UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Name of Subject Company)
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK OF $.01 PAR VALUE
(Title of Class of Securities)
307059-1-05
(CUSIP Number of Class of Securities)
Lewis E. Christman, Jr.
President and Chief Executive Officer
Family Steak Houses of Florida, Inc.
2113 Florida Boulevard
Neptune Beach, Florida 32266
(904) 249-4197
(Name, Address and Telephone Number
of Person Authorized to Receive Notice
and Communications on Behalf of the
Person(s) Filing Statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Family Steak Houses of Florida, Inc., a
Florida corporation (the "Company"). The address of the principal executive
office of the Company is 2113 Florida Boulevard, Neptune Beach, Florida 32266.
The title of the class of equity security to which this statement relates is
common stock, $.01 par value (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in the Schedule 14D-1,
dated March 6, 1997 (the "Schedule 14D-1"), of Bisco Industries, Inc., an
Illinois corporation (the "Bidder"), to purchase for cash up to 2,600,000 of the
Shares at $.90 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated March 6, 1997, and
in the related Letter of Transmittal (collectively, the "Offer"). The Offer is
conditioned upon, among other things, the Bidder being satisfied, in its sole
discretion, that Section 607.0902 of the Florida Business Corporation Act (the
"Control Share Act") shall be inapplicable to the Offer, or the Bidder otherwise
being satisfied that the Control Share Act will not deny voting rights to the
Shares acquired by the Bidder pursuant to the Offer. The Schedule 14D-1 states
that the principal executive offices of the Bidder are located at 704 W.
Southern Avenue, Orange, California 92665.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Information relating to certain contracts, agreements, arrangements,
understandings and relationships between the Company and its executive officers,
directors or affiliates is set forth in the sections entitled "Security
Ownership of Certain Beneficial Owners and of Management", "Director
Compensation", "Election of Directors", and "Employment Agreements" of the
Company's Proxy Statement dated May 1, 1996, for its Annual Meeting of
Shareholders held on June 18, 1996. A copy of such Proxy Statement is filed as
Exhibit 1 hereto, and the portions of such Proxy Statement referred to above are
incorporated herein by reference.
On December 30, 1996, the Company executed an employment agreement with
Lewis E. Christman, Jr., for a term ending on June 19, 1998 pursuant to which
Mr. Christman agreed to serve as Chief Executive Officer of the Company for an
annual salary of $130,000 in addition to medical, disability and other benefits
in accordance with Company policy, such stock options as may be granted by the
Board of Directors from time to time and a bi-annual automobile allowance. A
copy of such employment agreement is included as Exhibit 2 and is hereby
incorporated by reference.
On October 1, 1996, the Company entered into a two year employment
agreement with Edward B. Alexander pursuant to which he agreed to serve as the
Company's Chief Financial Officer and Treasurer for an annual salary of $90,000
plus benefits in accordance with Company
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policy and such stock options as may be granted by the Board of Directors from
time to time. A copy of such employment agreement is included as Exhibit 3 and
hereby is incorporated by reference.
On January 8, 1997, the Company entered into a consulting agreement with
Robert J. Martin, a director of the Company, in connection with his retirement
as an officer of the Company. Under the consulting agreement, the Company has
retained Mr. Martin to provide advice and assistance with the Company's business
for one year for a retainer of $13,500 and continued medical and other insurance
benefits. Also under this agreement, Mr. Martin agreed to refrain from being
engaged or taking part in or rendering services or advice to, directly or
indirectly, any entity in the family steakhouse or family cafeteria style
restaurant until January 7, 2000. Mr. Martin further agreed not to interfere
with, or take certain other actions with respect to, the Company's business
relationships with its franchisor, lenders, customers, employees, consultants or
advisors until after January 7, 2000. A copy of such consulting agreements is
included as Exhibit 3 and hereby is incorporated by reference.
Under the Company's Amended Employee Stock Option Plan and option
agreements executed thereunder, certain executive officers have been granted
options that become immediately exercisable if a person or persons acting
together for the purpose of acquiring Shares acquire beneficial ownership (as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of 33%
or more of the outstanding Shares. Similarly, the Company's Long Term Incentive
Plan and Option Agreements executed thereunder provide that options granted
thereunder will become immediately exercisable upon the earliest of the
following events: (i) the Company acquires actual knowledge that any person has
become the beneficial owner directly or indirectly of 25% or more of the
combined voting power of the shares, (ii) the first purchase of Shares pursuant
to a tender or exchange offer (other than a tender or exchange offer made by the
Company); (iii) shareholder approval of a merger or consolidation of the Company
(other than a merger or consolidation in which the company is the surviving
corporation and which does not result in any change in the Shares), the sale or
disposition of all or substantially the Company's assets or a plan of
liquidation or dissolution of the Company; or (iv) the Board or a designated
committee in its sole discretion determines that a person (other than a person
who exercised a controlling influence as of the Long Term Incentive Plan's
effective date) directly or indirectly exercises a controlling influence over
the management or policies of the Company. The executive officers holding
affected options, the number of affected shares and the exercise price thereof
are as follows:
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Number of Shares
That Would Become
Exercisable under
Name Exercise Price These Provisions
- ---- -------------- ----------------
Lewis E. Christman, Jr. $.40 2 100,000
Edward B. Alexander $.25 1 5,000
$.40 2 25,000
$.75 1 12,000
$.5625 2 10,000
Michael J. Walters $.25 1 4,500
$.75 1 8,250
$.5625 2 10,000
Robert J. Martin $.25 1 5,000
$.40 2 25,000
$.75 1 12,000
$.5625 2 10,000
1 Options granted under the Amended Employee Stock Option Plan.
2 Options granted under the Long Term Incentive Plan.
In addition to the foregoing options, the executive officers of the Company
have other option grants at varying exercise prices that are currently vested
and exercisable at this time.
As described in its press release dated December 19, 1996, the Company
closed on a $15,360,000 long-term refinancing of its senior debt provided by
Franchise Finance Corporation of America ("FFCA"). The forms of Mortgage,
Assignment of Rents and Leases, Security Agreement and Fixture Filing between
the Company and FFCA Mortgage Corporation (the "Mortgagee") entered into in
connection with this refinancing include a provision under which the Mortgagee
may declare the obligations under such agreements immediately due and payable
upon certain transfers of the mortgaged property by the Company without the
Mortgagee's consent. Prohibited transfers include if the Company is party to a
merger or a voluntary or involuntary sale, conveyance, transfer or pledge of the
Company's stock pursuant to which an aggregate of more than 25% of its stock is
vested in a party or parties who were not shareholders as of the date of such
agreement, December 18, 1996. There can be no assurance that the Mortgagee will
not deem consummation of the Offer as triggering its ability to declare the
Company's obligations immediately due and payable under this provision or
whether the Mortgagee will grant its consent to the Offer. This summary is
qualified in its entirety by reference to the form of Mortgage, Assignment of
Rents and Leases, Security Agreement and Fixture Filing attached hereto as
Exhibit 4 and incorporated herein by reference.
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The Company leases a restaurant in Spring Hill, Hernando County, Florida,
one of its top restaurants in terms of net sales revenues, under a lease
agreement dated September 18, 1996 between the Company and CNL American
Properties Fund (the "Landlord"). This lease agreement provides that a change in
the ownership of the controlling interest of the Company constitutes an
assignment of the lease for which the Company must obtain the Landlord's prior
written consent, which the Landlord may not unreasonably withhold. The lease
agreement provides that the Landlord may withhold consent, without being deemed
unreasonable, to any proposed assignment where (i) the financial capacity of the
assignee or subtenant is materially less than that of the Company, (ii) the
assignee or subtenant does not intend to operate a nationally or regionally
recognized restaurant on the premises or (iii) the type of restaurant or the
operating history of the assignee or subtenant or of the type of restaurant
proposed reflects an inability to generate gross sales or potential sales growth
equal to that of the Company. There can be no assurance that the Offer will not
trigger this provision or that the Landlord will provide its prior written
consent. This summary is qualified in its entirety by reference to this lease
agreement which was filed as Exhibit 10.02 to the Company's Form 10-Q for the
fiscal quarter ended October 2, 1996 and incorporated herein by reference.
Except as set forth above in this Item 3, to the knowledge of the Company,
there are no other material contracts, agreements, arrangements or undertakings
and no actual or potential conflicts of interest, between the Company and (i)
its executive officers, directors or affiliates, or (ii) the Bidder, its
executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)-(b) Background. On December 26, 1996, the Bidder, the Bisco Industries,
Inc. Profit Sharing and Savings Plan and Glen F. Ceiley, President and a
director of the Bidder, filed a Schedule 13D with the Securities and Exchange
Commission (the "Commission") to report ownership of more than five percent (5%)
of the Shares. On December 30, 1996, Mr. Ceiley sent the Company a shareholder
proposal for inclusion in the Company's proxy statement for the 1997 Annual
Meeting of Shareholders, proposing that the Company's shareholders adopt an
amendment to the Company's Articles of Incorporation to provide that the Control
Share Act would not apply to control share acquisitions of the Shares (the
"Proposal"). On January 16, 1997, the Schedule 13D was amended to reflect that
the Bidder and affiliates owned 6.1% of the Shares.
In late January 1997, Lewis E. Christman, Jr., the Company's President and
Chief Executive Officer, telephoned Mr. Ceiley and invited him to attend the
next meeting of the Board. On February 11, 1997, Mr. Ceiley attended a Board
meeting, during which he discussed his intentions in acquiring Shares and
attended a presentation on the Company's operational results for the fourth
quarter. Mr. Ceiley also indicated to the Board that he was considering possible
business combinations but had no definitive plans at that time. Mr. Ceiley
stated that he believed the management of the Company was doing many things
right and that he had become interested in the Company because he was seeking a
small cap investment that would offer a good growth
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return. Mr. Ceiley told the Board that he was interested in acquiring additional
Shares but would not seek a more active role in the management of the Company.
In the Offer, the Bidder states that its strategies for the Company could
include, among other things, the disposition by the Company of its restaurant
operations or other changes in the Company's business, corporate structure,
capitalization, operation or management.
After Mr. Ceiley left this February meeting, the Board of Directors, among
other things, considered and approved the adoption of a shareholder rights plan,
subject to the review and execution of such plan by the rights agent, with a
record date of May 1, 1997, for determining shareholders entitled to receive
rights under such shareholder rights plan. Such a plan is designed to deter
coercive and unfair takeover tactics and is not intended to prevent an
acquisition of the Company on terms that represent fair value to all
shareholders.
On March 6, 1997, the Bidder commenced the Offer. On March 11, 1997, the
Board of Directors held a meeting to review the terms and conditions of the
Offer, discuss its plan of action with respect to evaluating the Offer, and
receive preliminary advice from the Company's legal advisors. At this meeting,
the Board of Directors authorized the Company's management to retain a financial
advisor to prepare a valuation of the Company and to engage a proxy solicitor to
assist in responding to the Offer and any proxy contest or consent solicitation
that might arise.
At a special meeting of the Company's Board of Directors held on March 18,
1997, the Board of Directors of the Company reviewed the valuation study
prepared for the Board by J.C. Bradford & Co., LLC ("J.C. Bradford"), financial
advisors to the Company, considered such other factors as it deemed relevant,
and considered the advice of the Company's legal counsel regarding its fiduciary
duties. After extensive discussion and due consideration of relevant factors,
including those discussed below, the Company's Board of Directors unanimously
determined to reject the Offer, based upon the Board's determination that the
$.90 per Share amount of the Offer is inadequate and the Offer is not in the
best interests of the Company and its shareholders.
Recommendation of the Board of Directors
Accordingly, the Board of Directors unanimously recommends that the
Company's shareholders reject the Offer and not tender their Shares pursuant to
the Offer. A letter to shareholders communicating the Board's determination and
recommendation and a press release relating thereto are filed as Exhibits 6 and
7 hereto and are incorporated herein by reference.
In reaching its determination and recommendation described above, the Board
of Directors considered a number of factors, including, without limitation, the
following:
(a) The Board considered the Company's business, assets, financial
condition and future prospects, the strategic direction of the
Company's business, current conditions in its segment of the
restaurant industry and the historical and current
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market prices for the Shares. The Board also considered that the
Company recently refinanced its long-term debt on favorable terms,
opened a new restaurant in January 1997 and is positioned to renew its
commitment to growth by the addition of new Ryan's Family Steak House
Restaurants.
The Board also considered that the Company's management team is highly
regarded by the Company's franchisor, Ryan's Family Steak Houses,
Inc., and lender, FFCA Mortgage Corporation. Both the franchisor and
the lender have advised the Company that they support the Company's
current management and strategic focus and that they would not
recommend that the Company's shareholders tender their Shares in
response to the Offer. The Board observed that pursuant to the terms
of its Franchise Agreement the exclusivity of its franchise rights in
North and Central Florida would be terminated upon the closing and
disposition of two or more restaurants by the Bidder. The Board
believes that the introduction of new management or additional
influences on management is not advisable at this time and could be
disruptive to the Company's relationship with its franchisor.
The Board also believes that, while its lender, FFCA Mortgage
Corporation, is comfortable with the Company's current management team
and business operations after conducting extensive due diligence
investigations in connection with its recent $15 million refinancing
of the Company, FFCA Mortgage Corporation is not familiar with Mr.
Ceiley or the Bidder. The Board believes that FFCA Mortgage
Corporation is concerned by the Bidder's lack of experience in the
restaurant industry. Accordingly, the Board is of the opinion that the
Bidder's plans for the Company could interfere with the Company's
beneficial relationship with its primary lender.
The Board noted that the Company's book value is $1.03 per Share and
that for the 30-day period ended March 13, 1997 the average daily
closing price for the Shares was $.88 per share. Management also
reported to the Board that a number of shareholders had contacted the
Company, expressed their support of the Company's current management,
stated that the offer was too low and indicated that they would not
tender their shares in response to the Offer.
The Board also considered the fact that the Offer is for only
2,600,000 shares and that the shareholders who would remain if the
Bidder is successful in his Offer would be left with a Company
possibly controlled by a person with no expertise in the restaurant
industry, little financial resources and no experience managing a
publicly-traded company. The Board expressed concern for the fact that
so little is known about the Bidder and its plans for the Company if
the Offer is successful.
The Board further determined that any change in management, the
disposition of restaurants or other significant operational change
contemplated by the Bidder
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would have a significantly adverse effect on the Company's
relationships with its employees, customers, suppliers and other
constituencies, including the communities that the Company serves and
in which its facilities are located.
(b) The Board discussed the lack of information on the Bidder's plans for
the Company and the Bidder's lack of experience or expertise in the
restaurant industry and franchised businesses and in managing
publicly-traded corporations. The Board noted that the Offer and the
Board's meeting with Mr. Ceiley provided little indication of the
Bidder's strategies for the Company. The Board observed that the
Bidder's financial data as set forth in the Offer indicated working
capital of only $3.189 million, indicating that it would not be in a
position to provide substantial financial resources to the Company or
to purchase substantially more Shares upon completion of the Offer.
The financial data in the Offer also indicated that in 1996 the Bidder
had net sales of only $30.4 million, net income of only $1.68 million,
up from $595,000 two years earlier, and relatively low margins. The
Board also had concerns about the depth of the Bidder's management
team which consists of only three people according to its Offer. The
Board further noted that proper management of the Company requires
expertise in restaurant site selection, managing a substantial number
of employees, oversight of extremely high cost and highly perishable
food inventories, anti-fraud and theft cash control systems,
maintenance of uniform quality standards across retail outlets and
varying shifts of operation, and supervision of customer service,
cleanliness and other issues arising in the food service business.
Based on the Offer, which stated that the Bidder's principal executive
offices are in California and its principal business is the
distribution of fasteners and electronic components, the Board
concluded that the Bidder does not appear to have the business
expertise necessary to add value to the Company's full-service
restaurant operations in Florida.
(c) Management also advised the Board that they believe the Company is
stronger now than at any time in the last five years. The Company
recently closed on long-term financing that significantly lowered its
debt service, eliminated restrictive covenants and should permit it to
engage in the construction of new restaurants. Management reported
that the Company has made a firm offer to acquire a new restaurant
site and that it plans to open its second new restaurant this year in
the summer of 1997. Management reported that it believes the Offer is
inadequate and does not accurately reflect the value of the Company.
