UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-12454
RUBY TUESDAY, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 63-0475239
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4721 Morrison Drive, Mobile, Alabama 36609
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (334)344-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
$0.01 par value Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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, based upon the closing sale price of Common Stock on August
4, 1997 as reported on the New York Stock Exchange, was approximately
$380,296,315.
The number of shares of the Registrant's common stock outstanding at August
4, 1997 was 17,098,350.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended May 31, 1997 are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive proxy statement dated August 25,
1997 are incorporated by reference into Part III.
INDEX
PART I
Page
Number
Item 1. Business 4 - 9
Item 2. Properties 9 -10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 11
Executive Officers of the Company 11-12
PART II
Item 5. Market for the Registrant's Common Equity and
Related Shareholder Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the
Registrant 13-14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 14-21
PART I
Item 1. Business.
General
Prior to March 9, 1996, Ruby Tuesday, Inc. (the "Company") was known as
Morrison Restaurants Inc. ("Morrison"). Morrison operated three businesses
in the foodservice industry. These businesses were organized into two
operating groups, the Ruby Tuesday Group, consisting of the Company's
casual dining concepts, and the Morrison Group which was comprised of
Morrison's family dining restaurant and health care food and nutrition
services businesses.
On March 7, 1996, the shareholders of Morrison approved the distribution
(the "Distribution") of its family dining restaurant business (Morrison
Fresh Cooking, Inc. ("MFCI")) and its health care food and nutrition
services business (Morrison Health Care, Inc. ("MHCI")) to its shareholders
effective March 9, 1996. In conjunction with the Distribution, the Company
reincorporated in the state of Georgia, effected a one-for-two reverse
stock split of its common stock and changed its name to Ruby Tuesday, Inc.
The first Ruby Tuesday restaurant was opened in 1972 in Knoxville,
Tennessee near the campus of the University of Tennessee. The Ruby Tuesday
concept, with 16 operational units, was acquired by Morrison in 1982.
During the following years, Morrison added other casual dining concepts,
including the internally-developed Mozzarella's American Cafe
("Mozzarella's", formerly "Silver Spoon") and L&N Seafood Grill ("L&N").
In June 1994, Morrison's Board of Directors approved the plan to phase out
the L&N concept in an attempt to align all of the concepts into the
strategic focus of "feeding America for under $10." A majority of the L&Ns
were converted primarily to either Ruby Tuesday or Mozzarella's restaurants
and the remaining locations were either sold or closed. Based on favorable
operating results, Morrison subsequently decided to continue to operate
four of the L&N units as L&N's through the remainder of their lease terms.
In January 1995, Morrison completed the acquisition of Tias, Inc., a chain
of Tex-Mex restaurants, which allowed it to enter into one of the fastest
growing segments of the casual dining market. The information presented
below relates to the business of the Company following the Distribution
unless the context otherwise requires.
Operations
The Company operates three separate and distinct casual dining concepts
comprised of Ruby Tuesday, Mozzarella's and Tia's. As of May 31, 1997, the
Company operated 393 casual dining restaurants in 33 states.
Ruby Tuesday
Ruby Tuesdays are casual, full-service restaurants with mahogany woods and
whimsical artifacts, classic brass and Tiffany lamps which create a
comfortable, nostalgic look and feel. This year the Company continued to
focus on making Ruby Tuesdays feel even more fun and a little more casual,
with black and white checked table cloths, servers dressed in red polo
shirts, black pants, and short black aprons, and lighter, brighter wall
colors. Ruby Tuesday's menu is based on variety, with something for just
about everyone. Some of Ruby Tuesday's most popular entree items which are
prepared fresh daily are: fajitas, baby-back ribs, chicken entrees, soups,
sandwiches, salad bar, and signature Tallcake desserts in strawberry and
chocolate-Oreo varieties. Entree selections range in price from $4.99 to
$12.99.
At May 31, 1997, the Company operated 325 Ruby Tuesday units concentrated
primarily in the Southeast, Northeast, Mid-Atlantic and Midwest. Ruby
Tuesday is the Company's primary growth vehicle. The Company intends to
open approximately 36 additional units in fiscal 1998 with the majority of
new units expected to be opened in existing markets. While the concept has
historically been mall-based, current development plans call for
approximately 85% of new units to be freestanding. Existing prototypes
range in size from 4,500 to 5,500 square feet with seating for 170 to 205
guests. Located on smaller, and therefore less expensive, parcels of land,
the Company's new 4,500 square-foot, 185-seat units are more efficient and
cost less to build. They are being operated by Managing Partners who have
a financial stake in the success of their restaurants and generate average-
unit volume that exceeds the system average. Because they cost less to
open but are able to generate sales at the same level as larger units, the
Company believes they provide the opportunity for improved unit-level
returns on investment. Other than population and traffic volume, site
criteria requirements for new units include annual household incomes
ranging from $30,000 to $50,000 and good accessibility and visibility of
the location.
Mozzarella's American Cafe
Mozzarella's is a Company-developed, full-service restaurant with a menu
that features a variety of pastas and thin-crust gourmet pizzas, along with
made-from-scratch soups, entree salads and sandwiches, fresh seafood
selections, prime steak and grilled chicken all prepared with signature
recipes. Entree selections range in price from $5.49 to $12.99.
Mozzarella's decor is upbeat and colorful with polished wood trim and
paneling, European poster art, strings of overhead lights and tile floors.
Displays of olive oil, tomatoes, pasta and other food products contribute
to the appeal of the restaurant. Servers approach the guests dressed in
white button-down shirts and black trousers accented with a colorful tie.
Mozzarella's are primarily located in the Southeast and Mid-Atlantic with
particular concentration in the Washington, D.C. area, Florida and
Virginia. At May 31, 1997, the Company operated 48 Mozzarella's. The
Company intends to open approximatley two units in fiscal 1998 in order to
concentrate on improving the operational efficiency and effectiveness of
existing units. The current prototype for new restaurants is 5,300 square
feet and seats approximately 190 visitors.
Tia's Tex-Mex
Tia's, the Company's newest concept, is a full-service, casual dining
restaurant. The decor is reminiscent of an authentic Mexican restaurant
with chandeliers replicating those of an old Mexican hotel and colors,
textures and artifacts that reflect the restaurants' genuine Southwestern
heritage. Tortillas are made by hand in a display station which
contributes to Tia's unique atmosphere.
Tia's menu items, which are all fresh and made from scratch, include an
array of traditional Tex-Mex favorites such as: fajitas, enchiladas, tacos,
nachos and quesadillas and a selection of unique grilled and sauteed
dishes. The menu also provides the guest with a variety of appetizers and
desserts. Entree items range in price from $4.49 to $16.49. Chips are
cooked fresh throughout the day and served with just-made salsa to every
guest. Each guest is greeted by a casually dressed server wearing a red
polo shirt, blue jeans and a short black apron.
The Company had 20 Tia's operational at the end of fiscal 1997 and plans to
open approximately three units in fiscal 1998. New and existing units are
located in the Southwest, Southeast and Mid-Atlantic regions. New units
will have approximately 6,112 square feet with seating capacity for 215
visitors. New Tia's restaurants are considered in areas with annual
household incomes greater than $40,000, with sites which are visible,
accessible and meet certain population and traffic criteria.
Franchising
In fiscal year 1997, the Company began identifying a group of potential
restaurant owners-internal and external-to become Ruby Tuesday franchisees.
The franchise program, the Company's external partnership program, allows
the Company to become a financial partner with approximately ten regional
restaurant operators from the casual-dining industry who are expected to
build approximately ten units each over the next five years in new and
existing markets. In addition, the domestic franchise program calls for the
selling and franchising of certain Company-owned locations outside the
Company's priority-growth markets. Pursuant to this program, in July 1997,
the Company entered into a series of agreements with three limited
partnerships providing, among other things, for the sale of 29 Company-
owned units in Florida. After completion of the sale, these units will be
operated as Ruby Tuesday restaurants under franchising agreements. The
Company will also pursue the continuation of international license and
franchise development with large and experienced partners in broad
geographic territories. The Company's first domestic franchise opened in
May 1997, while Jardine Pacific operates four Ruby Tuesdays in Hong Kong.
Research and Development
The Company does not engage in any material research and development
activities. The Company, however, engages in on-going studies in connection
with the development of menu items for all of its restaurant concepts.
Additionally, it conducts consumer research to determine guest preferences,
trends, and opinions.
Raw Materials
Raw materials essential to the operation of the Company's business are
obtained through MRT Purchasing, LLC ("MRT"). MRT was organized to serve
as a purchasing cooperative to allow the Company, MHCI, and MFCI to pool
their collective purchasing power and to coordinate the purchase of certain
food, equipment and services. The Company is obligated to purchase all
core products through MRT arrangements; non-core products may be purchased
independently. The Company is committed to this purchasing arrangement for
an initial term of five years from March 9, 1996, the effective date of the
Distribution, and the agreement will automatically renew for additional
five-year terms. The Company may terminate its participation in these
purchasing arrangements upon six months prior written notice, provided it
continues to honor its purchase commitments under any then existing
contracts to which MRT is a party that extend beyond the termination date.
Raw materials are purchased by MRT principally from Specialty Distribution
(a division PYA/Monarch) under a cost-plus arrangement. The purchases from
Specialty Distribution are in accordance with a Supply Agreement entered
into on July 8, 1988, as amended. Purchasing obligations have been
allocated to the Company, MHCI, and MFCI based on past practice. If
Specialty Distribution is unable to meet the Company's supply needs, the
Company negotiates directly with primary suppliers to obtain competitive
prices. The Company uses purchase commitment contracts to stabilize the
potentially volatile pricing associated with certain commodities. Because
of the relatively short storage life of inventories, limited storage
facilities at the restaurants themselves, the Company's requirement for
freshness and the numerous sources of goods, a minimum amount of inventory
is maintained at the units. If necessary, all essential food, beverage and
operational products are available and can be obtained from alternative
suppliers in all cities in which the Company operates.
Trademarks of the Company
The Company has registered certain trademarks and service marks, with the
United States Patent and Trademark Office, including Ruby Tuesdayr,
Mozzarella'sr, and Tia'sr. The Company believes that these and other
related marks are of material importance to the Company's business.
Registrations of the trademarks listed above expire from 2004 to 2005,
unless renewed.
Seasonality
The Company's business is moderately seasonal. Average restaurant sales of
the Company are slightly higher during the winter months than during the
summer months as the Company is currently concentrated in mall-based units
which generally peak during the holiday season. Freestanding restaurant
sales are higher in the summer months
Customer Dependence
No material part of the business of the Company is dependent upon a single
customer, or very few customers, the loss of any one of which would have a
material adverse effect on the Company.
Competition
The Company's activities in the restaurant industry are subject to vigorous
competition relating to restaurant location and service, as well as
quality, variety and value perception of the food products offered. The
Company is in competition with other food service operations, with locally-
owned operations, as well as national and regional chains that offer the
same type of services and products as the Company.
Government Compliance
The Company is subject to various licensing requirements and regulations at
both the state and local levels for items such as zoning, land use,
sanitation, alcoholic beverage control, and health and fire safety, all of
which could delay the opening of a new restaurant or the operation of an
existing unit. The Company's business is subject to various other
regulations at the federal level such as health care, minimum wage, and
fair labor standards. Compliance with these regulations has not had, and
is not expected to have, a material adverse effect on the Company's
operations.
There is no material portion of the Company's business that is subject to
renegotiation of profits or termination of contracts or sub-contracts at
the election of the Government.
Environmental Compliance
Compliance with federal, state and local laws and regulations which have
been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, is
not expected to have a material effect upon the capital expenditures,
earnings or competitive position of the Company.
Personnel
The Company employs approximately 10,900 full-time and 13,500 part-time
employees. The Company believes working conditions are favorable and
employee compensation is comparable with its competition. None of the
Company's employees are covered by a collective bargaining agreement
International Operations
On March 30, 1995, the Company entered into a development agreement (the
"Agreement") with Jardine Pacific Restaurants Group Limited (the "Developer")
to open a minimum of eight, 20, and 38 Ruby Tuesday restaurants in the Asia-
Pacific region by the end of the third, sixth, and tenth anniversaries of the
date of the Agreement, respectively. Under the terms of the Agreement the
Company is to receive a licensing fee on the first seven Ruby Tuesday
restaurants opened by the Developer in the Asia-Pacific region and royalties
from all units, derived as applicable, from sales or profits as defined in
the Agreement. As of May 31, 1997, the Developer had opened two Ruby Tuesday
restaurants. Two additional units have opened since that date. The Company
does not expect this Agreement to have a material effect on future
operations, nor is it currently engaged in material operations in foreign
countries.
All Company-owned operations are located within the United States; however,
in conjunction with the franchise program discussed above, the Company
established a new International Division in 1997. Our International Division
is developing relationships with large companies around the world for global
expansion of the Ruby Tuesday brand that builds on our initial development
success in Hong Kong.
Item 2. Properties.
Information regarding the locations of the Company's Ruby Tuesdays,
Mozzarella's and Tia's operations is shown in the list below. Of the 393
Company-operated restaurants as of May 31, 1997, the Company owned the
building and held long-term land leases for 46 restaurants, owned the land
and building for 54 restaurants, and held leases covering land and building
for 293 restaurants. Administrative personnel of the Company are located
in the executive and administrative headquarters building located in
Mobile, Alabama. The administrative headquarters has a lease term ending
in 1998 and provides an option to purchase at a nominal amount at the end
of the initial lease term. This building was financed through the sale of
Industrial Development Revenue Bonds from the Industrial Development Board
of the City of Mobile, Alabama.
Additional information concerning the properties of the Company and its
lease obligations is incorporated herein by reference to Note 6 of the
Notes to Consolidated Financial Statements included in the Annual Report to
Shareholders for the fiscal year ended May 31, 1997.
As of May 31, 1997, the Company operated 393 restaurants, including 325
Ruby Tuesday, 48 Mozzarella's American Cafes and 20 Tia's Tex-mex
restaurants in the following locations:
Alabama (23) Kansas (1) New Jersey (11)
Arizona (4) Kentucky (2) New York (23)
Arkansas (3) Louisiana (4) North Carolina (7)
Colorado (9) Maine (1) Ohio (14)
Connecticut (9) Maryland (19) Oklahoma (1)
Delaware (3) Massachusetts (6) Pennsylvania (20)
Florida (56) Michigan (17) Rhode Island (1)
Georgia (34) Minnesota (3) South Carolina (9)
Illinois (10) Mississippi (5) Tennessee (29)
Indiana (6) Missouri (8) Texas (14)
Iowa (1) Nebraska (2) Virginia (38)
Item 3. Legal Proceedings.
The Company is currently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of its business. In addition,
the Company, as successor to Morrison Restaurants Inc., is a party to a
case (Morrison Restaurants Inc. v. United States of America, et al.),
originally filed by Morrison in 1994 to claim a refund of taxes paid in the
amount of approximately $3,000 and abatement of taxes assessed by the
Internal Revenue Service ("IRS") against Morrison on account of the
employer's share of FICA taxes on unreported tips allegedly received by
employees. The IRS filed a counterclaim for approximately $7,000 in
additional taxes. The case was decided favorably by the Company in
February, 1996 on summary judgment. The IRS appealed the District Court's
decision and, on August 12, 1997 the U.S. Court of Appeals for the Eleventh
Circuit reversed the award of summary judgment and remanded the case to the
District Court for proceedings consistent with the Court's opinion. In its
reversal, the Eleventh Circuit upheld the IRS' enforcement policy with
respect to the employer's share of FICA taxes on allegedly unreported tips.
The Company intends to petition the U.S. Court of Appeals for a review of
the matter by the full Court and, if necessary, appeal the reversal of the
decision. There can be no assurance, however, the that Company's position
will prevail. Although the amount in dispute is not material, it is
possible that if the Company's position does not prevail, the IRS will
attempt to assess taxes in additional units of the Company (as well as
other restaurant companies). In the event the IRS' enforcement policy with
respect to such assessments is ultimately upheld, the Company believes that
a dollar-for-dollar business tax credit would be available to the Company
to offset, over a period of four years, any taxes determined to be due.
Moreover, the Company is a participant in an IRS enforcement program which
would eliminate the risk of additional assessments by the IRS in return for
a restaurant employer's proactive role in encouraging employee tip
reporting. The protection against additional assessment afforded by the
agreement should be available to the Company. In the opinion of
management, the ultimate resolution of all pending legal proceedings will
not have a material adverse effect on the Company's operations or financial
position.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Company.
Executive officers of the Company are appointed by and serve at the discretion
of the Company's Board of Directors. Information regarding the Company's
executive officers as of August 4, 1997 is provided below.
Executive
Officer
Name Age Position with the Company Since
S. E. Beall, III 47 Chairman of the Board and 1982
Chief Executive Officer
R. D. McClenagan 49 President- Ruby Tuesday 1985
Division
P. G. Hunt 61 Senior Vice President, 1972
General Counsel and
Secretary
J. R. Mothershed 49 Senior Vice President and 1992
Chief Financial Officer,
Treasurer and Assistant
Secretary
M. S. Ingram 44 Senior Vice President, 1996
Human Resources
Mr. Beall has been Chairman of the Board and Chief Executive Officer of
the Company and prior to the Distribution, Morrison, since May 5, 1995.
Mr. Beall served as President and Chief Executive Officer of Morrison
from June 6, 1992 to May 4, 1995 and as President and Chief Operating
Officer of Morrison from September 1986 to June 1992.
Mr. McClenagan has been President of the Ruby Tuesday Division of the
Company and prior to the Distribution, Morrison, since March 1994. He
served as President of the Ruby Tuesday Group of Morrison from April
1990 to March 1994 and as Senior Vice President of the Specialty Rest-
aurant Division of Morrison from March 1985 to April 1990.
Mr. Hunt joined Morrison in June 1968 and was named Senior Vice
President, General Counsel and Secretary of Morrison in September 1985
and has served in the same capacity at the Company since the
Distribution. From December 1984 to September 1985, he served as Vice
President, General Counsel and Secretary of Morrison.
Mr. Mothershed joined Morrison in July 1972 and was named Senior Vice
President, Finance in March 1994. Mr. Mothershed has been Senior Vice
President of the Company since the Distribution and in June 1996 was
also named Chief Financial Officer of the Company. He served as Vice
President, Controller and Treasurer of Morrison from March 1989 until
March 1994.
Mr. Ingram joined Morrison in September 1979 as a General Manager for
Ruby Tuesday. Since that time, Mr. Ingram has held various positions
with Morrison and following the Distribution the Company, including Area
Director (1982-1987), Regional Vice President for Mozzarella's (1987-
1990), Division Vice President(1990-1994) and Senior Vice President,
Operations (1994-1996). Mr. Ingram was promoted to Senior Vice
President of Human Resources of the Company in September 1996.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters.
Certain information required by this item is incorporated herein by
reference to Note 12 of the Notes to Consolidated Financial Statements of
the Registrant's Annual Report to Shareholders for the fiscal year ended
May 31, 1997.
The Company has not paid dividends to shareholders since the Distribution.
During fiscal 1997, the Board of Directors approved a dividend policy as a
means of returning excess capital to its shareholders. This policy calls
for payment of semi-annual dividends of approximately $3.0 million
annually. Accordingly, the Company intends to pay its first dividend
beginning in the third quarter of fiscal 1998. Under various financing
agreements, the Company has agreed to restrict dividend payments (other
than stock dividends) and purchases of its capital stock (collectively,
"Restricted Payments") to amounts based on earnings after fiscal year 1996.
Specifically, the maximum amount available for Restricted Payments at any
time is the excess of shareholders' equity above the amount equal to the
sum of $180 million plus 50% (or minus 100% in the case of a deficit) of
Consolidated Net Earnings for the period commencing on June 2, 1996, and
terminating at the end of the last fiscal quarter preceding the date of any
proposed Restricted Payment. At May 31, 1997, the maximum amount of
permissible Restricted Payments was $31.1 million.
Item 6. Selected Financial Data.
The information contained under the caption "Summary of Operations" of the
Registrant's Annual Report to Shareholders for the fiscal year ended May
31, 1997 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the
Registrant's Annual Report to Shareholders for the fiscal year ended May
31, 1997 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements and the related report of
the Company's independent auditors contained in the Registrant's Annual
Report to Shareholders for the fiscal year ended May 31, 1997 are
incorporated herein by reference:
Consolidated Statements of Income - Fiscal years ended
May 31, 1997, June 1, 1996 and June 3, 1995.
Consolidated Balance Sheets - As of May 31, 1997 and June 1,
1996.
Consolidated Statements of Shareholders' Equity - Fiscal
years ended May 31, 1997, June 1, 1996 and June 3, 1995.
Consolidated Statements of Cash Flows - Fiscal years ended
May 31, 1997, June 1, 1996 and June 3, 1995.
Notes to Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company.
(a) The information regarding directors of the Company is incorporated
herein by reference to the information set forth in the table captioned
"Director and Director Nominee Information" under "Election of Directors"
in the definitive proxy statement of the Registrant dated August 25, 1997
relating to the Registrant's annual meeting of shareholders to be held on
September 29, 1997.
(b) Pursuant to Form 10-K General Instruction G(3), the information
regarding executive officers of the Company has been included in Part I of
this Report under the caption "Executive Officers of the Company".
Item 11. Executive Compensation.
The information required by this Item 11 is incorporated herein by
reference to the information set forth under the captions "Executive
Compensation" and "Directors' Fees and Attendance" in the definitive proxy
statement of the Registrant dated August 25, 1997 relating to the
Registrant's annual meeting of shareholders to be held on September 29,
1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this Item 12 is incorporated herein by
reference to the information set forth in the table captioned "Beneficial
Ownership of Common Stock" under "Election of Directors" in the definitive
proxy statement of the Registrant dated August 25, 1997 relating to the
Registrant's annual meeting of shareholders to be held on September 29,
1997.
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are incorporated by reference into
or are filed as a part of this report:
1. Financial Statements:
The following consolidated financial statements and the
independent auditors' report thereon, included in the
Registrant's Annual Report to Shareholders for the fiscal year
ended May 31, 1997, a copy of which is contained in the
exhibits to this report, are incorporated herein by reference:
Page Reference
in paper version
of Annual Report
to Shareholders
Consolidated Statements of Income for
the fiscal years ended May 31, 1997,
June 1, 1996 and June 3, 1995 26
Consolidated Balance Sheets as of
May 31, 1997 and June 1, 1996 27
Consolidated Statements of Shareholders'
Equity for the fiscal years ended
May 31, 1997, June 1, 1996 and
June 3, 1995 28
Consolidated Statements of Cash Flows
for the fiscal years ended May 31, 1997,
June 1, 1996 and June 3, 1995 29
Notes to Consolidated Financial Statements 30-42
Report of Independent Auditors 43
2. Financial Statement Schedules:
Financial statement schedules are omitted because they are either not
required or the required information is shown in the financial
statements or notes thereto.
3. Exhibits
The following exhibits are filed as part of this report:
RUBY TUESDAY, INC. AND SUBSIDIARIES
LIST OF EXHIBITS
Exhibit
Number Description
3.1 Articles of Incorporation and all mergers of Ruby Tuesday, Inc. (1)
3.2 Bylaws of Ruby Tuesday, Inc.(1)
4.1 Specimen Common Stock Certificate. (1)
4.2 Articles of Incorporation and all mergers of Ruby Tuesday, Inc. (filed as
Exhibit 3.1 hereto). (1)
4.3 Bylaws of Ruby Tuesday, Inc. (filed as Exhibit 3.2 hereto). (1)
10.1 Executive Supplemental Pension Plan together with First Amendment made
June 30, 1994 and Second Amendment made July 31, 1995.* (2)
Exhibit
Number Description
10.2 Master Agreement dated as of May 30, 1997 among Ruby Tuesday, Inc.,
as Lessee and Guarantor, Atlantic Financial Group , LTD., as lessor,
AmSouth Bank of Alabama, as a Lender, Barnett Bank of Jacksonville, N.A.,
as a Lender, First American National Bank, as a Lender, Wachovia Bank of
Georgia, N.A., as a Lender, Hibernia National Bank, as a Lender, First
Tennessee Bank, as a Lender, and SunTrust Bank, Atlanta, as Agent and as a
Lender; together with the Lease Agreement dated as of May 31, 1997 between
Atlantic Financial Group, LTD., as lessor and Ruby Tuesday, Inc.
as lessee; and the Loan Agreement dated as of May 31, 1997 among
Atlantic Financial Group, LTD., as lessor and borrower, the
financial institutions party hereto, as lenders, and SunTrust
Bank Atlanta, as Agent.
10.3 Morrison Restaurants Inc. Stock Incentive and Deferred Compensation Plan
for Directors together with First Amendment dated June 29, 1995.*(3)
10.4 1993 Executive Stock Option Program.* (4)
10.5 1993 Management Stock Option Program (July 1, 1993 - June 30, 1996).* (5)
10.6 [Reserved]
10.7 Morrison Restaurants Inc. 1987 Stock Bonus and Non-Qualified Stock Option
Plan, and Related Agreement.* (6)
10.8 Morrison Restaurants Inc. 1993 Non-Executive Stock Incentive Plan.* (7)
10.9 Morrison Restaurants Inc. Deferred Compensation Plan, as restated
effective January 1, 1994, together with amended and restated Trust
Agreement (dated December 1, 1992) to Deferred Compensation Plan.* (8)
10.10 Supply Agreement Between Morrison Restaurants Inc. and PYA/Monarch, Inc.
dated July 8, 1988. (9)
10.11 Letter Agreement dated March 5, 1996 amending Supply Agreement between
Morrison Restaurants Inc. and PYA/Monarch, Inc. (1)
10.12 Morrison Restaurants Inc. Management Retirement Plan together with First
Amendment made June 30, 1994 and Second Amendment made July 31, 1995.*(10)
Exhibit
Number Description
10.13 Asset Purchase Agreement dated June 27, 1994, by and among Morrison
Restaurants Inc. and Gardner Merchant Food Services, Inc. and the related
exhibits to such agreement. (11)
10.14 Morrison Restaurants Inc. Salary Deferral Plan, as amended and restated
December 31, 1993, together with First and Second Amendments to the Plan
dated October 21, 1994 and June 30, 1995, respectively.* (12)
10.15 Executive Group Life and Executive Accidental Death and Dismemberment
Plan.* (13)
10.16 Ruby Tuesday, Inc. Salary Deferral Plan Trust Agreement dated July 1,
1997.
10.17 Ruby Tuesday, Inc. Deferred Compensation Plan Trust Agreement dated July
1, 1997.
10.18 Form of Non-Qualified Stock Option Agreement for Executive Officers
Pursuant to the Morrison Restaurants Inc. Stock Incentive Plan.* (14)
10.19 [Reserved]
10.20 [Reserved]
10.21 Amendments to Morrison Restaurants Inc. 1987 Stock Bonus and
Non-Qualified Stock Option Plan.* (15)
10.22 Morrison Restaurants Inc. Executive Life Insurance Plan.* (16)
10.23 Distribution Agreement dated as of March 2, 1996 among Morrison
Restaurants Inc., Morrison Fresh Cooking, Inc. and Morrison Health Care,
Inc. (1)
10.24 Amended and Restated Tax Allocation and Indemnification Agreement dated
as of March 2, 1996 among Morrison Restaurants Inc., Custom Management
Corporation of Pennsylvania, Custom Management Corporation, John C. Metz &
Associates, Inc., Morrison International, Inc., Morrison Custom Management
Corporation of Pennsylvania, Morrison Fresh Cooking, Inc., Ruby Tuesday,
Inc., a Delaware corporation, Ruby Tuesday (Georgia), Inc., a Georgia
corporation, Tias, Inc. and Morrison Health Care, Inc. (1)
10.25 Agreement Respecting Employee Benefit Matters dated as of March 2, 1996
among Morrison Restaurants Inc., Morrison Fresh Cooking, Inc. and Morrison
Health Care, Inc. (1)
10.26 License Agreement dated as of March 2, 1996 between Ruby Tuesday
(Georgia), Inc. and Morrison Health Care, Inc. (1)
Exhibit
Number Description
10.27 Amended and Restated Operating Agreement of MRT Purchasing, LLC dated as
of March 2, 1996 among Morrison Restaurants Inc., Ruby
Tuesday, Inc., Morrison Fresh Cooking, Inc. and Morrison Health
Care, Inc. (1)
10.28 Form of 1996 Stock Incentive Plan.* (1)
10.29 Form of Second Amendment to Stock Incentive and Deferred Compensation Plan
for Directors.* (1)
10.30 Form of First Amendment to 1993 Non-Executive Stock Incentive Plan.* (1)
10.31 Form of Third Amendment to Executive Supplemental Pension Plan.* (1)
10.32 Form of Third Amendment to Management Retirement Plan.* (1)
10.33 Form of Third Amendment to Salary Deferral Plan.* (1)
10.34 Form of First Amendment to Deferred Compensation Plan.* (1)
10.35 Form of Second Amendment to Retirement Plan.* (1)
10.36 Form of Fourth Amendment to 1987 Stock Bonus and Non-Qualified Stock
Option Plan.* (1)
10.37 [Reserved]
10.38 Form of Indemnification Agreement to be entered into with executive
officers and directors. (1)
10.39 Form of Change of Control Agreement to be entered into with executive
officers.* (1)
10.40 Credit Agreement dated as of March 6, 1996 among Ruby Tuesday (Georgia),
Inc., SunTrust Bank, Atlanta, for itself and as Agent and Administrative
Agent, and the other lenders signatories
thereto. (1)
10.41 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc., a
Georgia corporation, and RT Orlando Franchise, L.P., d/b/a RT Orlando
Franchise Ltd., a Delaware limited partnership.
10.42 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc., a
Georgia corporation, and RT Tampa Franchise, L.P., d/b/a RT Tampa
Franchise Ltd., a Delaware limited partnership.
10.43 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc., a
Georgia corporation, and RT South Florida Franchise, L.P., d/b/a RT
South Florida Franchise Ltd., a Delaware limited partnership.
11 Statement regarding computation of per share earnings.
13 Annual Report to Shareholders for the fiscal year ended May 31,
1997 (Only portions specifically incorporated by reference in the
Form 10-K are being filed herewith).
Exhibit
Number Description
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
EXHIBIT FOOTNOTES
Exhibit
Footnote Description
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Exhibit of the same number on Form
8-B dated March 15, 1996 of Ruby Tuesday, Inc. (File No. 0-12454).
(2) Incorporated by reference to Exhibit 10(b) to Annual Report on Form 10-K
of Morrison Restaurants Inc. for the fiscal year ended June 5, 1993 (File
No. 0-1750).
(3) Incorporated by reference to Exhibit 10(c) to Annual Report on Form 10-K
of Morrison Restaurants Inc. for the fiscal year ended June 3, 1995 (File
No. 1-12454).
(4) Incorporated by reference to Exhibit 10(d) to Annual Report on Form 10-K
of Morrison Restaurants Inc. for the fiscal year ended June 3, 1995 (File
No. 1-12454).
(5) Incorporated by reference to Exhibit 10(e) to Annual Report on Form 10-K
of Morrison Restaurants Inc. for the fiscal year ended June 3, 1995 (File
No. 1-12454).
(6) Incorporated by reference to Exhibit 28.1 to Registration
Statement on Form S-8 of Morrison Restaurants Inc. (Reg. No. 33-13593).
Exhibit
Footnote Description
(7) Incorporated by reference to Exhibit 10(h) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(8) Incorporated by reference to Exhibit 10(i) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(9) Incorporated by reference to Exhibit 10(m) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
May 28, 1988 (File No. 0-1750).
(10) Incorporated by reference to Exhibit 10(n) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(11) Incorporated by reference to Exhibit (2) to the Current Report on
Form 8-K dated July 27, 1995 of Morrison Restaurants Inc. (File
No. 1-12454)
(12) Incorporated by reference to Exhibit 10(p) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(13) Incorporated by reference to Exhibit 10(q) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1989 (File No. 0-1750).
(14) Incorporated by reference to Exhibit 10(v) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(15) Incorporated by reference to Exhibit 10(z) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 4, 1994 (File No. 1-12454).
(16) Incorporated by reference to Exhibit 10(a)(a) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 4, 1994 (File No. 1-12454).
(b) Reports on Form 8-K
None.
(c) Exhibits filed with this report are attached hereto.
(d) The financial statement schedules listed in subsection
(a) (2) above are attached hereto.
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.
RUBY TUESDAY, INC.
Date 8/25/97 By: /s/ Samuel E. Beall, III
Samuel E. Beall, III
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated:
Date 8/25/97 By: /s/ Samuel E. Beall, III
Samuel E. Beall, III
Chairman of the Board and
Chief Executive Officer
Date 8/25/97 By: /s/ J. Russell Mothershed
J. Russell Mothershed
Senior Vice President, Finance
Chief Financial Officer
Treasurer and Assistant Secretary
Date 8/25/97 By:/s/J.B. McKinnon
J. B. McKinnon
Director
Date 8/25/97 By: /s/ Dr. Donald Ratajczak
Dr. Donald Ratajczak
Director
Date 8/25/97 By:/s/ Dolph W. von Arx
Dolph W. von Arx
Director
Date 8/25/97 By:/s/ Claire L. Arnold
Claire L. Arnold
Director
Date 8/25/97 By:/s/ Arthur R. Outlaw
Arthur R. Outlaw
Vice-Chairman of the Board
Date 8/25/97 By:/s/ Dr. Benjamin F. Payton
Dr. Benjamin F. Payton
Director
RUBY TUESDAY, INC. AND SUBSIDIARIES
LIST OF EXHIBITS
Exhibit
Number Description
3.1 Articles of Incorporation and all mergers of Ruby Tuesday, Inc. (1)
3.2 Bylaws of Ruby Tuesday, Inc.(1)
4.1 Specimen Common Stock Certificate. (1)
4.2 Articles of Incorporation and all mergers of Ruby Tuesday, Inc.
(filed as Exhibit 3.1 hereto). (1)
4.3 Bylaws of Ruby Tuesday, Inc. (filed as Exhibit 3.2 hereto). (1)
10.1 Executive Supplemental Pension Plan together with First Amendment
made June 30, 1994 and Second Amendment made July 31, 1995.* (2)
10.2 Master Agreement dated as of May 30, 1997 among Ruby Tuesday,
Inc., as Lessee and Guarantor, Atlantic Financial Group , LTD.,
as lessor, AmSouth Bank of Alabama, as a Lender, Barnett Bank of
Jacksonville, N.A., as a Lender, First American National Bank, as
a Lender, Wachovia Bank of Georgia, N.A., as a Lender, Hibernia
National Bank, as a Lender, First Tennessee Bank, as a Lender,
and SunTrust Bank, Atlanta, as Agent and as a Lender; together
with the Lease Agreement dated as of May 31, 1997 between
Atlantic Financial Group, LTD., as lessor and Ruby Tuesday, Inc.
as lessee; and the Loan Agreement dated as of May 31, 1997 among
Atlantic Financial Group, LTD., as lessor and borrower, the
financial institutions party hereto, as lenders, and SunTrust
Bank Atlanta, as Agent.
10.3 Morrison Restaurants Inc. Stock Incentive and Deferred
Compensation Plan for Directors together with First Amendment
dated June 29, 1995.*(3)
10.4 1993 Executive Stock Option Program.* (4)
10.5 1993 Management Stock Option Program (July 1, 1993 - June 30, 1996).* (5)
10.6 [Reserved]
10.7 Morrison Restaurants Inc. 1987 Stock Bonus and Non-Qualified
Stock Option Plan, and Related Agreement.* (6)
10.8 Morrison Restaurants Inc. 1993 Non-Executive Stock Incentive Plan.* (7)
10.9 Morrison Restaurants Inc. Deferred Compensation Plan, as restated
effective January 1, 1994, together with amended and restated Trust
Agreement (dated December 1, 1992) to Deferred Compensation Plan.* (8)
10.10 Supply Agreement Between Morrison Restaurants Inc. and
PYA/Monarch, Inc. dated July 8, 1988. (9)
10.11 Letter Agreement dated March 5, 1996 amending Supply Agreement
between Morrison Restaurants Inc. and PYA/Monarch, Inc. (1)
10.12 Morrison Restaurants Inc. Management Retirement Plan together
with First Amendment made June 30, 1994 and Second Amendment made
July 31, 1995.* (10)
10.13 Asset Purchase Agreement dated June 27, 1994, by and among
Morrison Restaurants Inc. and Gardner Merchant Food Services,
Inc. and the related exhibits to such agreement. (11)
10.14 Morrison Restaurants Inc. Salary Deferral Plan, as amended and
restated December 31, 1993, together with amended and restated
Trust Agreement (effective January 1, 1994) First and Second
Amendments to the Plan dated October 21, 1994 and June 30, 1995,
respectively, and the First Amendment to the Trust Agreement made
June 30, 1995.* (12)
10.15 Executive Group Life and Executive Accidental Death and
Dismemberment Plan.* (13)
10.16 [Reserved]
10.17 [Reserved]
10.18 Form of Non-Qualified Stock Option Agreement for Executive
Officers Pursuant to the Morrison Restaurants Inc. Stock
Incentive Plan.* (14)
10.19 [Reserved]
10.20 [Reserved]
10.21 Amendments to Morrison Restaurants Inc. 1987 Stock Bonus and Non-
Qualified Stock Option Plan.* (15)
10.22 Morrison Restaurants Inc. Executive Life Insurance Plan.* (16)
10.23 Distribution Agreement dated as of March 2, 1996 among Morrison
Restaurants Inc., Morrison Fresh Cooking, Inc. and Morrison
Health Care, Inc. (1)
10.24 Amended and Restated Tax Allocation and Indemnification Agreement
dated as of March 2, 1996 among Morrison Restaurants Inc., Custom
Management Corporation of Pennsylvania, Custom Management
Corporation, John C. Metz & Associates, Inc., Morrison
International, Inc., Morrison Custom Management Corporation of
Pennsylvania, Morrison Fresh Cooking, Inc., Ruby Tuesday, Inc., a
Delaware corporation, Ruby Tuesday (Georgia), Inc., a Georgia
corporation, Tias, Inc. and Morrison Health Care, Inc. (1)
10.25 Agreement Respecting Employee Benefit Matters dated as of March
2, 1996 among Morrison Restaurants Inc., Morrison Fresh Cooking,
Inc. and Morrison Health Care, Inc. (1)
10.26 License Agreement dated as of March 2, 1996 between Ruby Tuesday
(Georgia), Inc. and Morrison Health Care, Inc. (1)
10.27 Amended and Restated Operating Agreement of MRT Purchasing, LLC
dated as of March 2, 1996 among Morrison Restaurants Inc., Ruby
Tuesday, Inc., Morrison Fresh Cooking, Inc. and Morrison Health
Care, Inc. (1)
10.28 Form of 1996 Stock Incentive Plan.* (1)
10.29 Form of Second Amendment to Stock Incentive and Deferred
Compensation Plan for Directors.* (1)
10.30 Form of First Amendment to 1993 Non-Executive Stock Incentive
Plan.* (1)
10.31 Form of Third Amendment to Executive Supplemental Pension Plan.* (1)
10.32 Form of Third Amendment to Management Retirement Plan.* (1)
10.33 Form of Third Amendment to Salary Deferral Plan.* (1)
10.34 Form of First Amendment to Deferred Compensation Plan.* (1)
10.35 Form of Second Amendment to Retirement Plan.* (1)
10.36 Form of Fourth Amendment to 1987 Stock Bonus and Non-Qualified Stock
Option Plan.* (1)
10.37 [Reserved]
10.38 Form of Indemnification Agreement to be entered into with
executive officers and directors. (1)
10.39 Form of Change of Control Agreement to be entered into with executive
officers.* (1)
10.40 Credit Agreement dated as of March 6, 1996 among Ruby Tuesday
(Georgia), Inc., SunTrust Bank, Atlanta, for itself and as Agent
and Administrative Agent, and the other lenders signatories
thereto. (1)
10.41 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc.,
a Georgia corporation, and RT Orlando Franchise, L.P., d/b/a RT
Orlando Franchise Ltd., a Delaware limited partnership.
10.42 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc.,
a Georgia corporation, and RT Tampa Franchise, L.P., d/b/a RT
Tampa Franchise Ltd., a Delaware limited partnership.
10.43 Purchase agreement dated July 2, 1997 between Ruby Tuesday, Inc.,
a Georgia corporation, and RT South Florida Franchise, L.P.,
d/b/a RT South Florida Franchise Ltd., a Delaware limited partnership.
11 Statement regarding computation of per share earnings.
13 Annual Report to Shareholders for the fiscal year ended May 31,
1997 (Only portions specifically incorporated by reference in the
Form 10-K are being filed herewith).
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
RUBY TUESDAY, INC.
EXHIBIT FOOTNOTES
Exhibit
Footnote Description
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Exhibit of the same number on Form
8-B dated March 15, 1996 of Ruby Tuesday, Inc. (File No.0-12454).
(2) Incorporated by reference to Exhibit 10(b) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(3) Incorporated by reference to Exhibit 10(c) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(4) Incorporated by reference to Exhibit 10(d) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(5) Incorporated by reference to Exhibit 10(e) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(6) Incorporated by reference to Exhibit 28.1 to Registration
Statement on Form S-8 of Morrison Restaurants Inc. (Reg. No. 33-13593).
(7) Incorporated by reference to Exhibit 10(h) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(8) Incorporated by reference to Exhibit 10(i) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(9) Incorporated by reference to Exhibit 10(m) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
May 28, 1988 (File No. 0-1750).
(10) Incorporated by reference to Exhibit 10(n) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(11) Incorporated by reference to Exhibit (2) to the Current Report on
Form 8-K dated July 27, 1995 of Morrison Restaurants Inc. (File
No. 1-12454)
(12) Incorporated by reference to Exhibit 10(p) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 3, 1995 (File No. 1-12454).
(13) Incorporated by reference to Exhibit 10(q) to Annual Report on Form
10-K of Morrison Restaurants Inc. for the fiscal year ended June 3, 1989
(File No. 0-1750).
(14) Incorporated by reference to Exhibit 10(v) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 5, 1993 (File No. 0-1750).
(15) Incorporated by reference to Exhibit 10(y) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 4, 1994 (File No. 1-12454).
(16) Incorporated by reference to Exhibit 10(a)(a) to Annual Report on
Form 10-K of Morrison Restaurants Inc. for the fiscal year ended
June 4, 1994 (File No. 1-12454).
MASTER AGREEMENT
Dated as of May 30, 1997
among
RUBY TUESDAY, INC.,
as Lessee and Guarantor,
ATLANTIC FINANCIAL GROUP, LTD., as Lessor,
AMSOUTH BANK OF ALABAMA, as a Lender,
BARNETT BANK, N.A., as a Lender,
FIRST AMERICAN NATIONAL BANK, as a Lender,
WACHOVIA BANK OF GEORGIA, N.A., as a Lender,
HIBERNIA NATIONAL BANK, as a Lender,
FIRST TENNESSEE BANK, as a Lender,
and
SUNTRUST BANK, ATLANTA, as Agent and as a Lender
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS; INTERPRETATION 2
SECTION 2
ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
NATURE OF TRANSACTION 2
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease
(a) Land 2
(b) Building 2
SECTION 2.2 Fundings of Purchase Price, Development Costs
and Construction Costs 3
(a) Initial Funding and Payment of Purchase Price for Land
and Development Costs on Closing Date 3
(b) Subsequent Fundings and Payments of Construction Costs
during Construction Term 3
(c) Aggregate Limits on Funded Amounts 3
(d) Notice, Time and Place of Fundings 4
(e) Lessee's Deemed Representation for Each Funding 4
(f) Not Joint Obligations 5
SECTION 2.3 Funded Amounts and Interest and Yield Thereon
Unused Fee 5
SECTION 2.4 Lessee Owner for Tax Purposes 6
SECTION 2.5 Amounts Due Under Lease 6
SECTION 3
CONDITIONS PRECEDENT; DOCUMENTS 7
SECTION 3.1 Conditions to the Obligations of the Funding
Parties on each Closing Date 7
(a) Documents 7
(i) Deed and Purchase Agreement 7
(ii) Lease Supplement 8
(iii) Mortgage and Assignment of Lease and Rents 8
(iv) Security Agreement and Assignment 8
(v) Survey 9
(vi) Title and Title Insurance 9
(vii) Appraisal 9
(viii) Environmental Audit and related Reliance
Letter 10
(ix) Evidence of Insurance 10
(x) Officer's Certificate 11
(xi) UCC Financing Statement; Recording Fees;
Transfer Taxes 11
(xii) Opinions 11
(xiii) Officer's Certificate 12
(xiv) Good Standing Certificates 12
(b) Litigation 12
(c) Legality 12
(d) No Events 12
(e) Representations 13
(f) Cutoff Date 13
(g) Transaction Expenses 13
SECTION 3.2 Additional Conditions for the Initial Closing Date 13
(i) Guaranty 13
(ii) Loan Agreement 13
(iii) Master Agreement 13
(iv) Construction Agency Agreement 13
(v) Lease 14
(vi) Lessee's Resolutions and Incumbency Certificate, etc. 14
(vii) Opinions of Counsel 14
(viii) Good Standing Certificate 14
(ix) Lessor's Consents and Incumbency Certificate, etc. 14
SECTION 3.3 Conditions to the Obligations of Lessee 15
(a) General Conditions 15
(b) Legality 15
(c) Purchase Agreement; Ground Lease 15
SECTION 3.4 Conditions to the Obligations of the Funding
Parties on each Funding Date 15
(a) Funding Request 15
(b) Condition Fulfilled 15
(c) Representations 16
(d) No Bonded Stop Notice or Filed Mechanics Lien 16
(e) Lease Supplement 16
SECTION 3.5 Completion Date Conditions 16
(a) Title Policy Endorsements; Architect's Certificate 16
(b) Construction Completion 17
(c) Lessee Certification 17
SECTION 4
REPRESENTATIONS 18
SECTION 4.1 Representations of Lessee 18
(a) Organization; Corporate Powers 18
(b) Authority 18
(c) Binding Obligations 18
(d) No Conflict 19
(e) Governmental Consents 19
(f) Governmental Regulation 19
(g) Requirements of Law 20
(h) Rights in Respect of the Leased Property 20
(i) Hazardous Materials 20
(j) Leased Property 21
(k) True and Complete Disclosure 22
(l) Taxes 22
(m) Financial Statements 22
(n) No Material Litigation 22
(o) Margin Regulations 23
(p) Insurance 23
(q) No Default 23
(r) No Burdensome Restrictions 23
(s) Subsidiaries 23
(t) ERISA 24
(1) Identification of Plans 24
(2) Compliance 24
(3) Liabilities 24
(4) Funding 24
(u) Patents, Trademarks, Licenses, Etc. 25
(v) Ownership of Property 25
(w) Indebtedness 26
(x) Labor Matters 26
SECTION 4.2 Representations of the Lessor 26
(a) Securities Act 26
(b) Due Organization, etc. 26
(c) Due Authorization; Enforceability, etc. 27
(d) No Conflict 27
(e) Litigation 27
(f) Lessor Liens 27
(g) Employee Benefit Plans 27
(h) General Partner 28
(i) Financial Information 28
(j) No Offering 28
SECTION 4.3 Representations of each Lender 28
(a) Securities Act 28
(b) Employee Benefit Plans 28
SECTION 5
COVENANTS OF THE LESSEE AND THE LESSOR 29
SECTION 5.1 Affirmative Covenants 29
(a) Corporate Existence, Etc. 29
(b) Compliance with Laws, Etc. 29
(c) Payment of Taxes and Claims, Etc. 29
(d) Keeping of Books 29
(e) Visitation, Inspection, Etc 29
(f) Insurance; Maintenance of Properties 30
(g) Reporting Covenants 30
(i) Annual Financial Statements 30
(ii) Quarterly Financial Statements 31
(iii) No Default/Compliance Certificate 31
(iv) Notice of Default 31
(v) Litigation 31
(vi) Environmental Notices 32
(vii) ERISA 32
(viii) Liens 33
(ix) Public Filings, Etc. 33
(x) Accountants' Reports 33
(xi) Burdensome Restrictions, Etc. 33
(xii) New Material Subsidiaries 34
(xiii) Other Information 34
(h) Financial Covenants 34
(i) Fixed Charge Coverage 34
(ii) Consolidated Funded Debt to Total Capitalization 34
(iii) Consolidated Net Worth 34
(i) Notices Under Certain Other Indebtedness 35
SECTION 5.2 Negative Covenants 35
(a) Indebtedness 35
(b) Liens 36
(c) Mergers, Sales, Etc. 37
(d) Investments, Loans, Etc. 38
(e) Letters of Credit 40
(f) Sale and Leaseback Transactions 40
(g) Transactions with Affiliates 40
(h) Changes in Business 40
(i) ERISA 40
(j) Limitation on Payment Restrictions Affecting
Consolidated Companies 41
(k) Actions Under Certain Documents 41
(l) Changes in Fiscal Year 41
(m) Issuance of Stock by Subsidiaries 41
SECTION 5.3 Further Assurances 41
SECTION 5.4 Additional Required Appraisals 42
SECTION 5.5 Lessor's Covenants 42
SECTION 6
TRANSFERS BY LESSOR AND LENDERS 43
SECTION 6.1 Lessor Transfers 43
SECTION 6.2 Lender Transfers 43
SECTION 7
INDEMNIFICATION 44
SECTION 7.1 General Indemnification 44
SECTION 7.2 Environmental Indemnity 46
SECTION 7.3 Proceedings in Respect of Claims 48
SECTION 7.4 General Tax Indemnity 50
(a) Tax Indemnity 50
(b) Exclusions from General Tax Indemnity 51
(c) Contests 53
(d) Reimbursement for Tax Savings 54
(e) Payments 55
(f) Reports 56
(g) Verification 56
SECTION 7.5 Increased Costs, etc. 56
(a) Interest Rate Not Ascertainable, etc. 56
(b) Illegality 57
(c) Increased Costs 57
(d) Conversion to Base Rate Advances 58
(e) Alternative Lending Office 59
(f) Funding Losses 59
(g) Assumptions Concerning Funding of LIBOR Advances 60
(h) Capital Adequacy 60
(i) Replacement of Lender 61
SECTION 7.6 End of Term Indemnity 61
SECTION 8
MISCELLANEOUS 62
SECTION 8.1 Survival of Agreements 62
SECTION 8.2 Notices 62
SECTION 8.3 Counterparts 62
SECTION 8.4 Amendments 63
SECTION 8.5 Headings, etc. 64
SECTION 8.6 Parties in Interest 64
SECTION 8.7 GOVERNING LAW 64
SECTION 8.8 Expenses 64
SECTION 8.9 Severability 65
SECTION 8.10 Liabilities of the Funding Parties 65
SECTION 8.11 Submission to Jurisdiction; Waivers 65
SECTION 8.12 Liabilities of the Agent 66
APPENDIX A Definitions and Interpretation
SCHEDULES
SCHEDULE 2.2 Commitments
SCHEDULE 4.1(l) Taxes
SCHEDULE 4.1(n) Litigation
SCHEDULE 4.1(q) Defaults
SCHEDULE 4.1(r) Burdensome Restrictions
SCHEDULE 4.1(s) Subsidiaries
SCHEDULE 4.1(t) ERISA
SCHEDULE 4.1(u) Patents, Trademarks, Licenses
SCHEDULE 4.1(v) Ownership of Property
SCHEDULE 4.1(w) Indebtedness
SCHEDULE 4.1(x) Labor Matters
SCHEDULE 5.2(a) Indebtedness on Initial Closing Date
SCHEDULE 5.2(b) Liens
SCHEDULE 8.2 Notice Information
EXHIBITS
EXHIBIT A Form of Funding Request
EXHIBIT B Form of Assignment of Lease and Rents
EXHIBIT C Form of Security Agreement and Assignment
EXHIBIT D Form of Mortgage
EXHIBIT E [Reserved]
EXHIBIT F Form of Environmental Audit Reliance Letter
EXHIBIT G Forms of Opinions of Counsel
EXHIBIT H Form of Lessee Certification of Construction Completion
EXHIBIT I Form of Payment Date Notice
EXHIBIT J Form of Assignment and Assumption Agreement
||
MASTER AGREEMENT
THIS MASTER AGREEMENT, dated as of May 30, 1997 (as it may be
amended or modified from time to time in accordance with the provisions
hereof, this "Master Agreement"), is among RUBY TUESDAY, INC., a Georgia
corporation ("Lessee"); ATLANTIC FINANCIAL GROUP, LTD., a Texas limited
partnership (the "Lessor"), AMSOUTH BANK OF ALABAMA, an Alabama banking
corporation ("AmSouth"), BARNETT BANK, N.A., a national banking
association ("Barnett"), FIRST AMERICAN NATIONAL BANK, a national banking
association ("First American"), WACHOVIA BANK OF GEORGIA, N.A., a
national banking association ("Wachovia"), HIBERNIA NATIONAL BANK, a
national banking association ("Hibernia"), FIRST TENNESSEE BANK, a
Tennessee banking corporation ("First Tennessee")and SUNTRUST BANK,
ATLANTA, a Georgia banking corporation ("SunTrust"; AmSouth, Barnett,
First American, Wachovia, SunTrust, Hibernia and First Tennessee,
together with any other financial institution that becomes a party hereto
as a lender, collectively referred to as "Lenders" and individually as a
"Lender"), and SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as
agent for the Lenders (in such capacity, the "Agent").
PRELIMINARY STATEMENT
In accordance with the terms and provisions of this Master
Agreement, the Lease, the Loan Agreement and the other Operative
Documents, (i) the Lessor contemplates acquiring Land identified by the
Lessee from time to time, and leasing such Land to the Lessee, (ii) the
Lessee, as Construction Agent for the Lessor, wishes to construct
Buildings on such Land for the Lessor and, when completed, to lease such
Buildings from the Lessor as part of the Leased Properties under the
Lease, (iii) the Lessee, as agent, wishes to obtain, and the Lessor is
willing to provide, funding for the acquisition of the Land and the
construction of Buildings, (iv) the Lessor wishes to obtain, and Lenders
are willing to provide, from time to time, financing of a portion of the
funding of the acquisition of the Land and the construction of the
Buildings, and (v) the Lessee is willing to provide its Guaranty
Agreement to the Lenders and the Lessor.
In consideration of the mutual agreements contained in this Master
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 2
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used
and not defined herein shall have the meanings assigned thereto in
Appendix A hereto for all purposes hereof; and the rules of
interpretation set forth in Appendix A hereto shall apply to this Master
Agreement.
SECTION 3
ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
NATURE OF TRANSACTION
SECTION 3.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Land. Subject to the terms and conditions of this
Master Agreement, with respect to each parcel of Land identified by the
Lessee, on the related Closing Date (i) the Lessor agrees to acquire such
interest in the related Land from the applicable Seller as is
transferred, sold, assigned and conveyed to the Lessor pursuant to the
applicable Purchase Agreement or to lease such interest in the related
Land from the applicable Ground Lessor as is leased to the Lessor
pursuant to the applicable Ground Lease, (ii) the Lessor hereby agrees to
lease, or sublease, as the case may be, such Land to the Lessee pursuant
to the Lease, and (iii) the Lessee hereby agrees to lease, or sublease,
as the case may be, such Land from the Lessor pursuant to the Lease.
(b) Building. With respect to each parcel of Land, subject
to the terms and conditions of this Master Agreement, from and after the
Closing Date relating to such Land (i) the Construction Agent agrees,
pursuant to the terms of the Construction Agency Agreement, to construct
and install the Building on such Land for the Lessor prior to the
Scheduled Construction Termination Date, (ii) the Lenders and the Lessor
agree to fund all or a portion of the costs of such construction and
installation (and interest and yield thereon), (iii) the Lessor shall
lease, or sublease, as the case may be, such Building as part of such
Leased Property to the Lessee pursuant to the Lease, and (iv) the Lessee
shall lease, or sublease, as the case may be, such Building from the
Lessor pursuant to the Lease.
SECTION 3.2 Fundings of Purchase Price, Development Costs and
Construction Costs.
(a) Initial Funding and Payment of Purchase Price for Land
and Development Costs on Closing Date. Subject to the terms and
conditions of this Master Agreement, on the Closing Date for any Land,
each Lender shall make available to the Lessor its initial Loan with
respect to such Land in an amount equal to the product of such Lender's
Commitment Percentage times the purchase price for the Land, if
applicable, and the development, transaction and closing costs incurred
by the Lessee through such Closing Date, which funds the Lessor shall
use, together with the Lessor's own funds in an amount equal to the
product of the Lessor's Commitment Percentage times the purchase price,
if applicable, for the related Land and the development, transaction and
closing costs incurred by the Lessee, as agent, through such Closing
Date, to purchase the Land from the applicable Seller pursuant to the
applicable Purchase Agreement or lease the Land from the applicable
Ground Lessor pursuant to the applicable Ground Lease and to pay to the
Lessee the amount of such development, transaction and closing costs, and
the Lessor shall lease, or sublease, as the case may be, such Land to the
Lessee pursuant to the Lease.
(b) Subsequent Fundings and Payments of Construction Costs
during Construction Term. Subject to the terms and conditions of this
Master Agreement, on each Funding Date following the Closing Date for
each parcel of Land until the related Construction Term Expiration Date,
(i) each Lender shall make available to the Lessor a Loan in an amount
equal to the product of such Lender's Commitment Percentage times the
amount of Funding requested by the Lessee for such Funding Date, which
funds the Lessor hereby directs the Lender to pay over to the Lessee as
set forth in paragraph (d), and (ii) the Lessor shall pay over to the
Lessee its own funds (which shall constitute a part of and an increase in
the Lessor's Invested Amount with respect to such Leased Property) in an
amount equal to the product of the Lessor's Commitment Percentage times
the amount of Funding requested by the Lessee for such Funding Date.
(c) Aggregate Limits on Funded Amounts. The aggregate
amount that the Funding Parties shall be committed to provide as Funded
Amounts under this Master Agreement and the Loan Agreement shall not
exceed (x) with respect to each Leased Property the costs of purchase and
construction of such Leased Property and the related closing and
financing costs, or (y) $40,000,000 in the aggregate for all Leased
Properties; provided, however, that in the event that the Lessee
exercises a Partial Purchase Option, the amount set forth in this clause
(y) shall be reinstated to the extent of the Funded Amounts paid by the
Lessee in connection with such Partial Purchase Option. The aggregate
amount that any Funding Party shall be committed to fund under this
Master Agreement and the Loan Agreement shall not exceed the lesser of
(i) such Funding Party's Commitment and (ii) such Funding Party's
Commitment Percentage of the aggregate Fundings requested under this
Master Agreement.
(d) Notice, Time and Place of Fundings. With respect to
each Funding, the Lessee shall give the Lessor and the Agent an
irrevocable prior written notice not later than 11:00 a.m., Atlanta,
Georgia time, three Business Days prior to the proposed Closing Date or
other Funding Date, as the case may be, pursuant, in each case, to a
Funding Request in the form of Exhibit A (a "Funding Request"),
specifying the Closing Date or subsequent Funding Date, as the case may
be, the amount of Funding requested, whether such Funding shall be a
LIBOR Advance, a Base Rate Advance or a combination thereof and the Rent
Period(s) therefor. All documents and instruments required to be
delivered on such Closing Date pursuant to this Master Agreement shall be
delivered at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, or at such other location as may be
determined by the Lessor, the Lessee and the Agent. Each Funding shall
occur on a Business Day and shall be in an amount equal to $500,000 or an
integral multiple of $100,000 in excess thereof. All remittances made by
any Lender and the Lessor for any Funding shall be made in immediately
available funds by wire transfer to or, as is directed by, the Lessee,
with receipt by the Lessee not later than 12:00 noon, Atlanta, Georgia
time, on the applicable Funding Date, upon satisfaction or waiver of the
conditions precedent to such Funding set forth in Section 3; such funds
shall (1) in the case of the initial Funding on a Closing Date, be used
to pay the purchase price to the applicable Seller for the related Land
and pay the Lessee development, transaction and closing costs related to
such Land, and (2) in the case of each subsequent Funding be paid to the
Lessee as the Construction Agent, for the payment or reimbursement of
Construction costs.
(e) Lessee's Deemed Representation for Each Funding. Each
Funding Request by the Lessee shall be deemed a reaffirmation of the
Lessee's indemnity obligations in favor of the Indemnitees under the
Operative Documents and a representation by the Lessee to the Lessor, the
Agent, and the Lenders that on the proposed Closing Date or Funding Date,
as the case may be, (i) the amount of Funding requested represents
amounts owing in respect of the purchase price of the related Land and
development, transaction and closing costs in respect of the Leased
Property (in the case of the initial Funding on a Closing Date) or
amounts that the Lessee reasonably believes will be due in the 90 days
following such Funding from the Lessee to third parties in respect of the
Construction, or amounts paid by the Lessee to third parties in respect
of the Construction for which the Lessee has not previously been
reimbursed by a Funding (in the case of any Funding), (ii) no Event of
Default or Potential Event of Default exists, and (iii) the
representations of the Lessee set forth in Section 4.1 are true and
correct in all material respects as though made on and as of such Funding
Date, except to the extent such representations or warranties relate
solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on
and as of such earlier date.
(f) Not Joint Obligations. Notwithstanding anything to the
contrary set forth herein or in the other Operative Documents, each
Lender's and the Lessor's commitments shall be several, and not joint.
In no event shall any Funding Party be obligated to fund an amount in
excess of such Funding Party's Commitment Percentage of any Funding, or
to fund amounts in the aggregate in excess of such Funding Party's
Commitment.
(g) Non-Pro Rata Fundings. Notwithstanding anything to the
contrary set forth in this Master Agreement, at the Agent's option,
Fundings may be made by drawing on the Lessor's Commitment until such
Commitment is fully funded before drawing on the Lenders' Commitments.
In such event, when the Lessor's Commitment is fully funded, the Lenders
will fund, on a pro rata basis as among themselves, 100% of the amount of
the Fundings thereafter. In no event shall any Funding Party have any
obligation to fund any amount hereunder in excess of the amount of such
Funding Party's Commitment.
SECTION 3.3 Funded Amounts and Interest and Yield Thereon Unused
Fee.
(a) The Lessor's Invested Amount for any Leased Property
outstanding from time to time shall accrue yield ("Yield") at the Lessor
Rate, computed using the actual number of days elapsed and a 360 day
year. If all or a portion of the principal amount of or yield on the
Lessor's Invested Amounts shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount
shall, without limiting the rights of the Lessor under the Lease, to the
maximum extent permitted by law, accrue yield at the Overdue Rate, from
the date of nonpayment until paid in full (both before and after
judgment).
(b) Each Lender's Funded Amount for any Leased Property
outstanding from time to time shall accrue interest as provided in the
Loan Agreement.
(c) During the Construction Term, in lieu of the payment of
accrued interest, on each Payment Date, each Lender's Funded Amount in
respect of a Construction Land Interest shall automatically be increased
by the amount of interest accrued and unpaid on the related Loans
pursuant to the Loan Agreement during the Rent Period ending immediately
prior to such Payment Date (except to the extent that at any time such
increase would cause such Lender's Funded Amount to exceed such Lender's
Commitment, in which event the Lessee shall pay such excess amount to
such Lender in immediately available funds on such Payment Date).
Similarly, in lieu of the payment of accrued Yield, on each Payment Date,
the Lessor's Invested Amount in respect of such Construction Land
Interest shall automatically be increased by the amount of Yield accrued
on the Lessor's Invested Amount in respect of such Land during the Rent
Period ending immediately prior to such Payment Date (except to the
extent that at any time such increase would cause the Lessor's Invested
Amount to exceed the Lessor's Commitment, in which event the Lessee shall
pay such excess amount to the Lessor in immediately available funds on
such Payment Date). Such increases in Funded Amounts shall occur without
any disbursement of funds by the Funding Parties.
(d) Three Business Days prior to the last day of each Rent
Period, the Lessee shall deliver to the Lessor and the Agent a notice
substantially in the form of Exhibit I (each, a "Payment Date Notice"),
appropriately completed, specifying the allocation of the Funded Amounts
related to such Rent Period to LIBOR Advances and Base Rate Advances and
the Rent Periods therefor, provided that no such allocation shall be in
an amount less than $500,000. Each such Payment Date Notice shall be
irrevocable. If no such notice is given, the Funded Amounts shall be
allocated to a LIBOR Advance with a Rent Period of three (3) months.
(e) Lessee hereby agrees to pay to each Funding Party an
unused fee for each day from the date hereof until the Funding
Termination Date equal to (i) 0.225% per annum times (ii) the difference
between such Funding Party's Commitment and its outstanding Lessor
Invested Amount or the principal of its outstanding Loans, as applicable,
times (iii) 1/360. Such unused fee shall be payable in arrears on each
Quarterly Payment Date.
SECTION 3.4 Lessee Owner for Tax Purposes. With respect to each
Leased Property, it is the intent of the Lessee and the Funding Parties
that for federal, state and local tax purposes (A) the Lessee owns such
Leased Property and will be entitled to all tax benefits ordinarily
available to an owner of property similar to such Leased Property,
(B) the Lease will be treated as a financing arrangement, and (C) the
Lessor will be treated as a lender making loans to the Lessee. Each of
the Lessee and each Funding Party agrees to file tax returns consistent
with such intent. Nevertheless, the Lessee acknowledges and agrees that
no Funding Party or any other Person has made any representations or
warranties concerning the tax, financial, accounting or legal
characteristics or treatment of the Operative Documents and that the
Lessee has obtained and relied solely upon the advice of its own tax,
accounting and legal advisors concerning the Operative Documents and the
accounting, tax, financial and legal consequences of the transactions
contemplated therein.
SECTION 3.5 Amounts Due Under Lease. With respect to each Leased
Property, anything else herein or elsewhere to the contrary
notwithstanding, it is the intention of the Lessee and the Funding
Parties that: (i) the amount and timing of Basic Rent due and payable
from time to time from the Lessee under the Lease shall be equal to the
aggregate payments due and payable with respect to interest on, and
principal of, the Loans in respect of such Leased Property and Yield on,
and principal of, the Lessor's Invested Amounts, if any, in respect of
such Leased Property on each Payment Date; (ii) if the Lessee elects the
Purchase Option or the Partial Purchase Option with respect to a Leased
Property or becomes obligated to purchase such Leased Property under the
Lease, the Funded Amounts in respect of such Leased Property, all
interest and Yield thereon and all other obligations of the Lessee owing
to the Funding Parties in respect of the Leased Property shall be paid in
full by the Lessee, (iii) if the Lessee properly elects the Remarketing
Option or the Surrender Option, the principal amount of, and accrued
interest on, the A Loans in respect of such Leased Property, will be paid
out of the Recourse Deficiency Amount, and the Lessee shall only be
required to pay to the Lenders in respect of the principal amount of the
B Loans in respect of such Leased Property and to the Lessor in respect
of the Lessor's Invested Amounts in respect of such Leased Property, the
proceeds of the sale of such Leased Property; and (iv) upon an Event of
Default resulting in an acceleration of the Lessee's obligation to
purchase such Leased Property under the Lease, the amounts then due and
payable by the Lessee under the Lease shall include all amounts necessary
to pay in full the Loans in respect of such Leased Property, and accrued
interest thereon, the Lessor's Invested Amounts in respect of such Leased
Property and accrued Yield thereon and all other obligations of the
Lessee owing to the Funding Parties in respect of such Leased Property.
SECTION 4
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 4.1 Conditions to the Obligations of the Funding Parties on
each Closing Date. The obligations of the Lessor and each Lender to
carry out their respective obligations under Section 2 of this Master
Agreement to be performed on the Closing Date with respect to any Leased
Property shall be subject to the fulfillment to the satisfaction of, or
waiver by, each such party hereto (acting directly or through its
counsel) on or prior to such Closing Date of the following conditions
precedent, provided that the obligations of any Funding Party shall not
be subject to any conditions contained in this Section 3.1 which are
required to be performed by such Funding Party:
(a) Documents. The following documents shall have been
executed and delivered by the respective parties thereto:
(i) Deed and Purchase Agreement. The related original
Deed duly executed by the applicable Seller and in recordable
form, and copies of the related Purchase Agreement, duly
executed by such Seller and the Lessor, shall each have been
delivered to the Agent by the Lessee, with copies thereof to
each other Funding Party or the related Ground Lease duly
executed by the Lessor and the related Ground Lessor shall
have been delivered to the Agent, with copies thereof to each
other Funding Party, as applicable (it being understood, that
each Purchase Agreement and each Ground Lease shall be
satisfactory in form and substance to the Lessor and the
Lenders).
(ii) Lease Supplement. The original of the related
Lease Supplement, duly executed by the Lessee and the Lessor
and in recordable form, shall have been delivered to the
Agent by the Lessee.
(iii) Mortgage and Assignment of Lease and Rents.
Counterparts of the Mortgage (substantially in the form of
Exhibit D attached hereto), duly executed by the Lessor and
in recordable form, shall have been delivered to the Agent
(which Mortgage shall secure all of the debt to the Agent
unless such mortgage is subject to a tax based on the amount
of indebtedness secured thereby, in which case the amount
secured will be limited to debt in an amount equal to 125% of
the projected cost of acquisition and construction of such
Leased Property); and the Assignment of Lease and Rents
(substantially in the form of Exhibit B attached hereto) in
recordable form, duly executed by the Lessor, shall have been
delivered to the Agent by the Lessor.
