or authorities required to be respectively obtained by
them in connection with their respective execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereunder.
Any item required by this paragraph may be waived in writing by the Buyer so
that this transaction may close and Buyer obtain possession of the Restaurants.
6.4 Litigation and Claims. No action, suit, proceeding, or investigation
by or before any court, administrative agency or other governmental authority
will have been instituted to restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement.
6.5 Absence of Changes. There shall not have occurred prior to the Closing
Date, (a) any material adverse change in the Assets or results of operations of
any of the Restaurants, or (b) the legal inability of any of the Sellers to
convey, assign and transfer the Assets to Buyer.
6.6 Estoppel Certificates. The Sellers shall have sent out and continue to
use Seller's commercially reasonable efforts to obtain and deliver to Buyer
executed copies of the Estoppel Certificates referred to in Section 4.7 hereof
from each of their respective lessors.
6.7 Non-Disturbance Agreements. The Sellers shall have sent out and
continue to use Seller's commercially reasonable efforts to obtain and deliver
to Buyer executed copies of the Non-Disturbance Agreements referred to in
Section 4.8 hereof from each holder of a superior
15
<PAGE>
mortgage on any of the Lease Property.
6.8 Real Estate Purchase Transactions. Seller shall perform all
obligations with respect to Section 1.13.
ARTICLE 7
INDEMNIFICATION
7.1 Sellers' Indemnification. Each of the Sellers will indemnify, defend
(with counsel reasonably acceptable to Buyer) and hold Buyer and each of its
officers, directors, employees, representatives, agents, shareholders and
affiliates (and their respective officers, directors, employees,
representatives, agents, shareholders and affiliates) harmless from and against
any losses, claims, damages or liabilities (including reasonable legal and other
expenses incurred in investigating and defending any claims or actions)
(collectively "Losses") to which Buyer or any of them may become subject insofar
as such Losses arise out of or are based upon any untrue representation or
warranty made by them respectively in this Agreement. Payments in respect of the
indemnification provided in this Section 7.1 shall be made promptly (and
currently) as Losses shall be incurred. Alternatively, Buyer shall have the
right to off-set any amounts due from the Sellers pursuant to this Section 7.1
against any amounts due under the Note described in Section 1.4 hereof,
provided, however, that Buyer shall not (i) receive any payment or (ii) exercise
such off-set right unless and until such time as the existence and amount of
such Losses have been definitively determined in the good faith judgement of the
Board of Directors of Buyer after reasonable satisfaction of a prior obligation
to "meet and confer" and negotiate in good faith with Sellers. Notwithstanding
the foregoing, none of Sellers shall have any obligation to indemnify Buyer
under this Section 7.1 unless, and then only to the extent that, Buyer shall
have incurred aggregate losses, damages, liabilities, costs and expenses in
excess of ONE THOUSAND DOLLARS ($1,000).
7.2 Buyer's Indemnification. Buyer will indemnify, defend (with counsel
reasonably acceptable to Sellers) and hold each of the Sellers harmless from and
against any Losses to which Sellers may become subject insofar as such losses
arise out of or are based upon any untrue representation or warranty of
Purchaser contained in this Agreement. Notwithstanding the foregoing, Buyer
shall have no obligation to indemnify any of the Sellers under this Section 7.2
unless, and then only to the extent that, such Seller shall have incurred
aggregate losses, damages, liabilities, costs and expenses in excess of ONE
THOUSAND DOLLARS ($1,000).
7.3 Survival of Indemnification Obligations. All of the Sellers'
obligations under Section 7.1 and all of Buyer's obligation under 7.2,
respectively, shall survive the Closing and continue in full force and effect
for until March 31, 1999.
ARTICLE 8
TERMINATION
8.1 Termination. The respective obligations of the parties hereto to
consummate the
16
<PAGE>
transactions pursuant to this Agreement may be terminated as follows:
(a) By mutual written agreement of the parties;
(b) By Buyer or the Sellers if the Closing shall not have occurred
on or before January 31, 1998; provided, however, that the party exercising such
termination right shall not have negligently, intentionally or willfully caused
the failure of any conditions to Closing set forth in Articles 5 or 6 hereof to
be satisfied prior to such date.