Management noted that ownership of approximately 30% of the
outstanding Shares would give the Bidder de facto control over the
Company and expressed concern that the Offer did not include a
"control premium." Management also expressed concern regarding the
Bidder's lack of experience in the restaurant industry, lack of
experience managing a publicly-traded company, lack of financial
resources and failure to disclose its plans regarding the Company.
Management also noted that the Company has
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approximately 1400 employees in 26 separate locations and that they
would apparently lose their jobs if the Bidder proceeded with plans to
dispose of restaurant operations as alluded to in the Offer.
(d) The Board also considered the valuation study prepared by J.C.
Bradford, the Company's financial advisor, which showed that the $.90
per Share value of the Company represented by the Offer is within the
range of value of the Company. In determining its valuation range for
the Company, J.C. Bradford employed five (5) different valuation
methodologies, including review of comparable public company
multiples, review of comparable mergers and acquisitions, preparation
of a discounted cash flow analysis, estimation of break-up value and
calculation of book value.
In reviewing comparable public company multiples, J.C. Bradford
reviewed the multiples of public companies with substantial operations
in the Southeastern United States and customer profiles similar to
those of the Company. These included: Bob Evans Farms; IHOP Corp.;
Shoneys, Inc.; Ryan's Family Steak Houses, Inc.; Piccadilly
Cafeterias, Inc.; Morrison Fresh Cooking, Inc.; Perkins Family
Restaurants; Vicorp Restaurants, Inc.; and Lubys Cafeterias, Inc.
In reviewing comparable mergers and acquisitions, J.C.Bradford
reviewed the consideration paid in the acquisition of similarly sized
restaurant companies in the Southeastern United States. These
included: Wendy's International, Inc. acquisition of Volunteer
Capital-Wendy's; Burger King Corp. acquisition of Davgar
Restaurants-Burger King; Apple South acquisition of Marcus Corp-
Applebees; American Family Restaurants acquisition of Denwest
Restaurant Corp.; Applebee's International, Inc. acquisition of Pub
Venture of New England, Inc.; DavCo Restaurants, Inc. acquisition of
Southern Hospitality Corp.; Outback Steakhouse, Inc. acquisition of
Connerty and Associates; AppleSouth acquisition of Apple Tenn-Flo,
L.P.; and Outback Steakhouse, Inc. acquisition of an undisclosed
Louisiana Outback.
In preparing its discounted cash flow analysis, J.C. Bradford used the
operating Cash Flow EBITDA Exit Multiple method and the Free Cash Flow
Net Income Exit Multiple method.
In estimating break-up value, J.C. Bradford relied on 1994 appraisals
of the Company's real estate properties, conducted by an independent
appraiser, and on the Company's preliminary financial statements for
the fiscal year ended January 1, 1997.
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In calculating book value, J.C. Bradford relied on the Company's
preliminary financial statements for the fiscal year ended January 1,
1997.
(e) The Board considered the opinion of the Company's management that the
terms of the Offer are inadequate. Management's opinion was based on
its knowledge of the Company's business, its view as to the long-term
financial plan and future prospects of the Company, its judgment as to
the value of the Company's assets, its opinion concerning the
Company's financial condition, and current conditions in the family
steak house restaurant industry.
(f) The Board of Directors also discussed the likelihood that the Company
could consider and consummate transactions with other parties on more
advantageous terms to the Company and its shareholders and its
determination to explore a variety of other alternatives to the Offer.
The Board observed that, given additional time, it could consider and
negotiate another transaction with a different party that might be
willing to pay a higher price per Share, to provide management
expertise in the family restaurant industry, and to contribute greater
financial resources than the Bidder.
(g) The Board noted the Bidder's willingness to prepare the Offer, expend
funds to retain legal counsel and other advisors to effectuate the
Offer and take other actions and determined that it should explore
further negotiations with the Bidder to better determine the Bidder's
plans for the Company and to attempt to increase the price per Share
in the Offer.
The foregoing discussion of the information and factors considered by the
Company's Board of Directors is not intended to be exhaustive. In view of the
wide variety of factors considered, both positive and negative, the Company's
Board of Directors did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company's
Board of Directors viewed its position and recommendation as being based on the
totality of the information presented to, and considered by, it.
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No Action with Respect to the Control Shares Act
The Offer is conditioned upon, among other things, the inapplicability of
the Florida Control Share Act to the Shares acquired by the Bidder. At its March
18, 1997 meeting, the Board determined to take no action which would render the
Control Shares Act inapplicable to the Shares.
Adoption of a Shareholder Rights Plan
At the March 18, 1997, meeting, the Board of Directors also decided to
accelerate the record date to March 19, 1997 for determining shareholders
entitled to a dividend distribution of rights under the previously adopted
shareholder rights plan. The Board believes that the shareholder rights plan
will provide the Company with additional time to negotiate an increase in the
Offer, to consider alternatives to the Offer, and to insure that any acquisition
of the Company occurs on terms that provide fair value to the shareholders. The
following summary of terms and conditions of the shareholder rights plan is
qualified in its entirety by reference to the Rights Agreement between the
Company and ChaseMellon Shareholder Services, Inc. which is attached as Exhibit
1 to the Company's Registration Statement on Form 8-A dated March 19, 1997 and
is hereby incorporated by reference.
Under the shareholder rights plan, the Company will issue one right for
each Share currently outstanding or newly issued prior to a Distribution Date
(as defined below). However, shareholders will not receive separate certificates
for the rights until the Distribution Date. Upon the occurrence of the events
enumerated below, each right will entitle the holder to purchase one-hundredth
of one share of Junior Participating Preferred Stock of the Company at a price
of $5.00 per one-hundredth of a share, subject to adjustment. The rights will be
exercisable and will trade separately from the Company's common stock upon the
earlier to occur of the following (a "Distribution Date"):
(a) the tenth business day after the date of public announcement that a
person or group of affiliated or associated persons have become the
beneficial owners of 15% or more of the outstanding Shares or voting
securities representing 15% or more of the total voting power (such a
person is defined as an "Acquiring Person"), or
(b) the tenth business day or such later date determined by the Board of
Directors after the first public announcement of a tender or exchange
offer, which, upon consummation, would result in a person or a group
being the beneficial owner of 15% or more of the outstanding Shares
(or 15% or more of the total voting power), or
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(c) the tenth business day after a majority of the Board who are not
officers of the Company have determined that a person is an Adverse
Person.
In light of the tender offer filed by Bisco on March 6, 1997, the Board
elected to postpone the Distribution Date which would have otherwise been
triggered under paragraph (b) above until April 15, 1997.
The plan defines an "Adverse Person" as a person who alone or together with
its associates and affiliates has become the beneficial owner of 10% of the
outstanding Shares or voting securities representing 10% of the total voting
power and the Board has determined, after reasonable inquiry and investigation,
that (i) such beneficial ownership is intended to cause the Company to
repurchase the common stock or voting securities beneficially owned by such
person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide the person with
short-term financial gain not serving the interests of the shareholders, or (ii)
the beneficial ownership is causing or reasonably likely to cause a material
adverse impact on the business or prospects of the Company to the detriment of
the Company's shareholders.
Until the Distribution Date, the rights will be transferred with and only
with the Shares. Separate certificates for the rights will be issued as soon as
practicable following the Distribution Date to holders of record of Shares as of
the Distribution Date. The rights will then begin trading separately from the
Shares.
Under the plan, if (i) a person becomes the beneficial owner of 15% or more
of the then outstanding Shares or voting power (except pursuant to certain
business combinations discussed below or an offer for all outstanding Shares and
all other voting securities which the independent and disinterested directors of
the Company determine to be fair to and otherwise in the best interests of the
Company and its shareholders) or (ii) any person is determined to be an Adverse
Person (either (i) or (ii) being a "Flip-in Event"), each holder of a right
(with the exception of an Adverse or Acquiring Person) will thereafter have the
right to receive, upon exercise, Shares having a value equal to no less than two
times the
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exercise price of the right. However, rights are not exercisable following the
occurrence of a Flip-in Event until such time as the rights are no longer
redeemable by the Company.
In the event of certain business combinations involving the Company, each
holder of a right may receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price of the right.
The Company may redeem each right for $0.001 at any time before the
earliest of (i) the tenth day after a person or group becomes an Acquiring
Person, (ii) the tenth day following the Board's determination that a person is
an Adverse Person, or (iii) March 20, 2007.
Revisions to the Company's Bylaws.
The Board of Directors also adopted Amended and Restated Bylaws of the
Company (the "Bylaws") in response to the Offer. The following summary of the
revisions to the Bylaws is qualified in its entirety by reference to the Amended
and Restated Bylaws which are attached as Exhibit 4 to the Company's
Registration Statement on Form 8-A dated March 19, 1997 and hereby incorporated
by reference.
Among the revisions to the Bylaws, the Board adopted a provision to the
Bylaws to provide that no business may be brought before an annual meeting of
shareholders by a shareholder unless, among other conditions, such shareholder
provides timely notice to the Company. To be timely, a shareholder's notice to
the Company must be delivered to or mailed and received at the principal
executive offices of the Company not less than sixty (60) days nor more than
ninety (90) days prior to the anniversary date of the immediately preceding
annual meeting of shareholders.
Likewise, in order for a shareholder of the Company to nominate persons for
election to the Board of Directors, in addition to other applicable
requirements, such shareholder must give timely notice thereof to the Company.
To be timely, a shareholder's notice to the Company must be delivered to or
mailed and received at the principal executive offices of the Company (a) in the
case of an annual meeting of shareholders, not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of shareholders and (b) in the case of a special
meeting of shareholders called for the purpose of electing directors, not later
than the close of business on the tenth (10th) day following the day on which
notice of the date of the special meeting of shareholders was mailed or public
disclosure of the date of the special meeting of shareholders was made,
whichever first occurs.
The provisions described above prescribing the timing and manner for
shareholder proposals and nominations for the election of directors are intended
to give the Company greater advance notice of such proposals and nominations and
a better opportunity to assess the validity and adequacy of such proposals or
nominations.
The revisions to the Bylaws adopted by the Board of Directors at the March
18, 1997 meeting also include provisions to establish a classified board of
directors. The classified
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structure of the Board of Directors is designed to promote stability in
management, since it limits the ability to effect a rapid change of the persons
who make up the Board of Directors. Under the revised Bylaws, the Company's
Board of Directors is divided into three classes: Class I, Class II, and Class
III. At the 1997 annual meeting of shareholders of the Company, Class I
directors shall be initially elected for a three-year term, Class II directors
for a two-year term and Class III directors for a one-year term. At each
succeeding annual meeting of the shareholders of the Company, commencing in
1998, the directors elected to succeed those directors whose terms then expire
shall belong to the same class as the directors they succeed and shall hold
office until the third succeeding annual meeting of shareholders or until their
earlier death, resignation or removal from office.
Another revision to the Bylaws provides for a supermajority (80%) vote of
directors to fill any vacancy on the Board of Directors. The requirement that
vacancies can only be filled by 80% of directors is intended to secure and
maintain the benefits of the classified board of directors. Accordingly, because
of this "supermajority" vote requirement, a shareholder that has acquired enough
shares to control the election process cannot circumvent the classified board
provision and stack the board with its designees. The revised Bylaw states that
any vacancy occurring on the Board of Directors, including any vacancy created
by reason of an increase in the number of directors, may be filled only by the
affirmative vote of 80% of the directors then in office. A director elected to
fill a vacancy shall hold office until the next shareholders' meeting at which
directors are elected.
The revisions to the Bylaws also authorize the Company to appoint an
inspector of elections and an inspector of written consents, for the purpose of
determining the validity and effect of proxies, consents and revocations and
counting and tabulating all votes, consents, waivers and releases, among other
functions. An inspector of elections or of written shareholder consents provides
an independent ministerial review of the validity and tabulation of such
shareholder votes, consents and revocations to determine when the minimum number
of votes that would be necessary to take the applicable corporate action have
been submitted.
The Board of Directors believes that these Bylaw revisions may help protect
the Company and its shareholders from coercive tactics proposed by the Bidder or
other persons seeking to exert control over the Company.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
By Letter Agreement dated March 13, 1997, the Board and J.C. Bradford
performed a valuation study of The Company and render its good faith estimate of
the fair value of the Shares. In connection therewith, the Company has agreed to
pay J.C. Bradford a fee of $25,000 payable upon the rendering of the valuation.
In addition, the Company has agreed to pay all reasonable fees and disbursements
of J.C. Bradford's counsel and all of J.C. Bradford's reasonable travel and
out-of-pocket expenses arising out of the Company's engagement, provided that
such expenses will not exceed $1,000 without the Company's
- 13 -
<PAGE>
prior written consent. The Company has also agreed to indemnify J.C. Bradford
against certain expenses and liabilities in connection with its engagement.
The Board has engaged Corporate Investor Communications, Inc. ("CIC") to
provide certain services in connection with the Offer and any proxy or consent
solicitation and has agreed to pay CIC a fee of $25,000 plus reasonable
disbursements which may include telephone charges, printing, postage, filing
reports, courier charges, data transmissions, and other expenses approved by the
Company.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the Company's knowledge, the only transactions in the Shares
effected during the past sixty (60) days by the Company or its executive
officers, directors, affiliates or subsidiaries were the exercise of options to
purchase 17,130 Shares each at an exercise price of $.01 per Share by each of
directors Richard M. Gray and Joseph M. Glickstein on February 12, 1997.
(b) To the Company's knowledge, none of the Company's directors, executive
officers, affiliates and subsidiaries intend to tender their Shares to the
Bidder pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) The Company has undertaken negotiations in response to the Offer that
are in the preliminary stages which relate to or would result in:
(1) any extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of Shares by or of the
Company; or
(4) a material change in the present capitalization or dividend
policy of the Company.
(b) There are no transactions, board resolutions, agreements in principle,
or a signed contract in response to the Offer which relates to or would result
in one of the matters referred to in item 7(a)(1), (2), (3) or (4).
- 14 -
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Company Proxy Statement dated May 8, 1996.+
Exhibit 2 - Employment Agreement with Lewis E. Christman, Jr.+
Exhibit 3 - Employment Agreement with Edward B. Alexander+
Exhibit 4 - Consulting Agreement with Robert J. Martin+
Exhibit 5 - Form of Mortgage, Assignment of Rents and Leases, Security
Agreement and Fixture Filing
Exhibit 6 - Lease Agreement dated September 18, 1996 with CNL American
Properties Fund (incorporated by reference)
Exhibit 7 - Form of Letter to Shareholders*
Exhibit 8 - Press Release dated March 19, 1997*+
* mailed to shareholders
+ to be filed by amendment
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 19, 1997 FAMILY STEAK HOUSES OF FLORIDA, INC.
By:/s/ Lewis E. Christman, Jr.
----------------------------------
Lewis E. Christman, Jr., President
and Chief Executive Officer
- 15 -
<PAGE>
NOTICE OF WITHDRAWAL
for
Shares of Common Stock
of
Family Steak Houses of Florida, Inc.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME ON FRIDAY, APRIL 4, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
This Notice of Withdrawal must be completed, signed, guaranteed by an eligible
institution and returned to:
HARRIS TRUST COMPANY OF NEW YORK
By mail: By Overnight Courier: By Hand:
Wall Street Station 77 Water Street, 4th Flr. Receive Window
P.O. box 1023 New York, NY 10005 77 Water Street
New York, NY 10268-1023 New York, NY 10005
By Facsimile:
(212) 701-7636 or 7640
To confirm receipt of your Notice of Withdrawal:
(212) 701-7624
LADIES AND GENTLEMAN:
The undersigned hereby withdraws the following shares of common stock, par value
$0.01 per share (the "Shares") of Family Steak Houses of Florida, Inc. a Florida
corporation tendered to Bisco Industries, Inc., an Illinois corporation (the
"Purchaser") pursuant to the Purchaser's offer to purchase up to 2,600,000
Shares at a price of $0.90 per Share, net to the tendering shareholder in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated March 6, 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TO BE WITHDRAWN
- ------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Certificate(s) Withdrawn
(Attach additional lists if necessary)
- ------------------------------------------------------ -----------------------------------------------------
Total Number
of Shares Number of
Certificate Represented by Shares
Number(s) Certificate(s) withdrawn *
- ------------------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
----------------- ----------------- -----------------
----------------- ----------------- -----------------
----------------- ----------------- -----------------
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Total Shares
- ------------------------------------------------------ ----------------- ----------------- -----------------
</TABLE>
* Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being withdrawn hereby
- --------------------------------------------------------------------------------
If you have any questions, please call our information agent, Corporate Investor
Communications, Inc. toll-free at (800) 932-8498
NEEDS TO BE SIGNED AND COMPLETED ON REVERSE SIDE
<PAGE>
PLEASE COMPLETE AND SIGN THE BOX BELOW AND HAVE IT GUARANTEED BY AN ELIGIBLE
INSTITUTION.
