U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1999.
Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________.
COMMISSION FILE NUMBER: 1-11386
INTERNATIONAL FAST FOOD CORPORATION
-------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
FLORIDA 65-0302338
------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1000 LINCOLN ROAD, SUITE 200
MIAMI BEACH, FLORIDA 33139
----------------------------------------------------------
(Address of Principal Executive Office)
(305) 531-5800
----------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share as of November 11, 1999 was 45,324,131.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
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INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
ITEM 1. Financial Statements......................................... 2
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998..................................................... 2
Consolidated Statements of Operations for the Three Months and Nine
Months Ended September 30, 1999 and 1998 (unaudited)................. 3
Consolidated Statements of Shareholders' Equity for the Nine Months
Ended September 30, 1999 (unaudited).................................. 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (unaudited)............................... 5
Notes to Consolidated Financial Statements (unaudited)................ 6
ITEM 2. Management's Discussion and Analysis or Plan of Operation 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................ 22
ITEM 2. Changes in Securities and Use of Proceeds.................... 22
ITEM 5. Other Information............................................ 22
ITEM 6. Exhibits and Reports on Form 8-K............................. 23
SIGNATURES............................................................ 24
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PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS.
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------- -----------
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents............................................. $ 608,051 $ 4,013,371
Restricted cash and certificates of deposit........................... 999,990 999,990
Receivables........................................................... 250,227 1,573,480
Inventories........................................................... 818,432 842,867
Prepaid expenses and other............................................ 814,816 1,150,700
---------- ----------
Total Current Assets.............................................. 3,491,516 8,580,408
Furniture, Equipment, Buildings and Leasehold Improvements, net............ 20,729,241 17,137,181
Deferred Debenture Issuance Costs, net of accumulated amortization of
$215,608 and $190,666, respectively..................................... 216,717 241,659
Deferred Issuance Costs of 11% Convertible Senior Subordinated Discount Notes,
net of accumulated amortization of $169,417 and $100,827,
respectively............................................................ 816,618 2,417,546
Other Assets, net of accumulated amortization of $403,704 and $284,532,
respectively............................................................ 1,245,419 991,461
Burger King Development Rights, net of accumulated amortization of
$270,270 and $189,189, respectively..................................... 729,730 810,811
Domino's Development Rights, net of accumulated amortization of $69,939
and $46,626, respectively............................................ 119,164 142,477
Costs in excess of net assets acquired, net of accumulated amortization
of $77,228 and $19,307, respectively...................................... 1,467,340 1,525,260
---------- -----------
Total Assets...................................................... $ 28,815,745 $ 31,846,803
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable...................................................... $ 3,502,371 $ 3,889,528
Accrued interest payable.............................................. 114,120 87,077
Other accrued expenses................................................ 1,417,896 1,176,019
Current portion of bank credit facilities............................. 6,597,764 1,512,260
---------- ----------
Total Current Liabilities......................................... 11,632,151 6,664,884
11% Convertible Senior Subordinated Discount Notes due October 31, 2007... 8,585,567 22,645,202
Bank Credit Facilities..................................................... 1,431,365 1,892,362
9% Subordinated Convertible Debentures, due December 15, 2007.............. 2,756,000 2,756,000
---------- ----------
Total Liabilities................................................. 24,405,083 33,958,448
---------- ----------
Deferred Credit............................................................ 250,000 1,000,000
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 8 AND 9)
SHAREHOLDERS' EQUITY (DEFICIT):
Series A Preferred Stock, $.01 par value, 2,000,000 shares authorized;
32,985 and 32,985 shares issued and outstanding,
respectively (liquidation preference of $3,298,500)................. 330 330
Series B Preferred Stock, $.01 par value, 400,000 shares authorized;
158,134 shares and no shares issued and outstanding,
respectively (liquidation preference of $15,813,436)................ 1,581 --
Common Stock, $.01 par value, 200,000,000 shares authorized;
45,324,131 and 44,901,587 shares issued and outstanding, 453,241 449,016
respectively........................................................
Additional paid-in capital............................................ 32,377,237 17,888,248
Accumulated deficit................................................... (28,671,727) (21,449,239)
---------- ----------
Total Shareholders' Equity (Deficit).............................. 4,160,662 (3,111,645)
---------- ----------
Total Liabilities and Shareholders' Equity (Deficit).............. $ 28,815,745 $31,846,803
============ ===========
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SEE ACCOMPANYING NOTES
2
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Revenues.......................................... $ 3,747,425 $ 2,016,349 $11,589,343 $ 5,705,371
Food and Packaging.................................. 1,384,910 784,067 4,413,430 2,235,433
----------- ----------- ----------- -----------
Gross Profit........................................ 2,362,515 1,232,282 7,175,913 3,469,938
----------- ----------- ----------- -----------
RESTAURANT OPERATING EXPENSES:
Payroll and Related Costs......................... 821,219 404,748 2,339,070 1,076,095
Occupancy and Other Operating Expenses............ 1,486,404 577,761 4,219,257 1,642,846
Pre-opening Expenses.............................. 35,567 -- 774,159 --
Depreciation and Amortization..................... 699,672 312,365 1,984,639 832,744
----------- ----------- ----------- -----------
Total Restaurant Operating Expenses............ 3,042,862 1,294,874 9,317,125 3,551,685
Loss From Restaurant Operations................ (680,347) (62,592) (2,141,212) (81,747)
----------- ----------- ----------- -----------
General and Administrative Expenses................. 959,430 837,308 3,218,144 1,979,714
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest and other income, net.................... 847,353 128,240 1,098,782 679,980
Interest expense, including amortization of
debentures issuance costs........................ (706,562) (775,399) (2,218,214) (2,189,941)
Foreign currency exchange gain (loss)............. 117,989 9,337 (26,925) 4,736
----------- ----------- ----------- -----------
Total other income (expenses).................. 258,780 (637,822) (1,146,357) (1,505,225)
----------- ----------- ----------- -----------
Loss before minority interest....................... (1,380,997) (1,537,722) (6,505,713) (3,566,686)
Minority Interest In Losses of Consolidated -- 48,000 -- 115,478
Subsidiary..........................................
Cumulative effect of change in accounting -- -- 620,000 --
principle...........................................
----------- ----------- ----------- -----------
Net Loss............................................ $(1,380,997) $(1,489,722) $(7,125,713) $(3,451,208)
=========== =========== =========== ===========
Basic and Diluted Net Loss Per Common Share......... $(.03) $(.03) $(.16) $(.08)
=========== =========== =========== ===========
Weighted Average Number of Common Shares 45,324,131 44,784,064 45,146,643 44,697,347
=========== =========== =========== ===========
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SEE ACCOMPANYING NOTES
3
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
COMMON STOCK PREFERRED STOCK ADDITIONAL
------------ --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998...... 44,901,587 $449,016 32,985 $330 $17,888,248 $(21,449,239) $(3,111,645)
Issuance of common stock to 11%
Noteholders................. 204,585 2,046 -- -- 112,522 -- 114,568
Issuance of common stock for 6%
preferred stock dividends... 217,959 2,179 -- -- 94,596 (96,775) --
Issuance of series B convertible
preferred stock in exchange for
conversion of $17,900,000 in 11%
discount notes................. -- -- 158,134 1,581 14,281,871 -- 14,283,452
Net loss for the period........ -- -- -- -- -- $ (7,125,713) $(7,125,713)
---------- -------- ------ ---- ----------- ------------ -----------
Balances, September 30, 1999
(unaudited)...................... 45,324,131 $453,241 191,119 $1,911 $32,377,237 $(28,671,727) $ 4,160,662
========== ======== ======= ====== =========== ============ ===========
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SEE ACCOMPANYING NOTES
4
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ................................................................... $(7,125,713) $ (3,451,208)
Adjustments to reconcile net loss to net cash used in operating activities:
Cumulative effect of change in accounting principle ...................... 620,000 --
Amortization and depreciation of furniture, equipment, buildings,
leasehold improvements and development rights .......................... 2,947,681 937,138
Amortization of debt discount and issuance costs ......................... 1,849,687 1,895,292
Forgiveness of Burger King fees .......................................... (750,000) --
Minority interest in losses of subsidiary ................................ -- (115,478)
Other operating items .................................................... 265,418 4,679
Changes in operating assets and liabilities, net of acquisition of business:
Receivables .............................................................. 1,323,253 (461,535)
Inventories .............................................................. 24,435 (194,894)
Prepaid expenses and other ............................................... (1,058,276) (746,081)
Accounts payable and other accrued expenses .............................. (145,279) 1,021,585
----------- ------------
Net cash used in operating activities ...................................... (2,048,794) (1,110,502)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for furniture, equipment and leasehold improvements ............... (5,489,851) (4,340,480)
Payments for other assets .................................................. (367,374) (846,683)
Purchase of minority interest in subsidiary ................................ -- (1,538,029)
----------- ------------
Net cash used in investing activities ...................................... (5,857,225) (6,725,192)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank credit facilities ....................................... (391,907) (246,624)
Borrowings under bank credit facilities .................................... 5,016,414 1,575,023
Payment of registration costs .............................................. -- (30,456)
----------- ------------
Net cash provided by financing activities .................................. 4,624,507 1,297,943
----------- ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ............... (123,808) (4,679)
----------- ------------
DECREASE IN CASH AND CASH EQUIVALENTS ...................................... (3,405,320) (6,542,430)
BEGINNING CASH AND CASH EQUIVALENTS ........................................ 4,013,371 18,642,335
----------- ------------
ENDING CASH AND CASH EQUIVALENTS ........................................... $ 608,051 $ 12,099,905
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................................. $ 336,069 $ 192,456
=========== ============
Interest capitalized ..................................................... $ 177,100 $ --
=========== ============
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SEE ACCOMPANYING NOTES
5
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION:
International Fast Food Corporation ("IFFC" or the "Company"), was
incorporated in December 1991 as a Florida corporation. The Company, has,
subject to certain exceptions, the exclusive right to develop franchised Burger
King restaurants and Domino's Pizza stores ("Domino's Stores") in the Republic
of Poland ("Poland").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION -- The accompanying unaudited consolidated
financial statements, which are for interim periods, have been prepared by the
Company in conformity with the instructions to Form 10-QSB and Article 10 of
Regulation S-X and therefore do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended December 31,
1998 of International Fast Food Corporation and Subsidiaries (the "Company"), as
filed with the Securities and Exchange Commission. The December 31, 1998
consolidated balance sheet contained herein was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.
