UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999, or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-9510
FFP PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 75-2147570
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2801 Glenda Avenue; Fort Worth, Texas 76117-4391
(Address of principal executive office, including zip code)
817/838-4700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class Name of Each Exchange on Which Registered
Class A Units of American Stock Exchange
Limited Partnership
Interests
Securities registered pursuant to Section 12(g) of the Act
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Class A Units held by non-affiliates of the
registrant at March 31, 2000, was $2,222,000. For purposes of this computation,
all officers, directors, and beneficial owners of 10% or more of the Class A
Units of the registrant are deemed to be affiliates. Such determination should
not be deemed an admission that such officers, directors, and beneficial owners
are affiliates.
Class A Units 2,234,262
(Number of units outstanding as of March 31, 2000)
<PAGE>
PART I
ITEM 1. BUSINESS.
General Background
FFP Partners, L.P. (the "Partnership") is a Delaware limited partnership
whose sole general partner is FFP Real Estate Trust and whose Class A Units of
limited partnership interest ("Limited Partner Units") are listed for trading on
the American Stock Exchange (trading symbol "FFP"). The Partnership no longer
has any type of limited partnership interests other than the Limited Partner
Units. {See Item 5. Market for the Registrant's Units and Related Security
Holder Matters.}
FFP Real Estate Trust, a Texas real estate investment trust, has served as
the Partnership's sole general partner since a restructuring of the Partnership
was completed on December 28, 1997. FFP Real Estate Trust is wholly owned by FFP
Partners Management Company, Inc. ("FFPMC"), which served as the sole general
partner of the Partnership from the inception of the Partnership until the
December 1997 restructuring.
The Partnership was formed in December 1986 pursuant to the Agreement of
Limited Partnership of FFP Partners, L.P. (as amended, the "Partnership
Agreement"). In May 1987, the Partnership purchased convenience stores, truck
stops, other retail motor fuel outlets, and ancillary businesses from affiliates
of its senior executives. The purchase of these outlets was completed in
conjunction with the Partnership's initial public offering of Limited Partner
Units. The senior executives of the Partnership had owned and managed these
operations prior to their acquisition by the Partnership. Through its
subsidiaries, the Partnership owned and operated these businesses until the
December 1997 restructuring.
In the December 1997 restructuring, the Partnership (a) retained the real
estate (land and buildings) previously used in its retail and wholesale
operations, and (b) transferred its convenience stores, truck stops, other
retail motor fuel outlets, and other businesses to FFP Marketing Company, Inc.
("FFP Marketing") in exchange for all the common stock of FFP Marketing. The
common stock of FFP Marketing was then distributed to its partners such that the
Partnership's limited partners received one share of common stock for each
Limited Partner Unit and the Partnership's general partner received common stock
in a percentage equal to its former ownership percentage. Since that time, FFP
Marketing's common stock has been listed for trading on the American Stock
Exchange (trading symbol "FMM").
The real estate retained by the Partnership in the December 1997
restructuring was then contributed at that time to FFP Properties, L.P. ("FFP
Properties"), a newly formed Texas limited partnership, in exchange for the
general partnership interest in FFP Properties. As a result, the Partnership now
serves as the general partner, and owns 60%, of FFP Properties, which in turn
owns the land and buildings. The limited partnership interests in the
Partnership that were previously held by John H. Harvison, the Chairman and
Chief Executive Officer of the Partnership's general partner, members of his
family, and corporations, partnerships, trusts, and other business entities
affiliated with him or his family members (collectively, the "Harvison Family")
were exchanged for economically equivalent limited partnership interests in FFP
Properties. As a result, the Harvison Family owns a 40% limited partnership
interest in FFP Properties.
In the 1997 restructuring, all of the Partnership's non-real estate operating
activities were transferred to FFP Marketing, and the business of the
Partnership now solely consists of the ownership and rental of real estate
through its general partnership interest in FFP Properties.
Unless the context requires otherwise, references herein to the Partnership
include its subsidiary, FFP Properties, and its general partner, FFP Real Estate
Trust. References herein to FFP Marketing include its subsidiaries.
The Partnership maintains its principal executive offices at 2801 Glenda
Avenue, Fort Worth, Texas 76117-4391. Its telephone number is (817) 838-4700.
The Partnership's Internet web site address is http://www.ffplp.com.
Business Strategy
The Partnership intends to pursue the following business strategy:
1. own its current portfolio of improved real properties,
2. collect rental income from those properties,
3. build equity in the properties through debt retirement and
appreciation, and
4. where acceptable deal terms, occupancy and financing are available,
expand its real estate holdings through the acquisition of other real
estate properties.
Such additional properties will most likely include retail sites leased to
FFP Marketing for convenience stores, truck stops, fast-food restaurants, and
other retail outlets. Any additional real estate acquired by the Partnership may
be used for other purposes and may be leased to other tenants. Although the
Partnership will consider investments in any type of real estate, it is
anticipated that most initial investments will be in convenience store locations
since most of the Partnership's contacts are in that industry, and the
Partnership believes it has considerable knowledge of the economics of those
operations. In addition, the Partnership expects that most real estate acquired
will be in smaller communities and towns. The Partnership believes that large
real estate owners and developers are primarily interested in metropolitan area
properties. Consequently, the Partnership believes it can obtain better yields
on investments in smaller towns since there is less competition.
The Partnership may or may not pursue a conversion to a real estate
investment trust. If the Partnership decides to convert into a real estate
investment trust, two scenarios are possible. One would be with a conversion
through a "merger" and the other would be undertaken through an "exchange". In
either case, if undertaken, the Partnership's unitholders would receive shares
of FFP Real Estate Trust in place of their limited partnership units of the
Partnership, and the FFP Real Estate Trust shares would be listed on a
securities exchange.
The Partnership has not yet decided to seek a tax ruling from the Internal
Revenue Service ("IRS") regarding a conversion. If one is sought, there can be
no assurance whether or when the IRS would respond favorably to the request. If
the Partnership decides to pursue a conversion and obtains a favorable tax
ruling from the IRS that a merger of the Partnership and its general partner,
FFP Real Estate Trust, would be tax-free to the Partnership's unitholders, then
the merger alternative would most likely be used. Under the merger alternative,
the Partnership would be merged into its general partner, FFP Real Estate Trust,
with the Partnership's unitholders receiving shares or units of FFP Real Estate
Trust in exchange for their units of the Partnership.
If the Partnership decides to pursue a conversion but is unable to obtain a
favorable ruling from the IRS on the merger alternative, then it could convert
to a real estate investment trust under the exchange alternative. Under the
exchange alternative, the Partnership's unitholders would be prohibited from
transferring their units to a third party but would be able to require the
Partnership's general partner to redeem their units either for shares of FFP
Real Estate Trust or for cash. FFP Real Estate Trust, not the Partnership's
unitholders, would determine whether to redeem the Partnership's units for
shares or cash. Management expects that any such redemption would be made in
exchange for shares or units of FFP Real Estate Trust.
Competition
Numerous parties with greater financial resources than the Partnership
compete with the Partnership in acquiring real estate for convenience stores,
truck stops, and other retail activities. These parties may be able to accept
more or less risk than the Partnership is willing to undertake. Competition will
affect the bargaining power of property owners who sell, buy or lease their
properties, may reduce the number of suitable investment opportunities available
to the Partnership, and may decrease the yield achievable on any real estate
owned or purchased by the Partnership.
Employees
Throughout 1999 and at March 31, 2000, FFP Real Estate Trust, general partner
of the Partnership, had two executive officers not paid directly by the
Partnership. Both of those hold similar positions with FFP Marketing. FFP Real
Estate Trust has entered into a reimbursement agreement with FFP Marketing
pursuant to which the Partnership pays FFP Marketing an annual lump sum of
$200,000 for administrative and other indirect costs provided to the Partnership
and reimburses FFP Marketing for all of direct costs of the Partnership. Neither
FFP Real Estate Trust nor the Partnership have any other employees.
Government Regulation -- Environmental Regulation
Substantially all the properties leased by the Partnership to FFP Marketing
contain underground storage tanks used for motor fuel storage. The underground
storage tanks are owned and operated by FFP Marketing, which is responsible for
compliance with all environmental laws, rules and regulations regarding such
tanks. If for any reason FFP Marketing is unable or unwilling to take all
actions that may be required under current or future environmental laws, rules
or regulations regarding underground storage tanks or other activities, the
Partnership could be required to take such actions and be responsible for
violations of such environmental laws, rules or regulations.
The Partnership may acquire additional properties that will also be subject
to environmental regulations, either because they will also contain underground
storage tanks or for other reasons. The Partnership intends to structure similar
leases with the operators of such properties so that the lessees will be
responsible for compliance with such environmental regulations.
Federal Income Tax Law
As a partnership, the Partnership pays no federal income tax. Rather, the
income or loss of the Partnership is allocated to its partners to be included in
their respective tax returns, subject to special rules for publicly traded
partnerships. Investors should note that (i) the passive loss rules of the
Internal Revenue Code are applied separately with respect to items attributable
to each publicly traded partnership, and (ii) net income from a publicly traded
partnership is not treated as passive income.
If in the future the Partnership becomes a real estate investment trust for
federal income tax purpose {see Business Strategy}, its earnings will no longer
be allocated to its partners, but it will not, as an entity, generally be
subject to federal income tax. However, it will be required to comply with
various complex requirements which limit the nature of its assets and sources of
its income. In addition, it will be required to distribute annually to its
shareholders at least 95% of its real estate investment trust taxable income.
Differences in timing between the actual receipt of income, the actual payment
of deductible expenses in arriving at taxable income, the creation of reserves,
and required debt amortization payments could require the Partnership to borrow
funds to meet the 95% distribution requirement even if management believed that
the then prevailing market conditions were not favorable for such borrowings or
that the borrowings were not advisable in the absence of such tax
considerations.
Forward-Looking Statements
This annual report on Form 10-K contains certain "forward-looking" statements
as such term is defined in the U.S. Private Securities Litigation Reform Act of
1995, and information relating to the Partnership and its subsidiary that is
based on the beliefs of management and assumptions made by and information
currently available to management. The Partnership is relying upon the "safe
harbor" contained in Section 27A of such act in making such forward-looking
statements. Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Although the Partnership believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, the Partnership's actual results could differ
materially from those set forth in the forward-looking statements. Among the
factors that could cause actual results to differ materially from the
forward-looking statements made include the following: changes in real estate
conditions, including rental rates and the construction or availability of
competing properties; the financial strength, cash flow, liquidity and other
relevant business aspects of FFP Marketing, the primary tenant of the
Partnership's properties; changes in the industries in which FFP Marketing
competes; changes in general economic conditions; the ability of management to
identify acquisition and investment opportunities meeting the Partnership's
investment objectives; the timely leasing of unoccupied properties; timely
re-leasing of currently occupied properties upon expiration of the current
leases or the default of the current tenant; the Partnership's ability to
generate funds sufficient to meet its debt service payments and other operating
expenses; the inability of the Partnership to control the management and
operation of its tenant and the businesses conducted on the Partnership's
properties; financing risks, including the availability of funds to service or
refinance existing debt and to finance acquisitions of additional property, the
existence of complex tax regulations relating to the Partnership's status as a
publicly traded partnership and, if achieved, to its status as a real estate
investment trust and the adverse consequences of the failure to qualify as such;
and other risks detailed from time to time in the Partnership's filings with the
Securities and Exchange Commission. Given these uncertainties, readers are
cautioned not to place undue reliance on the forward-looking statements. The
Partnership undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
Should one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, believed, estimated,
expected, or intended.
ITEM 2. PROPERTIES.
The Partnership owns approximately 200 parcels of improved real estate. Those
properties include the ownership of approximately 84 parcels of Partnership land
with buildings, 106 parcels with Partnership buildings only on land owned by
affiliates of FFP Marketing or the Harvison Family, and 10 miscellaneous
Partnership properties such as vacant lots, small houses or other minor types.
The Partnership's real properties are principally located in small cities and
towns in the states shown in the table below. The table below also shows the
uses of Partnership properties at year end 1999:
Vacant
or
Convenience Gasoline Truck Other
Stores Outlets Stops Uses Total
Texas 75 62 6 9 152
Oklahoma 0 4 0 0 4
Louisiana 14 1 0 0 15
Missouri 9 1 0 5 15
Illinois 0 0 0 1 1
Mississippi 5 0 0 1 6
Kentucky 1 0 1 0 2
New Mexico 0 0 2 1 3
Tennessee 1 1 0 0 2
Totals 105 69 9 17 200
All but one of the Partnership's properties under lease are leased to FFP
Marketing under long-term leases for the operation of convenience stores or
truck stops at those locations. These leases contain two important provisions:
1. "Triple Net" Leases. Under these "triple net" leases, the tenant (FFP
Marketing), and not the landlord (the Partnership), pays all real estate taxes,
insurance, operating costs, and capital costs for the properties. A "triple net"
lease is generally favored by a landlord because properties leased under "triple
net" provisions have considerably less operating expenses and risk than
properties leased without this provision.
2. Escalating Rent. Each of the leases provide that the rental income to be
received by the Partnership will increase every five years to the extent of any
increase in the consumer price index.
In February 1999, the Partnership purchased 14 properties located in Texas
from a third party and promptly leased them to FFP Marketing pursuant to 15-year
leases. The Partnership's scheduled rent income on these properties equals its
debt obligations on these properties during its initial five years of ownership
and should exceed its debt obligations to the extent that the rent escalates as
a result of an increase in the consumer price index. The land portion of the
rental income from these 14 properties is accounted for as operating leases;
therefore, the land at these locations is reflected as an asset on the
Partnership's balance sheet and the rental income is shown as such on the
Partnership's statement of income. On the other hand, the building portion of
the rent income from these 14 properties is accounted for as a direct financing
lease; as a result, the Partnership's financial statements do not include these
buildings, or the depreciation thereon, but instead reflect the Partnership's
receivable from these direct financing leases as an asset and the interest
income earned each month therefrom. Nevertheless, the Partnership does own legal
title to both the land and the buildings at these 14 locations.
The Partnership's leases to FFP Marketing approximately 78 properties where
the Partnership owns both the land and building. These leases generally expire
in December 2002 plus two five-year renewal periods at the sole option of FFP
Marketing. Assuming that these leases are renewed in 2002 and 2007, which is
expected, the rent payable to the Partnership will be adjusted by the change in
the consumer price index from January 1, 1998, to the date of each such renewal.
The Partnership's ownership in the 106 buildings leased to FFP Marketing is
subject to a pre-existing ground lease between FFP Marketing, as lessee, and the
Harvison Family, as lessor. The Partnership's ownership interest in these
buildings terminates concurrently with the end of the underlying ground lease
(generally, May 2007) and will continue beyond that date if the underlying
ground lease is renewed. The lessors under those ground leases have indicated to
the Partnership that they do not intend to extend the ground leases past 2007.
The Partnership refinanced all of its long-term indebtedness in October 1999.
The new debt is secured by liens against 63 Partnership properties and will be
fully amortized with fixed monthly payments over a 20-year term. As a condition
to that loan, FFP Marketing exercised its option to extend the term of the real
estate leases for 28 of those 63 properties to a 20-year term, and FFP Marketing
and the Partnership executed a new master lease covering the remaining 35 of
those 63 properties for a 20-year term. The Partnership's leases for these 63
properties contain "triple net" provisions and rent escalation provisions every
five years.
The Partnership's rental rates for all of the real estate leased to FFP
Marketing were determined by the Partnership based on its knowledge of the
properties and the general experience of its management in acting as lessor and
lessee for similar properties. The Partnership believes that the rental rates
paid by FFP Marketing to the Partnership are a fair rental value. Neither the
Partnership nor FFP Marketing have engaged a third party advisor or referred to
any third party surveys or analyses of rental rates in making this
determination.
ITEM 3. LEGAL PROCEEDINGS.
The Partnership is not subject to any material pending legal proceedings,
other than routine litigation incidental to its business, to which the
Partnership or its subsidiary is a party or of which any of their properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the holders of the Limited Partner Units
during the fourth quarter of 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED SECURITY HOLDER MATTERS.
The Limited Partner Units are listed for trading on the American Stock
Exchange under the trading symbol "FFP". At March 31, 2000, there were
approximately 224 holders of record and 627 beneficial owners of the Limited
Partner Units. The closing sales price of these Units was $1.00 per Unit on that
date. {See Item 12. Security Ownership of Certain Beneficial Owners and
Management.}
The following table sets forth the range of high and low sales prices for the
Limited Partner Units as reported on the American Stock Exchange for the periods
indicated:
High Low
(In dollars)
1999
First Quarter 1.2500 0.6250
Second Quarter 1.5000 0.8125
Third Quarter 1.1250 0.6875
Fourth Quarter 1.1250 0.6250
1998
First Quarter 4.0000 1.0000
Second Quarter 1.6250 1.1250
Third Quarter 1.5000 0.7500
Fourth Quarter 1.0000 0.3750
No distributions were made to partners in 1999 or 1998. The Board of Trustees
of FFP Real Estate Trust, the general partner of the Partnership, has not
established a distribution policy. Any future distributions may only be made in
compliance with the terms of the Partnership's new long-term debt. Accordingly,
no assurance can be given that the Partnership will be able to make any
distributions to its unitholders. The ability of the Partnership to make
distributions in the future will be dependent upon the Partnership's earnings
and cash flow, anticipated capital expenditures, and debt service requirements.
{See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Liquidity and Capital Resources.}
In August 1989, the Partnership entered into a Rights Agreement and
distributed Rights to the then holders of its Limited Partner Units to purchase
Limited Partner Units under certain circumstances. The Rights, which later
became exercisable in October 1994, gave each holder of a Right the option to
purchase a Limited Partner Unit at a price of $20 per Unit. The Rights had a
10-year term and expired in August 1999.
The Partnership's partnership agreement prohibits any person from owning more
than 4.9% of the Limited Partner Units. The agreement provides that any purchase
or transfer that would result in a person owning more than 4.9% of the Limited
Partner Units will be null and void, and that the units that were to be
transferred will become "Excess Units." Any such "Excess Units" will have no
voting or distribution rights and will be held in escrow by the Partnership.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA.
1999 1998 [1]
(In thousands, except
per unit data)
Rental income $2,975 $2,660
Interest and other income 822 70
Total revenues $3,797 $2,730
Real property, net $18,273 $16,684
Investment in direct financing leases, net $3,897 $0
Total assets $23,979 $16,804
Long-term debt $20,812 $13,355
Minority interest in subsidiary 945 857
Partners' equity 1,394 1,262
Total capitalization $23,151 $15,474
Net income (loss) $132 $(179)
Net income (loss) per unit-
Basic $0.06 $(0.08)
Diluted $0.06 $(0.08)
Adjusted EBITDA [2] $2,008 $1,354
FFO [3] $884 $519
____________________
[1] Although the Partnership was began operations in May 1987, no balance sheet
items or operating results prior to its restructuring on December 28, 1997 are
shown above for the Partnership. The Partnership's balance sheet items and
operating results after the restructuring are not comparable to any period
before then. In order to avoid potential misunderstandings, balance sheet items
and operating results of the Partnership for years prior to 1998 are included
with reports filed with the Securities and Exchange Commission by FFP Marketing.
[2] Adjusted EBITDA is defined as net income (loss) from continuing operations
before interest expense, income taxes, depreciation and amortization expense,
and reduced by the 40% minority interest. Adjusted EBITDA provides additional
information for evaluating financial results and is presented solely as a
supplemental measure. Adjusted EBITDA is not intended to represent cash flow and
should not be construed as an alternative to cash flow, net income, or any other
measure of financial performance presented in accordance with generally accepted
accounting principles.
[3] For a definition and discussion of FFO, see Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations, Liquidity and
Capital Resources - Comparison to REIT's.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
General
This discussion should be read in conjunction with the selected financial and
operating data, the description of the Partnership's business operations, and
the financial statements and related notes and schedules included elsewhere in
this Annual Report on Form 10-K. {See Item 1. Business - Forward-Looking
Statements.}
The primary tenant of the Partnership's properties is FFP Marketing, and the
business and affairs of the Partnership are managed by individuals who are
employed by FFP Marketing. This discussion should be read in conjunction with
the Annual Report on Form 10-K of FFP Marketing for its fiscal year ended
December 26, 1999. The failure for any reason by FFP Marketing to pay rent to
the Partnership is a material risk factor regarding an investment in the Limited
Partner Units.
As previously discussed, the Partnership and its assets and businesses were
restructured at the close of its fiscal year 1997, as follows: the Partnership
retained all of the real property used in its former retail operations and
entered into long-term, triple-net leases of that real property with FFP
Marketing, and all of its other assets and businesses were transferred to FFP
Marketing. In addition to retaining the real estate referred to above, the
Partnership retained certain liabilities, principally bank debt and other debt
secured by the real estate retained by it. All other liabilities (including
trade accounts payable, accrued expenses, money orders payable, deferred income
taxes, and obligations under capital leases) were transferred to FFP Marketing.
Accordingly, the Partnership's business since the December 1997 restructuring
consists of the leasing and management of its current real estate holdings and
the possible acquisition, leasing and management of additional real properties.
All operations, assets, and businesses of the Partnership prior to 1998 are not
comparable to the operations, assets, and businesses of the Partnership after
the December 1997 restructuring.
1999 Operations compared to 1998 Operations
The Partnership earned $132,000 in 1999, its second year of operations after
the December 1997 restructuring, which compared favorably to a net loss of
$179,000 in 1998. Total revenues in 1999 were $3,797,000, a $1,067,000 increase,
or 39%, over 1998 total revenues of $2,730,000. Total revenues increased in 1999
because of the 14 properties purchased in February 1999 by the Partnership and
then leased to FFP Marketing.
Interest expense in 1999 was $1,893,000, a 42% increase over 1998 interest
expense of $1,336,000. This increase resulted primarily from the additional debt
incurred in purchasing the 14 properties in February 1999, and a higher
percentage of interest expense and a higher interest rate in a new long-term
loan obtained in October 1999 to refinance a prior loan.
In addition, the Partnership increased its equity in real estate properties
by making principal payments on its long-term debts in the amounts of $1,191,000
in 1999 and $1,292,000 in 1998.
Depreciation and amortization expense was $1,253,000 in 1999, compared to
$1,203,000 in 1998. This 4% increase resulted from additional amortization
expense related to loan fees incurred in 1999.
General and administrative expenses were $451,000 in 1999, representing a 5%
decrease from general and administrative expenses in 1998 of $473,000. In each
year, these amounts include the overhead reimbursement fee of $200,000 paid to
FFP Marketing, as well as auditing fees, tax return software processing fees,
tax return review fees, and miscellaneous expenses in maintaining unleased
properties.
Cash flows provided by operating activities were $77,000 in 1999, compared to
$1,024,000 in 1998, a 92% decrease. Cash flows from financing activities were
$6,731,000 in 1999, compared to a usage of $1,292,000 in 1998, resulting from
acquisition debt in purchasing the 14 properties in February 1999. Cash flows
used in investing activities were $6,808,000 in 1999, compared to a provision of
$268,000 in 1998.
Comparison to REITs
The Partnership is not a real estate investment trust ("REIT"), but its
activities are much like those of a REIT. One performance measure used within
the REIT industry is funds from operations ("FFO"). FFO, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), means net
income (loss) as determined in accordance with generally accepted accounting
principles (or "GAAP"), but excluding gains (or losses) from debt
restructurings, similar activities, and sales of properties, plus depreciation
and amortization of real estate assets, and with adjustments for unconsolidated
partnerships and joint ventures. FFO was developed by NAREIT as a relative
measure of performance and liquidity of an equity REIT in order to recognize
that income-producing real estate historically has not depreciated on the basis
determined under GAAP. While FFO is one appropriate measure of performance of an
equity REIT, it (i) does not represent cash generated from operating activities
determined in accordance with GAAP (which, unlike FFO, generally reflects all
cash effects of transactions and other events that enter into the determination
of net income), (ii) is not necessarily indicative of cash flow available to
fund cash needs, and (iii) should not be considered as an alternative to net
income determined in accordance with GAAP as an indication of the Partnership's
operating performance, or to cash flow from operating activities determined in
accordance with GAAP as a measure of either liquidity or the Partnership's
ability to make distributions or to fund its other operations. The following
table presents the determination of FFO for the Partnership for the 1999 and
1998:
1999 1998
(In thousands, except per unit data)
Net income/(loss) before minority interests $220 $(282)
(Gains) from sales of properties 0 (56)
Depreciation and amortization 1,253 1,203
Funds from operations before minority 1,473 865
interests
Less - 40% of FFO attributable to minority
interests in subsidiary (589) (346)
Funds from operations (FFO) for the $884 $519
Partnership
FFO per unit (based on units outstanding
for diluted net income (loss) per unit
calculations) $0.39 $0.23
Although the Partnership has generated positive FFO, it has not made
distributions to unitholders because substantially all cash generated from the
Partnership's operations has been required for debt payments. Thus far, the
Trust Managers have determined to utilize such funds to build equity in its
properties.
The refinancing of Partnership long-term debt in October 1999 is expected to
improve the Partnership's future net cash flow. The terms of such new long-term
financing provide that the Partnership shall limit distributions to its partners
such that, after making any distribution, (a) the Fixed Charge Coverage Ratio
for each of the 63 pledged properties secured by that loan (summarized below)
shall not be less than 1.30 to 1.00, and (b) the Fixed Charge Coverage Ratio for
the Partnership (summarized below) shall be less than 1.35 to 1.00. In general,
the Fixed Charge Coverage Ratio during any period for a pledged store equals the
cash flow (pre-tax income before minority interest, plus depreciation and
interest expense) of that store for that period, divided by the amount of debt
payments for that store for that period, and the Fixed Charge Coverage Ratio
during a period equals the cash flow (pre-tax income before minority interest,
plus depreciation and interest expense) of the Partnership for that period,
divided by the amount of debt payments of the Partnership for that period. Each
Fixed Charge Coverage Ratio is calculated for the 12-month period ending each
December 31. Management has not yet determined if or how much of any Partnership
distributions will be made to the Partnership's unitholders.