================================================================================
PLEASE SIGN HERE
Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s). If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or a corporation or another person acting in a
fiduciary or representative capacity, please set forth full title.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated: ________________ , 1997
Name: __________________________________________________________________________
(Please Print)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
(Include zip code)
Area Code(s) and
Telephone Number(s) ____________________________________________________________
GUARANTEE OF SIGNATURE(S)
Name of Firm: ____________________________ _____________________________________
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
(Please Print)
Title: _________________________________________________________________________
Address:________________________________________________________________________
(Include zip code)
Area Code(s) and
Telephone Number(s) ____________________________________________________________
Dated: ________________ , 1997
================================================================================
If you have any questions, please call our information agent, Corporate Investor
Communications, Inc. toll-free at (800) 932-8498
RETURN TO:
Lawyers Title Insurance Corporation
40 East Mitchell Drive
Suite 100
Phoenix, Arizona 85012
Attention: Sheila Layne
THIS INSTRUMENT PREPARED BY:
Kutak Rock
Sixteenth Floor
3300 North Central Avenue
Phoenix, Arizona 85012
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND
FIXTURE FILING (this "Mortgage") is made as of _______ , 1996 between FAMILY
STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("Debtor"), whose address
is 2113 Florida Boulevard, Neptune Beach, Florida 32266 and FFCA MORTGAGE
CORPORATION, a Delaware corporation ("Mortgagee"), whose address is 17207 North
Perimeter Drive, Scottsdale, Arizona 85255.
PRELIMINARY STATEMENT:
The capitalized terms used in this Mortgage, if not elsewhere defined
herein, have the meanings set forth in Article I. Debtor holds fee simple
interest in the Premises, subject to Permitted Exceptions. Debtor is executing
this Mortgage for the purpose of granting the interest of Debtor in and to the
Mortgaged Property (as defined in the Granting Clauses below) as security for
the payment of the Obligations. The Mortgaged Property shall be and remain
subject to the lien of this Mortgage and shall constitute security for the
Obligations so long as the Obligations shall remain outstanding.
GRANTING CLAUSES:
Debtor, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, by
these presents does hereby create a security interest in, mortgage, grant,
bargain, sell, assign, pledge, give, transfer, set over and convey unto
Mortgagee and to its successors and assigns WITH POWER OF SALE, for the
<PAGE>
benefit of Mortgagee, all of Debtor's estate, right, title and interest in, to
and under any and all of the following property (the "Mortgaged Property"),
subject only to Permitted Exceptions:
Premises, Rents and Derivative Interests
The Premises; all rents, issues, profits, royalties, income and other
benefits derived from the Premises (collectively the "Rents"); all estate,
right, title and interest of Debtor in and to all leases or subleases covering
the Premises or any portion thereof now or hereafter existing or entered into,
including, without limitation, all cash or security deposits, advance rentals
and deposits or payments of similar nature; all right, title and interest of
Debtor in and to all options to purchase or lease the Premises or any portion
thereof or interest therein, and any greater estate in the Premises owned or
hereafter acquired; all interests, estate or other claims, both in law and in
equity, which Debtor now has or may hereafter acquire in the Premises; all
easements, rights-of-way and rights used in connection therewith or as a means
of access thereto, and all tenements, hereditaments and appurtenances thereof
and thereto, and all water rights and shares of stock evidencing the same; all
right, title and interest of Debtor, now owned or hereafter acquired, in and to
any land lying within the right-of-way of any street, open or proposed,
adjoining the Premises and any and all sidewalks, alleys and strips and gores of
land adjacent to or used in connection with the Premises;
Personal Property
All right, title and interest of Debtor in and to all tangible personal
property now owned or hereafter acquired by Debtor and now or at any time
hereafter located on or at the Premises or used in connection therewith,
including, without limitation, all goods, machinery, tools, equipment, lobby and
all other indoor and outdoor furniture, books, records, manuals, computer
systems, furnishings, inventory, rugs, and maintenance and other supplies (the
"Personal Property");
Intangibles
All of Debtor's interest in all existing and future accounts, contract
rights, general intangibles, files, books of account, agreements, franchise, if
assignable, license and/or area development agreements, permits, licenses and
certificates necessary or desirable in connection with the acquisition,
ownership, leasing, construction, operation, servicing or management of the
Mortgaged Property, whether now existing or entered into or obtained after the
date hereof, all existing and future names under or by which the Mortgaged
Property or any portion thereof may at any time be operated or known, all rights
to carry on business under any such names or any variant thereof, and all
existing and future telephone numbers and listings, advertising and marketing
materials, trademarks and good will in any way relating to the Mortgaged
Property or any portion thereof; and
2
<PAGE>
Claims and Awards
All the estate, interest, right, title, other claim or demand, including
claims or demands with respect to the proceeds of insurance in effect with
respect thereto, which Debtor now has or may hereafter acquire in the Mortgaged
Property, and any and all awards made for the taking by eminent domain, or by
any proceeding or purchase in lieu thereof, of the whole or any part of the
Mortgaged Property, including, without limitation, any awards resulting from a
change of grade of streets and awards for severance damages, and Debtor hereby
authorizes, directs and empowers Mortgagee, at its option, on Debtor's behalf,
or on behalf of the successors or assigns of Debtor, to adjust, compromise,
claim, collect and receive such proceeds and to give proper receipts and
acquittances therefor.
TO HAVE AND TO HOLD the Mortgaged Property hereby granted or mortgaged or
intended to be granted or mortgaged, unto Mortgagee, and its successors, heirs
and assigns, upon the terms, provisions and conditions set forth herein.
THIS MORTGAGE SHALL SECURE THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS (the
"Obligations"):
(i) Payment of indebtedness evidenced by the Note together with all
extensions, renewals, amendments and modifications thereof;
(ii) Payment of all other indebtedness and performance of all other
obligations and covenants of Debtor contained in any Loan Document,
together with any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby or thereby;
(iii) Payment of all indebtedness and performance of all other
obligations and covenants under any other agreement or instrument,
including, without limitation, promissory notes and guaranties, between,
among or by (1) Debtor any general or limited partnership organized in
accordance with the laws of any state of the United States or its
territories of which Debtor or any partner, officer, director or
shareholder of Debtor is a holder of a general or limited partnership
interest, or any corporation or other entity affiliated with Debtor or by
any partner, officer, director or shareholder of Debtor (the "Debtor
Entities"), and, or for the benefit of, (2) Mortgagee or any corporation,
partnership, joint venture, limited liability company, association or other
form of entity affiliated with Mortgagee (the "Mortgagee Entities"); and
(iv) Payment of all other sums, with interest thereon, which may
hereafter be owed by Debtor or its successors or assigns pursuant to the
Loan Documents to Mortgagee or its successors or assigns.
3
<PAGE>
It is the intention of the parties hereto that the Mortgaged Property shall
secure all of the Obligations presently or hereafter owed, and that the priority
of the security interest created by this Mortgage for all such Obligations shall
be controlled by the time of proper recording of this Mortgage. In addition,
this Mortgage shall also secure unpaid balances of advances made with respect to
the Mortgaged Property for the payment of taxes, assessments, insurance
premiums, costs or any other advances incurred for the protection of the
Mortgaged Property, together with interest thereon until paid at the rate
provided for in Section 2.15 hereof, all as contemplated in this Mortgage, all
of which shall constitute a part of the Obligations. This paragraph shall serve
as notice to all persons who may seek or obtain a lien on the Mortgaged Property
subsequent to the date of recording of this Mortgage, that until this Mortgage
is released, any debt owed Mortgagee by Debtor, including advances made
subsequent to the recording of this Mortgage, shall be secured with the priority
afforded this Mortgage as recorded.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Note and the other
Loan Documents are to be executed, delivered and secured and that the Mortgaged
Property is to be held and disposed of by Mortgagee, upon and subject to the
provisions of this Mortgage.
ARTICLE I
DEFINED TERMS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified (such definitions to be applicable equally to
singular and plural nouns and verbs of any tense):
"Code" means the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101 et
seq., as amended.
"De Minimis Amounts" shall mean, with respect to any given level of
hazardous substance or solid waste, that level or quantity of hazardous
substance or solid waste in any form or combination of forms which does not
constitute a violation of any Environmental Laws and is customarily employed in,
or associated with, similar businesses located in the county in which the
Mortgaged Property is located.
"Environmental Indemnity Agreement" means that certain Environmental
Indemnity Agreement dated as of the date of this Mortgage executed by Debtor for
the benefit of Mortgagee with respect to the Premises.
"Environmental Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Materials, relating to
4
<PAGE>
liability for or costs of Remediation or prevention of Releases or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. "Environmental Laws" includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the
Resource Conservation and Recovery Act (including but not limited to Subtitle I
relating to underground storage tanks); the Solid Waste Disposal Act; the Clean
Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe
Drinking Water Act; the Occupational Safety and Health Act; the Federal Water
Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act;
the Endangered Species Act; the National Environmental Policy Act; and the River
and Harbors Appropriation Act. "Environmental Laws" also includes, but is not
limited to, any present and future federal, state and local laws, statutes,
ordinances, rules, regulations and the like, as well as common law: conditioning
transfer of property upon a negative declaration or other approval of a
governmental authority of the environmental condition of the property; requiring
notification or disclosure of Releases or other environmental condition of the
Mortgaged Property to any governmental authority or other person or entity,
whether or not in connection with transfer of title to or interest in property;
imposing conditions or requirements in connection with permits or other
authorization for lawful activity; relating to nuisance, trespass or other
causes of action related to the Mortgaged Property; and relating to wrongful
death, personal injury, or property or other damage in connection with any
physical condition or use of the Mortgaged Property.
"Franchisor" means Ryan's Properties, Inc., a Delaware corporation, or its
successors.
"Hazardous Materials" means (i) any toxic substance or hazardous waste,
substance or related material, or any pollutant or contaminant; (ii) radon gas,
asbestos in any form which is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment which contains dielectric fluid
containing levels of polychlorinated biphenyls in excess of federal, state or
local safety guidelines, whichever are more stringent, or any petroleum product;
(iii) any substance, gas, material or chemical which is or may be defined as or
included in the definition of "hazardous substances," "toxic substances,"
"hazardous materials," hazardous wastes" or words of similar import under any
Environmental Laws; and (iv) any other chemical, material, gas or substance the
exposure to or release of which is or may be prohibited, limited or regulated by
any governmental or quasi-governmental entity or authority that asserts or may
assert jurisdiction over the Mortgaged Property or the operations or activity at
the Mortgaged Property, or any chemical, material, gas or substance that does or
may pose a hazard to the health and/or safety of the occupants of the Mortgaged
Property or the owners and/or occupants of property adjacent to or surrounding
the Mortgaged Property.
"Indemnified Parties" means Mortgagee and any person or entity who is or
will have been involved in the origination of the loan evidenced by the Note
(the "Loan"), any person or
5
<PAGE>
entity who is or will have been involved in the servicing of the Loan, any
person or entity in whose name the encumbrance created by this Mortgage is or
will have been recorded, persons and entities who may hold or acquire or will
have held a full or partial interest in the Loan (including, but not limited to,
investors or prospective investors in the securities contemplated by Section
5.18, as well as custodians, trustees and other fiduciaries who hold or have
held a full or partial interest in the Loan for the benefit of third parties),
as well as the respective directors, officers, shareholders, partners, members,
employees, agents, servants, representatives, contractors, subcontractors,
affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including but not limited to any other person or entity who holds
or acquires or will have held a participation or other full or partial interest
in the Loan or the Mortgaged Property, whether during the term of the Loan or as
a part of or following a foreclosure of the Loan and including, but not limited
to, any successors by merger, consolidation or acquisition of all or a
substantial portion of Mortgagee's assets and business).
"Loan Agreement" means the Loan Agreement dated as of even date herewith
between Debtor and Mortgagee.
"Loan Documents" means this Mortgage, the Note, the Environmental Indemnity
Agreement, the Loan Agreement and such other notes, deeds of trust or mortgages
and other documents or instruments contemplated thereby, all as amended and
supplemented.
"Losses" means any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees and other costs of defense).
"Note" means the promissory note dated as of even date herewith in the
amount of $1,300,000 executed by Debtor and payable to Mortgagee which is
secured by this Mortgage and any amendments, extensions or modifications
thereof.
"Permitted Exceptions" means those exceptions to title to the Premises
which have been approved in writing by Mortgagee.
"Premises" means the parcel or parcels of real estate legally described in
Exhibit A attached hereto, all rights, privileges and appurtenances therewith
and all buildings, fixtures and other improvements now or hereafter located on
such real estate (whether or not affixed to the real estate).
6
<PAGE>
"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
"Remediation" means any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Material, any actions to prevent, cure or mitigate any Release,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or any evaluation
relating to any Hazardous Materials.
"Reports" means the phase I environmental reports (and phase II
environmental reports if the same are recommended by such phase I reports,
respectively) to be prepared regarding each of the Premises, which Reports shall
be satisfactory in form and substance to FFCA in its sole discretion.
"Restoration" means the restoration, replacement or rebuilding of the
Premises, or any part thereof, as nearly as possible to its value, condition and
character immediately prior to any damage, destruction or Taking (as defined in
Section 3.01 hereof).
"State" means the State of Florida.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF DEBTOR
Debtor hereby represents, warrants, covenants and agrees as follows until
this Mortgage has been discharged:
Section 2.01. Payment of the Note. Debtor shall punctually pay, or cause to
be paid, the principal, interest and all other sums to become due in respect of
the Note and the Loan Documents in accordance with the Note and the Loan
Documents.
Section 2.02. Title to the Mortgaged Property. Debtor has good and
marketable fee simple title to the Mortgaged Property, free and clear of all
liens, encumbrances, charges and other exceptions to title, except Permitted
Exceptions. Debtor has and shall have full power and lawful authority to grant
the Mortgaged Property to Mortgagee in the manner and form herein done or
intended, preserve its title to its interest in the Mortgaged Property, subject
only to Permitted Exceptions, and forever warrant and defend the same to
Mortgagee against the claims of all persons. This Mortgage constitutes a valid
first lien upon and security interest in the Mortgaged Property.
7
<PAGE>
Section 2.03. Organization and Status of Debtor; Enforceability. (a) Debtor
has been duly organized or formed, is validly existing and in good standing
under the laws of its state of incorporation or formation and is qualified as a
foreign corporation, partnership or limited liability company to do business in
any jurisdiction where such qualification is required. Debtor is not a "foreign
corporation", "foreign partnership", "foreign trust" or "foreign estate", as
those terms are defined in the Internal Revenue Code and the regulations
promulgated thereunder. Debtor's United States tax identification number is
correctly set forth on the signature page of this Mortgage. The persons who have
executed this Mortgage on behalf of Debtor are duly authorized to do so.
(b) This Mortgage constitutes the legal, valid and binding obligation of
Debtor, enforceable against Debtor in accordance with its terms.
Section 2.04. Litigation; Absence of Breaches or Defaults. (a) Except as
set forth on Exhibit B (the "Litigation"), there are no suits, actions,
proceedings or investigations pending or threatened against or involving Debtor
or the Mortaged Property before any court, arbitrator, or administrative or
governmental body. If any or all of the Litigation is resolved unfavorably to
Debtor, such resolution will not result in any material adverse change in the
contemplated business, condition or worth or operations of Debtor or the
Mortgaged Property.
(b) Debtor is not, and the execution, delivery and performance of this
Mortgage and the documents, instruments and agreements provided for herein will
not result, in any breach of or default under any other document, instrument or
agreement to which Debtor is a party or by which Debtor, the Mortgaged Property
or any of Debtor's property is subject or bound.
