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 June 6, 1999
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.)
150 West Church Avenue Maryville, TN 37801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423)379-5700
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.[X]
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 11, 1999 as reported on the New York Stock Exchange, was
approximately $594,776,711.
The number of shares of the Registrant's common stock outstanding at
August 11, 1999 was 32,041,843.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 6, 1999 are incorporated by reference into Parts I and
II.
Portions of the Registrant's definitive proxy statement dated August 27,
1999 are incorporated by reference into Part III.
INDEX
PART I
Page
Number
Item 1. Business 4-8
Item 2. Properties 8-9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of
Security Holders 10
Executive Officers of the Company 10-11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Shareholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 12
PART III
Item 10. Directors and Executive Officers of the
Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial
Owners and Management 13
Item 13. Certain Relationships and Related Transactions 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 13-19
PART I
Item 1. Business.
General
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
Restaurants Inc. ("Morrison") in 1982. During the following years,
Morrison added other casual dining concepts, including the internally-
developed American Cafe (formerly "Mozzarella's American Cafe" and
"Silver Spoon"). 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. In a
spin-off transaction effective March 9, 1996, shareholders of Morrison
approved the distribution of two separate businesses of Morrison to its
shareholders. In conjunction with the spin-off, Morrison was
reincorporated in the State of Georgia and changed its name to Ruby
Tuesday, Inc. (the "Company").
The Company moved into franchising in 1997 with the opening of one
domestic franchised Ruby Tuesday restaurant and two international
franchised Ruby Tuesday restaurants. Since 1997, agreements for the
franchise development of new Ruby Tuesday restaurants have been signed
with 15 casual-dining operators who became domestic franchise partners
and six international franchisees. In conjunction with the signing of
the agreements with the domestic franchise partners, the Company sold 66
restaurants in its non-priority growth markets to the franchise partners.
During fiscal 1998, the Company moved its executive and certain other
administrative support departments to a new Restaurant Support Services
Center in Maryville, Tennessee.
The information presented below relates to the business of the Company
following the spin-off transaction in 1996 unless the context indicates
otherwise.
Operations
The Company owns and operates three casual dining concepts comprised of
Ruby Tuesday, American Cafe and Tia's Tex-Mex restaurants. The Company
also offers franchises for the Ruby Tuesday concept in domestic and
international markets. As of June 6, 1999, the Company owned and
operated 403 casual dining restaurants in 32 states. Also, as of fiscal
year end, franchise operations included 78 domestic units located in 11
states and seven international units located in the Asian Pacific Region
and Chile.
Ruby Tuesday
Ruby Tuesday restaurants are casual, full-service restaurants with warm
woods, whimsical artifacts and classic Tiffany lamps which create a
comfortable, nostalgic look and feel. As part of a continuing focus on
making Ruby Tuesday feel even more fun and a little more casual, the
Company has added black and white checked table cloths to accent the
tables, 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, pasta entrees, soups,
sandwiches, salad bar, and signature Tallcake desserts in strawberry and
chocolate-Oreo varieties. Entree selections range in price from $4.99 to
$13.99.
At June 6, 1999, the Company owned and operated 335 Ruby Tuesday units
concentrated primarily in the Southeast, Northeast, Mid-Atlantic and
Midwest regions. Ruby Tuesday is the Company's primary growth vehicle.
The Company intends to open approximately 42-46 additional Company owned
units in fiscal 2000 with the majority of new units expected to be opened
in existing markets. The concept's current development plans call for a
continued shift towards freestanding units versus mall-based with
approximately 95% of new units scheduled to be freestanding. Existing
prototypes range in size from 3,300 to 5,700 square feet with seating for
128 to 234 guests. Located on smaller, and therefore less expensive,
parcels of land, the Company's new 5,000 square-foot, 206-seat units are
more efficient and cost less to build. The new units 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 or greater level than larger units, the Company believes its
new units 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.
American Cafe
American Cafe 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 $5.99 to $13.99.
American Cafe'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.
American Cafe restaurants are primarily located in the Southeast and Mid-
Atlantic regions. At June 6, 1999, the Company operated 45 American Cafe
units. In an effort to concentrate on improving the operational
efficiency and effectiveness of existing units, the Company does not
currently intend to open any new American Cafe units in fiscal 2000.
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 $5.79 to
$24.99. 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 operated 23 Tia's at the end of fiscal 1999 and plans to open
three to four units in fiscal 2000. New and existing units will be and
are located in the Southwest, Southeast and Mid-Atlantic regions. New
units will be approximately 5,000 square feet, with seating capacity for
211 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
The domestic franchise program, which the Company began in fiscal 1997,
allows the Company to become a financial partner with some of the best
restaurant operators from the casual dining industry. Domestic
franchising efforts are concentrated outside the Company's core growth
markets. Pursuant to the franchise agreements, the Company receives
development and license fees from the franchisees for the right to
develop and operate Ruby Tuesday restaurants in their respective areas
over the next several years. The Company also receives royalty fees from
the franchisees based on a percentage of each restaurant's sales as well
as support service revenues for providing a variety of services,
including the maintenance of franchisees' accounting records.
In order to assist the franchise partners in obtaining capital needed for
new unit development, the Company has established a $52.5 million loan
facility with a group of banks. The Company, as sponsor of the loan
facility, serves as partial guarantor for the draws made on this
revolving line-of-credit.
During fiscal 1999, the Company sold 19 Ruby Tuesday units to several
domestic franchisees and eight new Ruby Tuesday units were opened by
franchisees, bringing the total of domestic franchised units to 78 with
15 domestic franchise partners and one traditional franchisee as of June
6, 1999. The 78 units are located in the following states: Arizona (7),
Colorado (11), Florida (37), Kansas (2), Kentucky (6), Massachusetts (2),
Minnesota (3), Missouri (1), Nebraska (1), New York (6) and Utah (2).
Subsequent to year end, the Company entered into letters of intent with
four potential franchise partners which provide, among other things, for
the sale of 22 units in Michigan, nine in Illinois and three in Indiana
during fiscal 2000. As of June 6, 1999, 28 of these units to be sold
were open. The remaining six are expected to open by the end of the
second quarter of fiscal 2000.
The Company's International Division, which was established in fiscal
1997, continued its international franchise development by opening two
international franchise units during the year. One international
franchise unit in Taiwan closed during the year. At present, the Company
has seven international franchised units with two franchisees located in
the Asia-Pacific region and Chile. As of June 6, 1999, the Company has
signed agreements with four additional international franchisees which
call for restaurants to be opened beginning in the second quarter of
fiscal 2000. The Company receives development and license fees from
international franchisees for the right to develop and operate Ruby
Tuesday restaurants and royalties fees based on a percentage of each
restaurant's sales. The International Division intends to develop
relationships with large companies around the world for global franchise
expansion of the Ruby Tuesday brand.
Training
WOW-U, located in the Maryville, Tennessee Restaurant Support Services
Center, serves as the centralized training center for all the Company's
restaurant managers and the franchise partners. Facilities include
classrooms and a test kitchen. WOW-U provides managers and franchise
partners the opportunity to gather for intensive, on-going instruction
and interaction. Programs include classroom instruction and various team
competitions which are designed to contribute to the skill and enhance
the dedication of the Company's teams and to strengthen its corporate
culture. Further contributing to the training experience is RT Lodge
which is located on a wooded campus just minutes from the Restaurant
Support Services Center. RT Lodge serves as the lodging quarters and
dining facility for those attending WOW-U. After a long day of
instruction and competition, trainees have the opportunity to dine and
socialize with fellow team members in a relaxed and tranquil atmosphere.
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
The Company has entered into a five year contract with U.S. Foodservice,
Inc. for the purchase of raw materials under a cost-plus arrangement. The
contract expires on March 3, 2003. If U.S. Foodservice, Inc. 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 or its affiliates has registered certain trademarks and
service marks, with the United States Patent and Trademark Office,
including Ruby Tuesday, The American Cafe, and Tia's. The Company holds
an exclusive license to use all such trade and service marks from such
affiliates which includes the right to sub-license. 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's mall-based restaurants, which
currently represent slightly over 50% of the Company's total restaurants
and average higher unit volumes, 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 8,400 full-time and 18,800 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.
Item 2. Properties.
Information regarding the locations of the Company's Ruby Tuesday,
American Cafe and Tia's Tex-Mex operations is shown in the list below. Of
the 403 Company-owned and operated restaurants as of June 6, 1999, the
Company owned the buildings and held long-term land leases for 97
restaurants, owned the land and buildings for 61 restaurants, and held
leases covering land and buildings for 245 restaurants. The Company's
Restaurant Support Services Center in Maryville, Tennessee which was
opened in fiscal 1998 is covered under a lease agreement with an initial
term of five years from October 2, 1998 with two five-year renewal
options. Executive and certain other administrative personnel of the
Company are located in the Maryville Support Sevices Center. The Company
also has a Restaurant Support Services Center facility located in Mobile,
Alabama, which is leased under a long-term lease agreement.
Additional information concerning the properties of the Company and its
leasing arrangements is incorporated herein by reference to Note 4 of the
Notes to Consolidated Financial Statements included in the Annual Report
to Shareholders for the fiscal year ended June 6, 1999.
As of June 6, 1999, the Company operated 403 restaurants, including 335
Ruby Tuesday, 45 American Cafe and 23 Tia's Tex-Mex restaurants in the
following locations:
Alabama (35) Louisiana (4) North Carolina (12)
Arkansas (4) Maine (1) Ohio (18)
Connecticut (11) Maryland (22) Oklahoma (1)
Delaware (4) Massachusetts (5) Pennsylvania (21)
Florida (23) Michigan (19) Rhode Island (1)
Georgia (42) Mississippi (5) South Carolina (11)
Illinois (12) Missouri (11) Tennessee (36)
Indiana (8) Nebraska (1) Texas (15)
Iowa (1) New Hampshire (2) Virginia (44)
Kansas (1) New Jersey (13) West Virginia (1)
Kentucky (1) New York (18)
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.
("Morrison"), 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 by the U.S. District Court in favor of 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 subsequently petitioned the U.S. Court of
Appeals for a review of the matter by the full Court. Such petition was
denied. There are four additional lawsuits on this issue filed by other
restaurant companies pending in other U.S. federal courts. In September,
1998, the District Court in Northern California held in favor of the
taxpayer on the identical issue in Fior d Italia v. United States
("Fior"). The District Court rejected the holding of the Eleventh
Circuit holding, inter alia, that the Eleventh Circuit opinion was
rejected by recently expressed congressional intent. The IRS' motion for
reconsideration in light of the Federal Circuit's decision in The Bubble
Room v. United States (infra) was denied. The IRS has appealed the
district court's ruling on Fior. In October 1998, in a split decision,
the United States Court of Appeals for the Federal Circuit issued a
decision unfavorable to the taxpayer in The Bubble Room v. United States.
The taxpayer's petition for a rehearing En Banc was also denied.
Although the amount in dispute is not material, it is possible that the
IRS will attempt to assess taxes in additional units of the Company (as
well as other restaurant companies). In such event, the Company believes
that a business tax credit would be available to the Company to offset,
over a period of years, a majority of any additional 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. In light of the proactive role of the Company,
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 11, 1999 is provided below.
Executive
Officer
Name Age Position with the Company Since
S. E. Beall, III 49 Chairman of the Board and 1982
Chief Executive Officer
R. D. McClenagan 51 President- Ruby Tuesday 1985
Division
J. R. Mothershed 51 Senior Vice President and 1992
Chief Financial Officer,
Treasurer and Assistant
Secretary
S. L. Turner 46 Executive Vice President, 1997
Human Resources and
Performance Management
D. T. Cronk 46 Senior Vice President, 1997
General Counsel and
Secretary
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
Restaurant Division of Morrison from March 1985 to April 1990.
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 and Vice President, Controller and Treasurer of the
Ruby Tuesday division of Morrison from October 1992 to April 1994.
Ms. Turner joined Ruby Tuesday in September 1997 and has served as
Executive Vice President, Human Resources and Performance Management
since June 1999. From September 1997 until June 1999, Ms. Turner
served as Senior Vice President-Human Resources. Prior to joining
the Company, Ms. Turner served as Senior Vice President-Human
Resources of Hasbro, Inc. from 1993 to 1997.
Mr. Cronk joined Ruby Tuesday as Senior Vice President-Legal in July
1997 and was named Senior Vice President, General Counsel and
Secretary of the Company in April 1998. Prior to joining the
Company, Mr. Cronk was Vice President-Worldwide Development, Friday's
Hospitality Worldwide, Inc. from November 1995 to July 1997 and Vice
President and General Counsel, Friday's Hospitality Worldwide, Inc.
from January 1991 to November 1995.
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 10 of the Notes to Consolidated Financial Statements of
the Registrant's Annual Report to Shareholders for the fiscal year ended
June 6, 1999.
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 $.045 per share. The
payment of a dividend in any particular future period and the actual
amount thereof remain, however, at the discretion of the Board of
Directors and no assurance can be given that dividends will be paid in
the future as currently anticipated. The Company declared and paid its
first semi-annual dividend since the Distribution during the third
quarter of fiscal 1998. In fiscal 1999, the Company declared and paid
semi-annual dividends in the first and third quarters. On July 1, 1999,
the Company's Board of Directors declared a semi-annual dividend of $.045
per share payable on July 30, 1999 to shareholders of record as of record
on July 16, 1999. 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 $180 million plus 100% of any equity
or subordinate debt offerings. At June 6, 1999, the maximum amount of
permissible Restricted Payments was $41.8 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
June 6, 1999 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 June
6, 1999 is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
"Disclosures About Market Risk" contained within "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page 20
of the Registrant's Annual Report to Shareholders for the fiscal year
ended June 6, 1999 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 June 6, 1999 are
incorporated herein by reference:
Consolidated Statements of Income - Fiscal years ended
June 6, 1999, June 6, 1998 and May 31, 1997.
Consolidated Balance Sheets - As of June 6, 1999 and June 6, 1998.
Consolidated Statements of Shareholders' Equity - Fiscal
years ended June 6, 1999, June 6, 1998 and May 31, 1997.
Consolidated Statements of Cash Flows - Fiscal years ended
June 6, 1999, June 6, 1998 and May 31, 1997.
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 27, 1999
relating to the Registrant's annual meeting of shareholders to be held on
September 30, 1999.
(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 27, 1999 relating to the
Registrant's annual meeting of shareholders to be held on September 30,
1999.
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 27, 1999
relating to the Registrant's annual meeting of shareholders to be held on
September 30, 1999.
Item 13. Certain Relationships and Related Transactions.
The information required by this Item 13 is incorporated herein by
reference to the information set forth under the caption "Certain
Transactions" in the definitive proxy statement of the Registrant dated
August 27, 1999 relating to the Registrant's annual meeting of
shareholders to be held on September 30, 1999.
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 June 6, 1999, 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 June 6, 1999,
June 6, 1998 and May 31, 1997 24
Consolidated Balance Sheets as of
June 6, 1999 and June 6, 1998 25
Consolidated Statements of Shareholders'
Equity for the fiscal years ended
June 6, 1999, June 6, 1998 and
May 31, 1997 26
Consolidated Statements of Cash Flows
for the fiscal years ended June 6, 1999,
June 6, 1998 and May 31, 1997 27
Notes to Consolidated Financial Statements 28-39
Report of Independent Auditors 40
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, as amended, of Ruby Tuesday, Inc. (19)
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, as amended, of Ruby Tuesday, Inc. (filed as Exhibit
3.2 hereto). (19)
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. (17)
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 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. (17)
10.17 Ruby Tuesday, Inc. Deferred Compensation Plan Trust Agreement
dated July 1, 1997. (17)
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. (17)
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. (17)
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. (17)
10.44 Loan Facility Agreement and Guaranty dated May 30, 1997 by
and among Ruby Tuesday, Inc., Suntrust Bank, Atlanta, and the
other lender signatories thereto. (18)
10.45 Form of first amendment to Ruby Tuesday, Inc. Deferred
Compensation Plan Trust Agreement.* (19)
10.46 Form of first amendment to Credit Agreement. (19)
10.47 Form of second amendment to Credit Agreement. (19)
10.48 Form of first amendment to Master Agreement. (19)
10.49 Form of first amendment to Loan Facility Agreement and
Guarantee. (19)
10.50 Form of second amendment to Loan Facility Agreement and
Guarantee. (19)
10.51 Form of third amendment to Loan Facility Agreement and
Guarantee. (19)
10.52 Lease agreement dated October 1, 1997 between Riverfront
Capital Business Trust, a Pennsylvania business trust and
Ruby Tuesday, Inc., a Georgia corporation. (19)
10.53 Amended and restated Contribution Agreement dated January 12,
1998, and entered into as of March 20, 1998 between Ruby
Tuesday, Inc., a Georgia corporation, RT Colorado, Inc., a
Colorado corporation and RT Denver Franchise, L.P., a
Delaware limited partner. (19)
10.54 Stock purchase agreement dated January 12, 1998 between Ruby
Tuesday, Inc., a Georgia corporation, Timothy P. Kaliher, RT
Colorado, Inc., a Colorado corporation, and RT Denver
Franchise, L.P., a Delaware limited partnership. (19)
10.55 Purchase agreement dated December 16, 1997 between Ruby
Tuesday, Inc., a Georgia corporation, and RT Southwest
Franchise, LLC, a Delaware limited liability company. (19)
10.56 Purchase agreement dated June 25, 1998 between Ruby Tuesday,
Inc., a Georgia corporation, and RT Long Island Franchise,
LLC, a Delaware limited liability company. (19)
10.57 Purchase agreement dated May 7, 1998 between Ruby Tuesday,
Inc., a Georgia corporation, and RT West Palm Beach
Franchise, L.P., a Delaware limited partnership. (19)
10.58 Omnibus Amendment dated October 2, 1998 to Master Agreement
dated as of May 30, 1997. (20)
10.59 Amended and Restated Loan Facility Agreement and Guaranty by
and among Ruby Tuesday, Inc., Suntrust Bank, Atlanta, and the
other lender signatories thereto dated October 2, 1998. (21)
10.60 Master Agreement dated as of June 3, 1998 among Ruby Tuesday,
Inc., as Lessee and Guarantor, Atlantic Financial Group ,
LTD., as lessor, Nationsbank, N.A., as a Lender, Union
Planters Bank, N.A., as a Lender, First Union National Bank,
as a Lender, and SunTrust Bank, Atlanta, as Agent and as a
Lender; together with the Lease Agreement dated as of June 3,
1999 between Atlantic Financial Group, LTD., as lessor and
Ruby Tuesday, Inc. as lessee; the Loan Agreement dated as of
June 3, 1999 among Atlantic Financial Group, LTD., as lessor
and borrower, the financial institutions party hereto, as
lenders, and SunTrust Bank Atlanta, as Agent; the
Construction Agency Agreement dated as of June 3, 1999 among
Atlantic Financial Group, LTD. and Ruby Tuesday, Inc., as
construction agent; and Appendix A to Master Agreement,
Lease, Loan Agreement and Construction Agency Agreement.
10.61 Form of Second Amendment to the Ruby Tuesday, Inc. 1996 Non-
Executive Stock Incentive Plan (formerly the 1993 Non-
Executive Stock Incentive Plan).*
13 Annual Report to Shareholders for the fiscal year ended June 6, 1999
(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.
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(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).
(17) Incorporated by reference to Exhibit of the same number on
Form 10-K for Ruby Tuesday, Inc. for the fiscal year ended
May 31, 1997 (File No. 0-12454).
(18) Incorporated by reference to Exhibit 99.1 on Form 10-Q dated
October 14, 1997 for Ruby Tuesday, Inc. for the three month
period ended August 30, 1997 (File No. 0-12454).
(19) Incorporated by reference to Exhibit of the same number on
Form 10-K for Ruby Tuesday, Inc. for the fiscal year ended
June 6, 1998 (File No. 1-12454).
(20) Incorporated by reference to Exhibit 99.1 on Form 10-Q for
Ruby Tuesday, Inc. for the quarter ended September 6, 1998
(File No. 1-12454).
(21) Incorporated by reference to Exhibit 99.2 on Form 10-Q for
Ruby Tuesday, Inc. for the quarter ended September 6, 1998
(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 8/30/99 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 8/30/99 By: /s/ Samuel E. Beall, III
Samuel E. Beall, III
Chairman of the Board and
Chief Executive Officer
Date 8/30/99 By: /s/ J. Russell Mothershed
J. Russell Mothershed
Senior Vice President, Finance
Chief Financial Officer
Treasurer and Assistant Secretary
Date 8/30/99 By: /s/ John B. McKinnon
John B. McKinnon
Director
Date 8/30/99 By: /s/ Dr. Donald Ratajczak
Dr. Donald Ratajczak
Director
Date 8/30/99 By: /s/ Dolph W. von Arx
Dolph W. von Arx
Director
Date 8/30/99 By: /s/ Claire L. Arnold
Claire L. Arnold
Director
Date 8/30/99 By: /s/ Dr. Benjamin F. Payton
Dr. Benjamin F. Payton
Director
Date 8/30/99 By: /s/ James A. Haslam, III
James A. Haslam, III
Director
Date 8/30/99 By: /s/ Elizabeth L. Nichols
Elizabeth L. Nichols
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, as amended, of Ruby Tuesday, Inc. (19)
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, as amended, of Ruby Tuesday, Inc. (filed as Exhibit
3.2 hereto). (19)
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. (17)
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 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. (17)
10.17 Ruby Tuesday, Inc. Deferred Compensation Plan Trust Agreement
dated July 1, 1997. (17)
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. (17)
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. (17)
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. (17)
10.44 Loan Facility Agreement and Guaranty dated May 30, 1997 by
and among Ruby Tuesday, Inc., Suntrust Bank, Atlanta, and the
other lender signatories thereto. (18)
10.45 Form of first amendment to Ruby Tuesday, Inc. Deferred
Compensation Plan Trust Agreement.* (19)
10.46 Form of first amendment to Credit Agreement. (19)
10.47 Form of second amendment to Credit Agreement. (19)
10.48 Form of first amendment to Master Agreement. (19)
10.49 Form of first amendment to Loan Facility Agreement and
Guarantee. (19)
10.50 Form of second amendment to Loan Facility Agreement and
Guarantee. (19)
10.51 Form of third amendment to Loan Facility Agreement and
Guarantee. (19)
10.52 Lease agreement dated October 1, 1997 between Riverfront
Capital Business Trust, a Pennsylvania business trust and
Ruby Tuesday, Inc., a Georgia corporation. (19)
10.53 Amended and restated Contribution Agreement dated January 12,
1998, and entered into as of March 20, 1998 between Ruby
Tuesday, Inc., a Georgia corporation, RT Colorado, Inc., a
Colorado corporation and RT Denver Franchise, L.P., a
Delaware limited partner. (19)
10.54 Stock purchase agreement dated January 12, 1998 between Ruby
Tuesday, Inc., a Georgia corporation, Timothy P. Kaliher, RT
Colorado, Inc., a Colorado corporation, and RT Denver
Franchise, L.P., a Delaware limited partnership. (19)
10.55 Purchase agreement dated December 16, 1997 between Ruby
Tuesday, Inc., a Georgia corporation, and RT Southwest
Franchise, LLC, a Delaware limited liability company. (19)
10.56 Purchase agreement dated June 25, 1998 between Ruby Tuesday,
Inc., a Georgia corporation, and RT Long Island Franchise,
LLC, a Delaware limited liability company. (19)
10.57 Purchase agreement dated May 7, 1998 between Ruby Tuesday,
Inc., a Georgia corporation, and RT West Palm Beach
Franchise, L.P., a Delaware limited partnership. (19)
10.58 Omnibus Amendment dated October 2, 1998 to Master Agreement
dated as of May 30, 1997. (20)
10.59 Amended and Restated Loan Facility Agreement and Guaranty by
and among Ruby Tuesday, Inc., Suntrust Bank, Atlanta, and the
other lender signatories thereto dated October 2, 1998. (21)
10.60 Master Agreement dated as of June 3, 1998 among Ruby Tuesday,
Inc., as Lessee and Guarantor, Atlantic Financial Group ,
LTD., as lessor, Nationsbank, N.A., as a Lender, Union
Planters Bank, N.A., as a Lender, First Union National Bank,
as a Lender, and SunTrust Bank, Atlanta, as Agent and as a
Lender; together with the Lease Agreement dated as of June 3,
1999 between Atlantic Financial Group, LTD., as lessor and
Ruby Tuesday, Inc. as lessee; the Loan Agreement dated as of
June 3, 1999 among Atlantic Financial Group, LTD., as lessor
and borrower, the financial institutions party hereto, as
lenders, and SunTrust Bank Atlanta, as Agent; the
Construction Agency Agreement dated as of June 3, 1999 among
Atlantic Financial Group, LTD. and Ruby Tuesday, Inc., as
construction agent; and Appendix A to Master Agreement,
Lease, Loan Agreement and Construction Agency Agreement.