(c) Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto (or any of their
respective officers or directors), except (i) based upon obligations set forth
in Section 9.2 hereof and (ii) to the extent that failure to satisfy the
conditions of Articles 5 and 6 hereof results from the grossly negligent,
intentional or willful breach, violation or non-compliance by any party hereto
of any covenant, agreement, obligation, representation or warranty contained in
this Agreement or any other agreement referred to herein.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally, sent by
certified mail, postage prepaid, return receipt requested, or sent by telecopier
or other electronic facsimile transmission, as elected by the party giving such
notice:
(a) if to Buyer or ICH, to:
SYBRA OF CALIFORNIA, INC.
c/o I.C.H. CORPORATION
9404 Genesee Avenue
Suite 330
La Jolla, CA 92037
Attn: Mr. James R. Arabia
with a copy to:
Pryor, Cashman, Sherman and Flynn
410 Park Avenue, 10th Floor
New York, NY 10022
Attn: Robert H. Drechsler, Esq.
17
<PAGE>
(b) if to Sellers, to:
William Brusslan
16055 Ventura Boulevard, Suite 1127
Encino, California 91436
Facsimile: (818) 783-2409
with a copy to:
David J. Hirsch
Law Offices of David J. Hirsch
9460 Wilshire Boulevard
Suite 830
Beverly Hills, California 90212
Any such notice or other communication will be deemed to have been received upon
actual receipt if personally delivered, one (1) business day following
transmission if sent by facsimile and appropriate confirmation is received or if
sent by overnight courier, or three (3) business days following mailing. Any
party hereto may change its address or facsimile number specified above by
giving written notice to the other party hereto in the same manner as specified
in this Section 9.1.
9.2 Expenses. Except as otherwise provided herein, whether or not the
transactions contemplated by this Agreement shall be consummated, each of the
parties hereto agrees that it shall bear all fees and expenses incurred by it in
connection with this Agreement.
9.3 Entire Agreement. This Agreement, including the schedules and annexes
attached hereto, contains the entire understanding of the parties hereto in
respect of its subject matter. There are no other restrictions, promises,
warranties, covenants or understandings, other than those expressly set forth
herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto.
9.4 Amendments; Waiver. This Agreement may not be amended, supplemented,
canceled or discharged except by a written instrument executed by the parties
hereto. No failure to exercise and no delay in exercising, any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude the
exercise of any other right, power or privilege (hereunder or otherwise). No
waiver of any breach of any agreement hereunder or any other agreement shall be
deemed to be a waiver of any preceding or succeeding breach of the same or any
other agreement. No extension of time of performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts. The
rights and remedies of the parties under this Agreement are in addition to all
other rights and remedies, at law or in equity, that either party may have
against the other.
9.5 Severability. Any provision of this Agreement or any of the agreements
contemplated hereby that shall be prohibited or unenforceable in any
jurisdiction shall, as to such
18
<PAGE>
jurisdiction, be ineffective to the extent of such prohibition or enforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.6 Headings. The descriptive headings of the Articles and Sections of
this Agreement are inserted for convenience and identification only and do not
constitute a part of this Agreement for purposes of interpretation.
9.7 Assignment. No party may assign its rights or delegate its duties
under this Agreement without the prior written consent of the other party
hereto. Whenever in this Agreement either of the parties hereto is referred to,
such reference will be deemed to include the permitted successors and assigns of
such party. The terms and conditions of this Agreement, the obligations imposed
and the rights conferred hereby will be binding upon and inure to the benefit of
the respective permitted successors and assigns of the parties hereto.
9.8 Attorneys' Fees. In the event of any action at law or suit in equity
in relation to this Agreement or any schedule, annex or other instrument or
agreement required hereunder, the prevailing party in such action or suit shall
be entitled to receive its reasonable attorneys' fees and all other costs and
expenses of such action or suit.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same Agreement.
9.10 Governing Law. This Agreement will be construed and interpreted
according to the laws of the State of California.
(the balance of this page is intentionally blank)
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
"BUYER":
SYBRA OF CALIFORNIA, INC.
By: /s/ James R. Arabia
---------------------
Name: James R. Arabia
Title: President/CEO
ICH CORPORATION
By: /s/ James R. Arabia
---------------------
Name: James R. Arabia
Title: President/CEO
"SELLERS":
294, INC.
By: /s/ William Brusslan
---------------------
Name: William Brusslan
Title: President
20
<PAGE>
AMERICAN FOOD CONCEPTS, INC.
By: /s/ William Brusslan
---------------------
Name: William Brusslan
Title: President
WEB ACQUISITION COMPANY LLC
By: /s/ William Brusslan
---------------------
Name: William Brusslan
Title: Member
"WILLIAM BRUSSLAN":
By: /s/ William Brusslan
---------------------
Name: William Brusslan
[Arby's Logo]
SYBRA, INC.