Section 2.05. Franchisor Provisions; Licenses and Permits. (a) Debtor have
entered into a franchise, license and/or area development agreement with
Franchisor for conduct of the business at the Mortgaged Property. Such
franchise, license and/or area development agreement is valid, binding and in
full force and effect, permits Debtor to operate a Franchisor's restaurant on
the Mortgaged Property and has a term which, upon exercise by Debtor of its
renewal rights, will not expire prior to the scheduled maturity date of the
Note.
(b) Debtor has obtained all required licenses and permits, both
governmental and private, to use and operate the Mortgaged Property in the
intended manner.
Section 2.06. Financial Condition; Information Provided to Mortgagee. The
financial statements, all financial data and all other documents and information
heretofore delivered to Mortgagee by or with respect to Debtor and/or the
Mortgaged Property in connection with this Mortgage and/or relating to Debtor
and/or the Mortgaged Property are true, correct and complete in all material
respects, and there have been no amendments to such financial statements,
financial data and other documents and information since the date such financial
8
<PAGE>
statements, financial data, documents and other information were prepared or
delivered to Mortgagee, and no material adverse change has occurred to any such
financial statements, financial data, documents and other information not
disclosed in writing to Mortgagee.
Section 2.07. Recording. Debtor shall, upon the execution and delivery
hereof and thereafter from time to time, take such actions as Mortgagee may
request to cause this Mortgage, each supplement and amendment to such instrument
and financing statements with respect thereto and each instrument of further
assurance (collectively, the "Recordable Documents") to be filed, registered and
recorded as may be required by law to publish notice and maintain the first
security interest hereof upon the Mortgaged Property and to publish notice of
and protect the validity of the Recordable Documents. Debtor shall, from time to
time, perform or cause to be performed any other act and shall execute or cause
to be executed any and all further instruments (including financing statements,
continuation statements and similar statements with respect to any of said
documents) requested by Mortgagee for carrying out the intention of, or
facilitating the performance of, this Mortgage. If Debtor shall fail to comply
with this Section, Mortgagee shall be and is hereby irrevocably appointed the
agent and attorney-in-fact of Debtor to comply therewith (including the
execution, delivery and filing of such financing statements and other
instruments), which appointment is coupled with an interest, but this sentence
shall not prevent any default in the observance of this Section from
constituting an Event of Default. To the extent permitted by law, Debtor shall
pay or cause to be paid recording taxes and fees incident thereto and all
expenses, taxes and other governmental charges incident to or in connection with
the preparation, execution, delivery or acknowledgment of the Recordable
Documents, any instruments of further assurance and the Note.
Section 2.08. Use; Maintenance and Repair. (a) Debtor shall use the
Mortgaged Property solely for the operation of a restaurant in accordance with a
franchise, license and/or area development agreement with Franchisor and for no
other purpose. Except as set forth below, Debtor shall at all times while this
Mortgage is in effect occupy the Mortgaged Property and diligently operate its
business on the Mortgaged Property. Debtor may cease diligent operation of
business for a period not to exceed 90 days and may do so only once within any
five-year period while this Mortgage is in effect. If Debtor does discontinue
operation pursuant to this Section, Debtor shall (i) give written notice to
Mortgagee 60 days prior to the day Debtor ceases operation, (ii) provide
adequate protection and maintenance of the Mortgaged Property during any period
of vacancy and (iii) pay all costs necessary to restore the Mortgaged Property
to their condition on the day operation of the business ceased at such time as
the Mortgaged Property is reopened for Debtor's business operations or other
substituted use. Notwithstanding anything herein to the contrary, Debtor shall
pay monthly the principal and interest due under the Note during any period in
which Debtor discontinues operation.
Debtor shall not, by itself or through any lease or other type of transfer,
convert the Premises to an alternative use or concept while this Mortgage is in
effect without Mortgagee's consent, which consent shall not be unreasonably
withheld. Mortgagee may consider any or all
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of the following in determining whether to grant its consent, without being
deemed to be unreasonable: (i) whether the converted use will be consistent with
the highest and best use of the Mortgaged Property, and (ii) whether the
converted use will increase Mortgagee's risks or decrease the value of the
Mortgaged Property.
(b) Debtor shall (i) maintain the Mortgaged Property in good condition and
repair, subject to reasonable and ordinary wear and tear, free from actual or
constructive waste, (ii) operate, remodel, update and modernize the Mortgaged
Property in accordance with those standards adopted from time to time by
Franchisor on a system-wide basis for Franchisor restaurants, with such
remodeling and modernizing being undertaken in accordance with Franchisor's
system-wide timing schedules for such activities, and (iii) pay all operating
costs of the Premises in the ordinary course of business.
Section 2.09. Compliance With Laws. (a) Debtor's use and occupation of the
Mortgaged Property, and the condition thereof, including, without limitation,
any Restoration, shall, at Debtor's sole cost and expense, materially comply
with all applicable statutes, regulations, rules, ordinances, codes, licenses,
permits, orders and approvals of any governmental agencies, departments,
commissions, bureaus, boards or instrumentalities of the United States, the
State and all political subdivisions thereof, including, without limitation, all
health, building, fire, safety and other codes, ordinances and requirements and
all applicable standards of the National Board of Fire Underwriters ("Applicable
Regulations").
(b) Without limiting the generality of the other provisions of this
Section, Debtor agrees that it shall be responsible for complying in all
respects with the Americans with Disabilities Act of 1990, as such act may be
amended from time to time, and all regulations promulgated thereunder
(collectively, the "ADA"), as it affects the Mortgaged Property, including,
without limitation, making required "readily achievable" changes to remove any
architectural or communications barriers, and providing auxiliary aides and
services within the Mortgaged Property. Debtor further agrees that any and all
alterations made to the Mortgaged Property while this Mortgage is in effect will
comply with the requirements of the ADA. All plans for alterations which must be
submitted to Mortgagee under the provisions of Section 2.10 must include a
statement from a licensed Architect or Engineer certifying that they have
reviewed the plans, and that the plans comply with all applicable provisions of
the ADA. Any subsequent approval or consent to the plans by the Mortgagee shall
not be deemed to be a representation on Mortgagee's part that the plans comply
with the ADA, which obligation shall remain with Debtor. Debtor agrees that it
will defend, indemnify and hold harmless Mortgagee and Mortgagee's shareholders,
directors, officers, agents, attorneys and employees from and against any and
all claims, demands, causes of action, suits, proceedings, liabilities, damages
(including consequential and punitive damages), losses, costs and expenses,
including attorneys' fees, caused by, incurred or resulting from Debtor's
failure to comply with its obligations under this Section.
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(c) In addition to the other requirements of this Section, Debtor shall, at
all times while this Mortgage is in effect, comply with all federal, state or
local statutes, laws, rules, regulations, ordinances, codes, policies or rules
of common law now or hereafter in effect and in each case, as amended, and any
judicial or administrative interpretation thereof, including any judicial order,
consent, decree or judgment, applicable to Debtor.
(d) Except as set forth in the Reports, the Mortgaged Property and Debtor,
are not in violation of or subject to any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under any Environmental Laws, and this representation and warranty
would continue to be true and correct following disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to the Mortgaged Property. If any such investigation or inquiry
is subsequently initiated, Debtor will promptly notify Mortgagee.
(e) Debtor has not obtained and is not required to obtain any permits,
licenses or similar authorizations to construct, occupy, operate or use any
buildings, improvements, fixtures and equipment forming a part of the Mortgaged
Property by reason of any Environmental Laws.
(f) Debtor has taken all reasonable steps to determine and has determined
to its reasonable satisfaction that (i) no Hazardous Materials have been
disposed of or otherwise Released on or about the Mortgaged Property; (ii) the
Mortgaged Property does not contain Hazardous Materials or underground storage
tanks; (iii) there is no threat of any Release migrating to the Mortgaged
Property; (iv) there is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with the Mortgaged
Property; (v) Debtor does not know of, and has not received, any written or oral
notice or other communication from any person or entity (including but not
limited to a governmental entity) relating to Hazardous Materials or Remediation
thereof, of possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Mortgaged Property, or any actual or potential administrative or judicial
proceedings in connection with any of the foregoing; and (vi) Debtor has
truthfully and fully provided to Mortgagee, in writing, any and all information
relating to environmental conditions in, on, under or from the Mortgaged
Property that is known to Debtor and that is contained in Debtor's files and
records, including but not limited to any reports relating to Hazardous
Materials in, on, under or from the Mortgaged Property.
(g) Debtor covenants and agrees that: (i) all uses and operations on or of
the Mortgaged Property, whether by Debtor or any other person or entity, shall
be in compliance with all Environmental Laws and permits issued pursuant
thereto; (ii) there shall be no Releases in, on, under or from the Mortgaged
Property; (iii) there shall be no Hazardous Materials in, on, or under the
Mortgaged Property, except in De Minimis Amounts; (iv) Debtor shall keep the
Mortgaged Property free and clear of all liens and other encumbrances imposed
pursuant to any Environmental Law, whether due to any act or omission of Debtor
or any other person or
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entity (the "Environmental Liens"); (v) Debtor shall, at its sole cost and
expense, fully and expeditiously cooperate in all activities pursuant to
subsection (i) below, including but not limited to providing all relevant
information and making knowledgeable persons available for interviews; (vi)
Debtor shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Mortgaged Property, pursuant to any reasonable written request of Mortgagee
(including but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas), and share with Mortgagee the reports and other results thereof, and
Mortgagee and other Indemnified Parties (as defined below) shall be entitled to
rely on such reports and other results thereof (provided, however, Debtor shall
not be obligated and Mortgagee shall not request that Debtor be obligated to
perform a Phase II environmental study of the Mortgaged Property unless such
study is recommended in a Phase I environmental report prepared in connection
with the Mortgaged Property; (vii) Debtor shall, at its sole cost and expense,
comply with all reasonable written requests of Mortgagee to (1) reasonably
effectuate Remediation of any condition (including but not limited to a Release)
in, on, under or from the Mortgaged Property; (2) comply with any Environmental
Law; (3) comply with any directive from any governmental authority; and (4) take
any other reasonable action necessary or appropriate for protection of human
health or the environment; (viii) Debtor shall not do or allow any tenant or
other user of the Mortgaged Property to do any act that materially increases the
dangers to human health or the environment, poses an unreasonable risk of harm
to any person or entity (whether on or off the Mortgaged Property), impairs or
may impair the value of the Mortgaged Property, is contrary to any requirement
of any insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Mortgaged Property; and (ix) Debtor shall immediately notify Mortgagee in
writing of (A) any presence of Releases or threatened Releases in, on, under,
from or migrating towards the Mortgaged Property; (B) any non-compliance with
any Environmental Laws related in any way to the Mortgaged Property; (C) any
actual or potential Environmental Lien; (D) any required or proposed Remediation
of environmental conditions relating to the Mortgaged Property; and (E) any
written or oral notice or other communication which Debtor becomes aware from
any source whatsoever (including but not limited to a governmental entity)
relating in any way to Hazardous Materials or Remediation thereof, possible
liability of any person or entity pursuant to any Environmental Law, other
environmental conditions in connection with the Mortgaged Property, or any
actual or potential administrative or judicial proceedings in connection with
anything referred to in this Section.
(h) Mortgagee and any other person or entity designated by Mortgagee,
including but not limited to any receiver, any representative of a governmental
entity, and any environmental consultant, shall have the right, but not the
obligation, to enter upon the Mortgaged Property at all reasonable times to
assess any and all aspects of the environmental condition of the Mortgaged
Property and its use, including but not limited to conducting any environmental
assessment or audit (the scope of which shall be determined in Mortgagee's sole
and absolute discretion) and taking samples of soil, groundwater or other water,
air, or building materials,
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and conducting other invasive testing. Debtor shall cooperate with and provide
access to Mortgagee and any such person or entity designated by Mortgagee.
(i) Debtor shall, at its sole cost and expense, protect, defend, indemnify,
release and hold harmless the Indemnified Parties from and against any and all
Losses (excluding Losses arising out of Mortgagee's gross negligence or wilful
misconduct) and costs of Remediation (whether or not performed voluntarily),
engineers' fees, environmental consultants' fees, and costs of investigation
(including but not limited to sampling, testing, and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas) imposed upon or incurred by or asserted against any Indemnified Parties,
and directly or indirectly arising out of or in any way relating to any one or
more of the following: (i) any presence of any Hazardous Materials in, on,
above, or under the Mortgaged Property; (ii) any past, present or threatened
Release in, on, above, under or from the Mortgaged Property; (iii) any activity
by Debtor, any person or entity affiliated with Debtor or any tenant or other
user of the Mortgaged Property in connection with any actual, proposed or
threatened use, treatment, storage, holding, existence, disposition or other
Release, generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
the Mortgaged Property of any Hazardous Materials at any time located in, under,
on or above the Mortgaged Property; (iv) any activity by Debtor, any person or
entity affiliated with Debtor or any tenant or other user of the Mortgaged
Property in connection with any actual or proposed Remediation of any Hazardous
Materials at any time located in, under, on or above the Mortgaged Property,
whether or not such Remediation is voluntary or pursuant to court or
administrative order, including but not limited to any removal, remedial or
corrective action; (v) any past, present or threatened non-compliance or
violations of any Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Mortgaged Property or operations
thereon, including but not limited to any failure by Debtor, any person or
entity affiliated with Debtor or any tenant or other user of the Mortgaged
Property to comply with any order of any governmental authority in connection
with any Environmental Laws; (vi) the imposition, recording or filing or the
threatened imposition, recording or filing of any Environmental Lien encumbering
the Mortgaged Property; (vii) any administrative processes or proceedings or
judicial proceedings in any way connected with any matter addressed in this
Section; (viii) any past, present or threatened injury to, destruction of or
loss of natural resources in any way connected with the Mortgaged Property,
including but not limited to costs to investigate and assess such injury,
destruction or loss; (ix) any acts of Debtor or other users of the Mortgaged
Property in arranging for disposal or treatment, or arranging with a transporter
for transport for disposal or treatment, of Hazardous Materials owned or
possessed by such Debtor or other users, at any facility or incineration vessel
owned or operated by another person or entity and containing such or similar
Hazardous Materials; (x) any acts of Debtor or other users of the Mortgaged
Property, in accepting any Hazardous Materials for transport to disposal or
treatment facilities, incineration vessels or sites selected by Debtor or such
other users, from which there is a Release, or a threatened Release of any
Hazardous Material which causes the incurrence of costs for Remediation; (xi)
any personal injury, wrongful death, or property
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damage arising under any statutory or common law or tort law theory, including
but not limited to damages assessed for the maintenance of a private or public
nuisance or for the conducting of an abnormally dangerous activity on or near
the Mortgaged Property; and (xii) any misrepresentation or inaccuracy in any
representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to this Section.
(j) The obligations of Debtor and the rights and remedies of Mortgagee set
forth in this Section are independent from those of Debtor pursuant to the
Environmental Indemnity Agreement. Furthermore, such obligations of Debtor and
rights and remedies of Mortgagee shall survive the termination, expiration
and/or release of the Loan Agreement, the Note, the other Loan Documents, the
Environmental Indemnity Agreement and/or the judicial or nonjudicial foreclosure
of this Mortgage by Mortgagee or the delivery of a deed-in-lieu of foreclosure
for the Premises by Debtor to Mortgagee.
Section 2.10. Alterations and Improvements. Debtor shall not alter the
exterior, structural, plumbing or electrical elements of the Mortgaged Property
in any manner without the consent of Mortgagee, which consent shall not be
unreasonably withheld or conditioned; provided, however, Debtor may undertake
nonstructural alterations to the Mortgaged Property costing less than $50,000
without Mortgagee's consent. If Mortgagee consents to the making of any such
alterations, the same shall be made by Debtor at Debtor's sole expense by a
licensed contractor and according to plans and specifications approved by
Mortgagee and subject to such other conditions as Mortgagee shall require. Any
work at any time commenced by Debtor on the Mortgaged Property shall be
prosecuted diligently to completion, shall be of good workmanship and materials
and shall comply fully with all the terms of this Mortgage. Upon completion of
any alterations or any Restoration, Debtor shall promptly provide Mortgagee with
(i) evidence of full payment to all laborers and materialmen contributing to the
alterations, (ii) a certificate from Debtor stating that all alterations shall
have been completed in conformity with the plans and specifications, (iii) a
certificate of occupancy, if required, and (iv) any other documents or
information reasonably requested by Mortgagee.