10.61 Form of Second Amendment to the Ruby Tuesday, Inc. 1996 Non-
Executive Stock Incentive Plan (formerly the 1993 Non-
Executive Stock Incentive Plan).*
13 Annual Report to Shareholders for the fiscal year ended June
6, 1999 (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.
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(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).
(17) Incorporated by reference to Exhibit of the same number on
Form 10-K for Ruby Tuesday, Inc. for the fiscal year ended
May 31, 1997 (File No. 0-12454).
(18) Incorporated by reference to Exhibit 99.1 on Form 10-Q dated
October 14, 1997 for Ruby Tuesday, Inc. for the three month
period ended August 30, 1997 (File No. 0-12454).
(19) Incorporated by reference to Exhibit of the same number on
Form 10-K for Ruby Tuesday, Inc. for the fiscal year ended
June 6, 1998 (File No. 1-12454).
(20) Incorporated by reference to Exhibit 99.1 on Form 10-Q for
Ruby Tuesday, Inc. for the quarter ended September 6, 1998
(File No. 1-12454).
(21) Incorporated by reference to Exhibit 99.2 on Form 10-Q for
Ruby Tuesday, Inc. for the quarter ended September 6, 1998
(File No. 1-12454).
MASTER AGREEMENT
Dated as of June 3, 1999
among
RUBY TUESDAY, INC.,
as Lessee and Guarantor,
ATLANTIC FINANCIAL GROUP, LTD., as Lessor,
NATIONSBANK, N.A., as a Lender,
UNION PLANTERS BANK N.A., as a Lender,
FIRST UNION NATIONAL BANK, as a Lender,
and
SUNTRUST BANK, ATLANTA, as Agent and as a Lender
TABLE OF CONTENTS
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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 2
SECTION 2.2 Fundings of Purchase Price,
Development Costs and Construction
Costs 3
SECTION 2.3 Funded Amounts and Interest and Yield
Thereon; Unused Fee 6
SECTION 2.4 Lessee Owner for Tax Purposes 7
SECTION 2.5 Amounts Due Under Lease 8
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS 9
SECTION 3.1 Conditions to the Obligations of the
Funding Parties on each Closing
Date 9
SECTION 3.2 Additional Conditions for the Initial
Closing Date 15
SECTION 3.3 Conditions to the Obligations of Lessee 17
SECTION 3.4 Conditions to the Obligations of the
Funding Parties on each Funding
Date 18
SECTION 3.5 Completion Date Conditions 19
SECTION 4 REPRESENTATIONS 22
SECTION 4.1 Representations of Lessee 22
SECTION 4.2 Representations of the Lessor 31
SECTION 4.3 Representations of each Lender 34
SECTION 5 COVENANTS OF THE LESSEE AND THE LESSOR 34
SECTION 5.1 Affirmative Covenants 34
SECTION 5.2 Negative Covenants 41
SECTION 5.3 Further Assurances 49
SECTION 5.4 Additional Required Appraisals 50
SECTION 5.5 Lessor's Covenants 50
SECTION 6 TRANSFERS BY LESSOR AND LENDERS 51
SECTION 6.1 Lessor Transfers 51
SECTION 6.2 Lender Transfers 52
SECTION 7 INDEMNIFICATION 52
SECTION 7.1 General Indemnification 52
SECTION 7.2 Environmental Indemnity 55
SECTION 7.3 Proceedings in Respect of Claims 57
SECTION 7.4 General Tax Indemnity 59
SECTION 7.5 Increased Costs, etc. 68
SECTION 7.6 End of Term Indemnity 73
SECTION 8 MISCELLANEOUS 74
SECTION 8.1 Survival of Agreements 74
SECTION 8.2 Notices 75
SECTION 8.3 Counterparts 75
SECTION 8.4 Amendments 75
SECTION 8.5 Headings, etc. 77
SECTION 8.6 Parties in Interest 77
SECTION 8.7 GOVERNING LAW 77
SECTION 8.8 Expenses 77
SECTION 8.9 Severability 78
SECTION 8.10 Liabilities of the Funding Parties 78
SECTION 8.11 Submission to Jurisdiction; Waivers 78
SECTION 8.12 Liabilities of the Agent 79
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 June 3, 1999 (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"), NATIONSBANK, N.A., a national banking
association ("NationsBank"), UNION PLANTERS BANK N.A., a national banking
association ("Union Planters"), FIRST UNION NATIONAL BANK, a national
banking association ("First Union"), and SUNTRUST BANK, ATLANTA, a
Georgia banking corporation ("SunTrust"; SunTrust, NationsBank, Union
Planters and First Union, 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) $45,000,000 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. The Agent shall notify the Lenders of a requested
Funding on the day the Agent receives the related Funding Request if the
Agent receives such Funding Request on or before 11:00 a.m., Atlanta,
Georgia time; if the Agent receives a Funding Request after such time, it
shall promptly notify the Lenders thereof, but in any event by close of
business on the next Business Day. 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 are then due 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's
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, 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).
Counterparts of the supplement to the Construction Agency
Agreement for such Leased Property, duly executed by the
Construction Agent and the Lessor, shall have been delivered
to the Agent.
(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) 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.
(xi) 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.
(xii) 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.
(xiii) 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 6, 1998.
(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 the Agent.
(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 and of in-house counsel to
Lessee, each dated the initial Closing Date, substantially in
the forms 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 6, 1998 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 September 6, 1998,
December 6, 1998 and March 7, 1999 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 Master 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 6, 1998 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, 1998 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, 1998, 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 2.00:1.00, measured as of the last day
of each fiscal quarter for the immediately preceding four quarters
ending on such date
(ii) Consolidated Funded Debt to Total Capitalization.
Maintain at all times, measured as of the last day of each fiscal
quarter of the Lessee, 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
$180,000,000.00, plus (ii) 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 March 6, 1996
(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 Initial 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. Each
assignment by a Lender shall be of a pro rata portion of such Lender's
A Loans and B Loans. Anything in this Section 6.2 to the contrary
notwithstanding, any Lender may assign and pledge all or any portion of
its Loans to any Federal Reserve Bank or the United States Treasury,
provided that no such assignment shall release the assigning Lender from
its obligations under the Operative Documents.
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, and, provided,
further, that with respect to each Construction Land Interest, the
Lessee's indemnity obligations with respect to such Leased Property,
shall be governed by Section 3.4 of the Construction Agency Agreement
during the Construction Term therefor. 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 or Section 3.4 of the Construction Agency
Agreement, 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 Agreement 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:
NATIONSBANK, N.A., as a Lender
By:
Name Printed:
Title:
UNION PLANTERS BANK N.A., as a Lender
By:
Name Printed:
Title:
FIRST UNION NATIONAL BANK, as a
Lender
By:
Name Printed:
Title:
SCHEDULE 2.2
AMOUNT OF EACH FUNDING PARTY'S COMMITMENT
Lessor Commitment Percentage: 3.5%
Lessor Commitment: $1,575,000
Lender Commitment Percentages:
SunTrust Bank, Atlanta
NationsBank, N.A.
Union Planters Bank N.A.
First Union National Bank
Lender Commitments: A Loans B Loans
SunTrust Bank, Atlanta $ 7,420,984 $1,004,016
NationsBank, N.A. 4,404,145 595,855
Union Planters Bank N.A. 13,212,435 1,787,565
First Union National Bank 13,212,435 1,787,565
SCHEDULE 8.2
ADDRESSES FOR NOTICES
Lessee: Ruby Tuesday, Inc.
P.O. Box 160266
Mobile, Alabama 36625-0001
Attn: J. Russell Mothershed
Telephone: 423/397-5741
Facsimile: 423/379-6817
Ruby Tuesday, Inc.
4721 Morrison Drive
Mobile, Alabama 36609-3350
Attn: J. Russell Mothershed
Telephone: 423/397-5741
Facsimile: 423/379-6817
Lessor: Atlantic Financial Group, Ltd.
2311 Cedar Springs Road, Suite 150
Dallas, Texas 75201
Attn: Stephen Brookshire
Telephone: 214/720-9237
Facsimile: 214/871-2799
Lender and Agent: SunTrust Bank, Atlanta
25 Park Place
24th Floor
MC120
Atlanta, Georgia 30303
Attn: David Edge
Telephone: 404/827-6735
Facsimile: 404/827-6270
Lenders: NationsBank, N.A.
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Reinhard Freimuth
Telephone: 704/388-6394
Facsimile: 704/386-3271
Union Planters Bank N.A.
900 South Gay Street
24th Floor
Knoxville, Tennessee 37901
Attn: Blake Whitaker
Telephone: 423/549-2203
Facsimile: 423/549-2236
First Union National Bank
150 4th Avenue North
Nashville, Tennessee 37219
Attn: Mark Skinner
Telephone: 615/251-0857
Facsimile: 615/251-0894
LEASE AGREEMENT
Dated as of June 3, 1999
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 2
2.2 Acceptance Procedure 2
ARTICLE III. RENT 3
3.1 Basic Rent 3
3.2 Supplemental Rent 3
3.3 Method of Payment 3
3.4 Late Payment 4
3.5 Net Lease; No Setoff, Etc 4
3.6 Certain Taxes 6
3.7 Utility Charges 7
ARTICLE IV. WAIVERS 7
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES 8
ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS,
MODIFICATIONS AND ADDITIONS 10
6.1 Maintenance and Repair; Compliance With Law 10
6.2 Alterations 11
6.3 Title to Alterations 11
ARTICLE VII. USE 11
ARTICLE VIII. INSURANCE 12
ARTICLE IX. ASSIGNMENT AND SUBLEASING 13
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE 14
10.1 Event of Loss. 14
10.2 Event of Taking. 15
10.3 Casualty. 16
10.4 Condemnation. 16
10.5 Verification of Restoration and Rebuilding 16
10.6 Application of Payments 17
10.7 Prosecution of Awards. 18
10.8 Application of Certain Payments Not Relating to an
Event of Taking 19
10.9 Other Dispositions 19
10.10 No Rent Abatement 19
ARTICLE XI. INTEREST CONVEYED TO LESSEE 20
ARTICLE XII. EVENTS OF DEFAULT 20
ARTICLE XIII. ENFORCEMENT 24
13.1 Remedies 24
13.2 Remedies Cumulative; No Waiver; Consents 27
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED
PROPERTY; RENEWAL 28
14.1 Lessee's Option to Purchase 28
14.2 Conveyance to Lessee 29
14.3 Acceleration of Purchase Obligation 30
14.4 Determination of Purchase Price 30
14.5 Purchase Procedure 30
14.6 Option to Remarket 32
14.7 Rejection of Sale 35
14.8 Return of Leased Property 35
14.9 Renewal 36
ARTICLE XV. LESSEE'S EQUIPMENT 37
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE 38
ARTICLE XVII. MISCELLANEOUS 38
17.1 Reports 38
17.2 Binding Effect; Successors and Assigns; Survival 39
17.3 Quiet Enjoyment 39
17.4 Notices 39
17.5 Severability 40
17.6 Amendment; Complete Agreements 41
17.7 Construction 41
17.8 Headings 41
17.9 Counterparts 41
17.10 GOVERNING LAW 42
17.11 Discharge of Lessee's Obligations by its Affiliates 42
17.12 Liability of Lessor Limited 42
17.13 Estoppel Certificates 43
17.14 No Joint Venture 43
17.15 No Accord and Satisfaction 43
17.16 No Merger 44
17.17 Survival 44
17.18 Chattel Paper 44
17.19 Time of Essence 44
17.20 Recordation of Lease. 45
17.21 Investment of Security Funds 45
17.22 Ground Leases 45
17.23 Land and Building 46
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 June 3, 1999, 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 I.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in Appendix A hereto for all purposes hereof.
ARTICLE II.
LEASE OF LEASED PROPERTY
Section II.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 II.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 III.
RENT
Section III.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 III.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 III.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 III.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 III.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 III.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 III.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 IV.
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 V.
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 VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section VI.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 VI.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 VI.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 VII.
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 VIII.
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 IX.
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 X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XI.
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 XII.
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;
(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; or
(o) An event of default occurs under the Lease Agreement, dated
as of May 30, 1997, between Lessor and Lessee.
ARTICLE XIII.
ENFORCEMENT
Section XIII.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 XIII.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 XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
Section XIV.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 XIV.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 XIV.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 (f) or (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 XIV.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 XIV.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 XIV.6 Option to Remarket Subject to the fulfillment of
each of the conditions set forth in this Section 14.6, Lessee shall have
the option to market all of, but not less than all of, the Leased
Properties for Lessor (the "Remarketing Option").
Lessee's effective exercise and consummation of the Remarketing
Option 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
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, which
exercise shall be irrevocable.
(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 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 (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 XIV.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 XIV.8 Return of Leased Property. If Lessor retains
title to any Leased Property pursuant to Section 14.7 hereof, 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 XIV.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.
ARTICLE XV.
LESSEE'S EQUIPMENT
After any repossession of any Leased Property (whether or not this
Lease has been terminated), 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 XVI.
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 XVII.
MISCELLANEOUS
Section XVII.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 XVII.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 XVII.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 XVII.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.
2311 Cedar Springs Road, Suite 150
Dallas, Texas 75201
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
303 Peachtree Street, 2nd Floor
MC1921
Atlanta, Georgia 30308
Attn: Center 120/Corporate
Banking South
If to a Lender, to the address provided in the Master Agreement.
Section XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.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 XVII.19 Time of Essence. Time is of the essence of this
Lease.
Section XVII.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 XVII.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 XVII.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 XVII.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.
RUBY TUESDAY, INC.
as Lessee
By____________________________
Name:
Title:
ATLANTIC FINANCIAL GROUP, LTD.,
as Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
By____________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date thereof.
SUNTRUST BANK, ATLANTA, as the Agent
By____________________________
Name:
Title:
By____________________________
Name:
Title:
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 June 3, 1999, 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:
LOAN AGREEMENT
Dated as of June 3, 1999
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 2
SECTION 2.1 Commitment 2
SECTION 2.2 Notes 2
SECTION 2.3 Scheduled Principal Repayment 3
SECTION 2.4 Interest 3
SECTION 2.5 Allocation of Loans to Leased Properties 3
SECTION 2.6 Prepayment 4
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS
IN RESPECT OF LEASE AND LEASED PROPERTY 4
SECTION 3.1 Distribution and Application of Rent Payments 4
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 of
Remarketing Option 5
SECTION 3.4 Distribution and Application to Funding Party
Balance of Remarketing Proceeds of
Leased Property 5
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 6
SECTION 3.6 Distribution of Other Payments 8
SECTION 3.7 Timing of Agent Distributions 8
SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND GUARANTY 9
SECTION 4.1 Covenant of Lessor 9
SECTION 4.2 Lessor Obligations Nonrecourse; Payment from
Certain Lease and Guaranty Obligations
and Certain Proceeds of Leased Property
Only 9
SECTION 4.3 Exercise of Remedies Under Lease and Guaranty 10
SECTION 4.4 Indemnity by Lessor 12
SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES 12
SECTION 5.1 Loan Events of Default 12
SECTION 5.2 Remedies 13
SECTION 6 THE AGENT 14
SECTION 6.1 Appointment 14
SECTION 6.2 Delegation of Duties 15
SECTION 6.3 Exculpatory Provisions 15
SECTION 6.4 Reliance by Agent 15
SECTION 6.5 Notice of Default 16
SECTION 6.6 Non-Reliance on Agent and Other Lenders 17
SECTION 6.7 Indemnification 17
SECTION 6.8 Agent in Its Individual Capacity 18
SECTION 6.9 Successor Agent 18
SECTION 7 MISCELLANEOUS 19
SECTION 7.1 Amendments and Waivers 19
SECTION 7.2 Notices 19
SECTION 7.3 No Waiver; Cumulative Remedies 19
SECTION 7.4 Successors and Assigns 19
SECTION 7.5 Counterparts 20
SECTION 7.6 GOVERNING LAW 20
SECTION 7.7 Survival and Termination of Agreement 20
SECTION 7.8 Entire Agreement 20
SECTION 7.9 Severability 20
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 June 3, 1999 is among ATLANTIC FINANCIAL GROUP, LTD., a Texas
limited partnership, as Lessor and Borrower (the "Lessor"); SUNTRUST
BANK, ATLANTA, UNION PLANTERS BANK N.A., NATIONSBANK, N.A., FIRST UNION
NATIONAL 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 1 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 2 AMOUNT AND TERMS OF COMMITMENTS; REPAYMENT AND
PREPAYMENT OF LOANS
SECTION 2.1 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 pro rata share 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 pro rata share
of the B Percentage of such the aggregate amount to be funded by the
Funding Parties on such date.
SECTION 2.2 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 the Agent, for the benefit of the Lenders, and in a
principal amount equal to the A Percentage of the aggregate Commitments
and 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 the Lenders 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. The Agent is hereby authorized
to record the date and amount of each Loan made by the Lenders to the
Lessor on the Notes, but the failure by the Agent 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 clauses (f) or (g)
of Article XII of the Lease, or upon Acceleration as described in Section
4.3(b) hereof, each Note shall automatically become due and payable in
full.
SECTION 2.3 Scheduled Principal Repayment. On the Lease
Termination Date, the Lessor shall pay the aggregate unpaid principal
amount of all Loans as of such date.
SECTION 2.4 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 2.5 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 2.6 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 or the Leased Property Balance or Construction
Failure Payment pursuant to the Construction Agency Agreement, the Lessor
shall have no right to prepay the Loans.
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN
PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY
SECTION 3.1 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 3.2 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 the Lessee's exercise of its option
to purchase such Leased Property under Section 5.3 of the
Construction Agency Agreement, 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 3.3 Distribution and Application to Funding Party Balances
of Lessee Payment of Recourse Deficiency Amount Upon Exercise of
Remarketing Option. 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, shall be applied by the Agent to the accrued and
unpaid interest on, and the outstanding principal of, the A Loans. With
respect to any Leased Property, the payment by the Lessee of the
Construction Failure Payment with respect thereto pursuant to the
Construction Agency Agreement shall be applied by the Agent first, to the
accrued and unpaid interest on, and the outstanding principal of, the A
Loans in respect of such Leased Property, second, to the accrued and
unpaid interest on, and outstanding principal of, the B Loans related to
such Leased Property and third, to the accrued and unpaid Yield on, and
outstanding Lessor Invested Amount related to such Leased Property.
SECTION 3.4 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 the Leased Properties 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 all the Leased
Properties, an amount equal to their Funding Party Balances in
respect of all the Leased Properties;
second, to the Lessor for application to its Funding Party
Balance in respect of all the Leased Properties; 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.
Any payments received by the Lessor as proceeds from the sale of any
Leased Property after a return to the Lessor pursuant to the Construction
Agency Agreement 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
(including both that portion of the A Loans and that portion of the
B Loans allocated to such Leased Property), an amount equal to such
Funding Party Balances in respect of such Leased Property;
second, to Lessor for application to its Funding Party
Balance in respect of such Leased Property; and
third, the excess to Lessor.
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.
(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(f) or (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 any Leased Property or the Operative Documents and
not previously reimbursed to it;
second, to the Lenders pro rata for application to the Loans
(first to outstanding principal and second to accrued and unpaid
interest), an amount equal to the outstanding principal, and
accrued interest on, the Loans;
third, to the Lessor for application to its Funding Party
Balances in respect of all the Leased Properties; and
fourth, to the Indemnified Parties, on a pro rata basis, for
any other amounts due to them under the Operative Documents; and
fifth, 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(f) or (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 3.6 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 3.7 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 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE AND
GUARANTY
SECTION 4.1 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 or the Lessee returns any Leased
Property pursuant to the Construction Agency Agreement, 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 4.2 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, the Construction Agency Agreement 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, the Construction Agency
Agreement 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 4.3 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 4.4 Indemnity by Lessor. During the Construction Term for
any Leased Property, Lessor hereby indemnifies each Lender and its
Affiliates, successors, permitted assigns, permitted transferees,
employees, officers, directors and agents from and against any and all
Claims that may be imposed on, incurred by or asserted or threatened to
be asserted against, any such Person, arising out of or related to such
Leased Property, or the leasing or financing thereof; it being understood
that the foregoing provision is subject to Section 4.2.
SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 5.1 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, the Construction Agency
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 5.2 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 6 THE AGENT
SECTION 6.1 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 6.2 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 6.3 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 6.4 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 6.5 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 6.6 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 6.7 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 6.8 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 6.9 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 7 MISCELLANEOUS
SECTION 7.1 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 7.2 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 7.3 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 7.4 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 7.5 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 7.6 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 7.7 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 7.8 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 7.9 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:___________________________
By: ____________________________
Name:____________________________
Title:___________________________
NATIONSBANK, N.A., as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
UNION PLANTERS BANK N.A., as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
FIRST UNION NATIONAL BANK, as a Lender
By: ____________________________
Name:____________________________
Title:___________________________
CONSTRUCTION AGENCY AGREEMENT
dated as of June 3, 1999
among
ATLANTIC FINANCIAL GROUP, LTD.
and
RUBY TUESDAY, INC.
as Construction Agent
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
1.1. Defined Terms 2
ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT 2
2.1. Appointment 2
2.2. Acceptance; Construction 2
2.3. Commencement of Construction 2
2.4. Supplements to this Agreement 3
2.5. Term 3
2.6. Identification of Properties; Construction
Documents 4
2.7. Scope of Authority 4
2.8. Covenants of the Construction Agent 6
ARTICLE III THE BUILDINGS 7
3.1. Construction 7
3.2. Amendments; Modifications 7
3.3. Casualty, Condemnation and Construction
Force Majeure Events 7
3.4. Indemnity 8
ARTICLE IV PAYMENT OF FUNDS 8
4.1. Funding of Property Acquisition Costs and
Property Buildings Costs 8
ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT 9
5.1. Construction Agency Events of Default 9
5.2. Damages 10
5.3. Remedies; Remedies Cumulative 10
ARTICLE VI NO CONSTRUCTION AGENCY FEE 12
6.1. Lease as Fulfillment of Lessor's Obligations 12
ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S
RIGHTS 12
7.1. Exercise of the Lessor's Rights 12
7.2. Lessor's Right to Cure Construction Agent's Defaults 12
ARTICLE VIII MISCELLANEOUS 13
8.1. Notices 13
8.2. Successors and Assigns 13
8.3. GOVERNING LAW 13
8.4. Amendments and Waivers 13
8.5. Counterparts 13
8.6. Severability 13
8.7. Headings and Table of Contents 13
EXHIBITS
Exhibit A Form of Supplement to Construction Agency Agreement
CONSTRUCTION AGENCY AGREEMENT
CONSTRUCTION AGENCY AGREEMENT, dated as of June 3, 1999 (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited
partnership, (the "Lessor"), and RUBY TUESDAY, INC., a Georgia
corporation ("RTI", and in its capacity as construction agent, the
"Construction Agent").
PRELIMINARY STATEMENT
A. Ruby Tuesday, Inc., as lessee (the "Lessee"), and Lessor, as
lessor, are parties to that certain Lease Agreement, dated as of June 3,
1999 (as amended, supplemented or otherwise modified from time to time
pursuant thereto, the "Lease"), pursuant to which the Lessee has agreed
to lease from Lessor, and Lessor has agreed to lease to Lessee, Lessor's
interests in certain Leased Properties.
B. Lessor, the Lessee, the Lenders signatory thereto and SunTrust
Bank, Atlanta, as agent for such Lenders (in such capacity, the "Agent")
are parties to that certain Master Agreement, dated as of even date
herewith (as amended, supplemented or otherwise modified from time to
time pursuant thereto, the "Master Agreement").
C. Subject to the terms and conditions hereof, (i) the Lessor
desires to appoint RTI as the Construction Agent to act as its sole and
exclusive agent for the identification and acquisition of the Land
pursuant to the Master Agreement and construction of the Buildings in
accordance with the Plans and Specifications and pursuant to the Master
Agreement, and (ii) the Construction Agent desires, for the benefit of
the Lessor, to cause the Buildings to be constructed in accordance with
the Plans and Specifications and pursuant to the Master Agreement and
this Agreement, in each case in accordance with the terms herein set
forth.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
I.1. Defined Terms. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings set forth in the Master
Agreement.
ARTICLE II
APPOINTMENT OF CONSTRUCTION AGENT
II.1. Appointment. Pursuant to and subject to the terms and
conditions set forth herein and in the Master Agreement and the other
Operative Documents, the Lessor hereby irrevocably designates and
appoints RTI as the Construction Agent to act as its exclusive agent for
the identification and acquisition from time to time of Land to be
acquired or leased by the Lessor and leased or subleased to RTI and
construction of the Buildings in accordance with the Plans and
Specifications on such Land.
II.2. Acceptance; Construction. RTI hereby unconditionally
accepts the designation and appointment as Construction Agent. The
Construction Agent will cause the Buildings to be constructed on the Land
substantially in accordance with the Plans and Specifications and, in
accordance with the Operative Documents, to be equipped in substantial
compliance in all material respects with all Requirements of Law and
insurance requirements.
II.3. Commencement of Construction. Subject to Construction Force
Majeure Events, the Construction Agent hereby agrees, unconditionally and
for the benefit of the Lessor, to cause construction of a Building to
commence on each parcel of Land as soon as is reasonably practicable, in
its reasonable judgment, after the Closing Date in respect of such Land.
For purposes hereof, construction of a Building shall be deemed to
commence on the date (the "Construction Commencement Date") on which
excavation for the foundation for such Building commences. Without
limiting the foregoing, no phase of such construction shall be undertaken
until all permits required for such phase have been issued therefor.
II.4. Supplements to this Agreement. On the Closing Date of each
parcel of Land, the Lessor and the Construction Agent shall each execute
and deliver to the Agent a supplement to this Agreement in the form of
Exhibit A to this Agreement, appropriately completed, pursuant to which
the Lessor and the Construction Agent shall, among other things, each
acknowledge and agree that the construction and development of such Land
will be governed by the terms of this Agreement. Following the execution
and delivery of a supplement to this Agreement as provided above, such
supplement and all supplements previously delivered under this Agreement
shall constitute a part of this Agreement. On or prior to the Closing
Date of each parcel of Land, the Construction Agent shall prepare and
deliver to the Lessor and the Agent a construction budget (the
"Construction Budget") for the related Leased Property, setting forth in
reasonable detail the budget for the Construction of the proposed
Building on such Land in accordance with the Plans and Specifications
therefor, and all related costs including the capitalized interest and
Yield expected to accrue during the related Construction Term.
II.5. Term. This Agreement shall commence on the date hereof and
shall terminate with respect to any given Leased Property upon the first
to occur of:
(a) payment by the Lessee of the Leased Property
Balance and termination of the Lease with respect to such Leased
Property in accordance with the Lease;
(b) the expiration or earlier termination of the Lease;
(c) termination of this Agreement pursuant to Article V
hereof;
(d) the Completion for such Leased Property; and
(e) the payment by the Construction Agent of the Leased
Property Balance or the Construction Failure Payment with respect
to such Leased Property pursuant to this Agreement.
II.6. Identification of Properties; Construction Documents. The
Construction Agent may execute any of its duties and obligations under
this Agreement by or through agents, contractors, employees or attorneys-
in-fact, and the Construction Agent shall enter into such agreements with
architects and contractors as the Construction Agent deems necessary or
desirable for the construction of the Buildings pursuant hereto (the
"Construction Documents"); provided, however, that no such delegation
shall limit or reduce in any way the Construction Agent's duties and
obligations under this Agreement; provided, further, that
contemporaneously with the execution and delivery of a Construction
Document, the Construction Agent will execute and deliver to the Lessor
the Security Agreement and Assignment, pursuant to which the Construction
Agent assigns to the Lessor, among other things, all of the Construction
Agent's rights under and interests in such Construction Documents. Each
construction contract shall be with a reputable general contractor with
experience in constructing projects that are similar in scope and type to
the proposed Building, and shall provide for a guarantee maximum project
cost and at least 10% retainage.
II.7. Scope of Authority. (a) Subject to the terms, conditions,
restrictions and limitations set forth in the Operative Documents, the
Lessor hereby expressly authorizes the Construction Agent, or any agent
or contractor of the Construction Agent, and the Construction Agent
unconditionally agrees, for the benefit of the Lessor, to take all action
necessary or desirable for the performance and satisfaction of all of the
Construction Agent's obligations hereunder with respect to the Leased
Properties acquired or leased by the Lessor, including, without
limitation:
(i) the identification and assistance with the
acquisition or lease of Land in accordance with the terms and
conditions of the Master Agreement;
(ii) all design and supervisory functions relating to
the construction of the Buildings and performing all engineering
work related to the construction of the Buildings;
(iii) negotiating and entering into all contracts or
arrangements to procure the equipment and services necessary to
construct the Buildings on such terms and conditions as are
customary and reasonable in light of local standards and practices;
(iv) obtaining all necessary permits, licenses,
consents, approvals and other authorizations, including those
required under Applicable Law (including Environmental Laws), from
all Governmental Authorities in connection with the development of
the Land and the construction of the Buildings on the Land in
accordance with the Plans and Specifications;
(v) maintaining all books and records with respect to
the construction, operation and management of the Leased
Properties; and
(vi) performing any other acts necessary or appropriate
in connection with the identification, and acquisition (or leasing)
and development of the Land and construction of the Buildings in
accordance with the Plans and Specifications.
(b) Neither the Construction Agent nor any of its Affiliates or
agents shall enter into any contract which would, directly or indirectly,
impose any liability or obligation on the Lessor unless such contract
expressly contains an acknowledgment by the other party or parties
thereto that the obligations of the Lessor are non-recourse, and that the
Lessor shall have no personal liability with respect to such obligations.
Subject to the foregoing, the Lessor shall execute such documents and
take such other actions as the Construction Agent shall reasonably
request, at the Construction Agent's expense, to permit the Construction
Agent to perform its duties hereunder.
(c) Subject to the terms and conditions of this Agreement and the
other Operative Documents, the Construction Agent shall have sole
management and control over the construction means, methods, sequences
and procedures with respect to the construction of the Buildings.
II.8. Covenants of the Construction Agent. The Construction Agent
hereby covenants and agrees that it will:
(a) following the Construction Commencement Date for
each parcel of Land, cause construction of a Building on such Land
to be prosecuted diligently and without undue interruption
substantially in accordance with the Plans and Specifications for
such Land, in accordance with the Construction Budget for such
Leased Property and in compliance in all material respects with all
Requirements of Law and insurance requirements;
(b) notify the Lessor and the Agent in writing not less
than five (5) Business Days after the occurrence of each
Construction Force Majeure Event;
(c) take all reasonable and practical steps to cause
the Completion Date for such Leased Property to occur on or prior
to the Scheduled Construction Termination Date for such Leased
Property, and cause all Liens (including, without limitation, Liens
or claims for materials supplied or labor or services performed in
connection with the construction of the Buildings), other than
Permitted Liens and Lessor Liens, to be discharged;
(d) following the Completion Date for each Leased
Property, cause all outstanding punch list items with respect to
the Buildings on such Leased Property to be completed within sixty
(60) days after said Completion Date; and
(e) at all times during construction of any Building,
cause all title to all personalty financed by the Lessor on or
within such Leased Property to be and remain vested in the Lessor
and cause to be on file with the applicable filing office or
offices all necessary documents under Article 9 of the Uniform
Commercial Code to perfect such title free of all Liens other than
Permitted Liens, it being understood and acknowledged that such
Lessor's rights, title and interest in and to said personalty have
been assigned to the Agent pursuant to the Operative Documents.
ARTICLE III
THE BUILDINGS
III.1. Construction. The Construction Agent shall cause the
Buildings to be constructed and equipped (as provided in the Plans and
Specifications) in compliance in all material respects with all
Requirements of Law and insurance requirements.
III.2. Amendments; Modifications. The Construction Agent may,
subject to the conditions, restrictions and limitations set forth herein
and in the Operative Documents (but not otherwise), at any time during
the term hereof revise, amend or modify the Plans and Specifications and
the related Construction Documents without the consent of the Lessor;
provided, however, that the Lessor's prior written consent will be
required in the following instances: (x) such revision, amendment or
modification by its terms would result in the Completion Date of the
Buildings occurring after the Scheduled Construction Termination Date, or
(y) such revision, amendment or modification would result in the cost for
such Leased Property exceeding the then remaining Commitments or increase
the Construction Budget therefor, or (z) the aggregate effect of such
revision, amendment or modification, when taken together with any
previous or contemporaneous revision, amendment or modification to the
Plans and Specifications for such Leased Property, would be to reduce the
Fair Market Sales Value of such Leased Property in a material respect
when completed.
III.3. Casualty, Condemnation and Construction Force Majeure
Events. If at any time prior to the Completion Date with respect to any
Building there occurs a Casualty or a Construction Force Majeure Event or
the Lessor or the Construction Agent receives notice of a Condemnation,
then, except as otherwise provided in the Lease, in each case the
Construction Agent shall promptly and diligently take all commercially
reasonable and practical steps to cause the construction of the Building
to be completed substantially in accordance with the Plans and
Specifications and with the terms hereof, and cause the Completion Date
to occur on or prior to the Scheduled Construction Termination Date.
III.4. Indemnity. During the Construction Term for each Leased
Property, the Construction Agent agrees to assume liability for, and to
indemnify, protect, defend, save and hold harmless the Lessor 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 the
Lessor, whether or not the Lessor shall also be indemnified as to any
such Claim by any other Person, in any way relating to or arising out of
(i) the Construction Agent's (or any subcontractor's) own actions or
failures to act while in possession or control of any Leased Property,
(ii) fraud, misapplication of funds, illegal acts or willful misconduct
on the part of the Construction Agent, (iii) any event described in
paragraph (f) or (g) of Article XII of the Lease with respect to the
Construction Agent or (iv) the inaccuracy of any representation or
warranty made by the Construction Agent. The foregoing indemnities are
in addition to, and not in limitation of, the indemnities with respect to
environmental claims set forth in Section 7.2 of the Master Agreement.
The provisions of Section 7.3 of the Master Agreement shall apply to any
amounts that the Construction Agent is requested to pay pursuant to this
Section 3.4.
ARTICLE IV
PAYMENT OF FUNDS
IV.1. Funding of Property Acquisition Costs and Property Buildings
Costs. (a) In connection with the acquisition or lease of any Land and
during the course of the construction of the Buildings on any Land, the
Construction Agent may request that the Lessor advance funds for the
payment of acquisition, transaction and closing costs or property
improvements costs, and the Lessor will comply with such request to the
extent provided for under, and subject to the conditions, restrictions
and limitations contained in, the Master Agreement and the other
Operative Documents.
(b) The proceeds of any funds made available to the Lessor to pay
acquisition, transaction and closing costs or improvements costs shall be
made available to the Construction Agent in accordance with the Funding
Request relating thereto and the terms of the Master Agreement. The
Construction Agent will use such proceeds only to pay the acquisition,
transaction and closing costs or improvements costs for Leased Properties
set forth in the Funding Request relating to such funds.
ARTICLE V
CONSTRUCTION AGENCY EVENTS OF DEFAULT
V.1. Construction Agency Events of Default. If any one or more of
the following events (each a "Construction Agency Event of Default")
shall occur and be continuing:
(a) the Construction Agent fails to apply any funds
paid by, or on behalf of, the Lessor to the Construction Agent for
the acquisition or lease of the Land and the construction of the
Buildings to the payment of acquisition, transaction and closing
costs or improvements costs for such Leased Property;
(b) subject to Construction Force Majeure Events, the
Construction Commencement Date with respect to any Leased Property
shall fail to occur for any reason on or prior to the date that is
one year after the Closing Date with respect to such Leased
Property;
(c) the Completion Date with respect to any Leased
Property shall fail to occur for any reason on or prior to the
earlier of the Funding Termination Date and the Scheduled
Construction Termination Date for such Leased Property;
(d) any Lease Event of Default shall have occurred and
be continuing; or
(e) the Construction Agent shall fail to observe or
perform in any material respect any term, covenant or condition of
this Agreement (except those specified in clauses (a) through (d)
above), and such failure shall remain uncured for a period of
thirty (30) days after notice thereof to the Construction Agent;
provided, however, no Construction Agency Event of Default shall be
deemed to occur if such failure or breach cannot reasonably be
cured within such period, so long as the Construction Agent shall
have promptly commenced the cure thereof and continues to act with
diligence to cure such failure or breach and such failure or breach
is cured within one hundred eighty (180) days after notice thereof
to the Construction Agent;
then, in any such event, the Lessor may, in addition to the other rights
and remedies provided for in this Article, immediately terminate this
Agreement as to any Leased Property or Properties or all of the Leased
Properties, separately, successively or concurrently (all in Lessor's
sole discretion) by giving the Construction Agent written notice of such
termination, and upon the giving of such notice, this Agreement shall
terminate as to such Leased Property or Properties or all of the Leased
Properties (as the case may be) and all rights of the Construction Agent
and, subject to the terms of the Operative Documents, all obligations of
the Lessor under this Agreement with respect to such Leased Property or
Properties or all of the Leased Properties (as the case may be) shall
cease. The Construction Agent shall pay upon demand all reasonable
costs, expenses, losses, expenditures and damages (including, without
limitation, attorneys' fees and disbursements) actually incurred by or on
behalf of the Lessor in connection with any Construction Agency Event of
Default.
V.2. Damages. The termination of this Agreement pursuant to
Section 5.1 shall in no event relieve the Construction Agent of its
liability and obligations hereunder, all of which shall survive any such
termination.
V.3. Remedies; Remedies Cumulative. (a) If a Construction Agency
Event of Default shall have occurred and be continuing, the Lessor shall
have all rights and remedies available under the Operative Documents or
available at law, equity or otherwise. Notwithstanding the foregoing, if
a Construction Agency Event of Default hereunder relates only to a
specific Leased Property or specific Leased Properties but not all Leased
Properties (but in any event excluding any Lease Event of Default), the
Construction Agent shall have the right to cure such Construction Agency
Event of Default by purchasing such Leased Property or Properties for the
Leased Property Balance(s) therefor from the Lessor in accordance with
the terms and subject to the conditions, restrictions and limitations of
Section 14.5 of the Lease. In the event that the Construction Agent does
not exercise its option to purchase such Leased Property or Properties,
the Construction Agent shall pay to the Lessor the Construction Failure
Payment(s) therefor within five (5) Business Days of the demand therefor
by the Lessor, and shall surrender and return such Leased Property or
Properties to the Lessor or its designee in accordance with the terms of
Section 14.8 of the Lease. In the event that the Construction Agent
returns any Leased Property to the Lessor pursuant to the previous
sentence, the Construction Agent shall take such action as the Lessor may
reasonably request in order to transfer to the Lessor (or its designee)
all of the Construction Agent's rights and claims in, to and under the
related Construction Contract(s), Architect's Agreement(s), all
agreements, security deposits, guaranties and surety bonds related
thereto and all governmental permits related to such Construction, and
the Construction Agent shall provide to the Lessor copies of all books,
records and documentation with respect to the foregoing.
(b) No failure to exercise and no delay in exercising, on the part
of the Lessor, any right, remedy, power or privilege under this Agreement
or under the other Operative Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges provided in this Agreement
are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
ARTICLE VI
NO CONSTRUCTION AGENCY FEE
VI.1. Lease as Fulfillment of Lessor's Obligations. All
obligations, duties and requirements imposed upon or allocated to the
Construction Agent shall be performed by the Construction Agent at the
Construction's Agent's sole cost and expense, and the Construction Agent
will not be entitled to, and the Lessor shall not have any obligation to
pay, any agency fee or other fee or compensation, and the Construction
Agent shall not be entitled to, and the Lessor shall not have any
obligation to make or pay, any reimbursement therefor, it being
understood that this Agreement is being entered into as consideration for
and as an inducement to the Lessor entering into the Lease and the other
Operative Documents.
ARTICLE VII
LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS
VII.1. Exercise of the Lessor's Rights. The Construction Agent
hereby acknowledges and agrees that the rights and powers of the Lessor
under this Agreement have been assigned to, and may be exercised by, the
Agent.
VII.2. Lessor's Right to Cure Construction Agent's Defaults. The
Lessor, without waiving or releasing any obligation or Construction
Agency Event of Default, may, upon prior written notice to the
Construction Agent (but shall be under no obligation to), remedy any
Construction Agency Event of Default for the account of and at the sole
cost and expense of the Construction Agent. All reasonable out of pocket
costs and expenses so incurred (including actual and reasonable fees and
expenses of counsel), together with interest thereon at the Overdue Rate
from the date on which such sums or expenses are paid by the Lessor,
shall be paid by the Construction Agent to the Lessor on demand.
ARTICLE VIII
MISCELLANEOUS
VIII.1. Notices. All notices, consents, directions, approvals,
instructions, requests, demands and other communications required or
permitted by the terms hereof to be given to any Person shall be given in
writing in the manner provided in, shall be sent to the respective
addresses set forth in, and the effectiveness thereof shall be governed
by the provisions of, Section 8.2 of the Master Agreement.
VIII.2. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Lessor, the Construction Agent and
their respective legal representatives, successors and permitted assigns.
The Construction Agent shall not assign its rights or obligations
hereunder without the prior written consent of the Lessor and the Agent.
VIII.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
VIII.4. Amendments and Waivers. The Lessor and the Construction
Agent may from time to time, enter into written amendments, supplements
or modifications hereto.
VIII.5. Counterparts. This Agreement may be executed on any
number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same agreement.
VIII.6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
VIII.7. Headings and Table of Contents. The headings and table of
contents contained in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
RUBY TUESDAY, INC.
By
Name:
Title:
ATLANTIC FINANCIAL GROUP, LTD.
By: Atlantic Financial Managers,
Inc., its General Partner
By
Name:
Title:
EXHIBIT A
Supplement to Construction Agency Agreement
SUPPLEMENT to Construction Agency Agreement, dated as of
______________, 199_, between ATLANTIC FINANCIAL GROUP, LTD., a Texas
limited partnership (the "Lessor"), and RUBY TUESDAY, INC., a Georgia
corporation (in its capacity as construction agent, the "Construction
Agent"). Capitalized terms used but not otherwise defined herein shall
have the meanings given them in the Construction Agency Agreement.
The Lessor and the Construction Agent are parties to that certain
Construction Agency Agreement, dated as of June 3, 1999 (as amended,
supplemented or otherwise modified, the "Construction Agency Agreement"),
pursuant to which (i) the Lessor has appointed the Construction Agent as
its sole and exclusive agent in connection with the identification and
acquisition of Land and construction of the Buildings in accordance with
the Plans and Specifications, and (ii) the Construction Agent has agreed,
for the benefit of the Lessor, to cause the construction of the Buildings
to be completed in accordance with the Plans and Specifications.