Inflation
The Partnership's real property leases with FFP Marketing provide that the
Partnership's rent income will increase every five years, assuming that those
leases are renewed at that time, as a result of increases in the consumer price
index during the prior five-year period. The Partnership's long-term debt is
subject to interest expense which accrues at a fixed rate. Otherwise, the
Partnership believes inflation will not have a material effect on operating
results.
Liquidity and Capital Resources
The Partnership has contracted with FFP Marketing to provide all cash
management services on behalf of the Partnership. For that reason, the
Partnership does not maintain a bank account. All of the Partnership's cash
receipts are received, and all of its disbursements are made, by FFP Marketing
on behalf of the Partnership, with the appropriate records being made to account
for amounts owed by the Partnership to FFP Marketing, or visa versa. FFP
Marketing owed the Partnership $892,000 on December 31, 1999; whereas the
Partnership owed FFP Marketing the amount of $21,000 on December 31, 1998,
exclusive of long-term secured debt.
Assuming no additional properties are acquired or sold, based upon executed
real estate leases, in 2000 the Partnership is projected to receive from FFP
Marketing $252,000 per month for rent plus $71,000 per month for the direct
financing leases, and the Partnership's debt service requirements in 2000 are
fixed at $222,000 per month. Such amounts are before reduction for the minority
interest of the Harvison Family in the subsidiary. In prior years the
Partnership was obligated to pay debt service obligations at a variable interest
rate and with a balloon payment of remaining principal due in November 2000.
That prior debt was refinanced in October 1999 with long-term fully-amortizing,
fixed rate financing. As a result of its forecast of positive cash flow,
management believes that the Partnership will be able to meet its obligations
for general and administrative expenses from operations.
All of the Partnership's real estate leases are "triple net" leases,
providing for the tenant (FFP Marketing), and not the landlord (the
Partnership), to pay all real estate taxes, insurance, operating and capital
costs for the properties. Therefore, the Partnership does not have any material
commitments for capital expenditures on those properties.
In February 1999, the Partnership purchased 14 additional improved real
properties from a third party on which 12 convenience stores and two truck stops
are operational. The Partnership immediately leased the 14 purchased properties
to FFP Marketing under real estate leases, which are accounted for as operating
leases for the land portion and as direct financing leases for the building
portion. These real estate leases provide for monthly rentals aggregating
$99,000 for a 15-year term, which equal the Partnership's monthly principal and
interest payments owed under its acquisition debt. Such amount was established
by related parties, but management believes that such amount is consistent with
market rates; however, no assurance can be given to that effect. The operating
leases for the land portion have been allocated a monthly rental aggregating
$28,000, and the direct financing leases for the buildings portion have been
allocated a monthly rental aggregating $71,000. These leases are "triple net"
leases, under which the Partnership pays no taxes, insurance, operating, or
capital costs, and provide for an increase in rent payments after each five-year
period during the term of the leases based upon any increase in the consumer
price index.
The Partnership incurred long-term acquisition debt in the original principal
amount of $9,550,000 in connection with its February 1999 acquisition. That debt
is fully amortizable over 15 years with equal, monthly payments of principal and
interest. FFP Marketing was required to guarantee the Partnership's acquisition
indebtedness.
In October 1999, the Partnership closed new long-term financing from a third
party lender and at that time repaid in full its long-term indebtedness
previously payable to FFP Marketing. The Partnership executed a promissory note
payable to the new lender in the amount of $12,000,000 plus a potential credit
enhancement amount of up to $1,043,000. This note is fully amortizable over its
20-year term with equal, monthly payments of principal, interest and credit
enhancement charges in the amount of $123,000. This note bears interest at 9.9%
per annum. The debt that the new loan refinanced required monthly principal
payments of $95,000 plus accrued interest, and required a balloon payment of all
unpaid principal in November 2000. If none of the loans with which the
Partnership's new loan is pooled incurs a default during the term of the loans,
the Partnership's credit enhancement payments, if any, will be applied by the
lender to reduce the principal balance of the note and result in a retirement of
such debt in approximately 19 years. The payment of this note is secured by a
deed of trust lien against 63 properties of the Partnership. All of those
properties are leased to FFP Marketing with a 20-year term.
When the Partnership repaid its debt to FFP Marketing in October 1999, FFP
Marketing also repaid all of its debt payable to the Partnership that had been
incurred when the Partnership sold inventory and equipment to FFP Marketing in
February 1999.
"Year 2000" Computer Issues
Over the past several years, the Partnership has prepared for the possible
disruptions that might have resulted from the date change to year 2000. No
significant year 2000 problems were experienced, and the Partnership believes
that no material exposure to year 2000 issues exist. The Partnership relies on
FFP Marketing for its information technology and computerization and obtains
those, in part, in exchange for the payment of an annual overhead reimbursement
fee. As a result, the Partnership did not incur any capital expenditures related
to modifications of existing software and conversions to new software for the
year 2000 issue.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnership is not subject to a market risk related to variable interest
rates because all of its long-term financing is subject to a fixed interest
rate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements begin on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Reference is made to the Partnership's Current Report on Form 8-K dated
December 29, 1999, which report is hereby incorporated herein by reference.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
General Partner
FFP Real Estate Trust is a Texas real estate investment trust formed in
December 1997. To date, its only activities have been to serve as the
Partnership's sole general partner and to manage its affairs and business. FFP
Real Estate Trust succeeded FFP Partners Management Company, Inc., as the
Partnership's sole general partner, effective December 28, 1997. The holders of
Limited Partner Units have no power, as limited partners, to direct, or
participate in the control of, the business of the Partnership.
Management of the General Partner
The names, ages, positions, and business experience of the executive officers
and trust managers of FFP Real Estate Trust on December 31, 1999, were as
follows:
Name Age Position
John H. Harvison 66 Chairman of the Board of Trust
Managers, President, and
Chief Executive Officer
Craig T. Scott 53 Vice President - Finance,
General Counsel, Secretary,
Treasurer and Chief Financial
Officer
Joseph F. Leonardo [1] 53 Trust Manager
J. D. St. Clair 65 Trust Manager
Randall W. Harvison 42 Trust Manager
- ------------------------------
[1] Member of Audit Committee
[2] Robert E. Garrison III resigned from the Board on February 23, 1999. No
replacement was made.
John H. Harvison has been Chairman of the Board of Trust Managers of FFP Real
Estate Trust since December 1997. He was Chairman of the Board of the
Partnership's former general partner since the commencement of the Partnership's
operations in May 1987. Mr. Harvison is also the Chairman of the Board and Chief
Executive Officer of FFP Marketing, which leases all of the real property owned
by the Partnership. Mr. Harvison is a founder and an executive officer of each
of the companies from which the Partnership initially acquired the retail
outlets that were transferred to FFP Marketing in the December 1997
restructuring of the Partnership. He has been active in the retail gasoline
business since 1958 and in the convenience store business since 1973. In
addition, he has been involved in real estate development, oil and gas
exploration and production, the ownership and management of an oil refinery and
other personal investments. In January 1995, Mr. Harvison consented to the entry
of a cease and desist order by the United States Office of Thrift Supervision
that, among other things, prohibits him from participating in any manner in the
conduct of the affairs of federally insured depository institutions. This Order
was issued in connection with Mr. Harvison's ownership in a federal savings bank
and transactions between him (and companies in which he had an ownership
interest) and that institution. In consenting to the issuance of the Order, Mr.
Harvison did not admit any of the allegations against him and consented to the
issuance of the Order solely to avoid the cost and distraction that would be
caused by prolonged litigation to contest the positions taken by the Office of
Thrift Supervision. Mr. Harvison is the father of Randall W. Harvison, who is
also a Trust Manager of the General Partner.
Craig T. Scott has been Vice President-Finance, General Counsel, Secretary,
Treasurer and Chief Financial Officer of FFP Real Estate Trust since October
1998. He is employed with similar titles by FFP Marketing and its subsidiaries.
From October 1996 until September 1998, Mr. Scott was engaged in the private
practice of law in Dallas and McKinney, Texas. From December 1991 until October
1996, he was employed by Box Energy Corporation as an attorney and as its
Executive Vice President. Mr. Scott previously engaged in the practice of law
for seven years with large law firms in Dallas, Texas; practiced law in
McKinney, Texas for four years; and was the president and co-owner of an oil and
gas exploration company for two years. He was previously employed for six years
by Arthur Andersen & Co., an international public accounting firm. Mr. Scott
obtained a BBA degree from the University of Texas in 1968, a JD degree from the
University of Texas School of Law in 1972, and a LLM degree from Southern
Methodist University School of Law in 1980. He is a member of the American
Institute of Certified Public Accountants, the Texas Society of CPAs, and the
State Bar of Texas.
Joseph F. Leonardo has been a Trust Manager of FFP Real Estate Trust since
December 1997. Since August 1992, Mr. Leonardo has been President and Chief
Executive Officer of Leonardo Management Corporation, which provide strategic
planning, market positioning, and other sales and marketing consulting services.
Mr. Leonardo also operates Convenience Directions which publishes Info
Marketing, a convenience store industry newsletter. Prior to forming Leonardo
Management, Mr. Leonardo served in various executive positions with several
convenience store operators.
J. D. St. Clair was a director of the Partnership's former general partner
from May 1987 until the December 1997 restructuring. He has served as a Trust
Manager of FFP Real Estate Trust since December 1997. Mr. St. Clair is also a
director of FFP Marketing and has been Vice President-Fuel Supply and
Distribution of FFP Marketing, and its predecessor, since May 1987. Mr. St.
Clair is a founder and an executive officer of several of the companies from
which the Partnership initially acquired the retail outlets that were
transferred to FFP Marketing in the December 1997 restructuring. He has been
involved in the retail gasoline marketing and convenience store business since
1971. Prior to 1971, Mr. St. Clair performed operations research and system
analysis for Bell Helicopter, Inc., from 1967 to 1971; for the National
Aeronautics and Space Administration from 1962 to 1967; and Western Electric
Company from 1957 to 1962.
Randall W. Harvison has served as a Trust Manager of FFP Real Estate Trust
since December 1997. He is an attorney and has been engaged in a solo practice
in Fort Worth, Texas, since 1994. Since 1987, Mr. Harvison was also employed by
a subsidiary of FFP Marketing and of various companies controlled by the
Harvison Family that are engaged in real estate investment and management and
other investment activities. Randall W. Harvison is the son of John H. Harvison,
the Chairman of the Board of Trust Managers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Regulations issued under the Securities Exchange Act of 1934 require certain
officers, directors of the general partner, and other persons to report their
holdings of the Limited Partner Units to the Securities and Exchange Commission
and to the Partnership. To the best of the Partnership's knowledge, based upon
copies of reports and other representations provided to the Partnership, all
1999 reports required under Section 16 of the Securities Exchange Act of 1934
were filed in a timely manner.
ITEM 11. EXECUTIVE COMPENSATION.
Each Trust Manager of FFP Real Estate who is not an officer or employee of
the FFP Real Estate receives an annual retainer of $4,000 plus $1,000 for each
Board meeting, or committee meeting not held in conjunction with a Board
meeting, which he attends and $500 for each telephone meeting in which he
participates. Each Trust Manager is also reimbursed for expenses related to
attendance at Board meetings.
In the past, non-employee Trust Managers were granted options to acquire
25,000 Limited Partner Units at the fair market value of the underlying units on
the date of grant. The options become exercisable with respect to one-third of
the units covered thereby on each of the anniversary dates following the grant
and expire 10 years after grant. In the event of a change in control of the
Partnership, any unexercisable portion of the options will become immediately
exercisable. Upon exercise, the option price may be paid, in whole or in part,
in Limited Partner Units owned by the Trust Manager.
Trust Managers who are officers or employees of FFP Real Estate Trust receive
no additional compensation for attendance at Board or committee meetings.
Neither the Partnership nor FFP Real Estate Trust, the general partner of the
Partnership, paid any salary or bonus (cash or non-cash) to any person in 1999.
Accordingly, there were no "Named Executive Officers" of the Partnership in
1999.
The Partnership and FFP Marketing are parties to a reimbursement agreement
pursuant to which the Partnership reimburses FFP Marketing for all direct costs
of the Partnership (such as costs to prepare the Partnership's annual
partnership tax returns, annual audit fees, etc.) and an agreed upon lump sum
amount for indirect overhead costs allocable to the Partnership. The
reimbursement for officers' compensation costs incurred by FFP Marketing in
connection with the Partnership's activities is determined by the amount of time
management and other personnel spend on activities of the Partnership compared
to the amount of time they spend on activities of FFP Marketing. Since FFP Real
Estate Trust's only activity is to serve as the general partner of the
Partnership, all of its costs and expenses will be borne by the Partnership. The
indirect cost reimbursement paid by the Partnership to FFP Marketing for 1999
was $200,000.
Options Exercised During 1999 and Year End Option Values. All options held by
directors, officers, and employees to acquire Limited Partner Units of the
Partnership that were outstanding at the completion of the December 1997
restructuring of the Partnership were divided into separate options to purchase
Limited Partner Units of the Partnership and a like number of FFP Marketing
common shares. The exercise price for the then existing options for the
Partnership's units was divided between the two new options in proportion to the
average closing price on the American Stock Exchange of the Partnership's
Limited Partner Units and shares of FFP Marketing's common stock during the
first month of trading following completion of the restructuring.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Limited Partner Units
The following table sets forth as of March 31, 2000, information with respect
to the Limited Partner Units beneficially owned by all Trust Managers and
executive officers of FFP Real Estate Trust (such information is based on
ownership reported to the Partnership by such persons):
Amount and Nature of Percent
Beneficial Ownership of Class
Name of Beneficial Owner [1] [1]
John H. Harvison, Chairman of
the Board of Trust Managers
and President 40,000 [2] 1.7%
Craig T. Scott, Vice President 10,000 [3] 0.4%
Joseph F. Leonardo, Trust Manager 8,334 [4] 0.4%
J. D. St. Clair, Trust Manager 42,400 [5] 1.8%
Randall W. Harvison, Trust Manager 8,334 [6] 0.4%
All directors and executive
officers as a group (5 persons) 12,400 0.6%
- -------------------------------------------------------
[1] Based on 2,234,262 Limited Partner Units outstanding at March 31, 2000, plus
any Limited Partner Units that an individual has the right to acquire within 60
days pursuant to the exercise of options. Options exercisable within 60 days are
deemed to be outstanding for the purpose of computing the percentage ownership
of such individual but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person or group shown in the
table.
[2] Consists of options to acquire 40,000 units exercisable within 60 days.
[3] Consists of options to acquire 10,000 units exercisable within 60 days but
excludes options to acquire 20,000 units not exercisable within 60 days.
[4] Consists of options to acquire 8,334 units exercisable within 60 days but
excludes options to acquire 16,666 units not exercisable within 60 days.
[5] Consists of 12,400 units held directly and options to acquire 30,000 units
exercisable within 60 days.
[6] Consists of options to acquire 8,334 units exercisable within 60 days but
excludes options to acquire 16,666 units not exercisable within 60 days.
General Partner
FFP Real Estate Trust is the sole general partner of the Partnership and has
served as such since December 1997. As sole general partner, FFP Real Estate
Trust makes all decisions relating to the management of the Partnership. FFP
Partners Management Company, Inc., a Delaware corporation indirectly owned by
entities owned by John H. Harvison and members of his immediate family, is the
sole shareholder of FFP Real Estate Trust.
Subsidiary
FFP Properties, L.P., a Texas limited partnership, is owned 60% by the
Partnership, as general partner. The limited partnership interests of FFP
Properties, L.P. are owned 1% by FFP Partners Management Company, Inc. and 39%
indirectly by entities owned by John H. Harvison and members of his immediate
family.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Related Transactions
As previously stated, the Partnership and FFP Marketing are parties to a
reimbursement agreement pursuant to which the Partnership reimburses FFP
Marketing for all direct costs of the Partnership (such as costs to prepare the
Partnership's annual partnership tax returns, annual audit fees, etc.) and an
agreed upon lump sum of $200,000 for indirect overhead costs allocable to the
Partnership. The agreed upon amount for indirect overhead costs incurred by FFP
Marketing in connection with the Partnership's activities was determined by the
amount of time management and other personnel spend on activities of the
Partnership compared to the amount of time they spend on activities of FFP
Marketing. Since FFP Real Estate Trust's only activity is to serve as the
general partner of the Partnership, all of its costs and expenses have been
borne by the Partnership. For each of 1999 and 1998, the Partnership paid
$200,000 to FFP Marketing as its indirect overhead cost reimbursement.
From December 1997 and until June 1998, the Partnership and FFP Marketing
were jointly liable on substantially all the debt that was transferred to the
Partnership in the December 1997 restructuring. In June 1998, that debt was
restructured such that the Partnership's liability to the bank lender was
substituted with a liability payable to FFP Marketing. The Partnership paid
interest expense to FFP Marketing on that indebtedness in the amount of $893,000
and $693,000 in 1999 and 1998, respectively. Such debt was repaid by the
Partnership in October 1999. The amount owed by the Partnership under its
promissory note payable to FFP Marketing was $14,201,000 at December 31, 1998.
John H. Harvison, Chairman and Chief Executive Officer of FFP Marketing, and
Craig T. Scott, Vice President - Finance, General Counsel and Chief Financial
Officer of FFP Marketing, hold similar positions with the Partnership. In
addition, companies owned directly or indirectly by Mr. Harvison and members of
his immediate family and/or other members of the senior management of FFP
Marketing own 100% of the general partner of the Partnership and 40% of the
subsidiary of the Partnership.
The Partnership leases almost all of its properties to FFP Marketing. The
leases were initially entered into in conjunction with the December 1997
restructuring of the Partnership, when the non-real estate assets and businesses
of the Partnership were transferred to FFP Marketing while the real estate used
in the retail operations was retained by the Partnership. The lease rates for
the properties were based upon knowledge of the properties by the then
management of the Partnership and FFP Marketing and their general experience in
acting as lessor and lessee for similar properties. Management of the
Partnership and FFP Marketing believes that the lease rates are comparable to
lease rates that could be entered into with unrelated third parties. However,
third party advisors were not engaged, and reference was not made to third party
surveys or analyses of rental rates, in making this determination. FFP Marketing
paid $2,952,000 and $2,628,000 in lease payments to the Partnership for these
properties during 1999 and 1998, respectively. FFP Marketing also paid the
Partnership $710,000 in 1999 as payments on direct financing leases.
Prior to the December 1997 restructuring of the Partnership, the Partnership
was managed by its former general partner, which made determinations with
respect to costs incurred by it (whether directly or indirectly through its
affiliates) that were reimbursed by the Partnership. The Partnership reimbursed
the former general partner and any of its affiliates for direct and indirect
general and administrative costs, principally officers' compensation and
associated expenses, related to the business of the Partnership. The
reimbursement was based on the time devoted by employees to the Partnership's
business or upon such other reasonable basis as was determined by the former
general partner.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) Financial Statements. See Index to Financial Statements on page F-1
hereof.
(2) Financial Statement Schedules. No Financial Statement Schedules are
included because they are either not required, not applicable, or the required
information is included in the consolidated financial statements or notes
thereto.
(3) Exhibits.
3.1 Amended and Restated Certificate of Limited Partnership of FFP
Partners, L.P. {1 - Ex. 3.7}
4.1 Amended and Restated Agreement of Limited Partnership of
FFP Partners, L.P., dated May 21, 1987, as amended by
the First Amendment to Amended and Restated Agreement of
Limited Partnership dated August 14, 1989, and by the
Second Amendment to Amended and Restated Agreement of
Limited Partnership dated July 12, 1991. {2 - Ex 4.1}
4.2 Third Amendment to Amended and Restated Agreement of Limited
Partnership of FFP Partners, L.P., dated as of December
28, 1997. {4}
10.1 Nonqualified Unit Option Plan of FFP Partners, L.P.
{1-Ex. 10.2}
10.2 Form of Lease Agreement between FFP Properties, L.P., and FFP
Operating Partners, L.P. {4}
10.3 Form of Building Lease Agreement between FFP Properties, L.P.,
and FFP Operating Partners, L.P. {4}
10.4 Master Lease Agreement dated September 29, 1999, between
FFP Properties, L.P., and FFP Operating Partners, L.P. {5}
10.5 Form of Pledge and Security Agreement dated September 22,
1999 between FFP Properties, L.P. and AMRESCO Commercial
Finance, Inc. {5}
21.1 Subsidiary of the Registrant. {5}
23.1 Independent Auditors' Consent. {5}
23.2 Independent Auditors' Consent. {5}
27 Financial data schedule. {5}
99.1 Current Report on Form 8-K regarding a change in the Partner-
ship's certifying accountant, dated December 29, 1999,
which report is hereby incorporated by reference.
- ---------------------------------------------------------------
{1} Included as the indicated exhibit in the Partnership's
Registration Statement on Form S-1 (Registration No. 33-12882)
dated May 14, 1987, and incorporated herein by reference.
{2} Included as the indicated exhibit in the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 27, 1992,
and incorporated herein by reference.
{3} Included as the indicated exhibit in the Partnership's
registration statement on Form 8-A dated as of August 29, 1989,
and incorporated herein by reference.
{4} Included as the indicated exhibit in the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 28, 1997,
and incorporated herein by reference. {5} Included herewith.
(b) Current Report on Form 8-K regarding a change in the Partnership's
certifying accountant, dated December 29, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 12, 2000 FFP PARTNERS, L.P.
(Registrant)
By: FFP Real Estate Trust
General Partner
By: /s/ John H. Harvison
John H. Harvison
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated as of April 12, 2000.
/s/ John H. Harvison
John H. Harvison President and Chief Executive
Officer and Trust Manager of FFP
Real Estate Trust (Principal executive officer)
/s/ Craig T. Scott
Craig T. Scott Vice President - Finance,
Secretary, Treasurer, General
Counsel and Chief Financial
Officer of FFP Real Estate Trust
(Principal financial and accounting officer)
Joseph F. Leonardo Trust Manager of FFP Real Estate Trust
/s/ J. D. St. Clair
J. D. St. Clair Trust Manager of FFP Real Estate Trust
/s/ Randall W. Harvison
Randall W. Harvison Trust Manager of FFP Real Estate Trust
<PAGE>
ITEM 8. INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Certified Public Accountants F-2
Independent Auditors' Report F-3
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-4
Consolidated Statements of Operations for the Periods Ended
December 31, 1999 and 1998 F-5
Consolidated Statement of Partners' Capital for the Periods
Ended December 31, 1999 and 1998 F-6
Consolidated Statements of Cash Flows for the Periods
Ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners of
FFP Partners, L.P.:
We have audited the accompanying consolidated balance sheet of FFP Partners,
L.P. (a Delaware limited partnership) and its subsidiary, FFP Properties, L.P.,
as of December 31, 1999, and the related statements of operations, partners'
capital and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FFP
Partners, L.P. and its subsidiary as of December 31, 1999, and the consolidated
results of their operations and their consolidated cash flows for the year ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Grant Thornton LLP
Dallas, Texas
March 31, 2000
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners of
FFP Partners, L.P.:
We have audited the accompanying consolidated balance sheet of FFP Partners,
L.P. (a Delaware limited partnership) and its subsidiary, FFP Properties, L.P.,
as of December 31, 1998, and the related consolidated statements of operations,
partners' capital and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FFP
Partners, L.P. and its subsidiary as of December 31, 1998, and the results of
their operations and their cash flows for the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Fort Worth, Texas
March 30, 1999
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands)
1999 1998
ASSETS
Current assets
Prepaid expenses $31 $26
Net investment in direct financing leases with
affiliate, current portion 53 0
Due from affiliate 892 0
Total current assets 976 26
Real property
Land and improvements 8,685 5,929
Buildings 21,413 21,329
30,098 27,258
Accumulated depreciation (11,825) (10,574)
18,273 16,684
Notes receivable 114 44
Net investment in direct financing leases with
affiliate 3,844 0
Other assets, net 772 50
Total assets $23,979 $16,804
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Current installments of long-term debt $565 $148
Current installments of notes payable to affiliate 0 1,143
Accrued expenses 263 39
Total current liabilities 828 1,330
Long-term debt, excluding current installments 20,812 297
Notes payable to affiliate, excluding current
installments 0 13,058
Total liabilities 21,640 14,685
Minority interest in subsidiary 945 857
Commitments and contingencies
Partners' capital
Limited partners' capital 1,372 1,242
General partner's capital 22 20
Total partners' capital 1,394 1,262
Total liabilities and partners' capital $23,979 $16,804
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statements of Operations
Periods Ended December 31, 1999 and 1998
(In thousands, except per unit)
1999 1998
Revenues
Rental income $2,975 $2,660
Gain on sale of property 0 56
Interest and other income 822 14
Total revenues 3,797 2,730
Expenses
General and administrative expenses 451 473
Depreciation and amortization 1,253 1,203
Interest expense 1,873 1,336
Total expenses 3,577 3,012
Income (loss) before minority interest in subsidiary 220 (282)
Minority interest in subsidiary (88) 103
Net income (loss) $132 $(179)
Net income (loss) per unit
Basic $0.06 $(0.08)
Diluted $0.06 (0.08)
Weighted average number of units outstanding
Basic 2,272 2,272
Diluted 2,277 2,272
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statements of Partners' Capital
Periods Ended December 31, 1999 and 1998
(In thousands)
Limited General
Partners Partner Total
Balance, December 28, 1997 $1,418 $23 1,441
Net (loss) (176) (3) (179)
Balance, December 31, 1998 1,242 20 1,262
Net income 130 2 132
Balance, December 31, 1999 $1,372 $22 $1,394
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Periods Ended December 31, 1999 and 1998
(In thousands)
1999 1998
Cash flows from operating activities
Net income (loss) $132 $(179)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities -
Depreciation and amortization 1,253 1,203
Gain on sales of real property 0 (56)
Minority interest in subsidiary 88 (103)
Changes in operating assets and liabilities -
(Increase) decrease in prepaid expenses (5) 170
(Increase) in due from affiliate (892) 0
Increase in other assets (723) (50)
Increase in accrued expenses 224 39
Net cash provided by operating activities 77 1,024
Cash flows from investing activities
Purchases of land and building (2,846) (96)
Proceeds from the sale of real property 5 408
Investment in direct financing lease with affiliate (3,897) 0
Increase in notes receivable (70) (44)
Net cash provided by (used in) investing activities (6,808) 268
Cash flows from financing activities
Payments on long-term debt (417) (15,493)
Proceeds from long-term debt 21,349 0
Proceeds from long-term debt to affiliate 0 14,773
Payments on long-term debt to affiliate (14,201) (572)
Net cash used by financing activities 6,731 (1,292)
Net increase/(decrease) in cash 0 0
Cash at beginning of year 0 0
Cash at end of year $0 $0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest during 1999 and 1998 was approximately $1,737 and $1,300,
respectively.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
(a) Organization of Company
These Consolidated Financial Statements include the accounts of FFP Partners,
L.P. (the "Company"), and its 60%-owned subsidiary, FFP Properties, L.P. ("FFP
Properties").