(iv) Security Agreement and Assignment. Counterparts
of the Security Agreement and Assignment (substantially in
the form of Exhibit C attached hereto), duly executed by the
Lessee, with an acknowledgment and consent thereto
satisfactory to the Lessor and the Agent duly executed by the
related General Contractor and the related Architect, as
applicable, and complete copies of the related Construction
Contract and the related Architect's Agreement certified by
the Lessee, shall have been delivered to the Lessor and the
Agent (it being understood and agreed that if no related
Construction Contract or Architect's Agreement exists on such
Closing Date, such delivery shall not be a condition
precedent to the Funding on such Closing Date, and in lieu
thereof the Lessee shall deliver complete copies of such
Security Agreement and Assignment and consents concurrently
with the Lessee's entering into such contracts).
(v) Survey. The Lessee shall have delivered, or shall
have caused to be delivered, to the Lessor and the Agent, at
the Lessee's expense, an accurate survey certified to the
Lessor and the Agent in a form reasonably satisfactory to the
Lessor and the Agent and showing no state of facts
unsatisfactory to the Lessor or the Agent and prepared within
ninety (90) days of the Closing Date by a Person reasonably
satisfactory to the Lessor and the Agent. Such survey shall
(1) be acceptable to the Title Insurance Company for the
purpose of providing extended coverage to the Lessor and a
lender's comprehensive endorsement to the Agent, (2) show no
encroachments on such Land by structures owned by others, and
no encroachments from any part of such Leased Property onto
any land owned by others, and (3) disclose no state of facts
reasonably objectionable to the Lessor, the Agent or the
Title Insurance Company, and be reasonably acceptable to each
such Person.
(vi) Title and Title Insurance. On such Closing Date,
the Lessor shall receive from a title insurance company
acceptable to the Lessor and the Agent an ALTA Owner's Policy
of Title Insurance issued by such title insurance company and
the Agent shall receive from such title insurance company an
ALTA Mortgagee's Policy of Title Insurance issued by such
title insurance company, in each case, in the amount of the
projected cost of acquisition and construction of such Leased
Property, reasonably acceptable in form and substance to the
Lessor and the Agent, respectively (collectively, the "Title
Policy"). The Title Policy shall be dated as of the Closing
Date, and, to the extent permitted under Applicable Law,
shall include a pending disbursements clause reasonably
satisfactory to the Lessor and the Agent and coverage over
the creditors' rights exclusion and the general exceptions to
such policy, and shall contain such affirmative endorsements
as to mechanic's liens, easements and rights-of-way,
encroachments, the non-violation of covenants and
restrictions, survey matters and other matters as the Lessor
or the Agent shall reasonably request.
(vii) Appraisal. Unless the Lessee shall have
previously delivered to the Agent Appraisals with respect to
Leased Properties that are expected by the Lessee, based on
reasonable estimates, to have an aggregate Leased Property
Balance in excess of $10,000,000, each Funding Party shall
have received a report of the Appraiser (an "Appraisal"),
paid for by the Lessee, which shall meet the requirements of
the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, shall be satisfactory to such Funding Party and
shall state in a manner satisfactory to such Funding Party
the estimated "as vacant" value of such Land and the Building
to be constructed thereon. Such Appraisal must show that (1)
the estimated Fair Market Sales Value of the Leased Property
(determined as if the Building had already been completed in
accordance with the related Plans and Specifications and by
excluding from such value the amount of assessments on such
Leased Property) at the commencement of the Lease Term with
respect thereto is equal to the projected cost of acquisition
and construction of such Leased Property, and (2) the "as
vacant" value described above is at least 45% of the total
cost of the Leased Property, including the trade fixtures,
equipment and personal property utilized in connection with
the Leased Property and to be funded by the Funding Parties.
Upon request by the Lessee, the Funding Parties agree to
waive delivery on such Closing Date of an Appraisal, provided
that no subsequent Funding with respect to such Leased
Property shall occur until such Appraisal has been delivered.
(viii) Environmental Audit and related Reliance
Letter. The Lessor and the Agent shall have received an
Environmental Audit for such Leased Property, which shall not
include a recommendation for further investigation and is
otherwise satisfactory to the Lessor and the Agent; and the
firm that prepared the Environmental Audit for such Leased
Property shall have delivered to the Lessor and the Agent a
letter (substantially in the form of Exhibit F attached
hereto) stating that the Lessor, the Agent and the Lenders
may rely upon such firm's Environmental Audit of such Land,
it being understood that the Lessor's and the Agent's
acceptance of any such Environmental Audit shall not release
or impair the Lessee's obligations under the Operative
Documents with respect to any environmental liabilities
relating to such Leased Property.
(ix) Evidence of Insurance. The Lessor and the Agent
shall have received from the Lessee certificates of insurance
evidencing compliance with the provisions of Article VIII of
the Lease (including the naming of the Lessor, the Agent and
the Lenders as additional insured or loss payee with respect
to such insurance), in form and substance reasonably
satisfactory to the Lessor and the Agent.
(x) Officer's Certificate. Each of the Agent and the
Lessor shall have received an Officer's Certificate of the
Lessee stating that, to the best of such officer's knowledge,
(A) each and every representation and warranty of the Lessee
contained in the Operative Documents is true and correct in
all material respects on and as of such Closing Date as
though made on and as of such Closing Date, except to the
extent such representations or warranties relate solely to an
earlier date, in which case such representations and
warranties were true and correct in all material respects on
and as of such earlier date; (B) no Event of Default,
Potential Event of Default or Construction Force Majeure
Event has occurred and is continuing; (C) each Operative
Document to which the Lessee is a party is in full force and
effect with respect to it; and (D) no event that could
reasonably be expected to have a Material Adverse Effect has
occurred since June 1, 1996.
(xi) UCC Financing Statement; Recording Fees; Transfer
Taxes. Each Funding Party shall have received satisfactory
evidence of (i) the execution and delivery to Agent of a UCC-
1 and, if required by applicable law, UCC-2 financing
statement to be filed with the Secretary of State of the
applicable State (or other appropriate filing office) and the
county where the related Land is located, respectively, and
such other Uniform Commercial Code financing statements as
any Funding Party deems necessary or desirable in order to
perfect such Funding Party's interests and (ii) the payment
of all recording and filing fees and taxes with respect to
any recordings or filings made of the related Deed, the
Lease, the related Lease Supplement, the related Mortgage and
the related Assignment of Lease and Rents.
(xii) Opinions. The opinion of local counsel for the
Lessee qualified in the jurisdiction in which such Leased
Property is located, substantially in the form set forth in
Exhibit G-2 attached hereto, and containing such other
matters as the parties to whom they are addressed shall
reasonably request, shall have been delivered and addressed
to each of the Lessor, the Agent and the Lenders, and to the
extent requested by the Agent, opinions supplemental to those
delivered under Section 3.2(vii) and reasonably satisfactory
to the Agent shall have been delivered and addressed to each
of the Lessor, the Agent and the Lenders.
(xiii) Officer's Certificate. The Agent shall have
received an Officer's Certificate of the Lessor stating that,
to the best of such officer's knowledge, (A) each and every
representation and warranty of the Lessor contained in the
Operative Documents is true and correct in all material
respects on and as of the Closing Date as though made on and
as of the Closing Date, except to the extent such
representations or warranties relate solely to an earlier
date, in which case such representations and warranties shall
have been true and correct in all material respects on and as
of such earlier date; (B) no Event of Default or Potential
Event of Default has occurred and is continuing; (C) each
Operative Document to which the Lessor is a party is in full
force and effect with respect to it; and (D) no event that
could have a Material Adverse Effect has occurred since the
date of the most recent financial statements of the Lessor
delivered or required to be delivered to the Agent.
(xiv) Good Standing Certificates. The Agent shall
have received good standing certificates for the Lessor and
the Lessee from the appropriate offices of the state where
the related Land is located.
(b) Litigation. No action or proceeding shall have been
instituted or threatened nor shall any governmental action, suit,
proceeding or investigation be instituted or threatened before any
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority, to set
aside, restrain, enjoin or prevent the performance of this Master
Agreement or any transaction contemplated hereby or by any other
Operative Document or which is reasonably likely to materially adversely
affect the Leased Property or any transaction contemplated by the
Operative Documents or which could reasonably be expected to result in a
Material Adverse Effect.
(c) Legality. In the opinion of such Funding Party or its
counsel, the transactions contemplated by the Operative Documents shall
not violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for such Funding
Party to participate in any of the transactions contemplated by the
Operative Documents.
(d) No Events. (i) No Event of Default, Potential Event of
Default, Event of Loss or Event of Taking relating to such Leased
Property shall have occurred and be continuing, (ii) no action shall be
pending or threatened by a Governmental Authority to initiate a
Condemnation or an Event of Taking, and (iii) there shall not have
occurred any event that could reasonably be expected to have a Material
Adverse Effect since June 1, 1996.
(e) Representations. Each representation and warranty of
the parties hereto or to any other Operative Document contained herein or
in any other Operative Document shall be true and correct in all material
respects as though made on and as of the Closing Date, except to the
extent such representations or warranties relate solely to an earlier
date, in which case such representations and warranties shall have been
true and correct in all material respects on and as of such earlier date.
(f) Cutoff Date. No Closing Date shall occur after the
Funding Termination Date.
(g) Transaction Expenses. The Lessee shall have paid the
Transaction Costs then accrued and invoiced which the Lessee has agreed
to pay pursuant to Section 8.8.
SECTION 4.2 Additional Conditions for the Initial Closing Date.
The obligations of the Lessor and each Lender to carry out their
respective obligations under Section 2 of this Master Agreement to be
performed on the initial Closing Date shall be subject to the
satisfaction of, or waiver by, each such party hereto (acting directly or
through its counsel) on or prior to the initial Closing Date of the
following conditions precedent in addition to those set forth in Section
3.1, provided that the obligations of any Funding Party shall not be
subject to any conditions contained in this Section 3.2 which are
required to be performed by such Funding Party:
(i) Guaranty. Counterparts of the Guaranty Agreement,
duly executed by the Lessee, shall have been delivered to
each Funding Party.
(ii) Loan Agreement. Counterparts of the Loan
Agreement, duly executed by the Lessor, the Agent and each
Lender shall have been delivered to each of the Lessor and
the Agent. An A Note and a B Note, duly executed by the
Lessor, shall have been delivered to each Lender.
(iii) Master Agreement. Counterparts of this Master
Agreement, duly executed by the parties hereto, shall have
been delivered to each of the parties hereto.
(iv) Construction Agency Agreement. Counterparts of
the Construction Agency Agreement, duly executed by the
parties thereto shall have been delivered to each of the
parties hereto.
(v) Lease. Counterparts of the Lease, duly executed
by the Lessee and the Lessor, shall have been delivered to
each Funding Party and the original, chattel paper copy of
the Lease shall have been delivered to the Agent.
(vi) Lessee's Resolutions and Incumbency Certificate,
etc. Each of the Agent and the Lessor shall have received
(x) a certificate of the Secretary or an Assistant Secretary
of the Lessee, attaching and certifying as to (i) the Board
of Directors' (or appropriate committee's) resolution duly
authorizing the execution, delivery and performance by it of
each Operative Document to which it is or will be a party,
(ii) the incumbency and signatures of persons authorized to
execute and deliver such documents on its behalf, (iii) its
articles or certificate of incorporation, certified as of a
recent date by the Secretary of State of the state of its
incorporation and (iv) its by-laws, and (y) good standing
certificates for the Lessee from the appropriate offices of
the States of such Person's incorporation and principal place
of business.
(vii) Opinions of Counsel. The opinion of Powell
Goldstein Frazer & Murphy LLP, dated the initial Closing
Date, substantially in the form set forth in Exhibit G-1
attached hereto, and containing such other matters as the
parties to whom it is addressed shall reasonably request,
shall have been delivered and addressed to each of the
Lessor, the Agent and the Lenders. The opinion of Grogan &
Browner PC, dated the initial Closing Date, substantially in
the form set forth in Exhibit G-3 attached hereto, and
containing such other matters as the parties to whom it is
addressed shall reasonably request, shall have been delivered
to each of the Agent and the Lenders.
(viii) Good Standing Certificate. The Agent shall
have received a good standing certificate for the Lessor from
the appropriate offices of the State of Texas.
(ix) Lessor's Consents and Incumbency Certificate,
etc. The Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the General Partner of
the Lessor attaching and certifying as to (i) the consents of
the partners of the Lessor duly authorizing the execution,
delivery and performance by it of each Operative Document to
which it is or will be a party, (ii) the incumbency and
signatures of persons authorized to execute and deliver such
documents on its behalf, and (iii) the Partnership Agreement.
SECTION 4.3 Conditions to the Obligations of Lessee. The
obligations of the Lessee to lease the Leased Property from the Lessor
are subject to the fulfillment on the related Closing Date to the
satisfaction of, or waiver by, the Lessee, of the following conditions
precedent:
(a) General Conditions. The conditions set forth in
Sections 3.1 and 3.2 that require fulfillment by the Lessor or the
Lenders shall have been satisfied, including the delivery of good
standing certificates by the Lessor pursuant to Sections 3.1(a)(xiv) and
3.2(b)(viii) and the delivery of an opinion of counsel for the Lessor
pursuant to Section 3.2(b)(vii).
(b) Legality. In the opinion of the Lessee or its counsel,
the transactions contemplated by the Operative Documents shall not
violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for the Lessee to
participate in any of the transactions contemplated by the Operative
Documents.
(c) Purchase Agreement; Ground Lease. The Purchase
Agreement and, if applicable, the Ground Lease shall be reasonably
satisfactory to the Lessee.
SECTION 4.4 Conditions to the Obligations of the Funding Parties on
each Funding Date. The obligations of the Lessor and each Lender to
carry out their respective obligations under Section 2 of this Master
Agreement to be performed on each Funding Date shall be subject to the
fulfillment to the satisfaction of, or waiver by, each such party hereto
(acting directly or through their respective counsel) on or prior to each
such Funding Date of the following conditions precedent, provided that
the obligations of any Funding Party shall not be subject to any
conditions contained in this Section 3.4 which are required to be
performed by such Funding Party:
(a) Funding Request. The Lessor and the Agent shall have
received from the Lessee the Funding Request therefor pursuant to Section
2.2(d).
(b) Condition Fulfilled. As of such Funding Date, the
condition set forth in Section 3.1(d)(i) shall have been satisfied.
(c) Representations. As of such Funding Date, both before
and after giving effect to the Funding requested by the Lessee on such
date, the representations and warranties that the Lessee is deemed to
make pursuant to Section 2.2(e) shall be true and correct in all material
respects on and as of such Funding Date as though made on and as of such
Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on
and as of such earlier date.
(d) No Bonded Stop Notice or Filed Mechanics Lien. As of
each Funding Date, and as to any Funded Amount requested for any Leased
Property on each such Funding Date, (i) neither the Lessor, the Agent nor
any Lender has received (with respect to such Leased Property) a bonded
notice to withhold Loan funds that has not been discharged by the Lessee,
and (ii) no mechanic's liens or materialman's liens have been filed
against such Leased Property that have not been discharged by the Lessee,
bonded over in a manner reasonably satisfactory to the Agent or insured
over by the Title Insurance Company.
(e) Lease Supplement. If the Funding relates to a Building
that will be leased under a Lease Supplement separate from the Lease
Supplement for the related Land, the original of such separate Lease
Supplement, duly executed by the Lessee and the Lessor and in recordable
form, shall have been delivered to the Agent.
SECTION 4.5 Completion Date Conditions. The occurrence of the
Completion Date with respect to any Leased Property shall be subject to
the fulfillment to the satisfaction of, or waiver by, each party hereto
(acting directly or through its counsel) of the following conditions
precedent:
(a) Title Policy Endorsements; Architect's Certificate.
The Lessee shall have furnished to each Funding Party (1) the following
endorsements to the related Title Policy (each of which shall be subject
to no exceptions other than those reasonably acceptable to the Agent): a
date-down endorsement (redating and confirming the coverage provided
under the Title Policy and each endorsement thereto) and a "Form 9"
endorsement (if available in the applicable jurisdiction), in each case,
effective as of a date not earlier than the date of completion of the
Construction, and (2) a certificate of the Architect dated at or about
the Completion Date, in form and substance reasonably satisfactory to the
Agent, the Lessor and the Lenders, and stating that (i) the related
Building has been completed substantially in accordance with the Plans
and Specifications therefor, and such Leased Property is ready for
occupancy, (ii) such Plans and Specifications comply in all material
respects with all material Applicable Laws in effect at such time, and
(iii) to the best of the Architect's knowledge, such Leased Property, as
so completed, complies in all material respects with all material
Applicable Laws in effect at such time. The Lessee shall also deliver to
the Agent true and complete copies of: (A) an "as built" or "record" set
of the Plans and Specifications, (B) a plat of survey of such Leased
Property "as built" to a standard reasonably acceptable to the Agent
showing all easements, paving, driveways, fences and exterior
improvements, and (C) copies of a certificate or certificates of
occupancy for such Leased Property or other legally equivalent permission
to occupy such Leased Property.
(b) Construction Completion. The related Construction
shall have been completed substantially in accordance with the related
Plans and Specifications, the related Deed and all Applicable Laws, and
such Leased Property shall be ready for occupancy and operation. All
fixtures, equipment and other property contemplated under the Plans and
Specifications to be incorporated into or installed in such Leased
Property shall have been substantially incorporated or installed, free
and clear of all Liens except for Permitted Liens.
(c) Lessee Certification. The Lessee shall have furnished
the Lessor, the Agent and each Lender with a certification of the Lessee
(substantially in the form of Exhibit H) that:
(i) all amounts owing to third parties for the related
Construction have been paid in full (other than contingent
obligations for which the Lessee has made adequate reserves), and
no litigation or proceedings are pending, or to the best of the
Lessee's knowledge, are threatened, against such Leased Property or
the Lessee which could reasonably be expected to have a Material
Adverse Effect;
(ii) all material consents, licenses and permits and
other governmental authorizations or approvals required for such
Construction and operation of such Leased Property have been
obtained and are in full force and effect;
(iii) such Leased Property has available all services
of public facilities and other utilities necessary for use and
operation of such Leased Property for its intended purposes
including, without limitation, adequate water, gas and electrical
supply, storm and sanitary sewerage facilities, telephone, other
required public utilities and means of access between the related
Building and public highways for pedestrians and motor vehicles;
(iv) all material agreements, easements and other
rights, public or private, which are necessary to permit the lawful
use and operation of such Leased Property as the Lessee intends to
use the Leased Property under the Lease and which are necessary to
permit the lawful intended use and operation of all then intended
utilities, driveways, roads and other means of egress and ingress
to and from the same have been obtained and are in full force and
effect and the Lessee has no knowledge of any pending modification
or cancellation of any of the same; and the use of such Leased
Property does not depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained and is in full force and effect for its continuing legal
use;
(v) all of the requirements and conditions set forth in
Section 3.5(b) hereof have been completed and fulfilled with
respect to such Leased Property and the related Construction; and
(vi) such Leased Property is in compliance in all
material respects with all applicable zoning laws and regulations.
SECTION 5
REPRESENTATIONS
SECTION 5.1 Representations of Lessee. Effective as of the date of
execution hereof, as of each Closing Date and as of each Funding Date,
the Lessee represents and warrants to each of the other parties hereto as
follows:
(a) Organization; Corporate Powers. Each of the Lessee and
each of its Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified as a foreign corporation and in good
standing (A) in each jurisdiction where a Leased Property is located, in
the case of the Lessee, and (B) under the laws of each other jurisdiction
where such qualification is required and where the failure to be duly
qualified and in good standing would have a Material Adverse Effect, in
the case of the Lessee and each of its Subsidiaries, and (iii) has all
requisite corporate power and authority to own, operate and encumber its
property and assets and to conduct its business as presently conducted
and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by the Operative Documents.
(b) Authority. (i) The Lessee has the requisite corporate
power and authority to execute, deliver and perform the Operative
Documents executed by it, or to be executed by it.
(ii) The execution, delivery and performance (or recording
or filing, as the case may be) of the Operative Documents, and the
consummation of the transactions contemplated thereby, have been duly
approved by the Board of Directors of the Lessee, or an appropriate
committee thereof, and no other corporate proceedings on the part of the
Lessee are necessary to consummate the transactions so contemplated.
(c) Binding Obligations. The Operative Documents executed
by the Lessee, have been duly executed and delivered (or recorded or
filed, as the case may be) by the Lessee, and constitute its legal, valid
and binding obligation, enforceable against it in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
limiting creditors' rights generally or by equitable principles
generally.
(d) No Conflict. The execution, delivery and performance
by the Lessee of each Operative Document to which it is a party and each
of the transactions contemplated thereby do not and will not (i) violate
any Applicable Law or Contractual Obligation of any Person the
consequences of which violation, singly or in the aggregate, would have a
Material Adverse Effect, (ii) result in or require the creation or
imposition of any Lien whatsoever on any Leased Property or upon any of
the properties or assets of the Lessee or any of its Subsidiaries (other
than Permitted Liens), or (iii) require any approval of stockholders of
the Lessee which has not been obtained.
(e) Governmental Consents. Except as have been made,
obtained or given, and are in full force and effect, and except for
routine filings with the SEC to be made in a timely fashion, no filing or
registration with, consent or approval of, notice to, with or by any
Governmental Authority, is required to authorize, or is required in
connection with, the execution, delivery and performance by the Lessee of
the Operative Documents, the use of the proceeds of the Fundings made to
effect the purchase of the Land and the Construction, or the legality,
validity, binding effect or enforceability of any Operative Document.
(f) Governmental Regulation. Neither the Lessee nor any
Subsidiary of the Lessee is an "investment company" or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended. The Lessee is not a "holding
company" or a "subsidiary company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Company Act of 1935, as amended.
(g) Requirements of Law. The Lessee and each Subsidiary of
the Lessee and each Person acting on behalf of any of them is in
compliance with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so comply would
have a Material Adverse Effect, either individually or together with
other such cases.
(h) Rights in Respect of the Leased Property. The Lessee
is not a party to any contract or agreement to sell any interest in any
Leased Property or any part thereof, other than pursuant to the Operative
Documents.
(i) Hazardous Materials. (i) To the best knowledge of the
Lessee, except as described in the related Environmental Audit, on
the Closing Date for each Leased Property, there are no Hazardous
Materials present at, upon, under or within such Leased Property or
released or transported to or from such Leased Property (except in
compliance in all material respects with all Applicable Law).
(ii) On the related Closing Date, no Governmental
Actions have been taken or, to the best knowledge of the Lessee,
are in process or have been threatened, which could reasonably be
expected to subject such Leased Property, any Lender or the Lessor
with respect to such Leased Property to any Claims or Liens under
any Environmental Law which would have a Material Adverse Effect,
or would have a materially adverse effect on the Lessor or any
Lender.
(iii) The Lessee has, or will obtain on or before the
date required by Applicable Law, all Environmental Permits
necessary to operate such Leased Property in accordance with
Environmental Laws and is complying with and has at all times
complied with all such Environmental Permits, except to the extent
the failure to obtain such Environmental Permits or to so comply
would not have a Material Adverse Effect.
(iv) Except as set forth in the related Environmental
Audit or in any notice subsequently furnished by the Lessee to the
Agent and approved by the Agent in writing prior to the respective
times that the representations and warranties contained herein are
made or deemed made hereunder, no notice, notification, demand,
request for information, citations, summons, complaint or order has
been issued or filed to or with respect to the Lessee, no penalty
has been assessed on the Lessee and no investigation or review is
pending or, to its best knowledge, threatened by any Governmental
Authority or other Person in each case relating to the Leased
Property with respect to any alleged material violation or
liability of the Lessee under any Environmental Law. To the best
knowledge of the Lessee, no material notice, notification, demand,
request for information, citations, summons, complaint or order has
been issued or filed to or with respect to any other Person, no
material penalty has been assessed on any other Person and no
investigation or review is pending or threatened by any
Governmental Authority or other Person relating to such Leased
Property with respect to any alleged material violation or
liability under any Environmental Law by any other Person.
(v) Such Leased Property and each portion thereof are
presently in compliance in all material respects with all
Environmental Laws, and, to the best knowledge of the Lessee, there
are no present or past facts, circumstances, activities, events,
conditions or occurrences regarding such Leased Property (including
without limitation the release or presence of Hazardous Materials)
that could reasonably be anticipated to (A) form the basis of a
material Claim against such Leased Property, any Funding Party or
the Lessee, (B) cause such Leased Property to be subject to any
material restrictions on ownership, occupancy, use or
transferability under any Environmental Law, (C) require the filing
or recording of any notice or restriction relating to the presence
of Hazardous Materials in the real estate records in the county or
other appropriate municipality in which such Leased Property is
located, or (D) prevent or materially interfere with the continued
operation and maintenance of such Leased Property as contemplated
by the Operative Documents.
(j) Leased Property. The present condition and use of such
Leased Property conforms in all material respects with all conditions or
requirements of all existing material permits and approvals issued with
respect to such Leased Property, and the present use of such Leased
Property and the Lessee's future intended use of such Leased Property
under the Lease does not, in any material respect, violate any Applicable
Law. To the best knowledge of the Lessee, no material notices,
complaints or orders of violation or non-compliance have been issued or
threatened or contemplated by any Governmental Authority with respect to
such Leased Property or any present or intended future use thereof. All
material agreements, easements and other rights, public or private, which
are necessary to permit the lawful use and operation of such Leased
Property as the Lessee intends to use such Leased Property under the
Lease and which are necessary to permit the lawful intended use and
operation of all presently intended utilities, driveways, roads and other
means of egress and ingress to and from the same have been, or to the
Lessee's best knowledge will be, obtained and are or will be in full
force and effect, and the Lessee has no knowledge of any pending material
modification or cancellation of any of the same.
(k) True and Complete Disclosure. All factual information
relating to the Lessee, or any of its assets or its financial condition,
or any of the Leased Properties heretofore or contemporaneously furnished
by the Lessee or on its behalf in writing to any Funding Party (including
without limitation all information contained in the Operative Documents)
for purposes of or in connection with any transaction contemplated by
this Master Agreement is, and all other such factual information
hereafter furnished by the Lessee or on its behalf in writing to any
Funding Party will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make such
information, together with past written information supplied hereunder
(taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided.
(l) Taxes. Except as set forth in Schedule 4.1(l), all
United States Federal income tax returns and all other material tax
returns which are required to be filed have been filed by or on behalf of
the Lessee and its Subsidiaries and all taxes due with respect to the
Lessee and its Subsidiaries pursuant to such returns or pursuant to any
assessment received by the Lessee or any Subsidiary have been paid, or
are being contested by appropriate proceedings being diligently
prosecuted. To the best knowledge of the Lessee, the charges, accruals
and reserves on the books of the Lessee and its Subsidiaries in respect
of taxes or other governmental charges are adequate.
(m) Financial Statements. The consolidated statement of
financial position of the Lessee as of June 1, 1996 and the related
statements of income, shareholders' equity and cash flows for the fiscal
year then ended, reported on by Ernst & Young and the consolidated
statements of financial position of the Lessee as of August 31, 1996,
November 30, 1996 and March 1, 1997 and the related statements of income,
shareholders' equity and cash flows for the three, six and nine months,
respectively, then ended, in each case, a copy of which has been
delivered to each of the Funding Parties, present fairly in all material
respects, in conformity with GAAP, the consolidated financial position of
the Lessee and its Subsidiaries as of such dates and the results of
operations and cash flows of the Lessee and its Subsidiaries for such
fiscal year or other period then ended.
(n) No Material Litigation. Except as set forth in Schedule
4.1(n), no litigation, investigations or proceedings of or before any
courts, tribunals, arbitrators or governmental authorities are pending
or, to the knowledge of Lessee, threatened by or against any of the
Consolidated Companies, or against any of their respective properties or
revenues, existing or future (a) with respect to any Operative Document,
or any of the transactions contemplated hereby or thereby, or (b) seeking
money damages in excess of $2,500,000, either singly or in the aggregate
or which, if adversely determined, would otherwise reasonably be expected
to have a Material Adverse Effect.
(o) Margin Regulations. No part of the proceeds of any of
the Fundings will be used for any purpose which violates, or which would
be inconsistent or not in compliance with, the provisions of the
applicable Margin Regulations.
(p) Insurance. The Consolidated Companies currently
maintain insurance with respect to their respective properties and
businesses, with financially sound and reputable insurers, having
coverages against losses or damages of the kinds customarily insured
against by reputable companies in the same or similar businesses, such
insurance being in amounts no less than those amounts which are customary
for such companies under similar circumstances. The Consolidated
Companies have paid all material amounts of insurance premiums now due
and owing with respect to such insurance policies and coverages, and
such policies and coverages are in full force and effect.
(q) No Default. Except as set forth on Schedule 4.1(q),
none of the Consolidated Companies is in default under or with respect to
any Contractual Obligation in any respect which default or defaults would
be reasonably expected in the aggregate to have a Material Adverse
Effect.
(r) No Burdensome Restrictions. Except as set forth on
Schedule 4.1(r) or in any notice furnished to the Agent and the Lenders
pursuant to Section 5.1(g)(xi)or in any notice furnished to the Lenders
pursuant to Section 5.1(g)(xii) at or prior to the respective times the
representations and warranties set forth in this Section 4.1(r) are made
or deemed to be made hereunder, none of the Consolidated Companies is a
party to or bound by any Contractual Obligation or Requirement of Law
which has had or would reasonably be expected to have a Material Adverse
Effect.
(s) Subsidiaries. Except as disclosed on Schedule 4.1(s),
on the date of this Agreement, Lessee has no Subsidiaries and neither
Lessee nor any Subsidiary is a joint venture partner or general partner
in any partnership. Except as disclosed on Schedule 4.1(s) or in any
notice furnished to the Lenders pursuant to Section 5.1(g)(xii) at or
prior to the respective times the representations and warranties set
forth in this Section 4.1(s) are made or deemed to be made hereunder,
Lessee has no Material Subsidiaries.
(t) ERISA. Except as disclosed on Schedule 4.1(t) or in any
notice to the Agent furnished pursuant to Section 5.1(g)(vii) at or prior
to the respective times the representations and warranties set forth in
this Section 4.1(t) are made or deemed to be made hereunder:
(1) Identification of Plans. None of the Consolidated
Companies nor any of their respective ERISA Affiliates maintains or
contributes to, or has during the past seven years maintained or
contributed to, any Plan that is subject to Title IV of ERISA;
(2) Compliance. Each Plan maintained by the Consolidated
Companies has at all times been maintained, by their terms and in
operation, in compliance with all applicable laws, and the Consolidated
Companies are subject to no tax or penalty with respect to any Plan of
such Consolidated Company or any ERISA Affiliate thereof, including
without limitation, any tax or penalty under Title I or Title IV of ERISA
or under Chapter 43 of the Tax Code, or any tax or penalty resulting from
a loss of deduction under Section 162, 404 or 419 of the Tax Code, where
the failure to comply with such laws, and such taxes and penalties,
together with all other liabilities referred to in this Section 4.1(t)
(taken as a whole), would in the aggregate have a Material Adverse
Effect;
(3) Liabilities. The Consolidated Companies are subject to
no liabilities (including withdrawal liabilities) with respect to any
Plans of such Consolidated Companies or any of their ERISA Affiliates,
including without limitation, any liabilities arising from Titles I or IV
of ERISA, other than obligations to fund benefits under an ongoing Plan
and to pay current contributions, expenses and premiums with respect to
such Plans, where such liabilities, together with all other liabilities
referred to in this Section 4.1(t) (taken as a whole), would in the
aggregate have a Material Adverse Effect;
(4) Funding. The Consolidated Companies and, with respect
to any Plan which is subject to Title IV of ERISA, each of their
respective ERISA Affiliates, have made full and timely payment of all
amounts (A) required to be contributed under the terms of each Plan and
applicable law, and (B) required to be paid as expenses (including PBGC
or other premiums) of each Plan, where the failure to pay such amounts
(when taken as a whole, including any penalties attributable to such
amounts) would have a Material Adverse Effect. No Plan subject to Title
IV of ERISA (other than a Multiemployer Plan) has an "amount of unfunded
benefit liabilities" (as defined in Section 4001(a)(18) of ERISA),
determined as if such Plan terminated on any date on which this
representation and warranty is deemed made, in any amount which, together
with all other liabilities referred to in this Section 4.1(t)(taken as a
whole), would have a Material Adverse Effect if such amount were then due
and payable. None of the Consolidated Companies would be subject to
withdrawal liability with respect to any Multiemployer Plan, determined
as if the event resulting in such withdrawal liability occurred on any
date on which this representation is made or deemed to be made based on
the most recent actuarial valuation data made available to employers
participating in the Multiemployer Plan, in any amount which, together
with all other liabilities referred to in this Section 4.1(t)(taken as a
whole), would have a Material Adverse Effect if such amounts were then
due and payable. The Consolidated Companies are subject to no
liabilities with respect to post-retirement medical benefits in any
amounts which, together with all other liabilities referred to in this
Section 4.1(t)(taken as a whole), would have a Material Adverse Effect
if such amounts were then due and payable.
(u) Patents, Trademarks, Licenses, Etc. Except as set forth
on Schedule 4.1(u), (i) the Consolidated Companies have obtained and hold
in full force and effect all material patents, trademarks, service marks,
trade names, copyrights, licenses and other such rights, free from
material burdensome restrictions, which are necessary for the operation
of their respective businesses as presently conducted, and (ii) to the
best of Lessee's knowledge, no product, process, method, service or other
item presently sold by or employed by any Consolidated Company in
connection with such business infringes any patents, trademark, service
mark, trade name, copyright, license or other right owned by any other
person and there is not presently pending, or to the knowledge of Lessee,
threatened, any claim or litigation against or affecting any Consolidated
Company contesting such Person's right to sell or use any such product,
process, method, substance or other item where the result of such failure
to obtain and hold such benefits or such infringement would have a
Material Adverse Effect.
(v) Ownership of Property. Except as set forth on Schedule
4.1(v), each Consolidated Company has good and marketable fee simple
title to or a valid leasehold interest in all of its real property and
good title to, or a valid leasehold interest in, all of its other
property, as such properties are reflected in the consolidated balance
sheet of the Consolidated Companies as of June 1, 1996 referred to in
Section 4.1(m), other than properties disposed of in the ordinary course
of business since such date or as otherwise permitted by the terms of
this Master Agreement, subject to no Lien or title defect of any kind,
except Liens permitted by this Master Agreement. The Consolidated
Companies enjoy peaceful and undisturbed possession under all of their
respective material leases.
(w) Indebtedness. Except for the Indebtedness set forth on
Schedule 4.1(w), none of the Consolidated Companies is an obligor in
respect of any Indebtedness for borrowed money, or any commitment to
create or incur any Indebtedness for borrowed money, in an amount greater
than $1,000,000 in any single case, and such Indebtedness and
commitments for amounts less than $1,000,000 do not exceed $2,500,000 in
the aggregate for all such Indebtedness and commitments of the
Consolidated Companies.
(x) Labor Matters. Except as set forth in Schedule 4.1(x)
or in any notice furnished to the Lenders pursuant to Section 5.1(g)(xi)
at or prior to the respective times the representations and warranties
set forth in this Section 4.1(x) are made or deemed to be made hereunder,
the Consolidated Companies have experienced no strikes, labor disputes,
slow downs or work stoppages due to labor disagreements which have had,
or would reasonably be expected to have, a Material Adverse Effect, and,
to the best knowledge of Lessee, there are no such strikes, disputes,
slow downs or work stoppages threatened against any Consolidated Company.
The hours worked and payment made to employees of the Consolidated
Companies have not been in violation in any material respect of the Fair
Labor Standards Act or any other applicable law dealing with such
matters. All payments due from the Consolidated Companies, or for which
any claim may be made against the Consolidated Companies, on account of
wages and employee health and welfare insurance and other benefits have
been paid or accrued as liabilities on the books of the Consolidated
Companies where the failure to pay or accrue such liabilities would
reasonably be expected to have a Material Adverse Effect.
SECTION 5.2 Representations of the Lessor. Effective as of the
date of execution hereof, as of each Closing Date and as of each Funding
Date, in each case, with respect to each of the Leased Properties, the
Lessor represents and warrants to the Agent, the Lenders and the Lessee
as follows:
(a) Securities Act. The interest being acquired or to be
acquired by the Lessor in such Leased Property is being acquired for its
own account, without any view to the distribution thereof or any interest
therein, provided that the Lessor shall be entitled to assign, convey or
transfer its interest in accordance with Section 6.1.
(b) Due Organization, etc. The Lessor is a limited
partnership duly organized and validly existing in good standing under
the laws of Texas and each state in which a Leased Property is located
and has full power, authority and legal right to execute, deliver and
perform its obligations under the Lease, this Master Agreement and each
other Operative Document to which it is or will be a party.
(c) Due Authorization; Enforceability, etc. This Master
Agreement and each other Operative Document to which the Lessor is or
will be a party have been or will be duly authorized, executed and
delivered by or on behalf of the Lessor and are, or upon execution and
delivery will be, legal, valid and binding obligations of the Lessor
enforceable against it in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally and by
general equitable principles.
(d) No Conflict. The execution and delivery by the Lessor
of the Lease, this Master Agreement and each other Operative Document to
which the Lessor is or will be a party, are not or will not be, and the
performance by the Lessor of its obligations under each will not be,
inconsistent with its Partnership Agreement, do not and will not
contravene any Applicable Law and do not and will not contravene any
provision of, or constitute a default under, any Contractual Obligation
of Lessor, do not and will not require the consent or approval of, the
giving of notice to, the registration with or taking of any action in
respect of or by, any Governmental Authority, except such as have been
obtained, given or accomplished, and the Lessor possesses all requisite
regulatory authority to undertake and perform its obligations under the
Operative Documents.
(e) Litigation. There are no pending or, to the knowledge
of the Lessor, threatened actions or proceedings against the Lessor
before any court, arbitrator or administrative agency with respect to any
Operative Document or that would have a material adverse effect upon the
ability of the Lessor to perform its obligations under this Master
Agreement or any other Operative Documents to which it is or will be a
party.
(f) Lessor Liens. No Lessor Liens (other than those
created by the Operative Documents) exist on the Closing Date on the
Leased Property, or any portion thereof, and the execution, delivery and
performance by the Lessor of this Master Agreement or any other Operative
Document to which it is or will be a party will not subject the Leased
Property, or any portion thereof, to any Lessor Liens (other than those
created by the Operative Documents).
(g) Employee Benefit Plans. The Lessor is not and will not
be making its investment hereunder, and is not performing its obligations
under the Operative Documents, with the assets of an "employee benefit
plan" (as defined in Section 3(3) of ERISA) which is subject to Title I
of ERISA, or "plan" (as defined in Section 4975(e)(1)) of the Code.
(h) General Partner. The sole general partner of the
Lessor is Atlantic Financial Managers, Inc.
(i) Financial Information. (A) The unaudited balance
sheet of the Lessor as of December 31, 1996 and the related statements of
income, partners' capital and cash flows for the year then ended, copies
of which have been delivered to the Agent and each Lender, fairly
present, in conformity with sound accounting principles, the financial
condition of the Lessor as of such dates and the results of operations
and cash flows for such periods.
(B) Since December 31, 1996, there has been no event, act,
condition or occurrence having a material adverse effect upon the
financial condition, operations, performance or properties of the Lessor,
or the ability of the Lessor to perform in any material respect under the
Operative Documents.
(j) No Offering. The Lessor has not offered the Notes to
any Person in any manner that would subject the issuance thereof to
registration under the Securities Act.
SECTION 5.3 Representations of each Lender. Effective as of the
date of execution hereof, as of each Closing Date and as of each Funding
Date, each Lender represents and warrants to the Lessor and to the Lessee
as follows:
(a) Securities Act. The interest being acquired or to be
acquired by such Lender in the Funded Amounts is being acquired for its
own account, without any view to the distribution thereof or any interest
therein, provided that such Lender shall be entitled to assign, convey or
transfer its interest in accordance with Section 6.2. Such Lender is an
accredited investor as that term is defined in Rule 501(a) under the
Securities Act.
(b) Employee Benefit Plans. Such Lender is not and will
not be making its investment hereunder, and is not performing its
obligations under the Operative Documents, with the assets of an
"employee benefit plan" (as defined in Section 3(3) of ERISA) which is
subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1))
of the Code.
SECTION 6
COVENANTS OF THE LESSEE AND THE LESSOR
SECTION 6.1 Affirmative Covenants. Lessee will:
(a) Corporate Existence, Etc. Preserve and maintain, and
cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, its material rights, franchises, and licenses, and
its material patents and copyrights (for the scheduled duration thereof),
trademarks, trade names, and service marks, necessary or desirable in the
normal conduct of its business, and its qualification to do business as a
foreign corporation in all jurisdictions where it conducts business or
other activities making such qualification necessary, where the failure
to be so qualified would reasonably be expected to have a Material
Adverse Effect.
(b) Compliance with Laws, Etc. Comply, and cause each of
its Subsidiaries to comply, with all Requirements of Law and Contractual
Obligations applicable to or binding on any of them where the failure to
comply with such Requirements of Law and Contractual Obligations would
reasonably be expected to have a Material Adverse Effect.
(c) Payment of Taxes and Claims, Etc. Pay, and cause each
of its Subsidiaries to pay, (i) all taxes, assessments and governmental
charges imposed upon it or upon its property, and (ii) all claims
(including, without limitation, claims for labor, materials, supplies or
services) which might, if unpaid, become a Lien upon its property,
unless, in each case, the validity or amount thereof is being contested
in good faith by appropriate proceedings and adequate reserves are
maintained with respect thereto.
(d) Keeping of Books. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, containing
complete and accurate entries of all their respective financial and
business transactions.
(e) Visitation, Inspection, Etc. Permit, and cause each of
its Subsidiaries to permit, any representative of the Agent, the Lessor
or any Lender to visit and inspect any of its property, to examine its
books and records and to make copies and take extracts therefrom, and to
discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as the Agent, the Lessor or such Lender may
reasonably request.
(f) Insurance; Maintenance of Properties.
(i) Maintain or cause to be maintained with financially
sound and reputable insurers, insurance with respect to its
properties and business, and the properties and business of its
Subsidiaries, against loss or damage of the kinds customarily
insured against by reputable companies in the same or similar
businesses, such insurance to be of such types and in such amounts
as is customary for such companies under similar circumstances;
provided, however, that in any event Lessee shall use its best
efforts to maintain, or cause to be maintained, insurance in
amounts and with coverages not materially less favorable to any
Consolidated Company as in effect on the date of this Master
Agreement.
(ii) Cause, and cause each of the Consolidated Companies to
cause, all properties used or useful in the conduct of its business
to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, settlements
and improvements thereof, all as in the judgment of Lessee may be
necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
(g) Reporting Covenants. Furnish to the Agent, the Lessor
and each Lender:
(i) Annual Financial Statements. As soon as available and
in any event within 90 days after the end of each Fiscal Year of
Lessee, balance sheets of the Consolidated Companies as at the end
of such year, presented on a consolidated basis, and the related
statements of income, shareholders' equity, and cash flows of the
Consolidated Companies for such Fiscal Year, presented on a
consolidated basis, setting forth in each case in comparative form
the figures for the previous Fiscal Year, all in reasonable detail
and accompanied by a report thereon of Ernst & Young or other
independent public accountants of comparable recognized national
standing, which such report shall be unqualified as to going
concern and scope of audit and shall state that such financial
statements present fairly in all material respects the financial
condition as at the end of such Fiscal Year on a consolidated
basis, and the results of operations and statements of cash flows
of the Consolidated Companies for such Fiscal Year in accordance
with GAAP and that the examination by such accountants in
connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards;
(ii) Quarterly Financial Statements. As soon as available
and in any event within 45 days after the end of each fiscal
quarter of Lessee (other than the fourth fiscal quarter), balance
sheets of the Consolidated Companies as at the end of such quarter
presented on a consolidated basis and the related statements of
income, shareholders' equity, and cash flows of the Consolidated
Companies for such fiscal quarter and for the portion of Lessee's
Fiscal Year ended at the end of such quarter, presented on a
consolidated basis setting forth in each case in comparative form
the figures for the corresponding quarter and the corresponding
portion of Lessee's previous Fiscal Year, all in reasonable detail
and certified by the chief financial officer or principal
accounting officer of Lessee that such financial statements fairly
present in all material respects the financial condition of the
Consolidated Companies as at the end of such fiscal quarter on a
consolidated basis, and the results of operations and statements of
cash flows of the Consolidated Companies for such fiscal quarter
and such portion of Lessee's Fiscal Year, in accordance with GAAP
consistently applied (subject to normal year-end audit adjustments
and the absence of certain footnotes);
(iii) No Default/Compliance Certificate. Together with the
financial statements required pursuant to subsections (i) and (ii)
above, a certificate of the principal accounting officer or chief
financial officer of Lessee (i) to the effect that, based upon a
review of the activities of the Consolidated Companies and such
financial statements during the period covered thereby, there
exists no Event of Default and no Potential Event of Default, or if
there exists an Event of Default or a Potential Event of Default,
specifying the nature thereof and the proposed response thereto,
and (ii) demonstrating in reasonable detail compliance as at the
end of such Fiscal Year or such fiscal quarter with the covenants
set forth in Sections 5.01 and 5.02(a) through (e).
(iv) Notice of Default. Promptly after any Executive
Officer of Lessee has notice or knowledge of the occurrence of an
Event of Default or a Potential Event of Default, a certificate of
the chief financial officer or principal accounting officer of
Lessee specifying the nature thereof and the proposed response
thereto;
(v) Litigation. Promptly after (i) the occurrence thereof,
notice of the institution of or any material adverse development in
any material action, suit or proceeding or any governmental
investigation or any arbitration, before any court or arbitrator or
any governmental or administrative body, agency or official,
against any Consolidated Company, or any material property of any
thereof seeking money damages in excess of $2,500,000 or which, if
adversely determined, would otherwise reasonably be expected to
have a Material Adverse Effect, or (ii) actual knowledge thereof,
notice of the threat of any such action, suit, proceeding,
investigation or arbitration;
(vi) Environmental Notices. Promptly after receipt thereof,
notice of any actual or alleged violation, or notice of any action,
claim or request for information, either judicial or
administrative, from any governmental authority relating to any
actual or alleged claim, notice of potential responsibility under
or violation of any Environmental Law, or any actual or alleged
spill, leak, disposal or other release of any Hazardous Materials
by any Consolidated Company which could result in penalties, fines,
claims or other liabilities to any Consolidated Company in amounts
in excess of $500,000;
(vii) ERISA. (1) Promptly after the occurrence thereof
with respect to any Plan of any Consolidated Company or any ERISA
Affiliate thereof, or any trust established thereunder, notice of
(A) a "reportable event" described in Section 4043 of ERISA and the
regulations issued from time to time thereunder (other than a
"reportable event" not subject to the provisions for 30-day notice
to the PBGC under such regulations), or (B) any other event which
could subject any Consolidated Company to any tax, penalty or
liability under Title I or Title IV of ERISA or Chapter 43 of the
Tax Code, or any tax or penalty resulting from a loss of deduction
under Section 162, 404 or 419 of the Tax Code, where any such
taxes, penalties or liabilities exceed or could exceed $500,000 in
the aggregate;
(2) Promptly after such notice must be provided to
the PBGC, or to a Plan participant, beneficiary or alternative
payee, any notice required under Section 101(d), 302(f)(4), 303,
307, 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under
Section 401(a)(29) or 412 of the Tax Code with respect to any Plan
of any Consolidated Company or any ERISA Affiliate thereof;
(3) Promptly after receipt, any notice received by
any Consolidated Company or any ERISA Affiliate thereof concerning
the intent of the PBGC or any other governmental authority to
terminate a Plan of such company or ERISA Affiliate thereof which
is subject to Title IV of ERISA, to impose any liability on such
company or ERISA Affiliate under Title IV of ERISA or Chapter 43 of
the Tax Code;
(4) Upon the request of the Agent, promptly upon the
filing thereof with the Internal Revenue Service ("IRS") or the
Department of Labor ("DOL"), a copy of IRS Form 5500 or annual
report for each Plan of any Consolidated Company or ERISA Affiliate
thereof which is subject to Title IV of ERISA;
(5) Upon the request of the Agent, (A) true and
complete copies of any and all documents, government reports and
IRS determination or opinion letters or rulings for any Plan of any
Consolidated Company from the IRS, PBGC or DOL, (B) any reports
filed with the IRS, PBGC or DOL with respect to a Plan of the
Consolidated Companies or any ERISA Affiliate thereof, or (C) a
current statement of withdrawal liability for each Multiemployer
Plan of any Consolidated Company or any ERISA Affiliate thereof;
(viii) Liens. Promptly upon any Consolidated Company
becoming aware thereof, notice of the filing of any federal
statutory Lien, tax or other state or local government Lien or any
other Lien affecting their respective properties, other than
Permitted Liens;
(ix) Public Filings, Etc. Promptly upon the filing thereof
or otherwise becoming available, copies of all financial
statements, annual, quarterly and special reports, proxy statements
and notices sent or made available generally by Lessee to its
public security holders, of all regular and periodic reports and
all registration statements and prospectuses, if any, filed by any
of them with any securities exchange, and of all press releases and
other statements made available generally to the public containing
material developments in the business or financial condition of
Lessee and the other Consolidated Companies;
(x) Accountants' Reports. Promptly upon receipt thereof,
copies of all financial statements of, and all reports submitted
by, independent public accountants to Lessee in connection with
each annual, interim or special audit of Lessee's financial
statements, including without limitation, the comment letter
submitted by such accountants to management in connection with
their annual audit;
(xi) Burdensome Restrictions, Etc. Promptly upon the
existence or occurrence thereof, notice of the existence or
occurrence of (i) any Contractual Obligation or Requirement of Law
described in Section 4.1(r), (ii) failure of any Consolidated
Company to hold in full force and effect those material trademarks,
service marks, patents, trade names, copyrights, licenses and
similar rights necessary in the normal conduct of its business, and
(iii) any strike, labor dispute, slow down or work stoppage as
described in Section 4.1(x);
(xii) New Material Subsidiaries. Within 30 days after the
formation or acquisition of any Material Subsidiary, or any other
event resulting in the creation of a new Material Subsidiary,
notice of the formation or acquisition of such Material Subsidiary
or such occurrence, including a description of the assets of such
entity, the activities in which it will be engaged, and such other
information as the Agent and any of the Lenders may request; and
(xiii) Other Information. With reasonable promptness, such
other information about the Consolidated Companies as the Agent,
the Lessor or any Lender may reasonably request from time to time.
(h) Financial Covenants.
(i) Fixed Charge Coverage. Maintain a Fixed Charge
Coverage Ratio greater than the ratio set forth opposite the
periods set forth below, measured as of the last day of each fiscal
quarter during such period for the immediately preceding four
quarters ending on such date:
Applicable Period Ratio
Fiscal Year End 1996 through
Fiscal Year End 1997 1.75:1.00
First day of Fiscal Year
1998 and thereafter 2.00:1.00
(ii) Consolidated Funded Debt to Total Capitalization.
Maintain at all times, measured as of the last day of each fiscal
quarter of the Lessee, commencing on Fiscal Year End 1996, a ratio
of Consolidated Funded Debt to Total Capitalization of less than
0.60:1.0.
(iii) Consolidated Net Worth. Maintain at all times
Consolidated Net Worth in an amount not less than the sum of
(i) $180,000,000.00, plus (ii) the greater of (x) $0, and (y) fifty
percent (50%) of the Consolidated Net Income (Loss) earned by
Lessee during the period commencing on June 2, 1996 and ending on
the last day of the fiscal quarter of the Lessee immediately
preceding the date of any calculation hereof (with such period
calculated as a single accounting period and taking into account
100% of all losses during such period), plus (iii) an amount equal
to 100% of the Net Proceeds of all issuances of stock, warrants,
Subordinated Debt, or other equity of the Lessee issued following
the date hereof.
(i) Notices Under Certain Other Indebtedness. Immediately
upon its receipt thereof, Lessee shall furnish the Agent a copy of any
notice received by it or any other Consolidated Company from the
holder(s) of Indebtedness referred to in Section 5.2(a)(ii), (iii), (vi),
(vii) or (iv) (or from any trustee, agent, attorney, or other party
acting on behalf of such holder(s)) in an amount which, in the aggregate,
exceeds $2,500,000, where such notice states or claims (i) the existence
or occurrence of any default or event of default with respect to such
Indebtedness under the terms of any indenture, loan or credit agreement,
debenture, note, or other document evidencing or governing such
Indebtedness, or (ii) the existence or occurrence of any event or
condition which requires or permits holder(s) of any Indebtedness to
exercise rights under any Change in Control Provision.
SECTION 6.2 Negative Covenants. Lessee will not and will not
permit any Subsidiary to:
(a) Indebtedness. Create, incur, assume, guarantee, suffer
to exist or otherwise become liable on or with respect to, directly or
indirectly, any Indebtedness, other than:
(i) Indebtedness of the Lessee under the Credit Agreement
and of the Material Subsidiaries of Lessee pursuant to the
guaranties delivered pursuant to the Credit Agreement;
(ii) Indebtedness outstanding or incurred on the initial
Closing Date and described on Schedule 5.2(a);
(iii) purchase money Indebtedness to the extent secured by a
Lien permitted by Section 5.2(b) or Indebtedness of a Person
acquired by the Lessee to the extent secured by a Lien permitted by
Section 5.2(h);
(iv) unsecured current liabilities (other than liabilities
for borrowed money or liabilities evidenced by promissory notes,
bonds or similar instruments) incurred in the ordinary course of
business and either (i) not more than 30 days past due, or (ii)
being disputed in good faith by appropriate proceedings with
reserves for such disputed liability maintained in conformity with
GAAP;
(v) Indebtedness of Lessee or any of its Subsidiaries under
(i) Interest Rate Contracts, (ii) the Franchisee Loan Program and
(iii) to the extent constituting Indebtedness, the Operative
Documents;
(vi) Subordinated Debt of the Lessee (but not Subsidiaries
of the Lessee);
(vii) Guarantees of advances to officers and employees in
the ordinary course of business, or Guarantees otherwise disclosed
to and approved in writing by the Agent and the Required Lenders;
(viii) Endorsements of instruments for deposit or collection
in the ordinary course of business; and
(ix) Other unsecured Indebtedness of the Lessee (but not
Subsidiaries of the Lessee) (other than Guarantees) which does not
result in a Potential Event of Default or an Event of Default.
(b) Liens. Create, incur, assume or suffer to exist any
Lien on any of its property now owned or hereafter acquired to secure any
Indebtedness other than:
(i) Liens existing on the initial Closing Date and disclosed
on Schedule 5.2(b);
(ii) any Lien on any property and proceeds thereof securing
Indebtedness incurred or assumed for the purpose of financing all
or any part of the acquisition cost of such property and any
refinancing thereof, provided that such Lien does not extend to any
other property (other than the proceeds of such property),
including any Lien arising pursuant to the Operative Documents;
(iii) Liens for taxes not yet due, and Liens for taxes or
Liens imposed by ERISA which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
are being maintained in accordance with GAAP;
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
and created in the ordinary course of business for amounts not yet
due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being
maintained in accordance with GAAP;
(v) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-
of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(vi) zoning, easements and restrictions on the use of real
property which do not materially impair the use of such property;
(vii) rights in property reserved or vested in any
Governmental Authority which do not materially impair the use of
such property; and
(viii) any Lien existing on property of a Person immediately
prior to its being consolidated with or merged into the Lessee or
into any Consolidated Company, or any Lien existing on any property
acquired by any Consolidated Company at the time such property is
so acquired (whether or not the Indebtedness secured thereby shall
have been assumed), provided that (x) no such Lien shall have been
created or assumed in contemplation of consolidation or merger or
such Person's becoming a Consolidated Company or such acquisition
of property and (y) each such Lien shall at all times be confined
solely to the item or items of property so acquired and, if
required by the terms of the instruments originally creating such
Lien, other property which is an improvement to or is acquired for
specific use in connection with such acquired property;
provided that, the aggregate amount of Indebtedness secured by Liens
permitted pursuant to this Section 5.2(b), excluding Indebtedness, if
any, arising pursuant to the Operative Documents, shall at no time exceed
15% of the Consolidated Net Worth of the Lessee calculated as of the last
day of the most recently ended fiscal quarter of the Lessee.
(c) Mergers, Sales, Etc. (A) Merge or consolidate with any
other Person, except that this Section 5.2(c) shall not apply to (i) any
merger or consolidation of Lessee with any other Person provided that the
Lessee is the surviving corporation after such merger or consolidation,
(ii) any merger or consolidation of any of the Lessee's Subsidiaries with
any other Person provided that any such Subsidiary shall be the surviving
corporation after such merger or consolidation or (iii) any merger
between Subsidiaries of Lessee, and (B) sell, lease, transfer or
otherwise dispose of its accounts, property or other assets (including
capital stock of any Subsidiary of Lessee), except that this Section
5.2(c) shall not apply to (i) any sale, lease, transfer or other
disposition of assets of any Subsidiary of the Lessee to the Lessee or
any of its Material Subsidiaries, (ii) sales of inventory in the ordinary
course of business of the Lessee and its Subsidiaries, (iii) disposition
of equipment or inventory determined in good faith to be obsolete or
unusable by the Lessee or its Subsidiaries, or (iv) any other sale of the
Lessee's assets during the Lease Term with an aggregate book value, when
aggregated with all other such sales since the Initial Closing Date, not
exceeding 7.5% of the aggregate book value of all of the Lessee's assets
on the date of such transfer; provided, however, that no transaction
pursuant to clause (A), clause (B)(i) or clause (B)(iv) above shall be
permitted if any Potential Event of Default or Event of Default exists at
the time of such transaction or would exist as a result of such
transaction.
(d) Investments, Loans, Etc. Make, permit or hold any
Investments in any Person, or otherwise acquire or hold any Subsidiaries,
other than:
(i) Investments in Subsidiaries of Lessee existing as of the
Initial Closing Date and Investments in franchisees of Lessee
arising pursuant to the Franchisee Loan Program;
(ii) Investments in the stock or other assets of any other
Person that is engaged in a business permitted by Section 5.2(h)
hereof that, as a result of such Investment, becomes a Subsidiary
of Lessee (other than Hostile Acquisitions); provided, however,
that the aggregate amount of Investments made pursuant to this
subsection (ii) shall not exceed, during the Lease Term, a total
value of ten percent (10%) of the Consolidated Net Worth of the
Lessee as calculated on the last day of the most recently ended
fiscal quarter of the Lessee;
(iii) marketable direct obligations of the United States or
any agency thereof, or obligations guaranteed by the United States
or any agency thereof, in each case supported by the full faith and
credit of the United States and maturing within one year from the
date of creation thereof;
(iv) Investments received in settlement of Indebtedness
created in the ordinary course of business;
(v) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof, the interest from
which is exempt from Federal income taxes, maturing within one year
from the date of acquisition thereof and either having as at any
date of determination the one of the two highest ratings obtainable
from either Standard & Poor's or Moody's;
(vi) unsecured commercial paper, the interest from which is
exempt from Federal income taxes, maturing no more than 270 days
from the date of creation and having as at any date of
determination either the highest rating obtainable from either
Standard & Poor's or Moody's;
(vii) commercial paper issued by corporations, each of which
has a consolidated net worth of not less than $500,000,000, and
conducts a substantial portion of its business in the United States
of America, maturing no more than 365 days from the date of
acquisition thereof and having as at any date of determination the
highest rating obtainable from either Standard & Poor's or Moody's;
and
(viii) money market or similar depository accounts,
certificates of deposit or bankers acceptances, in each case
redeemable upon demand or maturing within one year from the date of
acquisition thereof, issued by commercial banks incorporated under
the laws of the United States of America or any state thereof or
the District of Columbia, provided (x) each such bank has at any
date of determination combined capital and surplus of not less than
$1,000,000,000 and a rating of its long-term debt of at least A by
Standard & Poor's or at least A by Moody's or a long-term deposit
rating of at least A issued by Standard & Poor's or at least A
issued by Moody's, (y) the aggregate amount of all such
certificates of deposit issued by such bank are fully insured at
all times by the Federal Deposit Insurance Company;
provided however, notwithstanding the foregoing, the Lessee and any
Subsidiary may continue to own any Investment which (A) complied with the
provisions of clause (vi), (vii) or (viii) at the time such Investment
was made and (B) at any date of determination does not so comply solely
because (x) such Investment no longer has the rating required from
Standard & Poor's or Moody's or (y) the bank having the money market or
depository account or issuing the certificate of deposit or bankers
acceptance ceases to have the required level of capital and surplus or to
have a rating of its long-term debt of at least A by Standard & Poor's or
at least A by Moody's or to have a long-term deposit rating of at least A
by Standard & Poor's or at least A by Moody's, if, and for so long as, in
the good faith judgment of the relevant Executive Officer, no loss of the
principal amount of such Investment would occur as the result of the
Lessee or such Subsidiary continuing to own such Investment to maturity.
Nothing contained in the foregoing proviso shall be deemed to be
applicable to any new or renewed Investment at the time such Investment
is made or renewed.
(e) Letters of Credit. Create, incur, issue, assume,
guarantee, suffer to exist or otherwise become liable on or with respect
to, directly or indirectly, letters of credit where the maximum amount
available to be drawn under all such letters of credit would exceed, at
any one time outstanding, $50,000,000 in the aggregate.
(f) Sale and Leaseback Transactions. Sell or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which any
Consolidated Company intends to use for substantially the same purpose or
purposes as the property being sold or transferred; provided that, the
Consolidated Companies shall be permitted to sell or transfer property
and rent or lease such property or other property back so long as the
aggregate market value of such property sold or transferred during the
Lease Term does not exceed $5,000,000.
(g) Transactions with Affiliates.
(i) Enter into any transaction or series of related
transactions which in the aggregate would be material, whether or
not in the ordinary course of business, with any Affiliate of any
Consolidated Company (but excluding any Affiliate which is also a
wholly-owned Subsidiary of Lessee and any compensation arrangement
with an officer or director of the Lessee or any other Consolidated
Company entered into in the ordinary course of business), other
than on terms and conditions substantially as favorable to such
Consolidated Company as would be obtained by such Consolidated
Company at the time in a comparable arm's-length transaction with a
Person other than an Affiliate.
(ii) Convey or transfer to any other Person (including any
other Consolidated Company) any real property, buildings, or
fixtures used in the manufacturing or production operations of any
Consolidated Company, or convey or transfer to any other
Consolidated Company any other assets (excluding conveyances or
transfers in the ordinary course of business) if at the time of
such conveyance or transfer any Potential Event of Default or Event
of Default exists or would exist as a result of such conveyance or
transfer.
(h) Changes in Business. Enter into or engage in any
business which is substantially different from the business engaged in by
the Lessee and its Subsidiaries on the initial Closing Date.
(i) ERISA. Take or fail to take any action with respect to
any Plan of any Consolidated Company or, with respect to its ERISA
Affiliates, any Plans which are subject to Title IV of ERISA or to
continuation health care requirements for group health plans under the
Tax Code, including without limitation (i) establishing any such Plan,
(ii) amending any such Plan (except where required to comply with
Applicable Law), (iii) terminating or withdrawing from any such Plan, or
(iv) incurring an amount of unfunded benefit liabilities, as defined in
Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV
of ERISA with respect to any such Plan, which together with any other
action or omission referred to in this Section 5.2(i) (taken as a whole)
would have a Material Adverse Effect, without first obtaining the written
approval of the Required Lenders.
(j) Limitation on Payment Restrictions Affecting
Consolidated Companies. Create or otherwise cause or suffer to exist or
become effective, any consensual encumbrance or restriction on the
ability of any Consolidated Company to (i) pay dividends or make any
other distributions on any stock of a Subsidiary of the Lessee, or (ii)
pay any intercompany debt owed to Lessee or any other Consolidated
Company, or (iii) transfer any of its property or assets to Lessee or any
other Consolidated Company, except any consensual encumbrance or
restriction existing as of the Closing Date.
(k) Actions Under Certain Documents. Without the prior
written consent of the Required Lenders (i) modify, amend, cancel or
rescind any agreements or documents evidencing or governing Subordinated
Debt or intercompany debt, (ii) make any payment with respect to
Subordinated Debt, except that current interest accrued on such
Subordinated Debt as of the date of this Master Agreement and all
interest subsequently accruing thereon (whether or not paid currently)
may be paid unless a Potential Event of Default or Event of Default has
occurred and is continuing, (iii) voluntarily prepay any portion of
intercompany debt, or (iv) amend or revise the Sharing Agreements so as
to materially increase the liabilities or obligations of the Consolidated
Companies thereunder.
(l) Changes in Fiscal Year. Change the calculation of the
Fiscal Year of the Lessee.
(m) Issuance of Stock by Subsidiaries. Permit any
Subsidiary (either directly or indirectly by the issuance of rights or
options for, or securities convertible into such shares) to issue, sell
or dispose of any shares of its stock of any class (other than directors'
qualifying shares, if any) except to the Lessee or another Subsidiary.
SECTION 6.3 Further Assurances. Upon the written request of the
Lessor or the Agent, the Lessee, at its own cost and expense, will cause
all financing statements (including precautionary financing statements),
fixture filings and other similar documents, to be recorded or filed at
such places and times in such manner, as may be necessary to preserve,
protect and perfect the interest of the Lessor, the Agent and the Lenders
in the related Leased Property as contemplated by the Operative
Documents.
SECTION 6.4 Additional Required Appraisals. If, as a result of
any change in Applicable Law after the date hereof, an appraisal of all
or any of the Leased Property is required during the Lease Term under
Applicable Law with respect to any Funding Party's interest therein, such
Funding Party's Funded Amount with respect thereto or the Operative
Documents, then the Lessee shall pay the reasonable cost of such
appraisal.
SECTION 6.5 Lessor's Covenants. The Lessor covenants and agrees
that, unless the Agent and the Lenders shall have otherwise consented in
writing:
(a) it shall not amend its Partnership Agreement, except
to admit limited partners in connection with lease transactions similar
to the Transactions;
(b) it shall not incur any indebtedness or other monetary
obligation or liability, other than (i) non-recourse indebtedness
incurred in connection with the Transactions or similar transactions and
(ii) operating expenses incurred in the ordinary course of business that
are not delinquent;
(c) the proceeds of the Loans received from the Lenders
will be used by the Lessor solely to acquire the Leased Property and to
pay the Lessee for certain closing and transaction costs associated
therewith and for the costs of Construction. No portion of the proceeds
of the Loans will be used by the Lessor (i) in connection with, whether
directly or indirectly, any tender offer for, or other acquisition of,
stock of any corporation with a view towards obtaining control of such
other corporation, (ii) directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock, or (iii) for any purpose in violation of any Applicable Law;
(d) it shall not engage in any business or activity, or
invest in any Person, except for activities similar to its activities
conducted on the date hereof, the Transactions and lease transactions
similar to the Transactions;
(e) it will maintain tangible net worth in an amount no
less than the sum of (i) $100,000 plus (ii) 3% of its total assets
(calculated assuming no reduction in the value of any leased property
from its original cost to the Lessor);
(f) it will deliver to the Agent, as soon as available and
in any event within 90 days after the end of each fiscal year, a balance
sheet of the Lessor as of the end of such fiscal year and the related
statements of income, partners' capital and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, together with copies of its tax returns, all
certified by an officer of the general partner (and if the Lessor ever
prepares audited financial statements, it shall deliver copies thereto
the Agent);
(g) it will permit the Agent and its representatives to
examine, and make copies from, the Lessor's books and records, and to
visit the offices and properties of the Lessor for the purpose of
examining such materials, and to discuss the Lessor's performance
hereunder with any of its, or its general partner's, officers and
employees;
(h) it shall not consent to or suffer or permit any Lien
against the Leased Property, other than as expressly contemplated
pursuant to the Operative Documents;
(i) it shall not consent to or suffer or permit the
creation of any easement or other restriction against the Leased Property
other than as permitted pursuant to Article VI of the Lease; and
(j) it shall promptly discharge each Lessor Lien and shall
indemnify the Lenders and the Lessee for any diminution in value of any
Leased Property resulting from such Lessor Liens.
SECTION 7
TRANSFERS BY LESSOR AND LENDERS
SECTION 7.1 Lessor Transfers. The Lessor shall not assign, convey
or otherwise transfer all or any portion of its right, title or interest
in, to or under any Leased Property or any of the Operative Documents
without the prior written consent of the Lenders and the Lessee. Any
proposed transferee of the Lessor shall make the representation set forth
in Section 4.2(b) to the other parties hereto.