Notwithstanding anything in the foregoing paragraph to the contrary, Debtor
may make such alterations and improvements to the Mortgaged Property as are
contemplated by Section 2(B) of the Loan Agreement without Mortgagee's consent.
Section 2.11. After-Acquired Property. All right, title and interest of
Debtor in and to all improvements, alterations, substitutions, restorations and
replacements of, and all additions and appurtenances to, the Mortgaged Property,
hereafter acquired by or released to Debtor, immediately upon such acquisition
or release and without any further granting by Debtor, shall become part of the
Mortgaged Property and shall be subject to the lien hereof fully, completely and
with the same effect as though now owned by Debtor and specifically described in
the Granting Clauses hereof. Debtor shall execute and deliver to Mortgagee any
further assurances, mortgages, grants, conveyances or assignments thereof as the
Mortgagee may reasonably require
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to subject the same to the lien hereof. Debtor may remove items of equipment and
other items of Personal Property from the Mortgaged Property provided the
Mortgaged Property remains fully stocked and operational for the purposes
permitted hereunder or Debtor replaces such items of equipment or other Personal
Property with comparable or better items of equipment or other Personal
Property.
Section 2.12. Taxes. (a) Debtor shall do or cause to be done everything
necessary to preserve the lien hereof without expense to Mortgagee, including,
without limitation, paying and discharging or causing to be paid and discharged,
whether or not payable directly by Debtor or subject to withholding at the
source, (i) all taxes, assessments, levies, fees, water and sewer rents and
charges and all other governmental charges, general, special, ordinary or
extraordinary, and all charges for utility or communications services, which may
at any time be assessed, levied or imposed upon Debtor, the Mortgaged Property,
this Mortgage, the Obligations or the revenues, rents, issues, income and
profits of the Mortgaged Property or which may arise in respect of the
occupancy, use, possession or operation thereof, (ii) all income, excess
profits, sales, gross receipts and other taxes, duties or imposts, whether
similar or not in nature, assessed, levied or imposed by any governmental
authority on Debtor, the Mortgaged Property or the revenues, rents, issues,
income and profits of the Mortgaged Property (iii) all lawful claims and demands
of mechanics, laborers, materialmen and others which, if unpaid, might create a
lien on the Mortgaged Property, or on the revenues, rents, issues, income and
profits of the Mortgaged Property, unless Debtor shall contest the amount or
validity thereof in accordance with subsection (b).
(b) Debtor may, at its own expense, contest or cause to be contested (in
the case of any item involving more than $1000.00, after prior written notice to
Mortgagee), by appropriate legal proceedings conducted in good faith and with
due diligence, the amount or validity or application, in whole or in part, of
any item specified in subsection (a) or lien therefor, provided that (i) such
proceeding shall suspend the collection thereof from the Mortgaged Property or
any interest therein, (ii) neither the Mortgaged Property nor any interest
therein would be in any danger of being sold, forfeited or lost by reason of
such proceedings, (iii) no Event of Default has occurred and is continuing, (iv)
Debtor shall have deposited with Mortgagee adequate reserves for the payment of
the taxes, together with all interest and penalties thereon, unless paid in full
under protest, and (v) Debtor shall have furnished the security as may be
required in the proceeding or as may be required by Mortgagee to insure payment
of any contested taxes.
Section 2.13. Insurance. (a) Debtor shall maintain with respect to the
Mortgaged Property, at its sole expense, the following types and amounts of
insurance (which may be included under a blanket insurance policy if all the
other terms hereof are satisfied), in addition to such other insurance as
Mortgagee may reasonably require from time to time:
(i) Insurance against loss, damage or destruction by fire and other
casualty, including theft, vandalism and malicious mischief, flood (if the
Premises are in a location
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designated by the Federal Secretary of Housing and Urban Development as a
flood hazard area), earthquake (if the Premises are in an area subject to
destructive earthquakes within recorded history), boiler explosion (if
there is any boiler upon the Premises), plate glass breakage, sprinkler
damage (if the Premises have a sprinkler system), all matters covered by a
standard extended coverage endorsement, special coverage endorsement
commonly known as an "all risk" endorsement and such other risks as
Mortgagee may reasonably require, insuring the Mortgaged Property for not
less than 100% of their full insurable replacement cost.
(ii) Comprehensive general liability and property damage insurance,
including a products liability clause, covering Mortgagee and Debtor
against bodily injury liability, property damage liability and automobile
bodily injury and property damage liability, including without limitation
any liability arising out of the ownership, maintenance, repair, condition
or operation of the Mortgaged Property or adjoining ways, streets or
sidewalks and, if applicable, insurance covering Mortgagee, against
liability arising from the sale of liquor, beer or wine on the Premises.
Such insurance policy or policies shall contain a broad form contractual
liability endorsement under which the insurer agrees to insure Debtor's
obligations under Section 5.16 hereof to the extent insurable, and a
"severability of interest" clause or endorsement which precludes the
insurer from denying the claim of either Debtor or Mortgagee because of the
negligence or other acts of the other, shall be in amounts of not less than
$1,000,000.00 per injury and occurrence with respect to any insured
liability, whether for personal injury or property damage, or such higher
limits as Mortgagee may reasonably require from time to time, and shall be
of form and substance satisfactory to Mortgagee.
(b) Business income insurance equal to 100% of the principal and interest
payable under the Note for a period of not less than six months.
(c) State Worker's compensation reserves in the statutorily mandated limits
for Florida self-insurers, reinsurance for workers compensation risk in an
aggregate amount not less than $500,000 or such greater amount as Mortgagee may
from time to time require and such other insurance as may be necessary to comply
with applicable laws.
All insurance policies shall:
(i) Provide for a waiver of subrogation by the insurer as to claims
against Mortgagee, its employees and agents;
(ii) Provide that such insurance cannot be unreasonably cancelled,
invalidated or suspended on account of the conduct of Debtor, its officers,
directors, employees or agents;
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(iii) Provide that any "no other insurance" clause in the insurance
policy shall exclude any policies of insurance maintained by Mortgagee and
that the insurance policy shall not be brought into contribution with
insurance maintained by Mortgagee;
(iv) Contain a standard without contribution mortgage clause
endorsement in favor of Mortgagee and any other lender designated by
Mortgagee;
(v) Provide that the policy of insurance shall not be terminated,
cancelled or substantially modified without at least thirty (30) days'
prior written notice to Mortgagee and to any lender covered by any standard
mortgage clause endorsement;
(vi) Provide that the insurer shall not have the option to restore the
Premises if Mortgagee elects to terminate this Mortgage in accordance with
the terms hereof;
(vii) Be issued by insurance companies licensed to do business in the
state in which the Premises is located and which are rated A:VI or better
by Best's Insurance Guide or otherwise approved by Mortgagee; and
(viii) Provide that the insurer shall not deny a claim because of the
negligence of Debtor.
It is expressly understood and agreed that the foregoing minimum limits of
insurance coverage shall not limit the liability of Debtor for its acts or
omissions as provided in this Mortgage. All insurance policies (with the
exception of worker's compensation insurance to the extent not available under
statutory law) shall designate Mortgagee as additional insured as its interests
may appear and shall be payable as set forth in Article III hereof. All such
policies shall be written as primary policies, with deductibles not to exceed
10% of the amount of coverage. Any other policies, including any policy now or
hereafter carried by Mortgagee, shall serve as excess coverage. Debtor shall
procure policies for all insurance for periods of not less than one year and
shall provide to Mortgagee certificates of insurance or, upon Mortgagee's
request, duplicate originals of insurance policies evidencing that insurance
satisfying the requirements of this Mortgage is in effect at all times.
Notwithstanding anything in the foregoing to the contrary, Debtor shall
have the right to satisfy the requirements set forth in this subsection (c)
provided that (i) Debtor complies fully with any Florida statutory requirements
regarding State Worker's compensation insurance and any requirements or
regulations pertaining to self-insurance thereof.
Section 2.14. Impound Account. Upon the occurrence of an Event of Default
under this Mortgage or any other Loan Document, after the giving of notice and
the expiration of any applicable cure period, Mortgagee may require Debtor to
pay to Mortgagee sums which will provide an impound account (which shall not be
deemed a trust fund) for paying up to the next
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one year of taxes, assessments and/or insurance premiums. Upon such requirement,
Mortgagee will estimate the amounts needed for such purposes and will notify
Debtor to pay the same to Mortgagee in equal monthly installments, as nearly as
practicable, in addition to all other sums due under this Mortgage. Should
additional funds be required at any time, Debtor shall pay the same to Mortgagee
on demand. Debtor shall advise Mortgagee of all taxes and insurance bills which
are due and shall cooperate fully with Mortgagee in assuring that the same are
paid. Mortgagee may deposit all impounded funds in accounts insured by any
federal or state agency and may commingle such funds with other funds and
accounts of Mortgagee. Interest or other gains from such funds, if any, shall be
the sole property of Mortgagee. In the event of any default by Debtor, Mortgagee
may apply all impounded funds against any sums due from Debtor to Mortgagee.
Mortgagee shall give to Debtor an annual accounting showing all credits and
debits to and from such impounded funds received from Debtor.
Section 2.15. Advances by Mortgagee. Mortgagee may make advances to perform
any of the covenants contained in this Mortgage on Debtor's behalf, and all sums
so advanced shall be secured hereby prior to the Note. Debtor shall repay on
demand all sums so advanced with interest thereon at the then applicable
Adjustable Rate (as defined in the Note) plus 5% (or the highest rate permitted
by law, whichever is less), such interest to be computed from and including the
date of the making of such advance to and including the date of such repayment.
Section 2.16. Negative Covenants. Debtor agrees that Debtor shall not,
without the prior written consent of Mortgagee, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Mortgaged Property
or any part thereof or permit the Mortgaged Property or any part thereof to be
sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred. A sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer within the meaning of this Section
shall be deemed to include, but not limited to, (a) an installment sales
agreement wherein Debtor agrees to sell the Mortgaged Property or any part
thereof for a price to be paid in installments; (b) an agreement by Debtor
leasing all or any part of the Mortgaged Property or a sale, assignment or other
transfer of, or the grant of a security interest in, Debtor's right, title and
interest in and to any Leases or any Rents; (c) if Debtor is a party to a merger
or the voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise) or the creation
or issuance of new stock pursuant to which an aggregate of more than 25% of such
corporation's stock shall be vested in a party or parties who are not now
stockholders; (d) if Debtor or any general or limited partner or any member of
Debtor is a limited or general partnership or joint venture, the change, removal
or resignation of a general partner, limited partner or managing partner or the
transfer or pledge of the partnership interest of any general partner, limited
partner or managing partner or any profits or proceeds relating to such
partnership interest; and (e) if Debtor or any general or limited partner or
member of Debtor is a limited liability company, the change, removal or
resignation of a managing member or the transfer of the membership interest of
any managing member or any profits or proceeds
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relating to such membership interest. Notwithstanding the foregoing, a transfer
by devise or descent or by operation of law upon the death of a member, partner
or stockholder of Debtor or any general or limited partner or member thereof
shall not be deemed to be a sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer within the meaning of this Section.
Mortgagee reserves the right to condition the consent required hereunder
upon a modification of the terms hereof and on assumption of the Note, this
Mortgage and the other Loan Documents as so modified by the proposed transferee,
payment of Mortgagee's expenses incurred in connection with such transfer, the
approval by a rating agency selected by Mortgagee of the proposed transferee,
the proposed transferee's continued compliance with the covenants set forth in
this Mortgage, or such other conditions as Mortgagee shall determine in its sole
discretion to be in the interest of Mortgagee. Mortgagee shall not be required
to demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Obligations immediately due and
payable upon Debtor's sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer of the Mortgaged Property without Mortgagee's
consent. This provision shall apply to every sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property
regardless of whether voluntary or not, or whether or not Mortgagee has
consented to any previous sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Mortgaged Property.
Section 2.17. Financial Statements. Within 45 days after the end of each
fiscal quarter and within 120 days after the end of each fiscal year of Debtor,
Debtor shall deliver to Mortgagee (i) complete financial statements of Debtor
including a balance sheet, profit and loss statement, statement of changes in
financial condition and all other related schedules for the fiscal period then
ended; and (ii) income statements for the business at the Mortgaged Property.
All such financial statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied from period to period, and
shall be certified to be accurate and complete by Debtor (or the Treasurer or
other appropriate officer of Debtor). Debtor understands that Mortgagee is
relying upon such financial statements and Debtor represents that such reliance
is reasonable. In the event that Debtor's property and business at the Mortgaged
Property is ordinarily consolidated with other business for financial statement
purposes, such financial statements shall be prepared on a consolidated basis
showing separately the sales, profits and losses, assets and liabilities
pertaining to the Mortgaged Property with the basis for allocation of overhead
of other charges being clearly set forth. The financial statements delivered to
Mortgagee need not be audited, but Debtor shall deliver to Mortgagee copies of
any audited financial statements of Debtor which may be prepared, as soon as
they are available.
Section 2.18. Franchisor Requirements. In addition to the requirements set
forth in this Mortgage, Debtor, in its ownership, use, occupancy and maintenance
of the Mortgaged Property shall comply with all requirements of its franchise,
license and/or area development agreement
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with Franchisor. Debtor hereby consents to Mortgagee providing information it
obtains to Franchisor and to Mortgagee obtaining from Franchisor information
which Franchisor receives relating to Debtor's operation of its business on the
Premises.
Section 2.19. Incorporation of Representations and Warranties. The
representations and warranties of Debtor set forth in the Loan Agreement are
incorporated by reference into this Mortgage as if stated in full in this
Mortgage.
ARTICLE III
POSSESSION, USE AND RELEASE OF THE MORTGAGED PROPERTY
Section 3.01. Casualty or Condemnation. Debtor, immediately upon obtaining
knowledge of any casualty to any portion of the Mortgaged Property or of any
proceeding or negotiation for the taking of all or any portion of the Mortgaged
Property in condemnation or other eminent domain proceedings, shall notify
Mortgagee of such casualty, proceeding or negotiation. Any award, compensation
or other payment resulting from such casualty or condemnation or eminent domain
proceeding, as applicable, shall be applied as set forth below. Mortgagee may
participate in any condemnation or eminent domain proceeding, and Debtor will
deliver or cause to be delivered to Mortgagee all instruments requested by
Mortgagee to permit such participation.
(a) Casualty. (i) In the event of any material damage to or
destruction of the Mortgaged Property or any part thereof, Debtor will
promptly give written notice to Mortgagee, generally describing the nature
and extent of such damage or destruction. No damage to or destruction of
the Mortgaged Property shall relieve Debtor of its obligation to pay any
monetary sum due under the Loan Documents at the time and in the manner
provided in the Loan Documents.
(ii) In the event of any damage to or destruction of the Mortgaged
Property or any part thereof, Debtor, whether or not the insurance
proceeds, if any, on account of such damage or destruction shall be
sufficient for the purpose, at its expense, shall promptly commence and
complete the Restoration or prepay the Note in full in accordance with the
provisions of the Note with respect thereto.