The Company is a Delaware limited partnership formed in December 1986
pursuant to the Agreement of Limited Partnership of FFP Partners, L.P. (the
"Partnership Agreement"), with FFP Partners Management Company, Inc. ("FFPMC")
as its initial general partner. In May 1987, the Company purchased convenience
stores, truck stops, other retail motor fuel outlets, and ancillary businesses
from affiliates of its general partner. The purchase of those outlets was
completed in conjunction with the Company's initial public offering of Class A
Units of limited partnership interest. Through its subsidiaries, the Company
owned and operated these outlets, and other businesses, until December 1997.
In December 1997, the Company completed an organizational restructuring by
which the real estate used in the aforementioned retail operations was retained
by the Company while the convenience store, truck stop, other retail motor fuel
outlets, and other businesses it conducted were transferred to FFP Marketing
Company, Inc., a Texas corporation ("FFP Marketing"), in exchange for all the
common stock of FFP Marketing. The common stock of FFP Marketing was then
distributed on a one-for-one basis to the general partner and limited partners
of the Company. The assets and liabilities in the accompanying consolidated
balance sheet of the Company have been reflected at the historical carrying
values of the predecessor entity prior to the restructuring. Accordingly, no
gain or loss was recognized as a result of the 1997 organizational
restructuring.
Also in that December 1997 restructuring, the Company distributed the real
estate it retained to FFP Properties, a newly formed Texas limited partnership,
in exchange for the general partnership interest in FFP Properties. The limited
partnership interests in the Company held by John H. Harvison, the Chairman and
Chief Executive Officer of FFPMC, members of his family, and corporations,
partnerships, trusts, and other business entities affiliated with him or his
family members (collectively, the "Harvison Family") were exchanged for
economically equivalent limited partnership interests in FFP Properties. In
addition, FFP Real Estate Trust, a newly formed Texas real estate investment
trust that is wholly owned by FFPMC, then became the sole general partner of the
Company. John H. Harvison is the Chairman and Chief Executive Officer of FFP
Real Estate Trust. FFPMC is wholly owned by the Harvison Family.
By virtue of this restructuring, all of the operating activities of the
Company were transferred to FFP Marketing, and there is no comparative income
data for the Company for 1997.
The Company owns the real estate and conducts its rental activities through
FFP Properties, its operating subsidiary. The Company owns a 60% partnership
interest in FFP Properties and serves as its sole general partner. In the
consolidated financial statements of the Company, the minority interest in
subsidiary represents the Harvison Family's 40% limited partnership interest in
FFP Properties.
(b) Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiary. All significant intercompany accounts and
transactions are eliminated in the consolidated financial statements.
(c) Change in Fiscal Year
Prior to the restructuring of the Company on December 28, 1997, the Company
prepared its financial statements on the basis of a fiscal year which ended on
the last Sunday in December. However, in connection with the restructuring, the
Company changed its fiscal year to coincide with the calendar year. Accordingly,
the accompanying consolidated financial statements for the year ended December
31, 1998, include the 12 months then ended plus the three-day period from
December 29, 1997 through December 31, 1997. The effect of including these three
additional days in the consolidated financial statements for the year ended
December 31, 1998, is immaterial.
2. SIGNIFICANT ACCOUNTING POLICES
(a) Real Property
Real property is stated at cost, which may differ from fair market value.
Depreciation is provided on the straight-line method over the estimated useful
lives of the respective assets, which may range from five to 30 years.
(b) Fair Value of Financial Instruments
The carrying value of notes receivable approximates fair value because of the
short maturity of the instruments. The carrying amount of notes payable to
affiliate at December 31, 1998, approximated fair value because the interest
rate on such obligations varied with the prime rate. The carrying value of
long-term debt at December 31, 1999, amounted to $21,377,000. The fair value of
such debt is approximately $21,269,000 based on interest rates currently
available to the Company.
(c) Notes Receivable
The Company evaluates the collectibility of notes receivable in accordance
with the provisions of Statement of Financial Accounting Standards, ("SFAS") No.
114, "Accounting by Creditors for Impairment of Loans", as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." At year end 1999 and 1998, no notes receivable were determined to
be impaired.
(d) Units Issued and Outstanding
The equity interests in the Company are comprised of Class A Units of limited
partnership interest and units representing the general partnership interest.
These units issued and outstanding at year end 1999 and 1998 were as follows:
1999 1998
Limited partners 2,234,262 2,234,262
General partner 37,416 37,416
Totals 2,271,678 2,271,678
The Company's limited partner units are traded on the American Stock Exchange
under the "FFP" trading symbol. The general partner units are owned by its sole
general partner, FFP Real Estate Trust.
(e) Use of Estimates
The use of estimates is required to prepare the Company's consolidated
financial statements in conformity with accounting principles generally accepted
in the United States. Although management believes that such estimates are
reasonable, actual results could differ from the estimates.
(f) Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of such assets to future net cash flows
expected to be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
(g) Rental Revenue
The Company recognizes rental revenues when earned.
(h) Unit Option Plan
The Company accounts for its unit option plan in accordance with the
provisions of Accounting Principles Board ("APB") Option No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, compensation
expense would be recorded only if the current market price of the underlying
unit on the date of the grant of the option exceeded the exercise price of the
option. The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," which permits entities either to (i) recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant, or (ii) continue to apply the provisions of APB Opinion No. 25 and
provide proforma net income and earnings per share disclosures for employee
option grants made in 1995 and subsequent years as if the fair-value based
method defined in SFAS No. 123 had been applied. The Company elected the second
alternative (See Note 5).
(i) Income Taxes
As a partnership, the Company pays no federal income tax. Rather, the income
or loss of the Company is allocated to its partners to be included in their
respective tax returns, subject to special tax rules for publicly traded
partnership The net difference between the tax bases and the reported amounts of
assets and liabilities at year end 1999 is approximately $3,343,000.
(j) Segment Information
The Company operates in a single operating segment, the ownership and rental
of real estate. The Company earns substantially all of its rental income from a
single entity, FFP Marketing.
3. NOTES PAYABLE AND LONG-TERM DEBT
In February 1999, the Company purchased 14 additional improved real
properties from a third party on which 12 convenience stores and two truck stops
are operational. To fund that purchase, the Company incurred long-term
acquisition debt with a third party lender in the original principal amount of
$9,550,000. This note is fully amortizable over 15 years with equal, monthly
payments of principal and interest. This note bears interest at 9.275% per
annum. The payment of this note is secured by deed of trust liens against the 14
properties acquired, and FFP Marketing guaranteed the Partnership's acquisition
indebtedness. The amount of FFP Marketing's monthly lease payments to the
Company equals the Company's monthly debt payments.
The Company immediately leased the 14 purchased properties to FFP Marketing
under real estate leases accounted for as operating leases for the land portion
and direct financing leases for the building portion (see Note 7). These real
estate leases provide for monthly rentals aggregating $99,000 for a 15-year
term, which the Company uses to pay its monthly debt obligation.
The Company also purchased inventory and equipment at the 14 locations for
approximately $942,000 and $1,750,000, respectively. The Company immediately
sold this inventory and equipment to FFP Marketing in exchange for a note
receivable. Prior to its repayment in October 1999, the note bore interest at
the prime rate and was payable in monthly installments over 8 years.
In October 1999, the Company closed new long-term financing from a third
party lender and at that time repaid in full its long-term indebtedness
previously payable to FFP Marketing. The Company executed a promissory note
payable to the new lender in the amount of $12,000,000 plus a credit enhancement
amount of up to $1,043,000. This note is fully amortizable over 20 years with
equal, monthly payments of principal, interest and credit enhancement charges in
the amount of $123,000. This note bears interest at 9.7% per annum. If none of
the loans with which the Company's loan is pooled incurs a default during the
term of the loans, the Company's credit enhancement payments, if any, will be
applied by the lender to reduce the principal balance of the note and result in
a retirement of such debt in approximately 19 years. The payment of this note is
secured by a deed of trust lien against 63 properties of the Company. All of
those properties are leased to FFP Marketing with a 20-year term.
When the Company repaid its debt to FFP Marketing in October 1999, FFP
Marketing also repaid all of its debt payable to the Company that had been
incurred when the Company sold inventory and equipment to FFP Marketing in
February 1999.
Effective June 1998, the Company, FFP Marketing and FFP Marketing's primary
bank lender restructured the revolving credit facility and term loan due to the
lender. In connection with the restructuring of the Company in December 1997,
both the Company and FFP Marketing retained the liability for this debt as both
entities were primary obligors on the loans. Under the June 1998 restructuring
agreement, the lender made a loan to FFP Marketing, FFP Marketing made a loan to
the Company, and the Company repaid the balance of its debt to the lender, all
of which was done effective on June 28, 1998. This transaction included the
execution of a promissory note by the Company payable to FFP Marketing in the
original principal amount of $14,773,000 (the then current balance on the debt
due to the lender), which was recorded by the Company as notes payable to
affiliate, and the Company was released by the lender from all obligations. At
December 31, 1998, the Company was indebted to FFP Marketing in the amount of
$14,201,000. This debt payable to FFP Marketing was repaid in full in October
1999.
Prior to the Company's repayment of all indebtedness in October 1999 to FFP
Marketing, the interest rate and repayment terms of the Company's note payable
to FFP Marketing had mirrored the terms of FFP Marketing's debt to its lender,
including a maturity date in November 2000. The revised agreement with the
lender had required that FFP Marketing's loan to the Company be secured by real
estate owned by the Company, which was pledged to FFP Marketing and then, in
turn, also pledged by FFP Marketing to its lender as additional collateral on
its debt to the lender. The Company made monthly principal payments to FFP
Marketing of $95,000 plus accrued interest on the unpaid balance at a rate equal
to the bank's prime rate. As stated above, this loan was repaid in October 1999.
The Company is obligated under other notes payable which bear interest at per
annum rates ranging from 6% to 10% and are due in monthly or annual installments
through 2012. Such notes are secured by real property and had aggregate balances
of $68,000 and $445,000 at year end 1999 and 1998, respectively.
The aggregate fixed maturities of all of the Company's long-term debt for
each of the five years subsequent to 1999 are as follows:
(In thousands)
2000 $565
2001 610
2002 670
2003 739
2004 810
Thereafter 17,983
Total $21,377
4. INCOME (LOSS) PER UNIT
The following table reconciles the denominator in the calculation of the
basic and diluted income (loss) per unit for limited partnership and general
partnership units in 1999 and 1998:
1999 1998
(In thousands)
Weighted average number of units outstanding 2,272 2,272
Effect of dilutive options 5 0
Weighted average number of units outstanding,
assuming dilution 2,277 2,272
Options to purchase 292,999 units were included in the computation of diluted
income per for 1999. Options to purchase 295,999 units were not included in the
computation of diluted loss per unit for 1998 because it would have been
antidilutive. Such options could potentially dilute basic income per unit in the
future.
5. NONQUALIFIED UNIT OPTION PLAN
The Company has previously granted, and had outstanding at year end 1999,
nonqualified options to acquire 292,999 Class A Units. Such options were granted
under its Nonqualified Unit Option Plan and a Nonqualified Unit Option Plan for
Nonexecutive Employees. The Nonqualified Unit Option plan has terminated, but
another plan with the same terms was adopted by the Company. Options for 37,998
units are available for grant under the Nonqualified Unit Option Plan for
Nonexecutive Employees. A summary of activity under the unit option plans
follows:
Weighted
Exercise Average
Class A Price Exercise
Units Range Price
Options outstanding, December 28, 1997 241,999 $1.211-$2.2610 $1.410
Options granted during year 80,000 $0.750-$1.0625 0.946
Options expired or terminated during year (26,000) $1.2110 $1.211
Options exercised during year 0 0 0
Options outstanding, December 31, 1998 295,999 $0.7500-$2.261 $1.302
Options granted during year 0 0 0
Options expired or terminated during year (3,000) $1.2110 $1.211
Options exercised during year 0 0 0
Options outstanding, December 31, 1999 292,999 $0.7500-$2.2610 $1.304
Options exercisable, December 31, 1999 233,000 $0.7500-$2.2610 $1.639
Options exercisable, December 31, 1998 202,665 $1.2110-$2.2610 $1.438
All options to acquire Class A Units of the Company that were outstanding at
the completion of the December 1997 restructuring of the Company were divided
into separate options to purchase Class A Units of the Company and a like number
of FFP Marketing common shares. The exercise price for the then existing options
for Company units was divided between the two new options in proportion to the
closing price on the American Stock Exchange of the Company's Class A Units and
FFP Marketing's common shares. The adjusted exercise prices of the unit options
outstanding at December 31, 1999, and December 31, 1998, are as follows:
----------1999---------- -----------1998-----------
Exercise Options Options Options Options
Price Outstanding Exercisable Outstanding Exercisable
$0.7500 30,000 10,000 30,000 0
1.0625 50,000 16,668 50,000 0
1.2110 136,333 136,333 139,333 139,333
1.2516 6,666 6,666 6,666 6,666
1.3929 20,000 13,333 20,000 6,666
1.9380 25,000 25,000 25,000 25,000
2.2610 25,000 25,000 25,000 25,000
---------------------------------------------------
292,999 233,000 295,999 202,665
The weighted average exercise price of outstanding options under the plans at
year end was $1.304 unit with a remaining contractual life of 5.0 years.
No unit options were granted by the Company in 1999. The per share
weighted-average fair value of options granted in 1998 were estimated using the
Black Scholes option-pricing model, and the underlying assumptions used were:
Underlying Assumptions
-------------------------------------------------
Risk-Free Expected
Year Estimated Dividend Interest Expected Option
Granted Fair Value Yield Rate Volatility Life
1998 $0.73 0.0% 6.00% 53% 7 years
The Company applies APB Opinion No. 25 in accounting for its option plans.
Accordingly, no compensation cost related to the plans has been recognized in
the consolidated financial statements. Had the Company determined compensation
under SFAS No. 123, the Company's net income (loss) would have been reduced to
the pro forma amounts indicated below:
1999 1998
(In thousands, except
for per unit data)
Net income (loss)
As reported $132 $(179)
Pro forma 98 (213)
Net income (loss) per unit
As reported
Basic $0.06 $(0.08)
Diluted 0.06 (0.08)
Pro forma
Basic $0.04 $(0.10)
Diluted 0.04 (0.10)
Pro forma net income (loss) reflects only options granted subsequent to 1994.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts presented
above because compensation cost for options granted prior to 1995 is not
considered.
6. UNIT PURCHASE RIGHTS AND TRANSFER RESTRICTIONS
In August 1989, the Company entered into a Rights Agreement and distributed
the right to its unitholders (the "Rights") to purchase Rights Units, which were
substantially equivalent to Class A Units of the Company, at a price of $20.00
per Unit. By its terms, all of the Rights expired in August 1999.
In the December 1997 restructuring, the Partnership's limited partnership
agreement was amended to prohibit any person from owning more than 4.9% of the
Class A Units. The amended agreement provides that any transfer that would
result in a person owning more than this amount will be null and void, and the
units that were to be transferred will become "Excess Units," which will have no
voting or dividend rights and will be held in escrow by the Company.
7. LEASES
In connection with the new financing in October 1999, FFP Marketing executed
a new lease or extended existing leases for 63 properties providing security for
that debt. The term of those leases is 20 years. The Company's current rental
income from FFP Marketing under those leases equals $154,000 per month. The new
or extended leases provide for "triple net" leases, under which FFP Marketing
pays all taxes, insurance, operating, and capital costs, and for increased rent
payments every five years based upon increases in the consumer price index.
In February 1999, the Company purchased 14 additional improved real
properties from a third party on which 12 convenience stores and two truck stops
are operational. The Company immediately leased the properties to FFP Marketing
under 15-year leases. The Company's current rental income from FFP Marketing
under those leases equals $99,000 per month. Rental income allocated to the land
portion of these leases in a monthly amount of $28,000 is classified as
operating leases, while rental income allocated to the building portion of these
leases in a monthly amount of $71,000 is classified as direct financing leases.
The leases are "triple net" leases, under which FFP Marketing pays all taxes,
insurance, operating, and capital costs, and provide for an increase in rent
payments after each five-year period during the term of the leases based upon
any increase in the consumer price index.
The following table lists the components of the Company's net investment in
direct financing leases at year end 1999:
Minimum
Lease
Payments
(In thousands)
2000 $853
2001 853
2002 853
2003 853
2004 853
Thereafter 7,819
Total minimum lease payments 12,084
Amount representing interest (8,187)
Net investment in direct financing leases 3,897
Current portion (53)
Net investment in direct financing lease,
excluding current installments $3,844
Other than the 20-year leases and the 15-year leases described above,
substantially all of the remaining real properties of the Company are leased to
FFP Marketing under operating leases which generally expire in 2002 and 2007
plus two five-year renewal periods at the sole option of FFP Marketing. The
Company's current rental income from FFP Marketing under those leases equals
$98,000 per month. These leases are also "triple net" leases, under which FFP
Marketing pays all taxes, insurance, operating, and capital costs, and provide
for an increase in rent payments upon each renewal date, in the event of an
increase in the consumer price index.
Those remaining properties leased to FFP Marketing are comprised of two
types: parcels where the land and building are owned by the Company, and parcels
where only the building is owned by the Company and leased to FFP Marketing,
subject to a superior ground lease which extends until 2007 (the "Building Only
Properties"). Under the terms of the deeds by which the Company acquired the
Building Only Properties, the Company's ownership of the Building Only
Properties will terminate upon the expiration of the ground leases, unless
extended. The lessors under those ground leases have indicated to the Company
that they do not currently intend to extend the ground leases past 2007. The
Company's rental income from the Building Only Properties in each of 1999 and
1998 was $795,000.
8. RELATED PARTY TRANSACTIONS
The chief executive officer, vice president-finance, secretary, treasurer,
general counsel and chief financial officer of the Company's sole general
partner, FFP Real Estate Trust, hold similar positions with FFP Marketing. In
addition, entities owned directly or indirectly by the Company's chief executive
officer, members of his immediate family, and other members of the senior
management of the Company have in the past, and intend to do so in the future,
engaged in transactions with the Company.
The Company leases all but one of its real properties principally to FFP
Marketing. Since the earliest of the leases became effective concurrently with
the close of 1997, no lease payments were received by the Company prior to 1998.
In 1999 and 1998, the Company received lease payments from FFP Marketing in the
amount of $2,952,000 and $2,628,000, respectively. The Company also paid FFP
Marketing $710,000 in 1999 as direct financing lease payments for the buildings
purchased by the Company and leased in February 1999. In addition, the Company
paid interest of $892,000 and $693,000 to FFP Marketing in 1999 and 1998,
respectively, under its note payable to FFP Marketing.
The Company and FFP Marketing are parties to a reimbursement agreement
pursuant to which the Company reimburses FFP Marketing for all direct costs of
the Company (such as costs to prepare its annual partnership tax returns, annual
audit fees, et al.) plus $200,000 for indirect overhead costs of the Company.
For each of 1999 and 1998, the Company paid $200,000 to FFP Marketing as the
indirect overhead cost reimbursement.
MASTER LEASE AGREEMENT
This contract contains arbitration provisions and shall be
subject to arbitration under the Texas General Arbitration Act
(Article 224 et seq. Revised Civil Statutes of Texas)
THIS MASTER LEASE AGREEMENT is made and entered into as of September __,
1999, by and between FFP Properties, L.P., a Texas limited partnership
("Lessor"), and FFP Operating Partners, L.P., a Delaware limited partnership
("Lessee"), in order to terminate and supersede that certain Lease Agreement
dated August 4, 1999 and those certain Lease Agreements dated as of January 1,
1998, by and between Lessor and Lessee, including all previous amendments
thereto, covering the thirty-five (35) properties listed in Exhibit A attached
hereto and incorporated herein by reference (collectively, the "Prior Leases").
WHEREAS, the thirty-five (35) real properties listed in Exhibit A are
described with more particularity in Exhibit B attached hereto and incorporated
herein by reference; and
WHEREAS, Lessor and Lessee desire to continue the leasing of the subject
properties to Lessee pursuant to the provisions of this Master Lease Agreement
(this "Lease").
NOW, THEREFORE, it is agreed by and between Lessor and Lessee that the Prior
Leases are hereby terminated and superceded in all respects by this Master Lease
Agreement.
ARTICLE I
Premises
Section 1.01 Lessor, in consideration of the covenants and agreements to be
performed by Lessee and upon the terms and conditions hereinafter stated, does
hereby lease, demise, and let unto Lessee all the lands described on Exhibit B
attached hereto (the "Land"), together with all improvements, buildings, and
structures of Lessor, if any, situated on the Land (the "Improvements") and all
rights, easements, and appurtenances pertaining to the Land, including all
parking and access rights relating thereto (collectively with the Land and the
Improvements, the "Leased Premises").
ARTICLE II
Term and Adjustment to Monthly Rent
Section 2.01 Initial Term. The initial term of this Lease (the "Term") shall
be for a period commencing on January 1, 1998 (the "Commencement Date"), except
with respect to that certain property reflected in Exhibit A as location number
849, which term commenced on August 4, 1999, and ending on December 31, 2019.
Section 2.02 Adjustment to Monthly Rent. Commencing on the first (1st) day of
January in each of the years 2003, 2008, 2013, and 2018, the applicable rental
for each calendar month during each such incremental period shall be equal to
the Monthly Rent multiplied by the percentage of increase by which the Consumer
Price Index in the calendar month three (3) months preceding the first month of
each such period exceeds the Consumer Price Index in December 1997; provided,
however, that in no event shall such adjusted rental be less than the rental
payable during the initial Term. "Consumer Price Index" shall mean the Consumer
Price Index for Urban Wage Earners and Clerical Workers-All Items (Base Year
1967) of the United States Bureau of Labor Statistics. If the manner in which
such Consumer Price Index is determined by the Bureau of Labor Statistics shall
be substantially revised, an adjustment shall be made in such revised index
which would produce results equivalent, as nearly as possible, to those which
would have been obtained if the Consumer Price Index had not been revised. If
the Consumer Price Index shall become unavailable to the public because
publication is discontinued, or otherwise, Lessor will substitute therefor a
comparable index based upon changes in the cost of living or purchasing power of
the consumer dollar published by any other governmental agency or, if no such
index shall be available, then a comparable index published by a major bank or
other financial institution or by a recognized financial publication.
ARTICLE III
Use of Premises
Section 3.01 Permitted Uses. The Leased Premises shall be used for any lawful
use, including, but not limited to, the operation of the Leased Premises as a
convenience store, truck stop, and/or self-service gasoline station.
Section 3.02 Prohibited Uses. Lessee shall not perform any acts or carry on
any practices which may injure the Leased Premises or constitute a nuisance, or
use the Leased Premises for any business which is unlawful or in violation of
any public or city ordinances.
ARTICLE IV
Rent
Section 4.01 Rent Amount and Due Date. Lessee, without offset or deduction,
agrees to pay Lessor, at 2801 Glenda Avenue, Fort Worth, Texas, or such other
address as Lessor may designate, rent for the Leased Premises at the monthly
rate of Eighty-seven Thousand Two Hundred Twenty-three and No/100's Dollars
($87,223.00) ("Monthly Rent"), as adjusted in accordance with Section 2.02, in
advance on the first day of each and every calendar month during the Term of
this Lease, the first such payment becoming due and payable on the Commencement
Date. If the Commencement Date is other than the first day of a month or if the
term of the Lease terminates on a day other than the last day of the month, a
prorated monthly rental installment shall be paid.
Section 4.02 Delinquent Rent. All rental installments or payments (including
any amounts payable as additional rent) more than ten (10) days past due shall
subject Lessee to liability for payment of a late payment charge equal to five
percent (5.0%) of each such late monthly installment or payment.
Section 4.03 Net Lease. It is understood and agreed that this Lease is
intended to be a net lease. It is the intention of the parties that Lessor shall
receive the Monthly Rent hereunder free from all charges and expenses imposed
upon or by reason of the Leased Premises and the ownership thereof by Lessor.
Section 4.04 Lessee Remains Bound. Except as otherwise expressly provided
herein, this Lease shall not terminate, nor shall Lessee be entitled to any
abatement of rent or reduction thereof, nor shall the respective obligations of
Lessor and Lessee be otherwise affected by reason of damage to or destruction of
all or any portion of the Leased Premises, the condemnation of all or any part
thereof for use or otherwise, the prohibition of Lessee's use of all or any part
of same or the interference with such use, Lessee's acquisition of fee title to
the premises otherwise than pursuant to an express provision of this Lease, the
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up, reconstitution, or other proceeding affecting Lessor or
any assignee of Lessor, any action by any trustee or receiver of Lessor, any
assignee of Lessor or by any court, any default on the part of Lessor under this
Lease or under any other agreement to which Lessor and Lessee may be parties, or
for any other cause whether similar or dissimilar to the foregoing; any present
or future law to the contrary notwithstanding, it being the intention of the
parties hereto that the obligations of Lessee hereunder shall be separate
covenants and agreement, and that the Monthly Rent, additional rent, and all
other sums payable by Lessee hereunder shall continue to be payable in all
events and that the obligations of Lessee hereunder shall continue unaffected,
unless the obligation to pay or perform the same shall be terminated or modified
pursuant to the express provisions of this Lease. Lessee waives all rights which
may now or hereafter be conferred by law (i) to quit, terminate, or surrender
this Lease or the Leased Premises or any part thereof, or (ii) to any abatement,
suspension, deferment, or reduction of the Monthly Rent, additional rent, or any
other sums payable under this Lease, except as otherwise expressly provided
herein.