Subject to the terms and conditions of the Construction Agency
Agreement, the Lessor and the Construction Agent desire that the terms of
the Construction Agency Agreement apply to the Land described in
Schedule 1 and wish to execute this Supplement to provide therefor.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. The Construction Agent agrees to act as Construction Agent and
to perform its obligations under the Construction Agency Agreement in
connection with the completion of construction of the Building on the
Land described in Schedule 1 in accordance with the Plans and
Specifications for such Land. The Construction Agent hereby represents
and warrants to Lessor that the Construction Agent has heretofore
delivered to Lessor a true, correct and complete copy of the Plans and
Specifications for the Building on the Land described in Schedule 1 or,
if not available on the date hereof, will deliver such Plans and
Specifications as soon as available.
2. Each of the Lessor and the Construction Agent acknowledges and
agrees that the development of the Land described in Schedule 1 and the
construction of the Buildings thereon shall be governed by the terms of
the Construction Agency Agreement.
3. The anticipated construction budget relating to the
construction and development of the Building on the Land described in
Schedule 1 is $__________. The acquisition cost of the Land described in
Schedule 1 is $___________.
4. This Supplement shall, upon its execution and delivery,
constitute a part of the Construction Agency Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement
to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
RUBY TUESDAY, INC.
By
Name:
Title:
ATLANTIC FINANCIAL GROUP, LTD.
By: Atlantic Financial Managers,
Inc., its General Partner
By
Name:
Title:
Schedule 1 to Supplement
Description of Land Interest
APPENDIX A
to
Master Agreement, Lease,
Loan Agreement and Construction Agency Agreement
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors
and assigns are permitted by the Operative Documents;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument as amended, supplemented or modified and in effect from
time to time in accordance with the terms thereof and, if
applicable, the terms of the other Operative Documents and
reference to any promissory note includes any promissory note which
is an extension or renewal thereof or a substitute or replacement
therefor;
(v) reference to any Applicable Law means such Applicable
Law as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder and reference to any section
or other provision of any Applicable Law means that provision of
such Applicable Law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement
or reenactment of such section or other provision;
(vi) reference in any Operative Document to any Article,
Section, Appendix, Schedule or Exhibit means such Article or
Section thereof or Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to an Operative Document as a
whole and not to any particular Article, Section, paragraph or
other provision of such Operative Document;
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
(ix) "or" is not exclusive; and
(x) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but
excluding".
B. Accounting Terms. In each Operative Document, unless
expressly otherwise provided, accounting terms shall be construed and
interpreted, and accounting determinations and computations shall be
made, in accordance with GAAP.
C. Conflict in Operative Documents. If there is any conflict
between any Operative Documents, each such Operative Document shall be
interpreted and construed, if possible, so as to avoid or minimize such
conflict but, to the extent (and only to the extent) of such conflict,
the Master Agreement shall prevail and control.
D. Legal Representation of the Parties. The Operative Documents
were negotiated by the parties with the benefit of legal representation
and any rule of construction or interpretation otherwise requiring any
Operative Document to be construed or interpreted against any party shall
not apply to any construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears,
terms defined herein have the respective indicated meanings when used in
each Operative Document.
"A Loan" means the A Percentage of Fundings made pursuant to the
Loan Agreement and the Master Agreement.
"A Note" is defined in Section 2.2 of the Loan Agreement.
"A Percentage" means 85%.
"Address" means with respect to any Person, its address set forth
in Schedule 8.2 to the Master Agreement or such other address as it shall
have identified to the parties to the Master Agreement in writing in the
manner provided for the giving of notices thereunder.
"Adjusted LIBO Rate" shall mean, with respect to each Rent Period
for a LIBOR Advance, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following formula:
Adjusted LIBO Rate = LIBOR
1.00 - LIBOR Reserve Percentage
As used herein, LIBOR Reserve Percentage shall mean, for any Rent Period
for a LIBOR Advance, the reserve percentage (expressed as a decimal)
equal to the then stated maximum rate of all reserves requirements
(including, without limitation, any marginal, emergency, supplemental,
special or other reserves) applicable to any member bank of the Federal
Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or against any successor category of liabilities as
defined in Regulation D).
"Advance" means a LIBOR Advance or a Base Rate Advance.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with, such
Person. For purposes of this definition, the term "control" (including
the correlative meanings of the terms "controlling," "controlled by" and
"under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise,
provided (but without limiting the foregoing) that no pledge of voting
securities of any Person without the current right to exercise voting
rights with respect thereto shall by itself be deemed to constitute
control over such Person.
"After-Tax Basis" means (a) with respect to any payment to be
received by an Indemnitee (which, for purposes of this definition, shall
include any Tax Indemnitee), the amount of such payment supplemented by a
further payment or payments so that, after deducting from such payments
the amount of all Taxes (net of any current credits, deductions or other
Tax benefits arising from the payment by the Indemnitee of any amount,
including Taxes, for which the payment to be received is made) imposed
currently on the Indemnitee by any Governmental Authority or taxing
authority with respect to such payments, the balance of such payments
shall be equal to the original payment to be received and (b) with
respect to any payment to be made by any Indemnitee, the amount of such
payment supplemented by a further payment or payments so that, after
increasing such payment by the amount of any current credits or other Tax
benefits realized by the Indemnitee under the laws of any Governmental
Authority or taxing authority resulting from the making of such payments,
the sum of such payments (net of such credits or benefits) shall be equal
to the original payment to be made; provided, however, for the purposes
of this definition, and for purposes of any payment to be made to either
the Lessee or an Indemnitee on an after-tax basis, it shall be assumed
that (i) federal, state and local taxes are payable at the highest
combined marginal federal and state statutory income tax rate (taking
into account the deductibility of state income taxes for federal income
tax purposes) applicable to corporations from time to time and (ii) such
Indemnitee or the Lessee has sufficient income to utilize any deductions,
credits (other than foreign tax credits, the use of which shall be
determined on an actual basis) and other Tax benefits arising from any
payments described in clause (b) of this definition.
"Agent" means SunTrust Bank, Atlanta, a Georgia banking
corporation, in its capacity as agent under the Master Agreement and the
Loan Agreement.
"Alterations" means, with respect to any Leased Property, fixtures,
alterations, improvements, modifications and additions to such Leased
Property.
"Applicable Law" means all existing and future applicable laws
(including Environmental Laws), rules, regulations (including proposed,
temporary and final income tax regulations), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and
interpretations by, any Governmental Authority, and applicable judgments,
decrees, injunctions, writs, orders or like action of any court,
arbitrator or other administrative, judicial or quasi-judicial tribunal
or agency of competent jurisdiction (including those pertaining to
health, safety or the environment (including, without limitation,
wetlands) and those pertaining to the construction, use or occupancy of
any Leased Property).
"Applicable Margin" means, with respect to all LIBOR Advances,
0.90% and with respect to all Base Rate Advances, 0%.
"Appraisal" is defined in Section 3.1 of the Master Agreement.
"Appraiser" means an MAI appraiser reasonably satisfactory to the
Agent.
"Architect" means with respect to any Leased Property the architect
engaged in connection with the construction of the related Building, if
any, who may be an employee of the General Contractor for such Leased
Property.
"Architect's Agreement" means, with respect to any Leased Property,
the architectural services agreement, if any, between the Lessee and the
related Architect.
"Assignment of Lease and Rents" means, with respect to any Leased
Property, the Assignment of Lease and Rents, dated as of the related
Closing Date, from the Lessor to the Agent, substantially in the form of
Exhibit B to the Master Agreement.
"Award" means any award or payment received by or payable to the
Lessor or the Lessee on account of any Condemnation or Event of Taking
(less the actual costs, fees and expenses, including reasonable
attorneys' fees, incurred in the collection thereof, for which the Person
incurring the same shall be reimbursed from such award or payment).
"B Loan" means the B Percentage of Fundings made pursuant to the
Loan Agreement and the Master Agreement.
"B Note" is defined in Section 2.2 of the Loan Agreement.
"B Percentage" means 11.5%.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended.
"Base Rate" means (with any change in the Base Rate to be effective
as of the date of change of either of the following rates) the higher of
(i) the rate which the Agent publicly announces from time to time as its
prime lending rate, as in effect from time to time, and (ii) the Federal
Funds Rate, as in effect from time to time, plus one-half of one percent
(0.50%) per annum. The Agent's prime lending rate is a reference rate
and does not necessarily represent the lowest or best rate actually
charged to customers; the Agent may make commercial loans or other loans
at rates of interest at, above or below the Agent's prime lending rate.
"Base Term" means, with respect to any Leased Property, (a) the
period commencing on the Initial Closing Date and ending on June 3, 2004
or (b) such shorter period as may result from earlier termination of the
Lease as provided therein.
"Base Rate Advance" means that portion of the Funded Amount bearing
interest at the Base Rate.
"Basic Rent" means, for any Lease Term, the rent payable pursuant
to Section 3.1 of the Lease, determined in accordance with the following:
each installment of Basic Rent payable on any Payment Date shall be in
an amount equal to the sum of (A) the aggregate amount of Lender Basic
Rent payable on such Payment Date, plus (B) the aggregate amount of
Lessor Basic Rent payable on such Payment Date, in each case for the
Leased Property or Properties that are then subject to the Lease.
"Board of Directors", with respect to a corporation, means either
the Board of Directors or any duly authorized committee of that Board
which pursuant to the by-laws of such corporation has the same authority
as that Board as to the matter at issue.
"Building" means, with respect to any Leased Property, the
buildings, structures and improvements located or to be located on the
related Land, along with all fixtures used or useful in connection with
the operation of such Leased Property, including, without limitation, all
furnaces, boilers, compressors, elevators, fittings, pipings,
connectives, conduits, ducts, partitions, equipment and apparatus of
every kind and description now or hereafter affixed or attached or used
or useful in connection with the Building, all equipment financed by the
Lessor and/or the Lenders and all Alterations (including all
restorations, repairs, replacements and rebuilding of such buildings,
improvements and structures) thereto (but in each case excluding trade
fixtures financed other than by the Lessor or the Lenders).
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks are required or authorized to be closed for business
in Atlanta, Georgia and, if the applicable Business Day relates to a
LIBOR Advance, on which trading is not carried on by and between banks in
the London interbank market.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which
would, in accordance with GAAP, be required to be classified and
accounted for as a capital lease on a balance sheet of such Person, other
than, in the case of Lessee or any of its Subsidiaries, any such lease
under which Lessee or a wholly-owned Subsidiary of Lessee is the lessor.
"Capital Lease Obligation" means, with respect to any Capital
Lease, the amount of the aggregate obligations of the lessee thereunder
which would, in accordance with GAAP, appear on a balance sheet of such
lessee in respect of such Capital Lease.
"Change in Control Provision" means any term or provision contained
in any indenture, debenture, note, or other agreement or document
evidencing or governing Indebtedness of Lessee evidencing debt or a
commitment to extend loans in excess of $2,000,000 which requires, or
permits the holder(s) of such Indebtedness of Lessee to require that such
Indebtedness of Lessee be redeemed, repurchased, defeased, prepaid or
repaid, either in whole or in part, or the maturity of such Indebtedness
of Lessee to be accelerated in any respect, as a result of a change in
ownership of the capital stock of Lessee or voting rights with respect
thereto.
"Casualty" means an event of damage or casualty relating to all or
part of any Leased Property that does not constitute an Event of Loss.
"Claims" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, proceedings,
settlements, utility charges, costs, expenses and disbursements
(including, without limitation, reasonable legal fees and expenses) of
any kind and nature whatsoever.
"Closing Date" means, with respect to each parcel of Land, the date
on which such Land is acquired by the Lessor pursuant to a Purchase
Agreement or such Land is leased to the Lessor pursuant to a Ground Lease
and the initial Funding occurs with respect to such Land under the Master
Agreement.
"Code" or "Tax Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment" means as to each Funding Party, its obligation to make
Fundings as investments in each Leased Property, or to make Loans to the
Lessor, in an aggregate amount not to exceed at any one time outstanding
the amount set forth for such Funding Party on Schedule 2.2 to the Master
Agreement (as it may be adjusted from time to time pursuant to Section 6
of the Master Agreement).
"Commitment Percentage" means as to any Funding Party, at a
particular time, the percentage of the aggregate Commitments in effect at
such time represented by such Funding Party's Commitment, as such
percentage is shown for such Funding Party on Schedule 2.2 to the Master
Agreement (as it may be adjusted from time to time pursuant to Section 6
of the Master Agreement).
"Completion Date" with respect to any Leased Property means the
Business Day on which the conditions specified in Section 3.5 of the
Master Agreement have been satisfied or waived with respect to such
Leased Property.
"Completion Date Appraisal" with respect to any Leased Property
means that appraisal, dated as of the Completion Date, delivered by the
Appraiser pursuant to Section 3.5 of the Master Agreement with respect to
such Leased Property.
"Condemnation" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, occupancy or title to any
Leased Property or any part thereof in, by or on account of any actual
eminent domain proceeding or other action by any Governmental Authority
or other Person under the power of eminent domain or any transfer in lieu
of or in anticipation thereof, which in any case does not constitute an
Event of Taking. A Condemnation shall be deemed to have "occurred" on
the earliest of the dates that use is prevented or occupancy or title is
taken.
"Consolidated Companies" means, collectively, Lessee and all of its
Subsidiaries.
"Consolidated Funded Debt" means, as of any date of determination,
the Funded Debt of the Consolidated Companies.
"Consolidated Interest Expense" means, for any period, total
interest expense of the Consolidated Companies (including without
limitation, interest expense attributable to Capital Leases, all
capitalized interest, all commissions, discounts and other fees and
charges owed with respect to bankers acceptance financing, net costs
(i.e., costs minus benefits) under Interest Rate Contracts, and total
interest expense (whether shown as interest expense or as loss and
expenses on sales of receivables) under a receivables purchase facility)
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" means, with reference to any
period, the net income (or deficit) of the Consolidated Companies for
such period (taken as a cumulative whole), after deducting all operating
expenses, provisions for all taxes and reserves (including reserves for
deferred income taxes) and all other proper deductions, all determined in
accordance with GAAP on a consolidated basis, after eliminating all
intercompany transactions and after deducting portions of income properly
attributable to minority interests, if any, in the stock and surplus of
the Subsidiaries of the Lessee.
"Consolidated Net Worth" means the shareholders' equity of the
Lessee and its Subsidiaries calculated in accordance with GAAP, less
treasury stock.
"Construction" means, with respect to any Leased Property, the
construction of the related Building pursuant to the related Plans and
Specifications.
"Construction Agency Agreement" means the Construction Agency
Agreement, dated as of June 3, 1999, between the Lessee and the Lessor.
"Construction Agent" means the Lessee in its capacity as
construction agent pursuant to the Construction Agency Agreement.
"Construction Budget" is defined in Section 2.4 of the Construction
Agency Agreement.
"Construction Conditions" means the conditions set forth in Section
3.5 of the Master Agreement.
"Construction Contract" means, with respect to any Leased Property,
that certain construction contract, if any, between the Lessee and a
General Contractor for the Construction of the related Building, provided
that such contract shall be assigned by the Lessee to the Lessor, and
such assignment shall be consented to by such General Contractor,
pursuant to an assignment of such construction contract substantially in
the form of the Security Agreement and Assignment set forth as Exhibit D
to the Master Agreement.
"Construction Failure Payment" with respect to any Leased Property
means the amount equal to the sum of (i) 89.9% of the acquisition cost of
the related Land, if the cost of the related Land is less than 25% of the
total expected cost of such Leased Property or 100% of the acquisition
cost of the related Land, if the cost of the related Land is equal to or
more than 25% of the total expected cost of such Leased Property, plus
(ii) 89.9% of the Construction costs (including development and
transaction costs) related to such Leased Property that have been
incurred through the date of payment, plus (iii) any amounts owed with
respect to such Leased Property pursuant to Section 3.4 of the
Construction Agency Agreement or Section 7.2 of the Master Agreement,
plus (iv) the cost of tenant improvements not paid by the Construction
Agent that were not part of the Construction Budget for such Leased
Property.
"Construction Force Majeure Event" means, with respect to any
Leased Property:
(a) an act of God arising after the related Closing Date, or
(b) any change in any state or local law, regulation or other
legal requirement arising after such Closing Date and
relating to the use of the Land or the construction of a
building on the Land, or
(c) strikes, lockouts, labor troubles, unavailability of
materials, riots, insurrections or other causes beyond the
Lessee's control
which prevents the Lessee from completing the Construction prior to the
Scheduled Construction Termination Date and which could not have been
avoided or which cannot be remedied by the Lessee through the exercise of
all commercially reasonable efforts or the expenditure of funds and, in
the case of (b) above, the existence or potentiality of which was not
known to and could not have been discovered prior to such Closing Date
through the exercise of reasonable due diligence by the Lessee.
"Construction Land Interest" means each parcel of Land for which
the Completion Date has not yet occurred.
"Construction Term" means, with respect to any Leased Property, the
period commencing on the related Closing Date and ending on the related
Construction Term Expiration Date, or such shorter period as may result
from earlier termination of the Lease as provided therein.
"Construction Term Expiration Date" means, with respect to any
Leased Property, the earliest of the following:
(a) the related Completion Date,
(b) the date on which the aggregate Funded Amounts equal the
Commitments, and
(c) the related Scheduled Construction Termination Date.
"Contractual Obligation", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, contract, undertaking, agreement, instrument or
other document to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is
subject (including, without limitation, any restrictive covenant
affecting any of the properties of such Person).
"Credit Agreement", means the Credit Agreement, dated as of March
6, 1996, among the Lessee, the lenders listed therein and SunTrust Bank,
Atlanta, as agent and as administrative agent.
"Deed" means, with respect to any Land, a General Warranty Deed
(or, if the related Title Policy is acceptable to the Lessee and the
Agent, a Special or Limited Warranty Deed), dated the applicable Closing
Date, from the applicable Seller to the Lessor, conveying such Land.
"EBITR" shall mean for any period, the Consolidated Net Income
(Loss) of the Consolidated Companies, plus, to the extent deducted
therefrom in determining Consolidated Net Income (Loss), the sum of (i)
Consolidated Interest Expense, (ii) provision for income taxes (whether
paid or deferred), (iii) Rental Obligations for such period, and (iv)
Restructuring Charges, and without giving effect to any extraordinary
gains or losses, any other non-cash charges or gains or losses from sales
of assets other than inventory sold in the ordinary course of business.
"Environmental Audit" means, with respect to each parcel of Land, a
Phase I Environmental Assessment, dated no more than 60 days prior to the
related Closing Date, by an environmental services firm satisfactory to
the Funding Parties.
"Environmental Laws" means and include the Resource Conservation
and Recovery Act of 1976, (RCRA) 42 U.S.C. SS 6901-6987, as amended by
the Hazardous and Solid Waste Amendments of 1984, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
SS 9601-9657, (CERCLA), the Hazardous Materials Transportation Act of
1975, 49 U.S.C. SS 1801-1812, the Toxic Substances Control Act, 15 U.S.C.
SS 2601-2671, the Clean Air Act, 42 U.S.C. SS 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. SS 136 et seq., and
all similar federal, state and local environmental laws, ordinances,
rules, orders, statutes, decrees, judgments, injunctions, codes and
regulations, and any other federal, state or local laws, ordinances,
rules, codes and regulations, and any other federal, state or local laws,
ordinances, rules, codes and regulations relating to the environment,
human health or natural resources or the regulation or control of or
imposing liability or standards of conduct concerning human health, the
environment, Hazardous Materials or the clean-up or other remediation of
any Leased Property, or any part thereof, as any of the foregoing may
have been from time to time amended, supplemented or supplanted.
"Environmental Permits" means all permits, licenses,
authorizations, certificates and approvals of Governmental Authorities
required by Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time or any successor federal statute.
"ERISA Affiliate" means, with respect to any Person, each trade or
business (whether or not incorporated) which is a member of a group of
which that Person is a member and which is under common control within
the meaning of the regulations promulgated under Section 414 of the Tax
Code.
"Event of Default" means any event or condition designated as an
"Event of Default" in Article XII of the Lease.
"Event of Loss" is defined in Section 10.1 of the Lease.
"Event of Taking" is defined in Section 10.2 of the Lease.
"Executive Officer" means with respect to any Person, the
President, Vice Presidents, Chief Financial Officer, Treasurer, Secretary
and any Person holding comparable offices or duties.
"Fair Market Rental Value" means, with respect to any Leased
Property, the fair market rent as determined by an independent appraiser
chosen by the Lessor, with the consent of the Lessee, not to be
unreasonably withheld or delayed (unless an Event of Default has occurred
and is continuing, in which case, no consent shall be required) that
would be obtained in an arm's-length lease between an informed and
willing lessee and an informed and willing lessor, in either case under
no compulsion to lease, and neither of which is related to or affiliated
with the Lessor or Lessee for the lease of such Leased Property on the
terms (other than the amount of Basic Rent) set forth, or referred to, in
the Lease. Such fair market rent shall be calculated as the value for
the use of such Leased Property to be leased in place at the Land,
assuming, in the determination of such fair market rental value, that
such Leased Property is in the condition and repair required to be
maintained by the terms of the related Lease (unless such fair market
rental value is being determined for the purposes of Section 13.1 of the
Lease and except as otherwise specifically provided in the Lease, in
which case this assumption shall not be made).
"Fair Market Sales Value" means, with respect to any Leased
Property or any portion thereof, the fair market sales value as
determined by an independent appraiser chosen by the Lessor or, so long
as the Funded Amounts are outstanding, the Agent, with the consent of the
Lessee, not to be unreasonably withheld or delayed (unless an Event of
Default has occurred and is continuing, in which case, no consent shall
be required) that would be obtained in an arm's-length transaction
between an informed and willing buyer (other than a lessee currently in
possession) and an informed and willing seller, under no compulsion,
respectively, to buy or sell and neither of which is related to the
Lessor or Lessee, for the purchase of such Leased Property. Such fair
market sales value shall be calculated as the value for such Leased
Property, assuming, in the determination of such fair market sales value,
that such Leased Property is in the condition and repair required to be
maintained by the terms of the Lease (unless such fair market sales value
is being determined for purposes of Section 13.1 of the Lease and except
as otherwise specifically provided in the Lease or the Master Agreement,
in which case this assumption shall not be made).
"Federal Funds Rate" means for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with member
banks of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of Atlanta, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing
selected by the Agent.
"Final Rent Payment Date" with respect to any Leased Property is
defined in Section 13.1(e) of the Lease.
"Fiscal Year" means any period of 52 (or, if applicable 53)
consecutive weeks ending on the first Saturday occurring after May 30 of
any year; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1999") refer to the Fiscal Year ending
on the first Saturday occurring after May 30 of that year.
"Fiscal Year End" means the last day of any Fiscal Year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
(i) EBITR to (ii) Fixed Charges for such period.