(iii) Insurance proceeds received by Mortgagee and Debtor on account
of any occurrence of damage to or destruction of the Mortgaged Property or
any part thereof, less the costs, fees and expenses incurred by Mortgagee
and Debtor in the collection thereof, including, without limitation,
adjuster's fees and expenses and attorneys' fees and expenses (the "Net
Insurance Proceeds"), shall be paid to (1) Debtor if the amount of such Net
Insurance Proceeds is less than $25,000 and applied by Debtor toward the
cost of the Restoration, and (2) Mortgagee if the amount of such Net
Insurance Proceeds
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is $25,000 or greater. Net Insurance Proceeds paid to Mortgagee shall be
held and disbursed by Mortgagee, or as Mortgagee may from time to time
direct, to prepay the Note upon request of Debtor pursuant to Section
3.01(a)(ii) above, or as the Restoration progresses, to pay or reimburse
Debtor for the cost of the Restoration, upon written request of Debtor
accompanied by evidence, satisfactory to Mortgagee, that (v) the
Restoration is in full compliance with all applicable laws, regulations,
restrictions and requirements, whether governmental or private, (w) the
amount requested has been paid or is then due and payable and is properly a
part of such cost, (x) there are no mechanics' or similar liens for labor
or materials theretofore supplied in connection with the Restoration, (y)
if the estimated cost of the Restoration exceeds the Net Insurance
Proceeds, Debtor has deposited into an escrow satisfactory to Mortgagee
such excess amount, which sum will be disbursed pursuant to escrow
instructions satisfactory to Mortgagee, and (z) the balance of such Net
Insurance Proceeds, together with the funds deposited into escrow, if any,
pursuant to the preceding subsection (y), after making the payment
requested will be sufficient to pay the balance of the cost of the
Restoration. Upon receipt by Mortgagee of evidence satisfactory to it that
the Restoration has been completed and the cost thereof paid in full, and
that there are no mechanics' or similar liens for labor or materials
supplied in connection therewith, the balance, if any, of such Net
Insurance Proceeds shall be paid to Debtor. If an Event of Default has
occurred and is continuing at the time of the damage or destruction to the
Mortgaged Property, all Net Insurance Proceeds shall be paid to Mortgagee,
and Mortgagee may retain and apply the Net Insurance Proceeds toward the
Obligations whether or not then due and payable, in such order, priority
and proportions as Mortgagee in its discretion shall deem proper, or to
cure such Event of Default, or, in Mortgagee's discretion, Mortgagee may
pay such Net Insurance Proceeds in whole or in part to Debtor to be applied
toward the cost of the Restoration. If Mortgagee shall receive and retain
Net Insurance Proceeds, the lien of this Mortgage shall be reduced only by
the amount received and retained by Mortgagee and actually applied by
Mortgagee in reduction of the Obligations.
(b) Eminent Domain. (i) In case of a taking of all or any part of the
Mortgaged Property or the commencement of any proceedings or negotiations
which might result in a taking, for any public or quasi-public purpose by
any lawful power or authority by exercise of the right of condemnation or
eminent domain or by agreement between Mortgagee, Debtor and those
authorized to exercise such right ("Taking"), Debtor will promptly give
written notice thereof to Mortgagee, generally describing the nature and
extent of such Taking. Mortgagee shall file and prosecute on behalf of
Mortgagee and Debtor any and all claims for an award, and all awards and
other payments on account of a Taking shall be paid to Mortgagee.
(ii) In case of a Taking of the whole of the Mortgaged Property, other
than for temporary use ("Total Taking"), or in case of a Taking of less
than all of the Mortgaged Property ("Partial Taking"), these Loan Documents
shall remain in full force
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and effect. Debtor, whether or not the awards or payments, if any, on
account of such Partial Taking shall be sufficient for the purpose (but
provided they are made available by Mortgagee for such purpose), at its own
cost and expense, will promptly commence and complete the Restoration. In
case of a Partial Taking, other than a temporary use, of such a substantial
part of the Mortgaged Property as shall result in the Mortgaged Property
remaining after such Partial Taking being unsuitable for use, such Taking
shall be deemed a Total Taking.
(iii) In case of a temporary use of the whole or any part of the
Mortgaged Property by a Taking, these Loan Documents shall remain in full
force and effect without any reduction of any monetary sum payable under
these Loan Documents. Subject to the application provisions below, Debtor
shall be entitled to the entire award for such Taking, whether paid by
damages, rent or otherwise. In any proceeding for such Taking, Mortgagee
shall have the right to intervene and participate; provided that, if such
intervention shall not be permitted, Debtor shall consult with Mortgagee,
its attorneys and experts, and make all reasonable efforts to cooperate
with Mortgagee in the prosecution or defense of such proceeding. At the
termination of any such use or occupation of the Mortgaged Property, Debtor
will, at its own cost and expense, promptly commence and complete the
Restoration.
(iv) Awards and other payments on account of a Taking, less the costs,
fees and expenses incurred by Mortgagee and Debtor in connection with the
collection thereof, including, without limitation, attorneys' fees and
expenses, shall be applied as follows:
(x) Net awards and payments received on account of a Total Taking
shall be allocated as follows:
(aa) There shall be paid to the Mortgagee an amount up to
the sum of the outstanding principal, including all sums advanced
by Mortgagee hereunder, and interest under the Note, all as of
the date on which such payment is made, such amount shall be
applied first against all sums advanced by Mortgagee under this
Mortgage, second against the accrued but unpaid interest on the
Note, and third to the remaining unpaid principal amount of the
Note.
(bb) Any remaining balance shall be paid to Debtor.
(y) Net awards and payments received on account of a Partial
Taking shall be held and allocated as follows: (i) toward the cost of
the Restoration, such application of net awards and other payments to
be made substantially in the manner provided in Section 3.01(a)(iii)
of this Mortgage; (ii) to Mortgagee to
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cure any default first, in the Note and second, in this Mortgage;
(iii) there shall be paid to Mortgagee, as the holder of this
Mortgage, an amount equal to that portion of any unpaid principal
amount of the Note, and any interest accrued thereon, bearing the same
relationship to the total unpaid principal amount of the Note, and any
interest accrued thereon, all as of the date on which such payment is
made, as the square footage in the Mortgaged Property taken on account
of such Partial Taking, bears to the total square footage in the
Mortgaged Property prior to such Partial Taking, and such amount shall
be applied against the unpaid principal amount of the Note; and (iv)
any remaining balance shall be paid to Debtor.
(z) Net awards and payments received on account of a Taking for
temporary use shall be held and applied to the payment of the monthly
installments of combined interest and principal becoming due under the
Note, until such Taking for temporary use is terminated and the
Restoration, if any, has been completed; provided, however, that, if
any portion of any such award or payment is made by reason of any
damage to or destruction of the Mortgaged Property, such portion shall
be held and applied as provided in Section 3.01(a)(iii) hereof. The
balance, if any, of such awards and payments shall be paid to Debtor
unless Debtor is in default under the Loan Documents, in which event
such awards and payments shall be paid to Mortgagee to cure such
default first, in the Note and second, in this Mortgage.
(v) Notwithstanding the foregoing, if at the time of any Taking or at
any time thereafter Debtor shall be in default under the Loan Documents and
such default shall be continuing, Mortgagee is hereby authorized and
empowered, in the name and on behalf of Debtor and otherwise, to file and
prosecute Debtor's claim, if any, for an award on account of any Taking and
to collect such award and apply the same, after deducting all costs, fees
and expenses incident to the collection thereof, to the curing of such
default and any other then existing default under the Loan Documents.
Section 3.02. Conveyance in Anticipation of Condemnation, Granting of
Easements, Etc. If no default shall have occurred and be continuing, Debtor may,
from time to time with respect to its interest in the Mortgaged Property, and
with Mortgagee's prior written consent, (i) sell, assign, convey or otherwise
transfer any interest therein to any person legally empowered to take such
interest under the power of eminent domain, (ii) grant easements and other
rights in the nature of easements, (iii) release existing easements or other
rights in the nature of easements which are for the benefit of the Mortgaged
Property, (iv) dedicate or transfer unimproved portions of the Mortgaged
Property for road, highway or other public purposes, (v) execute petitions to
have the Mortgaged Property annexed to any municipal corporation or utility
district, and (vi) execute and deliver to any person any instrument appropriate
to confirm or effect such grants, releases, dedications and transfers.
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Section 3.03. Mortgagee's Power. At any time, or from time to time, without
liability therefor, Mortgagee, without affecting the personal liability of any
person for payment of the Obligations or the effect of this Mortgage upon the
remainder of said Mortgaged Property, may from time to time without notice (i)
release any part of said Mortgaged Property, (ii) consent in writing to the
making of any map or plat thereof, (iii) join in granting any easement thereon,
(iv) join in any extension agreement or any agreement subordinating the lien or
charge hereof, (v) release any person so liable, (vi) extend the maturity or
alter any of the terms of any Obligations, (vii) grant other indulgences, (viii)
take or release any other or additional security for any Obligation, (ix) make
compositions or other arrangements with debtors in relation thereto, or (x)
advance additional funds to protect the security hereof and pay or discharge the
Obligations, and all amounts so advanced shall be secured hereby shall be due
and payable upon demand by Mortgagee.
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
Section 4.01. Events of Default. (a) Each of the following shall be an
event of default under this Mortgage (an "Event of Default"):
(i) If any representation or warranty of Debtor herein was false in
any respect when made or, in the event that any such representation or
warranty is continuing, becomes false in any respect at any time, or if
Debtor renders any false statement or account;
(ii) If any principal, interest or other monetary sum due under the
Note, this Mortgage or any other Loan Document is not paid within five days
after the date when due, or if Debtor fails to pay, prior to delinquency,
any taxes, assessments or other charges the failure of which to pay will
result in the imposition of a lien against the Mortgaged Property by
pursuant to Applicable Regulations;
(iii) If Debtor becomes insolvent within the meaning of the Code,
files or notifies Mortgagee that it intends to file a petition under the
Code, initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, hereinafter, an "Action"), becomes the subject of either a
petition under the Code or an Action, or is not generally paying its debts
as the same become due;
(iv) If Debtor fails to observe or perform any of the covenants,
conditions, or obligations of this Mortgage or any other Loan Document;
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(v) If there is a breach or default under (a) any franchise, license
and/or area development agreement permitting Debtor to operate the
Mortgaged Property in the manner authorized or if such franchise, license
and/or area development agreement otherwise terminates or expires, (b) any
guaranty of Debtor's obligations under this Mortgage, or (c) any other
agreement or instrument, including, without limitation, promissory notes
and guaranties, between, among or by any of the Debtor Entities and, or for
the benefit of, any of the Mortgagee Entities; or
(vi) If the franchise, license and/or area development agreement with
Franchisor with respect to the Premises expires or is terminated prior to
its scheduled expiration date.
(b) If any Event of Default occurs pursuant to subsection (a)(ii)
above, Mortgagee shall not be entitled to exercise its remedies set forth in
Section 4.02 below unless and until Mortgagee shall have given Debtor notice
thereof and a period of five days from the delivery of such notice shall have
elapsed without such Event of Default being cured.
(c) If any such event does not involve the payment of any principal,
interest or other monetary sum due under the Note, is not willful or
intentional, does not place any rights or property of Mortgagee in immediate
jeopardy, and is within the reasonable power of Debtor to promptly cure after
receipt of notice thereof, all as determined by Mortgagee in its reasonable
discretion, then such event shall not constitute an Event of Default hereunder,
unless otherwise expressly provided herein, unless and until Mortgagee shall
have given Debtor notice thereof and a period of 30 days shall have elapsed,
during which period Debtor may correct or cure such event, upon failure of which
an Event of Default shall be deemed to have occurred hereunder without further
notice or demand of any kind. If such event cannot reasonably be cured within
such 30-day period, as determined by Mortgagee in its reasonable discretion, and
Debtor is diligently pursuing a cure of such event, then Debtor shall have a
reasonable period to cure such event, which shall in no event exceed 90 days
after receiving notice of the event from Mortgagee. If Debtor shall fail to
correct or cure such event within such 90-day period, an Event of Default shall
be deemed to have occurred hereunder without further notice or demand of any
kind.
Section 4.02. Remedies. Upon the occurrence of any Event of Default subject
to the limitation set forth in Section 4.01(b), Mortgagee may declare all
Obligations to be due and payable, and the same shall thereupon become due and
payable without any presentment, demand, protest or notice (including notice of
intent to accelerate) of any kind except as otherwise provided herein.
Furthermore, upon the occurrence of any Event of Default, Mortgagee may:
(i) Either in person or by agent, with or without bringing any action
or proceeding, or by a receiver appointed by a court, and without regard to
the adequacy
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of its security, enter upon and take possession of the Mortgaged Property
or any part thereof and do any acts which it deems necessary or desirable
to preserve the value, marketability or rentability of the Mortgaged
Property, or part thereof or interest therein, increase the income
therefrom or protect the security hereof and, with or without taking
possession of the Mortgaged Property, take any action described herein, sue
for or otherwise collect the Rents, issues and profits thereof, including
those past due and unpaid, and apply the same, less costs and expenses of
operation and collection including reasonable attorneys' fees, upon any
Obligations, all in such order as Mortgagee may determine, and pursue any
remedy available under Chapter 697.07, Florida Statutes, as amended,
supplemented or superseded from time to time. The entering upon and taking
possession of the Mortgaged Property, the taking of any action described
herein, the collection of such Rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any Event of
Default or notice of default or invalidate any act done in response to such
Event of Default or pursuant to such notice of default and, notwithstanding
the continuance in possession of the Mortgaged Property or the collection,
receipt and application of rents, issues or profits, Mortgagee shall be
entitled to exercise every right provided for in any of the Loan Documents
or by law upon any Event of Default, including the right to exercise the
power of sale herein conferred;
(ii) Commence an action to foreclose this Mortgage pursuant to this
Mortgage in a single parcel or in several parcels, appoint a receiver,
specifically enforce any of the covenants hereof or sell the Mortgaged
Property pursuant to the power of sale herein conferred;
(iii) Exercise any or all of the remedies available to a secured party
under the Uniform Commercial Code as adopted in the State ("UCC"),
including, without limitation:
(1) Either personally or by means of a court appointed receiver,
commissioner or other officer, take possession of all or any of the
Personal Property and exclude therefrom Debtor and all others claiming
under Debtor, and thereafter hold, store, use, operate, manage,
maintain and control, make repairs, replacements, alterations,
additions and improvements to and exercise all rights and powers of
Debtor in respect of the Personal Property or any part thereof. In the
event Mortgagee demands or attempts to take possession of the Personal
Property in the exercise of any rights under any of the Loan
Documents, Debtor promises and agrees to promptly turn over and
deliver complete possession thereof to Mortgagee;
(2) Without notice to or demand upon Debtor, make such payments
and do such acts as Mortgagee may deem necessary to protect its
security interest in the Personal Property, including, without
limitation, paying, purchasing,
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contesting or compromising any encumbrance, charge or lien which is
prior to or superior to the security interest granted hereunder and,
in exercising any such powers or authority, to pay all expenses
incurred in connection therewith;
(3) Require Debtor to assemble the Personal Property or any
portion thereof, at the Premises, and promptly to deliver such
Personal Property to Mortgagee, or an agent or representative
designated by it. Mortgagee, and its agents and representatives, shall
have the right to enter upon any or all of Debtor's premises and
property to exercise Mortgagee's rights hereunder;
(4) Sell, lease or otherwise dispose of the Personal Property at
public sale, with or without having the Personal Property at the place
of sale, and upon such terms and in such manner as Mortgagee may
determine. Mortgagee may be a purchaser at any such sale; and
(5) Unless the Personal Property is perishable or threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Mortgagee shall give Debtor at least 10 days' prior
written notice of the time and place of any public sale of the
Personal Property or other intended disposition thereof. Such notice
may be delivered to Debtor at the address set forth at the beginning
of this Mortgage and shall be deemed to be given as provided herein;
(iv) Apply any sums then deposited in the impound account described in
Section 2.14 toward payment of the taxes, assessment and insurance premiums
for the Mortgaged Property and/or as a credit on the Obligations in such
priority and proportion as Mortgagee may determine in its sole discretion;
and
(v) If held by Mortgagee, surrender the insurance policies maintained
pursuant to Section 2.13, collect the unearned insurance premiums and apply
such sums as a credit on the Obligations in such priority and proportion as
Mortgagee in its sole discretion shall deem proper, and in connection
therewith, Debtor hereby appoints Mortgagee as agent and attorney-in-fact
(which is coupled with an interest and is therefore irrevocable) for
Mortgagee to collect such insurance premiums.
If Mortgagee elects to sell Debtor's interest in the Mortgaged Property by
exercise of the power of sale herein contained, Mortgagee shall cause such sale
to be performed in the manner then required by law.
(a) Mortgagee cause to be recorded, published and delivered such
notices of default and notices of sale as may then be required by law and
by this Mortgage. Thereafter, Mortgagee shall sell the Mortgaged Property
at the time and place of sale fixed by it, either as a whole, or in
separate lots or parcels or items as Mortgagee shall
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deem expedient, and in such order as it may determine, at public auction to
the highest bidder for cash in lawful money of the United States payable at
the time of sale, or as otherwise may then be required by law. Such
purchaser or purchasers thereof its good and sufficient deed or deeds
conveying the property so sold, without any covenant or warranty, express
or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including,
without limitation, Debtor or Mortgagee, may purchase at such sale.