ARTICLE V
Possession of Premises
Section 5.01 Lessee acknowledges that Lessee has fully inspected the Leased
Premises and on the basis of such inspection Lessee hereby accepts the Leased
Premises "AS IS." Lessee acknowledges that the Improvements, if any, situated
thereon are suitable for the purposes for which the same are leased, in their
present condition.
ARTICLE V
Alteration, Operating Expenses,
Construction, and Ownership of
Improvements
Section 6.01 Alterations and Improvements. Lessee shall have the right to
make alterations to or construct improvements on the Leased Premises. Any
alteration or improvement made to the Leased Premises shall be made in a
workmanlike manner and in compliance with all valid laws, governmental orders,
and building ordinances and regulations pertaining thereto. Lessee shall
promptly pay and discharge all costs, expenses, damages, and other liabilities
which may arise in connection with or by reason of any alterations,
reconstruction, demolition, or other work on the Leased Premises. All
alterations, reconstruction, demolition, or other work on the Leased Premises
when completed shall be of such a nature as not to reduce or otherwise adversely
affect the value of the Leased Premises. Lessee shall have the right to grant
easements upon the estate of Lessor which are required for utilities or access
in connection with construction of the improvements and Lessor agrees to execute
all documents which Lessee may reasonably request in order to grant such
easements.
Section 6.02 Operating Expenses. Lessee agrees to pay any and all expenses of
operation of the Leased Premises including, but not being limited to,
electricity, water, gas, and other utility services to persons and parties
occupying the Leased Premises; it being the intention of this Lease that the
amounts payable to Lessor hereunder as rent shall be absolutely net to Lessor,
without diminution by reason of any expenses of operation of the Leased
Premises.
Section 6.03 Repairs; Compliance with Laws. Lessee shall keep all
Improvements from time to time situated on the Leased Premises in a good repair
and condition, and at the end or other expiration of the term of this Lease
deliver up the Leased Premises and all Improvements thereon, whether on the
Leased Premises at the time of execution of this Lease or constructed by Lessee
in accordance herewith, in good condition, reasonable wear and tear excepted
(subject to Article XII hereof). Lessee shall at its sole cost and expense
comply with all requirements of all municipal, state, and federal authorities
now in force or which may hereafter be in force, pertaining to the Leased
Premises and shall faithfully observe in the use of the Leased Premises all
municipal, state, and federal laws and regulations now in force or which may
hereafter be in force.
Section 6.04 Title to the Improvements. All Improvements presently
constituting a part of the Leased Premises shall be owned by Lessor. Title to
all Improvements and any modifications, additions, restorations, repairs, and
replacements thereof hereafter placed or constructed by Lessee upon the Leased
Premises shall be in Lessee, its successors and assigns, until the expiration of
the Lease Term; provided, however, that the terms and provisions of this Lease
shall apply to all such Improvements and that all such Improvements (with the
exception only of moveable equipment and trade fixtures, and gasoline storage
tanks, pumps, and equipment) shall be surrendered to Lessor upon the termination
of the Lease Term.
Section 6.05 Liens. Lessor does not consent, and has not by the execution and
delivery of this Lease consented, to the imposition by Lessee or any contractor
or subcontractor of any liens upon the Lessor's interest in the Leased Premises.
Lessee agrees that all Improvements at any time constructed upon the Leased
Premises will be completed free and clear of all liens and claims of
contractors, subcontractors, mechanics, laborers, materialmen, and other
claimants. Lessee further covenants and agrees to protect, indemnify, defend,
and hold harmless Lessor from and against all bills and claims, liens and rights
to liens for labor and materials and architect's, contractor's, and
subcontractor's claims, and all fees, claims, and expenses incident to the
construction and completion of any improvements, including without limitation,
reasonable attorneys' fees and court costs incurred by Lessor.
ARTICLE VII
Utility Charges
Section 7.01 Lessee shall pay or cause to be paid promptly when due all
charges for water, electricity, gas, telephone, or any other utility services
furnished to the Leased Premises; it being the intention of this Lease that the
amounts payable to Lessor hereunder as rent shall be absolutely net to Lessor,
without diminution by reason of any expenses of utilities of the Leased
Premises. Lessee expressly agrees that Lessor is not, nor shall it be, required
to furnish to Lessee or any other occupant of the Leased Premises any water,
sewer, gas, heat, electricity, light, power, or any other facilities, equipment,
labor, materials, or services of any kind whatsoever.
ARTICLE VIII
Indemnification
Section 8.01 Lessee covenants and agrees, at its sole cost and expense, to
indemnify and hold Lessor harmless from and against any and all claims by or on
behalf of any person, firm, corporation, or governmental authority, arising from
the occupation, use, possession, conduct, or management of, or from any work or
thing whatsoever done in and about, the Leased Premises during the Lease Term,
or the subletting of any part thereof. Lessee further agrees to indemnify and
save Lessor harmless from and against any and all claims arising from any
condition, whether currently existing or hereafter occurring, of the Leased
Premises or the Improvements (including, but not limited to, claims or liability
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 and the Resource Conservation and Recovery Act of 1976, or any other
state or federal environmental law or regulation) or rising from any breach or
default on the part of Lessee to be performed pursuant to the terms of this
Lease, or arising from any action, injury, or damage whatsoever caused to any
person, firm, or corporation, including any sublessees of Lessee (other than
those caused by Lessor or its representatives and employees) occurring during
the Lease Term in or about the Leased Premises or upon and under the sidewalks
and the land adjacent thereto, including, but not limited to, any claim based on
the release of any hazardous or toxic materials. The indemnification obligations
of Lessee hereunder shall include all costs, expenses, and liabilities incurred
by Lessor, including reasonable attorneys' fees. If any action or proceeding
shall be brought against Lessor by reason of any such claim, Lessee upon receipt
of written notice from Lessor covenants to defend such action or proceeding with
counsel satisfactory to Lessor, unless such action or proceeding is defended by
any carrier of public liability insurance maintained by Lessee. Any insurance
policy or policies procured or maintained by Lessee insuring it against
liability for injury or death of a person or persons shall name Lessor as an
additional insured.
ARTICLE IX
Taxes and Assessments
Section 9.01 Obligation of Lessee. Lessee shall pay to, or on behalf of,
Lessor as additional rent the amount of the real estate taxes allocable to the
Leased Premises (which shall be separately assessed) for each tax year included
within the Term of this Lease, provided that for the first and last tax years
included in part within the term of this Lease, Lessee shall pay to Lessor a pro
rata share of such taxes for such tax years based upon the portions of such tax
years included within the term of this Lease; it being the intention of this
Lease that the amounts payable to Lessor hereunder as rent shall be absolutely
net to Lessor, without diminution by reason of any expenses of taxes or other
assessments on the Leased Premises. Real estate taxes shall not include any
income, excess profits, estate, inheritance, succession, transfer, franchise,
capital, or other tax or assessment upon Lessor or upon the rentals payable
under this Lease, all of which shall be the obligation of Lessor.
Section 9.02 Amount of Taxes. If there shall be more than one taxing
authority, the real estate taxes for any period shall be the sum of such taxes
for such period attributable to each taxing authority. The real estate taxes for
any tax year shall mean such amounts as shall be finally determined to be the
real estate taxes assessed and payable for such tax year less any abatements,
refunds, or rebates made thereof. For the purpose of determining payments due
from Lessee to Lessor in accordance with the provisions hereof, (i) the real
estate taxes for any tax year shall be deemed to be the real estate taxes
assessed and payable for such tax year until such time as the same may be
reduced by abatement, refund, or rebate, and (ii) if any abatement, refund, or
rebate shall be made for such tax year, the real estate taxes for such tax year
shall be deemed to be the real estate taxes as so reduced plus the expenses of
obtaining the reduction, with an appropriate adjustment to be made in the amount
payable from or paid by Lessee to Lessor on account of the real estate taxes.
Section 9.03 Contest of Assessments. Lessee shall have such rights to contest
the validity or amount of any real estate taxes as permitted to Lessor, or
Lessee, by law, either in its own name or in the name of Lessor. Lessor shall
cooperate with Lessee in any such contest and, in connection therewith, shall
make available to Lessee such information in its files as Lessee may reasonably
request. If any abatement, refund, or rebate shall be obtained, the expenses of
obtaining the same shall be a first charge thereon.
Section 9.04 Documentation and Payment. Lessor shall submit to Lessee copies
of the real estate tax bills for each tax year. Lessor shall bill Lessee for any
amount that may be payable by Lessee pursuant to the provisions herein. Such
bill shall be accompanied by a computation of the amount payable. The amount
payable by Lessee hereunder for any tax year shall be payable on or before the
time that Lessor shall be required to pay real estate taxes to the taxing
authority for such tax year, but if Lessee shall not have received a bill
therefor at least fourteen days prior to such time for payment, Lessee shall not
be required to make payment until fourteen days after the receipt of such bill.
(If real estate taxes are payable to any taxing authority for any tax year in
installments, the amount payable by Lessee hereunder shall be payable in similar
installments. If real estate taxes are payable to different taxing authorities
for any tax year at different times, an appropriate apportionment shall be made
of the amount payable by Lessee for such tax year and the apportioned amounts
shall be payable at such times). Lessor agrees that real estate taxes upon the
Leased Premises shall be paid by Lessor prior to the last day that the same may
be paid without penalty or interest, or if a discount shall be available for
early payment, prior to the last day that such discount shall be available.
Lessor agrees to provide Lessee evidence of any taxes paid by Lessor.
Section 9.05 Personal Property Taxes. Lessee agrees to pay all taxes levied
against personal property, trade fixtures, and inventory in, on, or about the
Leased Premises.
ARTICLE X
Title
Section 10.01 Lessor's Warranty of Title. Lessor warrants and represents that
the Leased Premises is owned by Lessor in fee, free and clear of any
restrictions which would materially adversely affect the use of the Leased
Premises by Lessee and that Lessor has the legal right to make and enter into
this Lease.
Section 10.02 Peaceable Possession. Lessor warrants to Lessee the peaceable
enjoyment of the Leased Premises against the lawful let, hindrance, or
disturbance of any person or persons whomsoever.
ARTICLE XI
Assignment, Subletting, and Encumbrance
Section 11.01 No Assignment or Subletting without Consent. Lessee may assign
this Lease or sublet all or any part of the Leased Premises without Lessor's
prior written consent; provided, however, that for so long as Lessor's interest
in the Leased Premises is encumbered either by mortgage or trust deed and/or by
assignment of this Lease to or for the benefit of AMRESCO Commercial Finance,
Inc., its successors or assigns (collectively, "Lender"), (i) no such assignment
shall occur nor be permitted, with or without Lessor's consent, without such
Lender's prior written consent, which consent may be withheld in Lender's sole
and absolute discretion, and (ii) no such subletting shall occur nor be
permitted, with or without Lessor's consent, without such Lender's prior written
consent, which consent may not be unreasonably withheld. Any attempted
assignment or subletting not complying with the provisions of this Section shall
be null and void and of no legal effect whatsoever.
Section 11.02 Lessee Remains Liable. If Lessee assigns this Lease or sublets
all or any part of the Leased Premises, Lessee shall remain liable and
responsible under this Lease for the performance of the covenants and
obligations of Lessee hereunder, in its capacity as a principal hereunder and
not as a surety.
Section 11.03 Notice in Event of Subletting. If Lessee assigns this Lease,
then Lessor, when giving notice to said assignee or any future assignee in
respect of any default, shall also serve a copy of such notice upon Lessee.
ARTICLE XII
Condemnation
Section 12.01 Entire Taking. If all of the Leased Premises shall be taken in
condemnation proceedings, this Lease shall terminate as of the taking and the
Monthly Rent and additional rent shall be paid to the date of such termination.
Lessor shall give Lessee a proportionate refund of any rent paid in advance.
Section 12.02 Partial Taking. If less than all of the Leased Premises shall
be taken in condemnation proceedings, this Lease shall not terminate, nor shall
Lessee be entitled to any abatement of rent or reduction thereof.
Section 12.03 Application of Award. If this Lease shall terminate pursuant to
the provisions of Section 12.01 of this Article, Lessor's share of the
condemnation award together with any separate award to Lessee shall be
apportioned and paid in the following order of priority:
A. There shall be first paid any and all reasonable expenses, charges, and
fees, including reasonable counsel fees, in collecting the award.
B. Lessor shall then be entitled to receive an amount equal to the reasonable
market value of the taken Leased Premises, on a basis without consideration of
any unexpired portion of the term of this Lease and unencumbered by this Lease.
If Lessor and Lessee cannot agree as to such value, the same shall be determined
by arbitration in accordance with the provisions of Section 17.11.
C. The balance of the award shall be paid to the Lessee; provided, that if
the remainder of the Lease Term is, at the time of the taking, less than one
year, such balance shall be paid to Lessor.
Section 12.04 Application of Award in Partial Taking. If this Lease shall not
terminate but shall continue in full force and effect pursuant to the provisions
of Section 12.02 of this Article, Lessee shall commence and proceed with
reasonable diligence to repair or reconstruct the remaining building or
buildings on the taken Leased Premises to a complete architectural unit or units
to the extent proceeds of the condemnation award are available therefor.
Lessor's share of the award in condemnation proceedings for any partial taking
where repair or reconstruction is undertaken, together with any separate award
to Lessee, shall be apportioned and paid in the following order of priority:
A. There shall first be paid any and all reasonable expenses, charges, and
fees paid to parties unaffiliated to either Lessor or Lessee, including
reasonable counsel fees, in collecting the awards.
B. The proceeds of the awards shall next be paid to Lessee for the
restoration of the building, improvements, and equipment situated on the Leased
Premises to a complete architectural unit or units; provided, however, that for
so long as Lessor's interest in the Leased Premises is encumbered either by
mortgage or trust deed and/or by assignment of this Lease to or for the benefit
of Lender, such proceeds shall be paid to and held by Lender or its designee and
be paid out from time to time to persons furnishing labor or materials, or both,
including architects' fees and contractors' compensation in such restoration
work on vouchers approved by a licensed architect, engineer or other person
approved by Lessor and employed by Lessee to superintend the work.
C. Lessor shall then be entitled to an amount equal to the reasonable market
value of the portion of the Leased Premises taken, without consideration of any
unexpired portion of the term of this Lease and unencumbered by this Lease. If
Lessor and Lessee cannot agree as to such value, the same shall be determined by
arbitration in accordance with the provisions of Section 17.11.
D. The balance of the award shall be paid to Lessee.
Section 12.05 Temporary Possession. If any right of temporary possession or
occupancy of all or any portion of the Leased Premises shall be obtained by any
competent authority in the exercise of the power of eminent domain, the
foregoing provisions of this Article shall be inapplicable thereto and this
Lease shall continue in full force and effect without reduction or suspension of
Monthly Rent and additional rent and Lessee shall be entitled to make claim for
and recover any award or awards, whether in the form of rental or otherwise,
recoverable in respect of such possession or occupancy. The award shall be paid
to Lessor and applied against the Monthly Rent payable by Lessee under this
Lease, as the same becomes due, with any surplus to be paid to Lessee; provided
that if any portion of the award is intended to cover the cost of restoring the
Leased Premises to the condition they were in prior to such temporary possession
or occupancy or to make any repairs occasioned by or resulting from such
possession or occupancy, such portion shall be so applied.
Section 12.06 Consent to Settlement by Lessor. Lessee shall have primary
responsibility for dealing with the condemning authority in the condemnation
proceedings, but Lessee shall not make any settlement with the condemning
authority nor convey or agree to convey the whole or any portion of the Leased
Premises to such authority in lieu of condemnation without first obtaining the
written consent of Lessor thereto, which consent shall not be unreasonably
withheld if Lessor receives not less than the fair market value of the Leased
Premises taken.
ARTICLE XIII
Events of Default and Remedies
Section 13.01 Events of Default. The following events ("Events of Default")
shall be deemed to be events of default by Lessee under this Lease:
A. Failure by Lessee to pay any installment of the Monthly Rent or any
additional rent or any other sum of money payable hereunder on the date the same
is due and such failure shall continue for a period of two (2) business days
after written notice to Lessee.
B. Failure by Lessee to comply with any term, provision, or covenant of this
Lease, other than the payment of rent or other sums of money, and Lessee shall
not cure such failure within thirty (30) days after written notice thereof to
Lessee; or if such failure cannot reasonably be cured within the said thirty
(30) days, and Lessee shall not have commenced to cure such failure within such
thirty (30) day period and shall not thereafter with all due diligence and good
faith proceed to cure such failure.
C. The entering of a decree or order by a court of competent jurisdiction
adjudging Lessee a bankrupt or insolvent or appointing a receiver or trustee or
assignee in bankruptcy or insolvency of all or substantially all of its
property, and any such decree or order shall have continued in force
undischarged or unstayed for a period of sixty (60) days.
D. The doing or permitting to be done by Lessee or any sublessee, assignee,
grantee, or agent of Lessee of anything which creates a lien upon Lessor's
interest in the Leased Premises, and any such lien is not discharged or bonded
within thirty (30) days after filing.
E. The insolvency of Lessee or the making a transfer in fraud of creditors,
an assignment for the benefit of creditors, or the filing of a proceeding in
bankruptcy by Lessee, or the appointing of a receiver or trustee for Lessee or
any of the assets of Lessee.
F. The termination, including by expiration or nonrenewal, without Lender's
prior written consent, which consent may be withheld in Lender s sole and
absolute discretion, of any of the existing leases between Lessor and Lessee
with respect to the real properties listed in Exhibit C attached hereto and
incorporated herein by reference (the "FMAC Encumbered Leases"), during such
time as Lessor s interest in the Leased Premises is encumbered either by
mortgage or trust deed and/or by assignment of this Lease to or for the benefit
of Lender.
Section 13.02 Remedies. Upon the occurrence of any Event of Default
enumerated in Section 13.01 hereof, Lessor shall have the option of (i)
terminating this Lease by written notice thereof to Lessee, (ii) continuing this
Lease in full force and effect, or (iii) curing the default on behalf of Lessee;
provided, however, that for so long as Lessor's interest in the Leased Premises
is encumbered either by mortgage or trust deed and/or assignment of this Lease
to or for the benefit of Lender, no such termination of this Lease shall occur
without Lender's prior written consent, which consent may be withheld in
Lender's sole and absolute discretion.
A. In the event that Lessor shall elect to terminate this Lease, upon written
notice to Lessee, this Lease shall be ended as to Lessee and all persons holding
under Lessee, and all of Lessee's rights shall be forfeited and lapsed, as fully
as if this Lease had expired by lapse of time. In such event, Lessee shall be
required immediately to vacate the Leased Premises and there shall immediately
become due and payable the amount by which (a) the total rent and other benefits
which would have accrued to Lessor under this Lease for the remainder of the
Term of this Lease if the terms and provisions of this Lease had been fully
complied with by Lessee exceeds (b) the total fair market rental value of the
Leased Premises for the balance of the Term of this Lease (it being the
intention of both parties hereto that Lessor shall receive the benefit of its
bargain); and Lessor shall at once have all of the rights of re-entry upon the
Leased Premises, without becoming liable for damages or guilty of a trespass. In
addition to the sum immediately due from Lessee under the foregoing provision,
there shall be recoverable from Lessee: (w) the reasonable cost of restoring the
Leased Premises to good condition, normal wear and tear excepted (subject to
Article XII hereof); (x) all accrued unpaid sums, plus interest at the highest
lawful rate per annum and late charges, if in arrears, under the terms of this
Lease up to the date of termination; (y) Lessor's reasonable cost of recovering
possession of the Leased Premises; and (z) rent and sums accruing subsequent to
the date of termination pursuant to the holdover provisions of Section 17.14
hereof.
B. In the event that Lessor shall elect to continue this Lease in full force
and effect, Lessee shall continue to be liable for all rents. Lessor shall
nevertheless have all of the rights of re-entry upon said Leased Premises
without becoming liable for damages or being guilty of a trespass and Lessor
after re-entry may relet the Leased Premises, or any part thereof, to a
substitute tenant or tenants for a period of time equal to or lesser or greater
than the remainder of the term on whatever terms and conditions Lessor, at
Lessor's sole discretion, deems advisable. Against the rents and sums due from
Lessee to Lessor during the remainder of the term, credit shall be given Lessee
in the net amount of rent received from the new tenant after deduction by Lessor
for: (a) the reasonable costs incurred by Lessor in reletting the Leased
Premises (including, without limitation, remodeling costs, brokerage fees, legal
fees, and the like); (b) the accrued sums, plus interest and late charges, if in
arrears, under the terms of this Lease; (c) Lessor's reasonable cost of
recovering possession of the Leased Premises; and (d) the cost of storing any of
Lessee's property left on the Leased Premises after re-entry. Notwithstanding
any provision in this paragraph B of Section 13.02 to the contrary, upon the
default of any substitute tenant or upon the expiration of the lease term of
such substitute tenant before the expiration of the Term of this Lease, Lessor
may, at Lessor's election, either relet to still another substitute tenant or
terminate this Lease and exercise its rights under paragraph A of this Section
13.02.
C. In the event that Lessor shall elect to cure the default of Lessee, all
sums expended by Lessor in effecting such cure, plus interest thereon at the
highest lawful rate per annum, shall be due and payable immediately. Such sum
shall constitute additional rent hereunder, and failure to pay such sum when due
shall enable Lessor to exercise all of its remedies under this Lease.
Section 13.03 Cumulative Rights. Pursuit of any of the foregoing remedies
shall not preclude pursuit of any of the other remedies herein provided or any
other remedies provided by law, nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rent due to Lessor hereunder or of any
damages accruing to Lessor by reason of the violation of any of the terms,
provisions, and covenants herein contained. Failure by Lessor to enforce one or
more of the remedies herein provided, upon any Event of Default, shall not be
deemed or construed to constitute a waiver of such default or of any other
violations or breach of any of the terms, provisions, and covenants herein
contained.
Section 13.04 Re-Entry by Lessor. No re-entry or taking possession of the
Leased Premises by Lessor shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention is given to
Lessee. Lessor, at its option, may make such alterations or repairs to the
Improvements as it, in its reasonable judgment, considers advisable and
necessary upon the occurrence of an Event of Default, at the cost of Lessee, and
the making of such alterations or repairs shall not operate or be construed to
release Lessee from liability hereunder. Lessor shall in no event be liable in
any way whatsoever for failure to relet the Leased Premises and the Improvements
or, in the event the Leased Premises and the Improvements are relet, for failure
to collect rent thereof under such reletting; and in no event shall Lessee be
entitled to receive any excess of such rent over the sums payable by Lessee to
Lessor hereunder; provided, however, that Lessor shall during such time as
Lessor is in possession of the Leased Premises as the result of any re-entry by
Lessor hereunder, and prior to any termination of this Lease, exercise
reasonable efforts to cause the Leased Premises to be re-leased.
Section 13.05 Effect of Waiver or Forbearance. No waiver by Lessor of any
breach by Lessee of any of its obligations, agreements, or covenants hereunder
shall be a waiver of any subsequent breach or of any obligation, agreement, or
covenant, nor shall any forbearance by Lessor to seek a remedy for any breach by
Lessee be a waiver by Lessor of its rights and remedies with respect to such
subsequent breach.
Section 13.06 Bankruptcy of Lessee. The provisions of paragraph C and E of
Section 13.01 above shall only apply with respect to the Lessee which is the
then owner of the leasehold estate. Notwithstanding the provisions of Section
13.01 to the contrary, the happening of any of the Events of Default mentioned
in paragraph C or E of Section 13.01 above shall not operate or permit Lessor to
declare a default hereunder or terminate this Lease so long as all covenants of
Lessee hereunder shall be performed by Lessee or its successor in interest.
ARTICLE XIV
Insurance
Section 14.01 Liability Insurance. Lessee shall, at Lessee's expense, procure
and maintain at all times during any term of this Lease a policy of
comprehensive general liability insurance, insuring Lessor and Lessee against
liability arising out of the ownership, use, occupancy, or maintenance of any
Leased Premises. Such insurance shall at all times be in an amount of not less
than $1,000,000.00 on a per occurrence basis. The limits of such insurance shall
not limit the liability of the Lessee under this Lease. All insurance required
under this Article XIV shall be with companies rated B++ or better in Best's
Insurance Guide. Lessee shall deliver to Lessor certificates of insurance
evidencing such insurance with loss payable clauses satisfactory to Lessor,
provided that in the event Lessee fails to procure and maintain such insurance,
Lessor may (but shall not be required to) procure same at Lessee's expense after
ten (10) days' prior written notice. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after sixty (60)
days' prior written notice to Lessor by the insurer. All such policies shall be
written as primary policies, not contributing with and not in excess of
coverages which the Lessor may carry. Lessee shall, within twenty (20) days
prior to the expiration of such policies, furnish Lessor with renewals or
binders or Lessor may order such insurance and charge the cost to the Lessee,
which amounts shall be payable by Lessee on demand as additional rent. Lessee
shall have the right to provide such insurance coverage pursuant to blanket
policies which the Lessee may have in force, provided such blanket policies
expressly afford coverage of any Leased Premises and to Lessor as is required by
this Section.