The accompanying unaudited consolidated financial statements include
the accounts of the Company and its Polish subsidiaries, International Fast Food
Polska, Sp. zo.o. ("IFFP"), Krolewska Pizza, Sp. zo.o. ("KP") and Pizza King
Polska, Sp. zo.o. ("PKP"). IFFP currently operates 25 Burger King restaurants
and 16 Domino's Pizza stores and a Domino's-approved commissary in Poland. All
significant intercompany transactions and balances have been eliminated in
consolidation. In the opinion of management, the interim consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the information contained
therein. The interim results of operations are not necessarily indicative of the
results which may be expected for the full year.
IFFC's restaurant and store operations are conducted in Poland. The
Polish economy has historically been characterized by high rates of inflation
and devaluation of the Polish zloty against the dollar and European currencies.
However, in recent years, the rates of inflation and devaluation improved. For
the years ended December 31, 1994, 1995, 1996, 1997 and 1998 the annual
inflation rate in Poland was 32%, 21.6%, 19.5%, 13.0% and 8.6%, respectively.
Payment of interest and principal on the 9% Convertible Subordinated Debentures,
11% Convertible Senior Subordinated Discount Notes, the new Citibank line of
credit and payment of franchise fees to Burger King Corporation ("BKC") and
Domino's Pizza, Inc. ("Domino's") for each restaurant and store opened are in
United States currency. Additionally, the Company is dependent on certain
sources of supply which require payment in European or United States currencies.
Because IFFC's revenues from operations are in zlotys, the official currency of
Poland, IFFC is subject to the risk of currency fluctuations. IFFC has and
intends to maintain substantially all of its unutilized funds in United States
or Western European denominated currency and/or securities and/or European
Currency Units. There can be no assurance that IFFC will successfully manage its
exposure to currency fluctuations or that such fluctuations will not have a
material adverse effect on IFFC.
The value of the zloty is pegged pursuant to a system based on a basket
of currencies, as well as all other economic and political factors that effect
the value of currencies generally. At September 30, 1999 and December 31, 1998,
the exchange rate was 4.118 and 3.494 zlotys per dollar, respectively. The
accounts of IFFC's Polish subsidiaries are maintained in zlotys and are
remeasured into U.S. dollars, the functional currency, at the end of each
reporting period. Monetary assets and liabilities are remeasured, using current
exchange rates. Non-monetary assets, liabilities, and related expenses,
primarily furniture, equipment, leasehold improvements and related depreciation
and amortization, are remeasured using historical exchange rates. Income and
expense accounts, excluding depreciation and amortization, are remeasured using
an annual weighted average exchange rate. Transaction gains and losses that
arise from exchange rate fluctuations in transactions denominated in a currency
other than the functional currency are included in the results of operations as
incurred.
6
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LIQUIDITY AND PLAN OF OPERATIONS -- As of September 30, 1999, IFFC had
negative working capital of approximately $8,140,634 and cash and cash
equivalents of $608,051. IFFC has significant commitments to develop restaurants
in accordance with the BKC Development Agreement and the New Master Franchise
Agreement with Domino's. The Company has sustained losses from operations since
its incorporation in December 1991. For the nine months ended September 30, 1999
and 1998, the Company reported net losses of $7,125,713 and $3,451,208,
respectively. At September 30, 1999 the Company had an accumulated deficit of
$28,671,727. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Management believes that cash flows from currently existing stores,
when combined with existing financial resources and drawings on the Company's
$8,000,000 line of credit secured by BKC (which, under certain circumstances,
may be increased to $10,000,000) (see Note 11), will be sufficient to fund
operations and development costs through at least December 31, 1999. The Company
is in advance of the required development schedule. However, no assurance can be
given that management's goals will be achieved. Management is seeking to obtain
additional equity financing to fund future development. No assurance can be
given that such financing will be obtained or that it can be obtained on
favorable terms.
CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid
investments purchased with a maturity of three months or less at the time of
acquisition to be cash equivalents. The Company maintains its U.S. cash in bank
deposit accounts which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company believes it
is not exposed to any significant credit risk on cash and cash equivalents.
NET LOSS PER COMMON SHARE -- The basic net loss per common share in the
accompanying unaudited consolidated statements of operations is based upon the
net loss after preferred dividend requirements of $98,955 and $98,955 for the
nine months ended September 30, 1999 and 1998, respectively, divided by the
weighted average number of shares outstanding during each period. Diluted per
share data for the nine months ended September 30, 1999 and September 30, 1998
is the same as basic per share data since the inclusion of all potential common
shares that would be issuable upon the exercise of options and warrants and the
assumed conversion of convertible debt and preferred stock would be
anti-dilutive.
STORE PRE-OPENING EXPENSES -- Prior to January 1, 1999, the Company
capitalized pre-opening costs associated with opening new restaurants. Upon
commencement of revenue producing activities at a restaurant location, these
capitalized pre-opening costs were amortized over one year. In April 1998, the
Accounting Standards Executive Committee of the American Institute of Public
Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities." SOP 98-5 requires costs of start-up activities to be
expensed as incurred. The Company adopted SOP 98-5 on January 1, 1999. Upon
adoption, the Company expensed previously capitalized start-up costs totaling
$620,000 at January 1, 1999. In accordance with SOP 98-5, adoption has been
reported as a cumulative effect of change in accounting principle in the
accompanying unaudited consolidated statement of operations for the nine months
ended September 30, 1999. Pre-opening costs of $774,159 incurred subsequent to
December 31, 1998 have been charged directly to expense. If SOP 98-5 had been
adopted on January 1, 1998, pre-opening costs would have been $445,585 during
the nine months ended September 30, 1998.
ADVERTISING EXPENSE -- The Company accounts for advertising expense in
accordance with SOP 93-7, "Accounting for Advertising Costs" which generally
requires that advertising costs be expensed either as incurred or the first time
the advertising takes place. It is the Company's policy to expense advertising
costs the first time the advertising takes place. However, Accounting Principles
Board Opinion ("APB") No. 28, "Interim Financial Reporting" allows advertising
costs to be deferred within a fiscal year if the benefits of an advertising
expenditure clearly extend beyond the interim period in which the expenditure is
made. Pursuant to APB 28, it is the Company's policy to defer advertising
expenses at the end of interim periods to the extent that such costs will
7
<PAGE>
INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
clearly benefit future interim periods. During the nine months ended September
30, 1999, the Company incurred advertising expense of approximately $2,012,962,
of which approximately $640,008 was deferred at September 30, 1999 and is
included as a component of prepaid expenses in the accompanying September 30,
1999 unaudited consolidated balance sheet. Pursuant to SOP 93-7, the Company is
required to expense all advertising incurred at the end of the fiscal year.
RECLASSIFICATION -- Certain amounts in the 1998 consolidated financial
statements have been reclassified to conform with the 1999 presentation.
3. RESTRICTED CASH:
At September 30, 1999, the Company had a $999,990 certificate of
deposit hypothecated to an outstanding line of credit with Totalbank.
4. BANK CREDIT FACILITIES:
Bank credit facilities at September 30, 1999 and December 31, 1998
consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Amerbank, S.A, IFFP overdraft credit line, variable rate
approximately equal to prime, expiring April 1, 2000.......... $ -- $ 386
Amerbank, S.A., PKP overdraft credit line, variable rate
approximately equal to prime, expiring June 1, 2000........... 11,766 25,288
Amerbank, PKP line of credit of $300,000 payable in 10 quarterly installments
of $30,000 commencing on December 26, 1998, interest payable monthly at
3-1/8% above LIBOR,
due at maturity March 26, 2001................................ 176,363 266,362
Amerbank, IFFP line of credit of $950,000 payable in 29 monthly installments of
$32,000 commencing on March 12, 1998, interest payable monthly at .50%
above LIBOR, due
at maturity on August 12, 2000................................ 342,000 630,000
Amerbank, IFFP revolving credit facility of $1,500,000, interest is payable
monthly at 2.50% above LIBOR, payable in 35 monthly installments of
$41,666, commencing in July 2000, with final payment of $41,690, due at
maturity on
May 18, 2003.................................................. 1,500,000 1,500,000
Totalbank, IFFC line of credit of $999,000 payable in full on February 18,
2000, interest at 6.50% payable quarterly, collateralized by certificates
of deposit in the amount
of $999,990................................................... 999,000 982,586
Citibank, IFFP line of credit of $8,000,000 payable at maturity on January 15,
2000, interest at LIBOR plus
.95%, interest payable quarterly, unsecured................... 5,000,000 --
------------- -------------
Total Debt......................................................... 8,029,129 3,404,622
Less: Current Maturities........................................... 6,597,764 1,512,260
------------- -------------
Long Term Debt..................................................... $ 1,431,365 $ 1,892,362
============= =============
</TABLE>
8
<PAGE>
INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. 9% CONVERTIBLE SUBORDINATED DEBENTURES:
The 9% Convertible Subordinated Debentures (the "Debentures") mature on
December 15, 2007 and provide for the payment of cash interest, semi-annually on
June 15 and December 15, until maturity. At September 30, 1999 and December 31,
1998, there were $2,756,000 of Debentures outstanding.