(b) As may be permitted by law, Mortgagee shall apply the proceeds of
sale to payment of (i) first, to payment of all costs, fees and expenses,
including attorneys' fees and expenses incurred by the Mortgagee in
exercising the power of sale or foreclosing this Mortgage, and (ii) second,
as directed by Mortgagee or as may be required by law.
(c) Mortgagee may in the manner provided by law postpone sale of all
or any portion of the Mortgaged Property.
Section 4.03. Appointment of Receiver. If an Event of Default shall have
occurred, Mortgagee, as a matter of right and without notice to Debtor or anyone
claiming under Debtor, and without regard to the then value of the Mortgaged
Property or the interest of Debtor therein, or the insolvency of Debtor or the
then-owner of the Mortgaged Property, may seek the appointment of a receiver for
the Mortgaged Property upon ex parte application to any court of the competent
jurisdiction; provided, however, Mortgagee shall use good faith efforts to
provide telephonic notice to Edward B. Alexander, or such other party designated
by Debtor in a written notice to FFCA, of such application prior to filing of
such ex parte application. Debtor waives any right to any hearing or notice of
hearing prior to the appointment of a receiver. Such receiver shall be empowered
(a) to take possession of the Mortgaged Property and any businesses conducted by
Debtor thereon and any business assets used in connection therewith, (b) to
exclude Debtor and Debtor's agents, servants and employees from the Mortgaged
Property, or, at the option of the receiver, in lieu of such exclusion, to
collect a fair market rental from any such persons occupying any part of the
Mortgaged Property, (c) to collect the rents, issues, profits and income
therefrom, (d) to complete any construction that may be in progress, (e) to
continue the development, marketing and sale of the Mortgaged Property, (f) to
do such maintenance and make such repairs and alterations as the receiver deems
necessary, (g) to use all stores of materials, supplies and maintenance
equipment on the Mortgaged Property and replace such items at the expense of the
receivership estate, (h) to pay all taxes and assessments against the Mortgaged
Property, all premiums for insurance thereon, all utility and other operating
expenses, and all sums due under any prior or subsequent encumbrance, (i) to
request that Mortgagee advance such funds as may reasonably be necessary to the
effective exercise of the receiver's powers, on such terms as may be agreed upon
by the receiver and Mortgagee, but not in excess of the Default Rate (as defined
in the Note), and (j) generally to do anything that Debtor could legally do if
Debtor were in possession of the Mortgaged
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Property. All expenses incurred by the receiver or his agents, including
obligations to repay funds borrowed by the receiver, shall constitute a part of
the Obligations. Any revenues collected by the receiver shall be applied first
to the expenses of the receivership, including reasonable attorneys' fees
incurred by the receiver and by Mortgagee, together with interest thereon at the
highest rate of interest applicable in the Note from the date incurred until
repaid, and the balance shall be applied toward the Obligations or in such other
manner as the court may direct.
Section 4.04. Remedies Not Exclusive. Mortgagee shall be entitled to
enforce payment and performance of any Obligations and to exercise all rights
and powers under this Mortgage or under any Loan Documents or other agreement or
any laws now or hereafter in force, notwithstanding some or all of the
Obligations may now or hereafter be otherwise secured, whether by mortgage, deed
of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, whether by court action or pursuant to the power
of sale or other powers herein contained, shall prejudice or in any manner
affect Mortgagee's right to realize upon or enforce any other security now or
hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled to
enforce this Mortgage and any other security now or hereafter held by Mortgagee
in such order and manner as it may in its absolute discretion determine. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Mortgagee, or to which Mortgagee may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee. Mortgagee may pursue inconsistent remedies.
The acceptance by Mortgagee of any sum after the same is due shall not
constitute a waiver of the right either to require prompt payment, when due, of
all other sums hereby secured or to declare a subsequent Event of Default as
herein provided. The acceptance by Mortgagee of any sum in an amount less than
the sum then due shall be deemed an acceptance on account only and upon
condition that it shall not constitute a waiver of the obligation of Debtor to
pay the entire sum then due, and failure of Debtor to pay such entire sum then
due as contemplated by Section 4.01(b) shall be an Event of Default,
notwithstanding such acceptance of such amount on account, as aforesaid.
Mortgagee shall be, at all times thereafter and until the entire sum then due
shall have been paid, and notwithstanding the acceptance by Mortgagee thereafter
of further sums on account, or otherwise, entitled to exercise all rights in
this instrument conferred upon them or either of them, and the right to proceed
with a sale under any notice of default, or an election to sell, or the right to
exercise any other rights or remedies hereunder, shall in no way be impaired,
whether any of such amounts are received prior or subsequent to such proceeding,
election or exercise. Consent by Mortgagee to any action or inaction of Debtor
which is subject to consent or approval of Mortgagee hereunder shall not be
deemed a waiver of the right to require such consent or approval to future or
successive actions or inactions.
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Section 4.05. Possession of Mortgaged Property. In the event of a trustee's
sale or foreclosure sale hereunder and after the time of such sale, Debtor
occupies the portion of the Mortgaged Property so sold, or any part thereof,
Debtor shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
tenant or landlord, at a reasonable rental per day based upon the value of the
portion of the Mortgaged Property so occupied, such rental to be due and payable
daily to the purchaser. An action of unlawful detainer shall lie if the tenant
holds over after a demand in writing for possession of such Mortgaged Property;
and this agreement and a trustee's or sheriff's deed shall constitute a lease
and agreement under which the tenant's possession arose and continued. Nothing
contained in this Mortgage shall be construed to constitute Mortgagee as a
"mortgagee in possession" in the absence of its taking actual possession of the
Mortgaged Property pursuant to the powers granted herein.
Section 4.06. Waiver of Rights. To the extent permitted by law, Debtor
waives the benefit of all laws now existing or that hereafter may be enacted (i)
providing for any appraisement before sale of any portion of the Mortgaged
Property, or (ii) in any way extending the time for the enforcement of the
collection of the Obligations or creating or extending a period of redemption
from any sale made in collecting the Obligations. To the full extent Debtor may
do so under applicable law, Debtor agrees that Debtor will not at any time
insist upon, plea, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension,
redemption or homestead exemption, and Debtor, for Debtor, Debtor's
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement,
stay of execution, homestead exemption, notice of election to mature or declare
due the whole of the Obligations and marshaling in the event of foreclosure of
the liens hereby created. If any law referred to in this Section and now in
force, of which Debtor, Debtor's heirs, devisees, representatives, successors
and assigns or other person might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section. Debtor expressly waives and
relinquishes any and all rights, remedies and defenses that Debtor may have or
be able to assert by reason of the laws of the State pertaining to the rights,
remedies and defenses of sureties.
Section 4.07. Relief From Stay. In the event that Debtor commences a case
under the Code or is the subject of an involuntary case that results in an order
for relief under the Code, subject to court approval, Mortgagee shall thereupon
be entitled and Debtor irrevocably consents to relief from any stay imposed by
Section 362 of the Code on or against the exercise of the rights and remedies
otherwise available to Mortgagee as provided in the Loan Documents and Debtor
hereby irrevocably waives its rights to object to such relief. In the event
Debtor shall commence a case under the Code or is the subject of an involuntary
case that results in an order for relief under the Code, Debtor hereby agrees
that no injunctive relief against Mortgagee shall be sought under Section 105 or
other provisions of the Code by Debtor or other person or entity
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claiming through Debtor, nor shall any extension be sought of the stay provided
by Section 362 of the Code.
Section 4.08. Cash Collateral. To the fullest extent allowed by applicable
law, Debtor hereby acknowledges and agrees that in the event that Debtor
commences a case under the Code or is the subject of an involuntary case that
results in an order for relief under the Code: (i) that all of the Rents are,
and shall for purposes be deemed to be, "proceeds, product, offspring, rents, or
profits" of the Premises covered by the lien of this Mortgage, as such quoted
terms are used in Section 552(b) of the Code; (ii) that in no event shall Debtor
assert, claim or contend that any portion of the Rents are, or should be deemed
to be, "accounts" or "accounts receivable" within the meaning of the Code and/or
applicable state law; (iii) that the Rents are and shall be deemed to be in any
such bankruptcy proceeding "cash collateral" of Mortgagee as that term is
defined in Section 363 of the Code; and (iv) that Mortgagee has valid,
effective, perfected, enforceable and "choate" rights in and to the Rents
without any further action required on the part of Mortgagee to enforce or
perfect its rights in and to such cash collateral, including, without
limitation, providing notice to Debtor under Section 546(b) of the Code.
Section 4.09. Assignment of Rents and Leases. (a) Debtor hereby assigns,
transfers, conveys and sets over to Mortgagee all of Debtor's estate, right,
title and interest in, to and under all leases, whether existing on the date
hereof or hereafter entered into (including any extensions, modifications or
amendments thereto) relating to the Premises (the "Leases"), if any, together
with all rights, powers, privileges, options and other benefits of Debtor as the
lessor or lessee under the Leases regarding the current tenants and any future
tenants, and all the rents, revenues, profits and income from the Leases with
respect to the Premises, excluding Debtor's accounts receivable and those of its
tenants and subtenants, including those now due, past due or to become due.
Debtor irrevocably appoints Mortgagee its true and lawful attorney-in-fact, at
the option of Mortgagee, at any time and from time to time upon an Event of
Default, to take possession and control of the Premises, pursuant to Debtor's
rights as lessor under the Leases, and to demand, receive and enforce payment,
to give receipts, releases and satisfaction and to sue, in the name of Debtor or
Mortgagee, for all of the rents, revenues, profits and income thereof. It is
intended by Debtor and Mortgagee that the assignment set forth herein
constitutes an absolute assignment and not merely an assignment for additional
security. The consideration received by Debtor to execute and deliver this
assignment and the liens and security interests created herein is legally
sufficient and will provide a direct economic benefit to Debtor. Notwithstanding
the foregoing, however, so long as there is no Event of Default, Debtor shall
have a license, revocable upon an Event of Default, to possess and control the
Premises and collect and receive all rents, revenues, profits and income. Upon
an Event of Default, such license shall be automatically revoked. The assignment
of Rents and Leases contained in this Mortgage are intended to provide Mortgagee
with all the rights and remedies of mortgagees pursuant to Section 697.07,
Florida Statutes, as may be amended from time to time. However, in no event
shall this reference diminish, alter, impair, or affect any other rights or
remedies of Mortgagee.
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(b) Upon any Event of Default, Mortgagee may, at any time without notice
(except if required by applicable law), either in person, by agent or by a
court-appointed receiver, regardless of the adequacy of Mortgagee's security,
and at its sole election (without any obligation to do so), enter upon and take
possession and control of the Premises, or any part thereof, to perform all acts
necessary and appropriate to operate and maintain the Premises, including, but
not limited to, execute, cancel or modify the Leases, make repairs to the
Premises, execute or terminate contracts providing for the management or
maintenance of the Premises, all on such terms as are deemed best to protect the
security of this assignment, and in Mortgagee's or Debtor's name, sue or
otherwise collect such rents, revenues, profits and income from the Premises as
specified in this Mortgage as the same become due and payable, including, but
not limited to, rents then due and unpaid. Mortgagee may so sue for or otherwise
collect such rents, revenues, profits and income with or without taking
possession of the Premises. All rents collected shall be held by Debtor as
trustee for the benefit of Mortgagee only. Debtor agrees that upon an Event of
Default, each tenant of the Premises shall make its rent payable to and pay such
rent to Mortgagee (or Mortgagee's agents) on Mortgagee's written demand
therefor, delivered to such tenant personally, by mail, or by delivering such
demand to each rental unit, without any liability on the part of said tenant to
inquire further as to the existence of an Event of Default by Debtor.
(c) All rents, revenues, profits and income collected subsequent to any
Event of Default shall be applied at the direction of, and in such order as
determined by, Mortgagee to the costs, if any, of taking possession and control
of and managing the Premises and collecting such amounts, including, but not
limited to, reasonable attorney's fees, receiver's fees, premiums on receiver's
bonds, costs of repairs to the Premises, premiums on insurance policies, taxes,
assessments and other charges on the Premises, and the costs of discharging any
obligation or liability of Debtor as lessor or landlord of the Premises and to
the sums secured by this assignment. Mortgagee or the receiver shall have access
to the books and records used in the operation and maintenance of the Premises
and shall be liable to account only for those rents actually received. Mortgagee
shall not be liable to Debtor, anyone claiming under or through Debtor or anyone
having an interest in the Premises by reason of anything done or left undone by
Mortgagee hereunder, except to the extent of Mortgagee's gross negligence or
willful misconduct.
Any entering upon and taking possession and control of the Premises by
Mortgagee or the receiver and any application of rents, revenues, profits and
income as provided herein shall not cure or waive any Event of Default hereunder
or invalidate any other right or remedy of Mortgagee under applicable law or
provided therein.
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ARTICLE V
MISCELLANEOUS
Section 5.01. Satisfaction. If and when the Obligations shall have become
due and payable (whether by lapse of time or by acceleration or by the exercise
of the privilege of prepayment), and Debtor shall pay or cause to be paid
(provided such payment is permitted or required hereby) the full amount thereof
and shall also pay or cause to be paid all other sums payable hereunder by
Debtor with respect to the Obligations, then this Mortgage shall be void
(otherwise it shall remain in full force and effect in law and equity forever)
and Mortgagee agrees to execute an instrument evidencing the satisfaction of all
obligations under this Mortgage and releasing this Mortgage which shall be
prepared and recorded at Debtor's sole expense.
Section 5.02. Limitation of Rights of Others. Nothing in this Mortgage is
intended or shall be construed to give to any person, other than Debtor,
Mortgagee and the holder of the Note, any legal or equitable right, remedy or
claim under or in respect of this Mortgage or any covenant, condition or
provision herein contained.
Section 5.03. Severability. In case any one or more of the provisions
contained herein or in the Note shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Mortgage shall be
construed as if such provision had never been contained herein or therein.
Section 5.04. Notices; Amendments; Waiver. All notices, demands,
designations, certificates, requests, offers, consents, approvals, appointments
and other instruments given pursuant to this Mortgage (collectively called
"Notices") shall be in writing and given by (i) hand delivery, (ii) facsimile,
(iii) express overnight delivery service or (iv) certified or registered mail,
return receipt requested and shall be deemed to have been delivered upon (a)
receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c) the
next business day, if delivered by express overnight delivery service, or (d)
the third business day following the day of deposit of such notice with the
United States Postal Service, if sent by certified or registered mail, return
receipt requested; provided, however, if a Notice is deposited with the United
States Postal Service pursuant to this item (d), such Notice shall also be sent
in accordance with not less than one of the other methods set forth in this
Section 5.04. Notices shall be provided to the parties and addresses (or
facsimile numbers, as applicable) specified below:
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If to Debtor: Family Steak Houses of Florida, Inc.
2113 Florida Boulevard
Neptune Beach, Florida 32266
Attention:
Edward B. Alexander
Telephone: (904) 249-4197
Telecopy: (904) 249-1466
If to Mortgagee: Dennis L. Ruben, Esq.
Senior Vice President and General Counsel
FFCA Mortgage Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. Whenever in this Mortgage the giving of Notice is required, the
giving thereof may be waived in writing at any time by the person or persons
entitled to receive such Notice. Except as in this Mortgage otherwise expressly
provided, (i) this Mortgage may not be modified except by an instrument in
writing executed by Debtor and Mortgagee and (ii) no requirement hereof may be
waived at any time except by a writing signed by the party against whom such
waiver is sought to be enforced, nor shall any waiver be deemed a waiver of any
subsequent breach or default.
Section 5.05. Counterparts. This Mortgage may be executed in any number of
counterparts and each thereof shall be deemed to be an original; and all such
counterparts shall constitute but one and the same instrument.
Section 5.06. Successors and Assigns. All of the provisions herein
contained shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, to the same extent as if each such
successor and assign were in each case named as a party to this Mortgage.
Wherever used, the singular shall include the plural, the plural shall include
the singular and the use of any gender shall include all genders.
Section 5.07. Headings. The headings appearing in this Mortgage have been
inserted for convenient reference only and shall not modify, define, limit or
expand the express provisions of this Mortgage.