Section 14.02 Property Insurance. Lessee shall, at Lessee's expense, procure
and maintain at all times during the term of this Lease, a policy or policies of
insurance covering loss or damage to any Leased Premises in an amount not less
than ninety-five percent (95%) of the estimated replacement value thereof, and
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, sprinkler leakage,
flood, and special extended peril (all risk). Lessee shall pay the entire amount
of such annual insurance premiums and shall deliver to Lessor certificates of
insurance evidencing such insurance with loss payable clauses satisfactory to
Lessor, provided that in the event Lessee fails to provide and maintain such
insurance, Lessor may (but shall not be required to) procure same at Lessee's
expense after ten (10) days' prior written notice. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after sixty (60) days' prior written notice to Lessor by the insurer. All such
policies shall be written as primary policies, not contributing with and not in
excess of coverages which the Lessor may carry. Lessee shall furnish Lessor with
renewals or binders or Lessor may order such insurance and charge the cost to
the Lessee, which amounts shall be payable by Lessee on demand. Such insurance
shall provide for payment of losses thereunder to Lessor or the holder of a
first mortgage or deed of trust on any of the Leased Premises. Any loss proceeds
shall be made available for the purposes of replacing or rebuilding the
pertinent Leased Premises to the condition existing immediately prior to such
damage, if any such construction activities are permissible under applicable
laws and regulations then pertaining to the damaged Leased Premises; provided,
however, that for so long as Lessor's interest in the Leased Premises is
encumbered either by mortgage or trust deed and/or by assignment of this Lease
to or for the benefit of Lender, such proceeds shall be held by Lender or its
designee to be used in the manner herein provided.
Section 14.03 Release. Lessor hereby releases Lessee, and Lessee hereby
releases Lessor, and their respective officers, agents, employees, and
representatives, from any and all claims or demands for damages, loss, expense,
or injury to the Leased Premises, or to the furnishings, fixtures, equipment, or
inventory or other property of either Lessor or Lessee in, about, or upon the
Leased Premises, as the case may be, which is caused by or results from perils,
events, or happenings which are the subject of insurance carried by the
respective parties and in force at the time of any such loss; provided, however,
that such waiver shall be effective only to the extent permitted by the
insurance covering such loss and to the extent such insurance is not prejudiced
thereby or the expense of such insurance is not thereby increased.
ARTICLE XV
Attorney's Fees and Lessor's Lien
Section 15.01 Attorney's Fees. If on account of any breach or default by
either party hereunder it shall become necessary for the other party hereto to
employ an attorney to enforce or defend any of said party's rights or remedies
hereunder, and should such party prevail in a final judgment, the party against
whom enforcement was sought shall pay to the other party any reasonable
attorney's fees incurred by reason of such proceedings.
Section 15.02 Lessor's Lien. In addition to the statutory landlord's lien,
Lessor shall have at all times, and Lessee does hereby grant to Lessor, a valid
contractual lien upon and a security interest in all goods, wares, equipment,
fixtures, furniture, and other personal property of Lessee presently or which
may hereafter be situated on the Leased Premises and all proceeds therefrom to
secure the payment by Lessee of all rentals and other sums of money due
hereunder, and such property shall not be removed therefrom without the consent
of Lessor until all arrearages in rent, as well as any and all other sums of
money then due to Lessor hereunder, shall first have been paid and discharged.
Upon the occurrence of an Event of Default by Lessee, Lessor may sell any and
all improvements, goods, wares, equipment, fixtures, furniture, and other
personal property of Lessee situated on the Leased Premises at one or more
public or private sales after giving Lessee reasonable notice of the time and
place of any public sale or sales or of the time after which any private sale or
sales are to be made, with or without having such property at the sale, at which
Lessor or its assigns may purchase property to be sold, being the highest bidder
therefor. The requirement of reasonable notice to Lessee hereunder shall be met
if such notice is given in the manner prescribed in Section 17.06 of this Lease
at least ten (10) days before the time of sale. The proceeds from any such
disposition less any and all expenses connected with the taking of possession,
holding, and selling of the property (including reasonable attorney's fees and
legal expenses) shall be applied as a credit against any sums due by Lessee to
Lessor. Any surplus shall be paid to Lessee or as otherwise required by law.
Upon request by Lessor, Lessee agrees to execute and deliver to Lessor financing
statements in form sufficient to perfect the security interest of Lessor in the
aforesaid property and proceeds under the provisions of the Uniform Commercial
Code in force in the states in which the Leased Premises are located.
Notwithstanding anything to the contrary stated herein, the statutory lien of
Lessor and the landlord's lien and security interest granted in this paragraph
are subject and subordinate to the rights, if any, of the holder of any
indebtedness secured by Lessee's interest in the equipment or other property
located on the Leased Premises, and Lessor agrees to execute such additional
documents as shall be necessary to effect or evidence such subordination.
ARTICLE XVI
Right of First Refusal
Section 16.01 As long as Lessee is Lessee under this Lease and provided
Lessee is not in default hereunder, if at any time after the execution of this
Lease Lessor shall receive a bona fide offer which it is willing to accept to
sell or transfer legal title to the Leased Premises (or any interest therein) to
any person (other than an affiliate, shareholder, partner, joint venturer,
spouse, or lineal descendant of Lessor or any trust for their benefit), Lessor
shall, within fifteen (15) days after Lessor's receipt of the acceptable offer,
notify Lessee of the terms of such offer ("Lessor's Offer Notice"). Lessor's
Offer Notice shall include the name of the offeror and the offered consideration
and other terms of such offer (together with a copy of the offer) and Lessee,
within ten (10) days after receipt of Lessor's Offer Notice, shall have the
right to purchase the interest to be sold or transferred on all the other terms
and conditions stated in Lessor's Offer Notice. Failure of Lessee to exercise
such right within said ten (10) days period shall be deemed a waiver of such
right. Upon notice from Lessee of its decision not to exercise such right or
upon waiver of the same, Lessor shall be free to consummate the sale or transfer
in accordance with the terms set forth in Lessor's Offer Notice. In the event
such sale or transfer is not consummated within six (6) months after the date of
the delivery of Lessor's Offer Notice, the right granted to Lessee in this
Article XVI shall be reinstated, and any such subsequent sale or transfer shall
be subject to this right. Any sale or transfer contemplated by this Article XVI
shall be subject to the provisions of this Lease including, without limitation,
the rights of Lessee contained herein. Upon Lessee's exercise of its right of
first refusal hereunder, Lessee may assign such rights to any other person or
entity without the consent of Lessor or any trust for their benefit, but any
assignment shall not relieve Lessee of its obligations hereunder or thereunder.
The right of first refusal herein granted to Lessee shall not apply to any
transfer by Lessor of the Leased Premises to any affiliate, shareholder,
partner, joint venturer, spouse, or lineal descendant of Lessor or any trust for
their benefit or to any transfer by gift, will, or the laws of descent and
distribution. The right of first refusal herein granted to Lessee shall be, and
is hereby made, subject and subordinate to any mortgage or trust deed and/or
assignment of this Lease to or for the benefit of Lender.
ARTICLE XVII
Miscellaneous
Section 17.01 Inspection. Lessee shall permit Lessor and its agents to enter
into and upon the Leased Premises at all reasonable times and upon reasonable
notice for the purpose of inspecting the same on condition that Lessee's and
Lessee's tenants use and quiet enjoyment of the same is not interfered with.
Section 17.02 Estoppel Certificates. Lessee and Lessor shall, at any time and
from time to time upon not less than ten (10) days' prior request by the other
party, execute, acknowledge, and deliver to Lessor, or Lessee, as the case may
be, a statement in writing certifying that (i) this Lease is unmodified and in
full force and effect (or if there have been any modifications, that the same
are in full force and effect as modified and stating the modifications) and, if
so, the dates to which the fixed rent and any other charges have been paid in
advance, and (ii) that no default hereunder on the part of the Lessor or Lessee,
as the case may be, exists (except that if any such default does exist the
certifying party shall specify such default), it being intended that any such
statement delivered pursuant to this Section 17.02 may be relied upon by a
prospective purchaser or encumbrancer (including assignees) of the Leased
Premises.
Section 17.03 Release. If requested by Lessor, Lessee shall upon termination
of this Lease execute and deliver to Lessor an appropriate release, in form
proper for recording, of all Lessee's interest in the Leased Premises, and upon
request of Lessee, Lessor will execute and deliver a written cancellation or
termination of this Lease in proper form for recording; provided, that in no
event shall any such release, cancellation, or termination constitute a release
or relinquishment by either party of his or its rights against the other party
for any amounts payable by such other party under the terms of this Lease or any
damages to which such party is entitled as a result of any default by the other
party hereunder.
Section 17.04 Lessor's Right to Perform Lessee's Covenants. If Lessee shall
default in the performance of any of its covenants, obligations, or agreements
contained in this Lease, other than the obligation to pay rent, Lessor after ten
(10) days' notice to Lessee specifying such default (or shorter notice if any
emergency exists), may (but without any obligation so to do) perform the same
for the account and at the expense of Lessee, and the amount of any payment made
or other reasonable expenses, including reasonable attorneys' fees, incurred by
Lessor for curing such default, with interest thereon at the lower of twelve
percent (12.0%) per annum or the maximum amount allowed by law, shall be payable
by Lessee to Lessor on demand as additional rent.
Section 17.05 Non-Merger. There shall be no merger of this Lease, the
leasehold estate created hereby or the Improvements with the fee estate in and
to the Leased Premises by reason of the fact that this Lease, the leasehold
estate created thereby, or the Improvements, or any interest in the foregoing,
may be held directly or indirectly by or for the account of any person who shall
own the fee estate in and to the Leased Premises, or any portion thereof, and no
such merger shall occur unless and until all persons at the time having any
interest in the fee estate and all person having any interest in this Lease, the
leasehold estate, or the Improvements, including the holder of any mortgage or
deed of trust upon the fee estate in and to the Leased Premises and/or any
assignee of this Lease, shall join in a written instrument effecting such
merger.
Section 17.06 Notices. Any notice to be given or to be served in connection
with this Lease must be in writing, and may be given by facsimile, by certified
mail, or by overnight delivery service and shall be deemed to have been given
and received upon the earlier of receipt thereof by the receiving party or on
the third business day after a letter containing such notice, properly
addressed, with postage prepaid is deposited in the United States Mail or given
to a nationally recognized overnight delivery service, addressed as follows:
If to Lessor:
FFP Properties, L.P.
Attn: Lease Administration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
If to Lessee:
FFP Operating Partners, L.P.
Attn: Contracts Administration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
Each party hereto shall have the right, by giving not less than five (5)
days' prior written notice to the other parties hereto, to change any address of
such party for the purpose of notices under this Section 17.06.
Section 17.07 Successors and Assigns. The word "Lessor," as used in this
instrument, shall extend to and include any and all persons, whether natural or
artificial, who at any time or from time to time during the term of this Lease
shall succeed to the interest and estate of Lessor in the Leased Premises; and
all of the covenants, agreements, conditions, and stipulations herein contained
which inure to the benefit of and are binding upon Lessor shall also inure to
the benefit of and shall be, jointly and severally, binding upon the heirs,
executors, administrators, successors, assigns, and grantees of Lessor, and each
of them, and any and all persons who at any time or from time to time during the
term of this Lease shall succeed to the interest and estate of Lessor in the
real estate and property hereby demised. The word "Lessee," as used in this
instrument, shall extend to and include any and all persons, whether natural or
artificial, who at any time or from time to time during the term of this Lease
shall succeed to the interest and estate of Lessee hereunder in accordance with
the terms of Section 11.01; and all of the covenants, agreements, conditions,
and stipulations herein contained which inure to the benefit of or are binding
upon Lessee shall also inure to the benefit of and be jointly and severally
binding upon the successors, assigns, or other representatives of Lessee, and of
any and all persons who shall at any time or from time to time during the term
of this Lease succeed in accordance with the terms of Section 11.01 to the
interest and estate of Lessee hereby created in the Leased Premises.
Section 17.08 Modifications. This Lease may be modified only by written
agreement signed by the Lessor and Lessee; provided, however, that for so long
as Lessor's interest in the Leased Premises is encumbered either by mortgage or
trust deed and/or by assignment of this Lease, no amendment, waiver, release,
discharge, or other modification of the terms of this Lease shall be effective
without the written consent of Lender, which consent may be withheld in Lender's
sole and absolute discretion.
Section 17.09 Descriptive Headings. The descriptive headings of this Lease
are inserted for convenience in reference only and do not in any way limit or
amplify the terms and provisions of this Lease.
Section 17.10 No Joint Venture. The relationship between Lessor and Lessee at
all times shall remain solely that of landlord and tenant and shall not be
deemed a partnership or joint venture.
Section 17.11 Arbitration. Wherever in this Lease it is provided that any
question shall be determined by arbitration, such question shall be settled and
finally determined by arbitration in accordance with the rules then in effect of
the American Arbitration Association, or its successors, and the judgment upon
the award rendered may be entered in any court having jurisdiction thereover.
Such arbitration shall be held in the City of Fort Worth, Texas. The number of
arbitrators to be appointed shall be three (3). The arbitrators shall have at
least five (5) years experience in real estate in the area where the Leased
Premises is located and shall not be related to either party. The parties to the
arbitration, in addition to the rights granted under the rules of the
Association, shall have the right to offer evidence and testify at the hearings
and cross-examine witnesses. The cost of such arbitration shall be split equally
between the parties.
Section 17.12 Memorandum of Lease. Lessor and Lessee agree that they shall,
at any time at the request of the other, promptly execute a memorandum or short
form of this Lease, in recordable form, setting forth a description of the
Leased Premises, the term of this Lease, and any other provisions herein, or the
substance thereof, as either party desires.
Section 17.13 Partial Invalidity. If any term or provision of this Lease or
the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to any person or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
term of this Lease shall be valid and be in force to the fullest extent
permitted by law.
Section 17.14 Holding Over. In case of holding over by Lessee after
expiration or termination of the Term of this Lease, Lessee shall pay monthly,
as rent, an amount equal to 125% of the amount of Monthly Rent payable as of the
end of such Term during each month or partial month of the holdover period. No
holding over by Lessee after the Term of this Lease, either with or without
consent and acquiescence of Lessor, shall operate to extend the Lease for a
longer period than one month unless (i) a holdover agreement in writing
specifies a longer period or (ii) this Lease is extended in writing; and any
holding over without consent of Lessor in writing shall thereafter constitute
this Lease a lease from month to month. In the event of any unauthorized holding
over, Lessee shall indemnify Lessor against all claims for damages by any other
tenant or prospective tenant to whom Lessor may have leased all or any part of
the Leased Premises, resulting from delay by Lessor in delivering possession of
all or any part of the Leased Premises.
Section 17.15 Lessor Default. In the event of any default hereunder by
Lessor, Lessee may, if such default continues after a reasonable notice period
following receipt of written notice thereof to Lessor, cure such default for the
account and at the expense of Lessor. If Lessee at any time after the expiration
of such curative period by reason of such breach is compelled to pay, or elects
to pay, any sum of money or do any act which will require the payment of any sum
of money, or is compelled to incur any expense, including reasonable attorney's
fees, in instituting, prosecuting, and/or defending any action or proceeding to
enforce Lessee's rights hereunder or otherwise, the sum or sums so paid by
Lessee, with all interest, costs, and damages, shall on demand be paid by Lessor
to Lessee, but Lessee shall have no right to offset any such sums against any
amounts which may be due to Lessor hereunder.
Section 17.16 Lessor Covenant. Lessor shall pay when due all principal and
interest on any mortgage or superior lease to which this Lease is subordinate or
subordinated, and shall pay or discharge (by bonding or otherwise) all valid
mechanic's liens filed against the Leased Premises by reasons of any
construction by Lessor.
Section 17.17 Sublease. If this Lease is in fact a sublease, Lessee accepts
this Lease subject to all of the terms and conditions of the underlying lease
under which Lessor holds the Leased Premises as lessee. Lessee covenants that it
will do no act or thing which would constitute a violation by Lessor of its
obligation under such underlying lease; provided, however, that Lessee's
agreement in this regard is premised on Lessor's assurances to the effect that
the terms of this Lease do not violate such underlying lease.
Section 17.18 Venue. This Lease is entered into in Tarrant County, Texas, and
is enforceable in that county.
Section 17.19 Further Covenants. Lessor and Lessee, as applicable, each
further covenant and agree for the benefit of Lender that for so long as
Lessor's interest in the Leased Premises is encumbered either by mortgage or
trust deed and/or by assignment of this Lease:
A. Lessee shall timely take all such action necessary to exercise all renewal
options and extend each of the FMAC Encumbered Leases.
B. Lessee shall remain obligated under this Lease in accordance with its
terms and Lessee will not take any action to terminate, rescind, or avoid this
Lease, notwithstanding the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up, or other proceeding
affecting Lessor or any assignee of Lessor in any such proceeding and
notwithstanding any action with respect to this Lease which may be taken by any
trustee or receiver of Lessor or of any assignee of Lessor in any such
proceeding or by any court in any such proceeding.
C. Lessee waives all rights now or hereafter conferred by law (a) to quit,
terminate, or surrender this Lease or any of the premises or any part thereof,
or (b) to any abatement, suspension, deferment, or reduction of the Monthly Rent
or any other sums payable under this Lease, except as otherwise expressly
provided herein, regardless of whether such rights shall arise from any present
or future constitution, statute, or rule of law.
D. In the event that, notwithstanding the express provision of this Lease,
this Lease shall terminate by operation of law, or action of or authorization by
any court, or if any receiver or trustee in bankruptcy, liquidator, or assignee
of Lessor shall initiate any action for the taking possession of the rentals
payable hereunder and the application thereof for the benefit of any creditors
of Lessor other than the holders of obligations secured by a first mortgage or
trust deed on the Leased Premises, Lessee shall, upon thirty (30) days' written
notice to Lessee by Lender that it has all requisite authority to lease the
premises or any part thereof and desires to lease the same or part to Lessee,
enter into a new lease with Lender containing substantially the same terms as
this Lease, provided that a reputable title company will insure that Lessee has
good and valid title to the leasehold estate under the new lease. Forthwith upon
the execution and delivery of such new lease, this Lease and all obligations of
Lessee hereunder shall terminate without further action by any party hereto.
E. This Lease shall be subject and subordinate to the lien of any mortgage or
trust deed to or for the benefit of Lender, without the necessity of the
execution and delivery of any further instruments, whether any such lien is
currently existing or hereafter created, and Lessee shall execute and deliver
upon Lender's request, without charge, such further instruments evidencing such
subordination of this Lease as Lender may request from time to time.
F. In the event of Lender's foreclosure of any mortgage or the exercise of
any power of sale with respect to the Leased Premises, Lessee shall attorn to
Lender and recognize Lender as the Lessor under this Lease, provided Lender
expressly agrees in writing to be bound by the terms of this Lease.
17.20 Third-Party Beneficiary. Lessor and Lessee acknowledge that Lender
shall be a third-party beneficiary of this Lease for so long as Lessor's
interest in the Leased Premises is encumbered either by mortgage or trust deed
and/or by assignment of this Lease to or for the benefit of Lender.
IN WITNESS WHEREOF, the parties have executed this instrument as of the day
and year first above written.
LESSOR:
FFP PROPERTIES, L.P.
By: FFP Partners, L.P.
its sole general partner
By: FFP Real Estate Trust
its sole general partner
By: _____________________________
Craig T. Scott, Vice President
LESSEE:
FFP OPERATING PARTNERS, L.P.
By: FFP Operating LLC
its sole general partner
By: __________________________
Robert J. Byrnes, President
ACKNOWLEDGMENTS
STATE OF TEXAS )
)
County of Tarrant )
This instrument was acknowledged before me on September ____, 1999, by Craig
T. Scott, Vice President of FFP Real Estate Trust, general partner of FFP
Partners, L.P., general partner of FFP Properties, L.P., who stated that the
same was signed in such capacity for such entities and the purposes indicated
therein.
_____________________________
NOTARY PUBLIC, STATE OF TEXAS
[Notary stamp]
STATE OF TEXAS )
)
County of Tarrant )
This instrument was acknowledged before me on September ____, 1999, by
Robert J. Byrnes, President of FFP Operating LLC, general partner of FFP
Operating Partners, L.P., who stated that the same was signed in such capacity
for such entities and for the purposes indicated therein.
_____________________________
NOTARY PUBLIC, STATE OF TEXAS
[Notary stamp]
<PAGE>
EXHIBIT B
OF
MASTER LEASE AGREEMENT
(Legal descriptions for all properties listed on Exhibit A)
PLEDGE AND SECURITY AGREEMENT
ACLC 1999-2 SBL PROGRAM
made by
FFP Properties, L. P.,
as Borrower
in favor of
AMRESCO COMMERCIAL FINANCE, INC.,
as Secured Party
<PAGE>
PLEDGE AND SECURITY AGREEMENT (this "Security Agreement"), dated as of the
date set forth on the signature page hereof, by FFP Properties, L. P. (the
"Borrower"), in favor of AMRESCO COMMERCIAL FINANCE, INC., a Nevada corporation
(together with its successors and assigns, the "Secured Party").
Preliminary Statements
A. On the date hereof; the Secured Party will make certain loans (each a
"Loan" and, collectively, the "Loans") to the Borrower segregated into two
series ("Series A and B" or for any such series a "Tranche") of which the Loans
in this series A are reflected in six (6) separate promissory notes in the ACLC
1999-2 SBL Program to the Secured Party, one promissory note in the amount of
$83,695.65, a second promissory note in the amount of $988,043.47, a third
promissory note in the amount of $2,318,478.25, a fourth promissory note in the
amount of $529,347.82, a fifth promissory note in the amount of $157,608.70, and
a sixth promissory note in the amount of $2,507,608.69, each dated the date
hereof (collectively, the "Promissory Note"), which Promissory Note will
evidence the Borrower's obligation, inter alia, (i) to repay the Loans
reflected in such Promissory Note, (ii) to guarantee the payment of
delinquencies or defaults in respect of Program Loans (as defined therein) in an
amount up to the Aggregate Credit Enhancement Amount (as defined therein), (iii)
to pay rebatable Scheduled Monthly Credit Enhancement Obligation Payments (as
defined therein) on each Loan and (iv) to pay interest and other amounts as set
forth therein.
B. It is a condition to the making of the Loans, that the Borrower shall have
executed and delivered this Security Agreement whereby the Borrower, in order to
provide security for the full payment when due of all amounts payable under the
Promissory Note, shall pledge and grant to the Secured Party a security interest
in the collateral described herein.
NOW THEREFORE, in consideration of the foregoing and in order to induce the
Secured Party to make the Loans available to the Borrower and for other good and
valuable consideration, the receipt and sufficiency of which the Borrower hereby
acknowledges, the Borrower and the Secured Party agree as follows:
ARTICLE I
DEFINITIONS AND OTHER TERMS
1.Definitions and Other Terms.
1.1.Defined Terms. The following terms shall have the meanings herein
specified unless the context otherwise requires. All terms not otherwise defined
herein shall have the meaning accorded to such terms in the Promissory Note. All
terms defined in the singular will have the same meaning when used in the plural
and vice versa.
"Accounts" means "accounts" as such term is defined in the UCC.
"Affiliate" means, with respect to any designated Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such designated Person and, without limiting the generality of the
foregoing, shall include, (a) any Person who is a director or officer of,
partner in, trustee of, or blood or legal relative, guardian or representative
of the designated Person, or any Person who acts or serves in a similar capacity
with respect to the designated Person, (b) any Person of which or whom the
designated Person is a director or officer, partner, trustee, or blood or legal
relative, guardian or representative, or with respect to which or whom, the
designated Person acts or serves in a similar capacity; and (c) any Person, who,
directly or indirectly, is the legal or beneficial owner of or controls ten
percent (10%) or more of any class of equity securities of the designated
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
"Affiliate Guarantor" has the meaning ascribed to such term in Section 1.2.
"Aggregate Credit Enhancement Amount" has the meaning ascribed to such term
in the Promissory Note.
"Applicable Collateral" means, for each Loan, the portion of the Collateral
specifically relating to the Store which corresponds to such Loan (as set forth
on Schedule 4 attached hereto).
"Business" means all Stores operated by the Borrower.
"Business Day" means any day other than a Saturday, Sunday or a day on which
banking institutions in New York City are authorized or obligated by law or
executive order to be closed.
"Cash Flow" means, for any period, with respect to any Person, an amount
equal to (a) the sum of (i) pre-tax income, (ii) interest expense, (iii)
depreciation and amortization, (iv) Discretionary Expenses, (v) Rental Expense
and (vi) Non-Recurring Expenses less Non-Recurring Income, all as reflected on
such Person's financial statement for such period.
"Chattel Paper" has the meaning ascribed to such term under the UCC.
"Code" means the Internal Revenue Code of 1986 as amended.
"Collateral" has the meaning ascribed to such term in Section 2.
"Consolidated FCCR" means, for any period, the ratio of (a) the Borrower's
Cash Flow for such period to (b) the sum of Fixed Charges and Rental Expense of
the Borrower for such period.
"Contracts" shall mean all contracts and agreements to which the Borrower now
is, or hereafter will be, bound, or a party, beneficiary or assignee (other than
rights evidenced by Chattel Paper, Documents or Instruments), including, without
limitation, any franchise agreements or license agreements and all other
agreements and documents executed and delivered with respect to such contracts,
and all revenues, rentals and other sums of money due and to become due
thereunder from any of the foregoing.
"Copyrights" shall mean all United States or other registered and
unregistered copyrights, all licenses thereto, and all applications therefor,
and all reissues, divisions, continuations, renewals, extensions, modifications,
supplements thereto or to any part thereof, and the right to sue for past,
present and future infringements of the foregoing, and all rights corresponding
to the foregoing throughout the world.
"Credit Enhancement Amount" has the meaning ascribed to such term in the
Promissory Note.
"Default Rate" has the meaning ascribed to such term in the Promissory Note.
"Deposit Accounts" has the meaning ascribed to such term in the UCC.
"Discretionary Expenses" means, with respect to any Person, the difference
between (a) operating expenses for salaries, wages, benefits, and reimbursements
and the like incurred by such Person and (b) the reasonable and customary
expenses for salaries; wages, benefits, and reimbursements incurred by such
Person, as determined by the Secured Party or any appointed servicer.