6. 11% CONVERTIBLE SENIOR SUBORDINATED DISCOUNT NOTES:
On November 5, 1997, the Company sold $27,536,000 of 11% Convertible
Senior Subordinated Discount Notes Due October 31, 2007 ( the "Notes") in a
private offering. At September 30, 1999 and December 31, 1998, the notes are
comprised as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Face amount of notes at maturity....................... $9,636,000 $27,536,000
Unamortized discount to be accreted as interest
expense and added to the original principal
balance of the notes over a period of three years...... (1,050,433) (4,890,798)
---------- -----------
Carrying value......................................... $8,585,567 $22,645,202
========== ===========
</TABLE>
The Notes are convertible, at the option of the holder, into shares of
Common Stock. As of September 30, 1999, none of the Notes had been converted
into Common Stock. On August 31, 1999, $17,900,000 of the Notes were exchanged
for an aggregate of 158,134 shares of Series B Convertible Preferred Stock.
7. SHAREHOLDERS' EQUITY:
The Company's stock option plan provides for the granting of options to
qualified employees and directors of the Company. Stock option activity is shown
below for the nine months ended September 30, 1999:
<TABLE>
<CAPTION>
Weighted
September 30, Average
1999 Share Price
---- -----------
<S> <C> <C>
Outstanding at beginning of period...................... 1,020,000 $.52
Granted................................................. -- --
Exercised............................................... -- --
Expired................................................. (100,000) $.40
-----------
Outstanding at end of period............................ 920,000 $.53
===========
Exercisable at end of period............................ 517,500 $.46
Price range of options outstanding at end of period..... $.40 - $.81
Available for grant at end of period.................... 1,080,000
</TABLE>
9
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INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At September 30, 1999, IFFC had reserved the following shares of Common
Stock for issuance:
<TABLE>
<CAPTION>
<S> <C>
Stock option plans............................................................... 2,000,000
Convertible Debentures convertible into Common Stock at a conversion price
of $8.50 per share on or before December 15, 2007........................... 324,235
Series A Preferred Stock convertible into Common Stock at a conversion price
of $3.00 per share.......................................................... 1,099,500
Series B Preferred Stock convertible into Common Stock at a conversion price
of $.66 per share........................................................... 23,959,752
Warrants to purchase 50,000 shares of Common Stock at an exercise price of
$.2831 per share on or before January 5, 2004............................... 50,000
Convertible Senior Subordinated Discount Notes convertible into Common
Stock, after November 5, 1998, at a conversion price of $.70 per share...... 13,765,714
----------
Total reserved shares............................................................ 41,199,201
==========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES:
On February 24, 1999, IFFP entered into a credit agreement (the "Credit
Agreement") with Citibank (Poland) S.A. pursuant to which Citibank granted IFFP
a line of credit in the amount of $5,000,000 (the "Line of Credit"). The purpose
of the Line of Credit was to finance the construction of nine Burger King
restaurants. The Line of Credit is priced at 0.95% above LIBOR and matures on
January 15, 2000. As of September 30, 1999, $5,000,000 was outstanding on this
credit facility. In order for IFFP to enter into the Credit Agreement, holders
of the outstanding Notes were required to waive certain provisions of the Note
Indenture. As compensation for such waiver, the Noteholders were issued an
aggregate of 204,585 shares of Common Stock, with a fair value of $0.56 per
share. The fair value of the common stock issued was expensed in the first
quarter.
The Line of Credit is guaranteed by BKC and the Company granted BKC a
security interest in the outstanding shares of IFFP. As a condition to the
guarantee, BKC required that IFFC, IFFP and Mitchell Rubinson, Chairman and
Chief Executive Officer, enter into a general release in favor of BKC for any
and all matters occurring prior to the date of the guarantee. Additionally, the
Company and IFFP entered into a reimbursement agreement (the "Reimbursement
Agreement") pursuant to which they agreed to reimburse BKC for any and all
amounts paid out by BKC pursuant to the guaranty and all costs and expenses
incurred by BKC in connection with the enforcement of its rights under the
Reimbursement Agreement. BKC also required that the Company, IFFP and Mitchell
Rubinson, the Chairman of the Board and Chief Executive Officer of the Company
and a principal shareholder ("Rubinson"), execute a general release of BKC
relating to any matters that occurred prior to the execution of the Credit
Agreement.
Additionally, Rubinson entered into a purchase agreement with BKC which
provides that if IFFP and the Company default on their obligations under the
Reimbursement Agreement and BKC takes possession of the IFFP shares, Rubinson is
required to purchase the IFFP shares from BKC for an amount equal to all amounts
paid out by BKC pursuant to the guaranty and all costs and expenses incurred by
BKC in connection with the enforcement of its rights under the Reimbursement
Agreement. Mr. Rubinson received a fee of $150,000 from the Company in
connection with the Purchase Agreement.
In March 1999, the Company entered into a letter agreement whereby it
granted Host Marriott Service Corporation ("Host Marriott") the non-exclusive
rights to develop and operate Burger King restaurants within enclosed shopping
centers located in Poland where Host Marriott has leased substantially all of
the food and beverage facilities, each location to be subject to the approval of
Burger King. Pursuant to such agreement, Host Marriott will pay IFFC (a) an
initial fee of US $25,000 per location in exchange for IFFC's pre-opening
support and assistance, including furnishing design and construction advice,
hiring and training management staff, and advising on the selection of
information and accounting systems for each Burger King restaurant developed by
10
<PAGE>
INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Host Marriott, and (b) an on-going annual fee equal to the greater of U.S.
$7,000 per location, or 1.5% of Host Marriott's gross receipts from the
operation of each Burger King restaurant, in exchange for IFFC's on-going
technical assistance and services, including maintaining quality standards,
procurement and supply services, and on-going staff training. The annual fee
will be payable monthly, with an annual reconciliation, and will continue for
the duration of Host Marriott's operation of the location as a Burger King
restaurant.
Further, IFFC has the option to acquire up to 50% interest in the net
income of any Burger King restaurants developed by Host Marriott pursuant to the
agreement. IFFC may exercise such option by giving Host Marriott written notice,
at any time prior to the opening of each Burger King restaurant, specifying the
percentage interest that IFFC intends to acquire. If IFFC exercises such option,
it will be responsible for a pro rata portion of the total costs incurred by
Host Marriott in building, equipping and opening such restaurant, together with
a pro rata portion of the cost of any common facilities (e.g., seating areas,
tray wash areas, office and storage space, point of sale and telecommunications
systems, etc.) used in connection therewith. The letter agreement terminates
simultaneously with the BKC Agreement. Additionally, Host Marriott will be
responsible for all amounts payable to BKC (e.g., franchise fees, advertising
contributions, and royalty fees) for the franchise rights for each location
developed by it pursuant to the agreement.
9. LITIGATION:
DISPUTE WITH POLISH FISCAL AUTHORITIES. As of July 1995, IFFC may have
become subject to penalties for failure to comply with an amended tax law
requiring the use of cash registers with certain calculating and recording
capabilities and which are approved for use by the Polish Fiscal Authorities. As
a penalty for noncompliance, Polish tax authorities may disallow certain value
added tax deductions for July and August 1995. Additionally, penalties and
interest may be imposed on these disallowed deductions. IFFP believes that its
potential exposure is approximately $460,000, which amount has been accrued for
in the accompanying consolidated financial statements as of December 31, 1998
and September 30, 1999. IFFP has requested a final determination by the Polish
Minister of Finance. The Company is unable to predict the timing and nature of
the Minister's ruling. Although IFFP's NCR Cash Register System was a modern
system, it could not be modified. In 1998, IFFP replaced the system with a new
Siemen's system which complies with Polish regulations.