DEVELOPMENT
AGREEMENT
<PAGE>
ARBY'S, INC.
DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
PAGE
1 GRANT .............................................1
2. TERM ..............................................1
3. DEVELOPMENT FEE ...................................1
4. DEVELOPMENT SCHEDULE ..............................2
5. LOCATION OF RESTAURANTS ...........................2
6. SITE ACCEPTANCE ...................................2
7. DISCLAIMER ........................................2
8. LOCATION REQUIREMENTS .............................2
9. CONSTRUCTION ......................................3
l0. TRAINING...........................................3
11. LICENSE AGREEMENT..................................4
12. NO RIGHT TO OPERATE OR USE TRADEMARKS..............4
13. TERMINATION........................................4
14. EFFECT OF EXPIRATION OR TERMINATION................5
15. CONFIDENTIALITY....................................5
16. ASSIGNMENT.........................................5
17. NEW DEVELOPMENT AGREEMENT..........................6
18. GOVERNING LAW AND FORUM SELECTION..................6
19. DEVELOPER'S ACKNOWLEDGEMENTS.......................6
20. ENTIRE AGREEMENT...................................6
ATTACHMENTS
EXHIBIT "A" - TERRITORY ............................. 7
EXHIBIT "B" - DEVELOPMENT SCHEDULE .................. 11
EXHIBIT "C" - PAYMENT SCHEDULE ...................... 12
EXHIBIT "D" - ADDITIONAL TERMS & CONDITIONS ......... 13
EXHIBIT "E" - LETTER DATED OCTOBER 30,1997 .......... 15
<PAGE>
DEVELOPMENT AGREEMENT
This is a Development Agreement ("Agreement") made in Fort Lauderdale,
Florida, by and between ARBY'S, INC., a Delaware corporation with its principal
office at 1000 Corporate Drive. Fort Laud., Florida 33334 ("Arby's"), and SYBRA,
INC., a Michigan corporation with its principal office located at 8300 Dunwoody
Place, Suite 300, Atlanta, Georgia, 30350-1296 ("Developer").
WHEREAS, Arby's owns a number of trademarks and service marks, including
the trademark "ARBYS," and is a franchisor of Arby's Restaurants, which serve
roast beef sandwiches and other food items; and
WHEREAS, Developer desires the exclusive rights to develop Arby's
Restaurants within the geographic area specified in this Development Agreement
for the limited term of this Agreement; and
WHEREAS, Arby's is willing to grant such rights in accordance with the
terms and conditions of this Agreement;
NOW, THEREFORE, it is mutually agreed as follows:
1. GRANT. Arby's hereby grants to Developer during the term of this
Development Agreement and subject to the conditions hereof the exclusive right
to develop Arby's Restaurants in the limited geographical area identified and
set forth in Exhibit A hereto, exclusive of any Unit Trading Area or Protected
Area located therein as defined in any License or Franchise Agreements currently
issued to other parties; this geographical area shall be referred to as the
"Territory." The operation of the restaurants developed pursuant to this
Agreement will be governed by individual License Agreements issued by Arby's in
accordance with Section II below. So long as Developer is in compliance with the
terms and conditions of this Agreement, Arby's will not license others to
operate, nor will it itself operate, any new or additional Arby's Restaurants in
the Territory during the term of this Agreement.
2. TERM. Unless earlier terminated pursuant to Section 13, this
Development Agreement shall expire ten (10) years and (2) months from the date
of execution of this Agreement by Arby's or upon the execution by Arby's of the
License Agreement for the last of the restaurants specified in Exhibit B (the
"Development Schedule"), whichever first occurs.
3. DEVELOPMENT FEE. Upon execution of this Development Agreement,
Developer agrees to pay to Arby's a fee of One Million Five Hundred Thousand
dollars $1,500,000.00 (the "Development Fee"). This Development Fee represents
two hundred and twenty thousand dollars ($220,000.00) applied from the former
Development Agreement dated November 13, 1996, one hundred eighty thousand
dollars ($180,000.00) applied from the transfer fee in the April 14, 1997 letter
agreement between Developer and Arbys, and fifty thousand dollars ($50,000.00)
payable upon execution of this development agreement and the agreed upon payment
schedule specified in Exhibit C (the "Payment Schedule"). This Development Fee
shall be fully earned by Arby's in consideration of its execution of this
Agreement and shall be non-refundable. However, Arby's shall credit $10,000 of
the Development Fee toward payment of the License Fee for each of the one
hundred and fifty (150) License Agreements issued to Developer pursuant to this
Development Agreement,
<PAGE>
provided that the applicable restaurants are constructed and opened in
accordance with the Development Schedule.