"Fixed Charges" shall mean, with reference to any period,
determined in accordance with GAAP on a consolidated basis, the sum of
the following for the Consolidated Companies, after eliminating all
intercompany items:
(a) Consolidated Interest Expense for such period; and
(b) all Rental Obligations payable as lessee under any operating
lease properly charged or chargeable to income during such
period in accordance with GAAP;
provided that any interest charges or rentals paid or accrued by any
Person acquired by the Lessee or any of its Subsidiaries during such
period, through purchase, merger, consolidation or otherwise, shall be
included in "Fixed Charges" only to the extent that the earnings of such
Person are taken into account in determining EBITR for such period.
"Franchisee Loan Program" means that transaction evidenced by (i)
that certain Loan Facility Agreement, dated as of May 30, 1997, by and
among the Lessee, SunTrust Bank, Atlanta, as servicer and the other
financial institutions party thereto wherein the Lessee has guaranteed,
to the extent set forth therein, certain obligations of franchisees of
the Lessee and (ii) the other "Operative Documents" (as such term is
defined therein) executed by the Consolidated Companies in connection
therewith.
"Funded Amount" means, as to the Lessor, the Lessor's Invested
Amounts, and, as to each Lender, the outstanding principal amount of such
Lender's Loans.
"Funded Debt" means, as applied to any Person, all Indebtedness of
such Person which by its terms or by the terms of any instrument or
agreement relating thereto matures, or which is otherwise payable or
unpaid, one year or more from, or is directly or indirectly renewable or
extendable at the option of the debtor to a date one year or more
(including an option of the debtor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period
of one year or more) from, the date of the creation thereof, provided
that Funded Debt shall include, as at any date of determination, any
portion of such Indebtedness outstanding on such date which matures on
demand or within one year from such date (whether by sinking fund, other
required prepayment, or final payment at maturity) and shall also include
(i) all Indebtedness of such Person for borrowed money under a line of
credit, guidance line, revolving credit, bankers acceptance facility or
similar arrangement for borrowed money, including, without limitation,
all unpaid drawings under letters of credit and unreimbursed amounts
pursuant to letter of credit reimbursement agreements, regardless of the
maturity date thereof and (ii) as of any date of determination with
respect to the Lessee, the aggregate guaranty obligations of the Lessee
calculated as of such date (without giving effect to any liability of the
Lessee on any subsequent date) pursuant to the Franchisee Loan Program,
regardless of the maturity date thereof. In addition, there shall also
be included in Funded Debt the present value of all minimum lease
commitments to make payments with respect to operating leases of such
Person, determined based upon a discount rate of 10% in accordance with
discounted present value analytical methodology and, with respect to the
Lessee, shall include the rental obligations of the Lessee arising
pursuant to the Operative Documents assuming, for the purposes of such
calculation, regardless of the Lessee's actual election pursuant to the
Operative Documents, that the Lessee has exercised and will exercise all
optional extensions of the Lease and will exercise the Remarketing Option
at the end of the Lease Term.
"Funding" means any funding by the Funding Parties pursuant to
Section 2.2 of the Master Agreement.
"Funding Date" means each Closing Date and each other date during
the Construction Term on which a Funding occurs under Section 2 of the
Master Agreement.
"Funding Parties" means the Lessor, the Agent and the Lenders,
collectively.
"Funding Party Balance" means, with respect to any Leased Property,
(i) for the Lessor as of any date of determination, an amount equal to
the sum of the outstanding related Lessor's Invested Amount, all accrued
and unpaid Yield on such outstanding related Lessor's Invested Amount,
all unpaid related fees owing to the Lessor under the Operative
Documents, and all other related amounts owing to the Lessor by the
Lessee under the Operative Documents, and (ii) for any Lender as of any
date of determination, an amount equal to the sum of the outstanding
related Loans of such Lender, all accrued and unpaid interest thereon,
all unpaid related fees owing to such Lender under the Operative
Documents, and all other related amounts owing to such Lender by the
Lessee under the Operative Documents.
"Funding Request" is defined in Section 2.2 of the Master
Agreement.
"Funding Termination Date" means the earlier of (i) June 3, 2004
and (ii) the termination of the Lenders' Commitments pursuant to Section
5.2 of the Loan Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"General Contractor" means with respect to any Leased Property the
general contractor under the related Construction Contract as may be
selected by the Lessee.
"General Partner" means Atlantic Financial Managers, Inc., a Texas
corporation.
"Governmental Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances,
orders, judgments, decrees, licenses, exemptions, publications, filings,
notices to and declarations of or with, or required by, any Governmental
Authority, or required by any Applicable Law and shall include, without
limitation, all citings, environmental and operating permits and licenses
that are required for the use, occupancy, zoning and operation of any
Leased Property.
"Governmental Authority" means any foreign or domestic federal,
state, county, municipal or other governmental or regulatory authority,
agency, board, body, commission, instrumentality, court or any political
subdivision thereof.
"Ground Lease" means, with respect to any Land, the ground lease
between the related Ground Lessor and the Lessor pursuant to which a
leasehold estate is conveyed in the Land to the Lessor.
"Ground Lessor" means, as to any Land, the ground lessor of such
Land.
"Guarantor" means the Lessee, in its capacity as guarantor under
the Guaranty Agreement.
"Guaranty" means any contractual obligation, contingent or
otherwise (other than letters of credit), of a Person with respect to any
Indebtedness or other obligation or liability of another Person,
including without limitation, any such Indebtedness, obligation or
liability directly or indirectly guaranteed, endorsed, co-made or
discounted or sold with recourse by that Person, or in respect of which
that Person is otherwise directly or indirectly liable, including con-
tractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such In-
debtedness, obligation or liability or any security therefor, or any
agreement to provide funds for the payment or discharge thereof (whether
in the form of loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make any payment other than for value
received. The amount of any Guaranty shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in
respect of which guaranty is made or, if not so stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming
such Person is required to perform thereunder) as determined by such
Person in good faith.
"Guaranty Agreement" means the Guaranty, dated as of June 3, 1999
by the Guarantor in favor of the Funding Parties.
"Hazardous Material" means any substance, waste or material which
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous, including petroleum,
crude oil or any fraction thereof, petroleum derivatives, by products and
other hydrocarbons, or which is or becomes regulated under any
Environmental Law by any Governmental Authority, including any agency,
department, commission, board or instrumentality of the United States,
any jurisdiction in which a Leased Property is located or any political
subdivision thereof and also including, without limitation, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs") and
radon gas.
"Hostile Acquisition" means any Investment resulting in control of
a Person involving a tender offer or proxy contest that has not been
recommended or approved by the board of directors of the Person that is
the subject of the Investment prior to the first public announcement or
disclosure relating to such Investment.
"Indebtedness" of any Person means, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown
on the balance sheet of such Person as a liability (including, without
limitation, obligations for borrowed money and for the deferred purchase
price of property or services, and obligations evidenced by bonds,
debentures, notes or other similar instruments); (ii) all Capital Lease
Obligations; (iii) all Guaranties of such Person; (iv) Indebtedness of
others secured by any Lien upon property owned by such Person, whether or
not assumed; and (v) obligations or other liabilities under currency
contracts, Interest Rate Contracts, or similar agreements or combinations
thereof. Notwithstanding the foregoing, in determining the Indebtedness
of any Person, there shall be included all obligations of such Person of
the character referred to in clauses (i) through (v) above deemed to be
extinguished under GAAP but for which such Person remains legally liable
except to the extent that such obligations (x) have been defeased in
accordance with the terms of the applicable instruments governing such
obligations and (y) the accounts or other assets dedicated to such
defeasance are not included as assets on the balance sheet of such
Person.
"Indemnitee" means the Agent (in its individual capacity and in its
capacity as Agent), each Lender, and the Lessor, and their respective
Affiliates, successors, permitted assigns, permitted transferees,
employees, officers, directors and agents; provided, however, that in no
event shall the Lessee be an Indemnitee.
"Indemnitee Group" means the respective Affiliates, employees,
officers, directors and agents of the Agent (in its individual capacity),
each Lender or the Lessor, as applicable; provided, however, that in no
event shall the Lessee be a member of the Indemnitee Group.
"Initial Closing Date" means the Closing Date for the first Leased
Property acquired by the Lessor.
"Interest Rate Contract" means all interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest
rate insurance and other agreements and arrangements designed to provide
protection against fluctuations in interest rates, in each case as the
same may be from time to time amended, restated, renewed, supplemented or
otherwise modified.
"Investment" means, when used with respect to any Person, any
direct or indirect advance, loan or other extension of credit (other than
the creation of receivables in the ordinary course of business) or
capital contribution by such Person (by means of transfers of property to
others or payments for property or services for the account or use of
others, or otherwise) to any Person, or any direct or indirect purchase
or other acquisition by such Person of, or of a beneficial interest in,
capital stock, partnership interests, bonds, notes, debentures or other
securities issued by any other Person.
"Land" means the land described in Appendix B to the related Lease
Supplement.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, treaties or decrees of any Governmental Authority, or
of any court or similar entity established by any thereof.
"Lease" means the Lease Agreement, dated as of June 3, 1999,
together with each Lease Supplement thereto, between the Lessee and the
Lessor, with such modifications as are satisfactory to the Lessor and the
Agent in conformity with Applicable Law to assure customary remedies in
favor of the Funding Parties in the jurisdiction where the Leased
Property is located.
"Lease Balance" means, with respect to the Leased Properties, as of
any date of determination, an amount equal to the aggregate sum of the
outstanding Funded Amounts of all Funding Parties, all accrued and unpaid
interest on the Loans, all accrued and unpaid Yield on the Lessor's
Invested Amounts, all unpaid fees owing to the Funding Parties under the
Operative Documents, including all other amounts owing to the Funding
Parties by the Lessee under the Operative Documents.
"Lease Supplement" is defined in Section 2.1 of the Lease.
"Lease Term" with respect to the Lease means (a) the Base Term, as
it may be renewed pursuant to Section 14.9 of the Lease or (b) such
shorter period as may result from earlier termination of the Lease as
provided therein.
"Lease Termination Date" means the last day of the Lease Term.
"Leased Property" means Land and the related Building(s). For
purposes of the Lease, "Leased Property" means the Land identified in a
Lease Supplement and the Buildings related thereto, unless the context
provides otherwise.
"Leased Property Balance" means, with respect to any Leased
Property, as of any date of determination, an amount equal to the
aggregate sum of the outstanding related Funded Amounts of all Funding
Parties, all accrued and unpaid interest on the related Loans, all
accrued and unpaid Yield on the related Lease Lessor Invested Amounts,
all related unpaid fees owing to the Funding Parties under the Operative
Documents, including all other amounts owing to the Funding Parties by
the Lessee under the Operative Documents.
"Lender Basic Rent" means, for any Rent Period under the Lease, the
aggregate amount of interest accrued on the Loans related to the Leased
Property subject to the Lease pursuant to Section 2.5 of the Loan
Agreement during such Rent Period, plus the principal amount of such
Loans then due pursuant to Section 2.4 of the Loan Agreement.
"Lenders" means such financial institutions as are, or who may
hereafter become, parties to the Loan Agreement as Lenders to the Lessor.
"Lending Office" for each Lender means the office such Lender
designates in writing from time to time to Lessee and the Agent.
"Lessee" is defined in the preamble to the Master Agreement.
"Lessor" is defined in the preamble to the Master Agreement.
"Lessor Basic Rent" means, for any Rent Period under the Lease, the
aggregate amount of Yield accrued and unpaid on the Lessor's Invested
Amounts under the Lease under Section 2.3(a) of the Master Agreement
during such Rent Period.
"Lessor Liens" means Liens on or against any Leased Property, the
Lease, any other Operative Document or any payment of Rent (a) which
result from any act or omission of, or any Claim against, the Lessor
unrelated to the transactions contemplated by the Operative Documents or
from Lessor's failure to perform as required under the Operative
Documents or (b) which result from any Tax owed by the Lessor, except any
Tax for which the Lessee is obligated to indemnify (including, without
limitation, in the foregoing exception, any assessments with respect to
any Leased Property noted on the related Title Policy or assessed in
connection with any construction or development by the Lessee).
"Lessor Rate" is defined in the Lessor Side Letter.
"Lessor Side Letter" means the letter agreement, dated as of June
3, 1999, between Lessee and the Lessor.
"Lessor's Invested Amount" means the amounts funded by the Lessor
pursuant to Section 2 of the Master Agreement that are not proceeds of
Loans by a Lender, as such amount may be increased during the related
Construction Term pursuant to Section 2.3(c) of the Master Agreement.
"LIBOR" means, for any Rent Period, with respect to LIBOR Advances
the offered rate for deposits in U.S. Dollars, for a period comparable to
the Rent Period and in an amount comparable to such Advances, appearing
on the Reuters Screen LIBO Page as of 11:00 A.M. (London, England time)
on the day that is two London Business Days prior to the first day of the
Rent Period. If two or more of such rates appear on the Reuters Screen
LIBO Page, the rate for that Rent Period shall be the arithmetic mean of
such rates. If the foregoing rate is unavailable from the Reuters Screen
for any reason, then such rate shall be determined by the Agent from
Telerate Page 3750 or, if such rate is also unavailable on such service,
then on any other interest rate reporting service of recognized standing
designated in writing by the Agent to Lessee and the other Lenders; in
any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if
the rate is not such a multiple.
"LIBOR Advance" means that portion of the Funded Amount bearing
interest at a rate based on the Adjusted LIBO Rate.
"Lien" means any mortgage, deed of trust, security deed, pledge,
security interest, encumbrance, lien, easement, servitude or charge of
any kind, including, without limitation, any irrevocable license,
conditional sale or other title retention agreement, any lease in the
nature thereof, or any other right of or arrangement with any creditor to
have its claim satisfied out of any specified property or asset with the
proceeds therefrom prior to the satisfaction of the claims of the general
creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or
continuation statement under the Uniform Commercial Code of any
jurisdiction or any federal, state or local lien imposed pursuant to any
Environmental Law.
"Loan" shall have the meaning specified in Section 2.1 of the Loan
Agreement.
"Loan Agreement" means the Loan Agreement, dated as of June 3,
1999, among the Lessor, the Agent and the Lenders.
"Loan Documents" means the Loan Agreement, the Notes, the
Assignments of Lease and Rents, the Mortgages and all documents and
instruments executed and delivered in connection with each of the
foregoing.
"Loan Event of Default" means any of the events specified in
Section 5.1 of the Loan Agreement, provided that any requirement for the
giving of notice, the lapse of time, or both, or any other condition,
event or act has been satisfied.
"Loan Potential Event of Default" means any event, condition or
failure which, with notice or lapse of time or both, would become a Loan
Event of Default.
"Loss Proceeds" is defined in Section 10.6 of the Lease.
"Margin Regulations" means Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System, as the same may be in effect
from time to time.
"Master Agreement" means the Master Agreement, dated as of June 3,
1999, among the Lessee, the Lessor, the Agent and the Lenders.
"Material Adverse Effect" means a material adverse effect upon the
financial condition, operations, performance, prospects or properties of
the Lessee and its Subsidiaries, taken as a whole, or the ability of the
Lessee to perform in any material respect under the Operative Documents
or the value, utility or useful life of any Leased Property, or the
validity, enforceability or legality of any of the Operative Documents,
or the priority, perfection or status of any Funding Party's interest in
any Leased Property.
"Material Subsidiary" means (i) each Credit Party (as defined in
the Credit Agreement) other than the Lessee, and (ii) each other
Subsidiary of the Lessee, now existing or hereafter established or
acquired, that at any time prior to the Maturity Date, has or acquires
total assets in excess of $5,000,000, or that accounted for or produced
more than 5% of the Consolidated Net Income (Loss) of the Lessee on a
consolidated basis during any of the three most recently completed Fiscal
Years of the Lessee, or that is otherwise material to the operations or
business of the Lessee or another Material Subsidiary.
"Moody's" means Moody's Investor Service, Inc.
"Mortgage" means, with respect to any Leased Property, that certain
mortgage, deed of trust or security deed, dated as of the related Closing
Date, by the Lessor to the Agent, in the form of Exhibit D attached to
the Master Agreement, with such modifications as are satisfactory to the
Lessor and the Agent in conformity with Applicable Law to assure
customary remedies in favor of the Agent in the jurisdiction where the
Leased Property is located.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any equity offering or
issuance of Subordinated Debt, (i) all cash received with respect
thereto, whether by way of deferred payment pursuant to a promissory
note, a receivable or otherwise (and interest paid thereon), plus (ii)
the higher of the book value or the fair market value of any assets
(including any stock) received with respect thereto, in each case, net of
reasonable and customary sale expenses, fees and commissions incurred and
taxes paid or expected to be payable within the next twelve months in
connection therewith.
"Notes" means each A Note and each B Note issued by the Lessor
under the Loan Agreement, and any and all notes issued in replacement or
exchange therefor in accordance with the provisions thereof.
"Obligations" means all amounts owed by, and obligations of, the
Lessor to the Lenders or the Agent under the Loan Agreement, Notes and
other Operative Documents.
"Officer's Certificate" of a Person means a certificate signed by
the Chairman of the Board or the President or any Executive Vice
President or any Senior Vice President or any other Vice President of
such Person signing with the Treasurer or any Assistant Treasurer or the
Controller or any Assistant Controller or the Secretary or any Assistant
Secretary of the such Person, or by any Vice President who is also
Controller or Treasurer signing alone.
"Operative Documents" means the Master Agreement, the Guaranty
Agreement, the Purchase Agreements, the Deeds, the Lease, the Security
Agreement and Assignment, the Notes, the Loan Agreement, the Assignments
of Lease and Rents, the Mortgages, the Ground Leases and the other
documents delivered in connection with the transactions contemplated by
the Master Agreement.
"Overdue Rate" means the lesser of (a) the highest interest rate
permitted by Applicable Law and (b) an interest rate per annum
(calculated on the basis of a 365-day (or 366-day, if appropriate) year
equal to 2.0% above the Base Rate in effect from time to time or, in the
case of Yield, 2% above the Lessor Rate.
"Partial Purchase Option" is defined in Section 14.1(b) of the
Lease.
"Partnership Agreement" means the Agreement of Limited Partnership
of AFG, dated as of February 28, 1996, among the General Partner and the
persons listed on Schedule A thereto as limited partners.
"Payment Date" means the last day of each Rent Period (and if such
Rent Period is longer than three months, the day that is 90 days after
the first day of such Rent Period) or, if such day is not a Business Day,
the next Business Day.
"Payment Date Notice" is defined in Section 2.3(e) of the Master
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor thereto.
"Permitted Liens" means the following with respect to any Leased
Property: (a) the respective rights and interests of the Lessee, the
Lessor, the Agent and any Lender, as provided in the Operative Documents,
(b) Liens for Taxes either not yet due or being contested in good faith
and by appropriate proceedings, so long as enforcement thereof is stayed
pending such proceedings, (c) materialmen's, mechanics', workers',
repairmen's, employees' or other like Liens arising after the related
Closing Date in the ordinary course of business for amounts either not
yet due or being contested in good faith and by appropriate proceedings,
so long as enforcement thereof is stayed pending such proceedings,
(d) Liens arising after such Closing Date out of judgments or awards with
respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith, so long as the enforcement thereof has been
stayed pending such appeal or review, (e) easements, rights of way,
reservations, servitudes and rights of others against the Land which do
not materially and adversely affect the value or the utility of such
Leased Property, (f) other Liens incidental to the conduct of Lessee's
business which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit and which do not in the
aggregate materially detract from the value of such Leased Property or
materially impair the use thereof, and (g) assignments, leases and
subleases expressly permitted by the Operative Documents.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company,
trust, nonincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA), including, but not limited to, any defined
benefit pension plan, profit sharing plan, money purchase pension plan,
savings or thrift plan, stock bonus plan, employee stock ownership plan,
Multiemployer Plan, or any plan, fund, program, arrangement or practice
providing for medical (including post-retirement medical), hospitaliza-
tion, accident, sickness, disability, or life insurance benefits.
"Plans and Specifications" means with respect to any Building the
final plans and specifications for such Building prepared by the
Architect, and, if applicable, referred to by the Appraiser in the
Appraisal, as such Plans and Specifications may be hereafter amended,
supplemented or otherwise modified from time to time.
"Potential Event of Default" means any event, condition or failure
which, with notice or lapse of time or both, would become an Event of
Default.
"Purchase Agreement" means with respect to any Land, the purchase
agreement with the Seller for the conveyance of such Land to the Lessor.
"Purchase Option" is defined in Section 14.1(a) of the Lease.
"Quarterly Payment Date" means the last Business Day of each March,
June, September and December of each year.
"Recourse Deficiency Amount" means, as of any date of determination
thereof, the sum of (i) the aggregate principal amount of the A Loans
then outstanding, plus (ii) all accrued and unpaid interest on the A
Loans.
"Regulations" means the income tax regulations promulgated from
time to time under and pursuant to the Code.
"Release" means the release, deposit, disposal or leak of any
Hazardous Material into or upon or under any land or water or air, or
otherwise into the environment, including, without limitation, by means
of burial, disposal, discharge, emission, injection, spillage, leakage,
seepage, leaching, dumping, pumping, pouring, escaping, emptying,
placement and the like.
"Release Date" means, with respect to any Leased Property, the
earlier of (i) the date that the Lease Balance has been paid in full, and
(ii) the date on which the Agent gives notice to the Lessor that the
Lenders release any and all interest they may have in such Leased
Property, and all proceeds thereof, and any rights to direct, consent or
deny consent to any action by the Lessor with respect to such Leased
Property.
"Remarketing Option" is defined in Section 14.6 of the Lease.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Rent Period" means (x) in the case of Base Rate Advances, means
the period from, and including, a Quarterly Payment Date to, but
excluding, the next succeeding Quarterly Payment Date and (y) in the case
of LIBOR Advances, either a 1, 2, 3 or 6 month period; provided that:
(a) The initial Rent Period for any Funding shall commence
on the Funding Date of such Funding and each Rent Period occurring
thereafter in respect of such Funding shall commence on the day on
which the next preceding Rent Period expires;
(b) If any Rent Period would otherwise expire on a day
which is not a Business Day, such Rent Period shall expire on the
next succeeding Business Day, provided that if any Rent Period in
respect of LIBOR Advances would otherwise expire on a day that is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Rent Period shall expire on
the next preceding Business Day;
(c) Any Rent Period in respect of LIBOR Advances which
begins on a day for which there is no numerically corresponding day
in the calendar month at the end of such Rent Period shall, subject
to paragraph (d) below, expire on the last Business Day of such
calendar month; and
(d) No Rent Period shall extend beyond the Lease
Termination Date.