Discretionary Expenses shall in no event be less than zero.
"Distributions" means distributions, all salaries, fees and other
compensation, and all reimbursement or indemnification, directly or indirectly,
paid or payable to (or forte benefit of any Affiliate of the Borrower, other
than a Person who is an officer of the Borrower and is not otherwise an
Affiliate of the Borrower. "Distributions" shall include, but not be limited to,
any payment or reimbursement of travel and entertainment expenses, automobile
expenses, and premiums or expenses associated with any insurance policy other
than those expressly required to be maintained pursuant to Section 3.18 hereof.
"Document" has the meaning ascribed to such term under the UCC.
"ERISA" means the Employee Retirement Income Security Act of 1974 as amended.
"Equipment" means any "equipment", as such term is defined in the 13CC, used
or bought for use primarily in the Pledged Stores and not included within
Inventory, now or hereafter owned or leased by the Borrower and, in any event,
shall include, but shall not be limited to, all machinery, tools, computer
software, office equipment, furniture, appliances, furnishings, fixtures,
vehicles, motor vehicles, petroleum storage tanks and pumps, and any manuals,
instructions and similar items which relate to the foregoing, and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all improvements thereon and all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.
"Event of Default" has the meaning ascribed to such term in Section 7.
"Financing Statements" means the UCC financing statements, prepared by
Secured Party, and delivered to Borrower and which Borrower must execute and
deliver to Secured Party as a condition under the Loan Documents.
"Fixed Changes" means, with respect to any Person, for any period, without
duplication, the aggregate of all amounts paid or accrued by such Person during
such period with respect to Indebtedness, as determined in accordance with
generally accepted accounting principles.
"Franchise Agreement" means any franchise or license agreement or agreements
with Borrower as franchisor or licensor, or as franchisee or licensee.
"General lntangibles" shall mean "general intangibles" as such item is
defined in the UCC and shall include, but not be limited to, writings,
memoranda, confirmations, passbooks, signature cards, acknowledgements,
understandings, contract rights, licenses, including Liquor Licenses, leases,
permits, filings, consents, and approvals, and all puts, calls, options,
warrants, and securities, and all security interests, Patents, inventions,
processes, lists (including customer and suppliers lists), methods, and
information (including proprietary information, director and shareholder, sales,
business, financial, accounting, forecasts, projections, media, and other
information), know-how, software, programs, plans, data, blueprints, designs,
drawings, surveys, notices, Copyrights, Trademarks, tradenames, trade secrets,
service marks, service names, logos and goodwill, and all recordings and
registrations thereof, applications for recording or registration, renewals,
modifications, supplements, reissues, continuations, extensions, divisions
thereof and rights corresponding thereto, and all manuals, standards, practices,
mail, advertisements, files, reports, books, catalogs, records, journals,
invoices, and bills, and all rights (including voting rights, rights to receive
notice or to consent, rights to payment, interest, dividends, distributions or
earnings, rights to sue and enforce), powers (including powers of attorney),
privileges, benefits, and remedies relating thereto or arising in connection
therewith.
"Goods" has the meaning ascribed to such term in the UCC.
"Indebtedness" means, with respect to any Person, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, (d) all
capitalized lease obligations of such Person, (e) all indebtedness of others
secured by a Lien on any asset of such Person, whether or not such indebtedness
has been assumed by such Person and (f) all indebtedness of others to the extent
guaranteed by such Person.
"Instrument" has the meaning ascribed to such term in the UCC (other than
Instruments constituting Chattel Paper).
"Insurance and Condemnation Proceeds" means (a) any and all proceeds of any
insurance (insuring the Collateral or otherwise required to be maintained
hereunder, including return of unearned premium), indemnity, warranty or
guaranty payable to the Secured Party or Borrower flout time to time, and claims
fur insurance, indemnity, warranty or guaranty effected or held for the benefit
of the Borrower, with respect to any of the Collateral, and (b) any and all
payments (in any form whatsoever) made or due and payable to the Borrower from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority (or any person acting under color of governmental authority).
"Inventory" means all inventory of the Borrower of every type or description,
including all "inventory" as such term is defined in the UCC, now owned or
hereafter acquired and wherever located, whether raw, in process or finished,
and all materials usable in processing the same and all documents of title
covering any inventory, including, without limitation, work in process,
materials used or consumed in the Pledged Stores, now owned or hereafter
acquired or manufactured by the Borrower and held for sale in the ordinary
course of its business; all present and future substitutions thereof, parts and
accessories thereof and all additions thereto; and all Proceeds thereof and
products of such inventory in any form whatsoever.
"Lease Obligations" means with respect to any Person, any obligations or such
Person In connection with any leases for personal property (including Equipment)
or real property, to the extent such obligations are not included in
Indebtedness.
"License" means any license to use the Trademarks in connection with the
operation of the Business.
"Lien" means any deed, mortgage, pledge, security interest, hypothecation,
collateral assignment, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the UCC).
"Liquor License" means all liquor licenses issued to, or used by, Borrower or
any Affiliate of Borrower in connection with the Stores including, but not
limited to, all liquor licenses listed on Schedule 5 attached hereto.
"Loan" and "Loans" have the meanings ascribed to such terms in the
preliminary statements of this Security Agreement.
"Loan Amount" shall have the meaning ascribed to such term in the Promissory
Note.
"Loan Documents" means the Promissory Note, this Security Agreement and any
guarantee, mortgage, deed of trust or other instrument, agreement, certificate
or other writing, now or hereafter executed and delivered in connection with the
Promissory Note or the Obligations.
"Make Whole Premium" means: (a) for a Fixed Rate loan has the meaning
ascribed to such term in the Fixed Rate Promissory Note, and (b) for an
Adjustable rate loan means the same as "Prepayment Premium" as such term is
defined in the Adjustable Promissory Note.
"Non-Recurring Expenses" and "Non-Recurring Income" mean expenses or income,
as the case may be, that is extraordinary and generally not reflected in any
prior period or reasonably anticipated to be incurred in any subsequent period
received.
"Note Amount" has the meaning ascribed to such term in the Promissory Note.
"Obligations" means each and every obligation, covenant, agreement,
Indebtedness and liability of the Borrower to the Secured Party evidenced by,
arising under or in connection with thc Promissory Note (including, without
limitation, indebtedness, obligations and liabilities in respect of principal,
interest, the Make Whole Premium, the Credit Enhancement Amount and the
Scheduled Monthly Credit Enhancement Obligation Payments for each of the Loans),
this Security Agreement, or any other Loan Document, and any future advances
thereon, renewals, extensions, modifications, amendments, substitutions and
consolidations thereof, including the Borrower's obligations to pay (or
reimburse the Secured Party for) all costs and expenses (including attorneys
fees and disbursements) incurred by the Secured Party in obtaining, maintaining,
protecting and preserving its interest in the Collateral or its security
interest therein, foreclosing, retaking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral or in exercising
its rights hereunder or as a secured party under the UCC, any other applicable
law, regulation or rule or this Security Agreement, including interest on such
costs and expenses which shall accrue at the rate of eight percent (8%) per
annum, and all other indebtedness, obligations and liabilities of any kind of
the Borrower to the Secured Party, now or hereafter existing (including future
advances whether or not pursuant to commitment), arising directly between the
Borrower and the Secured Party relating to the Loan Documents, whether absolute
or contingent, joint and/or several, secured or unsecured, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, or direct or indirect, including the Borrower's liabilities to the
Secured Party as a member of any partnership, syndicate, association or other
group, and whether incurred by the Borrower as principal, surety, indorser,
guarantor, accommodation party or otherwise.
"Patents" means all United States or other registered and unregistered
patents, all licenses thereto, and all applications therefor, and all reissues,
divisions, continuations, renewals, extensions, modifications, supplements
thereto or to any part thereof, and the right to sue for past, present and
future infringements of the foregoing, and all rights corresponding to the
foregoing throughout the world.
"Permitted Liens" means any and all of the Liens set forth on Exhibit B
attached hereto.
"Person" means any individual, corporation, partnership, unincorporated
association, firm, trust, joint stock company, joint venture or other entity of
whatever nature.
"Pledged Stores" means those Stores listed on Schedule I attached hereto.
"Principal Party" shall have the meaning ascribed to such term in Section
7(e).
"Proceeds" shall mean "proceeds" as such term is defined in the UCC or under
other relevant law and shall include, but shall not be limited to, (a) any and
all proceeds of any insurance (insuring the Collateral or otherwise required to
be maintained hereunder, including return of unearned premium), indemnity,
warranty or guaranty payable to the Secured Party or Borrower from time to time,
and claims for insurance, indemnity, warranty or guaranty effected or held for
the benefit of the Borrower, with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to the Borrower
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority) and (c) any and all interest, income, dividends, distributions and
earnings on the Collateral or other monies, revenues or other amounts derived
from the Collateral, including any such amounts received in connection with any
disposition of the Franchise Agreement.
"Program" means the ACLC 1999-2 SBL Program of loans to Program Borrowers.
"Program Borrower" has the meaning ascribed to such term in the Promissory
Note. In addition, in the Secured Party's opinion, all Program Borrowers
substantially comply in all material respects with the Secured Party's current
underwriting guidelines for loans to small business owners, and in no event will
loans be made to Program Borrowers where (a) the Pledged Store has less than one
year of seasoning, and (b) (i) the most recent annual revenue of the Borrower is
less than $500,000 or (ii) the most recent annual Borrower Cash Flow is less
than $100,000.
"Program Loan Deficiencies" has the meaning ascribed to such term in the
Promissory Note.
"Promissory Note" has the meaning ascribed to such term in the preliminary
statements to this Security Agreement.
"Property" means the real property or properties on which the Pledged Stores
are located, as more specifically described on Schedule I attached hereto.
"Rental Expense" means, with respect to any Person, for any period, the
aggregate of all amounts paid or accrued with respect to Lease Obligations
during such period, as determined in accordance with generally accepted
accounting principles.
"Required Consolidated FCCR" has the meaning ascribed to such term in Section
3.15.
"Required Unit FCCR" has the meaning ascribed to such term in Section 3.15.
"Scheduled Monthly Credit Enhancement Obligation Payment" shall have the
meaning ascribed to such term in the Promissory Note.
"Scheduled Monthly Loan Payment" shall have the meaning ascribed to such term
in the Promissory Note.
"Securitization" means the sale, pledge, grant of a security interest,
collateral assignment, transfer and delivery or other encumbrance or disposition
of all or any portion of the Program Loans (or the Secured Party's rights and
powers therein) by the Secured Party, from time to time, to one or more of its
Affiliates or to other Persons, including the sale of the Program Loans by the
Secured Party to one or more Persons who will issue debt instruments or equity
certificates backed by such Program Loans and the servicing of such Program
Loans by Person appointed as servicer in connection therewith.
"State" shall have the meaning ascribed to such term in the Promissory Note.
"Store" means a business/commercial property owned and/or operated by the
Borrower and includes all aspects of the operating unit.
"Trademarks" shall mean all United States or other registered or unregistered
trademarks, trade names, service marks and service names together with the
goodwill of the business connected with the use thereof, and symbolized thereby,
all licenses thereto (including the License, if applicable) and all applications
therefor, and all reissues, divisions, continuations, renewals, extensions,
modifications, supplements thereto or to any part thereof, and the right to sue
for past, present and future infringements of the foregoing, and all rights
corresponding to the foregoing throughout the world.
"UCC" means the Uniform Commercial Code (or any comparable law) in effect in
any relevant jurisdiction the laws of which govern the perfection of security
interests hereunder.
"UCC Search" means the security interest, tax lien, suit and judgment search
of the Borrower conducted in the locations set forth on Schedule 2 hereto.
"Unit FCCR" means, with respect to any Pledged Store, for any period, the
ratio of(a) such Fledged Store's Cash Flow for such period to (b) the sum of
Fixed Charges and Rental Expense of the Borrower for such Pledged Store of such
period.
1.2. Certain Calculations, For the purposes of calculating the Borrower's
Cash Flow, Discretionary Expenses, Non-Recurring Expenses, Non-Recurring Income,
Indebtedness and Lease Obligations, the term "Borrower" shall mean the Borrower
and any Affiliate of the Borrower (an "Affiliate Guarantor") that is providing
the Secured Party with a guarantee of any of the Borrower's Obligations and the
term "financial statement" shall mean a consolidated financial statement of the
Borrower and such Affiliate.
1.3. Rules of Construction. When used in this Security Agreement: (a) "or" is
not exclusive; (b) a reference to a law includes any amendment or modification
of such law; (c) a reference to a Person includes its permitted successors and
permitted assigns; and (d) a reference to an agreement, instrument or document
shall include such agreement, instrument or document as the same may be amended,
modified or supplemented from time to time in accordance with its terms.
ARTICLE II
SECURITY INTERESTS
2. Security Interests.
2.1. Pledge and Grant of Security Interest. As collateral security for the
prompt and complete payment and performance when due of all of the Obligations,
the Borrower hereby pledges and grants to the Secured Party, a continuing
security interest in, and Lien on, all of the Borrower's right, title and
interest in and to the following (collectively, the "Collateral"): all Accounts,
Goods, Documents, Chattel Paper, Deposit Accounts, Instruments, Inventory,
Equipment, General Intangibles, Contracts (including the Franchise Agreement and
License (if applicable), certificates of title, fixtures, money, securities,
deposits, credits, claims, demands, assets and other personal property, now
owned, existing, hereafter acquired, held, used, sold or consumed in connection
with the Pledged Stores and any other property, rights and interests of the
Borrower which at any time relate to, arise out of or in connection with the
foregoing or which shall come into the possession or custody or under the
control of the Secured Party or any of its agents, representatives, associates
or correspondents, in connection with the foregoing; any and all additions and
accessions, replacements, substitutions and improvements, of or to all the
foregoing; and all products, rents, profits, offspring and Proceeds thereof.
Without limiting the generality of the foregoing, this Agreement also secures
the payment of all amounts which constitute part of the Obligations and would be
owed by the Borrower to the Secured Party but for the fact they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
2.2. Security Interest Absolute. All rights of the Secured Party and the
security interests hereunder shall be absolute and unconditional irrespective
of:
(a) any change in the time, manner, amount or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Promissory Note or any other Loan
Document;
(b) any exchange, release or non perfection of all or any part of the
Collateral or any other collateral, or any release from, amendment to, waiver of
or consent to departure from any guaranty, for all or any of the Obligations; or
(c) to the fullest extent permitted by law, any other circumstances which might
otherwise constitute a defense available to, or a discharge of, the Borrower or
a third party pledgor.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3. Representations. Warranties and Covenants. The Borrower hereby represents,
warrants and covenants that:
3.1. Organization. The Borrower (unless the Borrower is an individual) is and
will continue to be duly formed, validly existing and in good standing under the
laws of the state of its organization set forth on Schedule I and is duly
authorized to do business in, and is in good standing in each jurisdiction where
the Business or thc Property is located and where such organization,
qualification or standing is necessary, required or proper in connection with
the Borrower's ownership or use of the Collateral or the Property or the conduct
of the Business.
3.2. Power and Authority. The Borrower (and, with respect to clause (c),
below, in the case of Loan Documents executed by an Affiliate Guarantor, each
such Affiliate Guarantor) has all requisite power, authority and the legal right
and all necessary permits, consents, licenses and authorizations (a) to own the
Collateral, (b) to conduct the Business and (c) to execute, deliver and perform
its obligations under this Security Agreement, the Promissory Note and the other
Loan Documents.
3.3. Execution and Delivery: Enforceability. Upon execution, this Security
Agreement, the Promissory Note and the other Loan Documents will be duly
executed and delivered by the Borrower (and in the case of Loan Documents
executed by an Affiliate Guarantor, by each such Affiliate Guarantor). Upon
execution, each of this Security Agreement, the Promissory Note and the other
Loan Documents will constitute a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower, in accordance with its terms.
3.4. Name: Chief Executive Office: Location.
(a) The Borrower's legal name, federal tax payor identification number, and
mailing address are accurately set forth on Schedule I. The Borrower has not
merged, consolidated, acquired all or substantially all of the assets of any
other Person, or except as disclosed on Schedule I, used any other name (whether
in connection with the Business, Property or the Collateral or for business,
obtaining credit or financing or otherwise) in the last five years.
(b) The Borrower's principal place of business, chief executive office (and,
if the Borrower is an individual, residence) is accurately set forth on Schedule
I.
(c) The Borrower operates and shall continue to operate the Pledged Stores
from the Property at the address (es) and in the county (ies) or parish (ies),
as applicable, and state(s) set forth in Schedule I. Schedule I correctly
discloses that the Borrower either (i) is sole record owner of the Property or
(ii) leases (or subleases) the Property and the record owner of each Property is
the person or entity disclosed on Schedule I. All personal property of the
Borrower owned, acquired, held, used, sold or consumed in the Pledged Stores
including Accounts, Goods, Inventory, Equipment, General Intangibles, Contracts,
Chattel Paper, Instruments, Documents, certificates of title, fixtures,
securities and money, and all writings relating thereto and records thereof,
books of record or account, employees, business, offices and operations are
located at and conducted out of such Property or at its chief executive office.
(d) The Borrower will neither change its name, federal tax payor
identification number, or its chief executive office (or, if an individual,
residence), nor the location of its business, property or assets (including the
Pledged Stores and the Collateral), nor assume a different name, nor conduct its
business or affairs under any other name or in any other location, nor merge,
consolidate, or change its corporate structure (whether by stock sale, issuance,
purchase or otherwise), nor change its use of any item of Collateral, without in
each instance providing the Secured Party with not less than sixty (60) days
prior written notice of the proposed action and specifying within such notice
and with reasonable clarity and particularity the timing and nature of such
proposed action. Additionally, the Borrower shall provide such other information
in connection with the proposed action as the Secured Party may reasonably
request and shall have taken all action, reasonably satisfactory to the Secured
Party, to maintain the security interest of the Secured Party in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
3.5. No Conflict. The Borrower's (and in the case of Loan Documents executed
by an Affiliate Guarantor, such Affiliate Guarantor's) execution, delivery and
consummation of the transactions contemplated by this Security Agreement, the
Promissory Note and other Loan Documents do not and will not (with the passage
of time or otherwise) (a) conflict with, violate or constitute a default under
any law, rule, regulation, order, decree, contract, agreement (including the
Franchise Agreement, if applicable), note, mortgage, bond, indenture, lease,
license, or obligation of or applicable to the Borrower (or such Affiliate
Guarantor) or the Collateral or (b) grant, create or result in any Lien in favor
of any person (other than the Secured Party) on or to the Business or any other
property or assets of the Borrower (including the Collateral and the Franchise
Agreement, if applicable).
3.6. No Consent Required. Except for the filing of the Financing Statements
in the locations set forth on Schedule 2 hereto (and, if applicable, the
recording of the mortgage or deed of trust included in the Loan Documents), no
consent of any other Person and no authorization, approval or other action by
and no notice to or filing with, any court, government, agency or regulatory
authority is required (a) for the grant byte Borrower of the pledge and security
interest granted hereby or for the execution, delivery or performance of this
Security Agreement, the Promissory Note and other Loan Documents or (b) for
validity, perfection or maintenance of the pledge, lien and security interest
created hereby.
3.7. Affiliates. Schedule 3 contains a complete and accurate list of all
Affiliates of the Borrower (including Affiliate Guarantors) who have executed
and delivered any note, security agreement, guarantee or other loan document to
the Secured Party.
3.8. Title to the Collateral. The Borrower has and, subject to Section 4,
will maintain good and marketable title to the Collateral and the Franchise
Agreement (if applicable), free of all Liens (other than Permitted Liens and the
security interest granted to the Secured Party hereunder) and such Collateral
and Franchise Agreement (if applicable), are sufficient to enable a franchisee
to operate the Pledged Stores at the Property in accordance with the Franchise
Agreement.
3.9. No Liens. Except as shown on the 13CC List attached hereto as Exhibit A,
there is no Lien (including any federal or state tax lien), suit (including any
action, proceeding, or other litigation pending, or to the Borrower's knowledge,
threatened) or judgment (including any award, injunction, order) filed with,
registered, indexed or recorded in any public office, court, arbitration panel,
administrative agency or regulatory authority (or intended so to be), directly
or indirectly, identifying or encumbering or covering or involving the
Collateral or the Franchise Agreement (if applicable) or which could have a
material adverse effect on the Borrower, any Pledged Store or the Borrower's
ability to perform its Obligations. All Liens listed on Exhibit A shall be
removed upon funding of the Loan unless such lien is specifically identified as
a Permitted Lien. Other than the security interest granted to the Secured Party
hereunder and the Permitted Liens, and except as provided in Section 4 hereof,
the Borrower has not and, without the prior written consent of the Secured
Party, will not enter into any agreement or understanding or take, permit or
suffer to exist any action (including the filing of a financing statement,
agreement, pledge, mortgage, notice or registration) or event (whether by
operation of law or otherwise) for the purpose of, or that may have the effect
of, directly or indirectly, (a) granting a Lien on (including any state of
federal tax lien), pledging, transferring, assigning, selling, disposing of, or
encumbering any Collateral or the Franchise Agreement (if applicable), any
interest therein or rights pertaining thereto or involving the Borrower or the
Pledged Stores, or (b) changing, modifying, supplementing, or increasing the
amount of credit, loans, indebtedness or value secured by the Permitted Liens,
if any, or the amount, property or assets encumbered thereby.
3.10. Maintenance of Collateral and Business. At the Borrower's sole cost
and expense, the Borrower shall (a) keep, use, operate and maintain the
Collateral, the Pledged Stores, the Business and the Property in accordance with
applicable laws, rules, and regulations, and in accordance with the standards
established by the franchisor under the Franchise Agreement (if applicable), (b)
operate the Pledged Stores at the Property and in accordance with the Franchise
Agreement (if applicable) and customary, prudent business practices, and at all
times fully comply with terms and provisions of the Franchise Agreement (if
applicable), (c) fully comply with all current and future laws and regulations
concerning the storage and sale of petroleum products, if applicable, and (d)
not do or suffer to be done any act whereby the value of the Collateral, the
Property or any Pledged Store or any part or interest therein may be lessened in
any material respect. The Borrower shall notify the Secured Party promptly of
any actual or threatened destruction or material damage or impairment of any
Pledged Store, the Collateral or the Property or if Borrower receives a notice
of violation from any governmental entity or agency.
3.11. Perfected Security Interest. This Security Agreement and this grant
and transfer of the Collateral hereunder creates a valid and enforceable
security interest in the Collateral. Upon filing of the Financing Statements in
the locations set forth on Schedule 2 hereto, such security interest will be
perfected and subject to no prior or equal security interest other than and only
to the extent of the Permitted Liens. The execution and filing of the Financing
Statements has been duly authorized by all appropriate action on the part of the
Borrower (and any other Person named as debtor therein) and the Borrower (and
any other Person named as debtor therein) has duly executed the Financing
Statements.
3.12. No Violation: Indemnity. The Borrower has not and shall not acquire,
obtain, make, manufacture, produce, operate, hold, possess, maintain, use, sell,
transfer, grant, pledge, or dispose of (for purposes of this Section 3.12,
collectively "the Borrowers use") any of its Business, securities, property or
assets (including any proceeds of the Loans, the Collateral and the Property) in
violation of any statute, law, rule, ordinance, regulation, policy, procedure,
injunction, award, decree, judgment, contract, agreement (including the
Franchise Agreement, if applicable), understanding, or right or interest of any
other Person (for purposes of this Section 3.12, each such event a "violation"),
and to the Borrower's knowledge no such violation has been made by any other
Person and no basis for a claim of any such violation exists. The Borrower shall
indemnify and hold the Secured Party harmless from and against any such
violation, and any other loss, liability, damage, cost or expense whatsoever
(including attorneys' fees and disbursements) arising out of or in connection
with the Borrower's use of any of its Business, securities, property or assets
(including any proceeds of the Loans, the Collateral and the Property).
3.13. Franchise Agreement. The Borrower, if a franchisee or a franchisor
under a Franchise Agreement, is and will continue to be in good standing under
such Franchise Agreement. The Borrower, if a franchisee or franchisor under a
Franchise Agreement, has not breached and is not in default under the Franchise
Agreement; the Borrower shall not terminate, fail to renew, breach or be in
default under the Franchise Agreement; and the Borrower has no knowledge of any
claim of (or basis for any claim of) any such termination, nonrenewal, breach or
default. The Borrower agrees to fully comply, at the Borrower's own cost and
expense, with the terms of the License and the Franchise Agreement (including
any renewal option) and to promptly notice the Secured Party of any adverse
development with regard to the Franchise Agreement or the License, including any
claim of breach of or default under, or threat of nonrenewal or termination of,
or litigation involving the Franchise Agreement or the License.
3.14. Operating Experience. The Borrower has had at least two years
experience operating a business or businesses similar to the Business of the
Pledged Store. In addition, each Pledged Store has been operating for at least
twelve months.
3.15. FCCR. During the term of this Security Agreement, thc Borrower shall
maintain (a) a Unit FCCR for each Pledged Store of not less than 1.30:1 (the
"Required Unit FCCR") and (b) a Consolidated FCCR of not less than 1.35:1 (the
"Required Consolidated FCCR"). All calculations of each Unit FCCR and the
Consolidated FCCR shall be based upon the financial information furnished by the
Borrower hereunder (see Sections 3.21 and 3.22) for the twelve-month period
ending December 31 of each year or more frequently as the Secured Party may from
time to time reasonably request.
3.16. Limitation on Indebtedness. Lease Obligations and Distributions. The
Borrower shall not, directly or indirectly, incur any Indebtedness, Lease
Obligations or make or become obligated to make any Distributions if after
giving effect to such incurrence or payments, any Unit FCCR would be less than
the Required Unit FCCR or the Consolidated FCCR would be less than the Required
Consolidated FCCR.