REGENESIS MATTER. The Company is a party to the following legal
proceeding: ELPOINT COMPANY, LLC AND GENNADY YAKOVLEV, VS. MITCHELL RUBINSON,
MARILYN RUBINSON, EDDA RUBINSON, NIGEL NORTON, JAMES F. MARTIN, LEON BLUMENTHAL,
LAWRENCE RUTSTEIN, SHULMAN & ASSOCIATES, INC., MANNY SCHULMAN, FRANKLYN
WEICHSELBAUM, JAMES MIRANTI, INTERNATIONAL FAST FOOD CORPORATION, DOMINO'S PIZZA
INTERNATIONAL, INC., REGENESIS HOLDINGS CORPORATION, United States District
Court, Northern District of California (Case No. 99-1107 CRB). On March 10,
1999, certain shareholders of Regenesis Holdings Corporation (f/k/a QPQ
Corporation) ("Regenesis") filed a complaint against IFFC and certain of its
senior management and principal shareholders, including Mitchell Rubinson,
IFFC's Chairman of the Board and Chief Executive Officer, and James Martin,
IFFC's Vice President and Chief Financial Officer. Regenesis formerly held the
right to develop Domino's Pizza stores in Poland. Certain former officers and
principal stockholders of Regenesis are officers and principal shareholders of
IFFC. The complaint alleges, among other things, that the defendants
fraudulently transferred the Domino's development rights to IFFC, thereby
causing Regenesis to lose value. Additionally, the complaint alleges that IFFC
engaged in the misappropriation of corporate opportunities of QPQ Corporation.
The plaintiffs are seeking unspecified monetary damages, including treble and
punitive damages, and reasonable costs and attorney's fees. A settlement between
all parties has been reached in this matter and is awaiting court approval.
Management does not believe the settlement will have a material adverse effect
on the financial condition or results of operation of the Company.
OTHER LITIGATION. The Company is not a party to any litigation or
governmental proceedings that management believes would result in any judgments
or penalties that would have a material adverse effect on the Company.
11
<PAGE>
INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. SEGMENT INFORMATION:
The Company operates subsidiaries in the fast food industry in the
Republic of Poland. The Company, through its two wholly owned subsidiaries,
International Fast Food Polska, Sp. zo.o. ("IFFP") and Pizza King Polska Sp.
zo.o. ("PKP"), operates franchised Burger King restaurants and Domino's Pizza
stores, respectively, in the Republic of Poland. The Company's reportable
segments are strategic business units that offer different products. The Company
evaluates the performance of its segments based on revenue and operating income.
The Company's Burger King restaurants offer dine-in and take out hamburgers,
cheeseburgers, chicken sandwiches, fish sandwiches, french fries, soft drinks
including milk shakes and ice cream. The Company Domino's Pizza stores offer its
customers take out and delivery service for its pizzas, salads, chicken wings,
breadsticks and soft drinks. There is no material intersegment revenue. Interest
expense related to working capital and development activity is included in the
Company's unaudited consolidated statements of operations.
The following table presents financial information regarding the
Company's different industry segments as of and for the nine and three month
periods ended September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
------------------------------------------------
IFFP PKP TOTAL CORPORATE CONSOLIDATED
---- --- ----- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................................ $8,401 $3,188 $11,589 $ -- $11,589
Food and packaging costs............... 3,325 1,088 4,413 -- 4,413
Restaurant operating expenses.......... 4,774 1,785 6,559 -- 6,559
Pre-opening costs...................... 599 176 775 -- 775
Depreciation and amortization.......... 1,586 398 1,984 -- 1,984
------- ------ ------- ------- -------
Loss from restaurant operations........ $(1,883) $ (259) $(2,142) $ -- $(2,142)
======= ====== ======= ======= =======
General and administrative expenses.... 967 354 1,321 1,897 3,218
------- ------ ------- ------- -------
NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
------------------------------------------------
IFFP PKP TOTAL CORPORATE CONSOLIDATED
---- --- ----- --------- ------------
Revenue................................ $ 4,250 $ 1,455 $ 5,705 $ -- $5,705
Food and packaging costs............... 1,725 510 2,235 -- 2,235
Restaurant operating expenses.......... 1,893 825 2,718 -- 2,718
Depreciation and amortization.......... 609 224 833 -- 833
------- ------ ------- ------- -------
Loss from restaurant operations........ $ 23 $ (104) $ (81) $ -- $(81)
======= ====== ======= ======= =======
General and administrative expenses.... 917 213 1,130 849 1,979
------- ------ ------- ------- -------
THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
-------------------------------------------------
IFFP PKP TOTAL CORPORATE CONSOLIDATED
---- --- ----- --------- ------------
Revenue................................ $2,746 $1,001 $ 3,747 $ -- $ 3,747
Food and packaging costs............... 1,041 344 1,385 -- 1,385
Restaurant operating expenses.......... 1,669 638 2,307 -- 2,307
Pre-opening costs...................... -- 35 35 -- 35
Depreciation and amortization.......... 556 144 700 -- 700
------- ------ ------- ------- -------
Loss from restaurant operations........ $ (520) $ (160) $ (680) $ -- $(680)
======= ====== ======= ======= =======
General and administrative expenses.... 295 121 416 543 959
------- ------ ------- ------- -------
12
<PAGE>
INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
-------------------------------------------------
IFFP PKP TOTAL CORPORATE CONSOLIDATED
---- --- ----- --------- ------------
Revenue................................ $1,495 $ 521 $2,016 $ -- $2,016
Food and packaging costs............... 605 179 784 -- 784
Restaurant operating expenses.......... 645 338 983 -- 983
Depreciation and amortization.......... 218 94 312 -- 312
------- ------ ------- ------- -------
Loss from restaurant operations........ $ 27 $ (90) $ (63) $ -- $ (63)
======= ====== ======= ======= =======
General and administrative expenses.... 478 83 561 276 837
------- ------ ------- ------- -------
</TABLE>
11. SUBSEQUENT EVENTS:
In October 1999, the remaining holders of the Notes agreed to amend the
Notes to provide that interest earned on the Notes from October 31, 2000 to
October 31, 2003 will be paid in additional Notes, rather than cash. Interest
payable thereafter will be payable in cash.
In October 1999, IFFP increased the amount of the Line of Credit from
Citibank (Poland) S.A., which is guaranteed by BKC, to $8,000,000. IFFC may
increase the Line of Credit to $10,000,000 if it meets certain specified
criteria. As of November 12, 1999, $5,718,559 was outstanding on this credit
facility. All of the prior transaction documents were re-executed, including the
purchase agreement and the release. Additionally, as security for the Line of
Credit, BKC required that Mitchell Rubinson enter into a personal guaranty with
BKC and pledge 5,000,000 shares of the common stock of IFFC owned by him. In
connection with such matters, the Company entered into a reimbursement and fee
agreement whereby it agreed to reimburse Mr. Rubinson for all amounts paid by
him pursuant to his personal guaranty and to pay him a fee equal to 3% annually
of the amount being guaranteed. As of the date hereof, Mr. Rubinson has not been
paid under this agreement. In order for IFFP to increase the Line of Credit,
holders of the outstanding Notes were required to waive certain provisions of
the Note Indenture.
In connection with the increase of the Line of Credit, IFFC granted
warrants to acquire 4,000,000 shares of Common Stock to BKC at an exercise price
of $2.00 per share. Such warrants are immediately exercisable and expire on
October 21, 2004.
Effective November 1, 1999, Michael Welch, President, Chief Operating
Officer and a Director of the Company, resigned. James F. Martin was appointed
as President and Chief Operating Officer. Mr. Martin previously served, and
continues to serve, as Chief Financial Officer and a Director of the Company.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Information contained in this Quarterly Report on Form 10-QSB contains
"forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "could," "intends," "estimates," "projected," "contemplated" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology. No assurances can be given that the future results covered by the
forward-looking statements will be achieved. These statements, by their nature,
involve substantial risks and uncertainties, certain of which are beyond IFFC's
control. The following factors and other factors described elsewhere in this
annual report could cause actual experience to vary materially from the future
results covered in such forward-looking statements:
- - the future growth of our business and our ability to comply with the
restaurant development agreement with Burger King Corporation (the
"BKC Agreement") and the master franchise agreement with Domino's (the
"Domino's Agreement");
- - our ability to improve levels of profitability; the sufficiency of
cash flow provided by our operating, investing and financing
activities;
- - changes in our financial condition, and the economic, business and
political conditions in Poland;
- - the demand for our products and the ability of our third-party
suppliers to meet our quantity and quality requirements;
- - the ability to consummate joint ventures or other strategic
associations with third parties or lessors;
- - the ability to obtain suitable restaurant sites;
- - changes in the level of operating expenses and revenues;
- - changes in the present and future level of competition; and
- - our future liquidity and capital resource needs.
Other factors, such as the general state of the economy, could also cause actual
experience to vary materially from the matters covered in such forward-looking
statements.
GENERAL
IFFC currently operates 25 Burger King restaurants and 16 Domino's
Pizza stores. Additionally, IFFC has granted a third party permission to operate
one additional Burger King store. IFFC has incurred losses and anticipates that
it will continue to incur losses until, at the earliest, it establishes a number
of restaurants and stores generating sufficient revenues to offset its operating
costs and the costs of its proposed continuing expansion. There can be no
assurance that IFFC will ever achieve profitability or be able to successfully
establish a sufficient number of restaurants to achieve profitability.