4. DEVELOPMENT SCHEDULE. Developer shall open and continuously operate
properly licensed Arby's Restaurants in accordance with the Development Schedule
set forth in Exhibit B. In the event that Developer opens and continuously
operates a greater number of Arby's Restaurants than required during any interim
period of the Development Schedule, the requirements of the succeeding period(s)
shall be deemed satisfied to the extent of such excess number of restaurants, up
to the total number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for locating proposed
sites within the Teritory for each of the restaurants contemplated in the
Development Schedule; during the term of this Agreement, Developer shall use its
best efforts to locate suitable sites. Arby's may in its discretion offer
counseling and advice in site selection. In no event, however, shall Arby's be
obligated to loan money, guarantee leases, provide financing or otherwise become
directly involved and/or obligated to Developer or to any third party in respect
of such site selection or development; these activities and undertakings shall
be the exclusive responsibility of Developer, financially and otherwise.
6. SITE ACCEPTANCE. Upon selection by Developer of a proposed site for a
restaurant, Developer promptly shall submit to Arby's such specific site data
and demographic and other information concerning the site as may be reasonably
required by Arby's, utilizing such forms as may be required by Arby's. Arby's
shall either accept or reject such site in accordance with Arby's then-current
site selection policies and procedures. To be effective, any acceptance must be
in writing. Developer understands and acknowledges that Arby's may reject any
proposed site, in which event Developer will not proceed at the rejected site,
but will seek to locate an acceptable site. The acquisition in any manner of any
proposed site prior to acceptance by Arby's shall be at the sole risk and
responsibility of Developer and shall not obligate Arby's in any way to accept
same.
7. DISCLAIMER. In executing this Development Agreement, accepting a
proposed site, giving approvals or advice or providing services or assistance in
connection with this Development Agreement, Arby's does not guarantee the
suitability of an accepted site or the success of any Arby's restaurant
established at such site. Arby's expressly disclaims any warranties, express or
implied, with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the suitability of a
site and the success of any restaurant depend on many factors outside the
control of either Arby's or Developer (such as interest rates, unemployment
rates, demographic trends and the general economic climate), but principally
depend on Developer's efforts in the operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a proposed site,
Arby's may require Developer to negotiate a lease or sales contract that
includes certain reasonable terms regarding duration or other specified matters.
Developer understands and acknowledges that a site acceptance may be conditioned
on such matters and that if Developer does not wish to, or cannot, satisfy the
pertinent conditions within a reasonable time, the site will be deemed rejected.
<PAGE>
9. CONSTRUCTION. Upon receiving acceptance for a proposed site, Developer
shall excercise it's best efforts to proceed promptly to secure control of the
accepted site and to obtain necessary zoning and building approvals and permits.
At Arby's request, Developer shall furnish documentation satisfactorily to
Arby's evidencing such best efforts. Arby's will provide generic plans for the
Arby's-approved building, including specifications for fixtures, furnishings,
signs and equipment. Developer must hire an architect and general contractor to
adopt these generic plans to the accepted site and must submit proposed final
working plans to Arby's for approval within the time limits set by Arby's.
Developer shall not proceed with construction or remodeling until Developer has
received Arby's written approval of the final working plans. Developer shall
ensure that the building is constructed or remodeled in accordance with the
final working plans and specifications designated and approved by Arby's.
Developer will allow Arby's to make periodic inspections and will provide such
periodic progress reports as may be requested by Arby's.