3.17. Inspection. The Borrower shall allow the Secured Party, its agents and
representatives, from time to time, to inspect the Collateral, the Property and
the Borrower's books and records pertaining thereto or otherwise to the
Business, and the Borrower will assist (and permit abstracts and photocopies of
the Borrower's books and records to be taken and retained by) the Secured Party,
its agents and representatives in making any such inspection.
3.18. Insurance. At the Borrower's sole cost and expense, the Borrower shall:
(a) (i) keep the Collateral (which for purposes of this Section 3.18 includes
the Property) insured against loss or damage by fire, theft, collision and other
hazards (including flood, if no certification or other evidence satisfactory to
the Secured Party is delivered to the Secured Party to the effect that the
Property is not located within a federally designated special flood hazard area)
as may be required by the Franchise Agreement (if applicable), or the Secured
Party and by policies of fire, extended coverage and other insurance with such
company or companies, in such amounts (and, with respect to policies required
for property, fire and flood insurance in an amount not less than the lesser of
(A) the replacement value thereof, and (B) the Loan Amount payable under the
Promissory Note), as may be required by the Franchise Agreement (if applicable)
and the Secured Party, but in no event less than the minimum amount required to
prevent the imposition of any coinsurance requirement on the insured, (ii)
maintain liability insurance of not less than one million dollars, (iii)
maintain business interruption insurance with scope and coverage reasonably
satisfactory to the Secured Party, and (iv) maintain such other insurance
(including certain minimum levels of acceptable workers' compensation, property
damage, general public liability insurance) as may be required by law or by the
Franchise Agreement (if applicable);
(b) cause all insurance policies required hereunder (i) to be maintained by
providers either (A) having ratings of not less than B++ from A.M. Best Company
Inc. (or comparable ratings from a comparable rating agency) or (B) who, if not
so rated, have been approved by the Secured Party and (ii) to contain a standard
lender's loss payable endorsement or mortgagee's endorsement providing for
payment directly to the Secured Party and/or its designees and to provide for a
minimum of thirty (30) days notice to the Secured Party prior to cancellation or
modification or nonrenewal;
(c) timely pay all premiums, fees and charges required in connection with all
of its insurance policies and otherwise continue to maintain such policies in
full force and effect;
(d) promptly deliver the insurance policies, certificates (and renewals)
thereof or other evidence of compliance herewith to the Secured Party; and
(e) promptly notify the Secured Party of any loss covered by such insurance
policies and allow the Secured Party to join the Borrower in adjusting any loss
in excess of $50,000.
3.1. Loan Proceeds. No part of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of buying or carrying any "margin stock"
within the meaning of Regulation 0 or U of the Board of Governors of the Federal
Reserve System. The Borrower intends to and agrees to use the proceeds of the
Loans solely for the lawful, proper business or commercial purpose(s) set forth
in its application for the Loans and Secured Party's commitment letter.
3.20. Solvency. The Borrower (and each Affiliate Guarantor) is solvent and,
after giving effect to the Obligations, will continue to be solvent.
3.21. Reporting Requirements. The Borrower agrees to provide to the Secured
Party within twenty (20) days after June 30 and December31 of each calendar year
during the term of this Security Agreement, a compliance certificate (in the
form attached hereto as Exhibit C). The Borrower further agrees to provide to
the Secured Party: (a) within seventy-five (75) days after December 31st of each
calendar year and a, the Secured Party may reasonably request from time to time,
consolidated Borrower and individual Pledged Store internally generated
financial statements covering the twelve 02) month period then-ended; and (b)
copies of such other reports and information as the Secured Party may from time
to time request. The financial statements furnished to the Secured Party in
connection with the Borrower's application for the Loans and hereunder shall
reflect all Indebtedness and Lease Obligations of the Person covered thereby and
shall be sufficiently detailed to allow the Secured Party to calculate the Unit
FCCR of each Pledged Store and the Consolidated FCCR.
3.22. Accuracy of Information. All information, reports, statements and
financial and other data furnished (or hereafter furnished) by the Borrower to
the Secured Party, its agents or representatives hereunder or in connection with
the Borrower's application for the Loans and the Obligations, are (and shall be
on the date so furnished) true, complete and correct. Borrower hereby authorizes
Secured Party to request credit bureau reports while any of die Obligations are
outstanding.
3.23. Employee Benefit Plans.
(a) Definitions.
"Employee Benefit Plan" means any group health insurance, group life
insurance, medical, Sec. 401(k), profit sharing, defined benefit, pension,
cafeteria, SIMPLE, SEP, Bonower-sponsored IRA or any other employee benefit plan
sponsored by the Borrower, including without limitation any program, arrangement
or plan within the meaning of Section 3(3) of ERISA.
"Borrower." For purposes of this Section 3.23, the term "Borrower" shall
include all employers (whether or not incorporated) which by reason of common
control or otherwise are treated together with Borrower as a single employer
within the meaning of the Internal Revenue Code ("Code"), including without
limitation under Code Sections 414(b), (c), (in), (ii) or (o).
(b) Employee Benefit Plans Comply With ERISA and Code. For every Employee
Benefit Plan (i) the Employee Benefit Plan is in compliance with ERISA and the
Code, (ii) no accumulated funding deficiency within the meaning of ERISA or the
Code has been incurred, and (iii) neither Borrower nor any other party has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement. Each Employee Benefit Plan intended to be qualified
under the Code has been determined to be qualified by the Internal Revenue
Service and nothing has occurred since the date of the last determination which
resulted or is likely to result in the revocation of the determination.
(c) No PBGC or Withdrawal Liability. Borrower has not incurred any liability
to the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan or ceased operations at any facility or withdrawn from any
Employee Benefit Plan in a manner which could give rise to liability under
ERISA. For example and without limitation, no Employee Benefit Plan has been a
plan for which "reportable event," within the meaning of Section 4043 of ERISA,
has occurred, or to the knowledge of Borrower, has been a plan for which any
liability to the PBGC has been or is expected to be incurred. Borrower has not
incurred any withdrawal liability (including any contingent or secondary
withdrawal liability) within thc meaning of ERISA to any Employee Benefit Plan
which is a multiemployer plan (as defined by ERISA), and no event has occurred,
and there exists no condition or set of circumstances, which presents a material
risk of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any multiemployer plan which could result in any
liability with respect to a multiemployer plan. Borrower has not been notified
by the sponsor of any multiemployer plan that the multiemployer plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA,
and operations have not ceased at any facility which would subject Borrower to
the provisions of Section 4062(e) of ERISA. No proceeding has been instituted on
behalf of any multi-employer plan against Borrower to enforce Section 515 of
ERISA.
(d) No Tax or Other Liability. Borrower has no liability for any Employee
Benefit Plan for any lien, tax, penalty or excise tax under ERISA or the Code.
Other than claims for benefits submitted by participants or beneficiaries, no
claim, lawsuit or cause of action against or proceeding involving any Employee
Benefit Plan is pending or, to Borrower's knowledge, threatened by any party.
Except to the extent required under Section 601 et seq. of ERISA and Section
4980B of the Code, Borrower provides no benefits described in Section 3(1) of
ERISA to any retired or former employee or is obligated to provide benefits to
or on behalf of any employee following the employee's retirement or other
termination of service with Borrower.
(e) No Prohibited Transactions. No transaction relating to any Employee
Benefit Plan proscribed by Section 406 of ERISA ("Prohibited Transaction") has
occurred for which an exemption is not expressly available and applicable under
ERISA. Furthermore, to the extent within the knowledge or control of the
Borrower, neither the execution and delivery of this Security Agreement, the
acquisition of the Promissory Note by Secured Party or its Assigns, nor the
consummation of any other transaction contemplated by this Security Agreement
constitutes or will constitute a Prohibited Transaction with respect to any
Employee Benefit Plan for which an exemption is not expressly available and
applicable under ERISA.
(f) All Employee Benefit Plans Funded and Currently In Compliance. Borrower
has performed all of Borrower's obligations under all Employee Benefit Plans.
Full and timely payment has been made of all amounts which Borrower is required,
under applicable law or under any Employee Benefit Plan or any other agreement
to which Borrower is a party, to have paid for each Employee Benefit Plan.
Borrower has made adequate provision for reserves for all obligations and
liabilities under each Employee Benefit Plan that have accrued hut are not yet
due under the terms of any Employee Benefit Plan or related agreements.
(g) Transaction Will Not Trigger Benefits. The execution and delivery of this
Security Agreement, and the consummation of the transactions contemplated by
this Security Agreement, will not (i) result in any payment by Borrower
(including, without limitation, severance, unemployment compensation, parachute
payment, bonus or otherwise) becoming due to any director, employee, or
independent contractor of Borrower under any Employee Benefit Plan, agreement or
otherwise, (ii) increase any benefits otherwise payable under any Employee
Benefit Plan or agreement, or (iii) increase or create any liability referred to
in either Section 3.23(b) or 3.23(c) above.
3.24. Taxes. The Borrower and each of its Affiliates and each entity which
might have tax liabilities for which the Borrower or any of its Affiliates is or
may be liable, has filed all tax returns and paid all taxes required by law to
be filed or paid, which have become due pursuant to said returns (or which to
the knowledge of the Borrower are due and payable) and on all assessments
received by the Borrower, such Affiliate or such entity, as the case may be. No
extensions of the time for the assessment of deficiencies have been granted by
the Borrower or any of its Affiliates. There are no material Liens on any
properties or assets of the Borrower or any of its Affiliates imposed or arising
as a result of the delinquent payment or the nonpayment of any tax, assessment,
fee or other governmental charge. The income tax returns of the Borrower and its
Affiliates have been examined and reported upon by the relevant tax authorities,
or closed by applicable statutes of limitations, for all fiscal years through
the fiscal year ended ______N/A________ 19 and neither the Borrower nor any of
its Affiliates nor any such entity has given or consented to any waiver of the
statute of limitations with respect to its tax liabilities for any such year.
Adequate provision has also been made for all other taxes (whether past, current
or deferred, federal, provincial, local or foreign, due or to come due) on such
balance sheet, and the Borrower knows of no transaction or matter which might or
could result in additional tax assessments to the Borrower or any of its
Affiliates in the ordinary course since the date of such balance sheet. There
are no applicable taxes, fees or other governmental charges payable by the
Borrower or any of its Affiliates in connection with the execution and delivery
of this Agreement, and the other Loan Documents by the Borrower or any of its
Affiliates or the offer, issuance, sale and delivery of the Promissory Note by
the Borrower.
3.25. Property Leases. The Borrower, if a tenant or subtenant under a lease
or sublease of the Property, shall not terminate any such lease or sublease, and
the Borrower has no knowledge of any claim of (or basis for any claim of) any
such termination. The Borrower agrees to exercise and fully comply with the
terms of all renewal options provided for in such lease or sublease, and to
promptly notify the Secured Party of any adverse development with regard to the
threat of nonrenewal or termination of such lease of sublease.
3.26. Guaranty from FFP Marketing Company. Inc. Borrower shall enforce the
guaranty ("Affiliate Guaranty") provided by FFP Marketing Company, Inc. to
Borrower and Secured Party in connection with all leases between Borrower and
FFP Operating Partners, L.P., including that certain Master Lease Agreement of
equal date hereto, immediately upon any default by FFP Operating Partners, L.P.
under the terms of any such lease or master lease.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY, EQUIPMENT AND
REAL PROPERTY
4. Special Provisions Concerning Inventory. Equipment and Real Property. The
Borrower shall do nothing to impair the rights of the Secured Party in the
Inventory and the Equipment and shall cause the Inventory and the Equipment to
at all times be, constitute and remain personal property subject to the security
interest granted to the Secured Party. Notwithstanding the preceding sentence,
provided the Borrower is not in default under any of its Obligations (and no
event which with the passage of time would be an Event of Default has occurred
and is continuing), in the ordinary course of the Borrower's Business, (a) the
Borrower may sell its Inventory, and (b) subject to sections 3.15 and 3.16
hereto, with the prior consent of the Secured Party, which will not be
unreasonably withheld, the Borrower may, from time to time, refinance existing
Permitted Liens in accordance with the terms thereof, replace its Equipment,
acquire new Equipment and accessions to its Equipment, or acquire fee interest
in (or ground lease of) any Property, subject to purchase money security
interests; provided that, if the Secured Party has a leasehold mortgage or deed
of trust on any lease of such Property such lease remains in full force and
effect, subject to the Secured Party's security interest and any Person with a
lien on the fee interest in (or ground lease of) such Property provides the
Secured Party with a nondisturbance agreement and such other assurances as the
Secured Party shall reasonably request.
ARTICLE V
SPECIAL PROVISIONS CONCERNING INSURANCE AND
CONDEMNATION PROCEEDS AND PROCEEDS
5. Special Provisions Concerning Insurance and Condemnation Proceeds and
Proceeds.
5.1. Special Provisions Concerning Insurance and Condemnation Proceeds.
Unless prohibited under the terms of the Property lease, if applicable, the
Borrower hereby directs any and all transferors, distributors or payors
(including insurance companies with whom the Borrower maintains insurance) to
make payment of all Insurance and Condemnation Proceeds directly to the Secured
Party and authorizes the Secured Party, in its sole discretion, to apply the
same toward repayment of the Loans, whether or not due, or, toward replacement
of the Collateral. Notwithstanding the tens of the Property lease, if
applicable, the Borrower will use its best efforts and hereby assigns the
Insurance and Condemnation Proceeds toward replacement of the Collateral and
shall keep any lease or options to extend the lease in effect until the Loans
are paid.
5.2. Special Provisions Concerning Proceeds. All Proceeds, whether received
by the Secured Party or by the Borrower, or by any other Person will be included
in the Collateral subject to the security interest granted to the Secured Party
hereunder. Upon and during the continuation of an Event of Default, the Borrower
shall (a) identify, earmark, segregate and keep separate all Proceeds received
by it, (b) upon the Secured Party's request, promptly account to the Secured
Party for all Proceeds, and (c) hold all Proceeds received by the Borrower in
trust for the benefit of the Secured Party and shall promptly (and in any event
not later than the fifth day after receipt) deliver (or cause to be delivered)
the same to the Secured Party and into its possession in the form received by
the Borrower and at a time and in a manner satisfactory to the Secured Party.
ARTICLE VI
SPECIAL PROVISION CONCERNING RIGHTS AND
DUTIES WHILE IN POSSESSION OF COLLATERAL
6. Special Provision Concerning Rights and Duties While in Possession of
Collateral.
6.1 Borrower's Possession. Upon and during the continuance of an Event of
Default, to the extent the same shall, from time to time, be in the Borrower's
possession, the Borrower will hold all securities, Instruments, Chattel Paper,
Documents, certificates and money and other writings evidencing or relating to
the Collateral in trust for the Secured Party and, upon request or as otherwise
provided herein, promptly deliver the same to the Secured Party in a form
received and at a time and in a manner satisfactory to the Secured Party. With
respect to the Collateral in the Borrower's possession the Borrower shall at the
Secured Party's request take such action as the Secured Party in its discretion
deems necessary or desirable to create, perfect and protect the Secured Party's
security interest in any of the Collateral.
6.2. Secured Party's Possession. With respect to all of the Collateral
delivered or transferred to, or otherwise in the custody or control of
(including any items in transit to or set apart for) the Secured Party or any of
agents, associates or correspondence in accordance with this Security Agreement,
the Borrower agrees that: (a) such Collateral will be, and is deemed to be in
the sole possession of the Secured Party; (b) subject to Section4, the Borrower
has no right to withdraw or substitute any such Collateral with out the consent
of the Secured Party, which consent may be withheld or delayed in the Secured
Party's sole discretion; (c) the Borrower shall not take or permit any action,
or exercise any voting and other rights, powers and privileges in respect of the
Collateral inconsistent with the Secured Party's sole possession thereof; and
(d) the Secured Party may in its sole discretion and without notice, without
obligation or liability except to account for property actually received by it,
and without affecting or discharging the Obligations (i) further transfer and
segregate the Collateral in its possession; (ii) receive Proceeds and hold the
same as part of the Collateral and/or apply the same as herein after provided;
and (iii) exchange any of the Collateral for other property upon reorganization,
recapitalization or other readjustment. Following the occurrence of an Event of
Default, the Secured Party is authorized (A) to exercise or cause its nominee to
exercise all or any rights, powers and privileges (including to vote) on or with
respect to the Collateral with he same force and effect as an absolute owner
thereof; (B) whether any of the Obligations be due, in its name or in the
Borrower's name or otherwise, to demand, sue for, collect or receive any money
or property at any time payable or receivable on account of or in exchange for,
or make any compromise or settlement the Secured Party deems desirable with
respect to, any of the Collateral; and (C) to extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release, any of the Collateral. Notwithstanding the rights accorded the Secured
Party with respect to the Collateral and except to the extent provided below or
required by the UCC or other applicable law (which requirement cannot be
modified, waived or excused), the Secured Party's sole duty with respect to the
Collateral in its possession (with respect to custody, preservation, safekeeping
or otherwise) will be to deal with it in the same manner that the Secured Party
deals with similar property owned and possessed by it. Without limiting the
foregoing, the Secured Party, and any of its officers, directors, partners,
trustees, owners, employees and agents, to the extent permitted by law (I) will
have no duty with respect to the Collateral or the rights granted hereunder; (2)
will not be required to sell, invest, substitute, replace or otherwise dispose
of the Collateral; (3) will not be required to take any steps necessary to
preserve any rights against prior parties to any of the Collateral; (4) will not
be liable for (or deemed to have made an election of or exercised any right or
remedy on account of) any delay or failure to demand, collect or realize upon
any of the Collateral; and (5) will have no obligation or liability in
connection with the Collateral or arising under this Security Agreement. The
Borrower agrees that such standard of care is reasonable and appropriate under
the circumstances.
ARTICLE VII
EVENTS OF DEFAULT
7. Events of Default. The happening of any one or more of the following
events shall constitute an "Event of Default" hereunder:
(a) the Borrower shall fail to make any payment under this Security
Agreement, the Promissory Note or any Loan Document when the same becomes due
and payable and such failure shall continue for five (5) Business Days after the
Secured Party provides notice to the Borrower of such failure; or
(b) the Borrower shall default under, fail to perform or observe any covenant
or condition of or agreement in, or breach, or make a material inaccuracy in or
omission from, any representation or warranty under or in, this Security
Agreement, the Promissory Note, any other Loan Document, the Franchise Agreement
or the License (if applicable), any financial or other statement delivered to
the Secured Party or any agreement, instrument or obligation in connection with
any Permitted Lien, and such default, failure, breach, inaccuracy or omission
shall continue unremedied for the earliest of (i) fifteen (15) days following
the date that notice of such default, failure, breach, inaccuracy or omission is
given to the Borrower by the Secured Party, (ii) fifteen (15) days following the
date that the Borrower first obtains knowledge of such default, failure, breach,
inaccuracy or omission, or (iii) in the case of any Permitted Lien, the
occurrence of such event (or, if there exists an applicable cure period, the
expiration of such cure period); or
(c) if the Borrower is a party to a Franchise Agreement as of the execution
of this Security Agreement with regard to a Pledged Store and the other party to
such Franchise Agreement shall terminate or not renew such Franchise Agreement;
or
(d) any of the Borrower's Affiliates listed on Schedule 3 shall fail to make
any payment when due under or default under, fail to perform or observe any
covenant of or condition or agreement in breach of, or make any material
inaccuracy in or omission from any representation and warranty under, any
security agreement with the Secured Party or note held by the Secured Party or
any other loan document with the Secured Party or in any other agreement,
instrument, document or certificate, or financial or other statement delivered
to the Secured Party and such failure, default or breach continues beyond any
applicable grace period provided therein or
(e) the Borrower or any Affiliate Guarantor or any partnership in which the
Borrower is a partner (each hereinafter called a "Principal Party") shall die,
dissolve, merge or consolidate, suspend the transaction of business or incur any
material adverse change in its financial condition or prospects; or
(f) the Borrower or any other Principal Party shall be expelled from or
suspended by any stock or securities exchange or other exchange, or any
proceeding, procedure or remedy supplementary to or in enforcement of judgment
(involving an amount in excess of $20,000 in the aggregate) shall be resorted to
or commenced against, or with respect to any property of, the Borrower or any
other Principal Party; or
(g) the Borrower or any other Principal Party shall make an assignment for
the benefit of, or composition with, creditors, or shall be or become insolvent
or unable, or generally fail, to pay its debts when due, or shall be or become a
party or subject to any bankruptcy, reorganization, insolvency or other similar
proceeding, or a receiver or liquidator, custodian or trustee shall be appointed
for the Borrower or any other liable party, or a substantial portion of any of
the Borrower's or their respective assets and, if any of the foregoing shall
occur involuntarily as to the Borrower and any other Principal Party, it shall
not be dismissed with prejudice, stayed or discharged within forty-five (45)
days; or
(h) the Borrower or any other Principal Party shall take any action to
effect, or which indicates its acquiescence in, any of (e), (f) or (g), above;
or
(i) the Borrower defaults under any other loan or note to any other lender or
(j) the Obligations defined in the Affiliate Guaranty shall become due; or
(k) notwithstanding the foregoing, if a notice of default is given to the
Borrower under the lease, (if any) of the Property and such default is not cured
within three (3) days from the date of such notice.
ARTICLE VIII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
8. Remedies Upon Occurrence of Event of Default.
8.1.Cumulative Rights and Remedies. Upon the occurrence of an Event of
Default, the Secured Party shall have the rights, powers and remedies (a)
granted to secured parties under the UCC; (b) granted to the Secured Party under
any other applicable statute, law, rule or regulation; and (c) granted to the
Secured Party under this Security Agreement, the Promissory Note or any other
Loan Document or any other agreement between the Borrower and the Secured Party.
In addition, all such rights, powers and remedies shall be cumulative and not
alternative. Any single or partial exercise of, or forbearance, failure or delay
in exercising any right, power or remedy shall not be, nor shall any such single
or partial exercise of, or forbearance, failure or delay be deemed to be a
limitation, modification or waiver or any right, power or remedy and shall not
preclude the further exercise thereof; and every right power and remedy of the
Secured Party shall continue in full force and effect until such right, power
and remedy is specifically waived by an instrument in writing executed and
delivered with respect to each such waiver by the Secured Party.
8.2.Acceleration of Obligations. Upon the occurrence of an Event of Default,
and at any time thereafter if any Event of Default shall then be continuing, the
Secured Party may, from time to time in its discretion, by written notice to the
Borrower declare the Promissory Note (including any Make Whole Premium required
to be paid upon prepayment of any Loan) and any other Obligations to be
immediately due and payable whereupon (and, automatically without any notice,
demand or other action by the Secured Party, upon the occurrence of any Event of
Default set forth in subsections (e) through (h) of Section 7) such principal,
interest and other Obligations shall be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower to the maximum extent permitted by law.
8.3.Additional Rights of the Secured Party. Upon the occurrence of an Event
of Default, the Secured Party may, from time to time, in its discretion, and
without the Borrower's assent, without advertisements or notices of any kind
(except for the notice specified in Section 8.5 below regarding notice required
in connection with a public or private sale), or demand of performance or other
demand, or obligation or liability (except to account for amounts actually
received) to or upon the Borrower or any other person (all such advertisements,
notices and demands, obligations and liabilities, if any, hereby being expressly
waived and discharged to the extent permitted by law), forthwith, directly or
through its agents or representatives, (a) disclose such default and other
matters (including the name, address and telephone number of the Borrower) in
connection therewith in the Secured Party's reasonable discretion to any other
Program Borrower, the Borrower's franchisor or franchisee (if applicable) and
other creditors or obligors of the Borrower (and the Borrower understands that
the Secured Party intends to make such disclosure, from time to time); (b) to
the extent permitted by applicable law enter any premises, with or without the
assistance of other persons or legal process; (c) require the Borrower to
account for (including accounting for any products and proceeds of any
Collateral), segregate, assemble, make available arid deliver to the Secured
Party, its agents or representatives, the Collateral; (d) take possession of,
operate, render unusable, collect, transfer and receive, recover, appropriate,
foreclose, extend payment of, adjust, compromise, settle, release any claims
included in, and do all other acts or things necessary or, in the Secured
Party's sole discretion appropriate, to protect, maintain, preserve and realize
upon, the Collateral and any products and proceeds thereof, in whole or in part;
and (e) exercise all rights, powers and interests with respect to any and all
Collateral, and sell, assign, lease, license, pledge, transfer, negotiate
(including endorse checks, drafts, orders, or instruments), deliver or otherwise
dispose (by contract, option(s) or otherwise) of the Collateral or any part
thereof. Any such disposition may be in one or more public or private sales, at
or upon an exchange, board or system or in the county (ies) or parish (ies), as
applicable, in the state(s) set forth on Schedule I or elsewhere, at such price,
for cash or credit (or for future delivery without credit risk) and upon such
other terms and conditions as it deems appropriate, with the right of the
Secured Party to the extent permitted by law upon any cash sale or sales, public
or private, to purchase the whole or any part of said Collateral, free of any
right, claim or equity of redemption of or in the Borrower (such rights, claims
and equity or redemption, if any, hereby being expressly waived).
Notwithstanding that the Secured Party, whether in its own behalf and/or on
behalf of another or others, may continue to hold the Collateral and regardless
of the value thereof, or any delay or failure to dispose thereof, unless and
then only to the extent that the Secured Party proposes to retain the Collateral
in satisfaction of the Obligations by written notice in accordance with the UCC,
the Borrower shall be and remain liable for the payment in full of any balance
of the Obligations and expenses at any time unpaid. Without limiting the
foregoing, upon the Borrower's failure to abide by and comply with its
obligations under Section 3 (including Sections 3,9, 3.10 or 3.18) or Section 13
hereof, in addition to its other rights and remedies, the Secured Party may (but
is not required to), in its sole discretion and to the extent it deems
necessary, advisable or appropriate, take or cause to be taken such actions or
things to be done (including the payment or advancement of funds, or requiring
advancement of funds to be held by the Secured Party to fund such obligations,
including taxes or insurance) as may be required hereby (or necessary or
desirable in connection herewith) to correct such failure (including causing the
Collateral to be maintained or insurance protection required hereby to be
procured and maintained) and any and all costs and expenses incurred (including
attorney's fees and disbursements) in connection therewith shall be included in
the Borrower's Obligations and shall be immediately due and payable and bear
interest at the Default Rate.