SECTION 7.2 Lender Transfers. No Lender may grant participations
in its Commitment or sell Loans or participations in its Loan and
Commitment to any Person (other than an Affiliate) without the prior
written consent of the Lessee, which consent shall not be unreasonably
withheld. Any approved participation buyer shall not receive voting or
waiver rights except with respect to postponing maturities, decreasing
interest rates, releasing all or substantially all of the collateral or
increasing principal amounts. Assignments will be permitted only with
the prior written consent of the Lessee and the Agent, which consent
shall not be unreasonably withheld, obtained at least 14 days prior to
any proposed assignment, and the payment of a processing fee of $2,500 by
the assignor or assignee Lender (as agreed between such Persons) to the
Agent. Assignments shall be evidenced by an assignment and assumption
agreement in substantially the form set forth as Exhibit J.
SECTION 8
INDEMNIFICATION
SECTION 8.1 General Indemnification. The Lessee agrees, whether or
not any of the transactions contemplated hereby shall be consummated, to
assume liability for, and to indemnify, protect, defend, save and hold
harmless each Indemnitee, on an After-Tax Basis, from and against, any
and all Claims that may be imposed on, incurred by or asserted, or
threatened to be asserted, against such Indemnitee (whether because of
action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to any
Closing Date or after the Lease Termination Date, in any way relating to
or arising out of:
(a) any of the Operative Documents or any of the
transactions contemplated thereby, and any amendment, modification
or waiver in respect thereof; or
(b) any Land, any Building or any part thereof or interest
therein, including any Ground Lease;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental,
lease, sublease, repossession, maintenance, repair, alteration,
modification, addition, substitution, storage, transfer of title,
redelivery, use, financing, refinancing, disposition, operation,
condition, sale (including, without limitation, any sale pursuant
to the Lease), return or other disposition of all or any part of
any interest in any Leased Property or the imposition of any Lien,
other than a Lessor Lien (or incurring of any liability to refund
or pay over any amount as a result of any Lien, other than a Lessor
Lien) thereon, including, without limitation: (1) Claims or
penalties arising from any violation or alleged violation of law or
in tort (strict liability or otherwise), (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a
violation or alleged violation of the terms of any restriction,
easement, condition or covenant or other matter affecting title to
any Leased Property or any part thereof, (4) the making of any
Alterations in violation of any standards imposed by any insurance
policies required to be maintained by the Lessee pursuant to the
Lease which are in effect at any time with respect to any Leased
Property or any part thereof, (5) any Claim for patent, trademark
or copyright infringement, (6) Claims arising from any public
improvements with respect to any Leased Property resulting in any
charge or special assessments being levied against any Leased
Property or any Claim for utility "tap-in" fees, and (7) Claims for
personal injury or real or personal property damage occurring, or
allegedly occurring, on any Land, Building or Leased Property;
(d) the offer, issuance, sale or delivery of the Notes by
the Lessee;
(e) the breach or alleged breach by the Lessee of any
representation or warranty made by it or deemed made by it in any
Operative Document or any certificate required to be delivered by
any Operative Document;
(f) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection
with this Master Agreement, or the incurring of any fees or
commissions to which the Lessor, the Agent or any Lender might be
subjected by virtue of their entering into the transactions
contemplated by this Master Agreement (other than fees or
commissions due to any broker, finder or financial advisor retained
by the Lessor, the Agent or any Lender);
(g) the existence of any Lien on or with respect to any
Leased Property, the Construction, any Basic Rent or Supplemental
Rent, title thereto, or any interest therein, including any Liens
which arise out of the possession, use, occupancy, construction,
repair or rebuilding of any Leased Property or by reason of labor
or materials furnished or claimed to have been furnished to the
Lessee, or any of its contractors or agents or by reason of the
financing of any personalty or equipment purchased or leased by the
Lessee or Alterations constructed by the Lessee, except in all
cases the Liens listed as items (a) and (b) in the definition of
Permitted Liens;
(h) the transactions contemplated hereby or by any other
Operative Document, in respect of the application of Parts 4 and 5
of Subtitle B of Title I of ERISA and any prohibited transaction
described in Section 4975(c) of the Code; or
(i) any act or omission by the Lessee under any Purchase
Agreement or any other Operative Document, and any breach of any
requirement, condition, restriction or limitation in any Deed,
Purchase Agreement or Ground Lease;
provided, however, the Lessee shall not be required to indemnify any
Indemnitee under this Section 7.1 for any of the following: (1) any
Claim to the extent that such Claim results from the willful misconduct,
gross negligence or misrepresentation of such Indemnitee, or (2) any
Claim resulting from Lessor Liens which the Lessor Indemnitee Group is
responsible for discharging under the Operative Documents. It is
expressly understood and agreed that the indemnity provided for herein
shall survive the expiration or termination of, and shall be separate and
independent from any other remedy under this Master Agreement, the Lease
or any other Operative Document.
SECTION 8.2 Environmental Indemnity. In addition to and without
limitation of Section 7.1, the Lessee agrees to indemnify, hold harmless
and defend each Indemnitee from and against any and all claims (including
without limitation third party claims for personal injury or real or
personal property damage), losses (including but not limited to any loss
of value of any Leased Property), damages, liabilities, fines, penalties,
charges, suits, settlements, demands, administrative and judicial
proceedings (including informal proceedings) and orders, judgments,
remedial action, requirements, enforcement actions of any kind, and all
reasonable costs and expenses actually incurred in connection therewith
(including, but not limited to, reasonable attorneys' and/or paralegals'
fees and expenses), including, but not limited to, all costs incurred in
connection with any investigation or monitoring of site conditions or any
clean-up, remedial, removal or restoration work by any federal, state or
local government agency, arising directly or indirectly, in whole or in
part, out of
(i) the presence on or under any Land of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials
on, under, from or onto any Land,
(ii) any activity, including, without limitation,
construction, carried on or undertaken on or off any Land, and
whether by the Lessee or any predecessor in title or any employees,
agents, contractors or subcontractors of the Lessee or any
predecessor in title, or any other Person, in connection with the
handling, treatment, removal, storage, decontamination, clean-up,
transport or disposal of any Hazardous Materials that at any time
are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under any Land,
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource
damages), or death or injury to any Person, and all expenses
associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by
or under Environmental Laws, in each case to the extent related to
any Leased Property,
(iv) any claim concerning any Leased Property's lack of
compliance with Environmental Laws, or any act or omission causing
an environmental condition on or with respect to any Leased
Property that requires remediation or would allow any governmental
agency to record a lien or encumbrance on the land records, or
(v) any residual contamination on or under any Land, or
affecting any natural resources on any Land, and to any
contamination of any property or natural resources arising in
connection with the generation, use, handling, storage, transport
or disposal of any such Hazardous Materials on or from any Leased
Property; in each case irrespective of whether any of such
activities were or will be undertaken in accordance with applicable
laws, regulations, codes and ordinances;
in any case with respect to the matters described in the foregoing
clauses (i) through (v) that arise or occur
(w) prior to or during the Lease Term,
(x) at any time during which the Lessee or any Affiliate
thereof owns any interest in or otherwise occupies or possesses any
Leased Property or any portion thereof,
(y) during any period after and during the continuance of
any Event of Default or
(z) during any period of three years following the date an
Indemnitee takes possession of any Leased Property;
provided, however, the Lessee shall not be required to indemnify any
Indemnitee under this Section 7.2 for any Claim to the extent that such
Claim results from the willful misconduct or gross negligence of such
Indemnitee. It is expressly understood and agreed that the indemnity
provided for herein shall survive the expiration or termination of and
shall be separate and independent from any other remedy under this Master
Agreement, the Lease or any other Operative Document.
SECTION 8.3 Proceedings in Respect of Claims. With respect to any
amount that the Lessee is requested by an Indemnitee to pay by reason of
Section 7.1 or 7.2, such Indemnitee shall, if so requested by the Lessee
and prior to any payment, submit such additional information to the
Lessee as the Lessee may reasonably request and which is in the
possession of, or under the control of, such Indemnitee to substantiate
properly the requested payment. In case any action, suit or proceeding
shall be brought against any Indemnitee, such Indemnitee promptly shall
notify the Lessee of the commencement thereof (provided that the failure
of such Indemnitee to promptly notify the Lessee shall not affect the
Lessee's obligation to indemnify hereunder except to the extent that the
Lessee's ability to contest is materially prejudiced by such failure),
and the Lessee shall be entitled, at its expense, to participate in, and,
to the extent that the Lessee desires to, assume and control the defense
thereof with counsel reasonably satisfactory to such Indemnitee;
provided, however, that such Indemnitee may pursue a motion to dismiss
such Indemnitee from such action, suit or proceeding with counsel of such
Indemnitee's choice at the Lessee's expense; and provided further that
the Lessee may assume and control the defense of such proceeding only if
the Lessee shall have acknowledged in writing its obligations to fully
indemnify such Indemnitee in respect of such action, suit or proceeding,
the Lessee shall pay all reasonable costs and expenses related to such
action, suit or proceeding as and when incurred and the Lessee shall keep
such Indemnitee fully apprised of the status of such action suit or
proceeding and shall provide such Indemnitee with all information with
respect to such action suit or proceeding as such Indemnitee shall
reasonably request; and, provided further, that the Lessee shall not be
entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable opinion of
such Indemnitee, (x) such action, suit or proceeding involves any
possibility of imposition of criminal liability or any material risk of
material civil liability on such Indemnitee or (y) such action, suit or
proceeding will involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien) on any
Leased Property or any part thereof unless the Lessee shall have posted a
bond or other security satisfactory to the relevant Indemnitees in
respect to such risk or (z) the control of such action, suit or
proceeding would involve an actual or potential conflict of interest,
(B) such proceeding involves Claims not fully indemnified by the Lessee
which the Lessee and the Indemnitee have been unable to sever from the
indemnified claim(s), or (C) an Event of Default has occurred and is
continuing. The Indemnitee may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by the
Lessee in accordance with the foregoing.
If the Lessee fails to fulfill the conditions to the Lessee's
assuming the defense of any claim after receiving notice thereof on or
prior to the date that is 15 days prior to the date that an answer or
response is required, the Indemnitee may undertake such defense, at the
Lessee's expense. The Lessee shall not enter into any settlement or
other compromise with respect to any Claim in excess of $1,000,000 which
is entitled to be indemnified under Section 7.1 or 7.2 without the prior
written consent of the related Indemnitee, which consent shall not be
unreasonably withheld. Unless an Event of Default shall have occurred
and be continuing, no Indemnitee shall enter into any settlement or other
compromise with respect to any claim which is entitled to be indemnified
under Section 7.1 or 7.2 without the prior written consent of the Lessee,
which consent shall not be unreasonably withheld, unless such Indemnitee
waives its right to be indemnified under Section 7.1 or 7.2 with respect
to such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section
7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (other than claims in respect of
insurance policies maintained by such Indemnitee at its own expense), and
such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be reasonably necessary to preserve any
such claims and otherwise cooperate with the Lessee and give such further
assurances as are reasonably necessary or advisable to enable the Lessee
vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2
shall be paid to such Indemnitee promptly upon, but in no event later
than 30 days after, receipt of a written demand therefor from such
Indemnitee, accompanied by a written statement describing in reasonable
detail the basis for such indemnity and the computation of the amount so
payable.
If for any reason the indemnification provided for in Section 7.1
or 7.2 is unavailable to an Indemnitee or is insufficient to hold an
Indemnitee harmless, then the Lessee agrees to contribute to the amount
paid or payable by such Indemnitee as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such Indemnitee on the one hand
and by the Lessee on the other hand but also the relative fault of such
Indemnitee as well as any other relevant equitable considerations. It is
expressly understood and agreed that the right to contribution provided
for herein shall survive the expiration or termination of and shall be
separate and independent from any other remedy under this Master
Agreement, the Lease or any other Operative Document.
SECTION 8.4 General Tax Indemnity. (a) Tax Indemnity. Except as
otherwise provided in this Section 7.4, the Lessee shall pay on an After-
Tax Basis, and on written demand shall indemnify and hold each Tax
Indemnitee harmless from and against, any and all fees (including,
without limitation, documentation, recording, license and registration
fees), taxes (including, without limitation, income, gross receipts,
sales, rental, use, turnover, value-added, property, excise and stamp
taxes), levies, imposts, duties, charges, assessments or withholdings of
any nature whatsoever, together with any penalties, fines or interest
thereon or additions thereto (any of the foregoing being referred to
herein as "Taxes" and individually as a "Tax" (for the purposes of this
Section 7.4, the definition of "Taxes" includes amounts imposed on,
incurred by, or asserted against each Tax Indemnitee as the result of any
prohibited transaction, within the meaning of Section 406 or 407 of ERISA
or Section 4975(c) of the Code, arising out of the transactions
contemplated hereby or by any other Operative Document)) imposed on or
with respect to any Tax Indemnitee, the Lessee, any Leased Property or
any portion thereof or any Land, or any sublessee or user thereof, by the
United States or by any state or local government or other taxing
authority in the United States in connection with or in any way relating
to (i) the acquisition, financing, mortgaging, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
purchase, ownership, possession, rental, lease, sublease, maintenance,
repair, storage, transfer of title, redelivery, use, operation,
condition, sale, return or other application or disposition of all or any
part of any Leased Property or the imposition of any Lien (or incurrence
of any liability to refund or pay over any amount as a result of any
Lien) thereon, (ii) Basic Rent or Supplemental Rent or the receipts or
earnings arising from or received with respect to any Leased Property or
any part thereof, or any interest therein or any applications or
dispositions thereof, (iii) any other amount paid or payable pursuant to
the Notes, or any other Operative Documents, (iv) any Leased Property,
any Land or any part thereof or any interest therein (including, without
limitation, all assessments payable in respect thereof, including,
without limitation, all assessments noted on the related Title Policy),
(v) all or any of the Operative Documents, any other documents
contemplated thereby, any amendments and supplements thereto, and
(vi) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents.
(b) Exclusions from General Tax Indemnity. Section 7.4(a)
shall not apply to:
(i) Taxes on, based on, or measured by or with respect
to net income of the Lessor, the Agent and the Lenders (including,
without limitation, minimum Taxes, capital gains Taxes, Taxes on or
measured by items of tax preference or alternative minimum Taxes)
other than (A) any such Taxes that are, or are in the nature of,
sales, use, license, rental or property Taxes, and (B) withholding
Taxes imposed by the United States or any state in which Leased
Property is located (i) on payments with respect to the Notes, to
the extent imposed by reason of a change in Applicable Law
occurring after the date on which the holder of such Note became
the holder of such Note or (ii) on Rent, to the extent the net
payment of Rent after deduction of such withholding Taxes would be
less than amounts currently payable with respect to the Funded
Amounts;
(ii) Taxes on, based on, or in the nature of or
measured by Taxes on doing business, business privilege, franchise,
capital, capital stock, net worth, or mercantile license or similar
taxes other than (A) any increase in such Taxes imposed on such Tax
Indemnitee by any state in which Leased Property is located, net of
any decrease in such taxes realized by such Tax Indemnitee, to the
extent that such tax increase would not have occurred if on each
Funding Date the Lessor and the Lenders had advanced funds to the
Lessee in the form of loans secured by the Leased Property in an
amount equal to the Funded Amounts funded on such Funding Date,
with debt service for such loans equal to the Basic Rent payable on
each Payment Date and a principal balance at the maturity of such
loans in a total amount equal to the Funded Amounts at the end of
the Lease Term, or (B) any Taxes that are or are in the nature of
sales, use, rental, license or property Taxes relating to any
Leased Property;
(iii) Taxes that are based on, or measured by, the
fees or other compensation received by a Person acting as Agent (in
its individual capacities) or any Affiliate of any thereof for
acting as trustee under the Loan Agreement;
(iv) Taxes that result from any act, event or
omission, or are attributable to any period of time, that occurs
after the earliest of (A) the expiration of the Lease Term with
respect to any Leased Property and, if such Leased Property is
required to be returned to the Lessor in accordance with the Lease,
such return and (B) the discharge in full of the Lessee's
obligations to pay the Lease Balance, or any amount determined by
reference thereto, with respect to any Leased Property and all
other amounts due under the Lease, unless such Taxes relate to
acts, events or matters occurring prior to the earliest of such
times or are imposed on or with respect to any payments due under
the Operative Documents after such expiration or discharge;
(v) Taxes imposed on a Tax Indemnitee that result from
any voluntary sale, assignment, transfer or other disposition or
bankruptcy by such Tax Indemnitee or any related Tax Indemnitee of
any interest in any Leased Property or any part thereof, or any
interest therein or any interest or obligation arising under the
Operative Documents, or from any sale, assignment, transfer or
other disposition of any interest in such Tax Indemnitee or any
related Tax Indemnitee, it being understood that each of the
following shall not be considered a voluntary sale: (A) any
substitution, replacement or removal of any of the Leased Property
by the Lessee, (B) any sale or transfer resulting from the exercise
by the Lessee of any termination option, any purchase option or
sale option, (C) any sale or transfer while an Event of Default
shall have occurred and be continuing under the Lease, and (D) any
sale or transfer resulting from the Lessor's exercise of remedies
under the Lease;
(vi) any Tax which is being contested in accordance
with the provisions of Section 7.4(c), during the pendency of such
contest;
(vii) any Tax that is imposed on a Tax Indemnitee as a
result of such Tax Indemnitee's gross negligence or willful
misconduct (other than gross negligence or willful misconduct
imputed to such Tax Indemnitee solely by reason of its interest in
any Leased Property);
(viii) any Tax that results from a Tax Indemnitee
engaging, with respect to any Leased Property, in transactions
other than those permitted by the Operative Documents;
(ix) to the extent any interest, penalties or
additions to tax result in whole or in part from the failure of a
Tax Indemnitee to file a return or pay a Tax that it is required to
file or pay in a proper and timely manner, unless such failure
(A) results from the transactions contemplated by the Operative
Documents in circumstances where the Lessee did not give timely
notice to such Tax Indemnitee (and such Tax Indemnitee otherwise
had no actual knowledge) of such filing or payment requirement that
would have permitted a proper and timely filing of such return or
payment of such Tax, as the case may be, or (B) results from the
failure of the Lessee to supply information necessary for the
proper and timely filing of such return or payment of such Tax, as
the case may be, that was not in the possession of such Tax
Indemnitee; and
(x) any Tax that results from the breach by the Lessor
of its representation and warranty made in Section 4.2(b) or the
breach of any Lender of its representation and warranty made in
Section 4.3(b).
(c) Contests. If any claim shall be made against any Tax
Indemnitee or if any proceeding shall be commenced against any Tax
Indemnitee (including a written notice of such proceeding) for any Taxes
as to which the Lessee may have an indemnity obligation pursuant to
Section 7.4, or if any Tax Indemnitee shall determine that any Taxes as
to which the Lessee may have an indemnity obligation pursuant to Section
7.4 may be payable, such Tax Indemnitee shall promptly notify the Lessee.
The Lessee shall be entitled, at its expense, to participate in, and, to
the extent that the Lessee desires to, assume and control the defense
thereof; provided, however, that the Lessee shall have acknowledged in
writing its obligation to fully indemnify such Tax Indemnitee in respect
of such action if requested to do so by the Lessee, suit or proceeding if
the contest is unsuccessful; and, provided further, that the Lessee shall
not be entitled to assume and control the defense of any such action,
suit or proceeding (but the Tax Indemnitee shall then contest, at the
sole cost and expense of the Lessee, on behalf of the Lessee with
representatives reasonably satisfactory to the Lessee) if and to the
extent that, (A) in the reasonable opinion of such Tax Indemnitee, such
action, suit or proceeding (x) involves any meaningful risk of imposition
of criminal liability or any material risk of material civil liability on
such Tax Indemnitee or (y) will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on any Leased Property or any part thereof unless the
Lessee shall have posted a bond or other security satisfactory to the
relevant Tax Indemnitees in respect to such risk, (B) such proceeding
involves Claims not fully indemnified by the Lessee which the Lessee and
the Tax Indemnitee have been unable to sever from the indemnified
claim(s), (C) an Event of Default has occurred and is continuing,
(D) such action, suit or proceeding involves matters which extend beyond
or are unrelated to the Transaction and if determined adversely could be
materially detrimental to the interests of such Tax Indemnitee
notwithstanding indemnification by the Lessee or (E) such action, suit or
proceeding involves the federal or any state income tax liability of the
Tax Indemnitee. With respect to any contests controlled by a Tax
Indemnitee, (i) if such contest relates to the federal or any state
income tax liability of such Tax Indemnitee, such Tax Indemnitee shall be
required to conduct such contest only if the Lessee shall have provided
to such Tax Indemnitee an opinion of independent tax counsel selected by
the Tax Indemnitee and reasonably satisfactory to the Lessee stating that
a reasonable basis exists to contest such claim or (ii) in the case of an
appeal of an adverse determination of any contest relating to any Taxes,
an opinion of such counsel to the effect that such appeal is more likely
than not to be successful, provided, however, such Tax Indemnitee shall
in no event be required to appeal an adverse determination to the United
States Supreme Court. The Tax Indemnitee may participate in a reasonable
manner at its own expense and with its own counsel in any proceeding
conducted by the Lessee in accordance with the foregoing.
Each Tax Indemnitee shall at the Lessee's expense supply the Lessee
with such information and documents in such Tax Indemnitee's possession
reasonably requested by the Lessee as are necessary or advisable for the
Lessee to participate in any action, suit or proceeding to the extent
permitted by this Section 7.4. Unless an Event of Default shall have
occurred and be continuing, no Tax Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is
entitled to be indemnified under this Section 7.4 without the prior
written consent of the Lessee, which consent shall not be unreasonably
withheld, unless such Tax Indemnitee waives its right to be indemnified
under this Section 7.4 with respect to such Claim.
Notwithstanding anything contained herein to the contrary, (a) a
Tax Indemnitee will not be required to contest (and the Lessee shall not
be permitted to contest) a claim with respect to the imposition of any
Tax if such Tax Indemnitee shall waive its right to indemnification under
this Section 7.4 with respect to such claim (and any related claim with
respect to other taxable years the contest of which is precluded as a
result of such waiver) and (b) no Tax Indemnitee shall be required to
contest any claim if the subject matter thereof shall be of a continuing
nature and shall have previously been decided adversely, unless there has
been a change in law which in the opinion of Tax Indemnitee's counsel
creates substantial authority for the success of such contest. Each Tax
Indemnitee and the Lessee shall consult in good faith with each other
regarding the conduct of such contest controlled by either.
(d) Reimbursement for Tax Savings. If (x) a Tax Indemnitee
shall obtain a credit or refund of any Taxes paid by the Lessee pursuant
to this Section 7.4 or (y) by reason of the incurrence or imposition of
any Tax for which a Tax Indemnitee is indemnified hereunder or any
payment made to or for the account of such Tax Indemnitee by the Lessee
pursuant to this Section 7.4, such Tax Indemnitee at any time realizes a
reduction in any Taxes for which the Lessee is not required to indemnify
such Tax Indemnitee pursuant to this Section 7.4, which reduction in
Taxes was not taken into account in computing such payment by the Lessee
to or for the account of such Tax Indemnitee, then such Tax Indemnitee
shall promptly pay to the Lessee (xx) the amount of such credit or
refund, together with the amount of any interest received by such Tax
Indemnitee on account of such credit or refund or (yy) an amount equal to
such reduction in Taxes, as the case may be; provided that no such
payment shall be made so long as an Event of Default shall have occurred
and be continuing and, provided, further, that the amount payable to the
Lessee by any Tax Indemnitee pursuant to this Section 7.4(d) shall not at
any time exceed the aggregate amount of all indemnity payments made by
the Lessee under this Section 7.4 to such Tax Indemnitee with respect to
the Taxes which gave rise to the credit or refund or with respect to the
Tax which gave rise to the reduction in Taxes less the amount of all
prior payments made to the Lessee by such Tax Indemnitee under this
Section 7.4(d). Each Tax Indemnitee agrees to act in good faith to claim
such refunds and other available Tax benefits, and take such other
actions as may be reasonable to minimize any payment due from the Lessee
pursuant to this Section 7.4. The disallowance or reduction of any
credit, refund or other tax savings with respect to which a Tax
Indemnitee has made a payment to the Lessee under this Section 7.4(d)
shall be treated as a Tax for which the Lessee are obligated to indemnify
such Tax Indemnitee hereunder without regard to Section 7.4(b) hereof.
(e) Payments. Any Tax indemnifiable under this Section 7.4
shall be paid by the Lessee directly when due to the applicable taxing
authority if direct payment is practicable and permitted. If direct
payment to the applicable taxing authority is not permitted or is
otherwise not made, any amount payable to a Tax Indemnitee pursuant to
Section 7.4 shall be paid within thirty (30) days after receipt of a
written demand therefor from such Tax Indemnitee accompanied by a written
statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made
pursuant to Section 7.4 shall be made to the Tax Indemnitee entitled
thereto or the Lessee, as the case may be, in immediately available funds
at such bank or to such account as specified by the payee in written
directions to the payor, or, if no such direction shall have been given,
by check of the payor payable to the order of the payee by certified
mail, postage prepaid at its address as set forth in this Master
Agreement. Upon the request of any Tax Indemnitee with respect to a Tax
that the Lessee is required to pay, the Lessee shall furnish to such Tax
Indemnitee the original or a certified copy of a receipt for the Lessee's
payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(f) Reports. If the Lessee knows of any report, return or
statement required to be filed with respect to any Taxes that are subject
to indemnification under this Section 7.4, the Lessee shall, if the
Lessee is permitted by Applicable Law, timely file such report, return or
statement (and, to the extent permitted by law, show ownership of the
applicable Leased Property in the Lessee); provided, however, that if the
Lessee is not permitted by Applicable Law or does not have access to the
information required to file any such report, return or statement, the
Lessee will promptly so notify the appropriate Tax Indemnitee, in which
case Tax Indemnitee will file such report. In any case in which the Tax
Indemnitee will file any such report, return or statement, the Lessee
shall, upon written request of such Tax Indemnitee, prepare such report,
return or statement for filing by such Tax Indemnitee or, if such Tax
Indemnitee so requests, provide such Tax Indemnitee with such information
as is reasonably available to the Lessee.
(g) Verification. At the Lessee's request, the amount of
any indemnity payment by the Lessee or any payment by a Tax Indemnitee to
the Lessee pursuant to this Section 7.4 shall be verified and certified
by an independent public accounting firm selected by the Lessee and
reasonably acceptable to the Tax Indemnitee. Unless such verification
shall disclose an error in the Lessee's favor of 5% or more of the
related indemnity payment, the costs of such verification shall be borne
by the Lessee. In no event shall the Lessee have the right to review the
Tax Indemnitee's tax returns or receive any other confidential
information from the Tax Indemnitee in connection with such verification.
The Tax Indemnitee agrees to cooperate with the independent public
accounting firm performing the verification and to supply such firm with
all information reasonably necessary to permit it to accomplish such
verification, provided that the information provided to such firm by such
Tax Indemnitee shall be for its confidential use. The parties agree that
the sole responsibility of the independent public accounting firm shall
be to verify the amount of a payment pursuant to this Master Agreement
and that matters of interpretation of this Master Agreement are not
within the scope of the independent accounting firm's responsibilities.
SECTION 8.5 Increased Costs, etc.
(a) Interest Rate Not Ascertainable, etc. In the event
that the Agent shall have determined (which determination shall be made
in good faith and, absent manifest error, shall be final, conclusive and
binding upon all parties) that on any date for determining the Adjusted
LIBOR Rate for any Rent Period, by reason of any changes arising after
the date of this Master Agreement affecting the London interbank market,
or the Agent's position in such market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided
for in the definition of Adjusted LIBOR Rate, then, and in any such
event, the Agent shall forthwith give notice (by telephone confirmed in
writing) to Lessee and to the Lenders, of such determination and a
summary of the basis for such determination. Until the Agent notifies
Lessee that the circumstances giving rise to the suspension described
herein no longer exist, the obligations of the Lenders to make or permit
portions of the Loans to remain outstanding past the last day of the then
current Rent Periods as LIBOR Advances shall be suspended, and such
affected Advances shall bear the same interest as Base Rate Advances.
(b) Illegality.
(i) In the event that any Lender shall have
determined (which determination shall be made in good faith and,
absent manifest error, shall be final, conclusive and binding upon
all parties) at any time that the making or continuance of any
LIBOR Advance has become unlawful by compliance by such Lender in
good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful),
then, in any such event, the Lender shall give prompt notice (by
telephone confirmed in writing) to Lessee and to the Agent of such
determination and a summary of the basis for such determination
(which notice the Agent shall promptly transmit to the other
Lenders).
(ii) Upon the giving of the notice to Lessee referred
to in subsection (i) above, (A) Lessee's right to request and such
Lender's obligation to make LIBOR Advances shall be immediately
suspended, and such Lender shall make an Advance as part of the
requested Funding of LIBOR Advances as a Base Rate Advance, which
Base Rate Advance shall, for all other purposes, be considered part
of such Borrowing, and (B) if the affected LIBOR Advance or
Advances are then outstanding, Lessee shall immediately, or if
permitted by applicable law, no later than the date permitted
thereby, upon at least one Business Day's written notice to the
Agent and the affected Lender, convert each such Advance into a
Base Rate Advance or Advances, provided that if more than one
Lender is affected at any time, then all affected Lenders must be
treated the same pursuant to this Section 7.5(b).
(c) Increased Costs. If, by reason of (x) after the date
hereof, the introduction of or any change (including, without limitation,
any change by way of imposition or increase of reserve requirements) in
or in the interpretation of any law or regulation, or (y) the compliance
with any guideline or request from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks
or financial institutions generally made after the date hereof (whether
or not having the force of law):
(i) any Lender (or its applicable Lending Office)
shall be subject to any tax, duty or other charge with
respect to its LIBOR Advances or its obligation to make LIBOR
Advances or the basis of taxation of payments to any Lender
of the principal of or interest on its LIBOR Advances or its
obligation to make LIBOR Advances shall have changed (except
for changes in the tax on the overall net income of such
Lender or its applicable Lending Office imposed by the
jurisdiction in which such Lender's principal executive
office or applicable Lending Office is located); or
(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit
extended by, any Lender's applicable Lending Office shall be
imposed or deemed applicable or any other condition affecting
its LIBOR Advances or its obligation to make LIBOR Advances
shall be imposed on any Lender or its applicable Lending
Office or the London interbank market;
and as a result thereof there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining LIBOR
Advances (except to the extent already included in the determination of
the applicable Adjusted LIBOR Rate for LIBOR Advances) or its obligation
to make LIBOR Advances, or there shall be a reduction in the amount
received or receivable by such Lender or its applicable Lending Office,
then Lessee shall from time to time, upon written notice from and demand
by such Lender on Lessee (with a copy of such notice and demand to the
Agent), pay to the Agent for the account of such Lender within five
Business Days after the date of such notice and demand, additional
amounts sufficient to indemnify such Lender against such increased cost.
A certificate as to the amount of such increased cost, submitted to
Lessee and the Agent by such Lender in good faith and accompanied by a
statement prepared by such Lender describing in reasonable detail the
basis for and calculation of such increased cost, shall, except for
manifest error, be final, conclusive and binding for all purposes.
(d) Conversion to Base Rate Advances. If any Lender shall
advise the Agent that at any time, because of the circumstances described
in clause (x) or (y) in Section 7.5(c) or any other circumstances beyond
such Lender's reasonable control arising after the date of this Master
Agreement affecting such Lender or the London interbank market or such
Lender's position in such market, the Adjusted LIBOR Rate as determined
by the Agent will not adequately and fairly reflect the cost to such
Lender of funding its LIBOR Advances, then, and in any such event:
(i) the Agent shall forthwith give notice (by telephone
confirmed in writing) to Lessee and to the other Lenders of such
advice;
(ii) Lessee's right to request and such Lender's obligation
to make or permit portions of the Loans to remain outstanding past
the last day of the then current Rent Periods as LIBOR Advances
shall be immediately suspended; and
(iii) such Lender shall make a Loan as part of the requested
Funding of LIBOR Advances as a Base Rate Advance, which such Base
Rate Advance shall, for all other purposes, be considered part of
such Funding.
(e) Alternative Lending Office. Each Lender agrees that,
if requested by Lessee, it will use reasonable efforts (subject to
overall policy considerations of such Lender) to designate an alternate
Lending Office with respect to any of its LIBOR Advances affected by the
matters or circumstances described in paragraphs (a), (b), (c) or (d)
above to reduce the liability of Lessee or avoid the results provided
thereunder, so long as such designation is not disadvantageous to such
Lender as reasonably determined by such Lender, which determination shall
be conclusive and binding on all parties hereto. Nothing in this
Section 7.5(e) shall affect or postpone any of the obligations of Lessee
or any right of any Lender provided hereunder.
(f) Funding Losses. Lessee shall compensate each Lender,
upon its written request to Lessee (which request shall set forth the
basis for requesting such amounts in reasonable detail and which request
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all of the parties hereto), for all losses,
expenses and liabilities (including, without limitation, any interest
paid by such Lender to lenders of funds borrowed by it to make or carry
its LIBOR Advances to the extent not recovered by such Lender in
connection with the re-employment of such funds and including loss of
anticipated profits), which the Lender may sustain: (i) if for any
reason (other than a default by such Lender) a borrowing of, or
conversion to or continuation of, LIBOR Advances to Lessee does not occur
on the date specified therefor in a Funding Request or Payment Date
Notice (whether or not withdrawn), (ii) if any repayment (including any
conversions pursuant to this Section 7.5) of any LIBOR Advances to Lessee
occurs on a date which is not the last day of a Rent Period applicable
thereto, or (iii), if, for any reason, Lessee defaults in its obligation
to repay the Funded Amounts when required by the terms of the Lease.
(g) Assumptions Concerning Funding of LIBOR Advances.
Calculation of all amounts payable to a Lender under this Section 7.5
shall be made as though that Lender had actually funded its relevant
LIBOR Advances through the purchase of deposits in the relevant market
bearing interest at the rate applicable to such LIBOR Advances in an
amount equal to the amount of the LIBOR Advances and having a maturity
comparable to the relevant Rent Period and through the transfer of such
LIBOR Advances from an offshore office of that Lender to a domestic
office of that Lender in the United States of America; provided, however,
that each Lender may fund each of its LIBOR Advances in any manner it
sees fit and the foregoing assumption shall be used only for calculation
of amounts payable under this Section 7.5.
(h) Capital Adequacy. Without limiting any other
provision of this Master Agreement, in the event that any Lender shall
have determined that any law, treaty, governmental (or quasi-
governmental) rule, regulation, guideline or order regarding capital
adequacy not currently in effect or fully applicable as of the initial
Closing Date, or any change therein or in the interpretation or
application thereof, or compliance by such Lender with any request or
directive regarding capital adequacy not currently in effect or fully
applicable as of the initial Closing Date (whether or not having the
force of law and whether or not failure to comply therewith would be
unlawful) from a central bank or governmental authority or body having
jurisdiction, does or shall have the effect of reducing the rate of
return on such Lender's capital as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but
for such law, treaty, rule, regulation, guideline or order, or such
change or compliance (taking into consideration such Lender's policies
with respect to capital adequacy) by an amount deemed by such Lender to
be material, then within ten (10) Business Days after written notice and
demand by such Lender (with copies thereof to the Agent), Lessee shall
from time to time pay to such Lender additional amounts sufficient to
compensate such Lender for such reduction (but, in the case of
outstanding Base Rate Advances, without duplication of any amounts
already recovered by such Lender by reason of an adjustment in the
applicable Base Rate), provided that the Lessee shall not be obligated to
pay such compensation with respect to reductions incurred by such Lender
more than 120 days prior to the date that such Lender had actual
knowledge thereof. Each certificate as to the amount payable under this
Section 7.5(i) (which certificate shall set forth the basis for
requesting such amounts in reasonable detail), submitted to Lessee by any
Lender in good faith, shall, absent manifest error, be final, conclusive
and binding for all purposes.
(i) Replacement of Lender. In the event that any Lender
makes a claim for increased costs, or is subject to a circumstance making
LIBOR Advances unavailable, pursuant to this Section 7.5, the Lessee
shall have the right to replace such Lender with another financial
institution that is reasonably acceptable to the Agent. In the event
that the Lessee identifies such a replacement financial institution, and
the Agent consents thereto, the Lender that is to be replaced shall
assign its Loans and its Commitment to such replacement lender pursuant
to an assignment and assumption agreement in substantially the form set
forth as Exhibit J hereto upon payment to it of the outstanding
principal, and accrued interest on, its outstanding Loans, plus all other
amounts then due to it pursuant to the Operative Documents.
SECTION 8.6 End of Term Indemnity. In the event that at the end of
the Lease Term for a Leased Property: (i) the Lessee elects the option
set forth in Section 14.6 of the Lease, and (ii) after the Lessor
receives the sales proceeds from such Leased Property under Section 14.6
or 14.7 of the Lease, together with the Lessee's payment of the Recourse
Deficiency Amount, the Lessor shall not have received the entire Lease
Balance, then, within 90 days after the end of the Lease Term, the Lessor
or the Agent may obtain, at the Lessee's sole cost and expense, a report
from the Appraiser (or, if the Appraiser is not available, another
appraiser reasonably satisfactory to the Lessor or the Agent, as the case
may be, and approved by the Lessee, such approval not to be unreasonably
withheld) in form and substance satisfactory to the Lessor and the Agent
(the "Report") to establish the reason for any decline in value of such
Leased Property from the Lease Balance. The Lessee shall promptly
reimburse the Lessor for the amount equal to such decline in value to the
extent that the Report indicates that such decline was due to
(w) extraordinary use, failure to maintain, to repair, to
restore, to rebuild or to replace, failure to comply with all
Applicable Laws, failure to use, workmanship, method of
installation or removal or maintenance, repair, rebuilding or
replacement, or any other cause or condition within the power of
the Lessee to control or effect resulting in the Building failing
to be a restaurant unit of the type and quality contemplated by the
Appraisal (excepting in each case ordinary wear and tear), or
(x) any Alteration made to, or any rebuilding of, the
Leased Property or any part thereof by the Lessee, or
(y) any restoration or rebuilding carried out by the
Lessee or any condemnation of any portion of the Leased Property
pursuant to Article X of the Lease, or
(z) any use of such Leased Property or any part thereof
by the Lessee other than as permitted by the Lease, or any act or
omission constituting a breach of any requirement, condition,
restriction or limitation set forth in the related Deed or the
related Purchase Agreement.
SECTION 9
MISCELLANEOUS
SECTION 9.1 Survival of Agreements. The representations,
warranties, covenants, indemnities and agreements of the parties provided
for in the Operative Documents, and the parties' obligations under any
and all thereof, shall survive the execution and delivery and the
termination or expiration of this Master Agreement and any of the
Operative Documents, the transfer of any Land to the Lessor as provided
herein (and shall not be merged into any Deed), any disposition of any
interest of the Lessor in any Leased Property, the purchase and sale of
the Notes, payment therefor and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party
hereto or to any of the other Operative Documents and the fact that any
such party may waive compliance with any of the other terms, provisions
or conditions of any of the Operative Documents.
SECTION 9.2 Notices. Unless otherwise specified herein, all
notices, requests, demands or other communications to or upon the
respective parties hereto shall be addressed to such parties at the
addresses therefor as set forth in Schedule 8.2, or such other address as
any such party shall specify to the other parties hereto, and shall be
deemed to have been given (i) the Business Day after being sent, if sent
by overnight courier service; (ii) the Business Day received, if sent by
messenger; (iii) the day sent, if sent by facsimile and confirmed
electronically or otherwise during business hours of a Business Day (or
on the next Business Day if otherwise sent by facsimile and confirmed
electronically or otherwise); or (iv) three Business Days after being
sent, if sent by registered or certified mail, postage prepaid.
SECTION 9.3 Counterparts. This Master Agreement may be executed by
the parties hereto in separate counterparts (including by facsimile),
each of which when so executed and delivered shall be an original, but
all such counterparts shall together constitute but one and the same
instrument.
SECTION 9.4 Amendments. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified with
respect to the Lessee or any Funding Party, except (a) in the case of a
termination, amendment, supplement, waiver or modification to be binding
on the Lessee, with the written agreement or consent of the Lessee, and
(b) in the case of a termination, amendment, supplement, waiver or
modification to be binding on the Funding Parties, with the written
agreement or consent of the Required Funding Parties; provided, however,
that
(x) notwithstanding the foregoing provisions of this
Section 8.4, the consent of each Funding Party affected thereby shall be
required for any amendment, modification or waiver directly:
(i) modifying any of the provisions of this Section 8.4,
changing the definition of "Required Funding Parties" or "Required
Lenders", or increasing the Commitment of such Funding Party;
(ii) amending, modifying, waiving or supplementing any of
the provisions of Section 3 of the Loan Agreement or the
representations of such Funding Party in Section 4.2 or 4.3 or the
covenants of such Funding Party in Section 6 of this Master
Agreement;
(iii) reducing any amount payable to such Funding Party
under the Operative Documents or extending the time for payment of
any such amount, including, without limitation, any Rent, any
Funded Amount, any fees, any indemnity, the Leased Property
Balance, the Lease Balance, any Funding Party Balance, Recourse
Deficiency Amount, interest or Yield; or
(iv) consenting to any assignment of the Lease, releasing
any of the collateral assigned to the Agent and the Lenders
pursuant to any Mortgage and any Assignment of Lease and Rents (but
excluding a release of any rights that the Lenders may have in any
Leased Property, or the proceeds thereof as contemplated in the
definition of "Release Date"), releasing the Lessee from its
obligations in respect of the payments of Rent and the Lease
Balance, releasing the Lessee from its obligations under the
Guaranty or the other Operative Documents or changing the absolute
and unconditional character of any such obligation; and
(y) no such termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the
Lessor and the Lenders, be made to the Lease; and
(z) subject to the foregoing clauses (x) and (y), so long
as no Event of Default has occurred and is continuing, the Lessor, the
Agent and the Lenders may not amend, supplement, waive or modify any
terms of the Loan Agreement, the Notes, the Mortgages and the Assignments
of Lease and Rents without the consent of the Lessee (such consent not to
be unreasonably withheld or delayed); provided that in no event may the
Loan Agreement or the Notes be amended so as to increase the amount of
Basic Rent payable by the Lessee without the consent of the Lessee; the
Lessor and the Lessee may not amend, supplement, waive or modify any
terms of the Lease or any Security Agreement and Assignment without the
consent of the Agent and the Lenders.
SECTION 9.5 Headings, etc. The Table of Contents and headings of
the various Articles and Sections of this Master Agreement are for
convenience of reference only and shall not modify, define, expand or
limit any of the terms or provisions hereof.
SECTION 9.6 Parties in Interest. Except as expressly provided
herein, none of the provisions of this Master Agreement is intended for
the benefit of any Person except the parties hereto and their respective
successors and permitted assigns.
SECTION 9.7 GOVERNING LAW. THIS MASTER AGREEMENT HAS BEEN
DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 9.8 Expenses. Whether or not the transactions herein
contemplated are consummated, the Lessee agrees to pay, as Supplemental
Rent, all actual, reasonable and documented out-of-pocket costs and
expenses of the Lessor, the Agent and the Lenders in connection with the
preparation, execution and delivery of the Operative Documents and the
documents and instruments referred to therein and any amendment, waiver
or consent relating thereto (including, without limitation, the
reasonable fees and disbursements of Mayer, Brown & Platt, but not
including any fees and disbursements for any other outside counsel
representing any Lender) and of the Lessor, the Agent and the Lenders in
connection with the enforcement of the Operative Documents and the
documents and instruments referred to therein (including, without
limitation, the reasonable fees actually incurred and disbursements of
counsel for the Lessor, the Agent and the Lenders). All references in
the Operative Documents to "attorneys' fees" or "reasonable attorneys
fees" shall mean reasonable attorneys' fees actually incurred, without
regard to any statutory definition thereof.
SECTION 9.9 Severability. Any provision of this Master Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 9.10 Liabilities of the Funding Parties. No Funding
Party shall have any obligation to any other Funding Party or to the
Lessee with respect to the transactions contemplated by the Operative
Documents except those obligations of such Funding Party expressly set
forth in the Operative Documents or except as set forth in the
instruments delivered in connection therewith, and no Funding Party shall
be liable for performance by any other party hereto of such other party's
obligations under the Operative Documents except as otherwise so set
forth. No Lender shall have any obligation or duty to the Lessee, any
other Funding Parties or any other Person with respect to the
transactions contemplated hereby except to the extent of the obligations
and duties expressly set forth in this Master Agreement or the Loan
Agreement.
SECTION 9.11 Submission to Jurisdiction; Waivers. Each party
hereto hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Master Agreement or any other
Operative Document, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of Georgia sitting in
Fulton County, Georgia, the courts of the United States of America
for the Northern District of Georgia, and appellate courts from any
thereof;
(ii) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such party at its address set forth in
Schedule 8.2 or at such other address of which the other parties
hereto shall have been notified pursuant to Section 8.2; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law.
SECTION 9.12 Liabilities of the Agent. The Agent shall have
no duty, liability or obligation to any party to this Master Agreement
with respect to the transactions contemplated hereby except those duties,
liabilities or obligations expressly set forth in this Master Agreement
or the Loan Agreement, and any such duty, liability or obligations of the
Agent shall be as expressly limited by this Master Agreement or the Loan
Agreement, as the case may be.
IN WITNESS WHEREOF, the parties hereto have caused this Master
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
RUBY TUESDAY, INC., as the Lessee
By:
Name Printed:
Title:
ATLANTIC FINANCIAL GROUP, LTD., as
Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
By:
Name Printed:
Title:
SUNTRUST BANK, ATLANTA, as Agent and
as a Lender
By:
Name Printed:
Title:
By:
Name Printed:
Title:
AMSOUTH BANK OF ALABAMA, as a Lender
By:
Name Printed:
Title:
BARNETT BANK, N.A., as a Lender
By:
Name Printed:
Title:
FIRST AMERICAN NATIONAL BANK, as a
Lender
By:
Name Printed:
Title:
WACHOVIA BANK OF GEORGIA, N.A., as a
Lender
By:
Name Printed:
Title:
HIBERNIA NATIONAL BANK, as a Lender
By:
Name Printed:
Title:
FIRST TENNESSEE BANK, as a Lender
By:
Name Printed:
Title:
SCHEDULE 2.2
PAYMENT INSTRUCTIONS AND
AMOUNT OF EACH FUNDING PARTY'S COMMITMENT
Lessor Commitment Percentage: 3%
Lessor Commitment: $1,200,000
Lender Commitment Percentages:
Sun Trust Bank, Atlanta 22%
AmSouth Bank 13.3333%
Barnett Bank, N.A. 13.3333%
First American National Bank 13.3333%
Wachovia Bank of Georgia, N.A. 13.3333%
Hibernia National Bank 13.3333%
First Tennessee Bank 8.3333%
Total 97%
Lender Commitments:
SunTrust Bank, Atlanta $8,800,000.00
AmSouth Bank of Alabama $5,333,333.33
Barnett Bank $5,333,333.33
First American National Bank $5,333,333.33
Wachovia Bank of Georgia $5,333,333.33
Hibernia National Bank $5,333,333.34
First Tennessee Bank $3,333,333.34
Total $38,800,000.00
SCHEDULE 8.2
ADDRESSES FOR NOTICES
Lessee: Ruby Tuesday, Inc.
P.O. Box 160266
Mobile, Alabama 36625-0001
Attn: J. Russell Mothershed
Ruby Tuesday, Inc.
4721 Morrison Drive
Mobile, Alabama 36609-3350
Attn: J. Russell Mothershed
Lessor: Atlantic Financial Group, Ltd.
1000 Ballpark Way, Suite 304
Arlington, Texas 76011
Attn: Stephen Brookshire
Lender and Agent: SunTrust Bank, Atlanta
25 Park Place
Mail Code 120
Atlanta, Georgia 30303
Attn: Center 120/Corporate
Banking South
Lender: AmSouth Bank of Alabama
1900 5th Avenue North
Birmingham, Alabama 35203
Attn: Alan Lott
Lender: Barnett Bank, N.A.
50 North Laura Street
17th Floor
Jacksonville, Florida 32203-0789
Attn: Charles Pick
Lender: First American National Bank
315 Union Street
First American Center
3rd Floor
Nashville, Tennessee 37237-0310
Attn: Russell Rogers
Lender: First Tennessee National Bank
800 South Gay Street
Knoxville, Tennessee 37901
Attn: John Fisher
Lender: Hibernia National Bank
National Accounts
313 Carondelet Street
New Orleans, Louisiana 70130
Attn: Kay St. John
Lender: Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: John Canty
LOAN AGREEMENT
Dated as of May 30, 1997
among
ATLANTIC FINANCIAL GROUP, LTD.
as Lessor and Borrower,
the financial institutions party hereto,
as Lenders
and
SUNTRUST BANK, ATLANTA,
as Agent
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS; INTERPRETATION 1
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND
PREPAYMENT OF LOANS 1
SECTION 2.1 Commitment 1
SECTION 2.2 Notes 2
SECTION 2.3 Scheduled Principal Repayment 2
SECTION 2.4 Interest 2
SECTION 2.5 Allocation of Loans to Leased Properties 3
SECTION 2.6 Prepayment 3
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN
PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY 3
SECTION 3.1 Distribution and Application of Rent Payments 3
SECTION 3.2 Distribution and Application of Purchase Payment 4
SECTION 3.3 Distribution and Application to Funding
Party Balances of Lessee Payment of Recourse
Deficiency Amount Upon Exercise ofRemarketing
Option or Surrender Option 4
SECTION 3.4 Distribution and Application to Funding
Party Balance of Remarketing Proceeds of
Leased Property 4
SECTION 3.5 Distribution and Application of Payments
Received When an Event of Default Exists
or Has Ceased to Exist Following Rejection
of a Lease 5
SECTION 3.6 Distribution of Other Payments 6
SECTION 3.7 Timing of Agent Distributions 6
SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND
GUARANTY 7
SECTION 4.1 Covenant of Lessor 7
SECTION 4.2 Lessor Obligations Nonrecourse; Payment
from Certain Lease and Guaranty
Obligations and Certain Proceeds of
Leased Property Only 7
SECTION 4.3 Exercise of Remedies Under Lease and Guaranty 8
SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES 9
SECTION 5.1 Loan Events of Default 9
SECTION 5.2 Remedies 10
SECTION 6 THE AGENT 11
SECTION 6.1 Appointment 11
SECTION 6.2 Delegation of Duties 11
SECTION 6.3 Exculpatory Provisions 11
SECTION 6.4 Reliance by Agent 12
SECTION 6.5 Notice of Default 12
SECTION 6.6 Non-Reliance on Agent and Other Lenders 13
SECTION 6.7 Indemnification 13
SECTION 6.8 Agent in Its Individual Capacity 14
SECTION 6.9 Successor Agent 14
SECTION 7 MISCELLANEOUS 15
SECTION 7.1 Amendments and Waivers 15
SECTION 7.2 Notices 15
SECTION 7.3 No Waiver; Cumulative Remedies 15
SECTION 7.4 Successors and Assigns 15
SECTION 7.5 Counterparts 15
SECTION 7.6 GOVERNING LAW 15
SECTION 7.7 Survival and Termination of Agreement 16
SECTION 7.8 Entire Agreement 16
SECTION 7.9 Severability 16
APPENDIX A Definitions and Interpretation
EXHIBITS
EXHIBIT A-1 Form of A Note
EXHIBIT A-2 Form of B Note
THIS LOAN AGREEMENT (as it may be amended or modified from time to
time in accordance with the provisions hereof, this "Loan Agreement")
dated as of May 30, 1997 is among ATLANTIC FINANCIAL GROUP, LTD., a Texas
limited partnership, as Lessor and Borrower (the "Lessor"); SUNTRUST
BANK, ATLANTA, AMSOUTH BANK OF ALABAMA, BARNETT BANK OF JACKSONVILLE,
N.A., FIRST AMERICAN NATIONAL BANK, WACHOVIA BANK OF GEORGIA, N.A.,
HIBERNIA NATIONAL BANK, FIRST TENNESSEE BANK and the other financial
institutions which may from time to time become party hereto as lenders
(the "Lenders") and SUNTRUST BANK, ATLANTA, a Georgia banking
corporation, as agent for the Lenders (in such capacity, the "Agent").
PRELIMINARY STATEMENT
In accordance with the terms and provisions of the Master
Agreement, the Lease, this Loan Agreement and the other Operative
Documents, (i) the Lessor contemplates acquiring the Leased Properties
and leasing the Leased Properties to the Lessee, (ii) the Lessee, as
Construction Agent for the Lessor, wishes to construct Buildings on the
Land for the Lessor and, when completed, to lease the Buildings from the
Lessor as part of the Leased Property under the Lease, (iii) the Lessee
wishes to obtain, and the Lessor is willing to provide, funding for the
acquisition of the Land and the construction of the Buildings, (iv) the
Lessor wishes to obtain, and the Lenders are willing to provide,
financing of a portion of the funding for the acquisition of the Land and
the construction of the Buildings, and (v) the Lessee is willing to
provide its Guaranty Agreement to the Funding Parties.
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 2 DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used
and not defined herein shall have the meanings assigned thereto in
Appendix A hereto for all purposes hereof; and the rules of
interpretation set forth in Appendix A hereto shall apply to this Loan
Agreement.
SECTION 3 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND
PREPAYMENT OF LOANS
SECTION 3.1 Commitment. (a) Subject to the terms and conditions
hereof and of the Master Agreement, each Lender agrees to make term loans
to the Lessor ("Loans") from time to time during the period from and
including the Initial Closing Date through the Funding Termination Date,
on each Closing Date and on each subsequent Funding Date, in the amounts
required under Section 2.2 of the Master Agreement. Each such Loan shall
consist of an A Loan in the amount of such Lender's Commitment Percentage
of the A Percentage of the aggregate amount to be funded by the Funding
Parties on such date and a B Loan in the amount of such Lender's
Commitment Percentage of the B Percentage of such the aggregate amount to
be funded by the Funding Parties on such date.
SECTION 3.2 Notes. The A Loans made by each Lender to the Lessor
shall be evidenced by a note of the Lessor (an "A Note"), substantially
in the form of Exhibit A-1 with appropriate insertions, and the B Loans
made by each Lender to the Lessor shall be evidenced by a note of the
Lessor (a "B Note") substantially in the form of Exhibit A-2 with
appropriate insertions, each duly executed by the Lessor and payable to
the order of such Lender and in a principal amount equal to such Lender's
Commitment Percentage of the A Percentage of the aggregate Commitments
and such Lender's Commitment Percentage of the B Percentage of the
aggregate Commitments, respectively (or, if less, the aggregate unpaid
principal amount of all A Loans or B Loans, as the case may be, made by
such Lender to the Lessor). The Notes shall be dated the Initial Closing
Date and delivered to the Agent in accordance with Section 3.2 of the
Master Agreement. Each Lender is hereby authorized to record the date
and amount of each Loan made by such Lender to the Lessor on the Notes,
but the failure by such Lender to so record such Loan shall not affect or
impair any obligations with respect thereto. Each Note shall (i) be
stated to mature no later than the final Lease Termination Date and (ii)
bear interest on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rate per annum determined as
provided in, and payable as specified in, Section 2.4. Upon the
occurrence of an Event of Default under clause (g) of Article XII of the
related Lease, or upon Acceleration as described in Section 4.3(b)
hereof, each Note shall automatically become due and payable in full.
SECTION 3.3 Scheduled Principal Repayment. On the Lease
Termination Date, the Lessor shall pay the aggregate unpaid principal
amount of all Loans with respect to the related Leased Property as of
such date.
SECTION 3.4 Interest. (a) Each Loan related to a LIBOR Advance
shall bear interest during each Rent Period at a rate equal to the sum of
(i) the Adjusted LIBO Rate for such Rent Period, computed using the
actual number of days elapsed and a 360 day year, plus (ii) the
Applicable Margin per annum; each Loan related to a Base Rate Advance
shall bear interest at a rate equal to the Base Rate, computed using the
actual number of days elapsed and a 360 day year, plus (ii) the
Applicable Margin per annum.
(b) If all or a portion of the principal amount of or interest on
the Loans shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall, without limiting
the rights of the Lenders under Section 5, bear interest at the Overdue
Rate, in each case from the date of nonpayment until paid in full (as
well after as before judgment).
(c) Interest accruing on each Loan with respect to any Leased
Property during the Construction Term of such Leased Property shall,
subject to the limitations set forth in Section 2.3(c) of the Master
Agreement, be added to the principal amount of such Loan from time to
time. Following the date each Loan is made (or in the case of Loans with
respect to a Construction Land Interest, the Construction Term Expiration
Date), interest on such Loan shall be payable in arrears on each Payment
Date with respect thereto.
(d) Any change in the interest rate on the Loans resulting from a
change in the Base Rate shall become effective as of the opening of
business on the day on which such Base Rate changes as provided in the
definition thereof.
SECTION 3.5 Allocation of Loans to Leased Properties. Pursuant to
each Funding Request, each Loan shall be allocated to the Leased
Property, the cost of acquisition or construction of which the proceeds
of such Loan are used to pay. For purposes of the Operative Documents,
the "related Loans" with respect to any Leased Property or Loans "related
to" any Leased Property shall mean those Loans allocated to such Leased
Property as set forth in the foregoing sentence.
SECTION 3.6 Prepayment. Except in conjunction with a payment by
the Lessee of the Lease Balance or a Leased Property Balance pursuant to
the terms of the Lease, the Lessor shall have no right to prepay the
Loans.
SECTION 4 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN
PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY
SECTION 4.1 Distribution and Application of Rent Payments.
(a) Basic Rent. Each payment of Basic Rent with respect to any
Leased Property (and any payment of interest on overdue installments of
Basic Rent) received by the Agent shall be distributed first, pro rata to
the Lenders to be applied to the amounts of accrued and unpaid interest
(including overdue interest) on the Loans and second, to the Lessor to be
applied to accrued and unpaid Yield (including overdue Yield) on the
Lessor's Invested Amounts related to such Leased Property.
(b) Supplemental Rent. Each payment of Supplemental Rent
received by the Agent shall be paid to or upon the order of the Person
owed the same in accordance with the Operative Documents.
SECTION 4.2 Distribution and Application of Purchase Payment. With
respect to any Leased Property, the payment by the Lessee of:
(a) the purchase price for a consummated sale of such Leased
Property received by the Agent in connection with the Lessee's
exercise of the Purchase Option or Partial Purchase Option under
Section 14.1 of the Lease, or
(b) the Lessee's compliance with its obligation to purchase
the Leased Property in accordance with Section 14.2 or 14.3 of the
Lease, or
(c) the payment by the Lessee to Agent of the related Leased
Property Balance therefor in accordance with Section 10.1 or
Section 10.2 of the Lease,
shall be distributed by Agent as promptly as possible first, to the
Lenders pro rata in accordance with, and for application to, their
respective Funding Party Balances in respect of such Leased Property and
second, to the Lessor for application to its Funding Party Balance in
respect of such Leased Property.
SECTION 4.3 Distribution and Application to Funding Party Balances
of Lessee Payment of Recourse Deficiency Amount Upon Exercise of
Remarketing Option or Surrender Option. With respect to any Leased
Property, the payment by the Lessee of the Recourse Deficiency Amount to
the Agent on the Lease Termination Date in accordance with Section 14.6
or Section 14.7 of the Lease upon the Lessee's exercise of the
Remarketing Option or Surrender Option, shall be applied by the Agent to
the accrued and unpaid interest on, and the outstanding principal of, the
A Loans in respect of such Leased Property.
SECTION 4.4 Distribution and Application to Funding Party Balance
of Remarketing Proceeds of Leased Property. Any payments received by the
Lessor as proceeds from the sale of any Leased Property sold pursuant to
the Lessee's exercise of the Remarketing Option pursuant to Section 14.6
or 14.7 of the Lease, shall be distributed (or applied, in the case of
clause second below) by the Lessor as promptly as possible (it being
understood that any such payment received by the Lessor on a timely basis
and in accordance with the provisions of the Lease shall be distributed
on the date received in the funds so received) in the following order of
priority:
first, to the Lenders pro rata for application to their
remaining Funding Party Balances in respect of such Leased
Property, an amount equal to their Funding Party Balances in
respect of such Leased Property;
second, to the Lessor for application to its Funding Party
Balance in respect of such Leased Property; and
third, (i) if sold by the Lessee pursuant to Section 14.6 of
the Lease, the excess, if any, to the Lessee, and (ii) otherwise,
the excess, if any, to the Lessor.
SECTION 4.5 Distribution and Application of Payments Received When
an Event of Default Exists or Has Ceased to Exist Following Rejection of
a Lease.
(a) Proceeds of Leased Property. Any payments received by the
Lessor or the Agent when an Event of Default exists (or has ceased to
exist by reason of a rejection of the Lease in a proceeding with respect
to the Lessee described in Article XII(g) of the Lease), as
(i) proceeds from the sale of any or all of the Leased
Property sold pursuant to the exercise of the Lessor's remedies
pursuant to Article XIII of the Lease, or
(ii) proceeds of any amounts from any insurer or any
Governmental Authority in connection with an Event of Loss or Event
of Taking
shall if received by the Lessor be paid to the Agent as promptly as
possible, and shall be distributed or applied in the following order of
priority prior to the Release Date:
first, to the Agent for any amounts expended by it in
connection with such Leased Property or the Operative Documents and
not previously reimbursed to it;
second, to the Lenders pro rata for application to their
Funding Party Balances in respect of such Leased Property, an
amount equal to such Funding Party Balances in respect of such
Leased Property;
third, to the Lessor for application to its Funding Party
Balance in respect of such Leased Property; and
fourth, to the Lessee or the Person or Persons otherwise
legally entitled thereto, the excess, if any; and
on and after such Release Date such amounts shall be paid over to the
Lessor and shall be distributed or applied by the Lessor, first to the
Lessor for application to any amounts owed to it in respect of such
Leased Property, and second to the Lessee or the Person or Persons
otherwise legally entitled thereto, the excess, if any.
(b) Proceeds of Recoveries from Lessee and Guarantor. Any
payments received by any Funding Party when an Event of Default exists
(or has ceased to exist by reason of a rejection of the Lease in a
proceeding with respect to the Lessee described in Article XII(g) of the
Lease), from
(i) the Lessee as a payment in accordance with such Lease, or
(ii) the Guarantor as a payment in accordance with the
Guaranty Agreement, including, without limitation, any payment made
by the Guarantor in satisfaction of the guaranty of payment of the
Notes pursuant to the Guaranty Agreement,
shall be paid to the Agent as promptly as possible, and shall then be
distributed or applied by the Agent as promptly as possible in the order
of priority set forth in paragraph (a) above.
SECTION 4.6 Distribution of Other Payments. All payments under
Section 7.6 of the Master Agreement shall be made first, to the Lenders,
pro rata, until their Funding Party Balances have been paid in full, and
second, to the Lessor who shall be entitled to retain all such remaining
amounts. Except as otherwise provided in this Section 3, any payment
received by the Lessor which is to be paid to Agent pursuant hereto or
for which provision as to the application thereof is made in an Operative
Document but not elsewhere in this Section 3 shall, if received by the
Lessor, be paid forthwith to the Agent and when received shall be
distributed forthwith by the Agent to the Person and for the purpose for
which such payment was made in accordance with the terms of such
Operative Document.
SECTION 4.7 Timing of Agent Distributions. Payments received by
the Agent in immediately available funds before 12:00 p.m. (noon),
Atlanta, Georgia time, on any Business Day shall be distributed to the
Funding Parties in accordance with and to the extent provided in this
Section 3 on such Business Day. Payments received by the Agent in
immediately available funds after 12:00 p.m. (noon), Atlanta, Georgia
time shall be distributed to the Funding Parties in accordance with and
to the extent provided in this Section 3 on the next Business Day.
SECTION 5 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND
GUARANTY
SECTION 5.1 Covenant of Lessor. So long as any Lender's Commitment
remains in effect, any Loan remains outstanding and unpaid or any other
amount is owing to any Lender with respect to its Funding Party Balances,
subject to Section 4.2, the Lessor will promptly pay all amounts payable
by it under this Loan Agreement and the Notes issued by it in accordance
with the terms hereof and thereof and shall duly perform each of its
obligations under this Loan Agreement and the Notes. The Lessor agrees
to provide to the Agent a copy of each estoppel certificate that the
Lessor proposes to deliver pursuant to Section 17.13 of the Lease at
least five (5) days prior to such delivery and to make any corrections
thereto reasonably requested by the Agent prior to such delivery. The
Lessor shall keep each Leased Property owned by it free and clear of all
Lessor Liens. The Lessor shall not reject any sale of any Leased
Property pursuant to Section 14.6 of the Lease unless all of the related
Loans have been paid in full or the Lenders consent to such rejection.
In the event that the Lenders reject any sale of any Leased Property
pursuant to Section 14.6 of the Lease, the Lessor agrees to take such
action as the Lenders reasonably request to effect a sale or other
disposition of such Leased Property, provided that the Lessor shall not
be required to expend its own funds in connection with such sale or
disposition.
SECTION 5.2 Lessor Obligations Nonrecourse; Payment from Certain
Lease and Guaranty Obligations and Certain Proceeds of Leased Property
Only. All payments to be made by the Lessor in respect of the Loans, the
Notes and this Loan Agreement shall be made only from certain payments
received under the Lease and the Guaranty Agreement and certain proceeds
of the Leased Properties and only to the extent that the Lessor or the
Agent shall have received sufficient payments from such sources to make
payments in respect of the Loans in accordance with Section 3. Each
Lender agrees that it will look solely to such sources of payments to the
extent available for distribution to such Lender as herein provided and
that neither the Lessor nor the Agent is or shall be personally liable to
any Lender for any amount payable hereunder or under any Note. Nothing
in this Loan Agreement, the Notes or any other Operative Document shall
be construed as creating any liability (other than for willful
misconduct, gross negligence, misrepresentation or breach of contract
(other than the failure to make payments in respect of the Loans)) of the
Lessor individually to pay any sum or to perform any covenant, either
express or implied, in this Loan Agreement, the Notes or any other
Operative Documents (all such liability, if any, being expressly waived
by each Lender) and that each Lender, on behalf of itself and its
successors and assigns, agrees in the case of any liability of the Lessor
hereunder or thereunder (except for such liability attributable to its
willful misconduct, gross negligence, misrepresentation or breach of
contract (other than the failure to make payments in respect of the
Loans)) that it will look solely to those certain payments received under
the Lease and the Guaranty Agreement and those certain proceeds of the
Leased Properties, provided, however, that the Lessor in its individual
capacity shall in any event be liable with respect to (i) the removal of
Lessor's Liens or involving its gross negligence, willful misconduct,
misrepresentation or breach of contract (other than the failure to make
payments in respect of the Loans) or (ii) failure to turn over payments
the Lessor has received in accordance with Section 3; and provided
further that the foregoing exculpation of the Lessor shall not be deemed
to be exculpations of the Lessee, the Guarantor or any other Person.
SECTION 5.3 Exercise of Remedies Under Lease and Guaranty.
(a) Event of Default. With respect to any Potential Event of
Default as to which notice thereof by the Lessor to the Lessee is a
requirement to cause such Potential Event of Default to become an Event
of Default, the Lessor may at any time in its discretion give or withhold
such notice, provided that the Lessor agrees to give such notice to such
Lessee promptly upon receipt of a written request by any Lender or the
Agent.
(b) Acceleration of Lease Balance. When an Event of Default
exists, the Lessor, upon the direction of the Required Funding Parties,
shall exercise remedies under Article XIII of the Lease and under the
Guaranty Agreement to demand payment in full of the Lease Balance by the
Lessee or the Guarantor (the "Acceleration"). Following the
Acceleration, the Lessor shall consult with the Lenders regarding actions
to be taken in response to such Event of Default. The Lessor (1) shall
not, without the prior written consent of Required Funding Parties and
(2) shall (subject to the provisions of this Section), if so directed by
Required Funding Parties, do any of the following: commence eviction or
foreclosure proceedings, or make a demand under the Guaranty Agreement,
or file a lawsuit against the Lessee under the Lease, or file a lawsuit
against the Guarantor under the Guaranty Agreement, or sell the Leased
Property, or exercise other remedies against the Lessee or the Guarantor
under the Operative Documents in respect of such Event of Default;
provided, however, that any payments received by the Lessor shall be
distributed in accordance with Section 3. Notwithstanding any such
consent, direction or approval by the Required Funding Parties of any
such action or omission, the Lessor shall not have any obligation to
follow such direction if the same would, in the Lessor's reasonable
judgment, require the Lessor to expend its own funds or expose the Lessor
to liability, expense, loss or damages unless and until the Lenders
advance to the Lessor an amount which is sufficient, in the Lessor's
reasonable judgment, to cover such liability, expense, loss or damage
(excluding the Lessor's pro rata share thereof, if any). Notwithstanding
the foregoing, on and after the related Release Date, the Lenders shall
have no rights to the related Leased Property or any proceeds thereof,
the Lenders shall have no rights to direct or give consent to any actions
with respect to such Leased Property and the proceeds thereof, the Lessor
shall have absolute discretion (but in all events subject to the terms of
the Operative Documents) with respect to such exercise of remedies with
respect to such Leased Property, and the proceeds thereof, including,
without limitation, any foreclosure or sale of such Leased Property, and
the Lessor shall have no liability to the Lenders with respect to the
Lessor's actions or failure to take any action with respect to such
Leased Property.