10. TRAINING. Unless Developer already is operating at least one Arby's
restaurant, Developer, a partner of Developer if Developer is a partnership, or
the majority shareholder of Developer if Developer is a corporation, must
complete Arby's New Owner's Training Program prior to issuance of the License
Agreement for the first restaurant set forth in the Development Schedule. In
addition, if Developer is not operating any Arby's restaurants prior to Issuance
of the License Agreement for the first restaurant set forth in the Development
Schedule, two representatives of Developer must attend and be certified at
Arby's Restaurant Management Training Program prior to issuance of the License
Agreement for the first restaurant under the Development Schedule, another
representative of Developer must attend and be certified prior to issuance of
the License Agreement for the second restaurant under the Development Schedule,
and Arby's in its sole discretion and prior to issuance of any further License
Agreements for additional restaurants may require additional representatives of
Developer to attend and be certified at the Restaurant Management Training
Program or complete another comparable program approved in advance by Arby's. If
Developer is an individual who intends to participate in the daily operation of
the restaurant, or if Developer includes a partner or shareholder who intends to
participate in the daily operation of the restaurant, that person must attend
and be certified at the Restaurant Management Training Program as one of
Developer's first two representatives. If Developer already is operating one,
but only one, Arby's restaurant prior to issuance of the License Agreement for
the first restaurant under the Development Schedule, one additional
representative of Developer must attend and be certified at the Restaurant
Management Training Program prior to issuance of the License Agreement for the
first restaurant under the Development Schedule, and Arby's in its sole
discretion and prior to issuance of any further License Agreements for
additional restaurants may require additional representatives of Developer to
attend and be certified at the Restaurant Management Training Program or
complete another comparable program approved in advance by Arby's. If Developer
already is operating two or more Arby's restaurants prior to issuance of the
License Agreement for the first restaurant under the Development Schedule,
Arby's in its sole discretion and prior to issuance of any License Agreement
under the Development Schedule, may require an additional representative to
attend and be certified at the Restaurant Management Training Program or
complete another comparable training program approved in advance by Arby's.
Arby's will pay tuition for training at the New Owner's Training Program and the
Restaurant Management Training Program; all other expenses shall be the sole
responsibility of Developer.
<PAGE>
11. LICENSE AGREEMENT. No Arby's Restaurant may be opened or operated by
Developer under any circumstances until the required License Fee has been paid
and the License Agreement for such location has been executed by Arby's. The
License Fee shall be thirty-seven thousand and five hundred dollars ($37,500)
for Developer's first License Agreement, and twenty-five thousand dollars
($25,000) for each subsequent License Agreement. The License Fee for each
License Agreement must be paid at least thirty (30) days prior to scheduled
execution of the Agreement. All License Agreements issued pursuant to this
Development Agreement will contain generally the same terms and conditions as
are being offered to other licensees similarly situated at time of issuance,
including without limitation those terms and conditions pertaining to royalties
and other fees and duration of the Agreement; as a condition of Arby's execution
of such License Agreement, Arby's may require Optionee or its principles to
execute a corporate letter of credit or corporate guarantee to secure payment of
royalties and other fees required to be paid under the License Agreement.
Developer shall comply with Arby's then-current franchising policies and
procedures for issuance of the License Agreements. Arby's shall be under no
obligation to execute and issue a License Agreement if Developer is in breach or
default of any other License or Franchise Agreement between Arby's and
Developer, or if Developer is not eligible for expansion pursuant to Arby's
then-current criteria for expansion. In addition, Arby's shall be under no
obligation to execute and issue a License Agreement unless Developer has
complied in a timely manner with all terms and conditions of this Development
Agreement and has satisfied all requirements set forth herein (including
construction and training requirements) with respect to the pertinent accepted
site. If and when a License Agreement is executed by Arby's, it shall govern the
relations between the parties with respect to the pertinent restaurant.
12. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer acknowledges that
until a License Agreement has been issued for a specified site, Developer shall
not have or be entitled to exercise any of the rights, powers and privileges
granted by the License Agreement, including without limitation the right to use
Arby's trademarks, service marks and trade names; that the execution of this
Development Agreement shall not be deemed to grant any such rights, powers or
privileges to Developer; and that Developer may not under any circumstances
commence operation of any Arby's restaurant prior to execution by Arby's of a
License Agreement for the pertinent location.
13. TERMINATION. This Agreement shall terminate immediately and without
notice to either party upon:
(a) the death of Developer, if Developer is an individual; or
(b) the commencement of any proceedings by or against Developer
under the Bankruptcy Act, under any Chapter thereof or
amendment thereto, or under any other insolvency act, whether
federal or state; the appointment of any trustee or receiver
for the business or property of Developer; or any assignment
by Developer for the benefit of creditors.
<PAGE>
Arby's shall have the right at its election to terminate this Agreement
immediately upon notice to Developer, upon the occurrence of any of the
following:
(a) failure to comply with the Development Schedule;
(b) the attempted assignment of this Agreement without the prior
written approval of Arby's;
(c) if Developer is a corporation or a partnership, the transfer
of more than 30% of the capital stock or partnership interest
of such corporation or partnership during the term of this
Agreement without the prior written approval of Arby's;
(d) the discovery by Arby's of any material misrepresentation in
any of the information or documents submitted to Arby's by or
on behalf of Developer;
(e) any violation by Developer of any of the provisions of this
Agreement; or
(f) the termination by Arby's of any License or Franchise
Agreement or other agreement between Arby's and Developer or
Developer's failure to cure a default under any other
agreement between Arby's and Developer within the time
specified by Arby's.