8.4. Application of Proceeds. The Secured Party may apply the net proceeds,
if any, of any collection, receipt, recovery, appropriation, foreclosure or
realization, or from any use, operation, sale, assignment, lease, pledge,
transfer, delivery or disposition of all or any of the Collateral, after
deducting all reasonable costs and expenses (including attorneys fees, court
costs and legal expenses) incurred in connection therewith or with respect to
the care, safekeeping, custody, maintenance, protection, administration or
otherwise of any and all of said Collateral or in any way relating to the rights
of the Secured Party under this Security Agreement, (a) first, to the
satisfaction of the Obligations, in whole or in pan, in such order as the
Secured Party may, in its discretion, elect; (b) second, to the payment,
satisfaction or discharge of any of other Indebtedness or obligation as required
by any law, rule or regulation; and (c) lastly, the surplus, if any, to the
Borrower.
8.5. Required Notice of Sale. In exercising its rights, powers and remedies
as secured party, the Secured Party agrees to give the Borrower five (5) days
notice of the time and place of any public sale of Collateral or of the time
after which any private sale of Collateral may take place, unless the Collateral
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Borrower agrees that such period
and notice is commercially reasonable under the circumstances.
8.6. Applicable Collateral. In furtherance and not in limitation of the
foregoing, in no event shall the designation of all or any portion of the
Collateral as "Applicable Collateral" restrict or limit he Secured Party in the
exercise of its remedies under this Section 8. Such designation is intended
solely for the purposes set forth in Section 14.2. All of the Collateral shall
secure all of the Obligations. The Borrower expressly waives any right (a) to
limit the Secured Party solely to the Applicable Collateral with respect to any
Loan or (b) to require the Secured Party to proceed against the Applicable
Collateral with respect to any Loan before proceeding against any other
Collateral with respect to such Loan. The Borrower agrees that, upon the
occurrence of an Event of Default, the Secured Party may proceed against the
Collateral in satisfaction of any Obligation, in such manner and in such order
as the Secured Party may determine in its sole and absolute discretion.
8.7. Confession of Judgment. In the event that Secured Party is domiciled in,
or any of the Collateral is located in Louisiana, and to the extent of such
domicile or location where Louisiana law is applicable to this Security
Agreement regarding the enforcement of liens created by this Security Agreement:
(a) Borrower hereby acknowledges to be indebted under and confesses judgment
in favor of Secured Party for the full amount of the Obligations, in principal
and interest, together with all attorneys fees, and other fees and charges as
specified herein, including without limitation any and all sums that Secured
Party may advance during the life of this Security Agreement for the payment of
premiums of insurance, municipal charges, taxes, costs, and expenses, or for the
protection and preservation of this Security Agreement as authorized herein, and
does, by these presents, consent, agree and stipulate that in the event of any
payment of principal and interest due hereunder not being properly and fully
paid when the same becomes due and payable, or in the event of failure to comply
with any of the obligations set forth herein, the Obligations shall, at the
option of the Secured Party, become due and payable, and it shall be lawful for
Secured Party, without making a demand and without notice or putting in default,
the same being hereby expressly waived, to cause all and singular the Collateral
herein secured to be seized and sold by ordinary or executory process, issued by
any competent court or to proceed with enforcement of its rights under this
Security Agreement in any other manner provided by law; and
(b) Borrower hereby expressly waives allotment, citation, and all legal
notices, including the three (3) and five (5) day notice of demand and delays
provided for by the Code of Civil Procedure of the State of Louisiana, and
consents that said judgment or order for executory or ordinary process may be
rendered, signed and executed immediately, either in vacation or in term time,
and also waives the benefit of any and all laws or parts of laws relative to the
appraisement of the property seized and sold under executory or other legal
process, and consents that said property be sold with or without appraisement,
at Secured Party's option, to the highest bidder for cash, or on such terms as
Secured Party may direct, and that in the event of any such sale the property
may be sold at the option of Secured Party either as a whole or in such lots and
parcels as Secured Party may elect. In accordance with the foregoing, Borrower
hereby waives (a) the benefit of appraisal as provided in Articles 2332,
2336,2723, and 2724 of the Louisiana Code of Civil Procedure and all other laws
with regard to appraisal upon judicial sale; (b) the demand and three (3) days'
delay as provided under Articles 2639 and 2721 of the Louisiana Code of Civil
Procedure; (c) the notice of seizure as provided under Articles 2293 and 2721 of
the Louisiana Code of Civil Procedure; (d) the three (3) days' delay provided
under Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (e)
all other benefits provided under Articles 2331, 2722, and 2723 of the Louisiana
Code of Civil Procedure and all other similar provisions of the Louisiana Code
of Civil Procedure not specifically listed hereinabove.
(c) In the event the Collateral, or any part thereof, is seized as an
incident to an action for the recognition or the enforcement of this Security
Agreement, whether by executory process, writ of fieri facias, sequestration or
otherwise, Borrower and Secured Party do hereby designate Secured Party or its
agent as the keeper of the property, all in accordance with the provisions of
Louisiana Revised Statutes, Title 9, Section 5136, et seq. Borrower agrees to
pay the reasonable fees of such keeper, which compensation to the keeper shall
also be a part of the Obligations under this Security Agreement.
(d) Should it become necessary for Secured Party to foreclose against the
Collateral, all declarations of fact that are made under an authentic act before
a Notary Public in the presence of two witnesses, by a person declaring such
facts to lie within his or her knowledge, shall constitute authentic evidence
for purposes of executory process and also for purposes of La. R.S. 9:3509.1,
La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, as applicable.
ARTICLE IX
POST-DEFAULT POWER OF ATTORNEY
9. Post-Default Power of Attorney. The Borrower hereby irrevocably
constitutes and appoints, effective on and after the occurrence of an Event of
Default, the Secured Party acting through any officer or agent thereof, with
full power of substitution, as the Borrowers true and lawful attorney-in-fact
with full irrevocable power and authority in the Borrowers place and stead and
in the Borrowers name or in its own name, from time to time in the Secured
Party's discretion, to receive, open and dispose of mail addressed to the
Borrower, to take any and all action, to do all things, to execute, endorse,
deliver and file any and all writings, documents, instruments, notices,
statements (including financing statements, and writings to correct any error or
ambiguity in any Loan Document), applications and registrations (including
registrations and licenses for securities, Copyrights, Patents and Trademarks),
checks, drafts, acceptances, money orders, or other evidence of payment or
proceeds, which may be or become necessary or desirable in the sole discretion
of the Secured Party to accomplish the terms, purposes and intent of this
Security Agreement and the other Loan Documents, including the right to appear
in and defend any action or proceeding brought with respect to the Collateral or
Property, and to bring any action or proceeding, in the name and on behalf of
the Borrower, which the Secured Party, in its discretion, deems necessary or
desirable to protect its interest in the Collateral or Property. Said attorney
or designee shall not be liable for any acts of commission or omission, nor for
any error of judgment or mistake of fact or law, unless and then only to the
extent that the same constitutes its gross negligence or willful misconduct.
This power is coupled with an interest and is irrevocable. THIS POWER DOES NOT
AND SHALL NOT BE CONSTRUED TO AUTHORIZE ANY CONFESSION OF JUDGMENT.
ARTICLE X
INDEMNIFICATION
10. Indemnification. The Borrower agrees to indemnify the Secured Party and
hold the Secured Party harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions. judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Secured Party in any way relating, in
any way arising out of or in connection with this Security Agreement, the Loan
Documents or the transactions contemplated hereby or thereby. Without limitation
of the foregoing, the Borrower will reimburse the Secured Party for all expenses
(including expenses for legal services of every kind) of, or incidental to, the
negotiation of, entering into and enforcement of any of the provisions hereof
and of any of the Obligations, and any actual or attempted sale, lease or other
disposition of, and any exchange, enforcement, collection, compromise or
settlement of any of the Collateral and receipt of the Proceeds thereof, and for
the care of the Collateral and defending or asserting the rights and claims of
the Secured Party in respect thereof and for the care of the Collateral and
defending or asserting the rights and claims of the Secured Party in respect
thereof, by litigation or otherwise, including expense of insurance, and all
such expenses shall be the Borrowers Obligations.
ARTICLE XI
OBLIGATIONS ABSOLUTE
11. Obligations Absolute. The Borrower's Obligations will be absolute,
unconditional and irrevocable and will be paid or satisfied strictly in
accordance with their respective terms under all circumstances whatsoever,
including: (a) the invalidity or unenforceability of all or any of, or any part
of, this Security Agreement, the Promissory Note or any other Loan Document, or
any consent, waiver, amendment or modification thereof; (b) the existence of any
claim, setoff, defense or other right which the Borrower may have at any time
against the Secured Party, or any other Person, whether in connection with this
Security Agreement, any other Loan Documents, the transactions contemplated
hereby, thereby or otherwise all of which the Borrower hereby waives to the
maximum extent permitted by law; or (c) the loss, theft, damage, destruction or
unavailability of the Collateral to the Borrower for any reason whatsoever, it
being understood and agreed that the Borrower retains all liability and
responsibility with respect to the Collateral.
ARTICLE XII
ASSIGNMENT AND DISSEMINATION OF INFORMATION
12. Assignment and Dissemination of Information.
12.1. Assignment. This Security Agreement is freely assignable, in whole or
in part, by the Secured Party and, to the extent of any such assignment, the
Secured Party shall be fully discharged from all responsibility. The Borrower
understands and agrees that the Secured Party intends to and may, from time to
time, sell, pledge, grant a security interest in and collaterally assign,
transfer and deliver or otherwise encumber or dispose of the Promissory Note,
this Security Agreement and the other Loan Documents and its rights and powers
hereunder and thereunder, in whole or in part, in connection with the
Securitization or any other assignment or other disposition of the Promissory
Note. The Borrower may not, in whole or in part, directly or indirectly, assign
this Security Agreement or any Loan Document or its rights hereunder or
thereunder or delegate its duties hereunder without, in each instance, the
specific prior written consent of the Secured Party, which consent may be
withheld or delayed in the Secured Party's sole discretion, and payment of the
amounts required under and compliance with Section 13(b) of the Promissory Note.
For purposes of this Security Agreement, a change in control of the Borrower
(whether by stock sale, issuance or otherwise) shall constitute an assignment
hereof.
12.2. Dissemination of Information. If Secured Party determines at any time
to sell, transfer or assign the Promissory Note, Security Agreement, or other
Loan Documents, and any or all servicing rights with respect thereto, or to
otherwise issue a Securitization involving the Loan Documents, Secured Party may
forward to each purchaser, transferee, assignee, investor or their perspective
successors in such Securitization or any rating agency rating such
Securitization and each prospective investor, all documents and information
which Secured Party now has or may hereafter acquire relating to the Loan
Documents, the Borrower, any Guarantor and the Property, which shall have been
furnished by Borrower or any Guarantor, as Secured Party determines necessary or
desirable.
ARTICLE XIII
FURTHER ASSURANCE
13. Further Assurance. The Borrower agrees at any time and from time to time,
at the Borrower's sole cost and expense, to obtain, procure, execute and
deliver, file and affix such further agreements, bills of sale and assignments,
instruments, documents, warehouse receipts, bills of lading, vouchers, invoices,
notices, statements, writings, (including financing statements, and writings to
correct any error or ambiguity in any Loan Document), powers (including stock
and bond powers, and powers of attorney), tax stamps and information, and to
door cause to be done all such further acts and things (including the execution,
delivery and filing of financing statements, on Form UCC-1, payment of filing
fees and transfer, gains and recording taxes) as the Secured Party may
reasonably request, from time to time, in its discretion. Without limiting the
foregoing, the Borrower authorizes the Secured Party to the extent permitted
under the UCC to execute and file, or file without the Borrower's signature, any
and all financing statements, amendments thereto and continuations thereof as
the Secured Party deems necessary or appropriate and the Borrower shall pay and
indemnify the Secured Party for and hold the Secured Party harmless from any and
all costs and expenses in connection therewith. The Borrower agrees that it will
promptly notify the Secured Party of and agree to correct any defect, error or
omission in the contents of any of the Loan Documents or in the execution,
delivery or acknowledgement thereof The Borrower further agrees to execute,
prior to or within three months following closing, a Form 4506 Request for Copy
or Transcript of Tax Form, which form will be provided by Secured Party.
ARTICLE XIV
TERM, PARTIAL RELEASE AND REINSTATEMENT
14. Term. Partial Release and Reinstatement
14.1. Term. This Security Agreement shall be immediately in fill force and
effect upon the Borrower's execution below, whether or not it is signed by the
Secured Party. Upon indefeasible payment in 11:11 of the Obligations in
accordance with the terms thereof, this Security Agreement and the security
interest granted hereunder shall terminate and the Secured Party, at the
Borrower's expense, will execute and deliver to the Borrower the proper
instruments (including UCC termination statements) acknowledging the termination
of such security interest, and will duly assign, transfer and deliver (without
recourse, representation or warranty) such Collateral as may be in the Secured
Party's possession, and not to be retained, sold, or otherwise applied or
released pursuant to this Security Agreement, to the Borrower, except that the
Borrower's obligations under Sections 10, 11, 13 and IS shall survive
indefinitely.
14.2. Partial Release. Upon the indefeasible payment in full of any Loan
(including, without imitation, any Make Whole Premium or other amounts payable
by the Borrower with respect to such Loan) in accordance with the provisions of
the Promissory Note, the security interest hereunder with respect to the
Applicable Collateral shall terminate, and the Secured Party, at the expense of
the Borrower, will execute and deliver to the Borrower the proper instruments
(including UCC partial release statements) acknowledging the termination of such
security interest, and will duly assign, transfer and deliver (without recourse,
representation or warranty) such of the Applicable Collateral a_ may be in the
possession of the Secured Party and has not theretofore been sold or otherwise
applied or released pursuant to this Security Agreement, to the Borrower, and
shall take such other action as the Borrower may reasonably request to
effectuate the foregoing.
14.3. Reinstatement. This Security Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any Principal
Party or upon the appointment of any interferon or conservator of, or trustee or
similar official for, the Borrower, any Principal Party or any substantial part
of the Borrower's or any Principal Party's assets, or otherwise, all as though
such payments had not been made.
ARTICLE XV
MISCELLANEOUS
15.1. FINAL AGREEMENT: AMENDMENTS. CONSENTS. AUTHORIZATIONS. THIS SECURITY
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE BORROWER ANT) THE SECURED
PARTY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND THE SECURED PARTY. THE BORROWER
UNDERSTANDS AND AGREES THAT ORAL AGREEMENTS AND ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE, THE BORROWER ACKNOWLEDGES AND AGREES THERE ARE NO ORAL AGREEMENTS
BETWEEN THE BORROWER AND THE SECURED PARTY. This Security Agreement and the Loan
Documents represent the entire understanding of the Secured Party and the
Borrower with respect to the transactions contemplated hereby and thereby. None
of the terms or provisions of this Security Agreement or any other Loan Document
may be waived, altered, modified, or amended except in each instance by a
specific written instrument duly executed by the Secured Party. Without limiting
the foregoing, no action or omission to act shall be deemed to be a consent,
authorization, representation or agreement of the Secured Party, under the UCC
or otherwise, unless, in each instance, the same is in a specific writing signed
by the Secured Party. The inclusion of Proceeds in the Collateral does not and
shall not be deemed to authorize the Borrower to sell, exchange or dispose of
the Collateral or the Franchise Agreement or otherwise use the Collateral in any
manner not otherwise specifically authorized herein.
15.2. Notices. All notices and other communications given pursuant to or in
connection with this Security Agreement shall be in duly executed writing
delivered to the parties at the addresses set forth below (or such other address
as may be provided by one party in a notice to the other party):
If to the Secured Party: If to the Assignee of Secured Party:
AMRESCO COMMERCIAL FINANCE, INC. NORWEST BANK MINNESOTA, NA.
112 E. Parkcenter Blvd. Sixth & Marquette
Suite 300 Minneapolis, MN 55479-0070
Boise, Idaho 83706
Facsimile Number: (208) 333-2050 Facsimile Number: (612) 667-9825
If to the Borrower, to the Borrower's chief executive office (or residence),
as represented by the Borrower herein.
Notice delivered in accordance with the foregoing shall be effective (a) when
delivered, if delivered personally or by receipted-for telex, telecopier, or
facsimile transmission. (b) two (2) days after being delivered in the United
States (properly addressed and all fees paid) for overnight delivery service to
a courier (such as Federal Express) which regularly provides such service and
regularly obtains executed receipts evidencing delivery or (c) five (5) days
after being deposited (properly addressed and stamped for first-class delivery)
in a daily serviced United States mail box.
15.3. Reasonableness. If at any time the Borrower believes that the Secured
Party has not acted reasonably in granting or withholding any approval or
consent under the Promissory Note, this Security Agreement, or any other Loan
Document or otherwise with respect to the Obligations, as to which approval or
consent either the Secured Party has expressly agreed to act reasonably, or
absent such agreement, a court of law having jurisdiction over the subject
matter would require the Secured Party to act reasonably, then the Borrower's
sole remedy shall be to seek injunctive relief or specific performance and no
action for monetary damages or punitive damages shall in any event or under any
circumstance be maintained by the Borrower against the Secured Party.
15.4. Recovery of Sums Required To Be Paid. The Secured Party shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due, without regard to
whether or not the balance of the Obligations shall be due, and without
prejudice to the right of the Secured Party thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by the Borrower
existing at the time such earlier action was commenced.
15.5. WAIVERS. THE BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES ALL
OF THE WAIVERS SET FORTH IN THIS SECURITY AGREEMENT, THE PROMISSORY NOTE AND THE
OTHER LOAN DOCUMENTS KNOWINGLY, INTENTIONALLY, VOLUNTARILY, WITHOUT DURESS, AND
ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS
ATTORNEY; THE BORROWER FURTHER ACKNOWLEDGES THAT SUCH WAIVERS ARE A MATERIAL
INDUCEMENT TO THE SECURED PARTY TO MAKE THE LOANS TO THE BORROWER AND THAT THE
SECURED PARTY WOULD NOT HAVE MADE THE LOANS WITHOUT SUCH WAIVERS; AND THE
BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES SUCH WAIVERS WITH RESPECT
TO EACH OTHER LOAN IN THE PROGRAM.
15.6. WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND THE SECURED PARTY BY ITS ACCEPTANCE OF THE
PROMISSORY NOTE AND THIS SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS IRREVOCABLY
AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR ARTICLE XV OTHER LOAN
DOCUMENT OR THE OBLIGATIONS.
15.7. Relationship. The relationship of the Secured Party to the Borrower
hereunder is strictly and solely that of secured lender on the one hand and
borrower and guarantor on the other and nothing contained in the Promissory
Note, this Security Agreement or any other Loan Document or otherwise in
connection with the Obligations is intended to create, or shall in any event or
under any circumstance be construed as creating, a partnership, joint venture,
tenancy-in-common, joint tenancy or other relationship of any nature whatsoever
between the Secured Party and the Borrower other than as secured lender on the
one hand and borrower and guarantor on the other.
15.8. Time is of the Essence. For all payments to be made and all obligations
to be performed under the Loan Documents, time is of the essence.
15.9. Governing Law: Binding Effect. THIS SECURITY AGREEMENT AND ALL LOAN
DOCUMENTS ARE ENTERED INTO IN THE STATE OF IDAHO, SECURED PARTY'S CHIEF
EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS IS LOCATED IN THE STATE OF
IDAHO, AND ALL NOTICES AND SUMS PAYABLE UNDER THE LOAN DOCUMENTS RELATING TO
THIS SECURITY AGREEMENT WILL BE SENT TO THE SECURED PARTY IN THE STATE OF IDAHO.
BORROWER AND SECURED PARTY AGREE THAT THE VALIDITY, ENFORCEABILITY, CONSTRUCTION
AND INTERPRETATION OF THIS SECURITY AGREEMENT, AND OF ALL TRANSACTIONS AND
DOCUMENTS UNDER OR RELATING TO IT, WILL BE CONSTRUED, APPLIED, ENFORCED AND
GOVERNED UNDER THE LAWS OF THE STATE OF IDAHO (WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW), PROVIDED HOWEVER, THAT WITH RESPECT TO THE
CREATION, ATTACHMENT, PERFECTION, PRIORITY AND ENFORCEMENT TO ANY LIENS CREATED
BY THIS SECURITY AGREEMENT, THE LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY
IS LOCATED IS LOCATED SHALL APPLY. This Security Agreement shall be binding upon
the Borrower, and the heirs, devises, administrators executives, personal
representatives, successors, receivers, trustees, and (without limiting Section
12 hereof) assignees, including all successors in interest of the Borrower in
and to all or any part of the Collateral, and shall inure to the benefit of the
Secured Party, and the successors and assignees of the Secured Party.
15.10. Severability. Whenever possible this Security Agreement, the
Promissory Note and each Loan Document and each provision hereof and thereof
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law. If and to the extent that any such provision shall he held
invalid and unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof or
thereof, and any determination that the application of any provision hereof or
thereof to any person or under any circumstance is illegal and unenforceable
shall not affect the legality, validity and enforceability of such provision as
it may be applied to any other person or in any other circumstance.
15.11. Headings Descriptive. The headings, titles and captions used herein
are for convenience only and shall not affect the construction of this Security
Agreement or any term or provision hereof.
15.12. Counteparts. This Security Agreement may be executed in a number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same agreement.
15.13. Acknowledgement. Borrower acknowledges that Secured Party's
underwriting guidelines and standards are applied on a case by case basis and
that waivers may be granted in any particular case (including in the case of a
borrower to be included in a pool with Borrower). Borrower further acknowledges
that Secured Party's underwriting guidelines or standards may be modified at any
time by Secured Party without notice to Borrower.
15.4 Attorneys Fees and Costs. Borrower agrees that upon the occurrence of an
Event of Default, the Borrower shall pay all costs and expenses actually
incurred by Secured Party (including without limitation attorneys fees and
disbursements) incident to the enforcement, collection, protection or
preservation of any right or claim of Secured Party under the Loan Documents,
including any such fees or costs incurred in connection with any bankruptcy or
insolvency proceeding of Borrower.
15.15. Loan Pool Flexibility. Secured Party shall have the right, at its sole
and absolute discretion upon written notice to Borrower, to transfer (a
"Transfer"), within eighteen (18) months from the effective date of this
Security Agreement, all or any of the Loans and all Liens related to such Loam,
from the Program to any other loan program formed by Secured Party. Upon the
occurrence of a Transfer, the Loan Documents shall be automatically amended and
reclassified to reflect the Transfer. Borrower shall execute all amendments or
other documents Secured party deems necessary to effectuate a Transfer.
15.16. Public Announcement. Upon the closing of the Loans, Secured Party is
authorized in its discretion to issue news releases and at its own expense to
publish "tombstone ads" and other announcements in newspapers, trade journals
and other appropriate media, containing information about the Loans as may be
deemed noteworthy by Secured Party, including without limitation the legal and
trade name of Borrowers, the amount of the Loan and the name, nature and
location of the Collateral.
IN WITNESS WHEREOF, the Borrower has executed and entered into this Security
Agreement and delivered it to the Secured Party on and as of the date set forth
below. This document is executed under seal and intended to take effect as a
sealed instrument.
Date: September 22, 1999
FFP Properties, L. P.
WITNESS
By: FFP Real Estate Trust
sole general partner
(SEAL)
By:___________________
Craig T. Scott
Vice President
STATE OF TEXAS )
) ss.
COUNTY OF Tarrant )
This instrument was acknowledged before me on the 17th day of September, 1999
by, Craig T. Scott, Vice President of FFP Real Estate Trust, a Texas real estate
investment trust and the sole general partner of FFP Partners, L. P., a Delaware
limited partnership, sole general partner of FFP Properties, L.P., a Texas
limited partnership, who stated that the same was signed for the purposes and in
the capacity indicated therein and on behalf of said entities.
__________________________________
Notary Public State of Texas
__________________________________
Notary's commission expires:
SECURED PARTY:
AMRESCO Commercial Finance, Inc.
By:_____________________________
Dale Conder
Vice President
<PAGE>
SCHEDULE I
A. Borrower Information
If an individual, the Borrower's residence address:
Street:
City:
County or Parish, as applicable:
State:
Zip:
The Borrower's chief executive office: 2801 Glenda Avenue
Fort Worth, TX 76117-4391
The Borrower's state of organization:
Exhibit 21.1
FFP PARTNERS, L.P.
Subsidiary of the Registrant
State of Percentage
Organization Type of Entity Owned
Legal Name of Subsidiary
FFP Properties, L.P. Texas Limited partnership 60%
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We have issued our report dated March 31, 2000, accompanying the consolidated
financial statements included in the annual report of FFP Partners, L.P. on Form
10-K for the year ended December 31, 1999. We hereby consent to the
incorporation by reference of said report in the registration statement of FFP
Partners, L.P. on Form S-8 (File No. 33-73170).
Grant Thornton LLP
Dallas, Texas
April 12, 2000
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Partners of
FFP Partners, L.P.:
We consent to incorporation by reference in the registration statement (No.
33-73170) on Form S-8 of FFP Partners, L.P. of our report dated March 30, 1999,
relating to the consolidated balance sheet of FFP Partners, L.P. and subsidiary
as of December 31, 1998, and the related consolidated statements of operations,
partners' capital, and cash flows for the period ended December 31, 1998, which
report appears in the December 31, 1999 annual report on Form 10-K of FFP
Partners, L.P.
KPMG LLP
Fort Worth, Texas
April 12, 2000
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
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<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 976
<PP&E> 30,098
<DEPRECIATION> 11,825
<TOTAL-ASSETS> 23,979
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0
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<COMMON> 1,394
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<INCOME-TAX> 0
<INCOME-CONTINUING> 132
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<CHANGES> 0
<NET-INCOME> 132
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