SECTION 6 LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 Loan Events of Default. Each of the following events
shall constitute a Loan Event of Default (whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law
or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any Governmental Authority) and
each such Loan Event of Default shall continue so long as, but only as
long as, it shall not have been remedied:
(a) Lessor shall fail to distribute in accordance with the
provisions of Section 3 any amount received by the Lessor pursuant
to the Lease, the Guaranty Agreement or the Master Agreement within
two (2) Business Days of receipt thereof if and to the extent that
the Agent or the Lenders are entitled to such amount or a portion
thereof; or
(b) the Lessor shall fail to pay to the Agent, within two
(2) Business Days of the Lessor's receipt thereof, any amount which
the Lessee or the Guarantor is required, pursuant to the Operative
Documents, to pay to the Agent but erroneously pays to the Lessor;
or
(c) failure by the Lessor to perform in any material
respect any other covenant or condition herein or in any other
Operative Document to which the Lessor is a party, which failure
shall continue unremedied for thirty (30) days after receipt by the
Lessor of written notice thereof from the Agent or any Lender; or
(d) any representation or warranty of the Lessor contained
in any Operative Document or in any certificate required to be
delivered thereunder shall prove to have been incorrect in a
material respect when made and shall not have been cured within
thirty (30) days of receipt by the Lessor of written notice thereof
from the Agent or any Lender; or
(e) the Lessor or the General Partner shall become bankrupt
or make an assignment for the benefit of creditors or consent to
the appointment of a trustee or receiver; or a trustee or a
receiver shall be appointed for the Lessor or the General Partner
or for substantially all of its property without its consent and
shall not be dismissed or stayed within a period of sixty (60)
days; or bankruptcy, reorganization or insolvency proceedings shall
be instituted by or against the Lessor or the General Partner and,
if instituted against the Lessor or the General Partner, shall not
be dismissed or stayed for a period of sixty (60) days; or
(f) any Event of Default shall occur and be continuing.
SECTION 6.2 Remedies.
(a) Upon the occurrence of a Loan Event of Default hereunder, (i)
if such event is a Loan Event of Default specified in clause (e) of
Section 5.1 with respect to the Lessor, automatically the Lenders'
Commitments shall terminate and the outstanding principal of, and accrued
interest on, the Loans shall be immediately due and payable, and (ii) if
such event is any other Loan Event of Default, upon written request of
the Required Lenders, the Agent shall, by notice of default to the
Lessor, declare the Commitments of the Lenders to be terminated forthwith
and the outstanding principal of, and accrued interest on, the Loans to
be immediately due and payable, whereupon the Commitments of the Lenders
shall immediately terminate and the outstanding principal of, and accrued
interest on, the Loans shall become immediately due and payable.
(b) When a Loan Event of Default exists, the Agent may, and upon
the written instructions of the Required Funding Parties shall, exercise
any or all of the rights and powers and pursue any and all of the
remedies available to it hereunder, under the Notes, the Mortgages and
the Assignments of Lease and Rents and shall have and may exercise any
and all rights and remedies available under the Uniform Commercial Code
or any provision of law. When a Loan Event of Default exists, the Agent
may, and upon the written instructions of the Required Funding Parties
shall, have the right to exercise all rights of the Lessor under the
Lease pursuant to the terms and in the manner provided for in the
Mortgages and the Assignments of Lease and Rents.
(c) Except as expressly provided above, no remedy under this
Section 5.2 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy provided under this Section 5.2 or under
the other Operative Documents or otherwise available at law or in equity.
The exercise by the Agent or any Lender of any one or more of such
remedies shall not preclude the simultaneous or later exercise of any
other remedy or remedies. No express or implied waiver by the Agent or
any Lender of any Loan Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Loan Event of
Default. The failure or delay of the Agent or any Lender in exercising
any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such
right upon the continuation or recurrence of any such contingencies or
similar contingencies and any single or partial exercise of any
particular right by the Agent or any Lender shall not exhaust the same or
constitute a waiver of any other right provided herein.
SECTION 7 THE AGENT
SECTION 7.1 Appointment. Each Lender hereby irrevocably designates
and appoints the Agent as the agent of such Lender under this Loan
Agreement and the other Operative Documents, and each such Lender
irrevocably authorizes the Agent, in such capacity, to take such action
on its behalf under the provisions of this Loan Agreement and the other
Operative Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Loan
Agreement and the other Operative Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Loan Agreement, the Agent
shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Loan Agreement or any other Operative
Document or otherwise exist against the Agent.
SECTION 7.2 Delegation of Duties. The Agent may execute any of its
duties under this Loan Agreement and the other Operative Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
SECTION 7.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (a) liable for any action lawfully taken or omitted
to be taken by it or such Person under or in connection with this Loan
Agreement or any other Operative Document (except for its or such
Person's own gross negligence or willful misconduct) or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Lessor, the Guarantor or the
Lessee or any officer thereof contained in this Loan Agreement or any
other Operative Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent
under or in connection with, this Loan Agreement or any other Operative
Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Loan Agreement or any other
Operative Document or for any failure of the Lessor, the Guarantor or the
Lessee to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Loan Agreement or any other
Operative Document, or to inspect the properties, books or records of the
Lessor, the Guarantor or the Lessee.
SECTION 7.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
the Lessor, the Guarantor or the Lessee), independent accountants and
other experts selected by the Agent. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Loan Agreement or any other
Operative Document unless it shall first receive such advice or
concurrence of the Required Funding Parties as it deems appropriate or it
shall first be indemnified to its satisfaction by the Funding Parties
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting,
under this Loan Agreement and the other Operative Documents in accordance
with a request of the Required Lenders, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
SECTION 7.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Loan Potential Event of
Default or Loan Event of Default hereunder unless the Agent has received
notice from a Lender referring to this Loan Agreement, describing such
Loan Potential Event of Default or Loan Event of Default and stating that
such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the
Lenders. The Agent shall take such action with respect to such Loan
Potential Event of Default or Loan Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and
until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Loan Potential Event of Default or Loan
Event of Default as it shall deem advisable in the best interests of the
Lenders.
SECTION 7.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Lessor, the
Guarantor or the Lessee, shall be deemed to constitute any representation
or warranty by the Agent to any Lender. Each Lender represents to the
Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Lessor, the Guarantor and the Lessee and made its
own decision to make its Loans hereunder and enter into this Loan
Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Loan Agreement and the other
Operative Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and
other condition and creditworthiness of the Lessor, the Guarantor and the
Lessee. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent
shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or
creditworthiness of the Lessor, the Guarantor or the Lessee which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 7.7 Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Lessee
or Guarantor and without limiting the obligation of the Lessee or
Guarantor to do so), ratably according to the percentage each Lender's
Commitment bears to the total commitments of all of the Lenders on the
date on which indemnification is sought under this Section 6.7 (or, if
indemnification is sought after the date upon which the Lenders
Commitments shall have terminated and the Loans shall have been paid in
full, ratably in accordance with the percentage that each Lender's
Commitment bears to the Commitments of all of the Lenders immediately
prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of
the Notes) be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of, the Commitments, this Loan
Agreement, any of the other Operative Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the Agent's
gross negligence or willful misconduct. The agreements in this
Section 6.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
SECTION 7.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with the Lessor, the Guarantor or the Lessee as
though the Agent were not the Agent hereunder and under the other
Operative Documents. With respect to Loans made or renewed by it and any
Note issued to it, the Agent shall have the same rights and powers under
this Loan Agreement and the other Operative Documents as any Lender and
may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual
capacity. Each Lender acknowledges that the Agent in its individual
capacity has had and continues to have other business relations and
transactions with the Lessee and the Lessor.
SECTION 7.9 Successor Agent. The Agent may resign as Agent upon 20
days' notice to the Lenders. If the Agent shall resign as Agent under
this Loan Agreement and the other Operative Documents, then the Required
Funding Parties shall appoint a successor agent for the Lenders, which
successor agent shall be a commercial bank organized under the laws of
the United States of America or any State thereof or under the laws of
another country which is doing business in the United States of America
and having a combined capital, surplus and undivided profits of at least
$100,000,000, whereupon such successor agent shall succeed to the rights,
powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon such appointment and approval, and the
former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent
or any of the parties to this Loan Agreement or any holders of the Notes.
After any retiring Agent's resignation as Agent, all of the provisions
of this Section 6 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Loan Agreement
and the other Operative Documents.
SECTION 8 MISCELLANEOUS
SECTION 8.1 Amendments and Waivers. Neither this Loan Agreement,
any Note, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of Section 8.4 of the
Master Agreement.
SECTION 8.2 Notices. Unless otherwise specified herein, all
notices, requests, demands or other communications to or upon the
respective parties hereto shall be given in accordance with Section 8.2
of the Master Agreement.
SECTION 8.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
SECTION 8.4 Successors and Assigns. This Loan Agreement shall be
binding upon and inure to the benefit of the Lessor, the Agent, the
Lenders, all future holders of the Notes and their respective successors
and permitted assigns.
SECTION 8.5 Counterparts. This Loan Agreement may be executed by
one or more of the parties to this Loan Agreement on any number of
separate counterparts and all of said counterparts taken together shall
be deemed to constitute one and the same agreement. A set of the
counterparts of this Loan Agreement signed by all the parties hereto
shall be lodged with the Lessor and the Agent.
SECTION 8.6 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF GEORGIA.
SECTION 8.7 Survival and Termination of Agreement. All covenants,
agreements, representations and warranties made herein and in any
certificate, document or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Loan
Agreement, and the Notes and shall continue in full force and effect so
long as any Note or any amount payable to any Lender under or in
connection with this Loan Agreement or the Notes is unpaid, at which time
this Loan Agreement shall terminate.
SECTION 8.8 Entire Agreement. This Loan Agreement and the other
Operative Documents set forth the entire agreement of the parties hereto
with respect to its subject matter, and supersedes all previous
understandings, written or oral, with respect thereto.
SECTION 8.9 Severability. Any provision of this Loan Agreement or
of the Notes which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or thereof or affecting the
validity, enforceability or legality of any such provision in any other
jurisdiction.
IN WITNESS THEREOF, the parties hereto have caused this Loan
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
SUNTRUST BANK, ATLANTA, as Agent
By: ____________________________
Name:____________________________
Title:___________________________
By: ____________________________
Name:____________________________
Title:___________________________
ATLANTIC FINANCIAL GROUP, LTD., as Lessor
and Borrower
By: Atlantic Financial Managers, Inc.,
its General Partner
By: ____________________________
Name:____________________________
Title:___________________________
SUNTRUST BANK, ATLANTA,
as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
AMSOUTH BANK OF ALABAMA, as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
BARNETT BANK OF JACKSONVILLE, N.A., as a
Lender
By: ____________________________
Name:____________________________
Title:___________________________
FIRST AMERICAN NATIONAL BANK, as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
WACHOVIA BANK OF GEORGIA, N.A., as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
HIBERNIA NATIONAL BANK, as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
FIRST TENNESSEE BANK, as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
LEASE AGREEMENT
Dated as of May 30, 1997
between
ATLANTIC FINANCIAL GROUP, LTD., as Lessor,
and
RUBY TUESDAY, INC., as Lessee
TABLE OF CONTENTS
(Lease Agreement)
Page
ARTICLE I. DEFINITIONS 1
ARTICLE II. LEASE OF LEASED PROPERTY 1
2.1 Acceptance and Lease of Property 1
2.2 Acceptance Procedure 2
ARTICLE III. RENT 2
3.1 Basic Rent 2
3.2 Supplemental Rent 2
3.3 Method of Payment 3
3.4 Late Payment 3
3.5 Net Lease; No Setoff, Etc 3
3.6 Certain Taxes 5
3.7 Utility Charges 5
ARTICLE IV. WAIVERS 6
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES 7
ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS,
MODIFICATIONS AND ADDITIONS 8
6.1 Maintenance and Repair; Compliance With Law 8
6.2 Alterations 9
6.3 Title to Alterations 9
ARTICLE VII. USE 9
ARTICLE VIII. INSURANCE 9
ARTICLE IX. ASSIGNMENT AND SUBLEASING 11
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR
DAMAGE 11
10.1 Event of Loss. 11
10.2 Event of Taking. 12
10.3 Casualty. 13
10.4 Condemnation. 13
10.5 Verification of Restoration and Rebuilding 13
10.6 Application of Payments 14
10.7 Prosecution of Awards. 15
10.8 Application of Certain Payments Not Relating
to an Event of Taking 15
10.9 Other Dispositions 16
10.10 No Rent Abatement 16
ARTICLE XI. INTEREST CONVEYED TO LESSEE 16
ARTICLE XII. EVENTS OF DEFAULT 17
ARTICLE XIII. ENFORCEMENT 20
13.1 Remedies 20
13.2 Remedies Cumulative; No Waiver; Consents 22
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED
PROPERTY;RENEWAL 23
14.1 Lessee's Option to Purchase 23
14.2 Conveyance to Lessee 24
14.3 Acceleration of Purchase Obligation 24
14.4 Determination of Purchase Price 24
14.5 Purchase Procedure 25
14.6 Option to Remarket; Surrender Option 26
14.7 Rejection of Sale 29
14.8 Return of Leased Property 29
14.9 Renewal 30
ARTICLE XV. LESSEE'S EQUIPMENT 30
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE 31
ARTICLE XVII. MISCELLANEOUS 31
17.1 Reports 31
17.2 Binding Effect; Successors and Assigns;
Survival 32
17.3 Quiet Enjoyment 32
17.4 Notices 32
17.5 Severability 33
17.6 Amendment; Complete Agreements 33
17.7 Construction 33
17.8 Headings 34
17.9 Counterparts 34
17.10 GOVERNING LAW 34
17.11 Discharge of Lessee's Obligations by its
Affiliates 34
17.12 Liability of Lessor Limited 34
17.13 Estoppel Certificates 35
17.14 No Joint Venture 35
17.15 No Accord and Satisfaction 35
17.16 No Merger 35
17.17 Survival 36
17.18 Chattel Paper 36
17.19 Time of Essence 36
17.20 Recordation of Lease. 36
17.21 Investment of Security Funds 36
17.22 Ground Leases 37
17.23 Land and Building 37
APPENDICES AND EXHIBITS
APPENDIX A Defined Terms
EXHIBIT A Lease Supplement
THIS LEASE AGREEMENT (as from time to time amended or supplemented,
this "Lease"), dated as of May 30, 1997, is between ATLANTIC FINANCIAL
GROUP, LTD., a Texas limited partnership (together with its successors
and assigns hereunder, the "Lessor"), as Lessor, and RUBY TUESDAY, INC.,
a Georgia corporation (together with its successors and permitted assigns
hereunder, the "Lessee"), as Lessee.
PRELIMINARY STATEMENT
A. Lessor will purchase, or acquire a leasehold interest in,
from one or more third parties designated by Lessee, on each Closing
Date, certain parcels of real property to be specified by Lessee,
together with any improvements thereon.
B. Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, each such property.
C. Lessee will construct certain improvements on such parcels of
real property which as constructed will be the property of Lessor and
will become part of such property subject to the terms of this Lease.
In consideration of the mutual agreements herein contained and
other good and valuable consideration, receipt of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
ARTICLE II.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in Appendix A hereto for all purposes hereof.
ARTICLE III.
LEASE OF LEASED PROPERTY
Section III.1 Acceptance and Lease of Property. On each Closing
Date, Lessor, subject to the satisfaction or waiver of the conditions set
forth in Section 3 of the Master Agreement, hereby agrees to accept
delivery on such Closing Date of the Land designated by Lessee to be
delivered on such Closing Date pursuant to the terms of the Master
Agreement, together with any improvements thereon and simultaneously to
lease to Lessee hereunder for the Lease Term, Lessor's interest in such
Land and in such improvements, together with any Building which
thereafter may be constructed thereon pursuant to the Construction Agency
Agreement, and Lessee hereby agrees, expressly for the direct benefit of
Lessor, commencing on such Closing Date for the Lease Term, to lease from
Lessor Lessor's interest in such Land to be delivered on such Closing
Date together with Lessor's interest in any Building and other
improvements thereon or which thereafter may be constructed thereon
pursuant to the Construction Agency Agreement.
Section III.2 Acceptance Procedure. Lessor hereby authorizes one
or more employees of Lessee, to be designated by Lessee, as the
authorized representative or representatives of Lessor to accept delivery
on behalf of Lessor of that Leased Property identified on the applicable
Funding Request. Lessee hereby agrees that such acceptance of delivery
by such authorized representative or representatives and the execution
and delivery by Lessee on each Closing Date of a Lease Supplement in
substantially the form of Exhibit A hereto (appropriately completed)
shall, without further act, constitute the irrevocable acceptance by
Lessee of that Leased Property which is the subject thereof for all
purposes of this Lease and the other Operative Documents on the terms set
forth therein and herein, and that such Leased Property, together with
any improvements constructed thereon pursuant to the Construction Agency
Agreement, shall be deemed to be included in the leasehold estate of this
Lease and shall be subject to the terms and conditions of this Lease as
of such Closing Date. The demise and lease of each Building pursuant to
this Section 2.2 shall include any additional right, title or interest in
such Building which may at any time be acquired by Lessor, the intent
being that all right, title and interest of Lessor in and to such
Building shall at all times be demised and leased to Lessee hereunder.
ARTICLE IV.
RENT
Section IV.1 Basic Rent. Beginning with and including the first
Payment Date occurring after the Closing Date, Lessee shall pay to the
Agent the Basic Rent for the Leased Properties, in installments, payable
in arrears on each Payment Date during the Lease Term, subject to Section
2.3(c) of the Master Agreement.
Section IV.2 Supplemental Rent. Lessee shall pay to the Agent, or
to whomever shall be entitled thereto as expressly provided herein or in
any other Operative Document, any and all Supplemental Rent within five
(5) Business Days of the date the same shall become due and payable and
in the event of any failure on the part of Lessee to pay any Supplemental
Rent, the Agent shall have all rights, powers and remedies provided for
herein or by law or in equity or otherwise in the case of nonpayment of
Basic Rent. All Supplemental Rent to be paid pursuant to this
Section 3.2 shall be payable in the type of funds and in the manner set
forth in Section 3.3.
Section IV.3 Method of Payment. Basic Rent shall be paid to the
Agent, and Supplemental Rent (including amounts due under Article XIV
hereof) shall be paid to the Agent (or to such Person as may be entitled
thereto) or, in each case, to such Person as the Agent (or such other
Person) shall specify in writing to Lessee, and at such place as the
Agent (or such other Person) shall specify in writing to Lessee, which
specifications by the Agent shall be given by the Agent at least five (5)
Business Days prior to the due date therefor. Each payment of Rent
(including payments under Article XIV hereof) shall be made by Lessee
prior to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment
in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such
payment shall be due, unless such scheduled date shall not be a Business
Day, in which case such payment shall be made on the next succeeding
Business Day.
Section IV.4 Late Payment. If any Basic Rent shall not be paid on
the date when due, Lessee shall pay to the Agent, as Supplemental Rent,
interest (to the maximum extent permitted by law) on such overdue amount
from and including the due date thereof to but excluding the Business Day
of payment thereof at the Overdue Rate.
Section IV.5 Net Lease; No Setoff, Etc. This Lease is a net lease
and notwithstanding any other provision of this Lease, Lessee shall pay
all Basic Rent and Supplemental Rent, and all costs, charges, taxes
(other than taxes covered by the exclusion described in Section 7.4(b) of
the Master Agreement), assessments and other expenses foreseen or
unforeseen, for which Lessee or any Indemnitee is or shall become liable
by reason of Lessee's or such Indemnitee's estate, right, title or
interest in the Leased Properties, or that are connected with or arise
out of the acquisition (except the initial costs of purchase by Lessor of
its interest in any Leased Property, which costs, subject to the terms of
the Master Agreement, shall be funded by the Funding Parties pursuant to
the Master Agreement), installation, possession, use, occupancy,
maintenance, ownership, leasing, repairs and rebuilding of, or addition
to, the Leased Properties or any portion thereof, and any other amounts
payable hereunder and under the other Operative Documents without
counterclaim, setoff, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and Lessee's obligation
to pay all such amounts throughout the Lease Term, including the
Construction Term, is absolute and unconditional. The obligations and
liabilities of Lessee hereunder shall in no way be released, discharged
or otherwise affected for any reason, including without limitation: (a)
any defect in the condition, merchantability, design, quality or fitness
for use of any Leased Property or any part thereof, or the failure of any
Leased Property to comply with all Applicable Law, including any
inability to occupy or use any Leased Property by reason of such non-
compliance; (b) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any
requisition or taking of any Leased Property or any part thereof; (c) any
restriction, prevention or curtailment of or interference with any use of
any Leased Property or any part thereof including eviction; (d) any
defect in title to or rights to any Leased Property or any Lien on such
title or rights or on any Leased Property; (e) any change, waiver,
extension, indulgence or other action or omission or breach in respect of
any obligation or liability of or by Lessor, the Agent or any Lender; (f)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to Lessee,
Lessor, any Lender, the Agent or any other Person, or any action taken
with respect to this Lease by any trustee or receiver of Lessee, Lessor,
any Lender, the Agent, any Ground Lessor or any other Person, or by any
court, in any such proceeding; (g) any claim that Lessee has or might
have against any Person, including without limitation, Lessor, any
vendor, manufacturer, contractor of or for any Building or any part
thereof, the Agent, any Ground Lessor or any Lender; (h) any failure on
the part of Lessor to perform or comply with any of the terms of this
Lease, any other Operative Document or of any other agreement; (i) any
invalidity or unenforceability or illegality or disaffirmance of this
Lease against or by Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof whether or not
related to the Transaction; (j) the impossibility or illegality of
performance by Lessee, Lessor or both; (k) any action by any court,
administrative agency or other Governmental Authority; (l) any
restriction, prevention or curtailment of or interference with the
Construction or any use of any Leased Property or any part thereof; or
(m) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Lessee shall have notice or knowledge of any of
the foregoing. Except as specifically set forth in Articles XIV or X of
this Lease, this Lease shall be noncancellable by Lessee in any
circumstance whatsoever and Lessee, to the extent permitted by Applicable
Law, waives all rights now or hereafter conferred by statute or otherwise
to quit, terminate or surrender this Lease, or to any diminution,
abatement or reduction of Rent payable by Lessee hereunder. Each payment
of Rent made by Lessee hereunder shall be final and Lessee shall not seek
or have any right to recover all or any part of such payment from Lessor,
the Agent, any Lender or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the
condition, use, operation, maintenance, and management of the Leased
Properties and Lessor shall have no responsibility in respect thereof and
shall have no liability for damage to the property of either Lessee or
any subtenant of Lessee on any account or for any reason whatsoever,
other than solely by reason of Lessor's willful misconduct or gross
negligence.
Section IV.6 Certain Taxes. Without limiting the generality of
Section 3.5, Lessee agrees to pay when due all real estate taxes,
personal property taxes, gross sales taxes, including any sales or lease
tax imposed upon the rental payments hereunder or under a sublease,
occupational license taxes, water charges, sewer charges, assessments of
any nature and all other governmental impositions and charges of every
kind and nature whatsoever (the "tax(es)"), when the same shall be due
and payable without penalty or interest; provided, however, that this
Section shall not apply to any of the taxes covered by the exclusion
described in Section 7.4(b) of the Master Agreement. It is the intention
of the parties hereto that, insofar as the same may lawfully be done,
Lessor shall be, except as specifically provided for herein, free from
all expenses in any way related to the Leased Properties and the use and
occupancy thereof. Any tax relating to a fiscal period of any taxing
authority falling partially within and partially outside the Lease Term,
shall be apportioned and adjusted between Lessor and Lessee. Lessee
covenants to furnish Lessor and the Agent, upon the Agent's request,
within forty-five (45) days after the last date when any tax must be paid
by Lessee as provided in this Section 3.6, official receipts of the
appropriate taxing, authority or other proof satisfactory to Lessor,
evidencing the payment thereof.
So long as no Event of Default has occurred and is continuing,
Lessee may defer payment of a tax so long as the validity or the amount
thereof is contested by Lessee with diligence and in good faith;
provided, however, that Lessee shall furnish to Lessor and the Agent a
bond or other adequate security in an amount and on terms reasonably
satisfactory to Lessor and the Agent and shall pay the tax in sufficient
time to prevent delivery of a tax deed. Such contest shall be at
Lessee's sole cost and expense. Lessee covenants to indemnify and save
harmless Lessor, the Agent and each Lender from any actual and reasonable
costs or expenses incurred by Lessor, the Agent or any Lender as a result
of such contest.
Section IV.7 Utility Charges. Lessee agrees to pay or cause to be
paid as and when the same are due and payable all charges for gas, water,
sewer, electricity, lights, heat, power, telephone or other communication
service and all other utility services used, rendered or supplied to,
upon or in connection with the Leased Properties.
ARTICLE V.
WAIVERS
During the Lease Term, Lessor's interest in the Building(s)
(whether or not completed) and the Land is demised and let by Lessor "AS
IS" subject to (a) the rights of any parties in possession thereof, (b)
the state of the title thereto existing at the time Lessor acquired its
interest in the Leased Properties, (c) any state of facts which an
accurate survey or physical inspection might show (including the survey
delivered on the Closing Date), (d) all Applicable Law, and (e) any
violations of Applicable Law which may exist upon or subsequent to the
commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH
LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT
RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF
THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY
LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY,
CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES
(OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR
ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND
NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT,
HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY,
OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that
Lessor hereby represents and warrants that each Leased Property is and
shall be free of Lessor Liens. As between Lessor and Lessee, Lessee has
been afforded full opportunity to inspect each Leased Property, is
satisfied with the results of its inspections of such Leased Property and
is entering into this Lease solely on the basis of the results of its own
inspections and all risks incident to the matters discussed in the two
preceding sentences, as between Lessor, the Agent or the Lenders on the
one hand, and Lessee, on the other, are to be borne by Lessee. The
provisions of this Article IV have been negotiated, and, except to the
extent otherwise expressly stated, the foregoing provisions are intended
to be a complete exclusion and negation of any representations or
warranties by Lessor, the Agent or the Lenders, express or implied, with
respect to the Leased Properties, that may arise pursuant to any law now
or hereafter in effect, or otherwise.
ARTICLE VI.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
Lessee shall not directly or indirectly create, incur or assume,
any Lien on or with respect to any Leased Property, the title thereto, or
any interest therein, including any Liens which arise out of the
possession, use, occupancy, construction, repair or rebuilding of any
Leased Property or by reason of labor or materials furnished or claimed
to have been furnished to Lessee, or any of its contractors or agents or
Alterations constructed by Lessee, except, in all cases, Permitted Liens.
Notwithstanding the foregoing paragraph, at the request of Lessee,
Lessor shall, from time to time during the Lease Term and upon reasonable
advance written notice from Lessee, and receipt of the materials
specified in the next succeeding sentence, consent to and join in any (i)
grant of easements, licenses, rights of way and other rights in the
nature of easements, including, without limitation, utility easements to
facilitate Lessee's use, development and construction of the Leased
Properties, (ii) release or termination of easements, licenses, rights of
way or other rights in the nature of easements which are for the benefit
of the Land or the Building(s) or any portion thereof, (iii) dedication
or transfer of portions of the Land, not improved with a Building, for
road, highway or other public purposes, (iv) execution of agreements for
ingress and egress and amendments to any covenants and restrictions
affecting the Land or the Building(s) or any portion thereof and (v)
request to any Governmental Authority for platting or subdivision or
replatting or resubdivision approval with respect to the Land or any
portion thereof or any parcel of land of which the Land or any portion
thereof forms a part or a request for any variance from zoning or other
governmental requirements. Lessor's obligations pursuant to the
preceding sentence shall be subject to the requirements that:
(a) any such action shall be at the sole cost and expense of
Lessee and Lessee shall pay all actual and reasonable out-of-pocket costs
of Lessor, the Agent and any Lender in connection therewith (including,
without limitation, the reasonable fees of attorneys, architects,
engineers, planners, appraisers and other professionals reasonably
retained by Lessor, the Agent or any Lender in connection with any such
action),
(b) Lessee shall have delivered to Lessor and Agent a
certificate of a Responsible Officer of Lessee stating that
(1) such action will not cause any Leased Property,
the Land or any Building or any portion thereof to fail to comply
in any material respect with the provisions of the Lease or any
other Operative Documents, or in any material respect with
Applicable Law; and
(2) such action will not materially reduce the Fair
Market Sales Value, utility or useful life of any Leased Property,
the Land or any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the
Agent or any Lender so reasonably requests, Lessee will cause to be
issued and delivered to Lessor and the Agent by the Title Insurance
Company an endorsement to the Title Policy pursuant to which the Title
Insurance Company agrees that its liability for the payment of any loss
or damage under the terms and provisions of the Title Policy will not be
affected by reason of the fact that a portion of the real property
referred to in Schedule A of the Title Policy has been released or
conveyed by Lessor.
ARTICLE VII.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section VII.1 Maintenance and Repair; Compliance With Law.
Lessee, at its own expense, shall at all times (a) maintain each Leased
Property in good repair and condition (subject to ordinary wear and
tear), in accordance with prudent industry standards and, in any event,
in no less a manner as other similar restaurant units owned or leased by
Lessee or its Affiliates, (b) make all Alterations in accordance with,
and maintain (whether or not such maintenance requires structural
modifications or Alterations) and operate and otherwise keep each Leased
Property in compliance in all material respects with, all Applicable Laws
and insurance requirements, and (c) make all material repairs,
replacements and renewals of each Leased Property or any part thereof
which may be required to keep such Leased Property in the condition
required by the preceding clauses (a) and (b). Lessee shall perform the
foregoing maintenance obligations regardless of whether any Leased
Property is occupied or unoccupied. Lessee waives any right that it may
now have or hereafter acquire to (i) require Lessor, the Agent or any
Lender to maintain, repair, replace, alter, remove or rebuild all or any
part of any Leased Property or (ii) make repairs at the expense of
Lessor, the Agent or any Lender pursuant to any Applicable Law or other
agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL
BE LIABLE TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS,
MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL
PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR ANY PART
THEREOF. Neither Lessor, the Agent nor any Lender shall be required to
maintain, alter, repair, rebuild or replace any Leased Property in any
way.
Section VII.2 Alterations. Lessee may, without the consent of
Lessor, at Lessee's own cost and expense, make Alterations which do not
materially diminish the value, utility or useful life of any Leased
Property.
Section VII.3 Title to Alterations. Title to all Alterations
shall without further act vest in Lessor (subject to Lessee's right to
remove trade fixtures, personal property and equipment which do not
constitute Alterations and which were not acquired with funds advanced by
Lessor or any Lender) and shall be deemed to constitute a part of the
Leased Properties and be subject to this Lease.
ARTICLE VIII.
USE
Lessee may use each Leased Property or any part thereof for any
lawful purpose, and in a manner consistent with the standards applicable
to properties of a similar nature in the geographic area in which such
Leased Property is located, provided that such use does not materially
adversely affect the Fair Market Sales Value, utility, remaining useful
life or residual value of such Leased Property, and does not materially
violate or conflict with, or constitute or result in a material default
under, any Applicable Law or any insurance policy required hereunder. In
the event Lessee's use substantially changes the character of any
Building in a manner or to an extent that, in Lessor's or the Lenders'
reasonable opinion, adversely affects the Fair Market Sales Value and/or
marketability of such Building, Lessee shall, upon the termination or
expiration of this Lease, at Lessor's request, restore such Leased
Property to its general character at the Completion Date (ordinary wear
and tear excepted). Lessee shall not commit or permit any waste of any
Leased Property or any material part thereof.
ARTICLE IX.
INSURANCE
(a) At any time during which any part of any Building or
any Alteration is under construction and as to any part of any Building
or any Alteration under construction, Lessee shall maintain, or cause to
be maintained, at its sole cost and expense, as a part of its blanket
policies or otherwise, "all risks" non-reporting completed value form of
builder's risk insurance.
(b) During the Lease Term, Lessee shall maintain, at its
sole cost and expense, as a part of its blanket policies or otherwise,
insurance against loss or damage to any Building by fire and other risks,
including comprehensive boiler and machinery coverage, on terms and in
amounts no less favorable than insurance covering other similar
properties owned or leased by Lessee and that are in accordance with
normal industry practice, but in no event less than the replacement cost
of such Building from time to time.
(c) During the Lease Term, Lessee shall maintain, at its
sole cost and expense, commercial general liability insurance with
respect to the Leased Properties, as is ordinarily procured by Persons
who own or operate similar properties in the same geographic area. Such
insurance shall be on terms and in amounts that are no less favorable
than insurance maintained by Lessee or its Affiliates with respect to
similar properties that it owns or leases and that are in accordance with
normal industry practice, but in no event less than $1,000,000 per
occurrence. Such insurance policies shall also provide that Lessee's
insurance shall be considered primary insurance. Nothing in this Article
VIII shall prohibit Lessor, the Agent or any Lender from carrying at its
own expense other insurance on or with respect to the Leased Properties,
provided that any insurance carried by Lessor, the Agent or any Lender
shall not prevent Lessee from carrying the insurance required hereby.
(d) Each policy of insurance maintained by Lessee pursuant
to clauses (a) and (b) of this Article IX shall provide that all
insurance proceeds in respect of any loss or occurrence shall be adjusted
by Lessee, except if, and for so long as an Event of Default exists, all
losses shall be adjusted solely by, and all insurance proceeds shall be
paid solely to, the Agent (or Lessor if the Loans have been fully paid)
for application pursuant to this Lease.
(e) On the Closing Date for each Leased Property, on the
Completion Date and on each anniversary of the Initial Closing Date,
Lessee shall furnish Lessor with certificates showing the insurance
required under this Article VIII to be in effect and naming Lessor, the
Agent and the Lenders as additional insureds. Such certificates shall
include a provision for thirty (30) days' advance written notice by the
insurer to Lessor and the Agent in the event of cancellation or
expiration or nonpayment of premium with respect to such insurance, and
shall include a customary breach of warranty clause.
(f) Each policy of insurance maintained by Lessee pursuant
to this Article VIII shall (1) contain the waiver of any right of
subrogation of the insurer against Lessor, the Agent and the Lenders, and
(2) provide that in respect of the interests of Lessor, the Agent and the
Lenders, such policies shall not be invalidated by any fraud, action,
inaction or misrepresentation of Lessee or any other Person acting on
behalf of Lessee.
(g) All insurance policies carried in accordance with this
Article VIII shall be maintained with insurers rated at least A by A.M.
Best & Company, and in all cases the insurer shall be qualified to insure
risks in the State where such Leased Property is located.
ARTICLE X.
ASSIGNMENT AND SUBLEASING
Lessee may not assign any of its right, title or interest in, to or
under this Lease, except as set forth in the following sentence. Lessee
may (i) assign this Lease as it relates to all or any portion of any
Leased Property to any Affiliate of Lessee so long as Lessee's guaranty
pursuant to the Guaranty Agreement continues in full force and effect and
(ii) sublease all or any portion of any Leased Property, provided that
(a) all obligations of Lessee shall continue in full effect as
obligations of a principal and not of a guarantor or surety, as though no
sublease had been made; (b) such sublease shall be expressly subject and
subordinate to this Lease, the Loan Agreement and the other Operative
Documents; and (c) each such sublease shall terminate on or before the
Lease Termination Date. Lessee shall give the Agent and Lessor written
notice of any such assignment or sublease.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any
interest in any Leased Property or any portion thereof. Any such
mortgage or pledge shall be void.
ARTICLE XI.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section XI.1 Event of Loss. Any event (i) which would otherwise
constitute a Casualty during the Base Term, and (ii) which, in the good-
faith judgment of Lessee, renders repair and restoration of a Leased
Property impractical or uneconomical, and (iii) as to which Lessee,
within sixty (60) days after the occurrence of such event, delivers to
Lessor an Officer's Certificate notifying Lessor of such event and of
such judgment, shall constitute an "Event of Loss". In the case of any
other event which constitutes a Casualty, Lessee shall restore such
Leased Property pursuant to Section 10.3. If an Event of Loss other than
an Event of Taking shall occur, Lessee shall pay to Lessor on the next
Payment Date following delivery of the Officer's Certificate pursuant to
clause (iii) above an amount equal to the related Leased Property
Balance. Upon Lessor's receipt of such Leased Property Balance on such
date, Lessor shall cause Lessor's interest in such Leased Property to be
conveyed to Lessee in accordance with and subject to the provisions of
Section 14.5 hereof; upon completion of such purchase, but not prior
thereto, this Lease and all obligations hereunder with respect to such
Leased Property shall terminate, except with respect to obligations and
liabilities hereunder, actual or contingent, that have arisen or relate
to events occurring on or prior to such date of purchase, or which are
expressly stated herein to survive termination of this Lease.
Upon the consummation of the purchase of any Leased Property
pursuant to this Section 10.1, any proceeds derived from insurance
required to be maintained by Lessee pursuant to this Lease for any Leased
Property remaining after payment of such purchase price shall be paid
over to, or retained by, Lessee or as it may direct, and Lessor shall
assign to Lessee, without warranty, all of Lessor's rights to and
interest in insurance required to be maintained by Lessee pursuant to
this Lease.
Section XI.2 Event of Taking. Any event (i) which constitutes a
Condemnation of all of, or substantially all of, a Leased Property, or
(ii) (A) which would otherwise constitute a Condemnation, (B) which, in
the good-faith judgment of Lessee, renders restoration and rebuilding of
a Leased Property impossible, impractical or uneconomical, and (C) as to
which Lessee, within sixty (60) days after the occurrence of such event,
delivers to Lessor an Officer's Certificate notifying Lessor of such
event and of such judgment, shall constitute an "Event of Taking". In
the case of any other event which constitutes a Condemnation, Lessee
shall restore and rebuild such Leased Property pursuant to Section 10.4.
If an Event of Taking shall occur, Lessee shall pay to Lessor (1) on the
next Payment Date following the occurrence of such Event of Taking, in
the case of an Event of Taking described in clause (i) above, or (2) on
the next Payment Date following delivery of the Officer's Certificate
pursuant to clause (ii) above, in the case of an Event of Taking
described in clause (ii) above, an amount equal to the related Leased
Property Balance. Upon Lessor's receipt of such Leased Property Balance
on such date, Lessor shall cause Lessor's interest in such Leased
Property to be conveyed to Lessee in accordance with and subject to the
provisions of Section 14.5 hereof (provided that such conveyance shall be
subject to all rights of the condemning authority); upon completion of
such purchase, but not prior thereto, this Lease and all obligations
hereunder with respect to such Leased Property shall terminate, except
with respect to obligations and liabilities hereunder, actual or
contingent, that have arisen or relate to events occurring on or prior to
such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of such Leased Property
pursuant to this Section 10.2, all Awards received by Lessor, after
deducting any reasonable costs incurred by Lessor in collecting such
Awards, received or payable on account of an Event of Taking with respect
to such Leased Property during the related Lease Term shall be paid to
Lessee, and all rights of Lessor in Awards not then received shall be
assigned to Lessee by Lessor.
Section XI.3 Casualty. If a Casualty shall occur, Lessee shall
rebuild and restore the affected Leased Property, will complete the same
prior to the Lease Termination Date, and will cause the condition set
forth in Section 3.5 (c) of the Master Agreement to be fulfilled with
respect to such restoration and rebuilding prior to the Lease Termination
Date, regardless of whether insurance proceeds received as a result of
such Casualty are sufficient for such purpose.
Section XI.4 Condemnation. If a Condemnation shall occur, Lessee
shall rebuild and restore the affected Leased Property, will complete the
same prior to the Lease Termination Date, and will cause the condition
set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with
respect to such restoration and rebuilding prior to the Lease Termination
Date.
Section XI.5 Verification of Restoration and Rebuilding. In the
event of Casualty or Condemnation, to verify Lessee's compliance with the
foregoing Sections 10.3 and 10.4, Lessor, the Agent, the Lenders and
their respective authorized representatives may, upon five (5) Business
Days' notice to Lessee, make inspections of the affected Leased Property
with respect to (i) the extent of the Casualty or Condemnation and (ii)
the restoration and rebuilding of the related Building and the Land. All
actual and reasonable out-of-pocket costs of such inspections incurred by
Lessor, the Agent or any Lender will be paid by Lessee promptly after
written request. No such inspection shall unreasonably interfere with
Lessee's operations or the operations of any other occupant of such
Leased Property. None of the inspecting parties shall have any duty to
make any such inspection or inquiry and none of the inspecting parties
shall incur any liability or obligation by reason of making or not making
any such inspection or inquiry.
Section XI.6 Application of Payments. All proceeds (except for
payments under insurance policies maintained other than pursuant to
Article VIII of this Lease) received at any time by Lessor, Lessee or the
Agent from any Governmental Authority or other Person with respect to any
Condemnation or Casualty to any Leased Property or any part thereof or
with respect to an Event of Loss or an Event of Taking, plus the amount
of any payment that would have been due from an insurer but for Lessee's
self-insurance or deductibles ("Loss Proceeds"), shall (except to the
extent Section 10.9 applies) be applied as follows:
(a) In the event Lessee purchases such Leased Property
pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall
be applied as set forth in Section 10.1 or Section 10.2, as the
case may be;
(b) In the event of a Casualty at such time when no Event
of Default has occurred and is continuing and Lessee is obligated
to repair and rebuild such Leased Property pursuant to Section
10.3, Lessee may, in good faith and subsequent to the date of such
Casualty, certify to Lessor and to the applicable insurer that no
Event of Default has occurred and is continuing, in which event the
applicable insurer shall pay the Loss Proceeds to Lessee;
(c) In the event of a Condemnation at such time when no
Event of Default has occurred and is continuing and Lessee is
obligated to repair and rebuild such Leased Property pursuant to
Section 10.4, Lessor shall upon Lessee's request assign to Lessee
Lessor's interest in any applicable Awards; and
(d) As provided in Section 10.8, if such section is
applicable.
During any period of repair or rebuilding pursuant to this Article
X, this Lease will remain in full force and effect and Basic Rent shall
continue to accrue and be payable without abatement or reduction. Lessee
shall maintain records setting forth information relating to the receipt
and application of payments in accordance with this Section 10.6. Such
records shall be kept on file by Lessee at its offices and shall be made
available to Lessor, the Lenders and the Agent upon request.
Section XI.7 Prosecution of Awards. (a) If, during the
continuance of any Event of Default, any Condemnation shall occur, Lessee
shall give to Lessor and the Agent promptly, but in any event within
thirty (30) days after the occurrence thereof, written notice of such
occurrence and the date thereof, generally describing the nature and
extent of such Condemnation. With respect to any Event of Taking or any
Condemnation, Lessee shall control the negotiations with the relevant
Governmental Authority as to any proceeding in respect of which Awards
are required, under Section 10.6, to be assigned or released to Lessee,
unless an Event of Default shall have occurred and be continuing, in
which case (1) the Agent (or Lessor if the Loans have been fully paid)
shall control such negotiations; and (2) Lessee hereby irrevocably
assigns, transfers and sets over to Lessor all rights of Lessee to any
Award made during the continuance of an Event of Default on account of
any Event of Taking or any Condemnation and, if there will not be
separate Awards to Lessor and Lessee on account of such Event of Taking
or Condemnation, irrevocably authorizes and empowers the Agent (or Lessor
if the Loans have been fully paid) during the continuance of an Event of
Default, with full power of substitution, in the name of Lessee or
otherwise (but without limiting the obligations of Lessee under this
Article X), to file and prosecute what would otherwise be Lessee's claim
for any such Award and to collect, receipt for and retain the same;
provided, however, that in any event Lessor and the Agent may participate
in such negotiations, and no settlement will be made without the prior
consent of the Agent (or Lessor if the Loans have been fully paid), not
to be unreasonably withheld.
(b) Notwithstanding the foregoing, Lessee may prosecute, and
Lessor shall have no interest in, any claim with respect to Lessee's
personal property and equipment not financed by Lessor and Lessee's
relocation expenses.
Section XI.8 Application of Certain Payments Not Relating to an
Event of Taking. In case of a requisition for temporary use of all or a
portion of any Leased Property which is not an Event of Taking, this
Lease shall remain in full force and effect with respect to such Leased
Property, without any abatement or reduction of Basic Rent, and the
Awards for such Leased Property shall, unless an Event of Default has
occurred and is continuing, be paid to Lessee.
Section XI.9 Other Dispositions. Notwithstanding the
foregoing provisions of this Article X, so long as an Event of Default
shall have occurred and be continuing, any amount that would otherwise be
payable to or for the account of, or that would otherwise be retained by,
Lessee pursuant to this Article X shall be paid to the Agent (or Lessor
if the Loans have been fully paid) as security for the obligations of
Lessee under this Lease and, at such time thereafter as no Event of
Default shall be continuing, such amount shall be paid promptly to Lessee
to the extent not previously applied by Lessor or the Agent in accordance
with the terms of this Lease or the other Operative Documents.
Section XI.10 No Rent Abatement. Rent shall not abate
hereunder by reason of any Casualty, any Event of Loss, any Event of
Taking or any Condemnation of any Leased Property, and Lessee shall
continue to perform and fulfill all of Lessee's obligations, covenants
and agreements hereunder notwithstanding such Casualty, Event of Loss,
Event of Taking or Condemnation until the Lease Termination Date.
ARTICLE XII.
INTEREST CONVEYED TO LESSEE
Lessor and Lessee intend that this Lease be treated, for accounting
purposes, as an operating lease. For all other purposes, Lessee and
Lessor intend that the transaction represented by this Lease be treated
as a financing transaction; for such purposes, it is the intention of the
parties hereto (i) that this Lease be treated as a mortgage or deed of
trust (whichever is applicable in the jurisdictions in which the Leased
Properties are located) and security agreement, encumbering the Leased
Property, and that Lessee, as grantor, hereby grants to Lessor, as
mortgagee or beneficiary and secured party, or any successor thereto, a
first and paramount Lien on each Leased Property, (ii) that Lessor shall
have, as a result of such determination, all of the rights, powers and
remedies of a mortgagee, deed of trust beneficiary or secured party
available under Applicable Law to take possession of and sell (whether by
foreclosure or otherwise) any Leased Property, (iii) that the effective
date of such mortgage, security deed or deed of trust shall be the
effective date of this Lease, (iv) that the recording of this Lease or a
Lease Supplement shall be deemed to be the recording of such mortgage,
security deed or deed of trust, and (v) that the obligations secured by
such mortgage, security deed or deed of trust shall include the Funded
Amounts and all Basic Rent and Supplemental Rent hereunder and all other
obligations of and amounts due from Lessee hereunder and under the
Operative Documents.
ARTICLE XIII.
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether
any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) Lessee shall fail to make any payment of Basic Rent when due,
and such failure shall continue for five (5) or more days;
(b) Lessee shall fail to make any payment of Rent (other than
Basic Rent) or any other amount payable hereunder or under any of the
other Operative Documents (other than Basic Rent and other than as set
forth in clause (c)), and such failure shall continue for a period of ten
(10) days;
(c) Lessee shall fail to pay the Funded Amount or Lease Balance
when due pursuant to Sections 10.1, 10.2, 14.1 or 14.2, or Lessee shall
fail to pay the Recourse Deficiency Amount when required pursuant to
Article XIV or Lessee shall fail to make any payment when due under the
Construction Agency Agreement;
(d) Lessee shall fail to maintain insurance as required by
Article VIII hereof, and such failure shall continue until the earlier of
(i) 15 days after written notice thereof from Lessor and (ii) the day
immediately preceding the date on which any applicable insurance coverage
would otherwise lapse or terminate;
(e) (i) Any Consolidated Company shall fail to observe or perform
any covenants or agreements (whether or not waived) contained in any
agreements or instruments relating to any of its Indebtedness exceeding
$2,500,000 individually or in the aggregate, or any other event shall
occur if the effect of such failure or other event is to accelerate, or
with notice or passage of time or both, to permit the holder of such
Indebtedness or any other Person to accelerate, the maturity of such
Indebtedness; or any such Indebtedness shall be required to be prepaid
(other than by a regularly scheduled requirement prepayment) in whole or
in part prior to its stated maturity; or (ii) any event or condition
shall occur or exist which, pursuant to the terms of any Change in
Control Provision, requires or permits the holder(s) of the Indebtedness
subject to such Change in Control Provision to require that such
Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in
whole or in part, or the maturity of such Indebtedness to be accelerated;
or (iii) any Consolidated Company shall fail to make when due (whether at
stated maturity, by acceleration, on demand or otherwise, and after
giving effect to any applicable grace period) any payment of principal of
or interest on any Indebtedness (other than the Obligations) exceeding
$2,500,000 individually or in the aggregate;
(f) Lessee or any Material Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself
or of its property, (ii) be unable, or admit in writing inability, to pay
its debts as they mature, (iii) make a general assignment for the benefit
of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a
voluntary petition in bankruptcy, or a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law or an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, (vi)
take corporate action for the purpose of effecting any of the foregoing,
or (vii) have an order for relief entered against it in any proceeding
under any bankruptcy law;
(g) An order, judgment or decree shall be entered, without the
application, approval or consent of Lessee, by any court of competent
jurisdiction, approving a petition seeking reorganization of such entity
or appointing a receiver, trustee or liquidator of such entity or of all
or a substantial part of its assets, and such order, judgment or decree
shall continue unstayed and in effect for any period of 60 consecutive
days;
(h) any representation or warranty by Lessee in any Operative
Document or in any certificate or document delivered to Lessor, the Agent
or any Lender pursuant to any Operative Document shall have been
incorrect in any material respect when made;
(i) Lessee shall repudiate or terminate the Guaranty Agreement,
or the Guaranty Agreement shall at any time cease to be in full force and
effect or cease to be the legal, valid and binding obligation of Lessee;
(j) Lessee shall fail in any material respect to timely, perform
or observe any covenant, condition or agreement (not included in clause
(a), (b), (c), (d), (e), (f), (g), (h) or (i) of this Article XII) to be
performed or observed by it hereunder or under any other Operative
Document and such failure shall continue for a period of 30 days after
Lessee's receipt of written notice thereof from Lessor, the Agent or any
Lender;
(k) A Plan of either a Consolidated Company or of any of its
ERISA Affiliates which is subject to Title IV of ERISA:
(i) shall fail to be funded in accordance with the minimum
funding standard required by applicable law, the terms of
such Plan, Section 412 of the Tax Code or Section 302 of
ERISA for any plan year or a waiver of such standard is
sought or granted with respect to such Plan under applicable
law, the terms of such Plan or Section 412 of the Tax Code or
Section 303 of ERISA; or
(ii) is being, or has been, terminated or the subject of
termination proceedings under applicable law or the terms of
such Plan; or
(iii) shall require a Consolidated Company to provide security
under applicable law, the terms of such Plan, Section 401 or
412 of the Tax Code or Section 306 or 307 of ERISA; or
(iv) results in a liability to a Consolidated Company under
applicable law, the terms of such Plan, or Title IV of ERISA;
and there shall result form any such failure, waiver, termination or
other event described in clauses (i) through (iv) above a liability to
the PBGC or a Plan that would have a Material Adverse Effect;
(l) Judgments or orders for the payment of money in excess of
$2,500,000 individually or in the aggregate or otherwise having a
Material Adverse Effect shall be rendered against Lessee or any other
Consolidated Company and such judgment or order shall continue
unsatisfied (in the case of a money judgment) and in effect for a period
of 30 days during which execution shall not be effectively stayed or
deferred (whether by action of a court, by agreement or otherwise);
(m) Any person or group (within the meaning of Rule 13d-5 of the
Securities and Exchange Commission as in effect on the date hereof) shall
become the owner, beneficially or of record, of shares representing more
than thirty percent (30%) of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Lessee; or
(n) Any party to the Sharing Agreements shall default with
respect to its covenants or obligations thereunder where such default
results in a Material Adverse Effect.
ARTICLE XIV.
ENFORCEMENT
Section XIV.1 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Lessor may do one or more of the
following as Lessor in its sole discretion shall determine, without
limiting any other right or remedy Lessor may have on account of such
Event of Default (including, without limitation, the obligation of Lessee
to purchase the Leased Properties as set forth in Section 14.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this
Lease as of the date specified in such notice; however, (A) no reletting,
reentry or taking of possession of any Leased Property by Lessor will be
construed as an election on Lessor's part to terminate this Lease unless
a written notice of such intention is given to Lessee, (B)
notwithstanding any reletting, reentry or taking of possession, Lessor
may at any time thereafter elect to terminate this Lease for a continuing
Event of Default, and (C) no act or thing done by Lessor or any of its
agents, representatives or employees and no agreement accepting a
surrender of any Leased Property shall be valid unless the same be made
in writing and executed by Lessor;
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the
written demand of Lessor, return the Leased Properties promptly to Lessor
in the manner and condition required by, and otherwise in accordance with
all of the provisions of, Articles VI and XIV hereof as if the Leased
Properties were being returned at the end of the Lease Term, and Lessor
shall not be liable for the reimbursement of Lessee for any costs and
expenses incurred by Lessee in connection therewith and (ii) without
prejudice to any other remedy which Lessor may have for possession of the
Leased Properties, and to the extent and in the manner permitted by
Applicable Law, enter upon any Leased Property and take immediate
possession of (to the exclusion of Lessee) any Leased Property or any
part thereof and expel or remove Lessee and any other person who may be
occupying such Leased Property, by summary proceedings or otherwise, all
without liability to Lessee for or by reason of such entry or taking of
possession, whether for the restoration of damage to property caused by
such taking or otherwise and, in addition to Lessor's other damages,
Lessee shall be responsible for the actual and reasonable costs and
expenses of reletting, including brokers' fees and the reasonable costs
of any alterations or repairs made by Lessor;
(c) Lessor may (i) sell all or any part of any Leased Property at
public or private sale, as Lessor may determine, free and clear of any
rights of Lessee and without any duty to account to Lessee with respect
to such action or inaction or any proceeds with respect thereto (except
to the extent required by clause (ii) below if Lessor shall elect to
exercise its rights thereunder) in which event Lessee's obligation to pay
Basic Rent hereunder for periods commencing after the date of such sale
shall be terminated or proportionately reduced, as the case may be; and
(ii) if Lessor shall so elect, demand that Lessee pay to Lessor, and
Lessee shall pay to Lessor, on the date of such sale, as liquidated
damages for loss of a bargain and not as a penalty (the parties agreeing
that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of
such amount) (in lieu of Basic Rent due for periods commencing on or
after the Payment Date coinciding with such date of sale (or, if the sale
date is not a Payment Date, the Payment Date next preceding the date of
such sale)), an amount equal to (a) the excess, if any, of (1) the sum of
(A) all Rent due and unpaid to and including such Payment Date and (B)
the Funded Amounts with respect to such Leased Property, computed as of
such date, over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by Lessor, the Agent or any
Lender incident to such conveyance (including, without limitation, all
costs, expenses, fees, premiums and taxes described in Section 14.5(b)));
plus (b) interest at the Overdue Rate on the foregoing amount from such
Payment Date until the date of payment;
(d) Lessor may, at its option, not terminate this Lease, and
continue to collect all Basic Rent, Supplemental Rent, and all other
amounts (including, without limitation, the Funded Amount) due Lessor
(together with all costs of collection) and enforce Lessee's obligations
under this Lease as and when the same become due, or are to be performed,
and at the option of Lessor, upon any abandonment of any Leased Property
by Lessee or re-entry of same by Lessor, Lessor may, in its sole and
absolute discretion, elect not to terminate this Lease with respect
thereto and may make such reasonable alterations and necessary repairs in
order to relet such Leased Property, and relet such Leased Property or
any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals
and upon such other terms and conditions as Lessor in its reasonable
discretion may deem advisable; and upon each such reletting all rentals
actually received by Lessor from such reletting shall be applied to
Lessee's obligations hereunder in such order, proportion and priority as
Lessor may elect in Lessor's sole and absolute discretion; it being
agreed that under no circumstances shall Lessee benefit from its default
from any increase in market rents. If such rentals received from such
reletting during any Rent Period are less than the Rent to be paid during
that Rent Period by Lessee hereunder, Lessee shall pay any deficiency, as
calculated by Lessor, to Lessor on the Payment Date for such Rent Period;
(e) If any Leased Property has not been sold, Lessor may, whether
or not Lessor shall have exercised or shall thereafter at any time
exercise any of its rights under paragraph (b), (c) or (d) of this
Article XIII with respect to such Leased Property, demand, by written
notice to Lessee specifying a date (the "Final Rent Payment Date") not
earlier than 30 days after the date of such notice, that Lessee purchase,
on the Final Rent Payment Date, such Leased Property in accordance with
the provisions of Sections 14.2, 14.4 and 14.5; provided, however, that
(1) such purchase shall occur on the date set forth in such notice,
notwithstanding the provision in Section 14.2 calling for such purchase
to occur on the Lease Termination Date; and (2) Lessor's obligations
under Section 14.5(a) shall be limited to delivery of a special or
limited warranty deed and quit claim bill of sale of such Leased
Property, without recourse or warranty, but free and clear of Lessor
Liens;
(f) Lessor may exercise any other right or remedy that may be
available to it under Applicable Law, or proceed by appropriate court
action (legal or equitable) to enforce the terms hereof or to recover
damages for the breach hereof. Separate suits may be brought to collect
any such damages for any Rent Period(s), and such suits shall not in any
manner prejudice Lessor's right to collect any such damages for any
subsequent Rent Period(s), or Lessor may defer any such suit until after
the expiration of the Lease Term, in which event such suit shall be
deemed not to have accrued until the expiration of the Lease Term; or
(g) Lessor may retain and apply against Lessor's damages all sums
which Lessor would, absent such Event of Default, be required to pay to,
or turn over to, Lessee pursuant to the terms of this Lease.
Section XIV.2 Remedies Cumulative; No Waiver; Consents. To the
extent permitted by, and subject to the mandatory requirements of,
Applicable Law, each and every right, power and remedy herein
specifically given to Lessor or otherwise in this Lease shall be
cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in
equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of the right to exercise at
the same time or thereafter any right, power or remedy. No delay or
omission by Lessor in the exercise of any right, power or remedy or in
the pursuit of any remedy shall impair any such right, power or remedy or
be construed to be a waiver of any default on the part of Lessee or to be
an acquiescence therein. Lessor's consent to any request made by Lessee
shall not be deemed to constitute or preclude the necessity for obtaining
Lessor's consent, in the future, to all similar requests. No express or
implied waiver by Lessor of any Event of Default shall in any way be, or
be construed to be, a waiver of any future or subsequent Potential Event
of Default or Event of Default. To the extent permitted by Applicable
Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise
use any Leased Property or part thereof in mitigation of Lessor's damages
upon the occurrence of an Event of Default or that may otherwise limit or
modify any of Lessor's rights or remedies under this Article XIII.
ARTICLE XV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
Section XV.1 Lessee's Option to Purchase. (a) Subject to the
terms, conditions and provisions set forth in this Article XIV, Lessee
shall have the option (the "Purchase Option"), to be exercised as set
forth below, to purchase from Lessor, Lessor's interest in all of the
Leased Properties; provided that, except as set forth in paragraph (b)
below, such option must be exercised with respect to all, but not less
than all, of the Leased Properties. Such option must be exercised by
written notice to Lessor not later than twelve months prior to the Lease
Termination Date which notice shall be irrevocable; such notice shall
specify the date that such purchase shall take place, which date shall be
a Rent Payment Date occurring not less than thirty (30) days after such
notice or the Lease Termination Date (whichever is earlier). If the
Purchase Option is exercised pursuant to the foregoing, then, subject to
the provisions set forth in this Article XIV, on the applicable purchase
date or the Lease Termination Date, as the case may be, Lessor shall
convey to Lessee, without recourse or warranty (other than as to the
absence of Lessor Liens) and Lessee shall purchase from Lessor, Lessor's
interest in the Leased Properties.
(b) Subject to the terms, conditions and provisions set forth in
this Article XIV, Lessee shall have the option (the "Partial Purchase
Option"), to be exercised as set forth below, to purchase from Lessor
Lessor's interest in any Leased Property; provided that such option may
be exercised only if, after giving effect thereto, there are at least 15
Leased Properties subject to this Lease, unless it is exercised with
respect to all Leased Properties as set forth in paragraph (a) above.
Such option must be exercised by written notice to Lessor not later than
twelve months prior to the Lease Termination Date, which notice shall be
irrevocable; such notice shall specify the Leased Property to be
purchased and the date that such purchase shall take place, which date
shall be a Rent Payment Date occurring not less than thirty (30) days
after such notice or the Lease Termination Date (whichever is earlier).
If a Partial Purchase Option is exercised pursuant to the foregoing,
subject to the provisions set forth in this Article XIV, on the
applicable purchase date or the Lease Termination Date, as the case may
be, Lessor shall convey to Lessee, without recourse or warranty (other
than as to the absence of Lessor Liens) and Lessee shall purchase from
Lessor, Lessor's interest in the Leased Property that is the subject of
such Partial Purchase Option.
Section XV.2 Conveyance to Lessee. Unless (a) Lessee shall have
properly exercised the Purchase Option and purchased the Leased
Properties pursuant to Section 14.1(a) hereof, or (b) Lessee shall have
properly exercised the Remarketing Option or the Surrender Option and
shall have fulfilled all of the conditions of Section 14.6 hereof, then,
subject to the terms, conditions and provisions set forth in this Article
XIV, Lessee shall purchase from Lessor, and Lessor shall convey to
Lessee, on the Lease Termination Date all of Lessor's interest in the
Leased Properties. Lessee may designate, in a notice given to Lessor not
less than ten (10) Business Days prior to the closing of such purchase
(time being of the essence), the transferee to whom the conveyance shall
be made (if other than to Lessee), in which case such conveyance shall
(subject to the terms and conditions set forth herein) be made to such
designee; provided, however, that such designation of a transferee shall
not cause Lessee to be released, fully or partially, from any of its
obligations under this Lease.
Section XV.3 Acceleration of Purchase Obligation. Lessee shall be
obligated to purchase Lessor's interest in the Leased Properties
immediately, automatically and without notice upon the occurrence of any
Event of Default specified in clause (g) of Article XII, for the purchase
price set forth in Section 14.4. Upon the occurrence and during the
continuance of any other Event of Default, Lessee shall be obligated to
purchase Lessor's interest in the Leased Properties for the purchase
price set forth in Section 14.4 upon notice of such obligation from
Lessor.
Section XV.4 Determination of Purchase Price. Upon the purchase
by Lessee of Lessor's interest in the Leased Properties upon the exercise
of the Purchase Option or pursuant to Section 14.2 or 14.3, the aggregate
purchase price for all of the Leased Properties shall be an amount equal
to the Lease Balance as of the closing date for such purchase, plus any
amount due pursuant to Section 7.5(f) of the Master Agreement as a result
of such purchase. Upon the purchase by Lessee of Lessor's interest in a
Leased Property upon the exercise of a Partial Purchase Option, the
purchase price for such Leased Property shall be an amount equal to the
Leased Property Balance for such Leased Property as of the closing date
for such purchase, plus any amount due pursuant to Section 7.5(f) of the
Master Agreement as a result of such purchase.
Section XV.5 Purchase Procedure. (a) If Lessee shall purchase
Lessor's interest in a Leased Property pursuant to any provision of this
Lease, (i) Lessee shall accept from Lessor and Lessor shall convey such
Leased Property by a duly executed and acknowledged special or limited
warranty deed and quit claim bill of sale of such Leased Property in
recordable form, (ii) upon the date fixed for any purchase of Lessor's
interest in Leased Property hereunder, Lessee shall pay to the order of
the Agent (or Lessor if the Loans have been paid in full) the Lease
Balance or Leased Property Balance, as applicable, plus any amount due
pursuant to Section 7.5(f) of the Master Agreement as a result of such
purchase by wire transfer of immediately available funds, and (iii)
Lessor will execute and deliver to Lessee such other documents, including
releases, termination agreements and termination statements, as may be
legally required or as may be reasonably requested by Lessee in order to
effect such conveyance, free and clear of Lessor Liens and the Liens of
the Operative Documents.
(b) Lessee shall, at Lessee's sole cost and expense, obtain all
required governmental and regulatory approval and consents and in
connection therewith shall make such filings as required by Applicable
Law; in the event that Lessor is required by Applicable Law to take any
action in connection with such purchase and sale, Lessee shall pay all
costs incurred by Lessor in connection therewith. In addition, all costs
incident to such conveyance, including, without limitation, Lessee's
attorneys' fees, Lessor's attorneys' fees, commissions, Lessee's and
Lessor's escrow fees, recording fees, title insurance premiums and all
applicable documentary transfer or other transfer taxes and other taxes
required to be paid in order to record the transfer documents that might
be imposed by reason of such conveyance and the delivery of such deed
shall be borne entirely by and paid by Lessee.
(c) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Properties to
Lessee, there shall be no apportionment of rents (including, without
limitation, water rents and sewer rents), taxes, insurance, utility
charges or other charges payable with respect to the Leased Properties,
all of such rents, taxes, insurance, utility or other charges due and
payable with respect to the Leased Properties prior to termination being
payable by Lessee hereunder and all due after such time being payable by
Lessee as the then owner of the Leased Properties.
Section XV.6 Option to Remarket; Surrender Option. Subject to the
fulfillment of each of the conditions set forth in this Section 14.6,
Lessee shall have the option to either (i) market all of, but not less
than all of, the Leased Properties for Lessor (the "Remarketing Option")
or (ii) surrender all of, but not less than all of, the Leased Properties
to Lessor (the "Surrender Option").
Lessee's effective exercise and consummation of the Remarketing
Option or the Surrender Option, as the case may be, shall be subject to
the due and timely fulfillment of each of the following provisions, the
failure of any of which, unless waived in writing by Lessor and the
Lenders, shall render the Remarketing Option or the Surrender Option, as
the case may be, and Lessee's exercise thereof null and void, in which
event, Lessee shall be obligated to perform its obligations under
Section 14.2.
(a) Not later than twelve months prior to the Lease
Termination Date, Lessee shall give to Lessor and the Agent written
notice of Lessee's exercise of the Remarketing Option or the
Surrender Option, as the case may be, which exercise shall be
irrevocable and shall state whether Lessee has elected the
Remarketing Option or the Surrender Option.
(b) Not later than ten (10) Business Days prior to the Lease
Termination Date, Lessee shall deliver to Lessor and the Agent an
environmental assessment of each Leased Property dated not later
than forty-five (45) days prior to the Lease Termination Date.
Such environmental assessment shall be prepared by an environmental
consultant selected by the Required Funding Parties, shall be in
form, detail and substance reasonably satisfactory to the Required
Funding Parties, and shall otherwise indicate the environmental
condition of each Leased Property to be the same as described in
the related Environmental Audit.
(c) On the date of Lessee's notice to Lessor and the Agent
of Lessee's exercise of the Remarketing Option, or the Surrender
Option, as the case may be, each of the Construction Conditions
shall have been timely satisfied and no Event of Default or
Potential Event of Default shall exist, and thereafter, no Event of
Default or Potential Event of Default shall exist under this Lease.
(d) Lessee shall have completed all Alterations,
restoration and rebuilding of the Leased Properties pursuant to
Sections 6.1, 6.2, 10.3 and 10.4 (as the case may be) and shall
have fulfilled all of the conditions and requirements in connection
therewith pursuant to said Sections, in each case by the date on
which Lessor and the Agent receive Lessee's notice of Lessee's
exercise of the Remarketing Option or the Surrender Option, as the
case may be (time being of the essence), regardless of whether the
same shall be within Lessee's control.
(e) Lessee shall promptly provide any maintenance records
relating to each Leased Property to Lessor, the Agent and any
potential purchaser upon request, and shall otherwise do all things
necessary to deliver possession of such Leased Property to the
potential purchaser. Lessee shall allow Lessor, the Agent and any
potential purchaser access to any Leased Property for the purpose
of inspecting the same.
(f) On the Lease Termination Date, Lessee shall surrender
the Leased Properties in accordance with Section 14.8 hereof.
(g) In connection with any such sale of the Leased
Properties, Lessee will provide to the purchaser all customary
"seller's" indemnities, representations and warranties regarding
title, absence of Liens (except Lessor Liens) and the condition of
the Leased Properties, including, without limitation, an
environmental indemnity. Lessee shall fulfill all of the
requirements set forth in clause (b) of Section 14.5, and such
requirements are incorporated herein by reference. As to Lessor,
any such sale shall be made on an "as is, with all faults" basis
without representation or warranty by Lessor, other than the
absence of Lessor Liens.
(h) In connection with any such sale of Leased Properties,
Lessee shall pay directly, and not from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Properties, whether incurred by Lessor, any Lender, the Agent or
Lessee, including without limitation, the cost of all title
insurance, surveys, environmental reports, appraisals, transfer
taxes, Lessor's and the Agent's attorneys' fees, Lessee's
attorneys' fees, commissions, escrow fees, recording fees, and all
applicable documentary and other transfer taxes.