14
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS NINE MONTHS ENDED SEPTEMBER 30, 1998
RESULTS OF OPERATIONS
For the nine months ended September 30, 1999 and September 30, 1998,
IFFC generated sales of $11,589,343 and $5,705,371, respectively. In Polish
zlotys, IFFC generated sales of Pln.45,139,332 and Pln.19,965,946 for the nine
months ended September 30, 1999 and September 30, 1998, respectively. The 103.1%
increase in sales in U.S. dollar terms and 126.1% increase in Polish zloty terms
was primarily the result of the opening of new Burger King restaurants and
Domino's Pizza stores. Sales in U.S. dollar terms includes sales of $8,400,855
and $4,249,872 for the Burger King restaurants and $3,188,488 and $1,455,499 for
the Domino's Pizza stores, respectively. In Polish zloty terms IFFC's Burger
King same restaurant sales increased by approximately 5.0% for the nine months
ended September 30, 1999 as compared to the nine months ended September 30,
1998. Due to the devaluation of the zloty of approximately 11.5%, IFFC's Burger
King same restaurant sales, in U.S. dollar terms, decreased by approximately
6.5% for the nine months ended September 30, 1999 as compared to the nine months
ended September 30, 1998. The increase in same restaurant sales was primarily
attributable to the initial start up of television advertising in March 1999. In
U.S. dollar and Polish zloty terms, IFFC's Domino's same store sales increased
by approximately 10.3% and 22.7%, respectively, for the nine months ended
September 30, 1999 as compared to the nine months ended September 30, 1998. The
increase in same store sales was attributed to increased brand awareness in
Warsaw, Poland.
During the nine months ended September 30, 1999, IFFC incurred food and
packaging costs of $4,413,430, payroll and related costs of $2,339,070,
occupancy and other operating expenses of $4,219,257, depreciation and
amortization expense of $1,984,639 and pre-opening costs of $774,159. For the
nine months ended September 30, 1998, IFFC incurred food and packaging costs of
$2,235,433, payroll and related costs of $1,076,095, occupancy and other
operating expenses of $1,642,846 and depreciation and amortization expense of
$832,744. The increases in the above expenses from 1998 to 1999 were primarily
due to the opening of new Burger King restaurants and Domino's Pizza stores.
Food and packaging costs applicable to Burger King restaurants for the
nine months ended September 30, 1999 and 1998 were 39.6% and 40.6% of restaurant
sales, respectively. The 1.0% decrease as a percentage of restaurant sales was
primarily attributable to lower meat costs as a percentage of sales. Food and
packaging costs applicable to Domino's stores for the nine months ended
September 30, 1999 and 1998 were 34.1% and 35% of store sales, respectively. The
0.9% decrease as a percentage of store sales was primarily attributable to the
reduction of paper and cheese costs.
Payroll and related costs applicable to Burger King restaurants for the
nine months ended September 30, 1999 and 1998 were 19.5% and 17.4% of restaurant
sales, respectively. The 2.1% increase as a percentage of restaurant sales was
primarily as a result of payroll costs incurred in the new restaurants during
their initial start up coupled with wage increases in the Warsaw restaurants.
Payroll and related costs applicable to Domino's stores for the nine months
ended September 30, 1999 and 1998 were 22.0% and 23.2% of store sales,
respectively. The 1.2% decrease as a percentage of restaurant sales was
primarily as a result of an increase in same store sales without a corresponding
increase in payroll expenses.
Occupancy and other operating expenses applicable to Burger King
restaurants for the nine months ended September 30, 1999 and 1998 were 37.3% and
27.2% of restaurant sales, respectively. The 10.1% increase as a percentage of
restaurant sales was primarily attributable to higher royalties paid to Burger
King pursuant to the provisions of the BKC Agreement, coupled with higher
advertising costs, rent and utilities associated with the new restaurants.
Occupancy and other operating expenses applicable to Domino's stores for the
nine months ended September 30, 1999 and 1998 were relatively constant at 33.9%
and 33.5% of restaurant sales, respectively. The 0.4% increase as a percentage
of sales was primarily attributable to increased advertising expenses.
Depreciation and amortization expense applicable to Burger King
restaurants was $1,585,855 as compared to $609,129 for the nine months ended
15
<PAGE>
September 30, 1999 and 1998, respectively. The increase was primarily
attributable to depreciation for the new restaurants. Depreciation and
amortization expense applicable to Domino's stores was $398,784 as compared to
$223,615 for the nine months ended September 30, 1999 and 1998, respectively.
The increase was primarily attributable to depreciation on new stores.
General and administrative expenses for the nine months ended September
30, 1999 and 1998 were 27.8% and 34.7% of sales, respectively. The 6.9% decrease
as a percentage of sales was primarily attributable to higher total sales
without a corresponding increase in general and administrative expenses. For the
nine months ended September 30, 1999, general and administrative expenses
equaled $3,218,144. It consisted of executive and office staff salaries and
benefits ("Salary Expense") of $1,056,336; legal and professional fees, office
rent, travel, telephone and other corporate expenses ("Corporate Overhead
Expense") of $1,581,833, debt issuance costs of $391,092, and depreciation and
amortization of $188,883. For the nine months ended September 30, 1998, general
and administrative expense was $1,979,714 and included Salary Expense of
$788,652; Corporate Overhead Expenses of $964,399, and depreciation and
amortization of $226,663. The $1,238,430 increase in general and administrative
expenses for 1999 is primarily attributable to increased salaries associated
with expanded Polish operations, debt issuance costs associated with the $5.0
million Citibank loan and higher legal fees.
For the nine months ended September 30, 1999 and 1998 Interest and
Other Income consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
<S> <C>
Forgiveness of Burger King fee........................................... $ 750,000 --
Interest income.......................................................... 86,893 $711,936
All other, net........................................................... 261,889 (31,956)
---------- ----------
$1,098,782 $679,980
========== ==========
Interest Expense consisted of the following:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
Interest Expense on 9% Subordinated Convertible Debentures.......... $ 186,030 $ 186,030
Amortization of Debt Issuance Costs................................. 95,886 214,744
Accretion of discount on 11% Convertible Senior Subordinated
Discount Notes................................................... 1,753,801 1,680,548
Interest Expense on Bank Facilities................................. 359,597 108,619
Less: Interest Capitalized ......................................... (177,100) --
---------- ----------
Total............................................................... $2,218,214 $2,189,941
========== ==========
</TABLE>
Interest and other income increased by 61.6% to $1,098,782 from $679,980
for the nine months ended September 30, 1999 and 1998, respectively. The
increase in the 1999 period was primarily the result of the recognition of the
forgiveness of debt due Burger King of $750,000, which was partially offset by a
decrease in interest income. Interest income decreased for the 1999 period
primarily as the result of the decrease in cash and cash equivalents. Interest
expense exceeded interest and other income by $1,119,432 and $1,509,961 for the
nine months ended September 30, 1999 and 1998, respectively.
IFFC's interest expense on bank facilities was $359,597 and $108,619
for the nine months ended September 30, 1999 and 1998, respectively. The
$250,978 increase was attributable to IFFC's increase of borrowings under bank
credit facilities.
16
<PAGE>
As a result of the foregoing, the nine months ended September 30, 1999,
IFFC generated a net loss of $7,125,713 or $.16 per share of IFFC's Common Stock
compared to a net loss of $3,451,208, or $.08 per share of IFFC's Common Stock
for the nine months ended September 30, 1998.
IFFC anticipates that it will continue to incur certain expenses in
connection with its disputes with the Polish Fiscal Authorities. See "Legal
Proceedings - Dispute with Polish Fiscal Authorities" for a description of such
matters.
LIQUIDITY AND CAPITAL RESOURCES
To date, IFFC's business operations have been principally financed by
proceeds from public offerings of IFFC's equity and debt securities, private
offerings of equity and debt securities, proceeds from various bank credit
facilities, proceeds from the sale of certain equity securities, the settlement
of certain litigation with BKC, and proceeds from the private sale of the Notes.
Net cash used in operating activities increased by $938,292 for the
nine months ended September 30, 1999 compared to the nine months ended September
30, 1998. The increase was primarily attributable to increased losses from
operations in 1999.
Net cash flows used in investing activities decreased from $6,725,192
to $5,857,225 for the nine months ended September 30, 1998 and 1999,
respectively. The decrease was attributable to the purchase of the minority
interest in IFFP from Agros Investments, S.A. for $1,538,029 during the nine
months ended September 30, 1998.
Net cash provided by financing activities increased by $3,326,564 for
the nine months ended September 30, 1999, compared to the nine months ended
September 30, 1998. The increase was primarily attributable to advances under
the new Citibank Line of Credit.
As of September 30, 1999, IFFC had negative working capital of
approximately $8,140,634 and cash and cash equivalents of $608,051. IFFC has
significant commitments to develop restaurants in accordance with the BKC
Development Agreement and the New Master Franchise Agreement with Domino's. The
Company has sustained losses from operations since its incorporation in December
1991. For the nine months ended September 30, 1999 and 1998, the Company
reported net losses of $7,125,713 and $3,451,208, respectively. At September 30,
1999 the Company had an accumulated deficit of $28,671,727. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management believes that cash flows from currently existing stores,
when combined with existing financial resources and drawings on the Company's
$8,000,000 line of credit secured by BKC (approximately $2,281,441 available at
November 12, 1999), which may, under certain circumstances, be increased to
$10,000,000, will be sufficient to fund operations and development costs through
at least December 31, 1999. However, no assurance can be given that management's
goals will be achieved. Management is seeking to obtain additional equity
financing to fund future development. No assurance can be given that such
financing will be obtained or that it can be obtained on favorable terms.