"Rental Obligations" means, with reference to any period, the
aggregate amount of all rental obligations for which the Consolidated
Companies are directly or indirectly liable (as lessee or as guarantor or
other surety but without duplication) under all leases in effect at any
time during such period (other than operating leases for motor vehicles,
computers, office equipment and other similar items used in the ordinary
course of business of the Consolidated Companies), including all such
amounts for which any Person was liable during the period immediately
prior to the date such Person became a Subsidiary of the Lessee or was
merged into or consolidated with the Lessee or a Subsidiary of the
Lessee, as determined in accordance with GAAP and expressly including all
rental obligations arising under the Operative Documents (excluding
supplemental or contingent lease obligations thereunder).
"Report" is defined in Section 7.6 of the Master Agreement.
"Required Lenders" means, at any time, Lenders holding an aggregate
outstanding principal amount of Loans equal to at least 66-2/3% of the
aggregate outstanding principal amount of all Loans.
"Required Funding Parties" means, at any time, Funding Parties
holding an aggregate outstanding principal amount of Funded Amounts equal
to at least 66-2/3% of the aggregate outstanding principal amount of all
Funded Amounts.
"Requirements of Law" means, as to any Person, the charter and by-
laws or other organizational or governing documents of such Person, and
any law, rule or regulation, permit, approval, authorization, license or
variance, order or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject, including, without limitation, the Securities Act,
the Securities Exchange Act, Regulations T, U and X of the Board of
Governors of the Federal Reserve System, and any building, environmental
or land use requirement or permit or occupational safety or health law,
rule or regulation.
"Responsible Officer" means the Chairman or Vice Chairman of the
Board of Directors, the Chairman or Vice Chairman of the Executive
Committee of the Board of Directors, the President, any Senior Vice
President or Executive Vice President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer.
"Restructuring Charges" means the charges to be incurred by the
Lessee (whether directly or by allocation), in an amount not to exceed
$31,000,000 in connection with the restructuring of Morrison Restaurants
Inc. in connection with the transactions described in the recitals of the
Credit Agreement.
"Reuters Screen" shall mean, when used in connection with any
designated page and LIBOR, the display page so designated on the Reuters
Monitor Money Rates Service (or such other page as may replace that page
on that service for the purpose of displaying rates comparable to LIBOR).
"Scheduled Construction Termination Date" means with respect to any
Building the earlier of (i) two years after the Closing Date for the
related Land and (ii) one year after the commencement of the Construction
of the Building.
"SEC" means the United States Securities and Exchange Commission.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of
interest, shares, or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Agreement and Assignment" means, with respect to any
Leased Property, the Security Agreement and Assignment (Construction
Contract, Architect's Agreement, Permits, Licenses and Governmental
Approvals, and Plans, Specifications and Drawings) from the Lessee to the
Lessor, substantially in the form of Exhibit C to the Master Agreement.
"Seller" means as to any Leased Property, the seller thereof to the
Lessor on the related Closing Date.
"Sharing Agreements" means, collectively, (i) that certain
Distribution Agreement, dated as of March 2, 1996 by and among Morrison,
MFCI and MHCI, (ii) that certain License Agreement, dated as of March 2,
1996, by and between MFCI and MHCI, (iii) that certain License Agreement,
dated as of March 2, 1996, by and between Lessee and MHCI, (iv) that
certain Amended and Restated Tax Allocation and Indemnification
Agreement, dated as of March 2, 1996, by and among Morrison, MHCI, MFCI
and certain other subsidiaries of Morrison, and (v) that certain
Agreement Respecting Employee Benefit Matters, dated as of March 2, 1996,
by and among Morrison, MFCI and MHCI.
"Subordinated Debt" shall mean all Indebtedness of Lessee
subordinated to all Obligations, created, incurred or assumed on terms
and conditions satisfactory in all respects to the Agent and the Required
Lenders, including without limitation, with respect to interest rates,
payment terms, maturities, amortization schedules, covenants, defaults,
remedies, and subordination provisions, as evidenced by the written
approval of the Agent and Required Lenders.
"Subsidiary" means for any Person any corporation or other entity
of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned
by such Person.
"SunTrust Bank" is defined in the preamble to the Master Agreement.
"Supplemental Rent" means any and all amounts, liabilities and
obligations other than Basic Rent which the Lessee assumes or agrees or
is otherwise obligated to pay under the Lease or any other Operative
Document (whether or not designated as Supplemental Rent) to the Lessor,
the Agent, any Lender or any other party, including, without limitation,
amounts under Article XVI of the Lease, and indemnities and damages for
breach of any covenants, representations, warranties or agreements, and
all overdue or late payment charges in respect of any Funded Amount.
"Tax" or "Taxes" is defined in Section 7.4 of the Master Agreement.
"Tax Indemnitee" means the Lessor, the Agent, any Lender and their
respective Affiliates, successors, permitted assigns, permitted
transferees, employees, officers, directors and agents thereof,
provided, however, that in no event shall the Lessee be a Tax Indemnitee.
"Telerate" shall mean, when used in connection with any designated
page and LIBOR, the display page so designated on the Dow Jones Telerate
Service (or such other page as may replace that page on that service for
the purpose of displaying rates comparable to LIBOR).
"Title Insurance Company" means the company that has or will issue
the title policies with respect to a Leased Property, which company shall
be reasonably acceptable to the Funding Parties.
"Title Policy" is defined in Section 3.1 of the Master Agreement.
"Total Capitalization" shall mean, as of any date of determination,
the sum of (i) Consolidated Funded Debt, plus (ii) Consolidated Net
Worth.
"Transaction" means all the transactions and activities referred to
in or contemplated by the Operative Documents.
"UCC" means the Uniform Commercial Code of Georgia, as in effect
from time to time.
"Voting Stock" means the securities of any class or classes of the
Lessee the holders of which are entitled to elect all of the corporate
directors of the Lessee (or persons performing similar functions).
"Yield" is defined in Section 2.3 of the Master Agreement.
After recordation,
this instrument
should be returned to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Rex Palmer
SECOND AMENDMENT TO THE
RUBY TUESDAY, INC. 1996 NON-EXECUTIVE
STOCK INCENTIVE PLAN
THIS SECOND AMENDMENT is made as of April 12, 1999, by Ruby
Tuesday, Inc., a corporation organized and existing under the laws of the
State of Georgia (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Ruby Tuesday, Inc. 1996 Non-
Executive Stock Incentive Plan (the "Plan"); and
WHEREAS, the Company wishes to amend the Plan to reflect the
following chain of events: the approval by the Board of Directors of
increases in the number of shares reserved for issuance under the Plan
on, respectively, March 26, 1996 and July 1, 1997; the approval by the
Board of Directors of a two-for-one stock split as of April 17, 1998; and
the approval by the Board of Directors of an increase in the number of
shares reserved under the Plan on April 12, 1999;
NOW, THEREFORE, the Company does hereby amend the Plan, effective
as of the dates provided below, as follows:
1. By deleting, effective March 26, 1996, the first sentence of Plan
Section 2.2 in its entirety and substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2, 1,500,000
shares of Stock (the `Maximum Plan Shares') are hereby reserved
exclusively for issuance pursuant to Stock Incentives."
2. By deleting, effective July 1, 1997, Plan Section 2.2 in its
entirety and substituting therefor the following:
"2.2 Stock Subject to the Plan. Subject to adjustment in
accordance with Section 5.2, 2,000,000 shares of Stock (the
`Maximum Plan Shares') are hereby reserved exclusively for issuance
pursuant to Stock Incentives. At no time shall the Company have
outstanding Stock Incentives and shares of Stock issued in respect
of Stock Incentives in excess of the Maximum Plan Shares. The
shares of Stock attributable to the nonvested, unpaid, unexercised,
unconverted or otherwise unsettled portion of any Stock Incentive
that is forfeited or cancelled or expires or terminates for any
reason without becoming vested, paid, exercised, converted or
otherwise settled in full shall again be available for purposes of
the Plan."
3. By deleting, effective April 17, 1998, the first sentence of Plan
Section 2.2 and substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2,
4,000,000 shares of Stock (the `Maximum Plan Shares') are
hereby reserved exclusively for issuance pursuant to Stock
Incentives."
4. By deleting, effective April 12, 1999, the first sentence of Plan
Section 2.2 and substituting therefor the following:
"Subject to adjustment in accordance with Section 5.2,
8,000,000 shares of Stock (the `Maximum Plan Shares') are
hereby reserved exclusively for issuance pursuant to Stock
Incentives."
Except as specifically provided herein, the Plan shall remain in
full force and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to
be executed on the day and year first above written.
RUBY TUESDAY, INC.
By: ________________________________
Title:
_______________________________
Attest:
By: ____________________________
Title: __________________________
[CORPORATE SEAL]
<PAGE>
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, American Cafe, and Tia's Tex-Mex. Additionally,
the Company franchises its Ruby Tuesday concept in selected domestic and
international markets. As of June 6, 1999, the Company owned and operated
403 restaurants including 335 Ruby Tuesday, 45 American Cafe and 23 Tia's
Tex-Mex restaurants, located in 32 states. Franchise operations included
78 domestic units located in eleven states and seven international units
located in the Asian Pacific Region and Chile.
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 24 to 40.
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.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Company restaurant sales 99.3% 99.7% 100.0%
Franchise revenues 0.7 0.3 0.0
Total revenues 100.0 100.0 100.0
Operating costs and expenses:
(As a percentage of Company
restaurant sales):
Cost of merchandise 27.4 27.5 27.1
Payroll and related costs 32.0 32.2 32.6
Other 20.4 20.7 21.5
(As a percentage of Total revenues):
Selling, general and
administrative 6.9 7.4 6.5
Depreciation and amortization 5.5 5.6 5.9
Interest expense, net 0.4 0.5 0.6
Total operating costs and expenses 92.1 93.7 94.1
Income before income taxes 7.9 6.3 5.9
Provision for income taxes 2.8 2.2 2.1
Net income 5.1% 4.1% 3.8%
</TABLE>
15
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<PAGE>
Fiscal 1999 Compared to Fiscal 1998
Overview
During fiscal 1999, the Company opened 44 Ruby Tuesday and two
Tia's Tex-Mex restaurants while closing five Ruby Tuesday restaurants and
one American Cafe. In addition, the Company sold 19 Ruby Tuesday
restaurants to several domestic franchise partners for aggregate
consideration of $11.4 million in cash and $11.9 million in the form of
promissory notes due through 2014 bearing interest at rates ranging from
9.5% to 10%. The sale of these units resulted in a pre-tax gain of $3.1
million which is included in other operating costs and expenses.
Concurrently with the sale of the Ruby Tuesday units, the Company also
entered into a franchise agreement for each restaurant and a development
agreement with the franchise partners whereby the partners agree to open
varying numbers of Ruby Tuesday restaurants over the next five to nine
years in their respective areas. During 1999, eight new Ruby Tuesday
franchise units were opened by franchisees pursuant to development
agreements. As a result of franchise deals and unit closings, the
Company recorded asset impairment charges of $2.9 million during fiscal
1999 which is also included in other operating costs and expenses.
In addition to continuing to open Company-owned restaurants, the
Company plans to increase the number of domestic franchised units to
approach a 50/50 mix of Company-owned to franchised units over the next
five years. To this end, subsequent to June 6, 1999, the Company entered
into letters of intent with four potential franchisees providing, among
other things, for the sale of 34 Ruby Tuesday restaurants in fiscal 2000.
The sales of these units, if effected on the terms of the letters of
intent, are expected to result in a pre-tax gain of approximately $9.5
million.
Revenues
The Company's revenues increased to $722.3 million in fiscal 1999
from $711.4 million in fiscal 1998. The 1.5% revenue increase was the
result of increased same-store sales (2.0% for the Ruby Tuesday concept)
resulting from an emphasis on combo promotions causing a slight average
check increase. In conjunction with the new menus introduced during
1999, the Company focused on its combination platters which not only
increased gross profit, but also allowed the Company to benefit from
volume purchases of large quantities of singular items. Also
contributing to the increase was the net addition of 40 new units during
the year. In addition, franchise revenues increased $2.8 million as a
result of increased royalties and license fees due to growth of the
domestic franchise partner program. These increases were offset by the
reduction in revenues resulting from the sale of 19 Ruby Tuesday
restaurants to franchisees and the additional week in fiscal 1998.
Operating Profits
Pre-tax income increased $12.2 million in fiscal 1999 to $57.2
million. This increase resulted from the revenue increase of $10.9
million as previously discussed, coupled with reductions in other expense
categories, as discussed below.
Payroll and related costs, as a percentage of Company restaurant
sales, decreased 0.2% due to decreased management and hourly turnover.
The decreased turnover in management labor is attributable to the
development of the WOW-U training facility at the Maryville, Tennessee
Restaurant Support Service Center and the utilization of additional
selection tools during the interview process. WOW-U, which was completed
in late fiscal 1998, serves as the training facility for the Company's
restaurant managers. The training includes both educational and team
building activities in a relaxed environment. The decrease in hourly
turnover was the result of continued focus on the Company's certified
trainer program and the implementation of a newly developed six-step
interview process.
Other operating expenses decreased 0.3% as a percentage of Company
restaurant sales. Rent and leasing decreased due to the sale of higher
occupancy cost units to franchise partners and the continued shift toward
lower occupancy cost, free standing units. This decrease was partially
offset by the increased use of the synthetic leasing program which is
discussed in the Liquidity and Capital Resources section which follows.
Selling, general and administrative expenses decreased 0.5% as a
percentage of total revenues. The decrease was the result of reductions
in coupon redemption and administrative costs related to the Company's
local store marketing program (the
16
</PAGE>
<PAGE>
"Neighborhood Introduction Program") due to planned reductions in the use
of the program. Also contributing to the decrease was an increase in
marketing fees resulting from continued growth in the Company's franchising
program. Franchisees pay a fee, based on a percentage of revenues, to help
fund the Company's marketing efforts. This income is expected to increase
as the franchising program expands.
Income tax expense increased 0.6% as a percentage of total
revenues. The effective income tax rate for 1999 was 36.2% as compared
to 35.4% in 1998. The increase resulted from the Company's increased
emphasis on its franchising program for which the Company does not
receive any tax credits. The Company anticipates that any future
increase in the effective tax rate resulting from increased franchise
operations will be offset by reduced state taxes arising from certain
tax planning strategies.
Fiscal 1998 Compared to Fiscal 1997
Overview
During fiscal 1998, the Company opened 38 Ruby Tuesday restaurants, one
American Cafe, and one Tia's Tex-Mex while closing two Ruby Tuesday and
three American Cafe restaurants. In addition, the Company sold 46 Ruby
Tuesday units to several domestic franchisees for aggregate consideration
consisting of $34.8 million in cash and $12.5 million in the form of
promissory notes bearing interest at rates ranging from 8% to 10%.
Concurrent with the sale of the 46 units, the Company also entered into
development agreements whereby the franchisees agreed to open restaurants
in their respective areas over the next five to nine years. The Company
also continued its development of franchise programs through the opening
of four international franchise units during the year.
Revenues
The Company's revenues increased to $711.4 million in fiscal 1998
from $655.4 million in fiscal 1997. The 8.5% revenue increase was the
result of an additional week in fiscal 1998 coupled with increased same-
store sales and the net addition of 35 units during the year (not taking
into account units sold to franchisees) comprised of net additions of 36
Ruby Tuesday restaurants and one Tia's Tex-Mex, offset by a net reduction
to the American Cafe concept of two restaurants. This increase was offset
by the reduction in revenue which resulted from the sale of 46 units to
franchisees. Same-store sales in fiscal 1998 increased 2.8% for the Ruby
Tuesday concept. Same-store sales for American Cafe and Tia's Tex-Mex
were also positive for the year.
Operating Profits
Pre-tax income increased $6.2 million in fiscal 1998 to $45.0
million. The increase in pre-tax income is the result of increased sales
due to increased same-store sales for all concepts and the addition of
new units coupled with the cost changes discussed below.
Cost of merchandise as a percentage of Company restaurant sales
increased 0.4% due to a change in menu strategy. During the year,
various menu promotions were run which featured high cost, high gross
profit food items.
Payroll and related costs decreased 0.4% as a percentage of Company
restaurant sales in fiscal 1998. The decrease resulted from a reduction
in hourly labor as a percentage of Company restaurant sales due to
increased average unit volumes and reduced turnover. In addition,
payroll taxes decreased as a result of a reduction in state unemployment
tax rates. Finally, workers' compensation expense as a percentage of
Company restaurant sales decreased as a result of favorable claims
experience.
Other operating expenses decreased 0.8% as a percentage of Company
restaurant sales due to a decrease in supplies expense resulting from the
elimination of paper cocktail napkins and silverware wrappers and a
decrease in glassware breakage. Rent and leasing also decreased as a
result of the sale of certain high occupancy cost units to franchisees
and a continuing shift towards lower occupancy cost, free standing units.
Selling, general and administrative expenses increased 0.9% as a
percentage of total revenues. The increase resulted from additional
local store marketing in fiscal 1998, including coupon redemptions
associated with the Company's "Neighborhood Introduction Program" which
began in the third quarter of fiscal 1997. Also, during fiscal 1998, the
Company recognized costs associated with the start-up of its domestic and
international franchise programs.
17
</PAGE>
<PAGE>
Depreciation and amortization decreased 0.3% as a percentage of
total revenues due to the sale of 46 units to franchisees which had
higher unit depreciation costs and due to higher average unit volumes
resulting from positive same-store sales, and new unit openings that
generated higher sales volumes than in the previous year.
The effective tax rate remained relatively constant in fiscal 1998
as compared to fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Cash provided by operating activities was $86.0 million in fiscal
1999 and exceeded capital expenditures by approximately $13.4 million.
Proceeds from the issuance of stock pursuant to stock option exercises
provided $22.0 million of cash. Cash provided by the sale of restaurant
properties to franchisees totaled $11.4 million. Additional borrowings
under the Company's credit facilities provided $3.4 million of cash.
Pursuant to the Company's financial strategy approved by the Board during
fiscal 1994, $45.9 million of the Company's stock was reacquired during
fiscal 1999 with cash provided by the above sources. Additionally,
dividends of $2.9 million were paid during fiscal 1999.
Capital Expenditures
The Company requires capital principally for new restaurants,
equipment replacement and remodeling of existing units. Property and
equipment expenditures for fiscal 1999 were $72.6 million for new units,
capital projects on existing units and information technology projects.
In addition, $45.6 million was reimbursed to the Company for new unit
construction under its synthetic operating lease program. During fiscal
1999, 44 Ruby Tuesday and two Tia's Tex-Mex restaurants were opened.
Capital expenditures for fiscal 2000 are budgeted to be $84.2 million
which the Company intends to fund with cash provided by operating
activities and cash received in conjunction with the sales of units to
franchisees. Expenditures for units to be leased by the Company under
synthetic operating leases are budgeted to be $45.2 million for fiscal
2000. Planned Company-owned openings for fiscal 2000 include 42-46 Ruby
Tuesday and three-four 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 2000 or invest the projected amount of
money in capital expenditures and lease commitments. See "Special Note
Regarding Forward-Looking Statements."
Borrowings and Credit Facilities
At June 6, 1999, the Company had committed lines of credit
amounting to $12.2 million and non-committed lines of credit amounting to
$15.0 million with several banks at various interest rates approximating
5.18%. 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 years 1999
and 1998. Borrowings on these lines of credit were $8.7 million and
$16.2 million at June 6, 1999 and 1998, respectively. In addition to
these lines of credit, 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 term note and a $50.0 million
five-year revolving credit facility. The Company had $76.0 million and
$65.0 million of borrowings outstanding under this agreement at June 6,
1999 and 1998, respectively. As of June 6, 1999, the interest rate
associated with this facility approximated 5.4%. The credit facility
provides for certain restrictions on incurring additional indebtedness,
payment of dividends, and certain covenants regarding funded debt, net
worth, and fixed charge coverage requirements.
The Company has entered into five interest rate swap agreements
with notional amounts aggregating $125.0 million. The swap agreements
effectively fix the interest rate on an equivalent amount of the
Company's debt and floating-rate lease obligations to rates ranging from
5.79% to 6.25% for periods up through December 7, 2003.
During fiscal 1998, the Company entered into a $40.0 million master
operating lease agreement for the purpose of leasing new free-standing
units and a new Restaurant Support Services Center. This agreement was
amended in October, 1998 to provide for total funding of $80.0 million and to
18
</PAGE>
<PAGE>
change the agreement date to October 2, 1998. On June 3, 1999 the
Company entered into an additional $45.0 million master operating lease
agreement also for the purpose of leasing new free-standing units. Under
both master agreements, an operating lease agreement is entered into for
each facility providing for an initial lease term of five years from the
applicable agreement date 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. As of
June 6, 1999, the Company has entered into leases for 44 units (30 of
which were open at June 6, 1999) and the Maryville, Tennessee Restaurant
Support Services Center at an aggregated original cost to the lessor of
approximately $73.2 million ($45.6 and $27.6 million in 1999 and 1998,
respectively).
During fiscal 2000, the Company expects to fund operations, capital
expansion, the repurchase of common stock, and the payment of dividends
from operating cash flows, proceeds from sales of units to franchisees,
bank lines of credit, the five-year revolving line of credit, and through
operating leases. (See Note 3 of Notes to Consolidated Financial
Statements for a further discussion of borrowings and credit facilities.)
Long-term debt increased a net $10.9 million in 1999 due to increased
utilization of the revolving credit facility while short-term borrowings
under bank lines of credit decreased $7.5 million. The Company
anticipates a net increase of debt in fiscal 2000 of approximately $10.0
million. A larger increase in debt could result if actual cash flows
from operations are lower than currently anticipated or if capital
expenditures exceed budgeted amounts. See "Special Note Regarding
Forward-Looking Statements."
Guarantee of Indebtedness of Others
As part of its domestic franchising program, the Company has
negotiated with various lenders a $52.5 million credit facility to assist
franchise partners with operational cash flow requirements. The Company,
as sponsor of the credit facility, serves as partial guarantor for the
draws made on this revolving line-of-credit facility. As of June 6,
1999, the amount guaranteed by the Company on the facility was $10.0
million.
Working Capital
The Company's working capital deficiency and current ratio as of
June 6, 1999 were $31.9 million and 0.6:1, respectively. The Company
typically carries current liabilities in excess of current assets because
cash (a current asset) generated from operating activities is reinvested
in capital expenditures (a long-term asset).
Dividends
During fiscal 1997, the Board of Directors approved a dividend
policy as an additional means of returning excess capital to its
shareholders. This policy calls for payment of semi-annual dividends of
$.045 per share. In accordance with this policy, the Company paid
dividends of $2.9 million in fiscal 1999. The payment of a dividend in
any particular future period and the actual amount thereof remain,
however, at the discretion of the Board of Directors and no assurance can
be given that dividends will be paid in the future as currently
anticipated. See "Special Note Regarding Forward-Looking Statements." In
addition, the Company's credit facilities contain certain limitations on
the payment of dividends. See Note 3 of Notes to Consolidated Financial
Statements for more information.