(i) Lessee shall pay to the Agent on the Lease Termination
Date (or to such other Person as Agent shall notify Lessee in
writing, or in the case of Supplemental Rent, to the Person
entitled thereto) an amount equal to the Recourse Deficiency
Amount, plus all accrued and unpaid Basic Rent and Supplemental
Rent, and all other amounts hereunder which have accrued prior to
or as of such date, in the type of funds specified in Section 3.3
hereof.
If Lessee has exercised the Remarketing Option, the following additional
provisions shall apply: During the period commencing on the date twelve
months prior to the scheduled expiration of the Lease Term, Lessee shall,
as nonexclusive agent for Lessor, use commercially reasonable efforts to
sell Lessor's interest in the Leased Properties and will attempt to
obtain the highest purchase price therefor. All such marketing of the
Leased Properties shall be at Lessee's sole expense. Lessee shall submit
all bids to Lessor and the Agent and Lessor and the Agent will have the
right to review the same and the right to submit any one or more bids.
All bids shall be on an all-cash basis. In no event shall such bidder be
Lessee or any Subsidiary or Affiliate of Lessee. The written offer must
specify the Lease Termination Date as the closing date. If, and only if,
the selling price (net of closing costs and prorations, as reasonably
estimated by the Agent) is less than the difference between the Lease
Balance at such time minus the Recourse Deficiency Amount, then Lessor or
the Agent may, in its sole and absolute discretion, by notice to Lessee,
reject such offer to purchase, in which event the parties will proceed
according to the provisions of Section 14.7 hereof. If neither Lessor
nor the Agent rejects such purchase offer as provided above, the closing
of such purchase of the Leased Properties by such purchaser shall occur
on the Lease Termination Date, contemporaneously with Lessee's surrender
of the Leased Properties in accordance with Section 14.8 hereof, and the
gross proceeds of the sale (i.e., without deduction for any marketing,
closing or other costs, prorations or commissions) shall be paid directly
to the Agent (or Lessor if the Funded Amounts have been fully paid);
provided, however, that if the sum of the gross proceeds from such sale
plus the Recourse Deficiency Amount paid by Lessee on the Lease
Termination Date pursuant to Section 14.6(i), minus any and all costs and
expenses (including broker fees, appraisal costs, legal fees and transfer
taxes) incurred by the Agent or Lessor in connection with the marketing
of the Leased Properties or the sale thereof exceeds the Lease Balance as
of such date, then the excess shall be paid to Lessee on the Lease
Termination Date. Lessee shall have no right, power or authority to bind
Lessor in connection with any proposed sale of the Leased Properties.
Section XV.7 Rejection of Sale. Notwithstanding anything
contained herein to the contrary, if Lessor or the Agent rejects the
purchase offer for the Leased Properties as provided in Section 14.6,
then (a) Lessee shall pay to the Agent the Recourse Deficiency Amount
pursuant to Section 14.6(i), (b) Lessor shall retain title to the Leased
Properties, and (c) in addition to Lessee's other obligations hereunder,
Lessee will reimburse Lessor and the Agent, within ten (10) Business Days
after written request, for all reasonable costs and expenses incurred by
Lessor or Agent during the period ending on the first anniversary of the
Lease Termination Date in connection with the marketing, sale, closing or
transfer of the Leased Properties, which obligation shall survive the
Lease Termination Date and the termination or expiration of this Lease.
Section XV.8 Return of Leased Property. If Lessor retains
title to any Leased Property pursuant to Section 14.7 hereof or Lessee
has properly exercised the Surrender Option, then Lessee shall, on the
Lease Termination Date, and at its own expense, return possession of such
Leased Property to Lessor for retention by Lessor or, if Lessee properly
exercises the Remarketing Option and fulfills all of the conditions of
Section 14.6 hereof and neither Lessor nor the Agent rejects such
purchase offer pursuant to Section 14.6, then Lessee shall, on such Lease
Termination Date, and at its own cost, transfer possession of the Leased
Property to the independent purchaser thereof, in each case by
surrendering the same into the possession of Lessor or such purchaser, as
the case may be, free and clear of all Liens other than Lessor Liens, in
as good condition as it was on the Completion Date (as modified by
Alterations permitted by this Lease), ordinary wear and tear excepted,
and in compliance in all material respects with Applicable Law. Lessee
shall, on and within a reasonable time before and after the Lease
Termination Date, cooperate with Lessor and the independent purchaser of
such Leased Property in order to facilitate the ownership and operation
by such purchaser of such Leased Property after the Lease Termination
Date, which cooperation shall include the following, all of which Lessee
shall do on or before the Lease Termination Date or as soon thereafter as
is reasonably practicable: providing all books and records regarding the
maintenance and ownership of such Leased Property and all know-how, data
and technical information relating thereto, providing a copy of the Plans
and Specifications, granting or assigning all licenses (to the extent
assignable) necessary for the operation and maintenance of such Leased
Property, and cooperating in seeking and obtaining all necessary
Governmental Action. Lessee shall have also paid the cost of all
Alterations commenced prior to the Lease Termination Date. The
obligations of Lessee under this Article XIV shall survive the expiration
or termination of this Lease.
Section XV.9 Renewal. Subject to the conditions set forth
herein, Lessee may, by written notice to Lessor and the Agent given not
later than twelve months and not earlier than sixteen months, prior to
the Lease Termination Date, renew this Lease, for up to five years
commencing on the date following the Lease Termination Date. No later
than the date that is 45 days after the date the request to renew has
been delivered to each of Lessor and the Agent, the Agent will notify
Lessee whether or not Lessor and the Lenders consent to such renewal
request (which consent, in the case of Lessor and the Lenders, may be
granted or denied in their sole discretion, and may be conditioned on
such conditions precedent as may be specified by Lessor and the Lenders).
If the Agent fails to respond within such time frame, such failure shall
be deemed to be a rejection of such request. If the Agent notifies
Lessee of Lessor's and the Lenders' consent to such renewal, such renewal
shall be effective. Any renewal of this Lease shall be on the same terms
and conditions as are set forth herein for the original Lease Term,
except that the amount of Basic Rent to be paid by Lessee shall be as
mutually agreed upon among Lessee, Lessor and the Lenders prior to such
renewal.
ARTICLE XVI.
LESSEE'S EQUIPMENT
After any repossession of any Leased Property (whether or not this
Lease has been terminated), as a result of the exercise of the Surrender
Option or otherwise, Lessee, at its expense and so long as such removal
of such trade fixture, personal property or equipment shall not result in
a violation of Applicable Law, shall, within a reasonable time after such
repossession or within sixty (60) days after Lessee's receipt of Lessor's
written request (whichever shall first occur), remove all of Lessee's
trade fixtures, personal property and equipment from such Leased Property
(to the extent that the same can be readily removed from such Leased
Property without causing material damage to such Leased Property);
provided, however, that Lessee shall not remove any such trade fixtures,
personal property or equipment that (i) has been financed by Lessor under
the Operative Documents or otherwise constituting Leased Property (or
that constitutes a replacement of such property) or (ii) with respect to
which Lessor notifies Lessee that it is exercising the purchase option
with respect thereto, which purchase option Lessee hereby grants to
Lessor (in which case, Lessor shall pay to Lessee the fair market value
of such trade fixture, personal property or equipment on such date of
repossession (as determined by mutual agreement of Lessor and Lessee or,
if no mutual agreement is promptly achieved, by an appraiser reasonably
acceptable to Lessor and Lessee) and Lessee shall execute and deliver a
bill of sale therefor to Lessor), provided that the purchase option set
forth in this clause (ii) shall not apply to Lessee's inventory or to any
personal property of Lessee not used or useful in connection with the
Leased Property. Any of Lessee's trade fixtures, personal property and
equipment not so removed by Lessee within such period shall be considered
abandoned by Lessee, and title thereto shall without further act vest in
Lessor, and may be appropriated, sold, destroyed or otherwise disposed of
by Lessor without notice to Lessee and without obligation to account
therefor and Lessee will pay Lessor, upon written demand, all reasonable
costs and expenses incurred by Lessor in removing, storing or disposing
of the same and all costs and expenses incurred by Lessor to repair any
damage to such Leased Property caused by such removal. Lessee will
immediately repair at its expense all damage to such Leased Property
caused by any such removal (unless such removal is effected by Lessor, in
which event Lessee shall pay all reasonable costs and expenses incurred
by Lessor for such repairs). Lessor shall have no liability in
exercising Lessor's rights under this Article XV except as set forth in
clause (ii) of the first sentence hereof, nor shall Lessor be responsible
for any loss of or damage to Lessee's personal property and equipment.
ARTICLE XVII.
RIGHT TO PERFORM FOR LESSEE
If Lessee shall fail to perform or comply with any of its
agreements contained herein, Lessor, upon notice to Lessee, may perform
or comply with such agreement, and Lessor shall not thereby be deemed to
have waived any default caused by such failure, and the amount of such
payment and the amount of the expenses of Lessor (including actual and
reasonable attorneys' fees and expenses) incurred in connection with such
payment or the performance of or compliance with such agreement, as the
case may be, shall be deemed Supplemental Rent, payable by Lessee to
Lessor within thirty (30) days after written demand therefor.
ARTICLE XVIII.
MISCELLANEOUS
Section XVIII.1 Reports. To the extent required under Applicable
Law and to the extent it is reasonably practical for Lessee to do so,
Lessee shall prepare and file in timely fashion, or, where such filing is
required to be made by Lessor or it is otherwise not reasonably practical
for Lessee to make such filing, Lessee shall prepare and deliver to
Lessor (with a copy to the Agent) within a reasonable time prior to the
date for filing and Lessor shall file, any material reports with respect
to the condition or operation of such Leased Property that shall be
required to be filed with any Governmental Authority.
Section XVIII.2 Binding Effect; Successors and Assigns; Survival.
The terms and provisions of this Lease, and the respective rights and
obligations hereunder of Lessor and Lessee, shall be binding upon their
respective successors, legal representatives and assigns (including, in
the case of Lessor, any Person to whom Lessor may transfer any Leased
Property or any interest therein in accordance with the provisions of the
Operative Documents), and inure to the benefit of their respective
permitted successors and assigns, and the rights hereunder of the Agent
and the Lenders shall inure (subject to such conditions as are contained
herein) to the benefit of their respective permitted successors and
assigns. Lessee hereby acknowledges that Lessor has assigned all of its
right, title and interest to, in and under this Lease to the Agent and
the Lenders, and that all of Lessor's rights hereunder may be exercised
by the Agent.
Section XVIII.3 Quiet Enjoyment. Lessor covenants that it will
not interfere in Lessee's or any of its permitted sublessees' quiet
enjoyment of the Leased Properties in accordance with this Lease during
the Lease Term, so long as no Event of Default has occurred and is
continuing. Such right of quiet enjoyment is independent of, and shall
not affect, Lessor's rights otherwise to initiate legal action to enforce
the obligations of Lessee under this Lease.
Section XVIII.4 Notices. Unless otherwise specified herein, all
notices, offers, acceptances, rejections, consents, requests, demands or
other communications to or upon the respective parties hereto shall be in
writing and shall be deemed to have been given as set forth in Section
8.2 of the Master Agreement. All such notices, offers, acceptances,
rejections, consents, requests, demands or other communications shall be
addressed as follows or to such other address as any of the parties
hereto may designate by written notice:
If to Lessor: Atlantic Financial Group, Ltd.
1000 Ballpark Way, Suite 304
Arlington, Texas 76011
Attn: Stephen Brookshire
If to Lessee: Ruby Tuesday, Inc.
P.O. Box 160266
Mobile, Alabama 36625
Attn: J. Russell Mothershed
Ruby Tuesday, Inc.
4721 Morrison Drive
Mobile, Alabama 36609-3350
Attn: J. Russell Mothershed
with a copy to: General Counsel at same address
If to Agent: SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attn: Center 120/Corporate
Banking South
If to a Lender, to the address provided in the Master Agreement.
Section XVIII.5 Severability. Any provision of this Lease that
shall be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction, and Lessee shall remain liable to perform its obligations
hereunder except to the extent of such unenforceability. To the extent
permitted by Applicable Law, Lessee hereby waives any provision of law
that renders any provision hereof prohibited or unenforceable in any
respect.
Section XVIII.6 Amendment; Complete Agreements. Neither this
Lease nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, except by an instrument in
writing signed by Lessor and Lessee in accordance with the provisions of
Section 8.4 of the Master Agreement. This Lease, together with the other
Operative Documents, is intended by the parties as a final expression of
their lease agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations
between the parties having been incorporated herein and therein. No
course of prior dealings between the parties or their officers,
employees, agents or Affiliates shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Lease or any other
Operative Document. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the
parties or their Affiliates shall not be relevant or admissible to
determine the meaning of any of the terms of this Lease or any other
Operative Document. No representations, undertakings, or agreements have
been made or relied upon in the making of this Lease other than those
specifically set forth in the Operative Documents.
Section XVIII.7 Construction. This Lease shall not be construed
more strictly against any one party, it being recognized that both of the
parties hereto have contributed substantially and materially to the
preparation and negotiation of this Lease.
Section XVIII.8 Headings. The Table of Contents and headings of
the various Articles and Sections of this Lease are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
Section XVIII.9 Counterparts. This Lease may be executed by the
parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section XVIII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE
LEASEHOLD ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH
RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED.
Section XVIII.11 Discharge of Lessee's Obligations by its
Affiliates. Lessor agrees that performance of any of Lessee's
obligations hereunder by one or more of Lessee's Affiliates or one or
more of Lessee's sublessees of the Leased Properties or any part thereof
shall constitute performance by Lessee of such obligations to the same
extent and with the same effect hereunder as if such obligations were
performed by Lessee, but no such performance shall excuse Lessee from any
obligation not performed by it or on its behalf under the Operative
Documents.
Section XVIII.12 Liability of Lessor Limited. Except as otherwise
expressly provided below in this Section 17.12, it is expressly
understood and agreed by and between Lessee, Lessor and their respective
successors and assigns that nothing herein contained shall be construed
as creating any liability of Lessor or any of its Affiliates or any of
their respective officers, directors, employees or agents, individually
or personally, to perform any covenant, either express or implied,
contained herein, all such liability (other than that resulting from
Lessor's gross negligence or willful misconduct, except to the extent
imputed to Lessor by virtue of Lessee's action or failure to act), if
any, being expressly waived by Lessee and by each and every Person now or
hereafter claiming by, through or under Lessee, and that, so far as
Lessor or any of its Affiliates or any of their respective officers,
directors, employees or agents, individually or personally, is concerned,
Lessee and any Person claiming by, through or under Lessee shall look
solely to the right, title and interest of Lessor in the Leased
Properties and any proceeds from Lessor's sale or encumbrance thereof
(provided, however, that Lessee shall not be entitled to any double
recovery) for the performance of any obligation under this Lease and
under the Operative Documents and the satisfaction of any liability
arising therefrom (other than that resulting from Lessor's gross
negligence or willful misconduct, except to the extent imputed to Lessor
by virtue of Lessee's action or failure to act).
Section XVIII.13 Estoppel Certificates. Each party hereto agrees
that at any time and from time to time during the Lease Term, it will
promptly, but in no event later than thirty (30) days after request by
the other party hereto, execute, acknowledge and deliver to such other
party or to any prospective purchaser (if such prospective purchaser has
signed a commitment or letter of intent to purchase any Leased Property
or any part thereof or any Note or Lease Participation), assignee or
mortgagee or third party designated by such other party, a certificate
stating (a) that this Lease is unmodified and in force and effect (or if
there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (b) the date to
which Basic Rent has been paid; (c) whether or not there is any existing
default by Lessee in the payment of Basic Rent or any other sum of money
hereunder, and whether or not there is any other existing default by
either party with respect to which a notice of default has been served,
and, if there is any such default, specifying the nature and extent
thereof; (d) whether or not, to the knowledge of the signer after due
inquiry and investigation, there are any setoffs, defenses or
counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of the party executing such certificate and
(e) other items that may be reasonably requested; provided that no such
certificate may be requested unless the requesting party has a good faith
reason for such request.
Section XVIII.14 No Joint Venture. Any intention to create a
joint venture, partnership or other fiduciary relationship between Lessor
and Lessee is hereby expressly disclaimed.
Section XVIII.15 No Accord and Satisfaction. The acceptance by
Lessor of any sums from Lessee (whether as Basic Rent or otherwise) in
amounts which are less than the amounts due and payable by Lessee
hereunder is not intended, nor shall be construed, to constitute an
accord and satisfaction of any dispute between Lessor and Lessee
regarding sums due and payable by Lessee hereunder, unless Lessor
specifically deems it as such in writing.
Section XVIII.16 No Merger. In no event shall the leasehold
interests, estates or rights of Lessee hereunder, or of the holder of any
Notes secured by a security interest in this Lease, merge with any
interests, estates or rights of Lessor in or to the Leased Properties, it
being understood that such leasehold interests, estates and rights of
Lessee hereunder, and of the holder of any Notes secured by a security
interest in this Lease, shall be deemed to be separate and distinct from
Lessor's interests, estates and rights in or to the Leased Properties,
notwithstanding that any such interests, estates or rights shall at any
time or times be held by or vested in the same person, corporation or
other entity.
Section XVIII.17 Survival. The obligations of Lessee to be
performed under this Lease prior to the Lease Termination Date and the
obligations of Lessee pursuant to Article III, Articles X, XI, XIII,
Sections 14.2, 14.3, 14.4, 14.5, 14.8, Articles XIV, XV, and XVI, and
Sections 17.10 and 17.12 shall survive the expiration or termination of
this Lease. The extension of any applicable statute of limitations by
Lessor, Lessee, the Agent or any Indemnitee shall not affect such
survival.
Section XVIII.18 Chattel Paper. To the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform
Commercial Code in any applicable jurisdiction), no security interest in
this Lease may be created through the transfer or possession of any
counterpart other than the sole original counterpart, which shall be
identified as the original counterpart by the receipt of the Agent.
Section XVIII.19 Time of Essence. Time is of the essence of this
Lease.
Section XVIII.20 Recordation of Lease. Lessee will, at its
expense, cause this Lease or a memorandum of lease in form and substance
reasonably satisfactory to Lessor and Lessee (if permitted by Applicable
Law) to be recorded in the proper office or offices in the States and the
municipalities in which the Land is located.
Section XVIII.21 Investment of Security Funds. Any amounts not
payable to Lessee pursuant to any provision of Article VIII, X or XIV or
this Section 17.21 solely because an Event of Default shall have occurred
and be continuing shall be held by the Agent (or Lessor if the Loans have
been fully paid) as security for the obligations of Lessee under this
Lease and the Master Agreement. At such time as no Event of Default
shall be continuing, such amounts, net of any amounts previously applied
to Lessee's obligations hereunder or under the Master Agreement, shall be
paid to Lessee. Any such amounts which are held by the Agent (or Lessor
if the Loans have been fully paid) pending payment to Lessee shall until
paid to Lessee, as provided hereunder or, as long as the Loan Agreement
is in effect, until applied against Lessee's obligations herein and under
the Master Agreement and distributed as provided in the Loan Agreement or
herein (after the Loan Agreement is no longer in effect) in connection
with any exercise of remedies hereunder, be invested by the Agent or
Lessor, as the case may be as directed from time to time in writing by
Lessee (provided, however, if an Event of Default has occurred and is
continuing it will be directed by the Agent or, if the Loans have been
fully paid, Lessor) and at the expense and risk of Lessee, in Permitted
Investments. Any gain (including interest received) realized as the
result of any such investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such investment) shall be
applied in the same manner as the principal invested.
Section XVIII.22 Ground Leases. Lessee will, at its expense,
timely perform all of the obligations of Lessor, in its capacity as
ground lessee, under each Ground Lease and, if requested by Lessor shall
provide satisfactory evidence to Lessor of such performance.
Section XVIII.23 Land and Building. If the cost of the Land
related to any Leased Property exceeds 25% of the projected Leased
Property Balance for such Leased Property, the Land and the Building
related to such Leased Property shall be leased under separate Lease
Supplements. If any Building and the Land on which such Building is
located are subject to separate Lease Supplements, at any time that
Lessee exercises an option to purchase such Building or such Land, or to
renew this Lease with respect to such Building or such Land, or is
obligated to purchase such Building or such Land as a result of an Event
of Loss, an Event of Taking or an Event of Default, such purchase or
renewal shall be made simultaneously with respect to all of such Building
and such Land.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned have each caused this Lease
Agreement to be duly executed and delivered and attested by their
respective officers thereunto duly authorized as of the day and year
first above written.
Witnessed: RUBY TUESDAY, INC.
as Lessee
By______________________ By____________________________
Name: Name:
Title:
By______________________
Name:
ATLANTIC FINANCIAL GROUP, LTD.,
as Lessor
By: Atlantic Financial Managers,Inc., its General Partner
Witnessed:
By_______________________ By____________________________
Name: Name:
Title:
By_______________________
Name:
Recording requested by EXHIBIT A TO
and when recorded mail to: THE LEASE
____________________________
____________________________
____________________________
____________________________
LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
[ ], between ATLANTIC FINANCIAL GROUP, LTD., as the lessor (the
"Lessor"), and RUBY TUESDAY, INC., a Georgia corporation, as lessee (the
"Lessee").
WHEREAS Lessor is the owner of the Land described on Schedule I hereto
and wishes to lease the Land together with any Building and other improvements
thereon or which thereafter may be constructed thereon pursuant to the Lease to
Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions; Interpretation. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in Appendix A to the Lease Agreement,
dated as of May 30, 1997, between Lessee and Lessor; and the rules of
interpretation set forth in Appendix A to the Lease shall apply to this Lease
Supplement.
SECTION 2. The Properties. Attached hereto as Schedule I is the
description of certain Land (the "Subject Property"). Effective upon the
execution and delivery of this Lease Supplement by Lessor and Lessee, such
Land, together with any Building and other improvements thereon or which
thereafter may be constructed thereon pursuant to the Lease shall be subject to
the terms and provisions of the Lease and Lessor hereby grants, conveys,
transfers and assigns to Lessee those interests, rights, titles, estates,
powers and privileges provided for in the Lease with respect to the Subject
Property.
SECTION 3. Amendments to Lease with Respect to Subject Property.
Effective upon the execution and delivery of this Lease Supplement by Lessor
and Lessee, the following terms and provisions shall apply to the Lease with
respect to the Subject Property:
[Insert Applicable Sections per Local Law
as contemplated by the Master Agreement]
SECTION 4. Ratification; Incorporation. Except as specifically modified
hereby, the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. The terms of the Lease (as amended by
this Lease Supplement) are by this reference incorporated herein and made a
part hereof.
SECTION 5. Original Lease Supplement. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, BUT EXCLUDING
ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO
MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE HEREUNDER, AND THE
EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATE
IS LOCATED.
SECTION 7. Counterpart Execution. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of
the date and year first above written.
ATLANTIC FINANCIAL GROUP, LTD.,
as the Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
By____________________________
Name:
Title:
RUBY TUESDAY, INC., as the Lessee
By____________________________
Name:
Title:
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ____ ____, this
_____ day of __________, _______________, by _____________________, as
____________________ of Atlantic Financial Group, Ltd., on behalf of such
partnership.
[Notarial Seal] ___________________________
Notary Public
My commission expires: _____________
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ___ ____, this
_____ day of __________, __________, by ___________, as _____________, of Ruby
Tuesday, Inc., a Georgia corporation, on behalf of the corporation.
[Notarial Seal] ______________________________
Notary Public
My commission expires: ______________
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged as of the date hereof.
SUNTRUST BANK, ATLANTA, as the Agent
By___________________________
Name:
Title:
By___________________________
Name:
Title:
TRUST AGREEMENT
TO THE
RUBY TUESDAY, INC.
SALARY DEFERRAL PLAN
THIS TRUST AGREEMENT is made this 1st day of July, 1997, by
and between RUBY TUESDAY, INC., a corporation organized and
existing under the laws of the State of Georgia (the "Primary
Sponsor"); each other Affiliate or other entity adopting the Ruby
Tuesday, Inc. Salary Deferral Plan (the "Plan"), as provided
therein and executing this trust pursuant thereto; and THE
PRUDENTIAL TRUST COMPANY, a Pennsylvania corporation (the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Plan and related
trust (the "Trust"), which is intended to qualify as a profit
sharing plan under section 401(a) of the Internal Revenue Code and
also contains a cash or deferred arrangement as described in
Section 401(k) of the Internal Revenue Code, for the exclusive
benefit of Members thereunder and their Beneficiaries;
WHEREAS, the Trustee has been recently appointed as trustee of
the Trust; and
WHEREAS, the Primary Sponsor and Trustee desire to restate the
existing trust agreement (the "Existing Trust") to reflect the
appointment of the Trustee and for other reasons;
NOW, THEREFORE, in consideration of the foregoing and of the
further obligations and undertakings as hereinafter set forth, the
Primary Sponsor and Trustee hereby amend and restate the Existing
Agreement, effective July 1, 1997, as follows:
SECTION I.
DEFINITIONS
All terms and definitions contained in the Plan are hereby
incorporated in the Trust Agreement by reference except to the
extent that the terms of the Trust Agreement clearly indicate to
the contrary.
SECTION II.
THE FUND
The Primary Sponsor hereby establishes the Fund with the
Trustee. The Fund shall be held, managed and administered by the
Trustee in trust in accordance with the provisions of the Trust
without distinction between principal and income; provided,
however, the Trustee shall not accept interests in real estate or
limited partnerships. At no time shall any part of the Fund be
used for or diverted to purposes other than the exclusive benefit
of the Members or their Beneficiaries, subject, however, to the
payment of taxes and administrative expenses and to the return of
contributions to a Plan Sponsor under the specific conditions set
forth in the Plan. The Primary Sponsor's direction regarding a
return of contributions shall specify (i) the reason the Primary
Sponsor's contribution is being returned, which shall be consistent
with the applicable requirements of the Code and ERISA, (ii) the
amount of the contribution to be returned (less any Fund losses
attributable thereto), and (iii) the date by which the payment to
the Primary Sponsor must be made. The Trustee shall be entitled to
rely on the Primary Sponsor's direction given pursuant to this
Section II, and shall have no duty to inquire into the validity
thereof. The Primary Sponsor agrees to indemnify and hold harmless
the Trustee against and from all liabilities, claims, demands,
damages, costs and expenses, including reasonable attorneys' fees,
arising from the Trustee's compliance with any such direction.
SECTION III.
MAINTENANCE OF AND DISTRIBUTIONS FROM ACCOUNTS
A. The Plan Administrator shall maintain Accounts in
accordance with the Plan.
B. The Trustee may rely upon a notice given in accordance
with the terms of the Plan. The Trustee shall not be charged with
any notice unless given in accordance with the Plan, including
notification of any changes in the identity or authority of any
Fiduciary (other than the Trustee) or any other person acting in
regard to the Plan.
C. The Trustee shall make payments out of the Fund to the
persons, in the manner and in the amounts specified in directions
received by it from the Plan Administrator. The Plan Administrator
assumes all responsibility with respect to the directions and the
application of the payments. The Trustee is under no duty to
enforce payments of any contributions to the Fund and is not
responsible for the adequacy of the Fund to discharge liabilities
arising in connection with the Plan or Trust.
D. If any dispute arises as to the persons to whom the
payment of any funds or delivery of any assets shall be made by the
Trustee, the Trustee may withhold the payment or delivery until the
dispute has been determined by a court of competent jurisdiction or
has been settled by the parties concerned and may, in its sole
discretion, submit the dispute to a court of competent
jurisdiction.
SECTION IV.
INVESTMENTS
A. The Trustee shall have no authority with respect to the
investment and reinvestment of the Fund except upon receipt of
investment directions from the Primary Sponsor or otherwise
pursuant to the provisions of Sections V, VI and IX hereof, the
Trustee agrees to execute its duties hereunder with the care, skill
and diligence under the circumstances then prevailing that a
prudent man acting in like capacity and familiar with such matters
pursuant to the Trust would use in the conduct of an enterprise of
a like character and with like aims. If the Trustee holds Fund
assets for which it has not received instructions, the Primary
Sponsor hereby directs the Trustee to invest such assets in the
Investment Fund which best preserves principal.
B. Subject to the terms of the Plan and the Trust Agreement
and the provisions of ERISA, the Trustee shall invest the principal
and income of the Fund without distinction between principal and
income, in such securities or in such property, real, personal, or
mixed and wherever situated. Without limiting the foregoing, the
Trustee may make investments in, and may purchase, acquire, obtain,
retain, sell, transfer, pledge, hypothecate or encumber common or
preferred stocks, shares of mutual funds, trust and participation
certificates, bonds and mortgages, other evidences of indebtedness
or ownership, annuity contracts of life insurance companies,
savings accounts or plans, including, without limitation, savings
accounts or plans established by the Trustee, covered call options,
put options, and financial futures contracts, irrespective of
whether the securities or property shall be of a character
authorized by applicable state law for trust investments.
C. The Trustee shall not invest in any securities issued by
a Plan Sponsor or any affiliate (as defined in ERISA Section
407(d)(7)) of a Plan Sponsor unless the securities are "Qualifying
Employer Securities," which means (i) securities of a Plan Sponsor
or any affiliate which are stock, or (ii) a marketable obligation,
as defined in ERISA Section 407(e), of a Plan Sponsor or any
affiliate. Also, the Trustee shall not invest in any real property
leased to or used by a Plan Sponsor or any affiliate of a Plan
Sponsor unless the real property is "Qualifying Employer Real
Property," which means parcels of real property and related
personal property which are leased to the Plan Sponsor or to any
affiliate and which are geographically dispersed and are suitable
(or adaptable without excessive cost) for more than one use. All
or any portion of the Fund may be invested in Qualifying Employer
Securities.
D. In addition to any other investments proper under the
Trust, the Trustee shall, after receiving written approval from the
Primary Sponsor, from time to time invest all or any part of the
Fund in one or more group trusts or collective investment funds
(including, without limitation, such trusts or funds now or
hereafter established by the then Trustee) which contemplate the
commingling for investment purposes of the funds therein with trust
assets of other pension plans as defined in ERISA which are
qualified under Code Section 401 and which may be established by
other businesses, institutions and organizations other than the
Trustee. To the extent required by Revenue Ruling 81-100 and to
the extent consistent with the Trust, the terms and provisions of
the declaration of trust creating any group trust or collective
investment fund in which the Fund is invested are hereby adopted
and made a part hereof, and any part of the Fund so invested shall
be subject to all of the terms and provisions of any declaration of
trust creating the group trust or collective investment fund. The
Trustee shall from time to time withdraw from the group trust or
collective investment fund such part of the Fund, as the Primary
Sponsor directs.
E. The Trustee shall invest the assets of the Plan
allocated to Company Matching Accounts primarily in shares of
Qualifying Employer Securities; otherwise, except as otherwise
provided in accordance with the provisions of Sections V, VI and IX
hereof, the normal investment goals and objectives of the Plan are
capital growth, conservation of principal and production of income
through the receipt of interest or dividends from investments.
SECTION V.
INVESTMENT MANAGER
A. If an Investment Manager is designated in accordance
with the Plan, the Trustee shall invest and reinvest all or such
portion of the Fund as is specified in a written direction to the
Trustee from the Primary Sponsor in the manner in which the
Investment Manager directs the Trustee in writing. The Trustee
shall have no discretion with respect to the investment or
reinvestment of that portion of the Fund and shall not be liable
for that portion of the Fund or for any acts or omissions of the
Investment Manager or for following or for taking or refraining
from taking any action at any direction of the Investment Manager
given prior to receipt by the Trustee of written notice from the
Primary Sponsor of revocation of the designation of the Investment
Manager or for the failure of the Investment Manager to give a
direction or for any act or omission in connection with its
failure. The Trustee shall be entitled to rely upon notice of the
designation of an Investment Manager from the Primary Sponsor until
notified in writing by the designating party that the designation
is no longer in effect.
B. During any period of time in which an Investment Manager
directs the investment of a portion of the Fund, the Trustee, or
its designated agent, shall continue to receive all securities
purchased against payment therefor and to deliver all securities
sold against receipt of the proceeds therefrom. Any Investment
Manager authorized to direct investments may issue orders on behalf
of the Trustee for the purchase or sale of securities directly to a
broker or dealer and for such purpose the Trustee shall, upon
request, execute and deliver to the Investment Manager one or more
trading authorizations. Written notification of the issuance of
each order shall be given promptly to the Trustee by the Investment
Manager and the execution of each order shall be confirmed by the
broker to the Investment Manager and the Trustee. The notification
shall be authority of the Trustee to receive securities purchased
against payment therefor and to deliver securities sold against
receipt of the proceeds therefrom. All directions concerning
investments of the Investment Manager shall be signed by any person
acting on behalf of the Investment Manager as may be duly
authorized in writing. The transmission by the Investment Manager
to the Trustee of directions by photostatic teletransmission with
duplicate or facsimile signatures shall be considered a delivery in
writing of the directions until the Trustee is notified in writing
by the Primary Sponsor that the use of any device transmitting
duplicate or facsimile signatures is no longer authorized. The
Trustee may rely upon directions which it receives by photostatic
teletransmission prior to receipt of notice from the Primary
Sponsor that they are no longer authorized, and the Trustee shall
not be responsible for the consequences of any unauthorized use of
a device which use was not known by the Trustee at the time to be
unauthorized.
C. The Trustee shall be under no duty to make any review of
investments acquired for the Plan at the direction or order of an
Investment Manager or to make any recommendation with respect to
disposing of or continuing to retain any such investment.
D. The Trustee shall have no obligation to determine the
existence of any conversion, redemption, exchange, subscription or
other right relating to any securities purchased, of which notice
was given prior to the purchase of the securities, and shall have
no obligation to exercise any right unless the Trustee is informed
of its existence by the Investment Manager and is requested in
writing by the Investment Manager to exercise the right within a
reasonable time before the time for its exercise expires.
E. In the event that the Trustee is directed to purchase
securities issued by any foreign government or agency thereof, or
by any corporation domiciled outside of the continental limits of
the United States or its territories, it shall be the
responsibility of the Investment Manager to advise the Trustee in
writing with respect to any laws or regulations of any such foreign
countries which shall apply to the securities, including, but not
limited to, receipt of dividends or interest by the Trustee from
such securities.
SECTION VI.
INVESTMENT COMMITTEE
A. If an Investment Committee is designated by the Primary
Sponsor in accordance with the Plan, the Trustee shall, unless the
Primary Sponsor otherwise directs the Trustee in writing, invest
the Fund as the Investment Committee directs.
B. The Primary Sponsor may in writing direct that only a
portion of the Fund shall be invested as the Investment Committee
directs, in which case the Trustee shall invest the balance of the
Fund pursuant to Section IV hereof, subject to Sections V and IX
hereof.
SECTION VII.
TRUSTEE POWERS
As directed by the Primary Sponsor, in the administration of
the Trust, in addition to, and not in limitation of, any powers or
authority of the Trustee under the Trust or which the Trustee may
have under applicable law in addition thereto (all such additional
powers and authority being specifically hereby granted to the
Trustee), the Trustee is authorized and empowered to do the follow-
ing, without advertisement and without order of court and without
having to post bond or make any returns or report of its doings to
any court:
A. To purchase or subscribe for any securities or property,
including, without limitation, shares of mutual funds and to retain
the same in trust;
B. To sell, exchange, convey, transfer, or otherwise
dispose of, any securities or property held by it, by private
contract or at public auction, with or without advertising, and no
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency or propriety of any sale or other disposition;
C. To vote any stocks, bonds or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose or to consent to, or otherwise
participate in, corporate reorganizations or other changes
affecting corporate securities, and to delegate discretionary
powers, and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property held as
part of the Fund; provided, however, that the voting, tendering or
similar rights with respect to any Qualifying Employer Securities
which are subject to investment direction by Members shall be
exercised by Members or, where applicable, their Beneficiaries;
D. To register any investment held as a part of the Fund in
its own name or in the name of a nominee, and to hold any invest-
ment in bearer form or through or by a central clearing corporation
maintained by institutions active in the national securities
markets, but the books and records of the Trustee shall at all
times show that all investments are part of the Fund;
E. To write covered call options and to purchase or sell
put options and financial futures contracts;
F. To employ and act through suitable agents, accountants,
appraisers and attorneys (who may be counsel for the Trustee) and
to pay their reasonable expenses and compensation, and the Trustee
may consult with counsel (who, without limitation, may be counsel
to the Trustee or to a Plan Sponsor), and shall be protected to the
extent the law permits in acting upon the advice of counsel in
regard to legal questions, and may also employ agents and expert
assistants and delegate to them the ministerial duties which it
sees fit, in which event the Trustee shall periodically review the
performance of the persons to whom these duties have been
delegated;
G. To borrow or raise money for the purposes of the Trust;
and for any sums so borrowed to issue its promissory note as
Trustee, and to secure the repayment thereof by pledging all or any
part of the Fund; and no person lending money to the Trustee shall
be bound to see to the application of the money lent or to inquire
into the validity, expediency or propriety of the borrowing;
H. To make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and all other instruments or
agreements that may be necessary or appropriate to carry out the
powers of the Trustee under the Trust or incidental thereto;
I. To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Fund, to
commence or defend any legal or administrative proceedings arising,
necessary or appropriate in connection with the Plan, the Trust,
the Fund, the administration thereof or the powers or authority of
the Trustee under the Trust, and to represent the Plan, the Trust,
and the Fund in all legal and administrative proceedings;
J. To keep such portions of the Fund in cash or cash
balances as necessary to meet anticipated distributions from or
administrative costs of the Plan or Fund, it being understood that
the Trustee shall not be required to pay any interest on any cash
balances; and
K. Generally, to do all acts and to execute and deliver all
instruments as in the judgment of the Trustee may be necessary or
desirable to carry out any powers or authority of the Trustee,
without advertisement, without order of court and without having to
post bond or make any returns or report of its doings to any court.
SECTION VIII.
INVESTMENT FUNDS
A. The assets of the Fund shall be invested in at least
four (4) Investment Funds, with varying investment objectives, as
the Primary Sponsor shall from time to time determine. One such
Investment Fund shall be established for investments in Qualifying
Employee Securities.
B. The Primary Sponsor, in its sole discretion may, from
time to time, establish one or more additional Investment Funds, or
may change or terminate the availability of any then existing
Investment Fund or Investment Funds for all Members, provided,
however, that four (4) or more Investment Funds remain available.
C. Pursuant to directions from the Primary Sponsor, the
Trustee will keep a portion of the Fund in cash or cash balances as
required for the proper administration of Plan contributions and
disbursements, which amounts may be held in a separate suspense
account maintained by an affiliate of the Trustee. The expense of
operating and maintaining such suspense account will be charged
against earnings, if any, of such suspense account but will not
otherwise be charged back to the Fund to the extent expenses exceed
earnings. The Primary Sponsor and Trustee hereby acknowledge that
such earnings are never expected to exceed the expenses allocable
to the suspense account.
D. The Trustee, to the extent directed, may purchase for an
Investment Fund any property of another Investment Fund which would
then be appropriate for purchase by that Investment Fund and may
exchange property of one Investment Fund for property of another
Investment Fund if the exchanged properties would be appropriate
for purchase by the respective Investment Funds. Each purchase or
exchange shall be made at the fair market value of the property so
purchased or exchanged.
E. The terms and provisions of this Section shall not in
any way limit the authority, powers, and duties of the Trustee as
set forth in this Trust except to the extent that Section 404(c) of
ERISA applies to the investment election made by any Member
pursuant to the Plan and Trust. The Trustee shall exercise or
perform the same in regard to any Investment Fund only in
accordance with the purposes thereof. Further, the authority,
powers, and duties of the Trustee shall be subject to the
limitations provided in Sections V and VI of the Trust if an
Investment Manager or an Investment Committee is appointed as
provided therein, which Investment Manager or Investment Committee
may be appointed in respect of all or a part of any Investment Fund
or the Fund, but shall exercise or perform its authority, powers,
and duties only in a manner consistent with the purpose of the
Investment Fund or the Fund, as the case may be.
F. If the Plan permits loans to Plan participants, the
Trustee may delegate to an affiliate the responsibility for holding
and safeguarding the documents evidencing such participant loans.
The Trustee will deem any direction to disburse Fund assets for a
participant loan as a direction to transfer an equivalent amount of
assets to a suspense account maintained by the affiliate for
disbursement as a loan thereunder.
SECTION IX.
INVESTMENT DIRECTION BY MEMBERS
A. Subject to any other rules and restrictions as the Plan
Administrator may prescribe from time to time, with respect to
amounts allocated to Accounts other than post-1989 Company Matching
Accounts only, each Member may (1) direct that a portion or all of
his interest in one or more of the Investment Funds be transferred
to one or more of the other Investment Funds or (2) change his
election as to the Investment Funds in which future contributions
on his behalf to his Employee Deferred Account, Voluntary
Contribution Account and Rollover Account shall be invested. The
provisions of this Section are contingent upon the availability of
transfers among the Investment Funds under the terms of the
investments made by each Investment Fund. An investment direction,
once given, shall be deemed to be a continuing direction until
changed as otherwise provided herein.
B. If no investment election is outstanding, all such
contributions shall be allocated to such Investment Fund as the
Plan Administrator shall, in its sole discretion, determine.
C. Investment directions by Members shall be subject to the
following:
1. Investment directions by Members to the Plan
Administrator shall be made in the manner and pursuant to the
rules established by the Plan Administrator and shall indicate
the manner in which contributions are to be invested in, or
the allocation of a Member's Account among, the available
Investment Funds.
2. Directions provided to the Trustee shall remain in
effect until superseded by subsequent directions.
D. Each direction under the preceding paragraphs received by
the Plan Administrator shall be promptly delivered to the Trustee,
and shall be effective as to the Trustee only when received by the
Trustee. If a Member directs that all or a portion of his Account
be invested in a particular Investment Fund, the Trustee shall use
its best efforts to carry out the investment as soon as
practicable. However, the Trustee shall never be held liable for
failure to carry out an investment direction within the terms of
the Trust if the Trustee has made a bona fide effort to follow the
direction.
E. Any distribution to a Member pursuant to the Plan shall
be pro rata from each Investment Fund, except as otherwise
determined by the Plan Administrator.
SECTION X.
VALUATION AND ALLOCATION
A. For all purposes under the Plan and the Trust, including
particularly, but without limitation, valuing the Fund and each
Member's Account and allocating to each Member's Account its share
of the net income or net loss of the Fund, the following rules
shall apply:
1. Transfers or payments of funds or assets and the
income, gain, loss, or expenses attributable thereto between
Investment Funds shall be deemed made as of the Valuation Date
coinciding with or immediately following the actual receipt of
transfer or payment instructions in good order, and the funds
or assets shall not be credited or charged after such date
with any earnings or losses of the Investment Fund from which
transferred or paid but shall be credited or charged after
such date with any earnings or losses of the Investment Fund
to which transferred or paid.
2. Transfers or payments from an Investment Fund to a
Member or his Beneficiary between Valuation Dates shall be
charged against the interest of the Member in the Investment
Fund as of the Valuation Date coinciding with or immediately
following the actual receipt of transfer or payment
instructions in good order and contributions to an Investment
Fund which are allocated to the Account of a Member between
Valuation Dates shall be credited to the interest of such
Member in such Investment Fund as of the Valuation Date
coinciding with or immediately following the actual receipt of
transfer or payment instructions in good order.
3. Fair market value of the assets of each Investment
Fund shall be determined separately and the net income or net
loss of each Investment Fund shall be determined separately.
4. The value of a Member's Account, to the extent
invested in Investment Funds, shall be the sum of his
proportionate interests in each of the Investment Funds, and
the aggregate net income or net loss allocated to a Member's
Account shall be the aggregate of the net income or net loss
allocated to his proportionate interests in each of the
Investment Funds.
B. Subject to the provisions of Subsections C. and D.
below, the Trustee shall as of each Valuation Date, determine the
net income or net loss and the fair market value of the assets in
the Fund and each Investment Fund, respectively, as determined
below:
1. To the cash income, if any, since the last
Valuation Date, there shall be added or subtracted, as the
case may be, any net increase or decrease, since the last
Valuation Date, in the fair market value of the assets of the
Fund or Investment Fund, as applicable, since the last
Valuation Date, any gain or loss on the sale or exchange of
assets of the Fund or Investment Fund, as applicable, since
the last Valuation Date, accrued interest since the last
Valuation Date with respect to any interest-bearing security
as to which the purchaser would be required to pay the accrued
interest in addition to the quoted price, the amount of any
dividend which shall have been declared since the last
Valuation Date but not paid on shares of stock owned by the
Trustee if the market quotation used in determining the value
of such shares is ex-dividend, and the amount of any other
assets of the Fund or Investment Fund determined by the
Trustee to be income since the last Valuation date;
2. From the sum thereof there shall be deducted all
charges, expenses, and liabilities accrued since the last
Valuation Date which are proper under the provisions of the
Plan and the Trust and which in the discretion of the Trustee
are properly chargeable against income for the period.
C. Notwithstanding Subsection B hereof, in the event that
an Investment Manager is designated by the Primary Sponsor and if
the Investment Manager either directs the investment of or itself
invests any assets of the Fund, or in the event that an Investment
Committee is appointed by the Primary Sponsor and directs the
investment of any assets of the Fund, and if any of such assets are
non-listed securities or are not publicly traded or if the fair
market value of any of such assets cannot be readily determined,
then the Investment Manager or the Investment Committee, whichever
is applicable, shall determine the net income or net loss and the
fair market value of such assets and the Trustee shall be entitled
to rely upon such determination.
D. In the event that an Investment Manager is designated by
the Plan Sponsor and if the Trustee gives the Investment Manager
possession of any portion of the assets of the Fund, then the
Investment Manager shall determine the net income or net loss and
the fair market value of those assets and the Trustee shall be
entitled to rely upon the determination.
SECTION XI.
TRUSTEE COMPENSATION
A. The Trustee's compensation shall be the amount agreed
upon in a separate written agreement between the Primary Sponsor
and the Trustee. The Trustee is authorized to use the assets held
by it under the Trust to pay its reasonable compensation and
expenses. The Trustee shall deliver an invoice for such
compensation and expenses to the Primary Sponsor no less than
thirty (30) days prior to deducting same from the Fund. No person
who serves as the Trustee and who receives full-time pay from a
Plan Sponsor shall be entitled to receive any compensation from the
Fund, except for the reimbursement of expenses properly and
actually incurred by him in his role as Trustee.
B. All taxes of whatever kind or nature that may be levied
or assessed under existing or future laws upon, or in respect of,
the Plan, the Trust, the Fund or the income or gains thereof or
therefrom shall be paid from the Fund.
SECTION XII.
TRUSTEE RESPONSIBILITY
The Trustee is not responsible for the application, investment
or other disposition of any funds or property held or managed by,
or otherwise subject to direction by, any person other than the
Trustee. The Trustee is not responsible for the application of any
funds or property held by it under the Trust which have been paid
to the Plan Administrator or which have been paid pursuant to the
Plan and Trust or as directed by the Plan Administrator. The
Trustee has no responsibility with respect to any administration of
the Plan or the payment of any benefits under the Plan.
When determining the nature and extent of its
responsibilities, the Trustee is not required to obtain or review
the Plan. The Trustee shall not be liable for the validity or
legality of any changes made to the Plan by the Primary Sponsor.
SECTION XIII.
RECORDKEEPING
The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions
pursuant to the Plan and the Trust, and all books and records
relating thereto shall be open to inspection and audit at all
reasonable times by the Plan Administrator. Within ninety (90)
days following the later of the close of each Plan year or the
receipt of a Plan Sponsor's contribution, and within ninety (90)
days after a Report Date (which for purposes of this Trust shall
mean the date of the death, removal or resignation of any Trustee
from time to time serving hereunder, or the date of the termination
of the Trust) the Trustee shall file with the Plan Administrator
its written account. The account shall set forth (i) all
investments, receipts, disbursements and other transactions
effected by it during such Plan Year or during the period from the
last Valuation Date to the Report Date and (ii) the determination
of the Trustee of the net income or net loss of the Fund for such
Plan Year or during the period from the last Valuation Date to the
Report Date and the determination of the Trustee of the fair market
value of the assets of the Fund as at the Valuation Date or as at
the Report Date, as the case may be. Unless a Report Date is also
a Valuation Date, no allocation of earnings, gains or losses shall
be made to a Member's Account.
SECTION XIV.
REMOVAL OR RESIGNATION OF TRUSTEE,
AND AMENDMENT OR TERMINATION OF TRUST
A. The Trustee, or an individual Trustee, as applicable,
may be removed by the Primary Sponsor at any time upon sixty (60)
days' notice in writing to the Trustee and the Plan Administrator.
Any Trustee serving hereunder may resign at any time without leave
of court, upon sixty (60) days' notice in writing to the Plan
Sponsor and the Plan Administrator.
B. Upon the death, removal or resignation of a Trustee, the
Primary Sponsor shall appoint a successor Trustee as soon as
possible. If the former Trustee was one of several Trustees, the
remaining persons constituting the Trustee may continue to act as
Trustee until the Primary Sponsor appoints a successor co-Trustee.
C. Any removal of a Trustee or appointment of a successor
Trustee shall be without leave of court by notice in writing signed
by the Primary Sponsor and delivered to the Trustee being removed
or appointed, with a copy to the Plan Administrator. Any successor
Trustee serving at any time hereunder shall serve with the same
powers and duties as the Trustee named herein.
D. Upon receipt by the Trustee (or by the Primary Sponsor
in the event of the death of a last remaining individual Trustee)
of the designated successor's acceptance of its appointment as
successor Trustee hereunder, the funds and properties then
constituting the Fund shall be transferred to the successor
Trustee. However, the Trustee is not required to transfer funds
and properties to a successor trustee unless the Trustee is
discharged from all liability for any taxes which may be due and
owing by the Plan and Trust, or unless either (1) the successor
trustee, who must be acceptable to the Trustee, indemnifies the
Trustee against any such liability or (2) each Plan Sponsor so
indemnifies the Trustee in a manner acceptable to the Trustee.
E. If the Primary Sponsor fails to appoint a successor
trustee before the expiration of the sixty (60) day notice period,
or no written acceptance is received from a successor Trustee, then
at any time after the end of the sixty (60) day notice period the
Trustee may file an appropriate action in a court of competent
jurisdiction and assign to the custody of the court the funds and
properties then held by the Trustee constituting the Fund.
F. Upon the transfer of the Fund to a successor trustee or
to a court of competent jurisdiction, as the case may be, the
Trustee shall be relieved of all further responsibilities in
connection with the Plan, the Trust or the Fund. The Trustee is
authorized, however, to reserve therefrom such money or property as
it may deem advisable for payment of its fees and expenses in
connection with the settlement of its account or otherwise, and any
balance of the reserve remaining after the payment of such fees and
expenses shall be paid over to the successor trustee or to the
court.
G. The Primary Sponsor reserves the right to amend this
Trust Agreement by written notice to the Trustee. However, no
amendment which affects the rights, duties or responsibilities of
the Trustee may be made without the Trustee's consent.
H. The Trust shall continue for such time as may be
necessary to accomplish the purposes for which it was created and
shall terminate only upon the complete distribution of the Fund.
The Trust may be terminated as of any date by the Primary Sponsor
by written notice to the Trustee and the Plan Administrator given
in the manner prescribed in the Plan which specifies the date as of
which the Trust shall terminate. Upon termination of the Trust, if
the Trustee has not received instructions to the contrary from the
Primary Sponsor, the Trustee shall liquidate the Fund and, after
paying the reasonable expenses of the Trust, including expenses
involved in the termination, distribute the balance thereof
according to the written directions of the Plan Administrator. The
Trustee is not required to make any distribution until it is
reasonably satisfied that adequate provision has been made for the
payment of all taxes which may be due and owing by the Trust. In
no event shall any distribution be made by the Trustee until the
Trustee is reasonably satisfied that the distribution will not be
contrary to the applicable provisions of the Plan dealing with
terminations of the Plan and the Trust.
I. The Trust and the contributions made by each Plan
Sponsor to the Trustee are conditioned upon the conditions set
forth in the Plan as to qualification and returns of contributions,
and the returns of contributions by the Trustee to the Plan
Sponsors in certain events is governed by such provisions of the
Plan.
J. If at any time more than one person or entity is serving
as the Trustee, the persons or entities so serving shall act by the
action of a majority, with or without a meeting, and any action may
be evidenced by a writing executed by a majority of the persons or
entities constituting the Trustee.
K. The Trust shall be administered, construed and enforced
according to the laws of the Commonwealth of Pennsylvania to the
extent not preempted by federal laws, and the Trustee shall be
liable to account only in the courts of that state and in any court
of appropriate jurisdiction of the United States of America. All
transfers of funds or other property to or from the Trustee shall
be deemed to take place in the Commonwealth of Pennsylvania.
SECTION XV.
INDEMNIFICATION
In consideration of the Trustee's agreeing to enter into this
Agreement, the Primary Sponsor hereby agrees to hold harmless The
Prudential Trust Company, individually and as trustee under said
Agreement, and its directors, officers, and employees, from and
against all amounts, including without limitation taxes, expenses
(including reasonable counsel fees), liabilities, claims, damages,
actions, suits or other charges, incurred by or assessed against
The Prudential Trust Company, individually or as trustee, or its
directors, officers, or employees, (i) as a direct or indirect
result of anything done in good faith, or alleged to have been
done, by or on behalf of The Prudential Trust Company in reliance
upon the directions of the Primary Sponsor, or any Investment
Manager appointed by the Primary Sponsor, or any person or
committee authorized to act on behalf of the Primary Sponsor, or
anything omitted to be done in good faith, or alleged to have been
omitted, in the absence of such directions, (ii) as a direct or
indirect result of the failure of the Primary Sponsor or any person
or committee to adequately, carefully or diligently discharge its
responsibilities under the Plan, this Agreement, or applicable
Department of Labor or Treasury regulations or rulings, or (iii) if
the Trustee is named as a defendant in any lawsuit or other
proceeding involving the Plan or the Fund for any reason including,
without limitation, an alleged breach by the Trustee of its
responsibilities under the Agreement, unless the final judgment
entered in the lawsuit or proceeding holds the Trustee guilty of
gross negligence, willful misconduct, or an intentional breach of
fiduciary responsibility under ERISA. If the final judgment holds
the Trustee guilty of gross negligence, willful misconduct, or an
intentional breach of fiduciary responsibility under ERISA, the
Primary Sponsor hereby agrees to indemnify the Trustee only against
liability in excess of the Trustee's allocable share of such
liability. The Primary Sponsor further agrees that the
undertakings made by it in this Agreement shall be binding on its
successors or assigns and shall survive termination, amendment or
restatement of this Agreement, or the resignation or removal of the
Trustee.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be executed on the day and year first above written.
PRIMARY SPONSOR:
RUBY TUESDAY, INC.
By:/s/ Franklin E. Southall, Jr.
Title: Vice President and Controller
ATTEST:
/s/ Walter Cole
Title: Assistant Secretary
[CORPORATE SEAL]
TRUSTEE:
THE PRUDENTIAL TRUST COMPANY
By:/s/ Daniel Arcure
Title:Vice President and Assistant
Secretary
ATTEST:
/s/ Deborah L. Kennedy
Title: Assistant Comptroller
[SEAL]
TRUST AGREEMENT
FOR THE
RUBY TUESDAY, INC.
DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT is made this 1st day of July, 1997,
between RUBY TUESDAY, INC., a corporation organized under the laws
of the State of Georgia (the "Primary Sponsor"), each related
corporation or business executing this Trust Agreement (the Primary
Sponsor and each related corporation or business being sometimes
hereinafter referred to as a "Plan Sponsor"); and THE PRUDENTIAL
TRUST COMPANY, a Pennsylvania corporation (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Ruby Tuesday, Inc.
Deferred Compensation Plan (the "Plan"), which was established by
indenture dated December 18, 1989, to provide benefits in the form
of deferred compensation to a select group of management or highly
compensated employees of the Primary Sponsor or any of its related
corporations or businesses; and
WHEREAS, Morrison Restaurants Inc., as predecessor-in-interest
to the Primary Sponsor, by agreement dated June 16, 1988
established an irrevocable grantor trust (the "Trust"), within the
meaning of Section 671 of the Internal Revenue Code of 1986, as
amended (the "Code") to assist it and any of its related
corporations or businesses in meeting its obligations under the
Plan; and
WHEREAS, the Primary Sponsor desires to amend and restate the
existing trust agreement originally executed by and between
Morrison Restaurants Inc. and AmSouth Bank N.A., dated December 1,
1992, which agreement, as amended, contains the existing terms of
the Trust (the "Prior Trust Agreement"); and
WHEREAS, the Board of Directors of the Primary Sponsor has
approved the amendment and restatement of the Prior Trust Agreement
as embodied herein (the "Trust Agreement");
NOW, THEREFORE, the Primary Sponsor hereby restates the Trust,
effective as of July 1, 1997, as follows:
SECTION I.
INCORPORATION OF PLAN
All terms and conditions set forth in the Plan are
incorporated by reference except to the extent that the terms of
the Trust indicate to the contrary. In the event of a conflict
between the terms and provisions of the Trust Agreement and those
the Plan, the terms and provisions of the Trust Agreement shall be
given precedence. However, nothing contained in the Trust
Agreement is intended to diminish the amount of benefits required
to be paid for the benefit of any participant under the terms of
the Plan. To the extent possible, the terms and provisions of the
Plan and those of the Trust Agreement shall be interpreted as
mutually consistent.
SECTION II.
ESTABLISHMENT OF THE FUND
The Primary Sponsor has established a fund with the Trustee
(the "Fund") to be held and administered in accordance with this
Trust. The Trustee shall accept as part of the Fund all assets as
may be delivered by a Plan Sponsor to the Trustee and shall also
include all income accruing thereon, except as otherwise provided
in this Trust Agreement; provided, however, the Trustee shall not
accept interests in real estate or limited partnerships.
SECTION III.
MAINTENANCE OF AND DISTRIBUTIONS FROM ACCOUNTS
A. The Plan Administrator shall maintain Accounts in
accordance with the Plan.
B. The Trustee may rely upon a notice given in accordance
with the Plan. The Trustee shall not be charged with any notice
unless given in accordance with the Plan, including notification of
any changes in the identity or authority of any person acting in
regard to the Plan.
SECTION IV.
INVESTMENT OF THE FUND
A. The Trustee shall have no authority with respect to the
investment and reinvestment of the Fund except upon receipt of
investment directions from the Primary Sponsor or otherwise
pursuant to the provisions of Subsection B below and Section VII,
the Trustee shall invest the principal and income of the Fund
without distinction between principal and income in securities or
in property, real or personal and wherever situated. Without
limiting the foregoing, the Trustee may purchase, acquire, retain,
sell, transfer, pledge or encumber common or preferred stocks,
including stock of the Primary Sponsor or any affiliate, shares of
mutual funds, including mutual funds for which the Trustee is an
advisor, trust and participation certificates, bonds and mortgages,
other evidences of indebtedness or ownership, annuity contracts and
ordinary and term life insurance contracts of life insurance
companies, savings accounts or plans, including savings accounts or
plans established or to be established by the Trustee, and group
trusts or collective investment funds including group trusts or
collective investment funds operated by the Trustee. If the
Trustee holds Fund assets for which it has not received
instructions, the Primary Sponsor hereby directs the Trustee to
invest such assets in the Investment Fund which best preserves
principal.
B. Prior to the date a Change of Control (as defined in
Section XVI.C hereof) occurs, the Primary Sponsor, and on or after
the date a Change of Control occurs, the Trustee, may appoint one
or more investment managers (the "Investment Managers") which shall
be banks, investment advisers registered under the Investment
Advisers Act of 1940, or insurance companies, to direct the Trustee
as to the investment of all or a portion of the Fund for the
exclusive benefit of the participants of the Plans and their
beneficiaries. Notwithstanding the foregoing, prior to the date a
Change of Control occurs, the Primary Sponsor may appoint the
Trustee (or any of its affiliates) as an Investment Manager, if it
is otherwise qualified to serve as an Investment Manager and in
such instance, the Trustee shall have discretion over the
investment of the Fund.
The Primary Sponsor shall notify the Trustee of the
appointment of any Investment Manager (other than the Trustee)
under this Subsection by delivering to the Trustee (i) an executed
copy of an instrument under which the Investment Manager was
appointed to act hereunder and setting forth the investment powers
of the Investment Manager and (ii) a written instrument executed by
the Investment Manager in which it acknowledges that it has agreed
to act as such. Any notice of appointment pursuant to this
Subsection shall constitute a representation and warranty by the
Primary Sponsor that the Investment Manager is qualified under and
has been appointed in accordance with the provisions hereof.
Notwithstanding anything herein contained to the contrary, during
the term of its appointment, the Investment Manager shall have the
sole responsibility for the investment and reinvestment of the
portion of the Fund for which it was appointed to act, and shall
have full power in its discretion to direct the Trustee with
respect to the exercise by it of its investment powers, including
the voting of shares (except as otherwise provided by Section XVI.D
hereof). Pending receipt of instructions from any Investment
Manager with respect thereto and subject to any investment
guidelines agreed to in writing from time to time, any cash
received by the Trustee from time to time shall be invested by the
Trustee in demand and term notes (including those commonly known as
"master notes") maturing not more than three years after the date
of purchase thereof, United States Treasury bills, other government
and agency obligations maturing not more than three years after the
date of purchase thereof, group annuity or other contracts
providing a guaranteed rate of return with a maturity not exceeding
three years, certificates of deposit, commercial paper, government
guaranteed paper, common or collective trust funds, money market
mutual funds, other money market instruments, savings accounts or
other deposits with a financial institution (including the Trustee,
if a financial institution is serving as such) and part interests
in any one or more of the foregoing.
The Primary Sponsor may terminate its appointment of an
Investment Manager at any time and shall in writing notify the
Trustee of such termination, and may thereafter appoint a successor
Investment Manager in the same manner as provided above in this
Subsection. Any successor Investment Manager shall thereafter,
until its appointment is terminated, be deemed to be an "Investment
Manager" for all purposes of this Agreement. If there shall be more
than one Investment Manager, the portion of the Fund to be invested
by each Investment Manager shall be held in a separate account and
the powers and authority of each Investment Manager shall be
divided as set forth in the instruments appointing such Investment
Managers.
So long as an Investment Manager (other than the Trustee or
one of its affiliates) is serving as such, the Trustee shall be
under no duty or obligation to review the assets comprising any
portion of the Fund managed by the Investment Manager, to make any
recommendations with respect to the investment or reinvestment
thereof, or to determine whether any direction received from any
Investment Manager is proper or within the terms of this Trust
Agreement or to monitor the activities of any Investment Manager.
C. The Trustee shall have no liability or responsibility to
the Primary Sponsor or any persons claiming any interest in the
Fund for acting without question on the direction of, or for
failing to act in the absence of any direction from, any Investment
Manager unless the Trustee participated knowingly in, or knowingly
undertook to conceal, an act or omission of any Investment Manager
constituting a breach of its duties hereunder, knowing such act or
omission was a breach of such duties; provided, however, that the
Trustee shall not be deemed to have "participated" in a breach by
any Investment Manager for the purposes of this undertaking solely
as a result of the performance by the Trustee or its officers,
employees or agents of any custodial, reporting, recording, and
bookkeeping functions with respect to any assets of the Fund
managed by any Investment Manager or solely as a result of settling
purchase and sale transactions entered into or directed by any
Investment Manager, or to have "knowledge" of any such breach
solely as a result of the information received by the Trustee or
its officers, employees or agents in the normal course in
performing such functions or settling such transactions. If the
Trustee has actual knowledge of a breach committed by any
Investment Manager, it shall promptly notify the Primary Sponsor in
writing thereof, and the Trustee, except as required by applicable
law, shall thereafter have no responsibility to remedy such breach.
D. The Primary Sponsor may, prior to a Change of Control,
direct the Trustee in writing to transfer any portion of the Fund
to a subtrustee and to enter into an agreement with the subtrustee
reflecting the subtrust arrangement. In the event of a Change of
Control, the Primary Sponsor may only direct the Trustee to
transfer a portion of the Fund to a subtrustee with the consent of
a majority of the participants of the Plan and the designated
beneficiaries of deceased participants. The Trustee may terminate
a subtrust at any time and direct the subtrustee to return the
portion of the Fund held by the subtrustee; provided that prior to
a Change of Control the subtrust may only be terminated with the
consent of the Primary Sponsor.
SECTION V.
POWERS OF THE TRUSTEE
In the administration of the Trust, in addition to any powers
or authority of the Trustee under this Trust or which the Trustee
may have under applicable law, the Trustee is authorized and
empowered to do the following, without advertisement, without order
of court and without having to post bond or make any returns or
report of its doings to any court:
A. To purchase or subscribe for any securities or property
including, without limitation, securities of a Plan Sponsor and
real property leased to or used by a Plan Sponsor;
B. To sell, exchange, convey, transfer, or otherwise
dispose of any securities or property held by it, by private
contract or at public auction, with or without advertising, and no
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency or propriety of any disposition;
C. Except as provided in Section XVI.D hereof, to vote any
stocks, bonds or other securities, including securities of the Plan
Sponsor; to give general or special proxies or powers of attorney
with or without power of substitution; to exercise any conversion
privileges, subscription rights or other options, and to make any
payments incidental thereto; to oppose, consent to, or otherwise
participate in corporate reorganizations or other changes affecting
corporate securities, to delegate discretionary powers, and to-pay
any assessments or charges in connection therewith; and generally
to exercise any of the powers of an owner with respect to
securities or other property held-as part of the Fund;
D. To register any investment in its own name or in the
name of a nominee, and-to hold any investment in bearer form or
through or by a central clearing corporation maintained by
institutions active in the national securities markets, but the
records of the Trustee shall at all times show that all the
investments are part of the Trust;
E. To write covered call options and to purchase or sell
put options and financial futures contracts;
F. To employ and act through suitable agents, accountants,
appraisers, actuaries and attorneys (who may be counsel for the
Trustee) and to pay their reasonable expenses and compensation, to
consult with counsel (who, without limitation, may be counsel to
the Trustee).and shall be protected to the extent the law permits
in acting upon the advice of counsel in regard to legal questions,
and the Trustee shall periodically review the performance of the
persons to whom these duties have been delegated, but the Trustee
shall not be liable for relying upon the advice and expertise of
any such person to the extent permitted by law, provided the
Trustee's decisions in selecting and retaining such person were
prudently made (it is specifically understood that the Trustee may
hire an independent accounting firm to assist in making any
insolvency determination and an independent law firm to assist in
making any Change in Control determination);
G. To borrow or raise moneys for the purposes of the Trust
in the amounts, and upon the terms and conditions, as the Trustee
in its discretion may deem advisable; and for any sums borrowed to
issue its promissory note as Trustee, and to secure the repayment
thereof by pledging all or any part of the Trust; and no person
lending money to the Trustee shall be bound to see to the
application of the money lent or to inquire into the validity,
expediency or propriety of any borrowing;
H. To make, execute, acknowledge and deliver any documents
of transfer and conveyance and any other instruments or agreements
that may be necessary or appropriate to carry out the powers of the
Trustee under the Trust or incidental thereto;
I. To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust, to
commence or defend any suits or legal or administrative proceedings
arising, necessary or appropriate in connection with the Trust, the
administration and operation thereof or the powers or authority of
the Trustee under the Trust, and to represent the Trust in all
suits and legal and administrative proceedings;
J. To keep portions of the Trust in cash or cash balances
as the Trustee may deem to be in the best interest of the Trust;
K. To register any investment in its own name or in the
name of a nominee, and to hold any investment in bearer form or
through or by a central clearing corporation maintained by
institutions active in the national securities markets, but the
records of the Trustee shall at all times show that all the
investments are part of the Trust; and
L. Generally, to do all acts and to execute and deliver all
instruments as in the judgment of the Trustee may be necessary or
desirable to carry out any powers or authority of the Trustee.
SECTION VI.
INVESTMENT FUNDS
A. The assets of the Fund shall be invested in individual
funds (each of which is sometimes hereinafter referred to as an
"Individual Fund"), with varying investment objectives, as the
Primary Sponsor shall from time to time determine.
B. The Primary Sponsor, in its sole discretion may, from
time to time, establish one or more additional Individual Funds, or
may change or terminate the availability of any then existing
Individual Fund or Individual Funds for all Members.
C. Pursuant to directions from the Primary Sponsor, the
Trustee will keep a portion of the Fund in cash or cash balances as
required for the proper administration of Plan contributions and
disbursements, which amounts may be held in a separate suspense
account maintained by an affiliate of the Trustee. The expense of
operating and maintaining such suspense account will be charged
against earnings, if any, of such suspense account but will not
otherwise be charged back to the Fund to the extent expenses exceed
earnings. The Primary Sponsor and Trustee hereby acknowledge that
such earnings are never expected to exceed the expenses allocable
to the suspense account.
D. The Trustee, to the extent directed, may purchase for an
Individual Fund any property of another Individual Fund which would
then be appropriate for purchase by that Individual Fund and may
exchange property of one Individual Fund for property of another
Individual Fund if the exchanged properties would be appropriate
for purchase by the respective Individual Funds. Each purchase or
exchange shall be made at the fair market value of the property so
purchased or exchanged.