BKC AGREEMENT AND DOMINO'S AGREEMENT -- IFFC's material commitments for
capital expenditures in its restaurant and store business relate to the
provisions of the BKC Agreement and the Domino's Agreement.
AGREEMENT WITH MARRIOTT -- In March 1999, the Company entered into a
letter agreement whereby it granted Host Marriott Service Corporation ("Host
Marriott") the non-exclusive rights to develop and operate Burger King
restaurants within enclosed shopping centers located in Poland where Host
Marriott has leased substantially all of the food and beverage facilities, each
location to be subject to the approval of Burger King. Pursuant to such
agreement, which was amended in May 1999, Host Marriott will pay IFFC (a) an
initial fee of US $25,000 per location in exchange for IFFC's pre-opening
support and assistance, including furnishing design and construction advice,
17
<PAGE>
hiring and training management staff, and advising on the selection of
information and accounting systems for each Burger King restaurant developed by
Host Marriott, and (b) an on-going annual fee equal to the greater of U.S.
$7,000 per location, or 1.5% of Host Marriott's gross receipts from the
operation of each Burger King restaurant, in exchange for IFFC's on-going
technical assistance and services, including maintaining quality standards,
procurement and supply services, and on-going staff training. The annual fee
will be payable monthly, with an annual reconciliation, and will continue for
the duration of Host Marriott's operation of the location as a Burger King
restaurant.
Further, IFFC has the option to acquire up to 50% interest in the net
income of any Burger King restaurants developed by Host Marriott pursuant to the
agreement. IFFC may exercise such option by giving Host Marriott written notice,
at any time prior to the opening of each Burger King restaurant, specifying the
percentage interest that IFFC intends to acquire. If IFFC exercises such option,
it will be responsible for a pro rata portion of the total costs incurred by
Host Marriott in building, equipping and opening such restaurant, together with
a pro rata portion of the cost of any common facilities (e.g., seating areas,
tray wash areas, office and storage space, point of sale and telecommunications
systems, etc.) used in connection therewith. The letter agreement terminates
simultaneously with the BKC Agreement. Additionally, Host Marriott will be
responsible for all amounts payable to BKC (e.g., franchise fees, advertising
contributions, and royalty fees) for the franchise rights for each location
developed by it pursuant to the agreement.
CONVERTIBLE NOTES -- In November 1997, the Company sold $27,536,000 of
its 11% Convertible Senior Subordinated Discount Notes Due October 31, 2007 (the
"Notes") in a private offering. Interest is payable semi-annually, in cash, on
April 30 and October 31 of each year, commencing April 30, 2001. The Notes are
comprised as follows at September 30, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Face amount of notes at maturity......................... $9,636,000 $27,536,000
Unamortized discount to be accreted as interest
expense and added to the original principal balance
of the notes over a period of three years.............. (1,050,433) (4,890,798)
---------- -----------
Carrying value........................................... $8,585,567 $22,645,202
========== ===========
</TABLE>
The Notes are convertible, at the option of the holder, into shares of
Common Stock. As of September 30, 1999, none of the Notes had been converted
into Common Stock. On August 31, 1999, $17,900,000 of the Notes were exchanged
for an aggregate of 158,134 shares of Series B Preferred Stock. Additionally, in
October 1999, the remaining holders of the Notes agreed to amend the Notes to
provide that interest earned on the Notes from October 31, 2000 to October 31,
2003 will be paid in Notes, rather than cash. Interest payable thereafter will
be payable in cash.
DISPUTE WITH POLISH FISCAL AUTHORITIES -- IFFC anticipates that it will
continue to incur certain expenses in connection with its disputes with the
Polish Fiscal Authorities. See "Legal Proceedings -- Dispute with Polish Fiscal
Authorities" for a description of such matters and IFFC's best estimates of the
expenses IFFC anticipates incurring and the timing of such expenses.
POLISH BANK ACCOUNTS -- As of September 30, 1999 and December 31, 1998,
the Company had approximately $484,883 and $1,842,966, respectively, in Polish
bank accounts with substantially all of such funds held as U.S. dollar
denominated deposits. Substantially all of the Company's remaining cash is held
in U.S. dollar accounts in U.S. Banks.
18
<PAGE>
CREDIT FACILITIES -- IFFC has also financed its operations through the
use of credit facilities.
On February 24, 1999, IFFP entered into a credit agreement (the "Credit
Agreement") with Citibank (Poland) S.A. pursuant to which Citibank granted IFFP
a loan in the amount of $5,000,000 (the "Line of Credit"). The purpose of the
Line of Credit was to finance the construction of nine Burger King restaurants.
The Line of Credit is priced at 0.8% above LIBOR and matures on January 15,
2000. As of September 30, 1999, $5,000,000 was outstanding on this credit
facility. In order for IFFP to enter into the Credit Agreement, holders of the
outstanding Notes were required to waive certain provisions of the Note
Indenture. As compensation for such waiver, the Noteholders were issued an
aggregate of 204,585 shares of Common Stock, with a fair value of $.56 per
share.
The Line of Credit is guaranteed by BKC and the Company granted BKC a
security interest in the outstanding shares of IFFP. As a condition to the
guarantee, BKC required that IFFC, IFFP and Mitchell Rubinson enter into a
general release in favor of BKC for any and all matters occurring prior to the
date of the guarantee. Additionally, the Company and IFFP entered into a
reimbursement agreement (the "Reimbursement Agreement") pursuant to which they
agreed to reimburse BKC for any and all amounts paid out by BKC pursuant to the
guaranty and all costs and expenses incurred by BKC in connection with the
enforcement of its rights under the Reimbursement Agreement. BKC also required
that the Company, IFFP and Mitchell Rubinson, the Chairman of the Board and
Chief Executive Officer of the Company and a principal shareholder ("Rubinson"),
execute a general release of BKC relating to any matters that occurred prior to
the execution of the Credit Agreement.
Additionally, Rubinson entered into a purchase agreement with BKC which
provides that if IFFP and the Company default on their obligations under the
Reimbursement Agreement and BKC takes possession of the IFFP shares, Rubinson is
required to purchase the IFFP shares from BKC for an amount equal to all amounts
paid out by BKC pursuant to the guaranty and all costs and expenses incurred by
BKC in connection with the enforcement of its rights under the Reimbursement
Agreement. Mr. Rubinson received a fee of $150,000 from the Company in
connection with the Purchase Agreement.
In October 1999, IFFP increased the amount of the Line of Credit to
$8,000,000. IFFP may increase the Line of Credit to $10,000,000 if the Company
meets certain specified criteria. As of November 12, 1999, $5,718,559 was
outstanding on this facility. All of the prior transaction documents were
re-executed, including the purchase agreement and the release. Additionally, as
security of the Line of Credit, BKC required that Mitchell Rubinson enter into a
personal guaranty with BKC and pledge 5,000,000 shares of the common stock of
IFFC owned by him. In connection with such matters, the Company entered into a
reimbursement and fee agreement whereby it agreed to reimburse Mr. Rubinson for
all amounts paid by him pursuant to his personal guaranty and to pay him a fee
equal to 3% annually of the amount being guaranteed. As of the date hereof, Mr.
Rubinson has not been paid under this agreement. In order for IFFP to increase
the Line of Credit, holders of the outstanding Notes were required to waive
certain provisions of the Note Indenture.
ACCOUNTING POLICIES -- The following is a summary of certain accounting
policies that are new or have become material to the Company's operations during
the first nine months of 1999. For a discussion of all of the Company's material
accounting policies, reference is made to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998.
Prior to January 1, 1999, the Company capitalized pre-opening costs
associated with opening new restaurants. Upon commencement of revenue producing
activities at a restaurant location, these capitalized pre-opening costs were
amortized over one year. In April 1998, the Accounting Standards Executive
Committee of the American Institute of Public Accountants issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
requires costs of start-up activities to be expensed as incurred. The Company
adopted SOP 98-5 on January 1, 1999. Upon adoption, the Company expensed
previously capitalized start-up costs totaling $620,000 at January 1, 1999. In
accordance with SOP 98-5, adoption has been reported as a cumulative effect of
19
<PAGE>
change in accounting principle in the accompanying consolidated statement of
operations for the nine months ended September 30, 1999. Pre-opening costs of
$774,159 incurred subsequent to December 31, 1998 have been charged directly to
expense. If SOP 98-5 had been adopted on January 1, 1998, pre-opening expenses
would have been $445,585 during the nine months ended September 30, 1998.
The Company accounts for advertising expense in accordance with SOP
93-7, "Accounting for Advertising Costs" which generally requires that
advertising costs be expensed either as incurred or the first time the
advertising takes place. It is the Company's policy to expense advertising costs
the first time the advertising takes place. However, Accounting Principles Board
Opinion ("APB") No. 28, "Interim Financial Reporting" allows advertising costs
to be deferred within a fiscal year if the benefits of an advertising
expenditure clearly extend beyond the interim period in which the expenditure is
made. Pursuant to APB 28, it is the Company's policy to defer advertising
expenses at the end of interim periods to the extent that such costs will
clearly benefit future interim periods. During the nine months ended September
30, 1999, the Company incurred advertising expense of approximately $2,012,962,
of which approximately $640,008 was deferred at September 30, 1999 and is
included as a component of prepaid expenses on the accompanying unaudited
consolidated balance sheet. Pursuant to SOP 93-7, the Company is required to
expense all advertising incurred at the end of the fiscal year.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
The official currency in Poland is the zloty. The value of the zloty is
pegged pursuant to a system based on a basket of currencies, as well as all
other economic and political factors that effect the value of currencies
generally. At September 30, 1999, the exchange rate was 4.118 zlotys per dollar.