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
Financial Strategy and Stock Repurchase Plan
The Company employs a financial strategy which utilizes a prudent amount
of debt to minimize its weighted average cost of capital while allowing
financial flexibility and the equivalent of an investment-grade (BBB)
bond rating. This financial strategy sets a target debt-to-capital ratio
of no more than 60%, including operating leases. The strategy also
provides for repurchasing Company stock whenever cash flow exceeds
funding requirements while maintaining the target capital structure. During
fiscal 1999, the Company purchased 2.6 million shares of Company common stock
at a total purchase price of $45.9 million under its stock repurchase
program. During fiscal 1999, the Company's Board of Directors authorized the
repurchase of an additional 6.5 million shares of Company common stock.
After taking into account repurchases made during fiscal 1999 and the
19
</PAGE>
<PAGE>
additional authorization, the total number of remaining
shares authorized to be repurchased as of June 6, 1999 was approximately
7.3 million.
Franchising and Development Agreements
Subsequent to June 6, 1999, the Company entered into letters of intent
with four potential franchise partners. These letters of intent provide,
among other things, for the sale of 22 units in Michigan, nine in
Illinois, and three in Indiana. The closing of these sales, expected to
occur in the third quarter of fiscal 2000, is subject to the negotiation
of definitive agreements and various conditions, including the transfer of
liquor licenses, third party consents, and availability of financing. If
these sales are completed as contemplated by the letters of intent, the 34
units will be operated as Ruby Tuesday restaurants under separate
franchising agreements, and the Company will receive an aggregate sales
price of $53.3 million, of which approximately $40.0 million - $46.0
million will be paid in cash. The remaining amounts will be in the form
of interest bearing notes due through fiscal 2011. The sales of these
units are expected to result in a pre-tax gain of approximately $9.5
million. As of June 6, 1999, 28 of the 34 units to be sold were open.
The remaining six are expected to open by the end of the second quarter
of fiscal 2000. Fiscal 1999 revenues from the 28 units in operation
totaled $51.2 million, with operating profits of $5.1 million.
Disclosures About Market Risk
The Company manages its exposure to changes in short-term interest
rates, particularly to reduce the impact on its debt and floating-rate
lease obligations, by entering into interest rate swap agreements. The
counterparties to these contracts are high credit quality commercial
banks. Consequently, credit risk, which is inherent in all swaps, has
been minimized to a large extent. Interest expense is adjusted for the
differential to be paid or received as interest rates change. The effect
of such adjustments on interest expense has not been significant. The
level of floating-rate debt not fixed by swap agreements was not
significant during the year, and management does not expect a significant
increase in these amounts in 2000. Accordingly, the Company does not
presently believe it has material exposure to potential, near-term losses
in future earnings and/or cash flows from reasonably possible near-term
changes in market rates.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), which is effective for
the Company beginning in fiscal 2002. FAS 133 requires recognition of
all derivatives as either assets or liabilities on the balance sheet
measured at fair value. The Company utilizes interest rate swap
agreements to manage interest rate exposure. The Company is currently
studying the expected impact of FAS 133 on the consolidated financial
statements, but anticipates this impact to be insignificant.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which is
effective for the Company beginning in fiscal 2000. SOP 98-1 requires
the capitalization of certain costs incurred to develop or obtain
internal-use software. The Company's policy is to capitalize these costs
and, accordingly, the Company does not expect SOP 98-1 to have a material
effect upon adoption.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting the Costs of Start-Up
Activities" ("SOP 98-5"), which is effective for the Company beginning in
fiscal 2000. SOP 98-5 requires such costs to be expensed as incurred and
reported as a cumulative effect of a change in accounting principle in
the year of adoption. The Company does not anticipate the impact of SOP
98-5 to be material since unit start-up costs are already being expensed
as incurred.
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.
20
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Historically, the effect of inflation on the Company's net
income has not been materially adverse.
Effects of the Year 2000
The Company recognizes the need to ensure that its operations, as well as
those of third parties with whom the Company conducts business, will not
be adversely impacted by Year 2000 software failures. Software failures
due to processing errors potentially arising from calculations using the
Year 2000 date are a known risk. The Company is addressing this risk to
the availability and integrity of financial systems and the reliability
of operational systems through a combination of actions including the
implementation, upgrading, and enhancing of new financial, payroll, and
human resource software packages that are Year 2000 compliant and a
coordinated review of the Year 2000 readiness of key suppliers, financial
institutions, and others with which it does business.
The Company continues to make great strides towards ensuring that its
information technology and other systems and third party vendor systems
will be Year 2000 compliant. The telecommunications systems at both the
Maryville and Mobile Restaurant Support Centers have been replaced with
systems that are certified to be Year 2000 compliant and are currently
being used.
With regard to information technology, the Company has implemented a new
client-server platform for its financial, payroll and human resources
systems at its support centers and regional offices. The Company
activated the financial system in October, 1998 and the payroll and human
resource systems in March, 1999. These systems have been successfully
tested through Year 2043. The Company intends to upgrade and further
enhance the installed software to a version certified to be Year 2000
compliant. Current expectations are that this certified version will be
fully implemented and operational for both the financial and payroll and
human resource systems by the end of October, 1999. In addition, older
systems in the individual restaurants have already been replaced by new
systems which are Year 2000 compliant.
The Company has compiled a list of third party vendors who are being
monitored continuously regarding their compliance with Year 2000 issues.
The vendors identified are being requested to provide a representation to
the Company when they become Year 2000 compliant. Currently, there are
several vendors which are still completing their implementations of Year
2000 compliant systems. At the present time, the Company expects that
all its major vendors will be Year 2000 compliant by calendar year end.
Accordingly, the Company does not expect its operations to be materially
adversely affected.
The Company has incurred approximately 83% of the total estimated $6.6
million to be spent on converting, upgrading and enhancing systems which
address, among other priorities, the Year 2000 issue. The majority of
these costs relate to the new financial, payroll and human resource
software packages. Funds have been, and will continue to be, provided by
income from continuing operations. The computer systems in the
restaurants and the telecommunications systems for the Company were
scheduled to be replaced as a result of Company growth and not as a
direct result of Year 2000 issues.
The most significant risk to the Company with regard to the Year 2000
issue is that the systems placed in service by the Company and/or its
vendors will not be fully operational by the end of calendar year 1999.
This could adversely impact the day to day operations of the Company.
However, it is the Company's belief that all of its systems will be Year
2000 compliant by the end of October, 1999. As discussed above, although
there are several vendors not acknowledging Year 2000 compliance at this
time, the Company currently does not anticipate any material problems
with its major vendors. The Company believes at this time that no changes
in its current major vendors will be required; however, as the end of
calendar year 1999 approaches, the Company will begin identifying
alternative vendors for major vendors not Year 2000 compliant. Although
the Company does not expect that alternate vendors will be necessary, the
Company also does not anticipate any difficulty in locating alternative
vendors if necessary. Based on progress to date as described above, the
Company does not believe that its operations will be materially impacted
by the Year 2000 problems.
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Management's Outlook
The Company continues to strategically position itself for growth via
a diversified group of casual dining concepts and through the continuing
emphasis on its franchising and partnering programs. Ruby Tuesday, with
its menu that features fun-to-eat food, large portions, and a wide
variety, including a signature salad bar, burgers, ribs, fajitas,
chicken, soups and sandwiches, will maintain its aggressive posture. The
American Cafe concept will concentrate primarily on improved sales at
existing units. This concept specializes in gourmet pizzas and pastas,
signature soups and salads, sandwiches and classic dishes from across the
country, with a $10 average check. The Tia's concept with freshly
prepared menu items featuring an array of Tex-Mex favorites including
handmade tortillas and plentiful combination platters, offers the Company
an attractive opportunity in a high growth segment of the industry. The
Company plans to develop three to four new Tia's Tex-Mex restaurants in
fiscal 2000 and focus on increasing frequency and continuing to add new
and fresh items to its menu. Additionally, for all its concepts, in
fiscal 2000 the Company will continue its focus on improving same-store
sales, average-unit volume, customer frequency, and check average through
constant improvement of guest service, food quality, and appealing
promotions. Also, the Company is committed to continually finding ways
to reduce team turnover through the use of the WOW-U training facilities
for managers and the new six-step interview process for hourly employees.
The Company strongly believes good teams and low turnover are essential
to the success of its business.
The Company continues to identify potential restaurant owners - internal
and external - to become partners. Internally, approximately one-half of
the Company's restaurant managers have a financial stake in the success
of their units as internal managing partners. Externally, the Company
currently has fifteen domestic Ruby Tuesday franchise partners and signed
letters of intent with four others as previously discussed. In addition
to operating existing restaurants, these agreements provide for the
development of new restaurants in the partners' respective regions over
the next five to nine years. The domestic franchising program provides
the Company with the opportunity to have restaurants operating outside
its priority growth markets. Current business plans include increasing
the number of franchised restaurants to approach a 50/50 mix of Company-
owned to franchised units over the next five years. See "Special Note
Regarding Forward-Looking Information."
Internationally, the Company is continually developing relationships with
existing and potential franchisees. To this end, the Company's plans
which call for approximately six to ten openings in fiscal 2000 and the
continuous identification of potential new franchisees in targeted areas
around the world.
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 (both Company-
owned and franchised), future capital expenditures, future borrowings and
repayment of debt, payment of dividends and the effects of Year 2000
software failures. 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; the state of Year 2000 readiness of the Company's major
vendors; and changes in the availability of capital.
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RUBY TUESDAY, INC. AND SUBSIDIARIES
SUMMARY OF OPERATIONS
(In thousands except per-share data)
<TABLE>
<CAPTION>
Fiscal Year
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
System-wide revenues $ 841,059 $ 758,803 $ 660,776 $ 620,134 $ 515,312
Revenues $ 722,338 $ 711,420 $ 655,407 $ 620,134 $ 515,312
Income (loss) from continuing operations before
income taxes $ 57,208 $ 45,031 $ 38,813 $ (2,313)* $ 16,112**
Provision (benefit) for income taxes 20,694 15,951 13,768 (1,651) 5,027
Income (loss) from continuing operations $ 36,514 $ 29,080 $ 25,045 $ (662) $ 11,085
Income (loss) from discontinued operations, net
of applicable income taxes (2,222) 51,086***
Net income (loss) $ 36,514 $ 29,080 $ 25,045 $ (2,884) $ 62,171
Earnings (loss) per share:
Basic:
Continuing operations $ 1.13 $ 0.88 $ 0.71 $ (0.02) $ 0.32
Discontinued operations (0.06) 1.47
$ 1.13 $ 0.88 $ 0.71 $ (0.08) $ 1.79
Diluted:
Continuing operations $ 1.08 $ 0.84 $ 0.70 $ (0.02) $ 0.31
Discontinued operations (0.06) 1.42
$ 1.08 $ 0.84 $ 0.70 $ (0.08) $ 1.73
Weighted average common and
common equivalent shares:
Basic 32,387 33,205 35,190 34,626 34,643
Diluted 33,764 34,570 35,750 35,377 35,922
All fiscal years are composed of 52 weeks except for 1998 which is composed of 53 weeks.
Weighted average shares and all per-share data for years prior to a stock
split have been restated from their original presentation to give effect to the
2-for-1 stock split which occurred in fiscal year 1998 and the 1-for-2 stock
split which occurred in fiscal year 1996.
In fiscal 1996, the Company (then named Morrison Restaurant, Inc.) distributed
the common stock of its family dining restaurant business (Morrison Fresh Cooking,
Inc.) and its health care contract food and nutrition business (Morrison Management
Specialists, Inc. formerly Morrison Health Care, Inc.) to its shareholders. The
financial results of the two spun-off businesses are reported as discontinued operations.
Other financial data:
Total assets $ 430,815 $ 409,628 $ 418,871 $ 381,116 $ 484,051
Long-term debt $ 76,767 $ 65,895 $ 78,006 $ 76,108 $ 32,003
Shareholders' equity $ 221,801 $ 212,150 $ 223,640 $ 197,343 $ 245,493
Cash dividends per share of
common stock $ 0.09 $ 0.045 $ 0.00 $ 0.27 $ 0.35
* Includes a pre-tax charge of $25.9 million recognized as a
result of the implementation of FAS 121 and other
asset impairment charges and a $5.3 million restructure charge.
** Includes a pre-tax loss of $19.7 million recognized upon the decision
to phase out the L&N Seafood Grill concept.
*** Includes a pre-tax gain of $46.8 million ($25.8 million net of tax)
realized upon the sale of certain business and
industry contracts and assets.
</TABLE>
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<PAGE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per-share data)
<TABLE>
<CAPTION>
For the Fiscal Year Ended
June 6, June 6, May 31,
1999 1998 1997
<S> <C> <C> <C>
Revenues:
Restaurant sales and operating revenues $ 716,307 $ 709,184 $ 654,464
Franchise revenues 4,709 1,902 232
Other revenues 1,322 334 711
722,338 711,420 655,407
Operating costs and expenses:
Cost of merchandise 196,341 194,765 177,835
Payroll and related costs 229,949 228,676 213,323
Other 146,723 146,655 140,619
Selling, general and administrative 49,865 52,994 42,346
Depreciation and amortization 39,390 39,519 38,560
Interest expense net of interest income totaling
$1,691 in 1999, $900 in 1998, and $205 in 1997 2,862 3,780 3,911
665,130 666,389 616,594
Income before income taxes 57,208 45,031 38,813
Provision for income taxes 20,694 15,951 13,768
Net income $ 36,514 $ 29,080 $ 25,045
Earnings per share:
Basic $ 1.13 $ 0.88 $ 0.71
Diluted $ 1.08 $ 0.84 $ 0.70
Weighted average shares:
Basic 32,387 33,205 35,190
Diluted 33,764 34,570 35,750
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 6, June 6,
1999 1998
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 9,117 $ 8,291
Accounts and notes receivables 5,406 7,600
Inventories:
Merchandise 5,599 5,620
China, silver and supplies 3,923 3,902
Income tax receivable 2,544 1,713
Prepaid rent 3,039 2,880
Prepaid income taxes 2,165 2,506
Other prepaid expenses 4,692 4,477
Assets held for disposal 15,725 9,894
Total current assets 52,210 46,883
Property and equipment - at cost:
Land 38,913 34,665
Buildings 76,040 62,404
Improvements 186,673 188,867
Restaurant equipment 130,722 128,776
Other equipment 47,396 39,518
Construction in progress 23,589 26,245
503,333 480,475
Less accumulated depreciation and amortization 185,842 170,083
317,491 310,392
Cost in excess of net assets acquired, net 19,037 19,714
Other assets 42,077 32,639
Total assets $ 430,815 $ 409,628
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 27,605 $ 22,570
Short-term borrowings 8,720 16,220
Accrued liabilities:
Taxes, other than income taxes 11,256 12,748
Payroll and related costs 13,283 12,731
Insurance 9,379 8,928
Rent and other 13,789 11,136
Current portion of long-term debt 126 110
Total current liabilities 84,158 84,443
Long-term debt 76,767 65,895
Deferred income taxes 6,653 9,728
Deferred escalating minimum rents 12,025 11,719
Other deferred liabilities 29,411 25,693
Shareholders' equity:
Common stock, $0.01 par value; (authorized: 100,000 shares;
issued: 1999 - 32,017 shares, 1998 - 32,787 shares) 320 328
Capital in excess of par value 4,049 5,250
Retained earnings 218,007 207,034
222,376 212,612
Deferred compensation liability payable in Company stock 2,887 3,155
Company stock held by deferred compensation plan (2,887) (3,155)
Accumulated other comprehensive income (575) (462)
221,801 212,150
Total liabilities and shareholders' equity $ 430,815 $ 409,628
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
25
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<PAGE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands except per-share data)
<TABLE>
<CAPTION>
Company Stock Held Accumulated
by Deferred Capital in Deferred Other Total
Common Stock Issued Compensation Plan Excess of Retained Compensation Comprehensive Shareholders'
Shares Amount Shares Amount Par Value Earnings Liability Income Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 1, 1996 17,598 $176 (134) $(2,949) $1,762 $198,354 $ 0 $ 0 $197,343
Net income 25,045 25,045
Shares issued under stock
bonus and stock
option plans 310 3 4,249 4,252
Stock repurchases,
net of changes in the
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 0 0 223,640
Net income 29,080 29,080
Minimum pension liability
adjustment, net of taxes of $299 (462) (462)
Comprehensive Income 28,618
Shares issued under stock
bonus and stock
options plans 3,172 32 20,810 20,842
Cash dividends of $0.045
per common share (1,468) (1,468)
Stock repurchases, net
of changes in the
Deferred Compensation
Plan (4,602) (46) (7) (490) (18,124) (43,977) (62,637)
Deferred Compensation
Plan liability payable
in Company stock 3,155 3,155
2-for-1 stock split 16,497 165 (135) (165) 0
Balance, June 6, 1998 32,787 328 (269) (3,155) 5,250 207,034 3,155 (462) 212,150
Net income 36,514 36,514
Minimum pension liability
adjustment, net of taxes of $73 (113) (113)
Comprehensive Income 36,401
Shares issued under stock
bonus and stock
option plans 1,802 18 22,026 22,044
Cash dividends of $0.09
per common share (2,940) (2,940)
Stock Repurchases (2,572) (26) (23,227) (22,601) (45,854)
Changes in Deferred
Compensation Plan 41 268 (268) 0
Balance, June 6, 1999 32,017 $320 (228) $(2,887) $4,049 $218,007 $2,887 $(575) $221,801
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
RUBY TUESDAY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
For the Fiscal Year Ended
June 6, June 6, May 31,
1999 1998 1997
<S> <C> <C> <C>
Operating activities:
Net income $ 36,514 $ 29,080 $ 25,045
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 39,390 39,519 38,560
Amortization of intangibles 727 729 734
Deferred income taxes (2,545) (1,080) 3,712
Loss on impairment and disposition of assets 328 2,552 331
Changes in operating assets and liabilities:
Decrease/(increase) in receivables 309 (2,631) (2,581)
Increase in inventories (140) (1,040) (969)
(Increase)/decrease in income tax receivable (831) (397) 2,273
(Increase)/decrease in prepaid and other assets (548) (3,017) 2,610
Increase in accounts payable,
accrued and other liabilities 12,803 4,977 9,456
Net cash provided by operating activities 86,007 68,692 79,171
Investing activities:
Purchases of property and equipment (72,582) (65,750) (74,049)
Proceeds from disposal of assets 2,095 650 818
Proceeds from sale of restaurant properties
to franchisees 11,399 34,782
Proceeds from sale of home office building 5,450
Other, net (2,731) (3,461) (3,161)
Net cash used by investing activities (61,819) (28,329) (76,392)
Financing activities:
Proceeds from long-term debt 16,000 2,000
Net change in short-term borrowings (7,500) 15,686 (5,467)
Principal payments on long-term debt and
capital leases (5,112) (12,103) (95)
Proceeds from issuance of stock,
including treasury stock 22,044 20,842 4,252
Stock repurchases, net of changes in the
Deferred Compensation Plan (45,854) (62,637) (3,000)
Dividends paid (2,940) (1,468)
Net cash used by financing activities (23,362) (39,680) (2,310)
Increase in cash and short-term investments 826 683 469
Cash and short-term investments:
Beginning of period 8,291 7,608 7,139
End of period $ 9,117 $ 8,291 $ 7,608
Supplemental disclosure of cash flow information-Cash paid for:
Interest (net of amount capitalized) $ 4,750 $ 5,885 $ 3,599
Income taxes, net $ 17,812 $ 12,224 $ 7,783
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
27
</PAGE>
<PAGE>
RUBY TUESDAY, INC. AND SUSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
Ruby Tuesday, Inc. (the "Company") operates three casual dining
concepts comprised of Ruby Tuesday, American Cafe and Tia's Tex-Mex
restaurants. The Company also offers franchises for the Ruby Tuesday
concept in domestic and international markets. At June 6, 1999, the Ruby
Tuesday concept consisted of 335 units concentrated primarily in the
Northeast, Southeast, Mid-Atlantic and the Midwest. The American Cafe
concept has 45 units which are primarily located in the Mid-Atlantic, and
Southeast regions. Tia's Tex-Mex operates 23 units located in the
Southwest, Southeast, and Mid-Atlantic regions. Also, as of year-end,
there were 78 domestic Ruby Tuesday franchise units located in eleven
states and seven international Ruby Tuesday franchise units located in
the Asia Pacific Region and Chile.
Fiscal Year
The Company's fiscal year ends on the first Sunday following May 30.
Prior to fiscal 1999, the Company's fiscal year ended on the first
Saturday following May 30. The fiscal years ended June 6, 1999 and May
31, 1997, were comprised of 52 weeks, and the fiscal year ended June 6,
1998 was comprised of 53 weeks.
Cash and Short-Term Investments
The Company's cash management program provides for the investment of
excess cash balances in short-term money market instruments. Short-term
investments are stated at cost, which approximates market value. The
Company considers marketable securities with a maturity of three months
or less when purchased to be short-term investments.
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
The excess of cost over the fair value of net assets acquired of
purchased businesses generally is amortized on a straight-line basis over
40 years. At June 6, 1999 and 1998, accumulated amortization for cost in
excess of net assets acquired was $7.4 million and $6.7 million,
respectively.
Advertising Costs
The Company generally expenses advertising costs as incurred.
Advertising expense totaled $7.5 million, $12.7 million, and $10.2
million for fiscal years 1999, 1998, and 1997, respectively.
Fair Value of Financial Instruments
The Company's financial instruments at June 6, 1999 and 1998
consisted of cash and short-term investments, Deferred Compensation Plan
investments, notes receivable, short-term borrowings, long-term debt, and
interest rate swap agreements. The fair value of these financial
instruments approximated the carrying amounts reported in the
Consolidated Balance Sheets with the exception of Ruby Tuesday stock held
by the Deferred Compensation Plan which is included in shareholders'
equity at cost. Estimates of the fair value of the financial instruments
are based upon current market conditions, quoted market prices, and
present values of future cash flows.
Franchise Revenues
Franchise development and license fees received are recognized
when all material services have been substantially performed by the
Company and the restaurant has opened for business. Franchise royalties
(based on a percentage of monthly sales) are recognized as franchise
revenue on the accrual basis. Support service fees and marketing
fees charged to franchisees are included in selling,
28
</PAGE>
<PAGE>
general and administrative expenses as an offset to the related costs incurred
by the Company to provide these services. Costs associated with franchise
operations are expensed as incurred.