E. The authority, powers and duties of the Trustee as
described in this Trust Agreement shall be subject to and exercised
only in a manner consistent with any selection of Investment Funds
by the Primary Sponsor.
SECTION VII.
INVESTMENT DIRECTION BY MEMBERS
A. Subject to any other rules and restrictions as the Plan
Administrator may prescribe from time to time, with respect to
amounts allocated to Employee Deferred Accounts only, each Member
may (1) direct that a portion or all of his interest in one or more
of the Investment Funds be transferred to one or more of the other
Investment Funds or (2) change his election as to the Investment
Funds in which future contributions on his behalf to his Employee
Deferred Account shall be invested. The provisions of this Section
are contingent upon the availability of transfers among the
Investment Funds under the terms of the investments made by each
Investment Fund. An investment direction, once given, shall be
deemed to be a continuing direction until changed as otherwise
provided herein.
B. If no investment election is outstanding, all such
contributions shall be allocated to such Investment Fund as the
Plan Administrator shall, in its sole discretion, determine.
C. Investment directions by Members shall be subject to the
following:
1. Investment directions by Members to the Plan
Administrator shall be made in the manner and pursuant to the
rules established by the Plan Administrator and shall indicate
the manner in which contributions are to be invested in, or
the allocation of a Member's Account among, the available
Investment Funds.
2. Directions provided to the Trustee shall remain in
effect until superseded by subsequent directions.
D. Each direction under the preceding paragraphs received
by the Plan Administrator shall be promptly delivered to the
Trustee, and shall be effective as to the Trustee only when
received by the Trustee. If a Member directs that all or a portion
of his Account be invested in a particular Investment Fund, the
Trustee shall use its best efforts to carry out the investment as
soon as practicable. However, the Trustee shall never be held
liable for failure to carry out an investment direction within the
terms of the Trust if the Trustee has made a bona fide effort to
follow the direction.
E. Any distribution to a Member pursuant to the Plan shall
be pro rata from each Investment Fund, except as otherwise directed
by the Plan Administrator.
SECTION VIII.
VALUATION AND ALLOCATION
A. For all purposes under the Plan and the Trust, including
particularly, but without limitation, valuing the Fund and each
Member's Account and allocating to each Member's Account its share
of the net income or net loss of the Fund, the following rules
shall apply:
1. Transfers or payments of funds or assets and the
income, gain, loss, or expenses attributable thereto between
Investment Funds shall be deemed made as of the Valuation Date
coinciding with or immediately following the actual receipt of
transfer or payment instructions in good order, and the funds
or assets shall not be credited or charged after such date
with any earnings or losses of the Investment Fund from which
transferred or paid but shall be credited or charged after
such date with any earnings or losses of the Investment Fund
to which transferred or paid.
2. Transfers or payments from an Investment Fund to a
Member or his Beneficiary between Valuation Dates shall be
charged against the interest of the Member in the Investment
Fund as of the Valuation Date coinciding with or immediately
following the actual receipt of transfer or payment
instructions in good order and contributions to an Investment
Fund which are allocated to the Account of a Member between
Valuation Dates shall be credited to the interest of such
Member in such Investment Fund as of the Valuation Date
coinciding with or immediately following the actual receipt of
transfer or payment instructions in good order.
3. Fair market value of the assets of each Investment
Fund shall be determined separately and the net income or net
loss of each Investment Fund shall be determined separately.
4. The value of a Member's Account, to the extent
invested in Investment Funds, shall be the sum of his
proportionate interests in each of the Investment Funds, and
the aggregate net income or net loss allocated to a Member's
Account shall be the aggregate of the net income or net loss
allocated to his proportionate interests in each of the
Investment Funds.
B. Subject to the provisions of Subsections C and D below,
the Trustee shall as of each Valuation Date, and at such additional
times as the Primary Sponsor may in writing direct, determine the
net income or net loss and the fair market value of the assets in
the Fund and each Investment Fund, respectively, as determined
below:
1. To the cash income, if any, since the last
Valuation Date, there shall be added or subtracted, as the
case may be, any net increase or decrease, since the last
Valuation Date, in the fair market value of the assets of the
Fund or Investment Fund, as applicable, since the last
Valuation Date, any gain or loss on the sale or exchange of
assets of the Fund or Investment Fund, as applicable, since
the last Valuation Date, accrued interest since the last
Valuation Date with respect to any interest-bearing security
as to which the purchaser would be required to pay the accrued
interest in addition to the quoted price, the amount of any
dividend which shall have been declared since the last
Valuation Date but not paid on shares of stock owned by the
Trustee if the market quotation used in determining the value
of such shares is ex-dividend, and the amount of any other
assets of the Fund or Investment Fund determined by the
Trustee to be income since the last Valuation Date;
2. From the sum thereof there shall be deducted all
charges, expenses, and liabilities accrued since the last
Valuation Date which are proper under the provisions of the
Plan and the Trust and which in the discretion of the Trustee
are properly chargeable against income for the period.
C. Notwithstanding Subsection B hereof, in the event that
an Investment Manager is designated by the Primary Sponsor, or the
Trustee after a Change of Control, and if the Investment Manager
either directs the investment of or itself invests any assets of
the Fund, and if any of such assets are non-listed securities or
are not publicly traded or if the fair market value of any of such
assets cannot be readily determined, then the Investment Manager
shall determine the net income or net loss and the fair market
value of such assets and the Trustee shall be entitled to rely upon
such determination.
D. In the event that an Investment Manager is designated by
the Plan Sponsor, or the Trustee after a Change of Control, and if
the Trustee gives the Investment Manager possession of any portion
of the assets of the Fund, then the Investment Manager shall
determine the net income or net loss and the fair market value of
those assets and the Trustee shall be entitled to rely upon the
determination.
SECTION IX.
DUTIES OF THE TRUSTEE
A. Except for records dealing solely with the Trust and its
investments and disbursements, which shall be maintained by the
Trustee, each Plan Sponsor shall maintain all records contemplated
by the Plan.
B. Each Plan Sponsor shall furnish to the Trustee all the
information necessary to determine the benefits payable to or with
respect to each Member in the Plan, including any benefits payable
after a Member's death. Each Plan Sponsor shall from time to time,
and at least annually, and promptly upon the request of the Trustee
furnish updated information to the Trustee. In the event the Plan
Sponsor refuses or neglects to provide any updated information as
contemplated herein, the Trustee shall rely upon the most recent
information furnished to it by the Plan Sponsor; provided, however,
that on or after a Change of Control, the Trustee shall rely in its
discretion upon (1) information furnished to it by the Plan Sponsor
prior to a Change of Control, (2) information furnished to it by
the Plan Sponsor on or after a Change of Control and/or (3) any
information received by it from a Member or designated beneficiary
unless the recipient actually knows that any such information is
false. The Trustee has no responsibility to verify information
provided to them by the Plan Sponsor or any Member or designated
beneficiary.
C. Upon proper notification from the Plan Sponsor prior to
a Change of Control or upon an independent determination by the
Trustee on or after a Change of Control (based on such information
as the Trustee shall be entitled to rely upon pursuant to
Subsection B above), when, in the opinion of the Plan Sponsor prior
to a Change of Control or Trustee on or after a Change of Control,
as applicable, a Member's benefits under the Plan have become
payable, the Plan Sponsor or Trustee, as applicable, shall notify
the Member or the beneficiary of a deceased Member and, if
applicable, the Trustee. Such notice shall include the amount of
such benefits, the terms of payment, the amount of any taxes
required to be withheld from such amount, and the name, address and
social security number of the recipient. Upon the receipt of a
notification or after making its determination, as applicable, the
Trustee shall commence distributions from the Fund in accordance
therewith to the person or persons so indicated.
D. The Plan Sponsors shall have full responsibility for the
payment of all taxes of any nature levied, assessed or imposed upon
the Fund, including the payment of all withholding taxes to the
appropriate taxing authority and shall provide the Trustee with
such information as necessary to allow it to furnish each Member or
beneficiary with the appropriate tax information form evidencing
such payment and the amount thereof.
E. Prior to a Change of Control, the Trustee shall have no
responsibility for determining whether any Member or beneficiary
has died or whether a Member's rights under the terms of the Plan
have been forfeited and shall be entitled to rely upon information
furnished by the Plan Sponsor. On or after a Change of Control, the
Trustee shall determine whether a Member's benefit shall be deemed
forfeited or whether a Member or beneficiary has died based on
information supplied under Subsection B hereof; provided, however,
that a certified death certificate received by the Trustee shall be
conclusive evidence of the death of any person regardless of the
source of such certificate.
F. Nothing provided in this Trust Agreement shall relieve a
Plan Sponsor of its liabilities to pay the benefits provided under
the Plan except to the extent such liabilities are met by
application of Fund assets.
G. Each Plan Sponsor agrees that by the establishment of
this Trust it hereby forgoes any judicial review of any independent
determination by the Trustee as to the benefit payable to any
persons hereunder. If a dispute arises as to the amounts or timing
of any such benefits or the persons entitled thereto under the
Plans or this Trust Agreement, the Plan Sponsor agrees that such
dispute shall be resolved by binding arbitration proceedings
convened in Atlanta, Georgia and conducted in accordance with the
rules of the American Arbitration Association and that the results
of such proceedings shall be conclusive and shall not be subject to
judicial review. It is expressly understood that pending the
resolution of any such dispute, payment of benefits shall be made
and continued by the Trustee in accordance with its independent
determination and that the Trustee shall have no liability with
respect to such payments. The Plan Sponsor also agrees to pay the
entire cost of any arbitration or legal proceeding initiated by it
or by the Trustee or by any Member or beneficiary, including the
legal fees of the Trustee and the Member or other claimant
regardless of the outcome of any such proceeding.
SECTION X.
DISTRIBUTIONS FROM THE FUND
A. Consistent with the provisions of Section XII hereof,
the Trustee is authorized to pay from the Fund reasonable expenses
of the Trustee, including fees of accountants and legal counsel to
the Trust, and the Trustee's compensation.
B. The Trustee shall make any distribution required
pursuant to this Trust Agreement by mailing its check or other
evidence of payment to the person to whom such distribution or
payment is to be made at such address as was last furnished to the
Trustee or, if agreeable to the Plan Sponsor and the affected
Member and so directed in a written notice to the Trustee by those
parties, by crediting the account of such person or by transferring
funds to such person's account by bank or wire transfer. The
Trustee shall not be required to make any investigation to
determine the whereabouts or mailing address of any person. If the
person to receive a distribution can not be found, the Trustee
shall hold payment or deposit same in a bank (including the
Trustee, if a financial institution is serving as such) for the
credit of that person without liability for interest thereon. If a
check or other evidence of payment of the benefit hereunder has
been mailed to the last address of the person furnished the Trustee
and is returned unclaimed, the Trustee shall notify the Plan
Sponsor and shall discontinue further payments to the payee until
it receives instructions from the Plan Sponsor.
C. The Trustee shall not be bound by any instruction,
direction or notice unless and until it has been received in
writing by the Trustee and may rely upon any instruction, direction
or notice of a continuing nature until the Trustee receives a
writing which revokes that instruction, direction or notice. The
Trustee may without liability assume that any such instruction,
direction or notice is genuine unless it has actual knowledge or,
after receiving notification of a problem, has reasonably
determined that the instruction, direction or notice is not
genuine.
D. The Trustee shall not be responsible for the application
of any assets held as part of the Fund which have been distributed
pursuant to the Plan and the Trust Agreement.
E. If any dispute arises as to the persons to whom the
payment of any funds or delivery of any assets shall be made by the
Trustee, the Trustee may withhold payment or delivery until the
dispute has been determined by a court of competent jurisdiction or
has been settled by the parties concerned and may, in its sole
discretion, submit the dispute to a court of competent
jurisdiction.
SECTION XI.
CLAIMS OF CREDITORS
A. The Fund assets shall be treated as general assets of
the Plan Sponsor and shall remain subject to claims of the general
creditors of the Plan Sponsor under applicable state and federal
law. Nothing in the Trust Agreement shall affect the rights of any
Member as general creditor of the Plan Sponsor. No Member shall
have a preferred claim on or any beneficial ownership in the Fund
prior to the time for distribution to the Member under the terms of
a Plan or the terms of this Trust Agreement. In the event that the
Plan Sponsor becomes insolvent as described in Subsection C below,
each Member shall be deemed to waive any priority the Member may
have under law as an employee with respect to any claim against the
Plan Sponsor and the Trust beyond the rights the Member would have
as a general creditor of the Plan Sponsor.
B. Except as otherwise provided by Subsection C below, no
benefit which shall be payable under the Trust to any person shall
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of the same shall be void. No
benefit shall in any manner be subject to the debts, contracts,
liabilities, engagements or torts of any person, nor shall it be
subject to attachment or legal process for or against any person,
except to the extent provided by Subsection C below and as may
otherwise be required by law.
C. The board of directors of a Plan Sponsor shall
immediately notify the Trustee in writing of the insolvency of the
Plan Sponsor. For purposes of this Subsection C, the term
"insolvency" shall mean the inability of the Plan Sponsor to pay
its debts as they become due in the usual course of its business or
that the liabilities of the Plan Sponsor are in excess of its
assets. Upon receipt of the written notice, the Trustee shall
suspend all further payments to Members or their beneficiaries and
shall hold the assets of the Trust for the benefit of the creditors
of the Plan Sponsor in the manner directed by a court of competent
jurisdiction. If the Trustee should receive any written allegation
of the insolvency of the Plan Sponsor, the Trustee shall suspend
payments to Members and hold the assets of the Trust for the
benefit of the creditors of the Plan Sponsor and, within a period
of sixty (60) days after the receipt of the written allegation,
determine whether the Plan Sponsor is insolvent. If the Trustee
determines that the Plan Sponsor is solvent, it shall immediately
resume payments to the Members or their beneficiaries. In the
event that the Trustee has actual knowledge of the insolvency of
the Plan Sponsor, the Trustee shall hold the assets of the Trust
for the benefit of the creditors of the Plan Sponsor in the manner
directed by a court of competent jurisdiction. Unless the Trustee
(1) has been notified in writing by the board of directors of a
Plan Sponsor of the insolvency of a Plan Sponsor, (2) has received
any written allegation of the insolvency of a Plan Sponsor or (3)
has actual knowledge of the insolvency of a Plan Sponsor, the
Trustee shall have no duty to inquire whether a Plan Sponsor is
insolvent. The Trustee is hereby authorized to request and rely on
a letter from the Primary Sponsor's independent auditors as to the
Primary Sponsor's financial status. The Primary Sponsor agrees to
exert its best efforts to promote the production of such letter
within thirty (30) days after receipt of a request from the
Trustee.
SECTION XII.
FEES AND EXPENSES
The compensation and expenses of the Trustee shall be paid
from the assets of the Fund. Expenses of the Trustee shall include
the reasonable expenses and compensation of third parties employed
by the Trustee pursuant to Section IV.F hereof. The Trustee shall
be authorized to deduct its compensation and expenses from the Fund
no earlier than thirty (30) days after it delivers an invoice for
same to the Primary Sponsor.
SECTION XIII.
ACCOUNTS
A. The Trustee shall keep such records as the Trustee
considers necessary for the management of the Trust. The Trustee's
books and records of the Fund shall be open to inspection by the
Plan Sponsor and Members during regular business hours of the
Trustee.
B. The Trustee may establish separate accounts within the
Fund for any group or category of the Plan as it determines
appropriate to maintain its books of accounts and other records in
accordance with the provisions of the Plan and the Trust Agreement.
The Plan Sponsors shall maintain or cause to be maintained
accounting records for the Plan sufficient to allow the
determination of the portion of the Fund which is allocable both to
each of the Plan Sponsors. Irrespective of the commingling of
assets of the Plan for investment in the Fund, no portion of the
Fund which is allocable to any one of the Plan Sponsors shall be
used to pay benefits or discharge liabilities or obligations
specifically allocable or attributable, respectively, to any other
Plan or any other Plan Sponsor.
C. Within ninety (90) days after the close of each calendar
year, the date of the removal or resignation of the Trustee, or the
termination of the Trust, the Trustee shall render to the Primary
Sponsor a written account of its management of the Fund covering
the period since the previous account and report. The written
approval of that accounting and report by the Primary Sponsor or
the failure of the Primary Sponsor to notify the Trustee of its
disapproval of such accounting within one hundred and eighty (180)
days after its receipt shall be final and binding as to the
Trustee's administration of the Trust for the period upon the
Primary Sponsor and all persons who have or may thereafter have an
interest in the Trust.
SECTION XIV.
RESIGNATION, REMOVAL AND SUCCESSION
A. The Trustee may resign at any time upon giving sixty
(60) days' prior written notice to the Primary Sponsor.
B. The Trustee may be removed by the Primary Sponsor at any
time; provided, however, that in the event of a Change of Control,
the Trustee may thereafter be removed only after securing the
written consent of a majority of the Members of the Plan and the
designated beneficiaries of deceased Members.
C. Upon the removal or resignation of the Trustee, any
successor appointed shall have the same powers and duties as those
conferred upon the Trustee under this Trust. Prior to a Change of
Control, the appointment of any successor Trustee shall be in the
sole discretion of the Primary Sponsor. On or after a Change of
Control, the appointment of any successor Trustee shall be made
only with the consent of a majority of the Members of the Plans and
the designated beneficiaries of deceased Members. Upon receipt by
the Trustee of a written acceptance of the appointment by the
successor Trustee, the Trustee shall transfer to the successor
Trustee the assets constituting the Trust; provided, however, the
Trustee shall not be required to pay over assets to a successor
Trustee unless the Trustee shall be discharged from all liability
for any taxes which may be due and owing by the Trust, or unless
the successor Trustee, who must be acceptable to the Trustee,
indemnifies the Trustee and the Trustee in its sole discretion
agrees to accept indemnification. In the event that within ninety
(90) days after the removal or resignation of the Trustee the
Primary Sponsor shall have failed to appoint a successor Trustee or
the Trustee shall not have received a written acceptance from a
successor Trustee, then the Trustee may file an appropriate action
in a court of competent jurisdiction and transfer to the custody of
the court the assets then held by the Trustee constituting the
Trust. Upon transfer to a successor Trustee or to the court, as
the case may be, the Trustee shall be relieved of all further
responsibilities and liabilities in connection with the Trust. The
Trustee is authorized, however, to reserve therefrom any assets as
it may deem advisable for payment of its fees and expenses in
connection with the settlement of its account or otherwise, and any
balance of the reserve remaining after the payment of the Trustee's
fees and expenses shall be paid over to the successor Trustee or to
the court.
SECTION XV.
AMENDMENT AND TERMINATION
A. Prior to a Change of Control, the Trust Agreement may be
amended any time and to any extent by a written instrument executed
by the Primary Sponsor, provided, however, that no such amendment
shall be effective to the extent that it purports to make the Trust
revocable. In addition, no such amendment shall have the effect of
reducing benefits accrued by Members under the Plan, delaying the
times at which distributions are made from the Fund to Members and
their beneficiaries or allowing a Plan Sponsor or any other person
to receive distributions of the assets of the Fund not then
permitted under the terms of the Trust Agreement. On or after a
Change of Control, this Trust Agreement may only be amended with
the consent of a majority of the Members of the Plan and the
designated beneficiaries of deceased Members. No amendment that
purports to increase the duties or responsibilities of the Trustee
or to alter materially the manner in which the Trustee is to
discharge any continuing duties or responsibilities shall be given
effect without the consent of the Trustee and no other amendment
shall be given effect without first providing notice of same to the
Trustee. The Trustee and Primary Sponsor or, if applicable, a
majority of the Members of the Plan and the designated
beneficiaries of deceased Members may amend the Trust Agreement in
any manner not otherwise specifically precluded by this Subsection,
including any amendment regarding the removal of an existing
Trustee or the appointment of a successor Trustee.
B. Notwithstanding any other provisions of the Trust
Agreement to the contrary, the Trust shall terminate and all Fund
assets shall be distributed (1) on the complete distribution of the
Fund in accordance with the terms and provisions of the Plan; (2)
upon the delivery to the Trustee of a writing terminating the Trust
signed by the Primary Sponsor, all Members of the Plan and the
designated beneficiaries of deceased Members; or (3) in the event
the Internal Revenue Service makes a final determination that the
assets of the Fund constitute compensation currently taxable as
income to Members. Any assets remaining in the Fund after
satisfaction of all liabilities and expenses of the Plan shall be
returned to the Plan Sponsors.
SECTION XVI.
MISCELLANEOUS
A. The Trustee shall under no circumstances be required to
recognize any conveyance, transfer, assignment, mortgage, pledge or
encumbrance by any Member or any person entitled to receive
benefits under the Plan, any part of it, or any interest in it, or
to pay any money or thing of value to any creditor or assignee of
any Member or person for any cause whatsoever; provided, however,
this Subsection A does not affect the provisions of Section VIII of
the Trust Agreement.
B. The Primary Sponsor hereby agrees to indemnify and hold
harmless the Trustee from and against any and all losses, claims,
damages, liabilities, costs and expenses, including but not limited
to, liability for any judgments or settlements consented to in
writing by the Trustee, as applicable, which consents will not be
unreasonably withheld, and reasonable attorneys' fees arising out
of or in connection with or as a direct or indirect result of its
serving, respectively, as the trustee (including but not limited to
the Trustee's acts or omissions with respect to (1) the voting of
any share of stock held as part of the assets of the Trust; (2)
establishing or maintaining investment funds or effecting
investments therein in accordance with the terms and provisions of
the Trust; or (3) the determinations by the Trustee of insolvency
or of a Change of Control (including acts or omissions in
accordance with the terms and provisions of the Trust following any
determination of insolvency or a Change of Control); except those
losses, claims, damages, liabilities, costs and expenses, if any,
arising out of or in connection with or as a direct or indirect
result of the Trustee's gross negligence or willful neglect. The
Trustee shall promptly notify the Primary Sponsor of any claim,
action or proceeding for which it may seek indemnity. This
indemnity is a continuing obligation and shall be binding on the
Primary Sponsor and its successors, whether by merger or otherwise,
and assigns. In addition, this indemnity shall survive the
resignation or removal of the Trustee, the liquidation of the
Trust, or both events.
C. As used in this Trust Agreement, the term "Change of
Control" means any event that pursuant to the requirements of
Article X of the Primary Sponsor's Certificate of Incorporation, as
amended from time to time, requires the affirmative vote of the
holders of not less than eighty percent (80%) of the Voting Stock
(as defined therein); provided, however, that no event shall
constitute a Change of Control if approved by the Board of
Directors of the Primary Sponsor a majority of whom are "present
directors" and "new directors." For purposes of the preceding
sentence, "present directors" shall mean individuals who as of the
date of this Trust Agreement were members of the Board of Directors
of the Primary Sponsor and "new directors" shall mean any director
whose election by the Board of Directors of the Primary Sponsor (in
the event of vacancy) or whose nomination for election by the
Primary Sponsor's stockholders was approved by a vote of at least
three-fourths of the directors then still in office who are present
directors and new directors; provided that any director elected to
the Board of Directors of the Primary Sponsor solely to settle a
threatened or actual proxy contest shall in no event be deemed to
be a new director. The board of directors of the Primary Sponsor
shall immediately notify the Trustee of the occurrence of a Change
of Control. Upon receipt of such written notice or in the event the
Trustee has actual knowledge that a Change of Control has occurred,
the Trustee shall take no action nor facilitate the taking of any
action contemplated by the Trust Agreement as being taken-prior to
a Change-of Control if (1) an alternative procedure for taking such
action is prescribed on or after a Change of Control, or (2) any
action of the type described is expressly limited to the period
prior to a Change of Control. If the Trustee should receive any
written allegation to the effect that a Change of Control has
occurred, the Trustee shall take no action nor facilitate the
taking of any action described: in the immediately preceding
sentence until making an independent determination as to whether a
Change of Control has occurred. The Trustee shall make this
determination within a period of sixty (60) days after the receipt
of the written allegation. Following the determination, the
Trustee shall discharge its duties under the Trust Agreement in a
manner consistent with that determination.
D. Prior to a Change of Control, authority and
responsibility with regard to the voting of and control over any
securities of a Plan Sponsor held in the Trust shall be exercised
as follows: (1) the Primary Sponsor shall direct the Trustee in
writing as to the manner in which such securities are to be voted;
and (2) all other decisions affecting such securities, including,
limitation, decisions to oppose or consent to tender or exchange
offers, shall be similarly directed by the Primary Sponsor. The
Trustee shall take such steps as may be necessary or appropriate to
carry out the directions of the Primary Sponsor given pursuant to
this Subsection. On or after a Change of Control, voting and all
other decisions relating to the securities of a Plan Sponsor shall
be made by the Trustee or, if such securities are subject to the
investment authority of an Investment Manager, by that Investment
Manager.
E. The Trustee shall be required to take any and all
reasonable legal action to enforce the obligations of each Plan
Sponsor under the Trust Agreement.
F. Whenever the context requires, words of the masculine
gender used herein shall include the feminine and the neuter, and
the words used in the singular shall include the plural.
G. Each provision of the Trust Agreement is severable and
if any provision is found to be void as against public policy it
shall not affect the validity of any other provision hereof.
H. The Trust Agreement shall be binding upon the successors
and assigns of each Plan Sponsor and the Trustee.
I. The provisions of the Trust shall be construed according
to the laws of the Commonwealth of Pennsylvania and, to the extent
applicable, according to the laws of the United States.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties have hereunto set their hands
and seals the day and year first above written.
PRIMARY SPONSOR:
RUBY TUESDAY, INC.
By:/s/ Franklin E. Southall, Jr.
Title: Vice President and Controller
ATTEST:
By:/s/ Walter Cole
Title: Assistant Secretary
[CORPORATE SEAL]
TRUSTEE:
THE PRUDENTIAL TRUST COMPANY
By:/s/ Daniel Arcure
Title: Vice President and Assistant
Secretary
ATTEST:
By:/s/ Deborah L. Kennedy
Title: Assistant Comptroller
[SEAL]
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of the 2nd day
of July, 1997, between RUBY TUESDAY, INC., a Georgia corporation, whose
address is 4721 Morrison Drive, Mobile, Alabama 36609-3350 (herein
"Seller"), and RT ORLANDO FRANCHISE, L.P., d/b/a RT Orlando Franchise,
Ltd., a Delaware limited partnership, whose address is 8042 Monier Way,
Orlando, Florida 32835 (herein "Buyer").
1. Introduction. Seller is currently engaged in the business of
operating restaurants under the trade name, trademark and service mark
"Ruby Tuesday" at each of the locations listed on Exhibit A attached
hereto (hereinafter, the business of operating each such restaurant at
each such location being referred to individually, as the "Business" and
collectively as the "Businesses"). Seller wishes to sell to Buyer, and
Buyer wishes to purchase from Seller, certain assets of Seller used
exclusively in operating the Businesses, upon the terms and conditions
set out in this Agreement. Therefore, in consideration of the premises,
the mutual representations, warranties, covenants and agreements
hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties agree as
follows:
2. Sale and Purchase of Assets; Assumption of Liabilities. The
consummation of the transactions provided for herein (the "Closing")
shall take place at the offices of Seller at such time and place as the
parties may hereto agree in writing (the "Closing Date"), provided,
however, the Closing shall take place on the date that is the later to
occur of (i) the date that the temporary liquor licenses for the
Businesses have been issued to Buyer by the Florida Division of Alcoholic
Beverages and Tobacco, or (ii) the date that Buyer has received a firm
commitment for financing for the purchase of the Businesses on terms
reasonably acceptable to Buyer; provided, however, the Closing shall not
take place unless ten (10) business days have passed after the date that
Buyer receives Seller's Uniform Franchise Offering Circular without
Buyer's exercising any rescission rights available to Buyer under
applicable franchise law. On the Closing Date:
(a) Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, Buyer shall purchase from Seller, and
Seller shall sell, transfer, assign, convey and deliver, all of Seller's
right, title and interest in and to the following assets of Seller used
exclusively in the operation of the Businesses (the "Assets"), which
Assets shall be conveyed AS-IS, WHERE-IS:
(i) all stock in trade and merchandise in Seller's
inventory used by Seller exclusively in the conduct of the
Businesses as of the Closing Date (the "Inventory");
(ii) all furniture, fixtures, furnishings, equipment
and leasehold improvements used by Seller exclusively in the
conduct of the Businesses as of the Closing Date (the
"Personal Property");
(iii) all rights of Seller to the software used
exclusively in the conduct of the Businesses as of the
Closing Date and located at the premises where the Businesses
are conducted, including, without limitation, all rights of
Seller to use such software and the documentation related
thereto (the "Software");
(iv) all rights of Seller pursuant to all contracts,
leases (except for any interest of Seller in any lease with
any third party regarding the premises at which the
Businesses are conducted, other than the interest(s), if any,
to be subleased to Buyer pursuant to the Sublease(s) defined
below), warranties, commitments, agreements, purchase and
sale orders and other executory commitments of Seller related
solely to the Businesses as of the Closing Date (the
"Contracts");
(v) all rights of Seller in and to the underlying
land, if any, described on Exhibit G attached hereto,
together with the structure(s) building(s) and other
improvements owned by Seller and located on such land;
(vi) all rights of Seller (to the extent assignable)
pursuant to any governmental permits and licenses used
exclusively in the operation of the Businesses (the
"Permits");
(vii) Seller's telephone numbers for the Businesses
(the "Telephone Numbers");
(viii) Seller's petty cash on hand at the
Businesses as of the Closing Date (the "Petty Cash").
Notwithstanding the foregoing, the Assets do not include the following
assets of Seller:
(i) Seller's accounts or notes receivable;
(ii) Seller's cash on hand at or with respect to the
Businesses (other than the Petty Cash);
(iii) Seller's trade name, trademarks, service marks,
copyrights and all other intellectual property or intangible
property of Seller; and
(iv) to the extent that the Businesses are conducted
on premises leased by Seller from a third party (or third
parties), all rights of Seller in any leasehold or other
interest in the premises at which the Businesses are
conducted (except for any interest(s) to be subleased to
Buyer pursuant to the Sublease(s), defined below).
(b) Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, Seller shall assign, and Buyer shall assume
and agree to satisfy, pay, discharge, perform and fulfill, as applicable,
as they become due, without charge or cost to Seller except as provided
for in this Agreement, and agrees to hold Seller harmless with respect
to, the following liabilities and obligations of Seller (the "Assumed
Liabilities"):
(i) all liabilities and obligations of Seller related
to owning the Assets and operating the Businesses on and
after the Closing Date except for the Excluded Liabilities
described below; and
(ii) all liabilities and obligations of Seller under
the Contracts, the Permits and the Telephone Numbers that
arise or are attributable to events or conditions occurring
on or after the Closing Date.
Notwithstanding the foregoing, the Assumed Liabilities shall not include
the following liabilities or obligations of Seller (the "Excluded
Liabilities"):
(i) except to the extent otherwise provided in this
Agreement, any liabilities or obligations, whether or not
known, of Seller to be performed prior to the Closing Date or
arising out of or relating to Seller's ownership of the
Assets or operation of the Businesses prior to the Closing
Date; and
(ii) Seller's accounts payable, notes payable and
other obligations for or related to Seller's indebtedness to
banks or financial institutions.
3. Purchase Price. In consideration of the sale of Assets and
assumption of the Assumed Liabilities, at the Closing, Buyer shall
deliver to Seller the following:
(i) Five Million Eight Hundred Sixteen Thousand Three
Hundred Thirty-One Dollars ($5,816,331) (the "Purchase
Price"); and
(ii) any sales or other taxes due on the sale of
Assets and assumption of the Assumed Liabilities contemplated
by this Agreement (the "Transaction Taxes").
(a) Payment of the Purchase Price. The Purchase Price shall be
paid as follows:
(i) by the delivery of the sum of (A) seventy-five
(75%) percent of the Purchase Price, plus (B) the Transaction
Taxes, all to be paid by certified check drawn on a local
bank or by wire transfer of funds; and
(ii) by the delivery to Seller of Buyer's promissory
note, dated the Closing Date, in favor of Seller in the
original principal amount equal to twenty-five (25%) percent
of the Purchase Price (the "Note") in the form attached
hereto as Exhibit B. As security for the payment of the
Note, Buyer shall deliver to Seller a Security Agreement,
dated the Closing Date, in the form attached hereto as
Exhibit C and such other documents as may be reasonably
required by Seller to perfect a security interest for the
benefit of Seller in and to Buyer's assets (including,
without limitation, UCC-1 financing statements in favor of
Seller), and Buyer shall cause Ray Manning to enter into a
Guaranty in the form attached hereto as Exhibit D.
(b) Other Adjustments to Purchase Price. At the Closing, or as soon as
practicable after the Closing, the Purchase Price shall be adjusted, on a
dollar-for-dollar basis, to reflect the proration of all items of expense
or income directly relating to the Assets and the operation of the
Businesses as of the Closing Date, and the net adjustments for all such
items shall be paid in immediately available funds on or before the date
that occurs sixty (60) days after the Closing Date (the "Adjustment
Payment Date"). Prorated items shall include the following: rent, real
and personal property taxes, payroll and payroll taxes, insurance
premiums, utilities, security deposits, other prepaid items and other
items customarily prorated. To the extent possible, any prorations not
determinable as of the Closing Date shall be prorated on the basis of the
most current information available at Closing; provided, however, Seller
and Buyer agree that, upon presentation, on or before the Adjustment
Payment Date, of written confirmation of (i) a change in an estimated
amount, or (ii) a determination of the amount of any proration that
cannot be determined as of the Closing Date, such amount will be
reflected in the payment(s) to be made pursuant to this Section 3(b) on
or before the Adjustment Payment Date.
(c) Allocation of Purchase Price. The aggregate amount of the
Purchase Price and the Assumed Liabilities shall be allocated among the
Assets substantially in accordance with Schedule 3(c) attached hereto.
Seller and Buyer hereby agree to use such allocation to complete and file
Internal Revenue Service Form 8594 with the Internal Revenue Service.
4. Delivery of Documents and Related Transactions.
(a) At the Closing, the following documents (the "Closing
Documents"), together with the cash portion of the Purchase Price, shall
be delivered as follows:
(i) Seller shall deliver to Buyer the following
executed documents (the "Seller's Documents"):
1) a bill of sale, assignment and assumption
agreement for the Assets substantially in the form of
Exhibit E attached hereto (the "Bill of Sale"),
transferring to Buyer all of Seller's right, title and
interest in and to said Assets, free and clear of all
encumbrances except for Permitted Encumbrances (as
defined in Section 5(c) below), pursuant to which Buyer
will accept such Assets and assume the Assumed
Liabilities;
2) a Certificate of Occasional or Isolated
Sale substantially in the form of Exhibit F attached
hereto (the "Certificate of Occasional or Isolated
Sale");
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the following:
(A) a sublease or subleases between
Seller, as sublessor, and Buyer, as sublessee, of
such premises, in form satisfactory to the
parties hereto (the "Sublease(s)"); and
(B) the written consent of each landlord
to the Sublease(s), if required;
4) to the extent that the Businesses are
conducted on premises owned by Seller, a deed conveying
Seller's interest in and to the underlying land,
together with structure(s), building(s) and other
improvements at the premises described on Exhibit G
attached hereto (the "Deed");
5) an operating agreement, a development
agreement and a support services agreement,
substantially in the form of the drafts dated July 2,
1997, July 2, 1997, and July 2, 1997, respectively,
presented by Seller to Buyer (collectively, the
"Franchise Documents"); and
6) other related documents that Buyer may have
reasonably requested on or prior to the Closing Date.
(ii) Buyer shall deliver to Seller (x) the cash
portion of the Purchase Price, and (y) the following executed
documents (the "Buyer's Documents"):
1) the Note;
2) the Bill of Sale;
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the Sublease(s);
4) the Security Agreement and other security
documents referred to in Section 3(a)(ii) of this
Agreement;
5) the Guaranty;
6) the Franchise Documents; and
7) other related documents that Seller may
have reasonably requested on or prior to the Closing
Date.
(b) Further Assurances and Cooperation Post-Closing. Seller and
Buyer, from time to time after the Closing (but without obligation
separate from the obligations expressly provided by this Agreement),
hereby agree to execute, acknowledge and deliver to each other such
instruments of conveyance and transfer, and will take such other actions
and execute and deliver such other documents, certifications and further
assurances, as either party may reasonably request with respect to the
assignment, transfer and delivery of the Assets and the assumption of the
Assumed Liabilities and the perfection of Seller's security interest in
the Assets pursuant to Section 3(a)(ii), in order to consummate in full
the transactions provided for herein.
(c) Employees. Buyer and Seller agree as follows:
(i) Buyer's Responsibilities. Buyer shall offer
employment, on substantially the same terms and conditions as
currently in effect, to commence on and as of the Closing
Date, to each employee of the Businesses as of the Closing
Date (including, without limitation, any employee who is
absent from work on the Closing Date on paid vacation or
pursuant to any leave of absence authorized by Seller or
required by law (hereinafter, all employees accepting
employment with Buyer being referred to collectively as the
"Transferred Employees")). Buyer agrees to give the
Transferred Employees credit for their years of service with
Seller for the purpose of determining any eligibility or
vesting provisions that may be contained in employee plans
provided to such Transferred Employees by Buyer in connection
with their employment with Buyer. Buyer also agrees to give
the Transferred Employees credit for all vacation and sick
leave accrued during their employment with Seller and to
provide, for the fiscal year ending June 6, 1998, the same
vacation and sick leave benefits to all Transferred Employees
as they would have been eligible to receive under the
Seller's policies now in effect.
(ii) Seller's Responsibilities. Seller agrees that,
except as provided in Section 4(c)(i) above, Buyer shall not
be subject to any liability with respect to, or resulting
from the termination by Seller of any of its employees from,
any profit sharing, 401(k), pension, stock option, vacation
pay, sick pay, personal leave, severance pay, retirement,
bonus, deferred compensation, group life and health insurance
or other employee benefit plan, agreement or commitment of
Seller.
The foregoing Section 4(c) does not, and shall not be deemed or construed
to, create any right in, or confer any right on, any employee or any
other third party.
(d) Bulk Sales. Buyer hereby waives compliance with any
applicable "bulk sales law" or similar law by Seller, and Seller shall
indemnify and hold Buyer harmless against any liability under any such
laws for losses resulting from non-compliance therewith or Seller's
application of the proceeds of the sale of Assets contemplated by this
Agreement.
5. Seller's Representations and Warranties. Seller represents and
warrants to Buyer the following:
(a) Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia. Seller possesses all requisite corporate power and
authority to own the Assets and operate the Businesses and to enter into
and perform this Agreement and the Seller's Documents. The execution and
delivery and performance of each of this Agreement and the Seller's
Documents by Seller have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered on behalf of
Seller by duly authorized officers of Seller, and this Agreement
constitutes, and the Seller's Documents, when executed and delivered,
will constitute, the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting the rights of
creditors and general principles of equity.
(b) Compliance with Laws and Instruments. Subject to the
consents and approvals listed on Schedule 5(b), the execution, delivery
and performance by Seller of this Agreement and the Seller's Documents
will not result in any material violation of or be in conflict with or
constitute a material default under any applicable statute, regulation,
order, rule, writ, injunction or decree of any court or governmental
authority or of the Articles of Incorporation or Bylaws of Seller or of
any material agreement or other material instrument to which Seller is a
party or is a subject, or constitute a default thereunder.
(c) Title to Assets. Seller has good, valid and marketable title
to all of the Assets, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and other encumbrances
and defects of title of any nature whatsoever, except for (i) liens for
current real, personal or other property taxes not yet due and payable,
and (ii) the liens described on Schedule 5(c) (the "Permitted
Encumbrances"). There are no existing agreements, options, commitments
or rights with, of or to any person (other than Buyer) to acquire any of
Seller's interests in the Assets.
(d) Condition of Assets. Seller makes no representation or
warranty as to the condition of the Assets, which shall be conveyed to
Buyer on an AS IS, WHERE IS basis.
(e) No Finder's Fees. Seller has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Seller, threatened, before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Seller's Documents, or the consummation of the
transactions contemplated hereby and thereby, and no investigation that
might result in any such suit, action or proceeding is pending or, to the
knowledge of Seller, threatened.
(g) Legal Compliance. To the knowledge of Seller, except as
disclosed on Schedule 5(g), Seller has complied with all laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof), applicable to the Assets
and the operation of the Businesses for which the failure to so comply
would have a material adverse effect on the Assets or the Businesses, and
no action, suit, proceedings, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against Seller
alleging any failure so to comply,
(h) Tax Matters.
(i) Seller has filed all state, local and federal tax
returns required to be filed in connection with the ownership
of the Assets and the operation of the Businesses. All such
tax returns were correct and complete in all material
respects. All state, local and federal taxes currently due
and payable by Seller in connection with the Businesses have
been paid.
(ii) Seller has withheld and paid all taxes required
to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party employed by or
relating to the Businesses.
(i) Real Property. With respect to each Sublease and, if
applicable, the Deed:
(i) the underlying lease or sublease to which Seller
is a party (the "Lease") is the legal, valid, binding and
enforceable obligation of the Seller and is in full force and
effect;
(ii) subject to any applicable consent or approval
listed in Schedule 5(b), the Lease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby (including the assignments
and assumptions referred to in Section 4 above);
(iii) to the knowledge of Seller, no party to the Lease
is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) to the knowledge of Seller, no party to the Lease
has repudiated any provision thereof;
(v) to the knowledge of Seller, there are no
disputes, oral agreements or forbearance programs in effect
as to the Lease or Sublease;
(vi) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
Lease, or, if applicable, the real property that is subject
to the Deed, except for Permitted Liens;
(vii) except as disclosed on Schedule 5(g), to the
knowledge of Seller, all premises subject to any Lease, or,
if applicable, the Deed, (A) have received all approvals of
governmental authorities (including licenses and permits)
required in connection with the operation of the Businesses
and for which failure to receive such approval would have a
material adverse effect on the Assets or the Businesses, and
(B) have been operated and maintained in accordance with all
laws, rules and regulations applicable to the operation of
the Businesses and for which failure to be so operated and
maintained would have a material adverse effect on the Assets
of the Businesses; and
(viii) Seller has good and marketable title to the
parcel of real property subject to the Deed, free and clear
of any security interest, lien, covenant or other
restriction, installments of special liens or assessments not
yet delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property
subject thereto.
(j) Intellectual Property. To the knowledge of the Seller,
Seller has the right to use the Software, pursuant to license, sublease,
agreement or permission. After the Closing, the Software will be owned
or available for use by Buyer on substantially the same terms and
conditions as by Seller prior to the Closing.
(k) Contracts. Seller represents and warrants to Buyer with
respect to each Contract assigned to Buyer that (i) such Contract is
legal, valid, binding, enforceable, and in full force and effect; (ii)
subject to any applicable consents and approvals listed on Schedule 5(b),
such Contract will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and
assumptions); (iii) to the knowledge of Seller, no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under such Contract; and (iv) to the
knowledge of the Seller, no party has repudiated any provision of such
Contract.
(l) Other Litigation. Seller represents and warrants to Buyer
that Seller: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge affecting the Businesses, and (ii) is
not a party or, to the knowledge of Seller, is not threatened to be made
a party to any action, suit, proceeding, hearing, or investigation
affecting the Businesses of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(m) Environmental, Health and Safety Matters. To the knowledge
of Seller:
(i) Seller has complied and is in compliance with all
Environmental, Health, and Safety Requirements for which
failure to so comply would have a material adverse effect on
the Assets or the Businesses. (As used herein,
Environmental, Health, and Safety Requirements shall mean all
federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and
determinations, all contractual obligations and all common
law concerning public health and safety, worker health and
safety, and pollution or protection of the environment.)
(ii) Seller has not received any written or oral
notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety
Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety
Requirements.
6. Buyer's Representations. Buyer represents and warrants to Seller
the following:
(a) Organization and Authority. Buyer is a limited partnership,
duly organized, validly existing and in good standing under the laws of
the State of Delaware. The sole general partner of Buyer is R. Manning,
Inc., a Florida corporation, and the sole limited partner of Buyer is RT
Orlando, Inc. a Georgia corporation. Buyer is duly qualified to do
business and is in good standing in each jurisdiction where the conduct
of its business currently requires it to be qualified or would require it
to be qualified after the consummation of the transactions provided for
in this Agreement and the Buyer's Documents. Buyer possesses all
requisite power and authority to enter into and perform this Agreement
and the Buyer's Documents. The execution and delivery and performance of
this Agreement and the Buyer's Documents by Buyer have been duly
authorized by all necessary action (including, without limitation, all
necessary action by the general partner of Buyer). This Agreement has
been duly executed and delivered on behalf of Buyer by the sole general
partner, as duly authorized by Buyer, and this Agreement constitutes, and
the Buyer's Documents, when executed and delivered, will constitute, the
legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting the rights of creditors and general principles
of equity.
(b) Compliance with Laws and Instruments. The execution,
delivery and performance by Buyer of this Agreement and the Buyer's
Documents will not result in any material violation of or be in conflict
with or constitute a material default under any applicable statute,
regulation, order, rule, writ, injunction or decree of any court or
governmental authority or of the Certificate of Limited Partnership or
Limited Partnership Agreement of Buyer or of any material agreement or
other material instrument to which Buyer is a party or is subject, or
constitute a default thereunder.
(c) No Finder's Fees. Buyer has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(d) Independent Investigation. Buyer has had full opportunity to
inspect the Businesses and the Assets and to ask all questions of Seller
regarding the Businesses and the Assets. Buyer has had the opportunity
to conduct its own independent investigation relating to all aspects of
the Businesses and to obtain whatever opinions of specialists and experts
it has deemed necessary in making the decisions to enter into this
Agreement and the Buyer's Documents and to consummate the transactions
contemplated hereby and thereby. In making such decisions, (i) Buyer has
not relied on information received by it from Seller regarding the past
or present earnings of the Businesses as a determinant or indicator of
future earnings of the Businesses, and (ii) Buyer has not relied on
information received from Seller regarding the prospects of future
earnings of the Businesses.
(e) Condition of Assets. BUYER ACKNOWLEDGES AND AGREES THAT ALL
ASSETS TO BE TRANSFERRED, ASSIGNED OR LICENSED PURSUANT TO THIS AGREEMENT
AND THE CLOSING DOCUMENTS SHALL BE TRANSFERRED, ASSIGNED OR LICENSED ON
AN "AS IS, WHERE IS" BASIS, AND THAT, EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 5 OF THIS AGREEMENT, SELLER IS MAKING, AND SHALL MAKE, NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, RESPECTING
ANY OF THE ASSETS, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER. FURTHER, BUYER ACKNOWLEDGES THAT BUYER HAS
INFORMED ITSELF AS TO THE BUSINESSES, AND BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT SELLER MAKES, AND SHALL MAKE, NO REPRESENTATION OR WARRANTY
OF ANY KIND WITH RESPECT TO THE BUSINESSES.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Buyer, threatened before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Buyer's Documents, or the consummation of the
transactions contemplated hereby, and no investigation that might result
in any such suit, action or proceeding is pending or, to the knowledge of
Buyer, threatened.
(g) Other Litigation. Buyer represents and warrants to Seller
that Buyer: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge, and (ii) is not a party or, to the
knowledge of Buyer, is not threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
7. Conditions to Closing.
(a) Conditions to Obligations of Buyer. All obligations of Buyer
under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions
precedent:
(i) The representations and warranties of Seller
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing as if made at the
Closing.
(ii) Seller shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by or
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceeding, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law for the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Seller at
Closing pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Buyer shall have received a certificate from
Seller, dated the Closing Date and certifying in such detail
as Buyer may reasonably request, that the conditions
specified in Sections 7(a)(i), 7(a)(ii) and 7(a)(iv) hereof
have been fulfilled.
(b) Conditions to Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or
satisfaction prior to or at the Closing, of each of the following
conditions precedent:
(i) The representations and warranties of Buyer
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing if made at the Closing.
(ii) Buyer shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by it
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceedings, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law of the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing, to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Buyer at Closing
pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Seller shall have received a certificate from
Buyer dated the Closing Date and certifying in such detail as
Seller may reasonably request, that the conditions specified
in Sections 7(b)(i) and 7(b)(ii) hereof have been fulfilled
and that all consents and approvals required or necessary to
transfer to Buyer all licenses or permits held by Seller or
the Businesses with respect to the sale or consumption of
alcoholic beverages on the premises at which the Businesses
are conducted have been obtained.
8. Term and Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by either Seller or Buyer, if such terminating party is not
otherwise in default in this Agreement and if the Closing shall not have
occurred on or before January 2, 1998, or such other extended date, if
any, mutually agreed to by the parties in writing; and
(c) by either party if there has been a material breach of any
representation, warranty, covenant or agreement by the other party that
has not been cured or for which adequate assurance (reasonably acceptable
to such terminating party) of cure has not been given, in either case
within fifteen (15) business days following receipt of notice of such
breach.
If either party terminates this Agreement pursuant to the provisions
hereof, such termination shall be effected by notice to the other party
specifying the provision hereof pursuant to which such termination is
made. Except for any liability for the breach of this Agreement, upon
the termination of this Agreement pursuant to this Section 8, this
Agreement shall forthwith become null and void and there shall be no
further liability or the obligation on the part of Seller or Buyer
hereunder or with respect hereto.
9. Indemnification.
(a) Indemnification of Buyer. Subject to the limitations set
forth in Sections 9(c), 9(d), and 9(e), Seller shall indemnify and hold
Buyer, its partners and their respective officers, directors,
shareholders, employees, agents and representatives (the "Buyer
Indemnified Parties") harmless from, against, for and in respect of any
and all damages, losses, settlement payments, obligations, liabilities,
claims, actions or causes of action (whether as a result of direct claims
or third-party claims) actually suffered, sustained, incurred or required
to be paid by Buyer Indemnified Parties, net of any resulting income tax
benefits to Buyer Indemnified Parties, because of (i) the breach of any
written representation, warranty, agreement or covenant of Seller
contained in this Agreement (as the same shall have been modified at any
time at or before Closing including, without limitation, any modification
contained in any certificate of Seller concerning such matters delivered
at the Closing) or the Closing Documents; (ii) any and all Excluded
Liabilities; (iii) any contamination on or under the property that is
subject to the Deed or the Sublease(s) or in any of the Assets caused by
Seller prior to the Closing Date, or any liability for remediation or
clean-up of environmental conditions as a result of Seller's operations,
whether on or under the property that is subject to the Deed or the
Sublease(s) or elsewhere; (iv) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
actually incurred by Buyer Indemnified Parties in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any
of the matters indemnified against in this Section 9(a).
(b) Indemnification of Seller. Subject to the limitations set
forth in Sections 9(c), 9(d) and 9(e), Buyer shall indemnify and hold
Seller, its affiliated corporations and their respective officers,
directors, shareholders, employees, agents and representatives (the
"Seller Indemnified Parties") harmless from, against, for and in respect
of any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action (whether as a result of
direct claims or third-party claims) actually suffered, sustained,
incurred or required to be paid by Seller Indemnified Parties, net of any
resulting income tax benefits to Seller Indemnified Parties, because of
(i) the breach of any written representation, warranty, agreement or
covenant of Buyer contained in this Agreement (as the same shall have
been modified at any time at or before Closing, including, without
limitation, any modification contained in any certificate of Buyer
concerning such matters delivered at the Closing) or the Closing
Documents; (ii) any and all Assumed Liabilities and all liabilities in
connection with the operation of the Businesses in respect of periods on
and after the Closing Date; (iii) any contamination on or under the
property that is subject to the Deed or Sublease(s) or in any of the
Assets caused by Buyer on or after the Closing Date or any liability for
remediation or clean-up of environmental conditions as a result of
Buyer's operations, whether on or under the property that is subject to
the Deed or the Sublease(s) or elsewhere; and (iv) all reasonable costs
and expenses (including, without limitation, attorneys' fees, interest
and penalties) incurred by Seller Indemnified Parties in connection with
any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 9(b).
(c) Survival of Indemnification Obligations. Notice of any claim
under Section 9(a)(i) or Section 9(b)(i) of the indemnification
provisions hereof must be given prior to the date that occurs two (2)
years after the Closing Date, and any such claims not made within such
period shall be of no force or effect. Notice of any other claim under
the indemnification provisions hereof must be given within the applicable
time period of any applicable statute of limitations.
(d) General Rules Regarding Indemnification. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be
subject to the following terms and conditions:
(i) The indemnified party shall give prompt (so as
not to materially prejudice the position of the indemnifying
party) written notice (which in no event shall exceed 30 days
from the date on which the indemnified party first became
aware of such claim or assertion) to the indemnifying party
of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the
indemnity agreements contained in Sections 9(a) or 9(b)
hereof, stating the nature and basis of said claims and the
amounts thereof, to the extent known:
(ii) If any action, suit or proceeding is brought
against the indemnified party with respect to which the
indemnifying party may have liability under the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on
appeal or for review which counsel for the indemnified party
shall deem appropriate) by the indemnifying party. The
indemnified party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense
unless the employment of such counsel and the payment of such
fees and expenses both shall have been specifically
authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (A) if there are defenses
available to the indemnified party that are inconsistent with
those available to the indemnifying party to such extent as
to create a conflict of interest between the indemnifying
party and the indemnified party, the indemnified party shall
have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent
defenses, and the indemnifying party shall be responsible for
the reasonable fees and expenses of the indemnified party's
counsel insofar as they relate to such inconsistent defenses,
and (B) if such action, suit or proceeding involves or could
have an effect on matters beyond the scope of the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
indemnified party shall have the right to direct (at its own
expense) the defense of such action, suit or proceeding
insofar as it relates to such other matters. The indemnified
party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is
represented by separate counsel.
(iii) The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all
books and records of the indemnified party relating to such
proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
Whether or not the indemnifying party chooses to defend or
prosecute any claim involving a third party, all parties
hereto shall cooperate in the defense or prosecution thereof
and shall furnish such records, information and testimony and
attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in
connection therewith.
(iv) The indemnified party shall not make any
settlement of any claims without the written consent of the
indemnifying party.
(e) Limits on Indemnification Obligation. Notwithstanding
anything in Sections 9(a) and 9(b) to the contrary or in conflict, any
amount for which Seller is obligated to reimburse Buyer may, in Seller's
sole discretion, be satisfied by reducing amounts currently due to Seller
under the Note or the Operating Agreement included in the Franchise
Documents by a like amount.
(f) Insurance Proceeds.
(i) In determining the amount of any loss, liability
or expense for which any indemnified party is entitled to
indemnification under this Agreement, the gross amount
thereof will be reduced by any insurance proceeds actually
paid to any indemnified party; provided, however, if such
party has been indemnified hereunder but does not actually
receive such insurance proceeds until after being
indemnified, such party shall reimburse the indemnifying
party for amounts paid to such party to the extent of the
insurance proceeds so received.
(ii) Following the Closing Date, if Buyer should
suffer any loss, liability or expense covered by any of
Seller's insurance policies and wishes to make a claim
against the issuer of such policy, Seller shall use its best
efforts to assist Buyer in ascertaining and establishing
coverage, pursuing such claim and collecting under such
policy. In connection with the foregoing sentence, Seller
shall not be required to incur any costs (including
attorneys' fees or demonstrable increases in insurance
premiums), other than normal overhead expenses, or to forego
any similar claim of its own with respect to the same
occurrence, in assisting Buyer in these efforts, unless
Seller shall otherwise be obligated to indemnify Buyer
pursuant to Section 9(a).
(iii) Following the Closing Date, if Seller should
suffer any loss, liability or expense covered by any of
Buyer's insurance policies and wish to make a claim against
the issuer of such policy, Buyer shall use its best efforts
to assist Seller ascertaining and establishing coverage,
pursuing such claim and collecting under such policy. In
connection with the foregoing sentence, Buyer shall not be
required to incur any costs (including attorneys' fees or
demonstrable increases in insurance premiums), other than
normal overhead expenses, or to forego any similar claim of
its own with respect to the same occurrence, in assisting
Seller in these efforts, unless Buyer shall otherwise be
obligated to indemnify Seller pursuant to Section 9(b).
(iv) If both an indemnifying party and an indemnified
party have insurance coverage respecting a particular claim
for which indemnification is provided pursuant to Sections
9(a) and 9(b), the parties agree that the insurance coverage
of the indemnifying party will be called upon before the
insurance coverage of the indemnified party is called upon.
10. Miscellaneous.
(a) Survival. Unless this Agreement is terminated pursuant to
Section 8(a) or Section 8(b) hereof, all representations, warranties,
covenants and agreements made in this Agreement or in a certificate
delivered pursuant hereto by the parties hereto shall survive the
termination of this Agreement or the consummation of the transactions
contemplated hereby for a period of two (2) years after the Closing Date,
except for the provisions of Section 9 hereof, which provisions shall
survive the consummation of the transactions contemplated hereby in
accordance with the terms of such Section 9.
(b) Notices. All notices, requests, or other communications
hereunder shall be in writing and shall be deemed to have been duly given
when delivered or refused, if delivered personally, or, if delivered by
overnight carrier, such as Federal Express, when delivered as follows:
If delivered to Seller:
Ruby Tuesday, Inc.
Attention: Legal Department
4721 Morrison Drive
Mobile, Alabama 36609-3350
If delivered to Buyer:
RT Orlando Franchise, L.P.
8042 Monier Way
Orlando, Florida 32835
(c) Mail Addressed to Seller. After the Closing Date, Buyer may
open all mail addressed to Seller at the premises of the Businesses.
Buyer shall promptly forward to Seller any mail that does not require
Buyer's action.
(d) Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses.
(e) Sales, Transfer, Documentary and Other Taxes. In addition to
the Transaction Taxes paid herewith, Buyer shall pay all federal, state
and local sales, documentary, transfer or other taxes or recording fees,
if any, due as a result of the purchase, sale or transfer of the Assets
hereunder, whether imposed by law on Seller or Buyer, and Buyer shall
indemnify, reimburse and hold harmless Seller in respect of the liability
for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required to be filed in connection therewith.
(f) Entire Agreement. This Agreement, together with the Closing
Documents, sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and shall not be amended
or modified except by written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement, together with the
Closing Documents.
(g) Assignment and Binding Effect. This Agreement may not be
assigned by either party hereto without the prior written consent of the
other party. Subject to the foregoing, all of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the successors and assigns of Seller and Buyer, but
shall not be construed as conferring any other rights on any other
person.
(h) Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a
written instrument duly executed by such party.
(i) Construction. All headings contained in this Agreement are
for convenience of reference only, and do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation
of this Agreement.
(j) Exhibits and Schedules. All Exhibits and Schedules referred
to herein are intended to and hereby are specifically made part of this
Agreement.
(k) Severability. Any provision of this Agreement that is
invalid or enforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provisions in any other jurisdiction.
(l) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which counterparts taken together
shall constitute one and the same instrument.
(m) Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first above written.
SELLER:
RUBY TUESDAY, INC.
By:/s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
BUYER:
RT ORLANDO FRANCHISE, L.P.,
d/b/a RT Orlando Franchise, Ltd.
By:/s/ Ray G. Manning, Jr.
R. Manning, Inc., General Partner
Name: Ray G. Manning, Jr.
Title:President
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 3(c) Allocation of Purchase Price
Schedule 5(b) Seller's Consents and Approvals
Schedule 5(c) Permitted Encumbrances
Schedule 5(g) Compliance Disclosure
Schedule 7(a)(iv) Required Consents and Approvals
Exhibits
Exhibit A List of Restaurant Locations
Exhibit B Form of Note
Exhibit C Form of Security Agreement
Exhibit D Form of Guaranty
Exhibit E Form of Bill of Sale
Exhibit F Form of Certificate of Occasional or Isolated Sale
Exhibit G Legal Description for Owned Real Property
Schedule 3(c)
ALLOCATION OF PURCHASE PRICE
Schedule 5(b)
SELLER'S CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to Buyer
all licenses or permits currently held by Seller or the Businesses with
respect to the sale or consumption of alcoholic beverages on the premises at
which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s) or the Contracts.
Schedule 5(c)
PERMITTED ENCUMBRANCES
1. Liens that are immaterial in character, amount or extent, and that do
not materially affect the value, or do not materially interfere with the
present use, of the Assets.
2. UCC-1 Financing Statement filed August 5, 1996, as File No.960000161575
with the Florida Secretary of State, showing Ruby Tuesday, Inc. as
Debtor, and CLG, Inc., as Secured Party, covering equipment leased and
located as follows:
(n) Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd., Pembroke,
FL 33026 (RT South Florida Franchise, L.P.)
(o) Location 2681 - Fashion Island Mall, 18801-B Biscayne Blvd.,
Miami, FL 33180 (RT South Florida Franchise, L.P.)
(p) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114 (RT
Orlando Franchise, L.P.)
(q) Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620 (RT
Tampa Franchise, L.P.)
(r) Location 2860 - 9457 W.Atlantic Ave., Coral Springs, FL 33071 (RT
South Florida Franchise, L.P.)
3. UCC-1 Financing Statement filed August 5, 1996, as File No. 960000161579
with the Florida Secretary of State, showing Ruby Tuesday, Inc., as
Debtor, and CLG, Inc., as Secured Party, covering equipment leased and
located as follows:
(a) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114 (RT
Orlando Franchise, L.P.)
b. Location 3679 - 3500 S.W. College Rd., Ste. 104, Ocala, FL 33474
(RT Orlando Franchise, L.P.)
c. Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620 (RT
Tampa Franchise, L.P.)
d. Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd., Pembroke,
FL 33026 (RT South Florida Franchise, L.P.)
e. Location 2609 - 1950 N. Tamiami Trail, Naples, FL 33940 (RT Tampa
Franchise, L.P.)
f. Location 3924 - 777 East Merritt Causeway, Merritt Island, FL
32952 (RT Orlando Franchise, L.P.)
4. UCC-1 Financing Statement filed September 13, 1996, as File No.
960000192921 with the Florida Secretary of State, showing Ruby Tuesday,
Inc., as Debtor and Orix Credit Alliance, Inc., as Secured Party.
Schedule 5(g)
COMPLIANCE DISCLOSURE
The Businesses are not in full compliance with certain requirements of
the Americans with Disabilities Act of 1990.
Schedule 7(a)(iv)
REQUIRED CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to Buyer
all licenses or permits currently held by Seller or the Businesses with
respect to the sale or consumption of alcoholic beverages on the premises at
which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s).
3. All consents required by Seller's current lender(s).
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of the 2nd day
of July, 1997, between RUBY TUESDAY, INC., a Georgia corporation, whose
address is 4721 Morrison Drive, Mobile, Alabama 36609-3350 (herein
"Seller"), and RT TAMPA FRANCHISE, L.P., d/b/a RT Tampa Franchise, Ltd.,
a Delaware limited partnership, whose address is 1017 Frankland Road,
Tampa, Florida 33629 (herein "Buyer").
1. Introduction. Seller is currently engaged in the business of
operating restaurants under the trade name, trademark and service mark
"Ruby Tuesday" at each of the locations listed on Exhibit A attached
hereto (hereinafter, the business of operating each such restaurant at
each such location being referred to individually, as the "Business" and
collectively as the "Businesses"). Seller wishes to sell to Buyer, and
Buyer wishes to purchase from Seller, certain assets of Seller used
exclusively in operating the Businesses, upon the terms and conditions
set out in this Agreement. Therefore, in consideration of the premises,
the mutual representations, warranties, covenants and agreements
hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties agree as
follows:
2. Sale and Purchase of Assets; Assumption of Liabilities. The
consummation of the transactions provided for herein (the "Closing")
shall take place at the offices of Seller at such time and place as the
parties may hereto agree in writing (the "Closing Date"), provided,
however, the Closing shall take place on the date that is the later to
occur of (i) the date that the temporary liquor licenses for the
Businesses have been issued to Buyer by the Florida Division of Alcoholic
Beverages and Tobacco, or (ii) the date that Buyer has received a firm
commitment for financing for the purchase of the Businesses on terms
reasonably acceptable to Buyer; provided, however, the Closing shall not
take place unless ten (10) business days have passed after the date that
Buyer receives Seller's Uniform Franchise Offering Circular without
Buyer's exercising any rescission rights available to Buyer under
applicable franchise law. On the Closing Date:
(a) Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, Buyer shall purchase from Seller, and
Seller shall sell, transfer, assign, convey and deliver, all of Seller's
right, title and interest in and to the following assets of Seller used
exclusively in the operation of the Businesses (the "Assets"), which
Assets shall be conveyed AS-IS, WHERE-IS:
(i) all stock in trade and merchandise in Seller's
inventory used by Seller exclusively in the conduct of the
Businesses as of the Closing Date (the "Inventory");
(ii) all furniture, fixtures, furnishings, equipment
and leasehold improvements used by Seller exclusively in the
conduct of the Businesses as of the Closing Date (the
"Personal Property");
(iii) all rights of Seller to the software used
exclusively in the conduct of the Businesses as of the
Closing Date and located at the premises where the Businesses
are conducted, including, without limitation, all rights of
Seller to use such software and the documentation related
thereto (the "Software");
(iv) all rights of Seller pursuant to all contracts,
leases (except for any interest of Seller in any lease with
any third party regarding the premises at which the
Businesses are conducted, other than the interest(s), if any,
to be subleased to Buyer pursuant to the Sublease(s) defined
below), warranties, commitments, agreements, purchase and
sale orders and other executory commitments of Seller related
solely to the Businesses as of the Closing Date (the
"Contracts");
(v) all rights of Seller in and to the underlying
land, if any, described on Exhibit G attached hereto,
together with the structure(s) building(s) and other
improvements owned by Seller and located on such land;
(vi) all rights of Seller (to the extent assignable)
pursuant to any governmental permits and licenses used
exclusively in the operation of the Businesses (the
"Permits");
(vii) Seller's telephone numbers for the Businesses
(the "Telephone Numbers");
(viii) Seller's petty cash on hand at the
Businesses as of the Closing Date (the "Petty Cash").
Notwithstanding the foregoing, the Assets do not include the following
assets of Seller:
(i) Seller's accounts or notes receivable;
(ii) Seller's cash on hand at or with respect to the
Businesses (other than the Petty Cash);
(iii) Seller's trade name, trademarks, service marks,
copyrights and all other intellectual property or intangible
property of Seller; and
(iv) to the extent that the Businesses are conducted
on premises leased by Seller from a third party (or third
parties), all rights of Seller in any leasehold or other
interest in the premises at which the Businesses are
conducted (except for any interest(s) to be subleased to
Buyer pursuant to the Sublease(s), defined below).
(b) Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, Seller shall assign, and Buyer shall assume
and agree to satisfy, pay, discharge, perform and fulfill, as applicable,
as they become due, without charge or cost to Seller except as provided
for in this Agreement, and agrees to hold Seller harmless with respect
to, the following liabilities and obligations of Seller (the "Assumed
Liabilities"):
(i) all liabilities and obligations of Seller related
to owning the Assets and operating the Businesses on and
after the Closing Date except for the Excluded Liabilities
described below; and
(ii) all liabilities and obligations of Seller under
the Contracts, the Permits and the Telephone Numbers that
arise or are attributable to events or conditions occurring
on or after the Closing Date.
Notwithstanding the foregoing, the Assumed Liabilities shall not include
the following liabilities or obligations of Seller (the "Excluded
Liabilities"):
(i) except to the extent otherwise provided in this
Agreement, any liabilities or obligations, whether or not
known, of Seller to be performed prior to the Closing Date or
arising out of or relating to Seller's ownership of the
Assets or operation of the Businesses prior to the Closing
Date; and
(ii) Seller's accounts payable, notes payable and
other obligations for or related to Seller's indebtedness to
banks or financial institutions.
3. Purchase Price. In consideration of the sale of Assets and
assumption of the Assumed Liabilities, at the Closing, Buyer shall
deliver to Seller the following:
(i) Nine Million Seven Hundred Thirteen Thousand Four
Hundred Forty-One Dollars ($9,713,441) (the "Purchase
Price"); and
(ii) any sales or other taxes due on the sale of
Assets and assumption of the Assumed Liabilities contemplated
by this Agreement (the "Transaction Taxes").
(a) Payment of the Purchase Price. The Purchase Price shall be
paid as follows:
(i) by the delivery of the sum of (A) seventy-five
(75%) percent of the Purchase Price, plus (B) the Transaction
Taxes, all to be paid by certified check drawn on a local
bank or by wire transfer of funds; and
(ii) by the delivery to Seller of Buyer's promissory
note, dated the Closing Date, in favor of Seller in the
original principal amount equal to twenty-five (25%) percent
of the Purchase Price (the "Note") in the form attached
hereto as Exhibit B. As security for the payment of the
Note, Buyer shall deliver to Seller a Security Agreement,
dated the Closing Date, in the form attached hereto as
Exhibit C and such other documents as may be reasonably
required by Seller to perfect a security interest for the
benefit of Seller in and to Buyer's assets (including,
without limitation, UCC-1 financing statements in favor of
Seller), and Buyer shall cause Gary E. Gallagher to enter
into a Guaranty in the form attached hereto as Exhibit D.