The accounts of IFFC's Polish subsidiaries are maintained using the Polish
zloty.
IFFC's restaurant and store operations are conducted in Poland. The
Polish economy has historically been characterized by high rates of inflation
and devaluation of the Polish zloty against the dollar and European currencies.
However, in the years ended December 31, 1997 and 1998, the rates of inflation
and devaluation improved. For the years ended December 31, 1994, 1995, 1996,
1997 and 1998 the annual inflation rate in Poland was 32%, 21.6%, 19.5%, 13.0%
and 8.6% respectively, and as of December 31, 1994, 1995, 1996, 1997 and 1998
the exchange rate was 2.437, 2.468, 2.872, 3.514 and 3.494 zlotys per dollar,
respectively. Payment of interest and principal on the 9% Convertible
Subordinate Debentures, 11% Convertible Senior Subordinated Discount Notes, the
new Citibank line of credit and payment of franchise fees to Burger King and
Domino's for each restaurant and store opened are in United States currency.
Additionally, IFFC is dependent on certain sources of supply which require
payment in European or United States currencies. Since IFFC's revenues from
operations will be in zlotys, IFFC is subject to the risk of currency
fluctuations. IFFC has and intends to maintain substantially all of its
unutilized funds in United States or Western European currency denominated
securities and/or European Currency Units. There can be no assurance that IFFC
will successfully manage its exposure to currency fluctuations or that such
fluctuations will not have a material adverse effect on IFFC.
Thus far, IFFC's revenues have been used to fund restaurant operations
and IFFC's expansion. As a result, such revenues have been relatively insulated
from inflationary conditions in Poland. There can be no assurance that
inflationary conditions in Poland will not have an adverse effect on IFFC in the
future.
YEAR 2000 COMPUTER ISSUE
The SEC has issued Staff Legal Bulletin No. 5 stating that public
operating companies should consider whether there will be any anticipated costs,
problems and uncertainties associated with the Year 2000 issue, which affects
many existing computer programs that use only two digits to identify a year in
the date field. The Company has recently upgraded its computer operating systems
and believes that such systems are Year 2000 compliant. Additionally, IFFC
intends that any computer systems that it may purchase or lease in the future
will have already addressed the Year 2000 issue and anticipates that its
business operations will electronically interact with third parties very
minimally, if at all.
However, IFFC has not fully assessed the impact of the Year 2000 issue
on third parties with whom IFFC has material relationships, including its
distributors and suppliers. BKC is assisting the Company by assessing the
compliance of BKC-approved suppliers. Additionally, the Company is undertaking
20
<PAGE>
an assessment of third parties with which it has material relationships and
expects to complete the assessment of this information by September 1999.
Certain of the Company's suppliers are not computerized and will not be affected
by the Year 2000. However, the Company has determined that a material number of
its suppliers have antiquated computer systems which may be materially affected.
As information is received, the Company intends to analyze the compliance issues
and develops a strategy for non-compliant third parties on whom the Company is
materially dependent.
To date, the Company estimates that it has spent approximately $50,000
on Year 2000 efforts across all areas and expects to spend a total of
approximately $150,000 when complete. The Company expects to fund Year 2000
costs through operating cash flows and proceeds from debt and equity financings.
All system modification costs associated with Year 2000 will be expensed as
incurred.
The Company currently believes that the Year 2000 issue will not
present a materially adverse risk to its future consolidated results of
operations, liquidity, and capital resources. However, if the Company's belief
that its computer operating systems are compliant is incorrect or the level of
timely compliance by key suppliers or vendors is not sufficient, the Year 2000
issue could have a material impact on the Company's operations including, but
not limited to, delays in delivery of supplies resulting in loss of revenue,
increased operating costs, loss of customers or suppliers, or other significant
disruptions to the Company's business. The Company is in the process of
formulating contingency and business continuation plans which address the Year
2000 issue.
Determining the Year 2000 readiness of third party products
(information technology and other computerized equipment) and business
dependencies (including suppliers and distributors) requires pursuit, collection
and appraisal of voluntary statements made or provided by those parties, if
available, together with independent factual research. Although the Company has
taken, and will continue to take, reasonable efforts to gather information to
determine and verify the readiness of such products and business dependencies,
there can be no assurance that reliable information will be offered or otherwise
available. In addition, verification methods (including testing methods) may not
be reliable or fully implemented. Accordingly, notwithstanding the foregoing
efforts, there are no assurances that the Company is correct in its
determination or belief that a product or a business dependency is Year 2000
ready.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
DISPUTE WITH POLISH FISCAL AUTHORITIES. As of July 1995, IFFC may have
become subject to penalties for failure to comply with an amended tax law
requiring the use of cash registers with certain calculating and recording
capabilities and which are approved for use by the Polish Fiscal Authorities. As
a penalty for noncompliance, Polish tax authorities may disallow certain value
added tax deductions for July and August 1995. Additionally, penalties and
interest may be imposed on these disallowed deductions. IFFP believes that its
potential exposure is approximately $460,000, which amount has been accrued for
in the accompanying consolidated financial statements as of December 31, 1998.
IFFP has requested a final determination by the Polish Minister of Finance. The
Company is unable to predict the timing and nature of the Minister's ruling.
Although IFFP's NCR Cash Register System was a modern system, it could not be
modified. In 1998, IFFP replaced the system with a new Siemen's system which
complies with Polish regulations.
REGENESIS MATTER. The Company is a party to the following legal
proceeding: ELPOINT COMPANY, LLC AND GENNADY YAKOVLEV, VS. MITCHELL RUBINSON,
MARILYN RUBINSON, EDDA RUBINSON, NIGEL NORTON, JAMES F. MARTIN, LEON BLUMENTHAL,
LAWRENCE RUTSTEIN, SHULMAN & ASSOCIATES, INC., MANNY SCHULMAN, FRANKLYN
WEICHSELBAUM, JAMES MIRANTI, INTERNATIONAL FAST FOOD CORPORATION, DOMINO'S PIZZA
INTERNATIONAL, INC., REGENESIS HOLDINGS CORPORATION, United States District
Court, Northern District of California (Case No. 99-1107 CRB). On March 10,
1999, certain shareholders of Regenesis Holdings Corporation (f/k/a QPQ
Corporation) ("Regenesis") filed a complaint against IFFC and certain of its
senior management and principal shareholders, including Mitchell Rubinson,
IFFC's Chairman of the Board and Chief Executive Officer, and James Martin,
IFFC's Vice President and Chief Financial Officer. Regenesis formerly held the
right to develop Domino's Pizza stores in Poland. Certain former officers and
principal stockholders of Regenesis are officers and principal shareholders of
IFFC. The complaint alleges, among other things, that the defendants
fraudulently transferred the Domino's development rights to IFFC, thereby
causing Regenesis to lose value. Additionally, the complaint alleges that IFFC
engaged in the misappropriation of corporate opportunities of QPQ Corporation.
The plaintiffs are seeking unspecified monetary damages, including treble and
punitive damages, and reasonable costs and attorney's fees. A settlement between
all parties has been reached in this matter and is awaiting court approval.
Management does not believe the settlement will have a material adverse effect
on the financial condition or results of operation of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On August 31, 1999, the Company issued 158,134 shares of its newly
authorized Series B Convertible Preferred Stock, par value $.01 per share, in
exchange for $17,900,000 in stated principal amount of the Notes. Such shares
were issued in reliance on the exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended, and the provisions of Regulation D
promulgated thereunder. Shares of the Series B Convertible Preferred Stock are
immediately convertible into that number of shares of Common Stock determined by
dividing the aggregate liquidation value of the shares being converted by $.66.
The liquidation value of the Series B Convertible Preferred Stock is $100.00 per
share.
ITEM 5. OTHER INFORMATION.
Effective November 1, 1999, Michael Welch, President, Chief Operating
Officer and a Director of the Company, resigned. James F. Martin was appointed
as President and Chief Operating Officer. Mr. Martin previously served, and
continues to serve, as Chief Financial Officer and a Director of the Company.
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
--------------- ----------------------------
10.1* Employment Agreement dated October 4, 1999 between
IFFC and James F. Martin.
10.2 Amendment to Restaurant Development Agreement dated as
of October 21, 1999 by and among Burger King
Corporation, IFFC and IFFP.
10.3 Amended and Restated Reimbursement Agreement dated as
of October 21, 1999 by and among IFFC, IFFP and Burger
King
10.4 Amended and Restated Agreement for the Transfer of
Title to Shares by way of Security dated as of October
21, 1999 by and between IFFC, IFFP and Burger King
Corporation.
10.5 General Release dated as of October 21, 1999 by and
among Burger King Corporation, IFFC, IFFP and Mitchell
Rubinson.
10.6 Amended and Restated Purchase Agreement dated as of
October 21, 1999 by and among IFFC, Mitchell Rubinson,
IFFP and Burger King Corporation.
10.7 Guarantee of Future Advances Agreement dated as of
October 21, 1999 by and among IFFC, IFFP, Mitchell
Rubinson and Burger King Corporation.