Section 5.08. Security Agreement. With respect to the Personal Property or
any portion of the Mortgaged Property which constitutes fixtures or other
property governed by the UCC, this Mortgage shall constitute a security
agreement between Debtor as the debtor and Mortgagee as the secured party, and
Debtor hereby grants to Mortgagee a security interest in such portion
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of the Mortgaged Property. Cumulative of all other rights of Mortgagee
hereunder, Mortgagee shall have all of the rights conferred upon secured parties
by the UCC. Debtor will execute and deliver to Mortgagee all financing
statements that may from time to time be required by Mortgagee to establish and
maintain the validity and priority of the security interest of Mortgagee, or any
modification thereof, and all costs and expenses of any searches required by
Mortgagee. Mortgagee may exercise any or all of the remedies of a secured party
available to it under the UCC with respect to such property, and it is expressly
agreed that if upon an Event of Default Mortgagee should proceed to dispose of
such property in accordance with the provisions of the UCC, 10 days' notice by
Mortgagee to Debtor shall be deemed to be reasonable notice under any provision
of the UCC requiring such notice; provided, however, that Mortgagee may at its
option dispose of such property in accordance with Mortgagee's rights and
remedies with respect to the real property pursuant to the provisions of this
Mortgage, in lieu of proceeding under the UCC.
Debtor shall give advance notice in writing to Mortgagee of any proposed
change in Debtor's name, identity, or business form or structure and will
execute and deliver to Mortgagee, prior to or concurrently with the occurrence
of any such change, all additional financing statements that Mortgagee may
require to establish and maintain the validity and priority of Mortgagee's
security interest with respect to any of the Mortgaged Property described or
referred to herein.
Section 5.09. Effective as a Financing Statement. This Mortgage shall be
effective as a financing statement filed as a fixture filing with respect to all
fixtures included within the Mortgaged Property and is to be filed for record in
the real estate records of each county where any part of the Mortgaged Property
(including said fixtures) is situated. This Mortgage shall also be effective as
a financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of Debtor
is the address of Debtor set forth in the introductory paragraph of this
Mortgage, and the address of the Mortgagee from which information concerning the
security interests hereunder may be obtained is the address of Mortgagee as set
forth in the introductory paragraph of this Mortgage. A carbon, photographic or
other reproduction of this Mortgage or of any financing statement relating to
this Mortgage shall be sufficient as a financing statement for any of the
purposes referred to in this Section.
Section 5.10. Characterization; Interpretation. It is the intent of the
parties hereto that the business relationship created by the Note, this Mortgage
and the other Loan Documents is solely that of creditor and debtor and has been
entered into by both parties in reliance upon the economic and legal bargains
contained in the Loan Documents. None of the agreements contained in the Loan
Documents is intended, nor shall the same be deemed or construed, to create a
partnership between Mortgagee and Debtor, to make them joint venturers, to make
Debtor an agent, legal representative, partner, subsidiary or employee of
Mortgagee, nor to make Mortgagee in any way responsible for the debts,
obligations or losses of Debtor. Debtor
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acknowledges that Mortgagee and Franchisor are not affiliates, agents, partners
or joint venturers, nor do they have any other legal, representative or
fiduciary relationship.
Mortgagee and Debtor acknowledge and warrant to each other that each has
been represented by independent counsel and has executed this Mortgage after
being fully advised by said counsel as to its effect and significance. This
Mortgage shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument, the
relative bargaining powers of the parties or the domicile of any party.
Section 5.11. Time of the Essence. Time is of the essence in the
performance of each and every obligation under this Mortgage.
Section 5.12. Document Review. In the event Debtor makes any request upon
Mortgagee requiring Mortgagee or its attorneys to review and/or prepare (or
cause to be reviewed and/or prepared) any document or documents in connection
with or arising out of or as a result of this Mortgage, then, except as
expressly stated elsewhere herein, Debtor shall reimburse Mortgagee or its
designee promptly upon Mortgagee's demand therefor a reasonable processing and
reviewing fee in an amount not less than $500.00 for each such request.
Section 5.13. Estoppel Certificate. (a) At any time, and from time to time,
Debtor agrees, promptly and in no event later than 10 days after a request from
Mortgagee, to execute, acknowledge and deliver to Mortgagee a certificate in the
form supplied by Mortgagee, certifying: (1) the date to which principal and
interest have been paid under the Note and the amount thereof then payable; (2)
that no notice has been received by Debtor of any default under this Mortgage
which has not been cured, except as to defaults specified in the certificate;
(3) the capacity of the person executing such certificate, and that such person
is duly authorized to execute the same on behalf of Debtor; and (4) any other
information reasonably requested by Mortgagee in connection with the Loan
Agreement.
(b) If Debtor shall fail or refuse to sign a certificate in accordance with
the provisions of this Section within 10 Business Days following a request by
Mortgagee, Debtor irrevocably constitutes and appoints Mortgagee as its
attorney-in-fact to execute and deliver the certificate to any such third party,
it being stipulated that such power of attorney is coupled with an interest and
is irrevocable and binding.
Section 5.14. Limitation of Interest. Notwithstanding anything to the
contrary contained in any of the Loan Documents, the obligations of Debtor to
Mortgagee under the Note, this Mortgage and any other Loan Documents are subject
to the limitation that payments of interest and late charges to Mortgagee shall
not be required to the extent that receipt of any such payment by Mortgagee
would be contrary to provisions of applicable law limiting the maximum rate of
interest that may be charged or collected by Mortgagee. The portion of any such
payment received by Mortgagee that is in excess of the maximum interest
permitted by such
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provisions of law shall be credited to the principal balance of the Note or if
such excess portion exceeds the outstanding principal balance of the Note, then
such excess portion shall be refunded to Debtor. All interest paid or agreed to
be paid to Mortgagee shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and/or spread throughout the full term of the
Note (including, without limitation, the period of any renewal or extension
thereof) so that interest for such full term shall not exceed the maximum amount
permitted by applicable law.
Section 5.15. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Mortgage was substantially negotiated in the State of
Arizona, the executed Mortgage was delivered in the State of Arizona, all
payments under the Loan Documents will be delivered in the State of Arizona and
there are substantial contacts between the parties and the transactions
contemplated herein and the State of Arizona. For purposes of any action or
proceeding arising out of this Mortgage, the parties hereto expressly submit to
the jurisdiction of all federal and state courts located in the State of
Arizona. Debtor consents that it may be served with any process or paper by
registered mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Debtor waives and agrees not to
assert in any such action, suit or proceeding that it is not personally subject
to the jurisdiction of such courts, that the action, suit or proceeding is
brought in an inconvenient forum or that venue of the action, suit or proceeding
is improper. The creation of this Mortgage and the rights and remedies of
Mortgagee with respect to the Mortgaged Property, as provided herein and by the
laws of the State, shall be governed by and construed in accordance with the
internal laws of the State without regard to principles of conflict of law. With
respect to other provisions of this Mortgage, this Mortgage shall be governed by
the internal laws of the State of Arizona. Nothing in this Section shall limit
or restrict the right of Mortgagee to commence any proceeding in the federal or
state courts located in the State to the extent Mortgagee deems such proceeding
necessary or advisable to exercise remedies available under the Mortgage or the
other Loan Documents.
Section 5.16. Indemnification. Except for the gross negligence or willful
misconduct of Mortgagee, Debtor shall indemnify and hold harmless Mortgagee and
Mortgagee's shareholders, directors, officers, agents, attorneys and employees
from and against any and all claims, demands, causes of action, suits,
proceedings, liabilities, damages (including consequential and punitive
damages), losses, costs and expenses, including attorneys' fees, caused by,
incurred or resulting from its operations of or relating in any manner to the
Mortgaged Property, whether relating to their original design or construction,
latent defects, alteration, maintenance, use by Debtor or any person thereon,
supervision or otherwise, or from any breach of, default under or failure to
perform any term or provision of this Mortgage by Debtor, its officers,
employees, agents or other persons. It is expressly understood and agreed that
Debtor's obligations under this Section shall survive the expiration or earlier
termination of this Mortgage for any reason.
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Section 5.17. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. MORTGAGEE, BY ACCEPTING THIS MORTGAGE, AND DEBTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR
IN CONNECTION WITH THIS MORTGAGE, THE RELATIONSHIP OF MORTGAGEE AND DEBTOR,
DEBTOR'S USE OR OCCUPANCY OF THE MORTGAGED PROPERTY, AND/OR ANY CLAIM FOR INJURY
OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES
HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND
IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES FROM MORTGAGEE WITH RESPECT TO ANY
AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY DEBTOR AGAINST MORTGAGEE OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH THIS MORTGAGE OR ANY DOCUMENT CONTEMPLATED
HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE
PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
Section 5.18. Transfer of Loan. Mortgagee may, at any time, sell, transfer
or assign the Note, this Mortgage and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein or issue
mortgage pass-through certificates or other securities evidencing a beneficial
interest in a rated or unrated public offering or private placement as
contemplated by the Loan Agreement.
Section 5.19. Future Advances. This Mortgage secures future advances of any
nature whatsoever including, without limitation, those made pursuant to this
Mortgage and pursuant to Section 2(b) of the Loan Agreement. This Mortgage
secures advances up to a maximum indebtedness of $1,950,000 outstanding at any
time plus accrued and unpaid interest. It also secures certain other obligations
of the Debtor to Mortgagee as provided for by other provisions of this Mortgage.
Without limiting any other provisions of this Mortgage, this Mortgage also shall
secure repayment of the unpaid balances of advances made with respect to the
Mortgaged Property for the payment of taxes, assessments, maintenance charges,
insurance premiums or costs similar or dissimilar incurred for the protection of
the Mortgaged Property or for the lien of this Mortgage, expenses incurred by
Mortgagee by reason of default by the Debtor, or advances made as provided in
any Loan Document, including, without limitation, accruals of interest and
additional interest on sale or refinancing as provided in the Note, which
accruals and
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additional interest may be added to principal and themselves bear interest and
any reserve as provided in the Note. Debtor acknowledges that Mortgagee has not
obligated itself to make any advances nor has any representative of Mortgagee in
any manner indicated any intention to make any such advance other than as
expressly set forth in the Loan Agreement.
IN WITNESS WHEREOF, Debtor has caused this Mortgage to be executed and
delivered by its duly authorized officers as of the day and year first above
written.
DEBTOR:
FAMILY STEAK HOUSES OF FLORIDA, INC.,
a Florida corporation
By:
- ---------------------- --------------------------------
WITNESS
Printed Name:
--------------------
Title:
-----------------------------
- -------------------- [Corporate Seal]
Printed Name:
- ----------------------
WITNESS:
- ----------------------
Printed Name:
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STATE OF ]
] SS.
COUNTY OF ]
I HEREBY CERTIFY that on this __ day______, before me__________, an officer
duly authorized in the State aforesaid and in the County aforesaid to take
acknowledgements, the foregoing instrument was acknowledged before me
by____________, the___________ of Family Steak Houses of Florida, Inc., a
Florida corporation, freely and voluntarily under authority duly vested in him
by said corporation and that the seal affixed thereto is the true corporate seal
of said corporation. He is personally known to me or has produced _________ as
identification.
WITNESS my hand and official seal in the County and State last aforesaid
this __ day of ______ , 1996.
Notary Public
Typed, printed or stamped name of
Notary Public
My Commission Expires:
40
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EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
<PAGE>
EXHIBIT B
LITIGATION
EXHIBIT [7]
(Letterhead of Family Steak Houses of Florida, Inc.)
DEAR SHAREHOLDERS:
You are all familiar with the fact that on March 6, 1997, Bisco Industries,
Inc. ("Bisco") commenced a $.90 per share cash tender offer (the "Offer") to the
public shareholders of Family Steak Houses of Florida, Inc. (the "Company").
After due consideration of the terms and conditions of the offer and other
matters it deemed relevant, at a meeting on March 18, 1997, the Board of
Directors of the Company unanimously determined to recommend that the
shareholders reject the Bisco tender offer.
The Board based its decision on its opinion and consideration of a number
of factors, including:
1. the current market price and trading range of shares of the Company's
common stock Company's common stock and the current business, assets,
financial condition and future prospects, including the recent refinancing
of its long-term debt, recent new restaurant opening and its renewed
momentum for growth;
2. its franchisor's, Ryan's Family Steak Houses, Inc., concern about the
potentially disruptive influence of Bisco, which could lead to the Company
losing its exclusive franchise.
3. its lender's, Franchise Finance Corporation of America, confidence in the
Company's operations and current management team after extensive due
diligence in connection with the recent $15 million financing and their
concern regarding Bisco's financial strength, management expertise and
undefined plans for the Company;
4. the lack of information provided by Bisco with respect to its strategies
for the Company;
5. the lack of depth in Bisco's management team, its apparent lack of
experience and expertise in the franchised restaurant industry and its
apparently limited financial resources;
6. the range of values for the Company revealed in a valuation study prepared
by a nationally-recognized investment banking firm;
7. the Board's belief that it may be able to enter into an arrangement with a
third party other than Bisco that could provide greater financial
resources, a higher price per share, and better management expertise in the
Company's operations;
<PAGE>
8. the Board's belief that it might be able to negotiate a higher offer price
per share from Bisco;
9. the opinion of most shareholders who had contacted the Company that the
price of the Offer was too low and their stated intent not to tender their
shares in response to the Offer;
10. the Offer for only 30% of the outstanding shares of the Company's common
stock could, upon its consummation, result in the Company being controlled
by a person with no expertise in the restaurant industry, little financial
resources and no experience managing a publicly traded corporation; and
11. the impact of any changes in the Company's operation, including the
disposition of restaurants mentioned as a possible strategy in the Bisco's
Offer materials, on the Company's 1,400 employees and its customers,
suppliers and other constituencies including the communities in which its
facilities are located.
These factors are discussed in greater detail in the enclosed Schedule
14D-9 which we have filed with the Securities and Exchange Commission today.
Therefore, the Board recommends that its shareholders NOT tender their
shares in response to the tender offer of Bisco Industries, Inc.
As stated in its offer materials, Bisco will only pay for shares tendered
if it is satisfied, in its sole discretion, that the Florida Control Share Act
does not apply to its offer. The Control Share Act is a Florida state law
enacted to protect shareholders from, among other things, being forced to accept
an inadequate offer for their shares.
However, unless the Board of Directors approves Bisco's tender offer or the
shareholders either vote for a resolution to grant voting rights to shares
acquired by Bisco or adopt a Bylaw amendment to "opt out" of the Control Share
Act at the annual meeting of shareholders scheduled for June 17, 1997, any
shares acquired by Bisco through the tender offer will have no voting rights.
The Board has determined not to take any action that would make the Control
Share Act inapplicable to the shares acquired by Bisco.
At the March 18, 1997 meeting, the Board of Directors also decided to
declare a dividend of one Right for each outstanding share of the Company's
common stock under a shareholder rights plan previously adopted, pending certain
conditions, at the February 11, 1997 meeting of the Board of Directors. The
Board believes that the shareholder rights plan will provide the Company with
additional time to negotiate an increase in the Offer, to consider alternatives
to the Offer, and to insure that any acquisition of the Company occurs on terms
that provide fair value to all shareholders. The terms and conditions of the
shareholder rights plan are outlined in the enclosed Summary of Key Features of
Shareholder Rights Plan of Family Steak Houses of Florida, Inc.
<PAGE>
The Board of Directors also adopted Amended and Restated Bylaws of the
Company (the "Bylaws") in response to Bisco's tender offer. The revisions to the
Bylaws institute a classified Board of Directors, impose certain timing and
notice requirements on proposals and director nominations made by shareholders,
and authorize the Company to appoint inspectors of elections and consents to
determine the validity and effect of shareholder votes, proxies, consents and
revocations of consent. These revisions to the Bylaws are intended to provide
the Company with additional notice of, and to protect the Company from, coercive
tactics proposed by persons trying to exert control over the Company.
We are enclosing for your review the Company's Press Release published on
March 19, 1997, the Schedule 14D-9, and the Summary of Key Features of the
Company's Shareholder Rights Plan.
If you have already sent your shares in to Bisco, you can have them
returned to you by filling out the enclosed blue withdrawal form or, if your
shares are held through a bank or broker, by contacting your representative at
that firm. If you have any questions or need assistance in withdrawing your
shares, please call our information agent, Corporate Investor Communications at
1-800-932-8498.
We will keep you advised of further developments.
Very truly yours,
Lewis E. Christman, Jr.
President and Chief Executive Officer