(b) Other Adjustments to Purchase Price. At the Closing, or as
soon as practicable after the Closing, the Purchase Price shall be
adjusted, on a dollar-for-dollar basis, to reflect the proration of all
items of expense or income directly relating to the Assets and the
operation of the Businesses as of the Closing Date, and the net
adjustments for all such items shall be paid in immediately available
funds on or before the date that occurs sixty (60) days after the Closing
Date (the "Adjustment Payment Date"). Prorated items shall include the
following: rent, real and personal property taxes, payroll and payroll
taxes, insurance premiums, utilities, security deposits, other prepaid
items and other items customarily prorated. To the extent possible, any
prorations not determinable as of the Closing Date shall be prorated on
the basis of the most current information available at Closing; provided,
however, Seller and Buyer agree that, upon presentation, on or before the
Adjustment Payment Date, of written confirmation of (i) a change in an
estimated amount, or (ii) a determination of the amount of any proration
that cannot be determined as of the Closing Date, such amount will be
reflected in the payment(s) to be made pursuant to this Section 3(b) on
or before the Adjustment Payment Date.
(c) Allocation of Purchase Price. The aggregate amount of the
Purchase Price and the Assumed Liabilities shall be allocated among the
Assets substantially in accordance with Schedule 3(c) attached hereto.
Seller and Buyer hereby agree to use such allocation to complete and file
Internal Revenue Service Form 8594 with the Internal Revenue Service.
4. Delivery of Documents and Related Transactions.
(a) At the Closing, the following documents (the "Closing
Documents"), together with the cash portion of the Purchase Price, shall
be delivered as follows:
(i) Seller shall deliver to Buyer the following
executed documents (the "Seller's Documents"):
1) a bill of sale, assignment and assumption
agreement for the Assets substantially in the form of
Exhibit E attached hereto (the "Bill of Sale"),
transferring to Buyer all of Seller's right, title and
interest in and to said Assets, free and clear of all
encumbrances except for Permitted Encumbrances (as
defined in Section 5(c) below), pursuant to which Buyer
will accept such Assets and assume the Assumed
Liabilities;
2) a Certificate of Occasional or Isolated
Sale substantially in the form of Exhibit F attached
hereto (the "Certificate of Occasional or Isolated
Sale");
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the following:
(A) a sublease or subleases between
Seller, as sublessor, and Buyer, as sublessee, of
such premises, in form satisfactory to the
parties hereto (the "Sublease(s)"); and
(B) the written consent of each landlord
to the Sublease(s), if required;
4) to the extent that the Businesses are
conducted on premises owned by Seller, a deed conveying
Seller's interest in and to the underlying land,
together with structure(s), building(s) and other
improvements at the premises described on Exhibit G
attached hereto (the "Deed");
5) an operating agreement, a development
agreement and a support services agreement,
substantially in the form of the drafts dated July 2,
1997, July 2, 1997, and July 2, 1997, respectively,
presented by Seller to Buyer (collectively, the
"Franchise Documents"); and
6) other related documents that Buyer may have
reasonably requested on or prior to the Closing Date.
(ii) Buyer shall deliver to Seller (x) the cash
portion of the Purchase Price, and (y) the following executed
documents (the "Buyer's Documents"):
1) the Note;
2) the Bill of Sale;
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the Sublease(s);
4) the Security Agreement and other security
documents referred to in Section 3(a)(ii) of this
Agreement;
5) the Guaranty;
6) the Franchise Documents; and
7) other related documents that Seller may
have reasonably requested on or prior to the Closing
Date.
(b) Further Assurances and Cooperation Post-Closing. Seller and
Buyer, from time to time after the Closing (but without obligation
separate from the obligations expressly provided by this Agreement),
hereby agree to execute, acknowledge and deliver to each other such
instruments of conveyance and transfer, and will take such other actions
and execute and deliver such other documents, certifications and further
assurances, as either party may reasonably request with respect to the
assignment, transfer and delivery of the Assets and the assumption of the
Assumed Liabilities and the perfection of Seller's security interest in
the Assets pursuant to Section 3(a)(ii), in order to consummate in full
the transactions provided for herein.
(c) Employees. Buyer and Seller agree as follows:
(i) Buyer's Responsibilities. Buyer shall offer
employment, on substantially the same terms and conditions as
currently in effect, to commence on and as of the Closing
Date, to each employee of the Businesses as of the Closing
Date (including, without limitation, any employee who is
absent from work on the Closing Date on paid vacation or
pursuant to any leave of absence authorized by Seller or
required by law (hereinafter, all employees accepting
employment with Buyer being referred to collectively as the
"Transferred Employees")). Buyer agrees to give the
Transferred Employees credit for their years of service with
Seller for the purpose of determining any eligibility or
vesting provisions that may be contained in employee plans
provided to such Transferred Employees by Buyer in connection
with their employment with Buyer. Buyer also agrees to give
the Transferred Employees credit for all vacation and sick
leave accrued during their employment with Seller and to
provide, for the fiscal year ending June 6, 1998, the same
vacation and sick leave benefits to all Transferred Employees
as they would have been eligible to receive under the
Seller's policies now in effect.
(ii) Seller's Responsibilities. Seller agrees that,
except as provided in Section 4(c)(i) above, Buyer shall not
be subject to any liability with respect to, or resulting
from the termination by Seller of any of its employees from,
any profit sharing, 401(k), pension, stock option, vacation
pay, sick pay, personal leave, severance pay, retirement,
bonus, deferred compensation, group life and health insurance
or other employee benefit plan, agreement or commitment of
Seller.
The foregoing Section 4(c) does not, and shall not be deemed or construed
to, create any right in, or confer any right on, any employee or any
other third party.
(d) Bulk Sales. Buyer hereby waives compliance with any
applicable "bulk sales law" or similar law by Seller, and Seller shall
indemnify and hold Buyer harmless against any liability under any such
laws for losses resulting from non-compliance therewith or Seller's
application of the proceeds of the sale of Assets contemplated by this
Agreement.
5. Seller's Representations and Warranties. Seller represents and
warrants to Buyer the following:
(a) Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia. Seller possesses all requisite corporate power and
authority to own the Assets and operate the Businesses and to enter into
and perform this Agreement and the Seller's Documents. The execution and
delivery and performance of each of this Agreement and the Seller's
Documents by Seller have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered on behalf of
Seller by duly authorized officers of Seller, and this Agreement
constitutes, and the Seller's Documents, when executed and delivered,
will constitute, the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting the rights of
creditors and general principles of equity.
(b) Compliance with Laws and Instruments. Subject to the
consents and approvals listed on Schedule 5(b), the execution, delivery
and performance by Seller of this Agreement and the Seller's Documents
will not result in any material violation of or be in conflict with or
constitute a material default under any applicable statute, regulation,
order, rule, writ, injunction or decree of any court or governmental
authority or of the Articles of Incorporation or Bylaws of Seller or of
any material agreement or other material instrument to which Seller is a
party or is a subject, or constitute a default thereunder.
(c) Title to Assets. Seller has good, valid and marketable title
to all of the Assets, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and other encumbrances
and defects of title of any nature whatsoever, except for (i) liens for
current real, personal or other property taxes not yet due and payable,
and (ii) the liens described on Schedule 5(c) (the "Permitted
Encumbrances"). There are no existing agreements, options, commitments
or rights with, of or to any person (other than Buyer) to acquire any of
Seller's interests in the Assets.
(d) Condition of Assets. Seller makes no representation or
warranty as to the condition of the Assets, which shall be conveyed to
Buyer on an AS IS, WHERE IS basis.
(e) No Finder's Fees. Seller has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Seller, threatened, before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Seller's Documents, or the consummation of the
transactions contemplated hereby and thereby, and no investigation that
might result in any such suit, action or proceeding is pending or, to the
knowledge of Seller, threatened.
(g) Legal Compliance. To the knowledge of Seller, except as
disclosed on Schedule 5(g), Seller has complied with all laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof), applicable to the Assets
and the operation of the Businesses for which the failure to so comply
would have a material adverse effect on the Assets or the Businesses, and
no action, suit, proceedings, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against Seller
alleging any failure so to comply,
(h) Tax Matters.
(i) Seller has filed all state, local and federal tax
returns required to be filed in connection with the ownership
of the Assets and the operation of the Businesses. All such
tax returns were correct and complete in all material
respects. All state, local and federal taxes currently due
and payable by Seller in connection with the Businesses have
been paid.
(ii) Seller has withheld and paid all taxes required
to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party employed by or
relating to the Businesses.
(i) Real Property. With respect to each Sublease and, if
applicable, the Deed:
(i) the underlying lease or sublease to which Seller
is a party (the "Lease") is the legal, valid, binding and
enforceable obligation of the Seller and is in full force and
effect;
(ii) subject to any applicable consent or approval
listed in Schedule 5(b), the Lease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby (including the assignments
and assumptions referred to in Section 4 above);
(iii) to the knowledge of Seller, no party to the Lease
is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) to the knowledge of Seller, no party to the Lease
has repudiated any provision thereof;
(v) to the knowledge of Seller, there are no
disputes, oral agreements or forbearance programs in effect
as to the Lease or Sublease;
(vi) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
Lease, or, if applicable, the real property that is subject
to the Deed, except for Permitted Liens;
(vii) except as disclosed on Schedule 5(g), to the
knowledge of Seller, all premises subject to any Lease, or,
if applicable, the Deed, (A) have received all approvals of
governmental authorities (including licenses and permits)
required in connection with the operation of the Businesses
and for which failure to receive such approval would have a
material adverse effect on the Assets or the Businesses, and
(B) have been operated and maintained in accordance with all
laws, rules and regulations applicable to the operation of
the Businesses and for which failure to be so operated and
maintained would have a material adverse effect on the Assets
of the Businesses; and
(viii) Seller has good and marketable title to the
parcel of real property subject to the Deed, free and clear
of any security interest, lien, covenant or other
restriction, installments of special liens or assessments not
yet delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property
subject thereto.
(j) Intellectual Property. To the knowledge of the Seller,
Seller has the right to use the Software, pursuant to license, sublease,
agreement or permission. After the Closing, the Software will be owned
or available for use by Buyer on substantially the same terms and
conditions as by Seller prior to the Closing.
(k) Contracts. Seller represents and warrants to Buyer with
respect to each Contract assigned to Buyer that (i) such Contract is
legal, valid, binding, enforceable, and in full force and effect; (ii)
subject to any applicable consents and approvals listed on Schedule 5(b),
such Contract will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and
assumptions); (iii) to the knowledge of Seller, no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under such Contract; and (iv) to the
knowledge of the Seller, no party has repudiated any provision of such
Contract.
(l) Other Litigation. Seller represents and warrants to Buyer
that Seller: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge affecting the Businesses, and (ii) is
not a party or, to the knowledge of Seller, is not threatened to be made
a party to any action, suit, proceeding, hearing, or investigation
affecting the Businesses of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(m) Environmental, Health and Safety Matters. To the knowledge
of Seller:
(i) Seller has complied and is in compliance with all
Environmental, Health, and Safety Requirements for which
failure to so comply would have a material adverse effect on
the Assets or the Businesses. (As used herein,
Environmental, Health, and Safety Requirements shall mean all
federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and
determinations, all contractual obligations and all common
law concerning public health and safety, worker health and
safety, and pollution or protection of the environment.)
(ii) Seller has not received any written or oral
notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety
Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety
Requirements.
6. Buyer's Representations. Buyer represents and warrants to Seller
the following:
(a) Organization and Authority. Buyer is a limited partnership,
duly organized, validly existing and in good standing under the laws of
the State of Delaware. The sole general partner of Buyer is Gallagher
Family, Inc., a Florida corporation, and the sole limited partner of
Buyer is RT Tampa, Inc. a Georgia corporation. Buyer is duly qualified
to do business and is in good standing in each jurisdiction where the
conduct of its business currently requires it to be qualified or would
require it to be qualified after the consummation of the transactions
provided for in this Agreement and the Buyer's Documents. Buyer
possesses all requisite power and authority to enter into and perform
this Agreement and the Buyer's Documents. The execution and delivery and
performance of this Agreement and the Buyer's Documents by Buyer have
been duly authorized by all necessary action (including, without
limitation, all necessary action by the general partner of Buyer). This
Agreement has been duly executed and delivered on behalf of Buyer by the
sole general partner, as duly authorized by Buyer, and this Agreement
constitutes, and the Buyer's Documents, when executed and delivered, will
constitute, the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with their respective terms, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws relating to or affecting the rights of creditors and general
principles of equity.
(b) Compliance with Laws and Instruments. The execution,
delivery and performance by Buyer of this Agreement and the Buyer's
Documents will not result in any material violation of or be in conflict
with or constitute a material default under any applicable statute,
regulation, order, rule, writ, injunction or decree of any court or
governmental authority or of the Certificate of Limited Partnership or
Limited Partnership Agreement of Buyer or of any material agreement or
other material instrument to which Buyer is a party or is subject, or
constitute a default thereunder.
(c) No Finder's Fees. Buyer has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(d) Independent Investigation. Buyer has had full opportunity to
inspect the Businesses and the Assets and to ask all questions of Seller
regarding the Businesses and the Assets. Buyer has had the opportunity
to conduct its own independent investigation relating to all aspects of
the Businesses and to obtain whatever opinions of specialists and experts
it has deemed necessary in making the decisions to enter into this
Agreement and the Buyer's Documents and to consummate the transactions
contemplated hereby and thereby. In making such decisions, (i) Buyer has
not relied on information received by it from Seller regarding the past
or present earnings of the Businesses as a determinant or indicator of
future earnings of the Businesses, and (ii) Buyer has not relied on
information received from Seller regarding the prospects of future
earnings of the Businesses.
(e) Condition of Assets. BUYER ACKNOWLEDGES AND AGREES THAT ALL
ASSETS TO BE TRANSFERRED, ASSIGNED OR LICENSED PURSUANT TO THIS AGREEMENT
AND THE CLOSING DOCUMENTS SHALL BE TRANSFERRED, ASSIGNED OR LICENSED ON
AN "AS IS, WHERE IS" BASIS, AND THAT, EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 5 OF THIS AGREEMENT, SELLER IS MAKING, AND SHALL MAKE, NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, RESPECTING
ANY OF THE ASSETS, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER. FURTHER, BUYER ACKNOWLEDGES THAT BUYER HAS
INFORMED ITSELF AS TO THE BUSINESSES, AND BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT SELLER MAKES, AND SHALL MAKE, NO REPRESENTATION OR WARRANTY
OF ANY KIND WITH RESPECT TO THE BUSINESSES.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Buyer, threatened before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Buyer's Documents, or the consummation of the
transactions contemplated hereby, and no investigation that might result
in any such suit, action or proceeding is pending or, to the knowledge of
Buyer, threatened.
(g) Other Litigation. Buyer represents and warrants to Seller
that Buyer: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge, and (ii) is not a party or, to the
knowledge of Buyer, is not threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
7. Conditions to Closing.
(a) Conditions to Obligations of Buyer. All obligations of Buyer
under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions
precedent:
(i) The representations and warranties of Seller
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing as if made at the
Closing.
(ii) Seller shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by or
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceeding, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law for the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Seller at
Closing pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Buyer shall have received a certificate from
Seller, dated the Closing Date and certifying in such detail
as Buyer may reasonably request, that the conditions
specified in Sections 7(a)(i), 7(a)(ii) and 7(a)(iv) hereof
have been fulfilled.
(b) Conditions to Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or
satisfaction prior to or at the Closing, of each of the following
conditions precedent:
(i) The representations and warranties of Buyer
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing if made at the Closing.
(ii) Buyer shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by it
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceedings, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law of the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing, to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Buyer at Closing
pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Seller shall have received a certificate from
Buyer dated the Closing Date and certifying in such detail as
Seller may reasonably request, that the conditions specified
in Sections 7(b)(i) and 7(b)(ii) hereof have been fulfilled
and that all consents and approvals required or necessary to
transfer to Buyer all licenses or permits held by Seller or
the Businesses with respect to the sale or consumption of
alcoholic beverages on the premises at which the Businesses
are conducted have been obtained.
8. Term and Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by either Seller or Buyer, if such terminating party is not
otherwise in default in this Agreement and if the Closing shall not have
occurred on or before January 2, 1998, or such other extended date, if
any, mutually agreed to by the parties in writing; and
(c) by either party if there has been a material breach of any
representation, warranty, covenant or agreement by the other party that
has not been cured or for which adequate assurance (reasonably acceptable
to such terminating party) of cure has not been given, in either case
within fifteen (15) business days following receipt of notice of such
breach.
If either party terminates this Agreement pursuant to the provisions
hereof, such termination shall be effected by notice to the other party
specifying the provision hereof pursuant to which such termination is
made. Except for any liability for the breach of this Agreement, upon
the termination of this Agreement pursuant to this Section 8, this
Agreement shall forthwith become null and void and there shall be no
further liability or the obligation on the part of Seller or Buyer
hereunder or with respect hereto.
9. Indemnification.
(a) Indemnification of Buyer. Subject to the limitations set
forth in Sections 9(c), 9(d), and 9(e), Seller shall indemnify and hold
Buyer, its partners and their respective officers, directors,
shareholders, employees, agents and representatives (the "Buyer
Indemnified Parties") harmless from, against, for and in respect of any
and all damages, losses, settlement payments, obligations, liabilities,
claims, actions or causes of action (whether as a result of direct claims
or third-party claims) actually suffered, sustained, incurred or required
to be paid by Buyer Indemnified Parties, net of any resulting income tax
benefits to Buyer Indemnified Parties, because of (i) the breach of any
written representation, warranty, agreement or covenant of Seller
contained in this Agreement (as the same shall have been modified at any
time at or before Closing including, without limitation, any modification
contained in any certificate of Seller concerning such matters delivered
at the Closing) or the Closing Documents; (ii) any and all Excluded
Liabilities; (iii) any contamination on or under the property that is
subject to the Deed or the Sublease(s) or in any of the Assets caused by
Seller prior to the Closing Date, or any liability for remediation or
clean-up of environmental conditions as a result of Seller's operations,
whether on or under the property that is subject to the Deed or the
Sublease(s) or elsewhere; (iv) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
actually incurred by Buyer Indemnified Parties in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any
of the matters indemnified against in this Section 9(a).
(b) Indemnification of Seller. Subject to the limitations set
forth in Sections 9(c), 9(d) and 9(e), Buyer shall indemnify and hold
Seller, its affiliated corporations and their respective officers,
directors, shareholders, employees, agents and representatives (the
"Seller Indemnified Parties") harmless from, against, for and in respect
of any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action (whether as a result of
direct claims or third-party claims) actually suffered, sustained,
incurred or required to be paid by Seller Indemnified Parties, net of any
resulting income tax benefits to Seller Indemnified Parties, because of
(i) the breach of any written representation, warranty, agreement or
covenant of Buyer contained in this Agreement (as the same shall have
been modified at any time at or before Closing, including, without
limitation, any modification contained in any certificate of Buyer
concerning such matters delivered at the Closing) or the Closing
Documents; (ii) any and all Assumed Liabilities and all liabilities in
connection with the operation of the Businesses in respect of periods on
and after the Closing Date; (iii) any contamination on or under the
property that is subject to the Deed or Sublease(s) or in any of the
Assets caused by Buyer on or after the Closing Date or any liability for
remediation or clean-up of environmental conditions as a result of
Buyer's operations, whether on or under the property that is subject to
the Deed or the Sublease(s) or elsewhere; and (iv) all reasonable costs
and expenses (including, without limitation, attorneys' fees, interest
and penalties) incurred by Seller Indemnified Parties in connection with
any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 9(b).
(c) Survival of Indemnification Obligations. Notice of any claim
under Section 9(a)(i) or Section 9(b)(i) of the indemnification
provisions hereof must be given prior to the date that occurs two (2)
years after the Closing Date, and any such claims not made within such
period shall be of no force or effect. Notice of any other claim under
the indemnification provisions hereof must be given within the applicable
time period of any applicable statute of limitations.
(d) General Rules Regarding Indemnification. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be
subject to the following terms and conditions:
(i) The indemnified party shall give prompt (so as
not to materially prejudice the position of the indemnifying
party) written notice (which in no event shall exceed 30 days
from the date on which the indemnified party first became
aware of such claim or assertion) to the indemnifying party
of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the
indemnity agreements contained in Sections 9(a) or 9(b)
hereof, stating the nature and basis of said claims and the
amounts thereof, to the extent known:
(ii) If any action, suit or proceeding is brought
against the indemnified party with respect to which the
indemnifying party may have liability under the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on
appeal or for review which counsel for the indemnified party
shall deem appropriate) by the indemnifying party. The
indemnified party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense
unless the employment of such counsel and the payment of such
fees and expenses both shall have been specifically
authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (A) if there are defenses
available to the indemnified party that are inconsistent with
those available to the indemnifying party to such extent as
to create a conflict of interest between the indemnifying
party and the indemnified party, the indemnified party shall
have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent
defenses, and the indemnifying party shall be responsible for
the reasonable fees and expenses of the indemnified party's
counsel insofar as they relate to such inconsistent defenses,
and (B) if such action, suit or proceeding involves or could
have an effect on matters beyond the scope of the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
indemnified party shall have the right to direct (at its own
expense) the defense of such action, suit or proceeding
insofar as it relates to such other matters. The indemnified
party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is
represented by separate counsel.
(iii) The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all
books and records of the indemnified party relating to such
proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
Whether or not the indemnifying party chooses to defend or
prosecute any claim involving a third party, all parties
hereto shall cooperate in the defense or prosecution thereof
and shall furnish such records, information and testimony and
attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in
connection therewith.
(iv) The indemnified party shall not make any
settlement of any claims without the written consent of the
indemnifying party.
(e) Limits on Indemnification Obligation. Notwithstanding
anything in Sections 9(a) and 9(b) to the contrary or in conflict, any
amount for which Seller is obligated to reimburse Buyer may, in Seller's
sole discretion, be satisfied by reducing amounts currently due to Seller
under the Note or the Operating Agreement included in the Franchise
Documents by a like amount.
(f) Insurance Proceeds.
(i) In determining the amount of any loss, liability
or expense for which any indemnified party is entitled to
indemnification under this Agreement, the gross amount
thereof will be reduced by any insurance proceeds actually
paid to any indemnified party; provided, however, if such
party has been indemnified hereunder but does not actually
receive such insurance proceeds until after being
indemnified, such party shall reimburse the indemnifying
party for amounts paid to such party to the extent of the
insurance proceeds so received.
(ii) Following the Closing Date, if Buyer should
suffer any loss, liability or expense covered by any of
Seller's insurance policies and wishes to make a claim
against the issuer of such policy, Seller shall use its best
efforts to assist Buyer in ascertaining and establishing
coverage, pursuing such claim and collecting under such
policy. In connection with the foregoing sentence, Seller
shall not be required to incur any costs (including
attorneys' fees or demonstrable increases in insurance
premiums), other than normal overhead expenses, or to forego
any similar claim of its own with respect to the same
occurrence, in assisting Buyer in these efforts, unless
Seller shall otherwise be obligated to indemnify Buyer
pursuant to Section 9(a).
(iii) Following the Closing Date, if Seller should
suffer any loss, liability or expense covered by any of
Buyer's insurance policies and wish to make a claim against
the issuer of such policy, Buyer shall use its best efforts
to assist Seller ascertaining and establishing coverage,
pursuing such claim and collecting under such policy. In
connection with the foregoing sentence, Buyer shall not be
required to incur any costs (including attorneys' fees or
demonstrable increases in insurance premiums), other than
normal overhead expenses, or to forego any similar claim of
its own with respect to the same occurrence, in assisting
Seller in these efforts, unless Buyer shall otherwise be
obligated to indemnify Seller pursuant to Section 9(b).
(iv) If both an indemnifying party and an indemnified
party have insurance coverage respecting a particular claim
for which indemnification is provided pursuant to Sections
9(a) and 9(b), the parties agree that the insurance coverage
of the indemnifying party will be called upon before the
insurance coverage of the indemnified party is called upon.
10. Miscellaneous.
(a) Survival. Unless this Agreement is terminated pursuant to
Section 8(a) or Section 8(b) hereof, all representations, warranties,
covenants and agreements made in this Agreement or in a certificate
delivered pursuant hereto by the parties hereto shall survive the
termination of this Agreement or the consummation of the transactions
contemplated hereby for a period of two (2) years after the Closing Date,
except for the provisions of Section 9 hereof, which provisions shall
survive the consummation of the transactions contemplated hereby in
accordance with the terms of such Section 9.
(b) Notices. All notices, requests, or other communications
hereunder shall be in writing and shall be deemed to have been duly given
when delivered or refused, if delivered personally, or, if delivered by
overnight carrier, such as Federal Express, when delivered as follows:
If delivered to Seller:
Ruby Tuesday, Inc.
Attention: Legal Department
4721 Morrison Drive
Mobile, Alabama 36609-3350
If delivered to Buyer:
RT Tampa Franchise, L.P.
1017 Frankland Road
Tampa, Florida 33629
(c) Mail Addressed to Seller. After the Closing Date, Buyer may
open all mail addressed to Seller at the premises of the Businesses.
Buyer shall promptly forward to Seller any mail that does not require
Buyer's action.
(d) Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses.
(e) Sales, Transfer, Documentary and Other Taxes. In addition to
the Transaction Taxes paid herewith, Buyer shall pay all federal, state
and local sales, documentary, transfer or other taxes or recording fees,
if any, due as a result of the purchase, sale or transfer of the Assets
hereunder, whether imposed by law on Seller or Buyer, and Buyer shall
indemnify, reimburse and hold harmless Seller in respect of the liability
for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required to be filed in connection therewith.
(f) Entire Agreement. This Agreement, together with the Closing
Documents, sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and shall not be amended
or modified except by written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement, together with the
Closing Documents.
(g) Assignment and Binding Effect. This Agreement may not be
assigned by either party hereto without the prior written consent of the
other party. Subject to the foregoing, all of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the successors and assigns of Seller and Buyer, but
shall not be construed as conferring any other rights on any other
person.
(h) Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a
written instrument duly executed by such party.
(i) Construction. All headings contained in this Agreement are
for convenience of reference only, and do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation
of this Agreement.
(j) Exhibits and Schedules. All Exhibits and Schedules referred
to herein are intended to and hereby are specifically made part of this
Agreement.
(k) Severability. Any provision of this Agreement that is
invalid or enforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provisions in any other jurisdiction.
(l) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which counterparts taken together
shall constitute one and the same instrument.
(m) Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first above written.
SELLER:
RUBY TUESDAY, INC.
By:/s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
BUYER:
RT TAMPA FRANCHISE, L.P.,
d/b/a RT Tampa Franchise, Ltd.
By: /s/ Gary E. Gallagher
Gallagher Family, Inc., General
Name: Gary E. Gallagher
Title: President
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 3(c) Allocation of Purchase Price
Schedule 5(b) Seller's Consents and Approvals
Schedule 5(c) Permitted Encumbrances
Schedule 5(g) Compliance Disclosure
Schedule 7(a)(iv) Required Consents and Approvals
Exhibits
Exhibit A List of Restaurant Locations
Exhibit B Form of Note
Exhibit C Form of Security Agreement
Exhibit D Form of Guaranty
Exhibit E Form of Bill of Sale
Exhibit F Form of Certificate of Occasional or Isolated Sale
Exhibit G Legal Description for Owned Real Property
Schedule 3(c)
ALLOCATION OF PURCHASE PRICE
Schedule 5(b)
SELLER'S CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to
Buyer all licenses or permits currently held by Seller or the Businesses
with respect to the sale or consumption of alcoholic beverages on the
premises at which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s) or the Contracts.
Schedule 5(c)
PERMITTED ENCUMBRANCES
1. Liens that are immaterial in character, amount or extent, and that
do not materially affect the value, or do not materially interfere
with the present use, of the Assets.
2. UCC-1 Financing Statement filed August 5, 1996, as File
No.960000161575 with the Florida Secretary of State, showing Ruby
Tuesday, Inc. as Debtor, and CLG, Inc., as Secured Party, covering
equipment leased and located as follows:
(n) Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd.,
Pembroke, FL 33026 (RT South Florida Franchise, L.P.)
(o) Location 2681 - Fashion Island Mall, 18801-B Biscayne Blvd.,
Miami, FL 33180 (RT South Florida Franchise, L.P.)
(p) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114
(RT Orlando Franchise, L.P.)
(q) Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620
(RT Tampa Franchise, L.P.)
(r) Location 2860 - 9457 W.Atlantic Ave., Coral Springs, FL 33071
(RT South Florida Franchise, L.P.)
3. UCC-1 Financing Statement filed August 5, 1996, as File No.
960000161579 with the Florida Secretary of State, showing Ruby
Tuesday, Inc., as Debtor, and CLG, Inc., as Secured Party, covering
equipment leased and located as follows:
(a) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114
(RT Orlando Franchise, L.P.)
b. Location 3679 - 3500 S.W. College Rd., Ste. 104, Ocala, FL
33474 (RT Orlando Franchise, L.P.)
c. Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620
(RT Tampa Franchise, L.P.)
d. Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd.,
Pembroke, FL 33026 (RT South Florida Franchise, L.P.)
e. Location 2609 - 1950 N. Tamiami Trail, Naples, FL 33940 (RT
Tampa Franchise, L.P.)
f. Location 3924 - 777 East Merritt Causeway, Merritt Island, FL
32952 (RT Orlando Franchise, L.P.)
4. UCC-1 Financing Statement filed September 13, 1996, as File No.
960000192921 with the Florida Secretary of State, showing Ruby
Tuesday, Inc., as Debtor and Orix Credit Alliance, Inc., as Secured
Party.
Schedule 5(g)
COMPLIANCE DISCLOSURE
The Businesses are not in full compliance with certain requirements
of the Americans with Disabilities Act of 1990.
Schedule 7(a)(iv)
REQUIRED CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to
Buyer all licenses or permits currently held by Seller or the Businesses
with respect to the sale or consumption of alcoholic beverages on the
premises at which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s).
3. All consents required by Seller's current lender(s).
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of the 2nd day
of July, 1997, between RUBY TUESDAY, INC., a Georgia corporation, whose
address is 4721 Morrison Drive, Mobile, Alabama 36609-3350 (herein
"Seller"), and RT SOUTH FLORIDA FRANCHISE, L.P., d/b/a RT South Florida
Franchise, Ltd., a Delaware limited partnership, whose address is 2045
Bradbury Drive East, Mobile, Alabama 36695 (herein "Buyer").
1. Introduction. Seller is currently engaged in the business of
operating restaurants under the trade name, trademark and service mark
"Ruby Tuesday" at each of the locations listed on Exhibit A attached
hereto (hereinafter, the business of operating each such restaurant at
each such location being referred to individually, as the "Business" and
collectively as the "Businesses"). Seller wishes to sell to Buyer, and
Buyer wishes to purchase from Seller, certain assets of Seller used
exclusively in operating the Businesses, upon the terms and conditions
set out in this Agreement. Therefore, in consideration of the premises,
the mutual representations, warranties, covenants and agreements
hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties agree as
follows:
2. Sale and Purchase of Assets; Assumption of Liabilities. The
consummation of the transactions provided for herein (the "Closing")
shall take place at the offices of Seller at such time and place as the
parties may hereto agree in writing (the "Closing Date"), provided,
however, the Closing shall take place on the date that is the later to
occur of (i) the date that the temporary liquor licenses for the
Businesses have been issued to Buyer by the Florida Division of Alcoholic
Beverages and Tobacco, or (ii) the date that Buyer has received a firm
commitment for financing for the purchase of the Businesses on terms
reasonably acceptable to Buyer; provided, however, the Closing shall not
take place unless ten (10) business days have passed after the date that
Buyer receives Seller's Uniform Franchise Offering Circular without
Buyer's exercising any rescission rights available to Buyer under
applicable franchise law. On the Closing Date:
(a) Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, Buyer shall purchase from Seller, and
Seller shall sell, transfer, assign, convey and deliver, all of Seller's
right, title and interest in and to the following assets of Seller used
exclusively in the operation of the Businesses (the "Assets"), which
Assets shall be conveyed AS-IS, WHERE-IS:
(i) all stock in trade and merchandise in Seller's
inventory used by Seller exclusively in the conduct of the
Businesses as of the Closing Date (the "Inventory");
(ii) all furniture, fixtures, furnishings, equipment
and leasehold improvements used by Seller exclusively in the
conduct of the Businesses as of the Closing Date (the
"Personal Property");
(iii) all rights of Seller to the software used
exclusively in the conduct of the Businesses as of the
Closing Date and located at the premises where the Businesses
are conducted, including, without limitation, all rights of
Seller to use such software and the documentation related
thereto (the "Software");
(iv) all rights of Seller pursuant to all contracts,
leases (except for any interest of Seller in any lease with
any third party regarding the premises at which the
Businesses are conducted, other than the interest(s), if any,
to be subleased to Buyer pursuant to the Sublease(s) defined
below), warranties, commitments, agreements, purchase and
sale orders and other executory commitments of Seller related
solely to the Businesses as of the Closing Date (the
"Contracts");
(v) all rights of Seller in and to the underlying
land, if any, described on Exhibit G attached hereto,
together with the structure(s) building(s) and other
improvements owned by Seller and located on such land;
(vi) all rights of Seller (to the extent assignable)
pursuant to any governmental permits and licenses used
exclusively in the operation of the Businesses (the
"Permits");
(vii) Seller's telephone numbers for the Businesses
(the "Telephone Numbers");
(viii) Seller's petty cash on hand at the
Businesses as of the Closing Date (the "Petty Cash").
Notwithstanding the foregoing, the Assets do not include the following
assets of Seller:
(i) Seller's accounts or notes receivable;
(ii) Seller's cash on hand at or with respect to the
Businesses (other than the Petty Cash);
(iii) Seller's trade name, trademarks, service marks,
copyrights and all other intellectual property or intangible
property of Seller; and
(iv) to the extent that the Businesses are conducted
on premises leased by Seller from a third party (or third
parties), all rights of Seller in any leasehold or other
interest in the premises at which the Businesses are
conducted (except for any interest(s) to be subleased to
Buyer pursuant to the Sublease(s), defined below).
(b) Assumption of Liabilities. Subject to the terms and
conditions of this Agreement, Seller shall assign, and Buyer shall assume
and agree to satisfy, pay, discharge, perform and fulfill, as applicable,
as they become due, without charge or cost to Seller except as provided
for in this Agreement, and agrees to hold Seller harmless with respect
to, the following liabilities and obligations of Seller (the "Assumed
Liabilities"):
(i) all liabilities and obligations of Seller related
to owning the Assets and operating the Businesses on and
after the Closing Date except for the Excluded Liabilities
described below; and
(ii) all liabilities and obligations of Seller under
the Contracts, the Permits and the Telephone Numbers that
arise or are attributable to events or conditions occurring
on or after the Closing Date.
Notwithstanding the foregoing, the Assumed Liabilities shall not include
the following liabilities or obligations of Seller (the "Excluded
Liabilities"):
(i) except to the extent otherwise provided in this
Agreement, any liabilities or obligations, whether or not
known, of Seller to be performed prior to the Closing Date or
arising out of or relating to Seller's ownership of the
Assets or operation of the Businesses prior to the Closing
Date; and
(ii) Seller's accounts payable, notes payable and
other obligations for or related to Seller's indebtedness to
banks or financial institutions.
3. Purchase Price. In consideration of the sale of Assets and
assumption of the Assumed Liabilities, at the Closing, Buyer shall
deliver to Seller the following:
(i) Two Million Three Hundred Seventy-Six Thousand
One Hundred Thirty-Nine Dollars ($2,376,139) (the "Purchase
Price"); and
(ii) any sales or other taxes due on the sale of
Assets and assumption of the Assumed Liabilities contemplated
by this Agreement (the "Transaction Taxes").
(a) Payment of the Purchase Price. The Purchase Price shall be
paid as follows:
(i) by the delivery of the sum of (A) seventy-five
(75%) percent of the Purchase Price, plus (B) the Transaction
Taxes, all to be paid by certified check drawn on a local
bank or by wire transfer of funds; and
(ii) by the delivery to Seller of Buyer's promissory
note, dated the Closing Date, in favor of Seller in the
original principal amount equal to twenty-five (25%) percent
of the Purchase Price (the "Note") in the form attached
hereto as Exhibit B. As security for the payment of the
Note, Buyer shall deliver to Seller a Security Agreement,
dated the Closing Date, in the form attached hereto as
Exhibit C and such other documents as may be reasonably
required by Seller to perfect a security interest for the
benefit of Seller in and to Buyer's assets (including,
without limitation, UCC-1 financing statements in favor of
Seller), and Buyer shall cause M. Ashton Pond to enter into a
Guaranty in the form attached hereto as Exhibit D.
(b) Other Adjustments to Purchase Price. At the Closing, or as
soon as practicable after the Closing, the Purchase Price shall be
adjusted, on a dollar-for-dollar basis, to reflect the proration of all
items of expense or income directly relating to the Assets and the
operation of the Businesses as of the Closing Date, and the net
adjustments for all such items shall be paid in immediately available
funds on or before the date that occurs sixty (60) days after the Closing
Date (the "Adjustment Payment Date"). Prorated items shall include the
following: rent, real and personal property taxes, payroll and payroll
taxes, insurance premiums, utilities, security deposits, other prepaid
items and other items customarily prorated. To the extent possible, any
prorations not determinable as of the Closing Date shall be prorated on
the basis of the most current information available at Closing; provided,
however, Seller and Buyer agree that, upon presentation, on or before the
Adjustment Payment Date, of written confirmation of (i) a change in an
estimated amount, or (ii) a determination of the amount of any proration
that cannot be determined as of the Closing Date, such amount will be
reflected in the payment(s) to be made pursuant to this Section 3(b) on
or before the Adjustment Payment Date.
(c) Allocation of Purchase Price. The aggregate amount of the
Purchase Price and the Assumed Liabilities shall be allocated among the
Assets substantially in accordance with Schedule 3(c) attached hereto.
Seller and Buyer hereby agree to use such allocation to complete and file
Internal Revenue Service Form 8594 with the Internal Revenue Service.
4. Delivery of Documents and Related Transactions.
(a) At the Closing, the following documents (the "Closing
Documents"), together with the cash portion of the Purchase Price, shall
be delivered as follows:
(i) Seller shall deliver to Buyer the following
executed documents (the "Seller's Documents"):
1) a bill of sale, assignment and assumption
agreement for the Assets substantially in the form of
Exhibit E attached hereto (the "Bill of Sale"),
transferring to Buyer all of Seller's right, title and
interest in and to said Assets, free and clear of all
encumbrances except for Permitted Encumbrances (as
defined in Section 5(c) below), pursuant to which Buyer
will accept such Assets and assume the Assumed
Liabilities;
2) a Certificate of Occasional or Isolated
Sale substantially in the form of Exhibit F attached
hereto (the "Certificate of Occasional or Isolated
Sale");
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the following:
(A) a sublease or subleases between
Seller, as sublessor, and Buyer, as sublessee, of
such premises, in form satisfactory to the
parties hereto (the "Sublease(s)"); and
(B) the written consent of each landlord
to the Sublease(s), if required;
4) to the extent that the Businesses are
conducted on premises owned by Seller, a deed conveying
Seller's interest in and to the underlying land,
together with structure(s), building(s) and other
improvements at the premises described on Exhibit G
attached hereto (the "Deed");
5) an operating agreement, a development
agreement and a support services agreement,
substantially in the form of the drafts dated July 2,
1997, July 2, 1997, and July 2, 1997, respectively,
presented by Seller to Buyer (collectively, the
"Franchise Documents"); and
6) other related documents that Buyer may have
reasonably requested on or prior to the Closing Date.
(ii) Buyer shall deliver to Seller (x) the cash
portion of the Purchase Price, and (y) the following executed
documents (the "Buyer's Documents"):
1) the Note;
2) the Bill of Sale;
3) to the extent that the Businesses are
conducted on premises leased by Seller from a third
party (or third parties), the Sublease(s);
4) the Security Agreement and other security
documents referred to in Section 3(a)(ii) of this
Agreement;
5) the Guaranty;
6) the Franchise Documents; and
7) other related documents that Seller may
have reasonably requested on or prior to the Closing
Date.
(b) Further Assurances and Cooperation Post-Closing. Seller and
Buyer, from time to time after the Closing (but without obligation
separate from the obligations expressly provided by this Agreement),
hereby agree to execute, acknowledge and deliver to each other such
instruments of conveyance and transfer, and will take such other actions
and execute and deliver such other documents, certifications and further
assurances, as either party may reasonably request with respect to the
assignment, transfer and delivery of the Assets and the assumption of the
Assumed Liabilities and the perfection of Seller's security interest in
the Assets pursuant to Section 3(a)(ii), in order to consummate in full
the transactions provided for herein.
(c) Employees. Buyer and Seller agree as follows:
(i) Buyer's Responsibilities. Buyer shall offer
employment, on substantially the same terms and conditions as
currently in effect, to commence on and as of the Closing
Date, to each employee of the Businesses as of the Closing
Date (including, without limitation, any employee who is
absent from work on the Closing Date on paid vacation or
pursuant to any leave of absence authorized by Seller or
required by law (hereinafter, all employees accepting
employment with Buyer being referred to collectively as the
"Transferred Employees")). Buyer agrees to give the
Transferred Employees credit for their years of service with
Seller for the purpose of determining any eligibility or
vesting provisions that may be contained in employee plans
provided to such Transferred Employees by Buyer in connection
with their employment with Buyer. Buyer also agrees to give
the Transferred Employees credit for all vacation and sick
leave accrued during their employment with Seller and to
provide, for the fiscal year ending June 6, 1998, the same
vacation and sick leave benefits to all Transferred Employees
as they would have been eligible to receive under the
Seller's policies now in effect.
(ii) Seller's Responsibilities. Seller agrees that,
except as provided in Section 4(c)(i) above, Buyer shall not
be subject to any liability with respect to, or resulting
from the termination by Seller of any of its employees from,
any profit sharing, 401(k), pension, stock option, vacation
pay, sick pay, personal leave, severance pay, retirement,
bonus, deferred compensation, group life and health insurance
or other employee benefit plan, agreement or commitment of
Seller.
The foregoing Section 4(c) does not, and shall not be deemed or construed
to, create any right in, or confer any right on, any employee or any
other third party.
(d) Bulk Sales. Buyer hereby waives compliance with any
applicable "bulk sales law" or similar law by Seller, and Seller shall
indemnify and hold Buyer harmless against any liability under any such
laws for losses resulting from non-compliance therewith or Seller's
application of the proceeds of the sale of Assets contemplated by this
Agreement.
5. Seller's Representations and Warranties. Seller represents and
warrants to Buyer the following:
(a) Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia. Seller possesses all requisite corporate power and
authority to own the Assets and operate the Businesses and to enter into
and perform this Agreement and the Seller's Documents. The execution and
delivery and performance of each of this Agreement and the Seller's
Documents by Seller have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered on behalf of
Seller by duly authorized officers of Seller, and this Agreement
constitutes, and the Seller's Documents, when executed and delivered,
will constitute, the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting the rights of
creditors and general principles of equity.
(b) Compliance with Laws and Instruments. Subject to the
consents and approvals listed on Schedule 5(b), the execution, delivery
and performance by Seller of this Agreement and the Seller's Documents
will not result in any material violation of or be in conflict with or
constitute a material default under any applicable statute, regulation,
order, rule, writ, injunction or decree of any court or governmental
authority or of the Articles of Incorporation or Bylaws of Seller or of
any material agreement or other material instrument to which Seller is a
party or is a subject, or constitute a default thereunder.
(c) Title to Assets. Seller has good, valid and marketable title
to all of the Assets, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and other encumbrances
and defects of title of any nature whatsoever, except for (i) liens for
current real, personal or other property taxes not yet due and payable,
and (ii) the liens described on Schedule 5(c) (the "Permitted
Encumbrances"). There are no existing agreements, options, commitments
or rights with, of or to any person (other than Buyer) to acquire any of
Seller's interests in the Assets.
(d) Condition of Assets. Seller makes no representation or
warranty as to the condition of the Assets, which shall be conveyed to
Buyer on an AS IS, WHERE IS basis.
(e) No Finder's Fees. Seller has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Seller, threatened, before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Seller's Documents, or the consummation of the
transactions contemplated hereby and thereby, and no investigation that
might result in any such suit, action or proceeding is pending or, to the
knowledge of Seller, threatened.
(g) Legal Compliance. To the knowledge of Seller, except as
disclosed on Schedule 5(g), Seller has complied with all laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state, local and
foreign governments (and all agencies thereof), applicable to the Assets
and the operation of the Businesses for which the failure to so comply
would have a material adverse effect on the Assets or the Businesses, and
no action, suit, proceedings, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against Seller
alleging any failure so to comply,
(h) Tax Matters.
(i) Seller has filed all state, local and federal tax
returns required to be filed in connection with the ownership
of the Assets and the operation of the Businesses. All such
tax returns were correct and complete in all material
respects. All state, local and federal taxes currently due
and payable by Seller in connection with the Businesses have
been paid.
(ii) Seller has withheld and paid all taxes required
to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party employed by or
relating to the Businesses.
(i) Real Property. With respect to each Sublease and, if
applicable, the Deed:
(i) the underlying lease or sublease to which Seller
is a party (the "Lease") is the legal, valid, binding and
enforceable obligation of the Seller and is in full force and
effect;
(ii) subject to any applicable consent or approval
listed in Schedule 5(b), the Lease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby (including the assignments
and assumptions referred to in Section 4 above);
(iii) to the knowledge of Seller, no party to the Lease
is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) to the knowledge of Seller, no party to the Lease
has repudiated any provision thereof;
(v) to the knowledge of Seller, there are no
disputes, oral agreements or forbearance programs in effect
as to the Lease or Sublease;
(vi) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
Lease, or, if applicable, the real property that is subject
to the Deed, except for Permitted Liens;
(vii) except as disclosed on Schedule 5(g), to the
knowledge of Seller, all premises subject to any Lease, or,
if applicable, the Deed, (A) have received all approvals of
governmental authorities (including licenses and permits)
required in connection with the operation of the Businesses
and for which failure to receive such approval would have a
material adverse effect on the Assets or the Businesses, and
(B) have been operated and maintained in accordance with all
laws, rules and regulations applicable to the operation of
the Businesses and for which failure to be so operated and
maintained would have a material adverse effect on the Assets
of the Businesses; and
(viii) Seller has good and marketable title to the
parcel of real property subject to the Deed, free and clear
of any security interest, lien, covenant or other
restriction, installments of special liens or assessments not
yet delinquent and recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property
subject thereto.
(j) Intellectual Property. To the knowledge of the Seller,
Seller has the right to use the Software, pursuant to license, sublease,
agreement or permission. After the Closing, the Software will be owned
or available for use by Buyer on substantially the same terms and
conditions as by Seller prior to the Closing.
(k) Contracts. Seller represents and warrants to Buyer with
respect to each Contract assigned to Buyer that (i) such Contract is
legal, valid, binding, enforceable, and in full force and effect; (ii)
subject to any applicable consents and approvals listed on Schedule 5(b),
such Contract will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and
assumptions); (iii) to the knowledge of Seller, no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under such Contract; and (iv) to the
knowledge of the Seller, no party has repudiated any provision of such
Contract.
(l) Other Litigation. Seller represents and warrants to Buyer
that Seller: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge affecting the Businesses, and (ii) is
not a party or, to the knowledge of Seller, is not threatened to be made
a party to any action, suit, proceeding, hearing, or investigation
affecting the Businesses of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(m) Environmental, Health and Safety Matters. To the knowledge
of Seller:
(i) Seller has complied and is in compliance with all
Environmental, Health, and Safety Requirements for which
failure to so comply would have a material adverse effect on
the Assets or the Businesses. (As used herein,
Environmental, Health, and Safety Requirements shall mean all
federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and
determinations, all contractual obligations and all common
law concerning public health and safety, worker health and
safety, and pollution or protection of the environment.)
(ii) Seller has not received any written or oral
notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety
Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety
Requirements.
6. Buyer's Representations. Buyer represents and warrants to Seller
the following:
(a) Organization and Authority. Buyer is a limited partnership,
duly organized, validly existing and in good standing under the laws of
the State of Delaware. The sole general partner of Buyer is A. Pond,
Inc., a Florida corporation, and the sole limited partner of Buyer is RT
South Florida, Inc. a Georgia corporation. Buyer is duly qualified to do
business and is in good standing in each jurisdiction where the conduct
of its business currently requires it to be qualified or would require it
to be qualified after the consummation of the transactions provided for
in this Agreement and the Buyer's Documents. Buyer possesses all
requisite power and authority to enter into and perform this Agreement
and the Buyer's Documents. The execution and delivery and performance of
this Agreement and the Buyer's Documents by Buyer have been duly
authorized by all necessary action (including, without limitation, all
necessary action by the general partner of Buyer). This Agreement has
been duly executed and delivered on behalf of Buyer by the sole general
partner, as duly authorized by Buyer, and this Agreement constitutes, and
the Buyer's Documents, when executed and delivered, will constitute, the
legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting the rights of creditors and general principles
of equity.
(b) Compliance with Laws and Instruments. The execution,
delivery and performance by Buyer of this Agreement and the Buyer's
Documents will not result in any material violation of or be in conflict
with or constitute a material default under any applicable statute,
regulation, order, rule, writ, injunction or decree of any court or
governmental authority or of the Certificate of Limited Partnership or
Limited Partnership Agreement of Buyer or of any material agreement or
other material instrument to which Buyer is a party or is subject, or
constitute a default thereunder.
(c) No Finder's Fees. Buyer has not employed any broker or
finder or incurred any liability for any brokerage fees or commissions or
any finder's fees in connection with the negotiations related to this
Agreement or the consummation of the transactions contemplated hereby.
(d) Independent Investigation. Buyer has had full opportunity to
inspect the Businesses and the Assets and to ask all questions of Seller
regarding the Businesses and the Assets. Buyer has had the opportunity
to conduct its own independent investigation relating to all aspects of
the Businesses and to obtain whatever opinions of specialists and experts
it has deemed necessary in making the decisions to enter into this
Agreement and the Buyer's Documents and to consummate the transactions
contemplated hereby and thereby. In making such decisions, (i) Buyer has
not relied on information received by it from Seller regarding the past
or present earnings of the Businesses as a determinant or indicator of
future earnings of the Businesses, and (ii) Buyer has not relied on
information received from Seller regarding the prospects of future
earnings of the Businesses.
(e) Condition of Assets. BUYER ACKNOWLEDGES AND AGREES THAT ALL
ASSETS TO BE TRANSFERRED, ASSIGNED OR LICENSED PURSUANT TO THIS AGREEMENT
AND THE CLOSING DOCUMENTS SHALL BE TRANSFERRED, ASSIGNED OR LICENSED ON
AN "AS IS, WHERE IS" BASIS, AND THAT, EXCEPT AS EXPRESSLY SET FORTH IN
SECTION 5 OF THIS AGREEMENT, SELLER IS MAKING, AND SHALL MAKE, NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, RESPECTING
ANY OF THE ASSETS, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER. FURTHER, BUYER ACKNOWLEDGES THAT BUYER HAS
INFORMED ITSELF AS TO THE BUSINESSES, AND BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT SELLER MAKES, AND SHALL MAKE, NO REPRESENTATION OR WARRANTY
OF ANY KIND WITH RESPECT TO THE BUSINESSES.
(f) No Litigation. No suit, action or other proceeding, or any
injunction or final judgment relating thereto, is pending or, to the
knowledge of Buyer, threatened before any court or governmental or
regulatory official, body or authority in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the Buyer's Documents, or the consummation of the
transactions contemplated hereby, and no investigation that might result
in any such suit, action or proceeding is pending or, to the knowledge of
Buyer, threatened.
(g) Other Litigation. Buyer represents and warrants to Seller
that Buyer: (i) is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge, and (ii) is not a party or, to the
knowledge of Buyer, is not threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
7. Conditions to Closing.
(a) Conditions to Obligations of Buyer. All obligations of Buyer
under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions
precedent:
(i) The representations and warranties of Seller
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing as if made at the
Closing.
(ii) Seller shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by or
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceeding, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law for the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Seller at
Closing pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Buyer shall have received a certificate from
Seller, dated the Closing Date and certifying in such detail
as Buyer may reasonably request, that the conditions
specified in Sections 7(a)(i), 7(a)(ii) and 7(a)(iv) hereof
have been fulfilled.
(b) Conditions to Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or
satisfaction prior to or at the Closing, of each of the following
conditions precedent:
(i) The representations and warranties of Buyer
contained in this Agreement shall have been true on the date
hereof in all material respects, and shall be true in all
material respects as of the Closing if made at the Closing.
(ii) Buyer shall have performed and complied in all
material respects with all agreements and conditions required
by this Agreement to be performed or complied with by it
prior to or at the Closing.
(iii) As of the Closing, no suit, action or other
proceedings, or any injunction or final judgment relating
thereto, shall be threatened or be pending before any court
or governmental or regulatory official, body or authority in
which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action
or proceeding shall be pending or threatened.
(iv) Each consent or approval listed on Schedule
7(a)(iv) as required or necessary under contract or
applicable law of the consummation of the transactions
contemplated hereby shall have been obtained; provided,
however, those certain consents or approvals identified on
such Schedule 7(a)(iv) as being subject to deferral need not
have been obtained on or before the Closing, to the extent
that Seller shall have made appropriate arrangements to
secure to Buyer the practical and economic benefits of the
agreements or other arrangements to which such consents or
approvals relate.
(v) The documents to be delivered by Buyer at Closing
pursuant to Section 4(a) shall have been executed and
delivered.
(vi) Seller shall have received a certificate from
Buyer dated the Closing Date and certifying in such detail as
Seller may reasonably request, that the conditions specified
in Sections 7(b)(i) and 7(b)(ii) hereof have been fulfilled
and that all consents and approvals required or necessary to
transfer to Buyer all licenses or permits held by Seller or
the Businesses with respect to the sale or consumption of
alcoholic beverages on the premises at which the Businesses
are conducted have been obtained.
8. Term and Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by either Seller or Buyer, if such terminating party is not
otherwise in default in this Agreement and if the Closing shall not have
occurred on or before January 2, 1998, or such other extended date, if
any, mutually agreed to by the parties in writing; and
(c) by either party if there has been a material breach of any
representation, warranty, covenant or agreement by the other party that
has not been cured or for which adequate assurance (reasonably acceptable
to such terminating party) of cure has not been given, in either case
within fifteen (15) business days following receipt of notice of such
breach.
If either party terminates this Agreement pursuant to the provisions
hereof, such termination shall be effected by notice to the other party
specifying the provision hereof pursuant to which such termination is
made. Except for any liability for the breach of this Agreement, upon
the termination of this Agreement pursuant to this Section 8, this
Agreement shall forthwith become null and void and there shall be no
further liability or the obligation on the part of Seller or Buyer
hereunder or with respect hereto.
9. Indemnification.
(a) Indemnification of Buyer. Subject to the limitations set
forth in Sections 9(c), 9(d), and 9(e), Seller shall indemnify and hold
Buyer, its partners and their respective officers, directors,
shareholders, employees, agents and representatives (the "Buyer
Indemnified Parties") harmless from, against, for and in respect of any
and all damages, losses, settlement payments, obligations, liabilities,
claims, actions or causes of action (whether as a result of direct claims
or third-party claims) actually suffered, sustained, incurred or required
to be paid by Buyer Indemnified Parties, net of any resulting income tax
benefits to Buyer Indemnified Parties, because of (i) the breach of any
written representation, warranty, agreement or covenant of Seller
contained in this Agreement (as the same shall have been modified at any
time at or before Closing including, without limitation, any modification
contained in any certificate of Seller concerning such matters delivered
at the Closing) or the Closing Documents; (ii) any and all Excluded
Liabilities; (iii) any contamination on or under the property that is
subject to the Deed or the Sublease(s) or in any of the Assets caused by
Seller prior to the Closing Date, or any liability for remediation or
clean-up of environmental conditions as a result of Seller's operations,
whether on or under the property that is subject to the Deed or the
Sublease(s) or elsewhere; (iv) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
actually incurred by Buyer Indemnified Parties in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any
of the matters indemnified against in this Section 9(a).
(b) Indemnification of Seller. Subject to the limitations set
forth in Sections 9(c), 9(d) and 9(e), Buyer shall indemnify and hold
Seller, its affiliated corporations and their respective officers,
directors, shareholders, employees, agents and representatives (the
"Seller Indemnified Parties") harmless from, against, for and in respect
of any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action (whether as a result of
direct claims or third-party claims) actually suffered, sustained,
incurred or required to be paid by Seller Indemnified Parties, net of any
resulting income tax benefits to Seller Indemnified Parties, because of
(i) the breach of any written representation, warranty, agreement or
covenant of Buyer contained in this Agreement (as the same shall have
been modified at any time at or before Closing, including, without
limitation, any modification contained in any certificate of Buyer
concerning such matters delivered at the Closing) or the Closing
Documents; (ii) any and all Assumed Liabilities and all liabilities in
connection with the operation of the Businesses in respect of periods on
and after the Closing Date; (iii) any contamination on or under the
property that is subject to the Deed or Sublease(s) or in any of the
Assets caused by Buyer on or after the Closing Date or any liability for
remediation or clean-up of environmental conditions as a result of
Buyer's operations, whether on or under the property that is subject to
the Deed or the Sublease(s) or elsewhere; and (iv) all reasonable costs
and expenses (including, without limitation, attorneys' fees, interest
and penalties) incurred by Seller Indemnified Parties in connection with
any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 9(b).
(c) Survival of Indemnification Obligations. Notice of any claim
under Section 9(a)(i) or Section 9(b)(i) of the indemnification
provisions hereof must be given prior to the date that occurs two (2)
years after the Closing Date, and any such claims not made within such
period shall be of no force or effect. Notice of any other claim under
the indemnification provisions hereof must be given within the applicable
time period of any applicable statute of limitations.
(d) General Rules Regarding Indemnification. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be
subject to the following terms and conditions:
(i) The indemnified party shall give prompt (so as
not to materially prejudice the position of the indemnifying
party) written notice (which in no event shall exceed 30 days
from the date on which the indemnified party first became
aware of such claim or assertion) to the indemnifying party
of any claim which might give rise to a claim by the
indemnified party against the indemnifying party based on the
indemnity agreements contained in Sections 9(a) or 9(b)
hereof, stating the nature and basis of said claims and the
amounts thereof, to the extent known:
(ii) If any action, suit or proceeding is brought
against the indemnified party with respect to which the
indemnifying party may have liability under the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on
appeal or for review which counsel for the indemnified party
shall deem appropriate) by the indemnifying party. The
indemnified party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense
unless the employment of such counsel and the payment of such
fees and expenses both shall have been specifically
authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (A) if there are defenses
available to the indemnified party that are inconsistent with
those available to the indemnifying party to such extent as
to create a conflict of interest between the indemnifying
party and the indemnified party, the indemnified party shall
have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent
defenses, and the indemnifying party shall be responsible for
the reasonable fees and expenses of the indemnified party's
counsel insofar as they relate to such inconsistent defenses,
and (B) if such action, suit or proceeding involves or could
have an effect on matters beyond the scope of the indemnity
agreements contained in Sections 9(a) or 9(b) hereof, the
indemnified party shall have the right to direct (at its own
expense) the defense of such action, suit or proceeding
insofar as it relates to such other matters. The indemnified
party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is
represented by separate counsel.
(iii) The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all
books and records of the indemnified party relating to such
proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
Whether or not the indemnifying party chooses to defend or
prosecute any claim involving a third party, all parties
hereto shall cooperate in the defense or prosecution thereof
and shall furnish such records, information and testimony and
attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in
connection therewith.
(iv) The indemnified party shall not make any
settlement of any claims without the written consent of the
indemnifying party.
(e) Limits on Indemnification Obligation. Notwithstanding
anything in Sections 9(a) and 9(b) to the contrary or in conflict, any
amount for which Seller is obligated to reimburse Buyer may, in Seller's
sole discretion, be satisfied by reducing amounts currently due to Seller
under the Note or the Operating Agreement included in the Franchise
Documents by a like amount.
(f) Insurance Proceeds.
(i) In determining the amount of any loss, liability
or expense for which any indemnified party is entitled to
indemnification under this Agreement, the gross amount
thereof will be reduced by any insurance proceeds actually
paid to any indemnified party; provided, however, if such
party has been indemnified hereunder but does not actually
receive such insurance proceeds until after being
indemnified, such party shall reimburse the indemnifying
party for amounts paid to such party to the extent of the
insurance proceeds so received.
(ii) Following the Closing Date, if Buyer should
suffer any loss, liability or expense covered by any of
Seller's insurance policies and wishes to make a claim
against the issuer of such policy, Seller shall use its best
efforts to assist Buyer in ascertaining and establishing
coverage, pursuing such claim and collecting under such
policy. In connection with the foregoing sentence, Seller
shall not be required to incur any costs (including
attorneys' fees or demonstrable increases in insurance
premiums), other than normal overhead expenses, or to forego
any similar claim of its own with respect to the same
occurrence, in assisting Buyer in these efforts, unless
Seller shall otherwise be obligated to indemnify Buyer
pursuant to Section 9(a).
(iii) Following the Closing Date, if Seller should
suffer any loss, liability or expense covered by any of
Buyer's insurance policies and wish to make a claim against
the issuer of such policy, Buyer shall use its best efforts
to assist Seller ascertaining and establishing coverage,
pursuing such claim and collecting under such policy. In
connection with the foregoing sentence, Buyer shall not be
required to incur any costs (including attorneys' fees or
demonstrable increases in insurance premiums), other than
normal overhead expenses, or to forego any similar claim of
its own with respect to the same occurrence, in assisting
Seller in these efforts, unless Buyer shall otherwise be
obligated to indemnify Seller pursuant to Section 9(b).
(iv) If both an indemnifying party and an indemnified
party have insurance coverage respecting a particular claim
for which indemnification is provided pursuant to Sections
9(a) and 9(b), the parties agree that the insurance coverage
of the indemnifying party will be called upon before the
insurance coverage of the indemnified party is called upon.
10. Miscellaneous.
(a) Survival. Unless this Agreement is terminated pursuant to
Section 8(a) or Section 8(b) hereof, all representations, warranties,
covenants and agreements made in this Agreement or in a certificate
delivered pursuant hereto by the parties hereto shall survive the
termination of this Agreement or the consummation of the transactions
contemplated hereby for a period of two (2) years after the Closing Date,
except for the provisions of Section 9 hereof, which provisions shall
survive the consummation of the transactions contemplated hereby in
accordance with the terms of such Section 9.
(b) Notices. All notices, requests, or other communications
hereunder shall be in writing and shall be deemed to have been duly given
when delivered or refused, if delivered personally, or, if delivered by
overnight carrier, such as Federal Express, when delivered as follows:
If delivered to Seller:
Ruby Tuesday, Inc.
Attention: Legal Department
4721 Morrison Drive
Mobile, Alabama 36609-3350
If delivered to Buyer:
RT South Florida Franchise, L.P.
2045 Bradbury Drive East
Mobile, Alabama 36695
(c) Mail Addressed to Seller. After the Closing Date, Buyer may
open all mail addressed to Seller at the premises of the Businesses.
Buyer shall promptly forward to Seller any mail that does not require
Buyer's action.
(d) Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses.
(e) Sales, Transfer, Documentary and Other Taxes. In addition to
the Transaction Taxes paid herewith, Buyer shall pay all federal, state
and local sales, documentary, transfer or other taxes or recording fees,
if any, due as a result of the purchase, sale or transfer of the Assets
hereunder, whether imposed by law on Seller or Buyer, and Buyer shall
indemnify, reimburse and hold harmless Seller in respect of the liability
for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required to be filed in connection therewith.
(f) Entire Agreement. This Agreement, together with the Closing
Documents, sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and shall not be amended
or modified except by written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement, together with the
Closing Documents.
(g) Assignment and Binding Effect. This Agreement may not be
assigned by either party hereto without the prior written consent of the
other party. Subject to the foregoing, all of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the successors and assigns of Seller and Buyer, but
shall not be construed as conferring any other rights on any other
person.
(h) Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a
written instrument duly executed by such party.
(i) Construction. All headings contained in this Agreement are
for convenience of reference only, and do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation
of this Agreement.
(j) Exhibits and Schedules. All Exhibits and Schedules referred
to herein are intended to and hereby are specifically made part of this
Agreement.
(k) Severability. Any provision of this Agreement that is
invalid or enforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provisions in any other jurisdiction.
(l) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which counterparts taken together
shall constitute one and the same instrument.
(m) Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first above written.
SELLER:
RUBY TUESDAY, INC.
By:/s/ J. Russell Mothershed
Name: J. Russell Mothershed
Title: Senior Vice President
BUYER:
RT SOUTH FLORIDA FRANCHISE, L.P.,
d/b/a RT South Florida Franchise, Ltd.
By:/s/ M. Ashton Pond
A. Pond, Inc., General Partner
Name: M. Ashton Pond
Title: President
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 3(c) Allocation of Purchase Price
Schedule 5(b) Seller's Consents and Approvals
Schedule 5(c) Permitted Encumbrances
Schedule 5(g) Compliance Disclosure
Schedule 7(a)(iv) Required Consents and Approvals
Exhibits
Exhibit A List of Restaurant Locations
Exhibit B Form of Note
Exhibit C Form of Security Agreement
Exhibit D Form of Guaranty
Exhibit E Form of Bill of Sale
Exhibit F Form of Certificate of Occasional or Isolated Sale
Exhibit G Legal Description for Owned Real Property
Schedule 3(c)
ALLOCATION OF PURCHASE PRICE
Schedule 5(b)
SELLER'S CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to
Buyer all licenses or permits currently held by Seller or the Businesses
with respect to the sale or consumption of alcoholic beverages on the
premises at which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s) or the Contracts.
Schedule 5(c)
PERMITTED ENCUMBRANCES
1. Liens that are immaterial in character, amount or extent, and that
do not materially affect the value, or do not materially interfere
with the present use, of the Assets.
2. UCC-1 Financing Statement filed August 5, 1996, as File
No.960000161575 with the Florida Secretary of State, showing Ruby
Tuesday, Inc. as Debtor, and CLG, Inc., as Secured Party, covering
equipment leased and located as follows:
(n) Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd.,
Pembroke, FL 33026 (RT South Florida Franchise, L.P.)
(o) Location 2681 - Fashion Island Mall, 18801-B Biscayne Blvd.,
Miami, FL 33180 (RT South Florida Franchise, L.P.)
(p) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114
(RT Orlando Franchise, L.P.)
(q) Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620
(RT Tampa Franchise, L.P.)
(r) Location 2860 - 9457 W.Atlantic Ave., Coral Springs, FL 33071
(RT South Florida Franchise, L.P.)
3. UCC-1 Financing Statement filed August 5, 1996, as File No.
960000161579 with the Florida Secretary of State, showing Ruby
Tuesday, Inc., as Debtor, and CLG, Inc., as Secured Party, covering
equipment leased and located as follows:
(a) Location 2878 - 1808 Volusia Ave., Daytona Beach, FL 32114
(RT Orlando Franchise, L.P.)
b. Location 3679 - 3500 S.W. College Rd., Ste. 104, Ocala, FL
33474 (RT Orlando Franchise, L.P.)
c. Location 3919 - 2675 Roosevelt Blvd., Clearwater, FL 34620
(RT Tampa Franchise, L.P.)
d. Location 3929 - Pembroke Lakes Mall, 11401 Pines Blvd.,
Pembroke, FL 33026 (RT South Florida Franchise, L.P.)
e. Location 2609 - 1950 N. Tamiami Trail, Naples, FL 33940 (RT
Tampa Franchise, L.P.)
f. Location 3924 - 777 East Merritt Causeway, Merritt Island, FL
32952 (RT Orlando Franchise, L.P.)
4. UCC-1 Financing Statement filed September 13, 1996, as File No.
960000192921 with the Florida Secretary of State, showing Ruby
Tuesday, Inc., as Debtor and Orix Credit Alliance, Inc., as Secured
Party.
Schedule 5(g)
COMPLIANCE DISCLOSURE
The Businesses are not in full compliance with certain requirements
of the Americans with Disabilities Act of 1990.
Schedule 7(a)(iv)
REQUIRED CONSENTS AND APPROVALS
1. All consents and approvals required or necessary to transfer to
Buyer all licenses or permits currently held by Seller or the Businesses
with respect to the sale or consumption of alcoholic beverages on the
premises at which the Businesses are conducted.
2. All consents required or necessary from any third party (or third
parties) with respect to the Sublease(s).