For purposes of Sections 11 and 13 herein, any License or Franchise
Agreements issued to Developer, any affiliated company of Developer or any
corporation, partnership or joint venture (or their affiliates) in which
Developer or any stockholder, partner or joint venture of Developer, direct or
indirect, has any interest of ownership or participation, regardless of
location, shall be deemed an Agreement between Arby's and Developer.
14. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration or completion
of this Development Agreement, or upon termination for any reason, the rights
granted to Developer pursuant to Section 1 of this Development Agreement shall
be extinguished immediately. Unless the parties have executed a new development
agreement, Arby's thereafter shall have the right to operate or permit others to
operate Arby's Restaurants within the Territory, except as limited by the Unit
Trading Area or Protected Area provisions of any then-effective License or
Franchise Agreements.
15. CONFIDENTIALITY. At all times during the term of this Agreement, and
after termination of this Agreement for any reason, Developer (and if a
corporation or partnership, its shareholders, directors, and officers or
partners, as individuals) shall not divulge, disclose or communicate, directly
or indirectly, to any other person or entity any confidential or proprietary
information or knowledge obtained from Arby's.
16. ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon Arby's, its successors and assigns. However, neither this Agreement
nor any of Developer's rights hereunder shall be assignable or transferable by
Developer, directly or indirectly, by operation of law or otherwise, without
prior written approval from Arby's, which approval shall not be unreasonably
withheld.
<PAGE>
17. NEW DEVELOPMENT AGREEMENT. If Developer wishes to negotiate a new
development agreement with Arby's with respect to further development of Arby's
Restaurants in the Territory, Developer must so advise Arby's in writing sixty
(60) days before the expiration date of this Development Agreement or sixty (60)
days before the anticipated date of execution of the License Agreement for the
final restaurant under the Development Schedule in Exhibit B. Subject to receipt
of such notice and so long as this Development Agreement is in effect and
Developer is not and has not been in default under this Development Agreement or
any License or Franchise Agreement or other agreement with Arby's, Arby's then
will negotiate in good faith with Developer with respect to a new development
agreement during the remainder of the term of the Development Agreement.
18. GOVERNING LAW AND FORUM SELECTION. This Agreement shall be governed,
construed and interpreted in accordance with the laws of the State of Florida.
In the event of any dispute concerning the parties' rights or obligations under
this Agreement, Developer agrees to file any suit against Arby's only in the
federal or state court having jurisdiction where Arby's principal office is then
located.
19. DEVELOPER'S ACKNOWLEDGEMENTS. Developer understands and acknowledges
that there are significant risks in any business venture and that the primary
factor in Developer's success or failure under this agreenment will be
Developer's own efforts. In addition, Developer's acknowledges that Arby's and
its representatives have made no representations to Developer other than or
inconsistent with the matters set forth in the Franchise Offering Circular
provided to Developer and that Developer has undertaken this venture solely in
reliance upon the matters set forth in the Franchise Offering Circular and
Developer's own independent investigation of the merits of this venture.
20. ENTIRE AGREEMENT. This Development Agreement contains the entire
agreement between the parties and shall not be modified except by a written
document executed by both parties.
WITNESS: DEVELOPER:
SYBRA, INC.
/s/ Janice M. Parker By: /s/ James R. Arabia
- ------------------- -------------------
James R. Arabia
Chairman of the Board
& President
Date: 11/17/97
------------------
WITNESS: ARBY'S, INC.
[ILLEGIBLE]
- ------------------- By: /s/ Kenneth A. Thomas
----------------------
Kenneth A. Thomas
Senior Vice President & CFO
Date: 11/17/97
-------------------
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> May-1-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,418
<SECURITIES> 0
<RECEIVABLES> 530
<ALLOWANCES> 0
<INVENTORY> 1,372
<CURRENT-ASSETS> 9,142
<PP&E> 30,218
<DEPRECIATION> 5,522
<TOTAL-ASSETS> 75,264
<CURRENT-LIABILITIES> 14,148
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 75,264
<SALES> 73,787
<TOTAL-REVENUES> 75,006
<CGS> 19,808
<TOTAL-COSTS> 72,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,661
<INCOME-PRETAX> (1,117)
<INCOME-TAX> (253)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (864)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