Refranchising Gains (Losses)
Refranchising gains (losses), included in other operating costs and
expenses, include gains or losses on sales of restaurants to franchise
partners. All direct costs associated with the refranchising are
included in the calculation of the gain or loss. Upon making the
decision to sell a restaurant to a franchise partner, the restaurant is
reclassified to Assets Held For Disposal at the lower of book value or
fair market value and any anticipated loss is immediately recognized.
When the sale occurs, any loss not previously recognized is recorded
concurrently with the sale. The Company generally defers any gain up to
the amount of the note received in conjunction with the transaction.
Gains in excess of the notes are recognized currently.
Earnings Per Share
Earnings per share is determined in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128").
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding during each year
presented. Diluted earnings per share gives effect to options
outstanding during the applicable periods. The dilutive effect of the
Company's stock options increased the diluted weighted average shares
outstanding by 1,377,000, 1,365,000, and 560,000 for fiscal years 1999,
1998, and 1997, respectively.
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.
Impairment of Long-Lived Assets
The Company reviews underlying assets related to each of its
restaurants for impairment when circumstances indicate the carrying
amount may not be recoverable. Impairment charges, included in other
operating costs and expenses, totaled $2.9 million and $0.4 million for
fiscal years 1999 and 1998, respectively. Such charges principally
relate to units sold to franchisees and for other units which have been
closed.
Comprehensive Income
During fiscal 1998, the Company adopted FAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and
displaying of comprehensive income and its components. Comprehensive
income consists of net income and adjustments to the minimum pension
liability and is shown as a separate component in the Consolidated
Statements of Shareholders' Equity.
Segment Reporting
In 1999, the Company adopted FAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information". This statement requires
companies to report financial and descriptive information about its
reportable operating segments. Operating segments, as defined, are
components of an enterprise about which separate financial information is
available that is reviewed by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. This
statement allows aggregation of similar operating segments into a single
operating segment if the businesses are considered similar under the
criteria of the statement. For purposes of applying this statement, the
Company considers its three restaurant concepts and franchising
operations as similar and has aggregated them.
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.
29
</PAGE>
<PAGE>
2. Franchising
The Company's domestic franchise program currently includes fifteen
franchise partners whom it considers to be the nation's top restaurant
operators. In conjunction with this program, the Company has sold Ruby
Tuesday restaurants to these franchise partners as of June 6, 1999.
These units are now operating as franchised Ruby Tuesday restaurants.
During fiscal years 1999 and 1998, the Company sold 19 and 46 units,
respectively, to franchise partners for collective sales prices of $23.3
million and $47.3 million, respectively. The portion of the sales prices
not received in cash ($11.9 million in 1999 and $12.5 million in 1998)
were received in the form of notes bearing interest at rates ranging from
8-10% and due through 2014. As of June 6, 1999 and 1998, the financial
statements include deferred gains on these sales of $8.0 million and $2.2
million, respectively. The sales of these units, after consideration of
the deferred gain, resulted in a pre-tax gain of $3.1 million in 1999 and
a minimal gain in 1998. The gains are included in other operating costs
and expenses.
The Company also entered into development agreements with the
franchise partners whereby they will open varying numbers of Ruby Tuesday
restaurants over the next five to nine years following their respective
agreement dates. During fiscal 1999, eight Ruby Tuesday franchise units
were opened by franchisees pursuant to development agreements which
resulted in the recognition of development and licensing fees of $0.4
million. Deferred development fees associated with all domestic
franchisees totaled $1.3 million and $0.8 million at June 6, 1999 and
1998, respectively.
As part of its domestic franchising program, the Company has
negotiated with various lenders a $52.5 million credit facility to assist
franchise partners with working capital and operational cash flow
requirements. The Company, as sponsor of the credit facility, serves as
partial guarantor for the draws made on this revolving line-of-credit.
As of June 6, 1999, the amount guaranteed by the Company on the facility
was $10.0 million.
The Company also receives territorial development fees from
international franchisees for their right to develop Ruby Tuesday
restaurants. These fees, which are recognized as income as units are
opened in accordance with the various development agreements, totaled
$1.1 million at June 6, 1999.
3. Long-Term Debt
Long-term debt consists of the following:
(In Thousands)
Fiscal Year
1999 1998
Revolving credit facility $ 26,000 $ 15,000
Term notes payable to banks 50,000 50,000
Other long-term debt 893 1,005
76,893 66,005
Less current maturities 126 110
$ 76,767 $ 65,895
Annual maturities of long-term debt at June 6, 1999 are as follows:
(In Thousands)
2000 $ 126
2001 76,132
2002 143
2003 155
2004 84
Subsequent years 253
Total $ 76,893
The Company has a five-year credit facility with several banks which
allows the Company to borrow up to $100.0 million under various short-
term interest rate options. The $100.0 million credit facility is
comprised of a $50.0 million five-year interest only term note (bearing
interest at 5.54% at June 6, 1999) 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 June 6, 1999, the Company had $26.0 million of borrowings outstanding
with various banks under the revolving credit facility at interest rates
approximating 5.35% 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 on a long-term basis under the
revolving facility.
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</PAGE>
<PAGE>
The credit facility contains restrictions on incurring additional
indebtedness and payment of dividends and has certain covenants regarding
funded debt, net worth, and fixed charge coverage. At June 6, 1999,
retained earnings in the amount of $41.8 million were available for
distribution under these debt covenants.
The Company has entered into five interest rate swap agreements with
notional amounts aggregating $125.0 million. The swap agreements
effectively fix the interest rate on an equivalent amount of the
Company's debt and floating-rate lease obligations to rates ranging from
5.79% to 6.25% for periods up through December 7, 2003.
In addition, at June 6, 1999, the Company had committed lines of
credit amounting to $12.2 million and non-committed lines of credit
amounting to $15.0 million with several banks at various interest rates
approximating 5.18% and 5.89% at June 6, 1999 and 1998, respectively.
All of these lines are subject to periodic review by each bank. The
Company utilized its lines of credit to meet operational cash needs
during fiscal years 1999 and 1998. Borrowings on these lines of credit
were $8.7 million and $16.2 million at June 6, 1999 and 1998,
respectively.
Interest expense capitalized in connection with financing additions
to property and equipment amounted to approximately $0.8 million and $0.9
million for the years ended June 6, 1999 and 1998, respectively.
4. Leases
Various operations of the Company are conducted in leased premises.
Initial lease terms expire at various dates over the next 21 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).
At June 6, 1999, the future minimum lease payments, including
guaranteed residual values, under operating leases for the next five
years and in the aggregate are as follows:
(In Thousands)
2000 $ 41,300
2001 39,070
2002 38,097
2003 37,777
2004 92,467
Subsequent years 175,450
Total minimum lease payments $424,161
Future minimum sub-lease payments to be received for the next five
years and in the aggregate under noncancelable sub-lease agreements are
as follows:
(In Thousands)
2000 $ 5,322
2001 4,903
2002 4,738
2003 4,730
2004 4,692
Subsequent years 31,054
Total minimum sub-lease payments $ 55,439
Rental expense pursuant to operating leases is summarized as follows:
(In Thousands)
1999 1998 1997
Minimum rent $35,809 $36,288 $36,813
Contingent rent 3,527 3,490 2,421
$39,336 $39,778 $39,234
During fiscal 1998, the Company entered into a $40.0 million master
operating lease agreement for the purpose of leasing new free-standing
units and a new Restaurant Support Services Center. This agreement was
amended in October, 1998 to provide for total funding of $80.0 million
and to change the agreement date to October 2, 1998. On June 3, 1999,
the Company entered into an additional $45.0 million master operating
lease agreement also for the purpose of leasing new free-standing
units. An operating lease agreement is entered into for each facility
providing for an initial lease term of five years from the
applicable agreement date with two five-year renewal options.
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<PAGE>
Each lease also provides for substantial residual value guarantees and
include purchase options at the lessor's original cost of the properties.
As of June 6, 1999, the Company has entered into leases for 44 units (thirty
of which were open at June 6, 1999) and the Maryville, Tennessee Restaurant
Support Services Center at an aggregated original cost to the lessor of
approximately $73.2 million. Lease commitments applicable to such leases
entered into are included in the commitment amounts presented above.
5. Income Taxes
The components of income tax expense are as follows:
(In Thousands)
1999 1998 1997
Current:
Federal $ 20,144 $ 13,898 $ 7,953
State 3,095 3,133 2,103
23,239 17,031 10,056
Deferred:
Federal (2,162) (953) 3,167
State (383) (127) 545
(2,545) (1,080) 3,712
$ 20,694 $ 15,951 $ 13,768
A reconciliation from the statutory federal income tax expense to the
reported income tax expense is as follows:
(In Thousands)
1999 1998 1997
Statutory federal income taxes $ 20,023 $ 15,761 13,585
State income taxes, net of
federal income tax benefit 1,763 1,954 1,721
Tax credits (1,123) (1,146) (1,220)
Other, net 31 (618) (318)
$ 20,694 $ 15,951 $ 13,768
Deferred tax assets and liabilities are comprised of the following:
(In Thousands)
1999 1998
Deferred tax assets:
Employee benefits $ 10,337 $ 8,336
Insurance reserves 4,168 3,935
Escalating rents 4,721 4,601
Acquired net operating losses 2,193 2,193
Deferred gain on sales of
units to franchise partners 3,148 848
Restructuring and FAS 121
reserves 921 1,270
Deferred development fees 1,168 432
Other 2,541 1,864
Total deferred tax assets 29,197 23,479
Deferred tax liabilities:
Depreciation 27,103 26,686
Assets held for disposal 1,652 975
Prepaid deductions 1,461 998
Retirement plans 882 765
Other 2,587 1,277
Total deferred tax liabilities 33,685 30,701
Net deferred tax liability $(4,488) $(7,222)
At June 6, 1999, 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.
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<PAGE>
6. Employee Benefit Plans
Salary Deferral Plan - The Company maintains the Ruby Tuesday, Inc.
Salary Deferral Plan which is a 401(k) plan. The Company makes matching
contributions to the Plan based on each employee's pre-tax contribution
and years of service. The Company contributes 20% of the employee's pre-
tax contribution after three years of service, 30% after ten years of
service and 40% after 20 years of service. The Company's expense related
to the Plan approximated $0.2 million for each of 1999, 1998, and 1997.
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 except
that, in 1998, the Plan was amended to allow for 100% deferral of annual
earnings including bonus. The Company's expenses under the Plan
approximated $0.1 million for each of 1999, 1998, and 1997. Company
assets earmarked to pay benefits under the Plan are held by a rabbi
trust. Assets and liabilities of a rabbi trust must be accounted for as
if they are assets or liabilities of the Company, therefore, all earnings
and expenses are recorded in the Company's financial statements. The
Plan's assets and liabilities, which approximated $14.6 million and $13.6
million in 1999 and 1998, respectively, are included in Other Assets and
Other Liabilities in the Consolidated Balance Sheets, except for the
investment in Ruby Tuesday common stock and the related liability payable
in Ruby Tuesday common stock which are reflected in Shareholders' Equity
in the Consolidated Balance Sheets.
Retirement Plan - The Company, along with Morrison Fresh Cooking, Inc.
(which was subsequently purchased by Piccadilly Cafeterias, Inc.) and
Morrison Management Services, Inc. (formerly Morison Health Care, Inc.)
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 expenses related to
the Plan were recognized in 1999, 1998, or 1997.
Executive Supplemental Pension Plan and Management Retirement Plan -
Under these unfunded defined benefit pension plans, eligible employees
earn supplemental retirement income based upon salary and length of
service, reduced by social security benefits and amounts otherwise
receivable under the Retirement Plan.
To provide a source for the payment of benefits under these Plans, the
Company owns whole-life insurance contracts on some of the participants.
The cash value of these policies net of policy loans is $5.9 million and
$4.9 million at June 6, 1999 and 1998, respectively. The Company
maintains a rabbi trust to hold the policies and death benefits as they
are received.
The table presented on the following page details the reconciliation of
the benefit obligations and fair value of plan assets in addition to 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.
33
</PAGE>
<PAGE>
Pension Benefits
1999 1998 1997
Change in benefit obligation:
Benefit obligation at beginning of year $17,825 $13,674 $13,081
Service cost 159 123 43
Interest cost 1,288 1,077 536
Actuarial loss 2,291 3,917 442
Benefits paid (1,561) (966) (428)
Benefit obligation at end of year 20,002 17,825 13,674
Change in plan assets:
Fair value of plan assets at beginning of year 7,883 4,730 4,502
Retiree liability transfer 2,592
Actual return on plan assets 1,251 1,018 661
Benefits paid (935) (457) (433)
Fair value of plan assets at end of year 8,199 7,883 4,730
Reconciliation of funded status:
Funded status (11,803) (9,942) (8,944)
Unrecognized net actuarial loss 3,491 1,767 1,020
Unrecognized transition obligation 927 1,095 1,263
Unrecognized prior service cost 333 502 671
Accrued benefit cost $(7,052) $(6,578) $(5,990)
Amounts recognized in the Consolidated Balance
Sheets consist of:
Prepaid benefit cost $ 1,331 $ 1,137 $ 1,086
Accrued benefit liability (10,255) (9,258) (7,718)
Intangible asset 925 782 538
Accumulated other comprehensive income 947 761 104
Net amount recognized at year-end $(7,052) $(6,578) $(5,990)
Additional year-end information for pension plans
with benefit obligations in excess of plan assets:
Projected benefit obligation $11,821 $10,896 $ 9,388
Accumulated benefit obligation 10,255 9,258 7,424
Components of net periodic benefit cost:
Service cost $ 159 $ 123 $ 43
Interest cost 1,288 1,077 536
Expected return on plan assets (752) (454) (613)
Amortization of transition obligation 168 168 168
Amortization of prior service cost 169 169 169
Recognized actuarial loss 67 14 18
Net periodic benefit cost $ 1,099 $ 1,097 $ 321
Assumptions used:
Discount Rate 7.50% 7.50% 8.25%
Expected return on plan assets 10.00% 10.00% 10.00%
Rate of compensation increase 4.00% 4.00% 4.00%
34
</PAGE>
<PAGE>
7. 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 June 6, 1999.
The Ruby Tuesday, Inc. 1996 Stock Incentive Plan - A Committee, appointed
by the Board, administers the Ruby Tuesday, Inc. 1996 Stock Incentive
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 the Plan have been at the prevailing
market value at the time of grant. At June 6, 1999, the Company had
reserved a total of 1,823,000 shares of common stock for this Plan.
The Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for
Directors - Under The Ruby Tuesday, Inc. Stock Incentive and Deferred
Compensation Plan for Directors, non-employee directors have the
opportunity 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
the 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 June 6, 1999, the Company had reserved 177,000 shares of
common stock for the Plan.
The Ruby Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan - A
Committee, appointed by the Board, administers The Ruby Tuesday, Inc.
1996 Non-Executive Stock Incentive 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 the Plan have been at the prevailing market value at the
time of grant. At June 6, 1999, the Company had reserved a total of
6,287,000 shares of common stock for this Plan.
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 273,000 shares remain outstanding under the terms of the Plan at
June 6, 1999.
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
35
</PAGE>
<PAGE>
required pro forma disclosures as if the option valuation models were
used 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 1999, 1998, and 1997:
1999 1998 1997
Risk-free interest rate 5.50% 5.75% 6.00%
Expected dividend yield 0.56% .00-.69% .00%
Stock price volatility factor 0.465 0.412 0.373
Expected life of options (in years) 3.5-4 3-7 3-7
If the Company had adopted FAS 123 in accounting for its stock options
granted in fiscal years 1999, 1998 and 1997, its net income and earnings
per share would approximate the pro forma amounts below (in thousands
except for per share data):
1999 1998 1997
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
Net income $36,514 $33,089 $29,080 $26,194 $25,045 $22,331
Earnings per share:
Basic $ 1.13 $ 1.08 $ 1.02 $ 0.98 $ 0.88 $ 0.84
Diluted $ 0.79 $ 0.76 $ 0.71 $ 0.70 $ 0.63 $ 0.62
The following table summarizes the activity in options under these
stock option plans:
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Data) Number of Shares Under Option
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
1999 Price 1998 Price 1997 Price
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 4,794 $ 9.31 5,526 $ 8.87 4,930 $ 8.74
Granted 1,341 $16.86 518 $12.87 1,338 $ 8.90
Exercised (1,072) $ 8.76 (1,024) $ 8.76 (312) $ 5.44
Forfeited (194) $10.62 (226) $ 9.23 (430) $ 8.90
End of year 4,869 $11.46 4,794 $ 9.31 5,526 $ 8.87
Exercisable 2,102 $ 8.98 1,533 $ 8.64 1,766 $ 8.51
Outstanding option prices $4.34-$19.56 $4.34-$15.28 $4.34-$15.29
Exercised option prices $4.62-$14.22 $4.62-$14.22 $4.05-$ 8.55
Granted option prices $14.00-$19.56 $10.75-$13.50 $8.07-$10.63
Weighted avg. fair value of options
granted during the year $6.84 $4.27 $3.30
The weighted average remaining contractual life of the options outstanding at June 6, 1999 was 2.99 years.
</TABLE>
36
</PAGE>
<PAGE>
8. Commitments and Contingencies
At June 6, 1999, the Company was committed under letters of credit of
$7.1 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.
9. Subsequent Events
Subsequent to June 6, 1999, the Company entered into letters of intent
with four potential franchise partners. These letters of intent provide,
among other things, for the sale of twenty-two units in Michigan, nine
in Illinois, and three in Indiana. The closing of the sale of these
units, expected to occur in the third quarter of fiscal 2000, is subject
to various conditions, including the transfer of liquor licenses, third
party consents, and availability of financing. Upon completion of the
sales, the 34 units will be operated as Ruby Tuesday restaurants under
separate franchising agreements, and the Company will receive an
aggregate purchase price of $53.3 million, of which approximately $40.0
million - $46.0 million is expected to be paid in cash. The remaining
amounts will be in the form of interest bearing notes due through 2011.
The sales of these units are expected to result in a pre-tax gain of
approximately $9.5 million. As of June 6, 1999, 28 of the 34 units to be
sold were open. The remaining six are expected to open by the end of the
second quarter of fiscal 2000. Fiscal 1999 revenues from the 28 units in
operation totaled $51.2 million, with operating profits of $5.1 million.
37
</PAGE>
<PAGE>
10. Supplemental Quarterly Financial Data (Unaudited)
Quarterly financial results for the years ended June 6, 1999 and
1998, are summarized below. All quarters are composed of 13 weeks,
except for the quarter ended June 6, 1998, which includes 14 weeks.
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Data)
For the Year Ended June 6, 1999
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Revenues $178,147 $175,794 $184,729 $183,668 $722,338
Gross profit* $ 35,252 $ 33,514 $ 41,246 $ 39,313 $149,325
Income before income taxes $ 12,158 $ 9,654 $ 18,619 $ 16,777 $ 57,208
Provision for income taxes 4,362 3,503 6,746 6,083 20,694
Net income $ 7,796 $ 6,151 $ 11,873 $ 10,694 $ 36,514
Earnings per share:
Basic $ 0.24 $ 0.19 $ 0.37 $ 0.33 $ 1.13
Diluted $ 0.23 $ 0.18 $ 0.35 $ 0.32 $ 1.08
</TABLE>
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Data)
For The Year Ended June 6, 1998
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Revenues $174,099 $170,283 $181,602 $185,436 $711,420
Gross profit* $ 33,460 $ 31,402 $ 38,596 $ 37,866 $141,324
Income before income taxes $ 9,854 $ 7,333 $ 14,187 $ 13,657 $ 45,031
Provision for income taxes 3,474 2,612 5,026 4,839 15,951
Net income $ 6,380 $ 4,721 $ 9,161 $ 8,818 $ 29,080
Earnings per share:
Basic $ 0.19 $ 0.14 $ 0.28 $ 0.27 $ 0.88
Diluted $ 0.18 $ 0.13 $ 0.27 $ 0.26 $ 0.84
* The Company defines gross profit as revenue less cost of merchandise, payroll and related costs, and other
operating costs and expenses.
</TABLE>
38
</PAGE>
<PAGE>
Ruby Tuesday, Inc. common stock is publicly traded on the New York
Stock Exchange under the ticker symbol RI. The following table sets forth
the reported high and low prices of the common stock and cash dividends
paid thereon for each quarter during fiscal 1999 and 1998.
Fiscal Year Ended June 6, 1999
Per Share
Cash
Quarter High Low Dividends
First $17.44 $13.81 $0.045
Second $19.19 $14.00 -
Third $21.38 $18.00 $0.045
Fourth $20.00 $16.44 -
Fiscal Year Ended June 6, 1998
Per Share
Cash
Quarter High Low Dividends
First $13.91 $10.50 -
Second $14.25 $12.63 -
Third $13.25 $12.10 $0.045
Fourth $17.78 $12.82 -
On July 1, 1999, the Company's Board of Directors declared a semi-
annual cash dividend of $0.045 per share payable on July 30, 1999, to
shareholders of record on July 16, 1999. As of July 29, 1999, there were
approximately 5,560 holders of record of the Company's common stock.
39
</PAGE>
<PAGE>
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 June 6, 1999 and 1998, and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three fiscal years in the period ended June 6,
1999. 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 June 6, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended June 6, 1999, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 28, 1999
40
</PAGE>
<PAGE>
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):
Alabama:
Ruby Tuesday Services, Inc.
Delaware:
Morrison International, Inc.
Michigan:
Ruby Tuesday Business Development, 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. 333-77965) pertaining to the Ruby
Tuesday, Inc. 1996 Non-Executive Stock Incentive Plan (formerly the 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 28, 1999, 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 June 6, 1999.
/s/ Ernst & Young LLP
Ernst & Young LLP
Atlanta, Georgia
August 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUBY TUESDAY, INC. AS OF AND FOR THE YEAR ENDED
JUNE 6, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-06-1999
<PERIOD-END> JUN-06-1999
<CASH> 9,117
<SECURITIES> 0
<RECEIVABLES> 5,406
<ALLOWANCES> 0
<INVENTORY> 9,522
<CURRENT-ASSETS> 52,210
<PP&E> 503,333
<DEPRECIATION> 185,842
<TOTAL-ASSETS> 430,815
<CURRENT-LIABILITIES> 84,158
<BONDS> 76,767
0
0
<COMMON> 320
<OTHER-SE> 221,481
<TOTAL-LIABILITY-AND-EQUITY> 430,815
<SALES> 716,307
<TOTAL-REVENUES> 722,338
<CGS> 196,341
<TOTAL-COSTS> 416,062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,862
<INCOME-PRETAX> 57,208
<INCOME-TAX> 20,694
<INCOME-CONTINUING> 36,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,514
<EPS-BASIC> $1.13
<EPS-DILUTED> $1.08
</TABLE>