3. All consents required by Seller's current lender(s).
RUBY TUESDAY, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Average common shares outstanding......... 17,595 17,689 17,321
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treaury stock method", at the
average market price)..................... 280 640
Number of shares used in computation of
primary earnings per share.............. 17,875 17,689 17,961
Net income (loss)....................... $25,045 $(2,884) $62,171
Primary earnings (loss) per common and
common equivalent share................. $ 1.40 $ (0.16) $ 3.46
Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding......... 17,595 17,689 17,321
Average additional common shares issuable
on exercise of dilutive stock options
(computed by use of the "treasury stock
method", at the higher of period-end
or average market price)................ 314 664
Number of shares used in computation of
fully diluted earnings per share........ 17,909 17,689 17,985
Net income (loss)....................... $25,045 $(2,884) $62,171
Fully diluted earnings (loss) per common
and common equivalent share............. $ 1.40 $ (0.16) $ 3.46
Weighted average shares and all per-share data for prior years have been
restated to give effect to common stock dividends and common stock splits
through May 31, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Ruby Tuesday, Inc. owns and operates three casual dining restaurant
concepts: Ruby Tuesday, Mozzarella's, and Tia's. As of May 31, 1997, the
Company's operations included 393 restaurants located in 33 states.
On March 7, 1996 the shareholders of Morrison Restaurants Inc.
("Morrison") approved the distribution (the "Distribution") of its family
dining restaurant business (Morrison Fresh Cooking, Inc. ("MFC")) and its
health care food and nutrition services business (Morrison Health Care,
Inc. ("MHC")) to its shareholders effective March 9, 1996. Morrison
shareholders received one share of MFC stock for every four shares of
Morrison stock then held and one share of MHC stock for every three
shares of Morrison stock then held. In accordance with Accounting
Principles Board Opinion No. 30, the financial results of these two
businesses, together referred to as the Morrison Group, are reported as
discontinued operations. For accounting purposes, the Distribution is
reflected as if it occurred on March 2, 1996, the last day of the fiscal
1996 third quarter. In conjunction with the Distribution, Morrison
reincorporated in Georgia and changed its name to Ruby Tuesday, Inc. (the
"Company").
For an understanding of the significant factors that influenced the
Company's performance during the past three fiscal years, the following
should be read in conjunction with the Consolidated Financial Statements
and related Notes found on pages 26 to 43.
Results of Operations
The following table sets forth selected restaurant operating data as a
percentage of revenues for the periods indicated. All information is
derived from the Consolidated Financial Statements of the Company included
elsewhere in this Annual Report.
1997 1996 1995
Revenues 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of merchandise 27.1 27.5 26.9
Payroll and related costs 32.5 33.7 33.0
Other 21.5 21.6 20.6
Selling, general and
administrative 6.5 6.3 7.3
Depreciation and amortization 5.9 5.5 5.2
L&N conversion/closing costs 3.8
Interest expense, net 0.6 0.8 0.1
Loss on impairment of assets 4.2
Restructure charges 0.8
Total operating costs and expenses 94.1 100.4 96.9
Income (loss) from continuing
operations before income taxes 5.9 (0.4) 3.1
Provision (benefit) for federal
and state income taxes 2.1 (0.3) 0.9
Income (loss) from continuing
operations 3.8 (0.1) 2.2
Income (loss) from discontinued
operations, net of applicable
income taxes (0.4) 9.9
Net income (loss) 3.8% (0.5)% 12.1%
During fiscal 1996, the Company recorded $31.1 million in charges
related to asset impairment and restructure charges. The effect of these
charges on fiscal 1996 results of operations is discussed below.
During fiscal 1995, the Company phased out its L&N Seafood Grill
("L&N") concept. In connection therewith, the Company recorded $19.7
million in costs to close or convert into other concepts all L&N units.
Fiscal 1997 compared to Fiscal 1996
Overview
During fiscal 1997, the Company opened 30 Ruby Tuesdays, two
Mozzarella's, and three Tia's restaurants while closing six Ruby Tuesdays
and one Tia's restaurants. Also in 1997, the Company began its domestic
franchise program with the sale of one owned unit to a franchisee.
During fiscal 1997, the Company focused on same-store sales, average-
unit volume, customer frequency, and check average. The Company also plans
to further its franchise programs in fiscal 1998 by becoming a financial
partner with selected regional operators in the casual dining industry, by
franchising units located in areas outside of the Company's primary growth
markets, and by pursuing the continuation of international license and
franchise development with large and experienced partners in broad
geographic territories. The Company anticipates a 10% increase in owned
units in fiscal 1998; however, there can be no assurance growth will be
achieved in fiscal 1998. See "Special Note Regarding Forward-Looking
Information."
Revenues
The Company's revenues increased to $655.4 million in fiscal 1997
from $620.1 million in fiscal 1996. The 5.7% revenue increase was the
result of the net addition of 28 units during the year, comprised of 24
Ruby Tuesdays, two Mozzarella's, and two Tia's. For the Ruby Tuesday
concept, same-store sales decreased 0.8% in fiscal 1997. Same-store sales
for Tia's also declined, while Mozzarella's experienced positive same-
store sales.
Operating Profits
Pre-tax income from continuing operations increased $41.1 million in
fiscal 1997 to $38.8 million. The increase was due in part to $31.1
million of unusual non-recurring charges recorded in fiscal 1996 for
restructure charges and loss on impairment of assets. The remaining
increase in pre-tax income is the result of the net addition of 28 units
coupled with cost decreases discussed below.
Cost of merchandise as a percentage of revenues decreased 0.4% due to
a new menu which was implemented in October 1996 which lowered food costs
significantly. Also, there was an increased focus on food cost management
at the unit level in fiscal 1997, and the Company experienced an
improvement in rebates and volume discounts.
Payroll and related costs decreased 1.2% as a percentage of revenues
in fiscal 1997. The decrease is due to a reduction in management labor
resulting from a strategic decision to reduce unit managers to a level
that more accurately matches unit volume. The remaining portion of the
decrease is the result of reduced workers' compensation expense as a
percentage of revenues associated with favorable experience ratings in the
current year.
Other operating expenses decreased slightly as a percentage of
revenues (0.1%) due to a decrease in supplies expense resulting from
tighter controls over such items.
Selling, general and administrative expenses increased 0.2% as a
percentage of revenues. The increase resulted from additional advertising
in fiscal 1997, including coupon redemptions associated with the Company's
"Neighborhood Introduction Program" which began in the third quarter.
Depreciation increased 0.4% as a percentage of revenues due to
depreciation expense on information technology projects completed during
the prior year and a higher mix of free-standing units.
Net interest expense decreased 0.2% as a percentage of revenues from
$4.6 million in fiscal 1996 to $3.9 million in fiscal 1997 due to a
decrease in average debt outstanding during the year.
The increase in income from continuing operations compared to the
prior year primarily relates to unusual non-recurring charges recorded in
fiscal 1996. In fiscal 1996, the Company recorded charges of $31.1
million for loss on asset impairment and restructure charges (see further
discussion below).
The unusual charges referred to previously also contributed to the
unusual effective tax rate in fiscal 1996. Excluding the effects of
these charges in fiscal 1996, the effective income tax rate decreased
slightly in fiscal 1997 to 35.5% from 35.8% in fiscal 1996.
Fiscal 1996 compared to Fiscal 1995
Overview
During fiscal 1996, the Company opened 43 Ruby Tuesdays, five
Mozzarella's, and four Tia's and closed 17 Ruby Tuesdays and three
Mozzarella's. The Company experienced weak sales and declining profits in
the first two quarters of fiscal 1996. In response, the Company
instituted a plan to lower operating costs while increasing guest
frequency and check average. The implementation of this plan contributed
to the significant improvement in sales and profits (excluding the effect
of the restructuring and asset impairment charges) in the second half of
fiscal 1996.
Revenues
The Company's sales increased to $620.1 million in fiscal 1996 from
$515.3 million in fiscal 1995. The 20.3% revenue increase was the result
of the net addition of 32 units during the year, comprised of 26 Ruby
Tuesdays, two Mozzarella's, and four Tia's. For the Ruby Tuesday concept,
same-store sales decreased 1.3% in fiscal 1996. Same-store sales for
Mozzarella's and Tia's also declined.
Operating Profits
Pre-tax income (loss) from continuing operations decreased $18.4
million in fiscal 1996 to $(2.3) million. The decrease was due in part to
$11.4 million of unusual non-recurring charges recorded in fiscal 1996 in
excess of non-recurring charges incurred in fiscal 1995. In fiscal 1996,
the Company recorded $31.1 million for restructure charges and loss on
impairment of assets. As previously discussed, in fiscal 1995, a $19.7
million charge was recorded to reflect the estimated cost to convert or
close the Company's L&N units. The remaining decrease in pre-tax income
(loss) is the result of the decrease in same-store sales coupled with cost
increases discussed below.
Cost of merchandise as a percentage of revenues increased 0.6% from
the prior year due to new menu variations which include higher cost items.
Additionally, the percentage of revenues generated from sales of lower
margin menu items increased during the year.
Payroll and related costs increased 0.7% as a percentage of revenues
in fiscal 1996. The increase is due to additional staffing levels and
service programs at Ruby Tuesdays designed to improve guest service and
the fixed nature of Mozzarella's management and kitchen payroll coupled
with its decreasing same-store sales and increases in hourly wage rates.
These increases were offset in part by a decrease in the number of
managers per unit, an improvement in the Company's workers' compensation
claims experience as well as a decrease in other fringe benefits.
Other operating expenses increased 0.1% as a percentage of revenues
primarily due to an increase in insurance expense associated with higher
general liability rates.
Selling, general and administrative expenses decreased 1.0% as a
percentage of revenues. The decrease resulted from the Company's
achievement of its objective of reducing or keeping general and
administrative expenses flat for the year while increasing sales.
Depreciation increased 0.3% as a percentage of revenues due to the
Company's focus on expansion through freestanding units which are
typically owned as opposed to mall or strip units which are leased.
Net interest expense increased 0.7% as a percentage of revenues from
$0.7 million in fiscal 1995 to $4.6 million in fiscal 1996 due to the net
addition of $44.2 million in long-term borrowings.
The decline in income from continuing operations compared to the
prior year primarily relates to an increase in the amount incurred for
unusual non-recurring charges. In fiscal 1996, the Company recorded
charges of $31.1 million for loss on asset impairment and restructure
charges (see further discussion below). In fiscal 1995, the Company
recorded charges of $19.7 million related to management's decision to
phase out the L&N Seafood Grill concept.
The unusual charges referred to above also contributed to the
decrease in the provision for income taxes in fiscal 1996 from fiscal
1995. Excluding the effects of these charges in fiscal 1996 and fiscal
1995, the effective income tax rate increased slightly in fiscal 1996 to
35.8% from 35.6% in fiscal 1995.
Asset Impairment/Restructure Charges
The Company adopted Statement of Financial Accounting Standards No.
121 ("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", in the third quarter of fiscal
1996. FAS 121 establishes accounting standards that require an entity to
review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Long-lived assets
and certain identifiable intangibles to be disposed of are generally to
be reported at the lower of carrying amount or fair value less cost to
sell. Historically, the Company recognized such impairment upon the
decision to close a unit. As a result of the adoption of FAS 121, the
Company recorded a third quarter pre-tax charge for asset impairment of
$3.9 million. This amount is the difference between fair value and net
realizable value of impaired assets. An additional $22.0 million pre-tax
charge for asset impairment was recorded which did not relate to the
adoption of FAS 121. The total charge of $25.9 million (of which $3.9
million is the result of the adoption of FAS 121) is comprised of the
following: impairment on 16 units approved for closure within one year by
the Board of Directors on January 10, 1996 ($10.0 million); impairment on
in-unit computer equipment ($0.8 million) and write-offs resulting from
management's decision to abandon an information technology plan ($3.8
million) approved on that same date; and impairment on units remaining
open ($11.3 million).
The Board approved the closing of ten Ruby Tuesdays, four
Mozzarella's and two Tia's restaurants based upon management's review of
negative cash flow and operating loss units and other considerations.
The expected loss on disposal of the long-term assets of these units was
recorded at $10.0 million (net of an assumed salvage value of $0.9
million). Included in this amount was $0.6 million which represented the
goodwill associated with two Tia's units to be closed. During the
remainder of fiscal 1996, nine of these units were closed (six Ruby
Tuesdays and three Mozzarella's).
Prior to the announcement on September 27, 1995 of the Company's
plans to pursue a spin-off, Morrison was undertaking an information
technology project intended, among other things, to update or replace
certain accounting and human resource systems for all of Morrison. Upon
the September 27, 1995 announcement, management initiated a project by
project review of the information technology plan. Upon completion of
its review, management decided to abandon certain projects in
development, including the project to update or replace certain
accounting and human resource systems. In connection therewith, the
Company disposed of certain in-unit computer equipment and replaced that
equipment with computers more technologically advanced. At the January
10, 1996 board meeting, such actions were approved by the Board of
Directors. Accordingly, during the quarter ended March 2, 1996, the
Company recorded a charge of $3.8 million for the write-off of the
information technology projects and $0.8 million for the remaining
carrying value of certain in-unit computer equipment.
Negative cash flow and operating loss units not recommended for
closure were reviewed for impairment. Management believed these units
had been impaired based upon poor operating performance. Accordingly,
management estimated the undiscounted future cash flows to be generated
by these units and determined that certain of them would not likely
generate net cash flows in excess of carrying value. Management then
estimated the fair value of those units using discounted net cash flow as
a measure of fair value. Based upon third quarter operating and cash flow
results, two additional units were identified as impaired. Accordingly,
the charge of $11.3 million was recorded to reduce the carrying value of
the impaired assets (including the two units identified during the third
quarter) to their estimated fair value, as determined by using discounted
estimated future cash flows. Future cash flows were estimated based on
management judgment. Thus, actual cash flows could vary from such
estimates.
In addition to the write-down of fixed assets on the 16 units to be
closed, the Company accrued charges of $3.4 million relating to the
settlement of the related lease obligations. Management estimated it
could negotiate lease settlements within 36 months on a majority of those
units which could not be sublet. The Company believed that it could
sublease six of the units approved by the Board for closing. One of the
units closed was Company-owned.
The Company also recognized charges associated with the
Distribution of MFC and MHC and recognized charges of $5.3 million for
other costs associated with the closing of 16 restaurants that had not
met management's financial performance requirements.
Other charges of $1.8 million were also recorded during the third
quarter. These charges consisted primarily of estimated professional and
other fees incurred in accordance with the Distribution ($1.3 million);
severance pay for staff reductions expected during the quarter ($0.2
million) and miscellaneous other asset write-offs ($0.3 million).
Income from Discontinued Operations
Income (loss) from discontinued operations in fiscal 1996 was $(2.2)
million compared to $51.1 million in fiscal 1995. The decrease in
income from discontinued operations results from several factors
including the fact that fiscal 1996 only included the results of
operations for MFC and MHC prior to the Distribution date (three
quarters) as opposed to a full year in fiscal 1995. Also, fiscal 1995
included a $46.8 million gain ($25.8 million net of tax) on the sale of
certain of MHC's business and industry contracts and assets, while fiscal
1996 included a pre-tax charge of $23.7 million recognized in fiscal 1996
for costs associated with asset impairment and restructuring.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Cash provided by operating activities was $79.2 million in fiscal
1997 and exceeded capital expenditures by approximately $5.1 million.
Borrowings under the Company's credit facilities were reduced by $3.6
million. Pursuant to the Company's financial strategy approved by the
Board during fiscal 1994, $3.3 million of the Company's stock was
reacquired during fiscal 1997 from cash available after the Company's
investments in new units. (See the Consolidated Statements of Cash Flow
for more information.) In addition, shortly after year-end the Company
completed its dutch auction tender offer (as announced on May 1, 1997) to
purchase up to one million shares of its common stock. The number of
shares acquired pursuant to the offer was 670,512 at a purchase price of
$22.00 per share, for a total aggregate purchase price of $14.8 million,
plus fees and expenses associated with the offer. The shares repurchased
were financed through the Company's $50.0 million five-year revolving
credit facility and bank lines of credit.
Capital Expenditures
The Company requires capital principally for new restaurants,
equipment replacement and remodeling of existing units. Property and
equipment expenditures for fiscal 1997 were $74.0 million for new units,
capitalized costs of existing units and information technology projects.
During fiscal 1997, 30 Ruby Tuesdays, two Mozzarella's and three Tia's
Tex-Mex restaurants were opened. Capital expenditures for fiscal 1998
are projected to be $77.9 million. Planned openings for fiscal 1998
include approximately 36 Ruby Tuesday, two Mozzarella's and three Tia's
Tex-Mex restaurants. There can be no assurance, however, that the
Company will be able to open the projected number of restaurants in
fiscal 1998 or invest the projected amount of money in capital
expenditures. See "Special Note Regarding Forward-Looking Information."
Borrowings and Credit Facilities
At May 31, 1997, the Company had committed lines of credit amounting
to $25.0 million (of which $24.5 million remained available at May 31,
1997) and non-committed lines of credit amounting to $15.0 million with
several banks at various interest rates. All of these lines are subject
to periodic review by each bank and may be canceled by the Company at any
time. The Company utilized its lines of credit to meet operational cash
needs during fiscal 1997. Borrowings on these lines of credit were $0.5
million and $6.0 million at May 31, 1997 and June 1, 1996, respectively.
In addition to these lines of credit, the Company entered into a five-
year credit facility with several banks which allows the Company to
borrow up to $100.0 million under various interest rate options. The
$100.0 million credit facility is comprised of a $50.0 million five-year
interest only term note and a $50.0 million five-year revolving credit
facility. The Company had $78.0 million of borrowings outstanding under
this agreement at May 31, 1997 classified by the Company as long-term
debt based upon the Company's ability and intent to refinance those
borrowings on a long-term basis. The credit facility contains certain
restrictions on incurring additional indebtedness and certain funded
debt, net worth, and fixed charge coverage requirements.
On June 2, 1997, the Company entered into a $40.0 million master
operating lease agreement for the purpose of leasing new free-standing
units and a new corporate headquarters. An operating lease agreement will
be entered into for each facility providing for an initial lease term of
five years with two five-year renewal options. The leases will also
provide for substantial residual value guarantees and include purchase
options at the lessor's original cost of the properties. During 1998, the
Company intends to enter into leases for 13 units (ten of which are
expected to be opened in fiscal year 1998) and the new Maryville,
Tennessee corporate headquarters at an aggregated original cost to the
lessor of approximately $23.0 million. See "Special Note Regarding
Forward-Looking Information."
During fiscal 1998, the Company expects to fund operations, capital
expansion, and the repurchase of common stock from operating cash flows,
bank lines of credit, the five-year revolving line of credit, and through
operating leases. (See Note 5 of Notes to Consolidated Financial
Statements for a detailed discussion of borrowings and credit
facilities.) Long-term debt increased a net $1.9 million in 1997 due to
greater utilization of the revolving credit facility while short-term
debt (bank lines) decreased $5.5 million. The Company anticipates the
need for additional borrowings under its revolving lines of credit should
repurchases of Company stock be made as planned in fiscal 1998. The
actual amount needed to be borrowed from the revolving lines of credit
could differ from the amount currently anticipated if actual cash flow
from operations is higher or lower than currently anticipated or if
capital expenditures are greater or less than budgeted amounts. See
"Special Note Regarding Forward-Looking Information."
Working Capital
The Company's working capital and current ratio as of May 31, 1997
were $(33.6) million and 0.5:1, respectively. The Company typically
carries current liabilities in excess of current assets because cash
generated from operating activities is reinvested in capital
expenditures.
Dividends
The Company has not paid cash dividends since the Distribution.
During fiscal 1997, the Board of Directors approved a dividend policy as
a means of returning excess capital to its shareholders. This policy
calls for payment of semi-annual dividends of approximately $3.0 million
annually. Accordingly, the Company intends to pay its first dividend
beginning in the third quarter of fiscal 1998. See "Special Note
Regarding Forward-Looking Information."
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
Financial and Stock Repurchase Plan
The Company employs a financial strategy which utilizes a prudent
amount of debt to minimize the weighted average cost of capital while
allowing the Company to maintain financial flexibility and the equivalent
of an investment-grade (BBB) bond rating. This financial strategy sets a
target debt-to-capital ratio of 60%, including operating leases. The
strategy also provides for repurchasing Ruby Tuesday stock whenever cash
flow exceeds funding requirements while maintaining the target capital
structure. On May 2, 1997, the Company commenced a tender offer for up to
one million shares of the Company's common stock in a dutch auction at a
price between $20 and $22 per share. The tender offer was completed on
June 2, 1997 with the Company purchasing 670,512 shares at $22 per share,
for an aggregate purchase price of $14.8 million plus fees and expenses
associated with the offer. After the dutch auction was completed, 1.3
million shares remained available for repurchase under the Company's
stock repurchase program.
Franchising and Development Agreements
On July 2, 1997, the Company entered into a series of agreements with
three limited partnerships. These agreements provide, among other things,
for the sale of 29 Company-owned units in Florida to the limited
partnerships upon the transfer of the liquor licenses from the Company to
the partnerships. Upon completion of the sale, the 29 units will be
operated as Ruby Tuesday restaurants under separate franchising
agreements. On that same date, the Company also entered into development
agreements with these three limited partnerships whereby each of them
will open eight to ten franchise restaurants in their respective areas of
Florida over the next five years.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("FAS 128"), which the Company is required to adopt on February 28, 1998.
At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected
to result in an increase in primary earnings per share for the year ended
May 31, 1997 of $0.02 per share. The impact of FAS 128 on the calculation
of fully diluted earnings per share is not expected to be material.
Impact of Inflation
Historically, the Company has been able to recover inflationary cost
increases to items such as food and beverages through increased menu
prices. There have been, and there may be in the future, delays in the
implementation of such menu price increases. Competitive pressures may
also limit the Company's ability to recover such cost increases in their
entirety. Historically, the effect of inflation on the Company's net
income has not been materially adverse.
Management's Outlook
The Company has made many advances to strategically position itself
for growth via a diversified group of casual dining concepts. Ruby
Tuesday, with its menu of burgers, ribs, fajitas, chicken, soups, salads
and sandwiches, will maintain its aggressive posture. The Mozzarella's
concept will follow a year of moderate expansion with a concentration
primarily on improved sales at existing units. The concept specializes
in gourmet pizzas, pastas, soups, salads and sandwiches, with a $9
average check. Tia's, the Tex-Mex concept acquired in 1995, with freshly
prepared menu items, offers the Company an attractive opportunity to
enter a high growth segment of the industry. The Company's focus for
Tia's is to expand from the base acquired while maintaining the new unit
sales volumes. Management believes that it is positioned to take
advantage of growth opportunities well into the future.
In fiscal year 1997, the Company began identifying a group of
potential restaurant operators - internal and external - to become Ruby
Tuesday managing partners and franchisees. Approximately one-third of
the Company's restaurant managers have a financial stake in the success
of their units as internal managing partners. The franchise partner
program - the Company's external partnership program - will allow the
Company to become a financial partner with approximately 10 regional
operators from the casual-dining industry who will be expected to build
approximately 10 units each over the next five years in new and existing
markets. See "Special Note Regarding Forward Looking Information."
In order to facilitate this development, the Company negotiated a
$35.0 million credit agreement with several banks which will be used by
these franchise partners to help finance their expansion. The Company is
a partial guarantor on this credit facility.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The foregoing section contains various "forward-looking statements"
which represent the Company's expectations or beliefs concerning future
events, including the following: statements regarding unit growth,
future capital expenditures and future borrowings. The Company cautions
that a number of important factors could, individually or in the
aggregate, cause actual results to differ materially from those included
in the forward-looking statements including, without limitation, the
following: consumer spending trends and habits; mall-traffic trends;
increased competition in the casual dining restaurant market; weather
conditions in the regions in which the Company operates restaurants;
consumers' acceptance of the Company's development concepts; laws and
regulations affecting labor and employee benefit costs; the Company's
ability to attract qualified managers and franchisees; and changes in the
availability of capital.
<TABLE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per-share data)
<CAPTION>
For the Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Net sales and operating revenues.................... $ 654,464 $ 618,803 $ 514,292
Other revenues...................................... 943 1,331 1,020
655,407 620,134 515,312
Operating costs and expenses:
Cost of merchandise 177,835 170,352 138,665
Payroll and related costs 213,323 209,007 169,881
Other 140,619 134,043 106,028
Selling, general and administrative 42,346 39,139 37,521
Depreciation and amortization 38,560 34,131 26,634
L&N conversion/closing costs 19,727
Interest expense, net of interest income totaling
$205 in 1997, $160 in 1996, and $736 in 1995 3,911 4,637 744
Loss on impairment of assets 25,881
Restructure charges.................................. 5,257
616,594 622,447 499,200
Income (loss) from continuing operations before
income taxes 38,813 (2,313) 16,112
Provision (benefit) for federal and state income taxes 13,768 (1,651) 5,027
Income (loss) from continuing operations 25,045 (662) 11,085
Income (loss) from discontinued operations, net of
applicable income taxes ............................. (2,222) 51,086
Net income (loss)..................................... $ 25,045 $ (2,884) $ 62,171
Earnings (loss) per common and common equivalent share:
Continuing operations............................... $ 1.40 $ (0.03) $ 0.62
Discontinued operations............................. (0.13) 2.84
Earnings (loss) per common and common equivalent
share............................................... $ 1.40 $ (0.16) $ 3.46
Weighted average common and
common equivalent shares ........................... 17,875 17,689 17,961
The accompanying notes are an integral part of the consolidated financial statements.
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
May 31, June 1,
Assets 1997 1996
Current assets:
Cash and short-term investments................................. $ 7,608 $ 7,139
Accounts and notes receivables.................................. 4,621 2,040
Inventories:
Merchandise................................................... 6,088 5,678
China, silver and supplies.................................... 3,562 3,003
Income tax receivable........................................... 2,178 4,243
Prepaid expenses................................................ 7,047 8,167
Prepaid income taxes............................................ 4,388 2,988
Total current assets......................................... 35,492 33,258
Property and equipment - at cost:
Land.......................................................... 35,643 25,663
Buildings..................................................... 70,163 55,284
Improvements.................................................. 195,034 175,102
Restaurant equipment.......................................... 137,830 120,144
Other equipment............................................... 38,284 28,122
Construction in progress...................................... 35,450 39,160
512,404 443,475
Less accumulated depreciation and amortization................ 165,640 129,937
346,764 313,538
Costs in excess of net assets acquired.......................... 20,396 21,058
Other assets.................................................... 16,219 13,262
Total assets.................................................... $ 418,871 $ 381,116
Liabilities and shareholders' equity
Current liabilities:
Accounts payable.............................................. $ 28,828 $ 26,386
Short-term borrowings......................................... 534 6,001
Accrued liabilities:
Taxes, other than income taxes.............................. 11,425 10,602
Payroll and related costs................................... 8,982 6,917
Insurance................................................... 8,800 7,478
Rent and other.............................................. 10,393 9,112
Current portion of long-term debt............................. 102 95
Total current liabilities................................... 69,064 66,591
Long-term debt.................................................. 78,006 76,108
Deferred income taxes........................................... 13,552 8,232
Other deferred liabilities...................................... 34,609 32,842
Shareholders' equity:
Common stock, $0.01 par value; authorized: 100,000 shares;
issued: 1997 - 17,720 shares, 1996 - 17,598 shares......... 177 176
Capital in excess of par value............................... 2,729 1,762
Retained earnings............................................ 223,399 198,354
226,305 200,292
Less cost of Company stock held by deferred compensation plan 2,665 2,949
223,640 197,343
Total liabilities and shareholders' equity...................... $ 418,871 $ 381,116
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands except per-share data)
Capital in Total
<CAPTION>
Common Stock Issued Treasury Stock Excess of Retained Shareholders'
Shares Amount Shares Amount Par Value Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 4, 1994........................ 43,644 $436 (8,335) $(105,000) $77,656 $248,044 $221,136
Net income................................. 62,171 62,171
Shares issued under stock bonus and stock
option plans.............................. 562 7,792 3,132 10,924
Shares issued pursuant to Tias, Inc.
acquisition.............................. 355 5,273 3,727 9,000
Cash dividends of
$0.6916 per common share.................. (12,034) (12,034)
Purchase of treasury stock including
deferred compensation plan................ (1,701) (45,704) (45,704)
Balance, June 3, 1995........................ 43,644 436 (9,119) (137,639) 84,515 298,181 245,493
Net income (loss)......................... (2,884) (2,884)
Shares issued under stock bonus and stock
option plans............................. 84 1 129 1,926 1,663 251 3,841
Cash dividends of $0.543 per common share. (9,377) (9,377)
Purchase of treasury stock, net of changes
in deferred compensation plan............ 240 (858) (858)
Equity transfers to MFC and MHC........... 5,080 (43,952) (38,872)
Retirement of treasury stock.............. (8,616) (86) 8,616 128,542 (84,416) (44,040) 0
1-for-2 reverse stock split............... (17,514) (175) 175 0
Balance, June 1, 1996........................ 17,598 176 (134) (2,949) 1,762 198,354 197,343
Net income................................ 25,045 25,045
Shares issued under stock bonus and stock
options plans............................ 310 3 4,249 4,252
Purchase of treasury stock, net of changes
in deferred compensation plan............ (188) (2) 7 284 (3,282) (3,000)
Balance, May 31, 1997........................ 17,720 $177 (127) $(2,665) $2,729 $223,399 $223,640
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
Ruby Tuesday, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
For the Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
<S> <C> <C> <C>
Operating activities:
Income (loss) from continuing operations......... $ 25,045 $ (662) $ 11,085
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Loss on impairment of assets................... 25,881
Depreciation and amortization.................. 38,560 34,131 26,634
Amortization of intangibles.................... 734 699 607
Other, net..................................... (1,118)
Deferred income taxes.......................... 3,712 (7,157) 2,501
Loss on disposition of assets.................. 331 2,592 4,419
Changes in operating assets and liabilities:
Increase in receivables...................... (2,581) (282) (213)
Increase in inventories...................... (969) (1,197) (1,059)
Decrease in prepaid and
other assets................................ 2,610 721 3,355
Increase in accounts payable,
accrued and other liabilities.............. 9,456 14,989 18,810
Increase/(decrease) in income taxes payable.. 2,273 (4,493) 1,205
Cash provided by continuing operations........... 79,171 64,104 67,344
Cash provided (used) by discontinued operations.. 10,030 (11,128)
Net cash provided by operating activities......... 79,171 74,134 56,216
Investing activities:
Purchases of property and equipment............. (74,049) (109,164) (108,452)
Proceeds from disposal of assets................ 818 3,444 153
Other, net...................................... (3,161) (4,475) 2,701
Discontinued operations investing
activities, net.............................. (14,448) 71,693
Net cash used by investing activities............. (76,392) (124,643) (33,905)
Financing activities:
Proceeds from long-term debt.................... 2,000 44,200 30,800
Net change in short-term borrowings............. (5,467) (6,637) (11,828)
Principal payments on long-term debt and
capital leases................................. (95) (87) (7,438)
Proceeds from issuance of stock,
including treasury stock....................... 4,252 3,841 10,924
Stock repurchases, net of changes in
in deferred compensation plan.................. (3,000) (858) (45,704)
Dividends paid.................................. (9,377) (12,034)
Discontinued operations financing
activities, net.............................. 20,609 14,506
Net cash provided (used) by financing activities.. (2,310) 51,691 (20,774)
Increase in cash and short-term
investments...................................... 469 1,182 1,537
Cash and short-term investments:
Beginning of period.............................. 7,139 5,957 4,420
End of period.................................... $ 7,608 7,139 $ 5,957
Supplemental disclosure of cash flow information-
cash paid for:
Interest (net of amount capitalized)............ $ 3,599 $ 4,252 $ 1,547
Income taxes, net............................... $ 7,783 $ 2,605 $ 5,200
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
RUBY TUESDAY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Summary of Significant Accounting Policies-(Continued)
Inventories
Inventories consist of materials, food supplies, china and silver and are stated
at the lower of cost (first-in, first-out) or market.
Property and Equipment and Depreciation
Depreciation for financial reporting purposes is computed using the straight-
line method over the estimated useful lives of the assets or, for capital lease
property, over the term of the lease, if shorter. Annual rates of depreciation
range from 3% to 5% for buildings and improvements and from 8% to 34% for
restaurant and other equipment.
Income Taxes
Deferred income taxes are determined utilizing a liability approach. This
method gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities.
Pre-Opening Expenses
Salaries, personnel training costs and other expenses of opening new facilities
are charged to expense as incurred.
Intangible Assets
Excess of costs over the fair value of net assets acquired of purchased
businesses generally is amortized on a straight-line basis over 40 years.
At May 31, 1997 and June 1, 1996, accumulated amortization for costs in excess
of net assets acquired was $6.0 million and $5.3 million, respectively.
Advertising Costs
The Company generally expenses advertising costs as incurred. Advertising
expense as a percentage of revenues ranged from 1.2% to 1.5% for fiscal years
1997, 1996, and 1995.
Fair Value of Financial Instruments
The Company's financial instruments at May 31, 1997 and June 1, 1996 consisted
of cash and short-term investments, notes receivable, short-term borrowings and
long-term debt. The fair value of these financial instruments approximated the
carrying amounts reported in the consolidated balance sheets.
Earnings Per Share
Earnings per share are based on the weighted average number of shares
outstanding during each year and are adjusted, when the effect is dilutive, for
the assumed exercise of options, after the assumed repurchase of shares with the
related proceeds, after adjustment for stock splits and stock dividends through
May 31, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"), which
the Company is required to adopt on February 28, 1998. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an increase in primary
earnings per share for the year ended May 31, 1997 of $0.02 per share. The
impact of FAS 128 on the calculation of fully diluted earnings per share is not
expected to be material.
Stock-Based Employee Compensation Plans
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options and adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("FAS 123"). The Company grants
stock options for a fixed number of shares to employees with an exercise price
equal to the fair value of the shares at the date of grant and, accordingly,
recognizes no compensation expense for the stock option grants.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. Discontinued Operations
As previously mentioned, in fiscal 1996, Morrison distributed the common
stock of its family dining restaurant business (Morrison Fresh Cooking, Inc.,
or "MFC") and its health care contract food and nutrition business (Morrison
Health Care, Inc., or "MHC") to itsshareholders. Morrison shareholders received
one share of MFC stock for every four shares of Morrison stock and one share of
MHC stock for every three shares of Morrison stock. In accordance with
Accounting Principles Board Opinion No. 30, the financial results of the two
businesses, together referred to as the Morrison Group, are reported as
discontinued operations in the accompanying consolidated financial statements.
The condensed results presented below include an allocation of general expenses
of Morrison, such as legal, data processing and interest, on a specific
identification method, where appropriate. Management believes the allocation
methods used are reasonable. Condensed results of the discontinued operations
are as follows:
(In Thousands)
Fiscal Yea
1996 1995
Revenues......................... $ 370,439 $ 519,777
Income (loss) before provision
for income taxes............... $ (2,434) $ 88,600
Provision (benefit) for federal
and state income taxes......... $ (212) $ 37,514
Net income (loss)................ $ (2,222) $ 51,086
Included in the June 3, 1995 income before provision for income taxes is a $46.8
million gain on sale of certain business and industry contracts and assets of
MHC. Included in the June 1, 1996 income before provision for income taxes is a
charge of $23.7 million for costs associated with asset impairment and
restructuring.
As a result of the Distribution, the Company does not have any ownership
interest in either MFC or MHC, except for stock held within the rabbi trust
associated with the Company's Deferred Compensation Plan. (See Note 8 of Notes
to Consolidated Financial Statements for more information.) Prior to the spin-
off, the Company entered into agreements with both MFC and MHC governing certain
operating relationships among the Company, MFC and MHC subsequent to the
Distribution including (i) an agreement providing for assumptions of liabilities
and cross-indemnities to allocate responsibilities for liabilities arising out
of or in connection with business activities prior to the Distribution; (ii)
a tax indemnity agreement which provides that none of the three companies will
take any action that would jeopardize the intended tax free consequences of
the Distribution; (iii) a tax allocation agreement to the effect that MFC and
MHC will pay their respective shares of the Company's consolidated tax liability
for the tax years that MFC and MHC were included in the Company's consolidated
federal income tax return; (iv) a shared services agreement pursuant to which
each of the three companies agreed to provide to the other parties certain
services, subject to certain conditions, on an "as needed" basis;
(v) intellectual property license agreements which provided for the licensing of
rights currently owned by the Company to the three companies; and (vi) an
agreement providing for the allocation of employee benefit rights and
responsibilities among the three companies.
3.Impairment of Long-Lived Assets/Restructure Charges
In fiscal 1996, the Company adopted Statement of Financial Accounting Standards
No. 121 ("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." A pre-tax charge of $25.9 million was
recorded of which $3.9 million, the difference between fair value and net
realizable value of the impaired assets, resulted from the adoption of FAS 121.
The $25.9 million charge is comprised of the following: impairment on 16 units
approved for closure within one year by the Board of Directors on January 10,
1996, ($10.0 million); impairment on in-unit computer equipment ($0.8 million)
and write-offs resulting from management's decision to abandon an information
technology plan ($3.8 million) approved on that same date; and impairment on
units remaining open ($11.3 million).
The Board approved the closing of ten Ruby Tuesdays, four Mozzarella's and two
Tia's restaurants based upon management's review of negative cash flow and
operating loss units and other considerations. The expected loss on the
disposal of the long-lived assets of these units is $10.0 million (net of an
assumed salvage value of $0.9 million). Included in this amount is $0.6
million which represents the goodwill associated with two Tia's units to be
closed. Subsequently, a decision was made to keep two of the units open
because of operational improvements at those units. As of May 31, 1997, the
remaining 14 units have been closed.
Prior to the initiation of the Distribution, Morrison was undertaking an
information technology project intended, among other things, to update or
replace certain accounting and human resource systems for all of Morrison.
Upon initiation of the intended Distribution, management commenced a project
by project review of the information technology plan. Upon completion of its
review, management decided to abandon certain projects in development, including
the project to update or replace certain accounting and human resource systems.
In connection therewith, the Company instituted a plan to dispose of certain
in-unit computer equipment and replace that equipment with computers more
technologically advanced. Accordingly, in fiscal 1996 the Company recorded a
charge of $3.8 million for the write-off of the information technology projects
and $0.8 million for the remaining carrying value of certain in-unit computer
equipment.
Negative cash flow and operating loss units not recommended for closure were
also reviewed for impairment. Management believed these units might have been
impaired based upon poor operating performance. Accordingly, management
estimated the undiscounted future cash flows to be generated by these units and
determined that certain of them would not likely generate net cash flows in
excess of carrying value. Based upon third quarter fiscal 1996 operating and
cash flow results, two additional units were identified as impaired.
Accordingly, the charge of $11.3 million was recorded to reduce the carrying
value of the impaired assets (including the two units identified during the
third quarter) to their estimated fair value, as determined by using discounted
estimated future cash flows. Future cash flows were estimated based on
management judgment. Thus, actual cash flows could vary from such estimates.
In addition to the write-down of fixed assets on the units to be closed, the
Company accrued charges not included above of $3.4 million relating to the
settlement of the related lease obligations. Management estimated it could
negotiate lease settlements within 36 months on a majority of those units
which could not be sublet. During fiscal 1997, the Company paid approximately
$3.2 million in lease obligations and settlement costs relating to these units.
The remaining cost accrued for lease settlements was $1.8 million and $3.0
million at May 31, 1997 and June 1, 1996, respectively.
Other charges of $1.8 million were also recorded during the third quarter of
fiscal 1996. These charges consisted of estimated professional and other fees
incurred in accordance with the Distribution ($1.3 million); severance pay for
staff reductions expected during the quarter ($0.2 million) and miscellaneous
other asset write-offs ($0.3 million). Professional fees and severance pay
approximating the amounts accrued were paid prior to the end of fiscal 1996.
4. Phase Out of the L&N Seafood Grill Concept
On June 27, 1994, plans to phase out the L&N Seafood Grill concept were
announced by the Company. The original plan, as approved by the Board of
Directors, called for the conversion of 30 L&N units into other Company
concepts. All remaining units were to be sold or closed. The Company accrued
$19.7 million for costs to be incurred as a result of the phase-out.
This amount, originally accrued to cover the costs to convert 30 L&N units
and close the remaining eight, consisted primarily of the following: losses on
disposal of fixed assets net of anticipated proceeds and the net cost of related
lease obligations for the units to be closed (approximately $11.6 million),
expected operating losses during the phase-out period (approximately
$4.8 million), severance pay (approximately $1.1 million) and other losses on
the conversion of units, consisting primarily of the write-off of fixed assets,
inventory, and unamortized cost in excess of net assets acquired ($2.2 million).
The Company originally estimated that, of the $19.7 million charge, asset
write-offs (including inventory, fixed assets and goodwill) would total $9.2
million. Cash proceeds from disposal of the properties were anticipated to be
$0.7 million. The remaining $11.2 million represented the estimated cash outlay
for lease settlements, severance pay and other operating expenditures. The
original plan assumed that no units would be sublet and that buyout of leases
could occur. Determination of the number of months assumed in which buyouts
could occur was made on an individual unit basis.
Subsequent to the June 1994 announcement, the Company reacquired three
additional L&N units as a result of a default on a licensing agreement. These
three units were closed. Based upon favorable operating results, in the third
quarter of fiscal 1995, management decided to continue to operate four of the
L&N units as L&Ns through the remainder of their lease terms. During fiscal
1995, 21 of the L&N units were converted and are operating as other restaurant
concepts. In fiscal 1996, two additional units were converted and reopened as
Tia's.
The increase from the original plan in the number of units to be closed did not
result in a material increase to the $11.6 million closing cost estimate as the
increases necessary for the six additional units ultimately closed were offset
by decreases in estimates for the other units closed and the decrease which
resulted from the decision to continue to operate the four units discussed
above. Reserves totaling $1.6 million and $1.0 million remained outstanding
as of May 31, 1997 and June 1, 1996, respectively.
5. Long-Term Debt
Long-term debt consists of the following:
(In Thousands)
Fiscal Year
1997 1996
Revolving credit facility $27,000 $25,000
Term notes payable to banks 50,000 50,000
Other long-term debt 1,108 1,203
78,108 76,203
Less current maturities 102 95
$78,006 $76,108
Annual maturities of long-term debt at May 31, 1997 are as follows:
(In Thousands)
1998 $ 102
1999 113
2000 121
2001 77,132
2002 143
Subsequent years 497
Total $ 78,108
The Company has a five-year credit facility with several banks which allows the
Company to borrow up to $100.0 million under various interest rate options. The
$100.0 million credit facility is comprised of a $50.0 million five-year
interest only term note and a $50.0 million five-year revolving credit facility.
Commitment fees equal to 0.1875% per annum are payable quarterly on the unused
portion of the revolving credit facility. At May 31, 1997, the Company had
$27.0 million of borrowings outstanding with various banks under the revolving
credit facility at interest rates ranging from 6.05% to 6.31% per annum. Such
borrowings (with maturities up to 90 days) have been classified as long-term
based on the Company's ability and intent to refinance such borrowings under
the revolving facility.
The credit facility contains certain restrictions on incurring additional
indebtedness and certain funded debt, net worth, and fixed charge coverage
requirements. At May 31, 1997, retained earnings in the amount of $31.1 million
were available for distribution under the debt restrictions.
In order to control interest costs on the term loan, the Company entered into an
interest rate swap agreement in March 1996. The agreement effectively limited
the interest rate to 6.25% for the period ended March 4, 2001. Based on current
projections of long term interest rates, the Company elected to unwind its
interest rate swap agreement because it felt its net effective floating interest
rate for the five-year period would be less than the 6.25% fixed rate associated
with the swap agreement. The Company terminated the interest rate swap
agreement on September 10, 1996 and received approximately $1.7 million in cash.
The gain on the interest rate swap agreement is being amortized to interest
expense over the previously remaining life of the swap agreement. At May 31,
1997, the balance of the unamortized interest was approximately $1.4 million.
In addition, at May 31, 1997, the Company had committed lines of credit
amounting to $25.0 million (of which $24.5 million remained available at May 31,
1997) and non-committed lines of credit amounting to $15.0 million with several
banks at various interest rates. All of these lines are subject to periodic
review by each bank and may be canceled by the Company at any time. The Company
utilized its lines of credit to meet operational cash needs during fiscal year
1997. Borrowings on these lines of credit were $0.5 and $6.0 million at May 31,
1997 and June 1, 1996, respectively.
Interest expense capitalized in connection with financing additions to property
and equipment amounted to approximately $1.2 and $1.6 million for the years
ended May 31, 1997 and June 1, 1996, respectively.
6. Leases
Various operations of the Company are conducted in leased premises. Initial
lease terms expire at various dates over the next 22 years and may provide for
escalation of rent during the lease term. Most of these leases provide for
additional contingent rents based upon sales volume and contain options to
renew (at adjusted rentals for some leases). The administrative headquarters
has a lease term ending in 1998 and provides an option to purchase at a nominal
amount at the end of the initial lease term.
At May 31, 1997, the future minimum lease payments under operating leases for
the next five years and in the aggregate are as follows:
(In Thousands)
1998 $ 34,767
1999 34,155
2000 32,496
2001 30,466
2002 29,897
Subsequent years 198,968
Total minimum lease payments $360,749
Rental expense pursuant to operating leases is summarized as follows:
(In Thousands) 1997 1996 1995
Minimum rent $36,813 $33,930 $30,099
Contingent rent 2,421 2,195 1,654
$39,234 $36,125 $31,753
On June 2, 1997, the Company entered into a $40.0 million operating lease
agreement for the purpose of leasing new free-standing units and a new
corporate headquarters. An operating lease agreement will be entered into for
each facility providing for an initial lease term of five years with two five-
year renewal options. The lease will also provide for substantial residual
value guarantees and include purchase options at the lessor's original cost
of the properties. During 1998, the Company intends to enter into leases for
13 units (ten of which are expected to be opened in fiscal year 1998) and the
new Maryville, Tennessee corporate headquarters at an aggregated original cost
to the lessor of approximately $23.0 million.
7. Income Taxes
The components of income tax expense (benefit) are as follows:
(In Thousands)
1997 1996 1995
Current:
Federal $ 7,953 $ 4,323 $ 1,959
State 2,103 1,183 567
10,056 5,506 2,526
Deferred:
Federal 3,167 (5,949) 2,313
State 545 (1,208) 188
3,712 (7,157) 2,501
$ 13,768 $ (1,651) $ 5,027
Deferred tax assets and liabilities are comprised of the following:
(In Thousands)
1997 1996
Deferred tax assets:
Employee benefits $ 8,022 $ 7,626
Insurance reserves 4,107 4,005
Escalating rents 4,398 3,451
Acquired net operating losses 2,202 2,551
Restructuring and FAS 121 reserves 699 1,264
Unit closing reserve 755 313
Other 834 687
Total deferred tax assets 21,017 19,897
Deferred tax liabilities:
Depreciation 27,569 20,493
Prepaid deductions 741 1,010
Retirement plans 422 833
Other 1,449 2,805
Total deferred tax liabilities 30,181 25,141
Net deferred tax liability $ (9,164) $ (5,244)
At May 31, 1997, the Company had net operating loss carryforwards for tax
purposes of approximately $ 5.6 million as a result of the acquisition of Tias,
Inc., which expire through 2005. The Company's net operating loss carryforwards
are subject to an annual limitation due to the change in ownership of the
acquired company. Management does not believe a valuation allowance is
necessary.
A reconciliation from the statutory federal income tax expense (benefit) to the
reported income tax expense is as follows:
(In Thousands)
1997 1996 1995
Statutory federal income taxes $ 13,585 $ (810) $ 5,639
State income taxes, net of
federal income tax
benefit 1,721 (68) 549
Tax credits (1,220) (1,349) (2,964)
Other, net (318) 576 1,803
$ 13,768 $(1,651) $ 5,027
The effective income tax rate (benefit) was 35.5%, (71.4)%, and 31.2% in 1997,
1996, and 1995, respectively. The high effective tax benefit rate for 1996 is
attributable to the tax credits which were available to the Company.
8. Employee Benefit Plans
Salary Deferral Plan - Under the Ruby Tuesday, Inc. Salary Deferral Plan, each
eligible employee may elect to make pre-tax contributions to a trust fund in
amounts ranging from 2% to 10% of their annual earnings. Employees contributing
a pre-tax contribution of at least 2% may elect to make after-tax contributions
not in excess of 10% of annual earnings. The Company contribution to the Plan
is based on the employee's pre-tax contribution and years of service. After
three years of service, the Company contributes 20% of the employee's pre-tax
contribution, 30% after ten years of service and 40% after 20 years of service.
The Company's contributions to the trust fund approximated $0.2 million for 1997
and 1996 and $0.1 million for 1995.
Deferred Compensation Plan - The Company maintains the Ruby Tuesday, Inc.
Deferred Compensation Plan for certain selected employees. The provisions of
this Plan are similar to those of the Salary Deferral Plan. The Company's
contributions under the Plan approximated $0.1 million for each of 1997, 1996,
and 1995. Company assets earmarked to pay benefits under the Plan are held by
a rabbi trust. Assets of a rabbi trust must be accounted for as if they are
assets of the Company, therefore, all earnings and expenses are recorded in the
Company's financial statements. The Plan's assets, which approximated $10.8
million and $9.5 million in 1997 and 1996, respectively, are included in Other
Assets in the Consolidated Balance Sheets.
Retirement Plan - The Company, along with MFC and MHC, sponsors the Morrison
Restaurants Inc. Retirement Plan. Effective December 31, 1987, the Plan was
amended so that no additional benefits will accrue and no new participants will
enter the Plan after that date. Participants receive benefits based upon salary
and length of service. Certain responsibilities involving the administration of
the Plan are jointly shared by each of the three companies. No contribution was
made in 1997, 1996, or 1995.
Executive Supplemental Pension Plan - Under the Ruby Tuesday, Inc. Executive
Supplemental Pension Plan, employees with an average annual compensation of at
least $120,000 and who have completed five years in a qualifying position become
eligible to earn supplemental retirement income based upon salary and length of
service, reduced by social security benefits and amounts otherwise receivable
under the Retirement Plan. Expenses under the Plan approximated $1.0 million,
$0.6 million, and $0.5 million for 1997, 1996, and 1995,
respectively.
Management Retirement Plan - Under the Ruby Tuesday, Inc. Management Retirement
Plan, individuals actively employed by the Company as of June 1, 1989, or
thereafter, who have 15 years of credited service and whose average annual
compensation equals or exceeds $40,000, become participants. Participants will
receive benefits based upon salary and length of service, reduced by social
security benefits and benefits payable under the Retirement Plan. The Company
recognized approximately $0.7 million in income in 1997 and expenses of $0.3
million and $0.1 million in 1996 and 1995, respectively.
To provide a source for the payment of benefits under the Executive
Supplemental Pension Plan and the Management Retirement Plan, the Company owns
whole-life insurance contracts on some of the participants. The cash value of
these policies net of policy loans is $4.0 million at May 31, 1997. The Company
maintains a rabbi trust to hold the policies and death benefits as they are
received.
The following table details the components of pension expense, the funded status
and amounts recognized in the Company's Consolidated Financial Statements for
the Management Retirement Plan, the Executive Supplemental Pension Plan, and the
Retirement Plan. Amounts presented are in thousands.
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits Exceed Assets-
Accumulated Benefits- Executive Supplemental Pension Plan
Retirement Plan and Management Retirement Plan
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Components of pension expense (income):
Service cost......................... $ $ $ $ 43 $ 96 $ 73
Interest cost........................ 329 334 31 207 525 276
Actual return on plan assets......... (661) (787) (10)
Amortization and deferral............ 313 497 (23) 90 294 123
Other................................ 89
$ (19) $ 44 $ (2) $ 340 $ 915 $ 561
Plan assets at fair value............ $ 4,730 $ 4,502 $ 382 $ 0 $ 0 $ 0
Actuarial present value of
projected benefit obligations:
Accumulated benefit obligations:
Vested............................ 4,286 4,432 374 7,315 7,479 3,434
Nonvested......................... 109 63 8
Provision for future salary
increases........................ 1,964 1,960 883
Total projected benefit obligations... 4,286 4,432 374 9,388 9,502 4,325
Excess (deficit) of plan assets over
projected benefit obligations........ 444 70 8 (9,388) (9,502) (4,325)
Unrecognized net loss (gain).......... 318 607 74 703 235 (265)
Unrecognized prior service cost....... 671 840 665
Unrecognized net transition obligation 324 389 41 939 1,510 993
Additional minimum liability.......... (643) (1,164) (578)
Prepaid (accrued) pension cost........ $ 1,086 $ 1,066 $ 123 $(7,718) $ (8,081) $(3,510)
The Retirement Plan's assets include common stock, fixed income securities, short-term
investments and cash. The weighted-average discount rate for all three plans was 8.25%,
7.75%, and 8.5% for 1997, 1996, and 1995, respectively. The rate of increase in
compensation levels for the Executive Supplemental Pension Plan and Management Retirement
Plan was 4% for all three years. The expected long-term rate of return on plan assets for
the Retirement Plan was 10% for all three years.
</TABLE>
9. Capital Stock, Options, and Bonus Plans
Preferred Stock - Under its Certificate of Incorporation, the Company is
authorized to issue preferred stock with a par value of $0.01 in an amount not
to exceed 250,000 shares which may be divided into and issued in designated
series, with dividend rates, rights of conversion, redemption, liquidation
prices and other terms or conditions as determined by the Board of Directors.
No preferred shares have been issued as of May 31, 1997.
The Ruby Tuesday, Inc. 1996 Stock Incentive Plan - The Ruby Tuesday, Inc. 1996
Stock Incentive Plan is an amendment and restatement of the Morrison Restaurants
Inc. 1992 Stock Incentive Plan. A Committee, appointed by the Board,
administers the Plan on behalf of the Company and has complete discretion to
determine participants and the terms and provisions of Stock Incentives, subject
to the Plan. The Plan permits the Committee to make awards of shares of common
stock, awards of derivative securities related to the value of the common
stock, and certain cash awards to eligible persons. These discretionary awards
may be made on an individual basis or pursuant to a program approved by the
Committee for the benefit of a group of eligible persons. All options awarded
under this plan have been at the prevailing market value at the time of grant.
At May 31, 1997, the Company had reserved a total of 1,032,000 shares of common
stock for this Plan.
The Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for
Directors - The Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation
Plan for Directors is a continuation of the similarly titled 1994 Morrison plan.
To defer the receipt of their retainer fees or to allocate their retainer fees
to the purchase of shares of the Company, the Plan provides that the directors
must use 60% of their retainer to purchase shares of the Company if they have
not attained a specified level of ownership of shares of Company common stock.
Each director purchasing stock receives additional shares equal to 15% of the
shares purchased and three times the total shares in options which after six
months are exercisable for five years from the grant date. All options awarded
under this Plan have been at the prevailing market value at the time of grant.
A Committee, appointed by the Board, administers the Plan on behalf of the
Company. At May 31, 1997, the Company had reserved 92,000 shares of common
stock for the Plan.
The Ruby Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan - The Ruby
Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan is an amendment and
restatement of the similarly titled 1993 Morrison plan. A Committee, appointed
by the Board, administers the Plan on behalf of the Company and has full
authority in its discretion to determine the officers and key employees to whom
Stock Incentives are granted and the terms and provisions of Stock Incentives,
subject to the Plan. The Plan permits the Committee to make awards of shares
of common stock, awards of derivative securities related to the value of the
common stock, and certain cash awards to eligible persons. These discretionary
awards may be made on an individual basis or pursuant to a program approved by
the Committee for the benefit of a group of eligible persons. All options
awarded under this Plan have been at the prevailing market value at the time of
grant. At May 31, 1997, the Company had reserved a total of 1,262,000 shares of
common stock for this Plan.
In March 1996, the number and exercise price of all outstanding options were
adjusted for the spin-off of MFC and MHC and the concurrent reverse one-for-two
split of the Company shares.
In addition to the above plans, stock options are outstanding under a terminated
plan, the Ruby Tuesday, Inc. Stock Bonus and Non-Qualified Stock Option Plan,
which was effective from 1986 to 1992. Options to purchase 344,000 shares
remain outstanding under the terms of this Plan at May 31, 1997.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its employee stock options. In contrast to the intrinsic value based method
employed by APB 25, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("FAS 123") utilizes a fair value
based method. FAS 123 requires the use of option valuation models developed
for estimating the fair value of traded options which are fully transferable
and have no vesting restrictions. Option valuation models also utilize highly
subjective assumptions such as expected stock price volatility. Changes in the
assumptions can materially impact the fair value estimate and, in management's
opinion, do not necessarily provide a reliable single measure of the fair value
of its employee stock options. Since the Company has elected to account for its
employee stock options in accordance with APB 25, the required pro forma
disclosures as if the option valuation models were used in 1996 are presented
below in accordance with FAS 123.
All stock options are awarded at the prevailing market rate on the date of
grant; therefore, under the intrinsic value method employed by APB 25 no
compensation expense is recognized. For purposes of FAS 123 disclosure, the
estimated fair value of the options is expensed over the vesting period of the
options. Fair value was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions for 1997
and 1996: (i) risk-free interest rate of 6.00%, (ii) dividend yield of 0.00%,
(iii) stock price volatility factor of .373 and (iv) expected option lives
ranging from 3 to 7 years, depending on the plan under which the options were
granted. If the Company had adopted FAS 123 in accounting for its stock options
granted in fiscal years 1997 and 1996, its net income and earnings per share
would approximate the pro forma amounts below (in thousands except for per-share
data):
1997 1996
As Pro As Pro
Reported Forma Reported Forma
Net income(loss) $ 25,045 $ 22,331 $ (2,884) $ (4,671)
Earnings per share $ 1.40 $ 1.25 $ (0.16) $ (0.26)
The following table summarizes the activity in options under these stock
option plans (option amounts and prices for 1995 are derived from the historical
financial statements of Morrison Restaurants Inc. and do not reflect the
Distribution and the March 1996 reverse stock split):
Number of Shares Under Option
(In Thousands Except Per-Share Data)
Wtd. Wtd. Wtd.
Avg. Avg. Avg.
Exercise Exercise Exercise
1997 Price 1996 Price 1995 Price
Beginning of year....... 2,465 $17.48 2,695 $15.49 2,717 $14.05
Adjustment due to MFC
and MHC spin-off and
reverse stock split (1,368) $14.84
Granted 669 $17.79 1,340 $18.55 343 $24.94
Exercised (156) $10.87 (87) $10.14 (258) $11.47
Forfeited (215) $17.79 (115) $20.62 (107) $18.28
End of year 2,763 $17.74 2,465 $17.48 2,695 $15.49
Exercisable 883 $17.02 808 $15.71 971 $10.58
Outstanding options'
prices ................. $ 8.69-$30.57 $ 8.09-$30.57 $ 7.61-$28.75
Exercised options'
prices................. $ 8.09-$17.10 $ 7.61-$14.09 $ 5.40-$25.38
Granted options'
prices................. $16.13-$21.25 $13.62-$23.50 $14.01-$28.75
Weighted avg. fair value
of options granted
during the year........ $ 6.60 $ 3.75
The weighted average remaining contractual life of the options outstanding at
May 31, 1997, was 3.51 years.
On May 1, 1997, the Company announced its dutch auction tender offer to purchase
up to one million shares of its Common Stock at prices not in excess of $22.00
nor less than $20.00 per share. That tender offer expired on June 2, 1997. The
number of shares acquired pursuant to the offer aggregated 670,512 at a purchase
price of $22.00 per share, for a total aggregate purchase price of $14.8
million, plus fees and expenses associated with the offer. The shares
repurchased were financed through the Company's $50.0 million five-year
revolving credit facility and bank lines of credit.
10. Commitments and Contingencies
At May 31, 1997, the Company was committed under letters of credit of $16.8
million issued primarily in connection with its workers' compensation and
casualty insurance programs.
The Company is presently, and from time to time, subject to pending claims and
lawsuits arising in the ordinary course of its business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse effect on the Company's operations or consolidated
financial position.
11. Subsequent Event
On July 2, 1997, the Company entered into a series of agreements with three
limited partnerships. These agreements provide, among other things, for the sale
of 29 Company-owned units in Florida to the limited partnerships upon the
transfer of the liquor licenses from the Company to the partnerships. Upon
completion of the sale, the 29 units will be operated as Ruby Tuesday
restaurants under separate franchising agreements. The Company will be paid an
aggregate purchase price of $17.9 million, of which approximately $13.4
million will be paid in cash. The remaining approximate $4.5 million will be in
the form of a 10.0% interest bearing note. The sale of the Florida units,
anticipated to close late in the first quarter or early in the second quarter of
fiscal 1998, is expected to result in a minimal pre-tax gain. Fiscal 1997
revenue from these 29 units totaled $45.6 million, with operating profits of
$2.4 million. On that same date, the Company also entered into
development agreements with these three limited partnerships whereby each of
them will open eight to ten franchise restaurants in their respective areas of
Florida over the next five years. For these development rights, fees totaling
$0.3 million will be paid to the Company upon the completion of certain
financing arrangements.
<TABLE>
12. Supplemental Quarterly Financial Data (Unaudited)
Quarterly financial results for the years ended May 31, 1997 and June 1, 1996,
are summarized below. All quarters are composed of 13 weeks.
<CAPTION>
FIRST SECOND THIRD FOURTH
(In Thousands Except Per-Share Data) QUARTER QUARTER QUARTER QUARTER TOTAL
For The Year Ended May 31, 1997
<S> <C> <C> <C> <C> <C>
Revenues $157,282 $156,318 $172,605 $169,202 $655,407
Gross profit* $ 28,261 $ 27,956 $ 34,807 $ 32,606 $123,630
Income before income taxes $ 8,509 $ 6,116 $ 12,771 $ 11,417 $ 38,813
Provision for federal and
state income taxes 3,020 2,170 4,536 4,042 13,768
Net income $ 5,489 $ 3,946 $ 8,235 $ 7,375 $ 25,045
Earnings per common and
common equivalent share $ 0.31 $ 0.22 $ 0.46 $ 0.41 $ 1.40
FIRST SECOND THIRD FOURTH
(In Thousands Except Per-Share Data) QUARTER QUARTER QUARTER QUARTER TOTAL
For The Year Ended June 1, 1996
Revenues $145,964 $152,001 $163,957 $158,212 $620,134
Gross profit* $ 25,448 $ 23,068 $ 30,435 $ 27,781 $106,732
Income (loss) before income taxes $ 6,211 $ 3,125 $(20,981)** $ 9,332 $ (2,313)
Provision (benefit) for federal and
state income taxes 2,000 1,038 (8,142) 3,453 (1,651)
Income (loss) from continuing
operations 4,211 2,087 (12,839) 5,879 (662)
Income (loss) from discontinued
operations 5,245 4,647 (12,114)** (2,222)
Net income (loss) $ 9,456 $ 6,734 $(24,953) $ 5,879 $ (2,884)
Earnings (loss) per common and
common equivalent share:
Continuing operations $ 0.24 $ 0.13 $ (0.73) $ 0.33 $ (0.03)
Discontinued operations 0.29 0.26 (0.68) (0.13)
$ 0.53 $ 0.39 $ (1.41) $ 0.33 $ (0.16)
* The Company defines gross profit as revenue less cost of merchandise, payroll and related
costs, and other operating costs and expenses.
** Continuing operations includes a pre-tax loss of $25.9 million recognized as a result of
the implementation of FAS 121, other asset impairment charges and a $5.3 million restructure
charge. Discontinued operations includes a pre-tax loss of $23.7 million recognized for
costs associated with asset impairment and restructurings.
</TABLE>
<TABLE>
Morrison Restaurants Inc. common stock was publicly traded on the New
York Stock Exchange under the ticker symbol RI. In connection with the
Distribution, Morrison effected a one-for-two reverse stock split and changed
its name to Ruby Tuesday, Inc. Ruby Tuesday, Inc. common stock is now
publicly traded on the New York Stock Exchange under the ticker symbol RI. The
following table sets forth the reported high and low prices for each quarter
during fiscal 1997 and 1996 for (i) the common stock of Morrison Restaurants
Inc. prior to the Distribution, not adjusted for either the Distribution or
the reverse stock split; and (ii) the common stock of Ruby Tuesday, Inc. after
the Distribution.
<CAPTION>
Fiscal Year Ended May 31, 1997 Fiscal Year Ended June 1, 1996
As Ruby Tuesday, Inc. As Morrison Restaurants Inc.
Per Share Per Share
Cash Cash
Quarter High Low Dividends Quarter High Low Dividends
<S> <C> <C> <C> <S> <C> <C> <C>
First $22.88 $19.38 _ First $25.75 $19.13 $0.1750
Second $22.00 $15.38 _ Second $20.63 $15.50 $0.1840
Third $19.00 $16.25 _ Third $17.38 $12.50 $0.1840
Fourth $21.75 $17.13 _
As Ruby Tuesday, Inc.
Per Share
Cash
Quarter High Low Dividends
Fourth $23.00 $17.25 _
In the fourth quarter of fiscal 1997, the Board of Directors approved the
reinstatement of a dividend policy. This policy calls for payment of semi-annual
dividends of approximately $3.0 million annually with the first dividend expected to
be paid in the third quarter of fiscal 1998.
</TABLE>
Report of Independent Auditors
Shareholders and Board of Directors
Ruby Tuesday, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Ruby Tuesday,
Inc. and Subsidiaries as of May 31, 1997 and June 1, 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended May 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 Ruby Tuesday, Inc.
and Subsidiaries at May 31, 1997 and June 1, 1996, and the consolidated results
of their operations and their cash flows for each of the three fiscal years in
the period ended May 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements, in fiscal 1996
the Company changed its method of accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of.
Ernst & Young LLP
Birmingham, Alabama
June 19, 1997
Exhibit 13
RUBY TUESDAY, INC. AND SUBSIDIARIES
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
(a) The Registrant has no parent.
(b) The Registrant's subsidiaries and their jurisdictions of
each
organization are as follows (100% of voting securities of
each subsidiary
owned by the Registrant):
Delaware:
Morrison International, Inc.
Texas:
Tias, Inc.
In addition to the subsidiaries listed above, the
Registrant has a minority ownership in several
operating subsidiaries and several wholly-owned
and minority interests in non-operating
subsidiaries created solely for the purpose of
holding certain licenses.
Exhibit 23 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-32697) pertaining to the Ruby Tuesday, Inc. Deferred
Compensation Plan, in the Registration Statement (Form S-8 No. 333-03165)
pertaining to the Ruby Tuesday, Inc. Deferred Compensation Plan , in the
Registration Statement (Form S-8 No. 33-20585) pertaining to the Ruby Tuesday,
Inc. Salary Deferral Plan, in the Registration Statement (Form S-8 No. 333-
03153) pertaining to the Ruby Tuesday, Inc. Salary Deferral Plan, in the
Registration Statement (Form S-8 No. 2-97120) pertaining to Ruby Tuesday, Inc.
Long-Term Incentive Plan, in the Registration Statement (Form S-8 No. 33-13593)
pertaining to the Ruby Tuesday, Inc. 1987 Stock Bonus and Non-Qualified Stock
Option Plan, in the Registration Statement (Form S-8 No. 33-46220) pertaining
to the Ruby Tuesday, Inc. Compensatory Non-Qualified Stock Option Arrangements,
in the Registration Statement (Form S-8 No. 33-56452) pertaining to the
Ruby Tuesday, Inc. Stock Incentive and Compensation Plan for Directors, Stock
Incentive Plan and Non-Qualified Management Stock Option Agreements, in the
Registration Statement (Form S-8 No. 333-03155) pertaining to the Ruby Tuesday,
Inc. 1996 Stock Incentive Plan, in the Registration Statement (Form S-8 No.
333-03157) pertaining to the Ruby Tuesday, Inc. 1993 Non-Executive Stock
Incentive Plan, in the Registration Statement (Form S-8 No. 33-70490)
pertaining to the Ruby Tuesday, Inc. 1993 Non-Executive Stock Incentive Plan,
in the Registration Statement (Form S-8 No. 33-46218) pertaining to the Ruby
Tuesday, Inc. 1989 Non-Qualified Stock Option Plan, and in the Registration
Statement (Form S-3 No. 33-57159) of Ruby Tuesday, Inc., of our report dated
June 19, 1997, with respect to the consolidated financial statements of Ruby
Tuesday, Inc. incorporated by reference in the Annual Report (Form 10-K) for
the year ended May 31, 1997.
/s/ Ernst & Young LLP
Birmingham, Alabama
August 22 , 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RUBY
TUESDAY, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED MAY 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 7,608
<SECURITIES> 0
<RECEIVABLES> 4,621
<ALLOWANCES> 0
<INVENTORY> 9,650
<CURRENT-ASSETS> 35,492
<PP&E> 512,404
<DEPRECIATION> 165,640
<TOTAL-ASSETS> 418,871
<CURRENT-LIABILITIES> 69,064
<BONDS> 78,006
0
0
<COMMON> 177
<OTHER-SE> 223,463
<TOTAL-LIABILITY-AND-EQUITY> 418,871
<SALES> 654,464
<TOTAL-REVENUES> 655,407
<CGS> 177,835
<TOTAL-COSTS> 392,502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,911
<INCOME-PRETAX> 38,813
<INCOME-TAX> 13,768
<INCOME-CONTINUING> 25,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,045
<EPS-PRIMARY> $1.40
<EPS-DILUTED> $1.40
</TABLE>