10.8 Deferred Payment Agreement dated as of October 21,
1999 by and among IFFC, IFFP and Burger King
Corporation.
10.9 Warrant to Subscribe for and purchase 4,000,000 shares
of Common Stock issued to Burger King Corporation.
10.10 Guaranty dated October 21, 1999 by and between
Mitchell Rubinson and Burger King Corporation.
10.11 Security and Pledge Agreement dated October 21, 1999
by and between Mitchell Rubinson and Burger King
Corporation.
10.12* Reimbursement and Fee Agreement dated as of October
14, 1999 by and among IFFC and Mitchell Rubinson.
27.1 Financial Data Schedule (filed electronically only).
- ----------
*These exhibits are management contracts or compensatory plans or
arrangements.
(b) No reports on Form 8-K were filed during the quarter ended
on September 30, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, International Fast Food has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL FAST FOOD CORPORATION
DATE: November 15, 1999 By: /S/ MITCHELL RUBINSON
----------------------
Mitchell Rubinson, Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)
DATE: November 15, 1999 By:/S/ JAMES MARTIN
----------------
James Martin, President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
date October 4, 1999, effective November 1, 1999 or earlier, as provided in this
Agreement by and between International Fast Food Corporation, Inc., a Florida
corporation (the "Company"), and James F. Martin (the "Executive").
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to employ the Executive for the term
provided herein, and the Executive desires to be employed by the Company for
such term, all in accordance with the terms and provisions herein contained;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment.
(a) The Company hereby employs the Executive to render
full-time services to the Company as its President and Chief Operations Officer,
and Chief Executive Officer of its subsidiaries or affiliates that may be
founded. The Executive hereby accepts such employment, on the terms and
conditions contained in this Agreement.
(b) The Executive shall perform such duties for the Company as
may be determined and assigned to him from time to time by the Company's
Chairman of the Board ("Chairman") or the Company's Board of Directors (the
"Board"), which assigned duties shall be consistent with those normally
associated with such position and in which he is currently performing; provided
that the Board may delegate certain of the tasks, objectives or responsibilities
set forth in the Description to other officers or employees of the Company or
its subsidiaries and affiliates.
<PAGE>
(c) The Executive hereby agrees to devote his full business
time, attention and his best efforts to the performance of his duties hereunder.
(d) The Executive's place of employment during the term of his
employment hereunder shall be the Republic of Poland or at such place as is
reasonably designated by the Board. The Executive acknowledges that he may be
required in the future to change his residence in order to perform his
obligations hereunder.
(e) The Executive agrees to accept election and to serve
during all or any part of the Term, as hereinafter defined, as an officer or
director of the Company and any subsidiary or affiliate of the Company, without
any compensation therefor other than that specified herein, if elected to such
position by the shareholders or by the Board of the Company or of any subsidiary
or affiliate, as the case may be.
2. TERM. The term of this Agreement, and the employment of the
Executive hereunder, shall be for a period commencing on November 1, 1999 and
expiring on October 31, 2002 (the "Initial Term"). The company retains the right
to require Executive to start earlier than November 1, 1999, however, all other
dates shall remain the same.
3. Compensation Package.
---------------------
(a) The Executive's annual salary during the Term of this
agreement shall be $160,000.00 payable by check in equal bi-weekly installments
or in such other periodic installments as may be in accordance with the regular
payroll policies of the Company as from time to time in effect, less such
deductions or amounts to be withheld as shall be required by applicable law and
regulations.
2
<PAGE>
(b) The Executive's annual salary shall be increased by 10% in
the second and third years respectively, provided a bonus is earned pursuant to
Paragraph 3(e) of this Agreement.
(c) The Executive shall be entitled to participate in Company
provided family medical/dental insurance plans, provided that the policy may
have standard co-insurance and deductible provisions, and that 25% of the cost
of the policy shall be paid by the Executive.
(d) The Executive shall be entitled to three (3) weeks of paid
vacation during any year of the Term.
(e) The Executive shall be eligible for an annual bonus at the
Polish Subsidiary level only, subject to the limitations of paragraph 3(i) of
this Agreement, of 3% of net earnings in accordance with a mutually agreed upon
performance criteria to be negotiated in good faith by all parties.
(f) The Company shall provide the Executive with an
automobile. The Company shall be responsible for all associated expenses
relating to such automobile including insurance, gas and repairs.
(g) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by him in the performance of his
duties hereunder, in accordance with Company policy and upon the presentation by
the Executive of an itemized account of such expenditures.
(h) The Executive shall be eligible to receive stock option
grants under the Company's stock option plans in the discretion of the Company's
Board of Directors or option committees under such plans. The Company will
recommend to the Board or such committees a grant of a stock option to acquire
800,000 shares of the IFFC's common stock, par value $.01 per share (the "Common
Stock"), at an exercise price per share equal to $.66 market price, such options
to be exercisable in whole or in part and cumulatively according to the
following schedule, provided in each case that the Executive is an employee of
the Company on the date of reference:
3
<PAGE>
(i) 20 percent 1 year after the effective date;
(ii) 60 percent 2 years after the effective date;
(iii) 100 percent 3 years after the effective date.
In the event that Executive is terminated without cause as defined in paragraph
4(a) of this Agreement pursuant to a sale of at least 51% of either of the
Company's subsidiaries known as International Fast Food Polska ("IFFP") or Pizza
King Polska ("PKP"), the Executive's Options shall be deemed to be fully vested
subject to the closing of such event. In no event shall this Option be exercised
10 years after this Option first becomes exercisable.
(i) The Executive shall participate in any management
incentive plan approved by the Company and any third party investor in any of
the Company's Polish subsidiaries.
4. TERMINATION.
(a) Notwithstanding anything contained in this Agreement to
the contrary, the Company by written notice to the Executive shall at all times
have the right to terminate this Agreement, and the Executive's employment
hereunder, with or without "Cause", as hereinafter defined. For the purposes
hereof, "Cause" shall be defined to mean any act of the Executive or any failure
to act on the part of the Executive which constitutes:
(i) fraud or embezzlement;
(ii) conviction of a felony; or
(iii) commission of a crime involving dishonesty; or
(iv) a breach of any of the terms, provisions or
obligations of this Agreement.
4
<PAGE>
(b) Notwithstanding anything contained in this Agreement to
the contrary, this Agreement and the Executive's employment hereunder shall be
terminated automatically (i) immediately upon the death of the Executive, and
(ii) if the Executive shall, as the result of mental or physical incapacity,
illness or disability, be unable and fail to perform reasonably his duties and
responsibilities provided for herein for any continuous period of 60 days during
the term of this Agreement, provided that the obligations of the Company to make
payments hereunder shall be suspended during the pendency of any disability
which has persisted for a continuous period of 30 days during the term of this
Agreement.
(c) If, during the Term, this Agreement is terminated pursuant
to Paragraph 4(b) hereof, the Company shall pay to the Executive or the personal
representative of his estate Twenty Five Thousand Dollars ($25,000) in a lump
sum within thirty (30) days of such termination.
(d) If, during the Term, the Company terminates the
Executive's employment hereunder without Cause, the Company shall pay to the
Executive a lump sum termination amount (the "Termination Amount") within thirty
days of such termination and neither party shall have any further obligations
hereunder, except pursuant to Paragraphs 5 and 6 hereof. The Termination Amount
shall be $50,000.00.
(e) If the Company terminates the Executive's employment
hereunder for Cause, neither party shall have any further obligations hereunder
except pursuant to Paragraphs 5 and 6 hereof.
5. NONDISCLOSURE. The Executive understands that, solely as a result of
his employment with the Company, he will have knowledge of and access to certain
confidential information relating to the operational, financial and planning
5
<PAGE>
aspects of the Company's business and other aspects of the Company's business.
The Executive agrees that, during or following his employment by the Company, he
will not disclose to others (except in the course of his employment with the
Company and solely in furtherance of the interest of the Company) any such
confidential information. The provisions of this paragraph shall not preclude
the Executive from using, after the termination of his employment with the
Company, his general professional knowledge and skills including those developed
while employed by the Company. The Executive further agrees to comply with any
provision of any agreement between the Company and any other party relating to
the confidentiality of information relating to that party or its operations.
6. RESTRICTIVE COVENANTS. The Executive shall not at any time during
the term of his employment hereunder and for a period of two (2) years after the
date this Agreement expires or is terminated for any reason, directly or
indirectly, for himself or for any other person, firm, corporation, partnership,
association or other entity, except on behalf of the Company:
(a) engage or be involved in any business operations in Poland
the same or similar to those currently conducted by the Company;
(b) interfere with business relationships between the Company
and its suppliers, franchisors, or customers;
(c) without the Company's prior written consent, become
employed by an entity with which the Company has a business relationship; or
(d) without the Company's prior written consent, hire or
solicit the employment of any person or associate in the employ of the Company
or its subsidiaries or affiliates.
6
<PAGE>
The Executive acknowledges that (i) the foregoing covenants are
reasonable in scope and duration and (ii) he will be able to earn a living and
provide for his family without violating the foregoing covenants.
7. NO DELEGATION. Neither the Company nor the Executive shall delegate
its or his obligations pursuant to this Agreement to any other person, except as
provided in Paragraph 8 hereof.
8. NO ASSIGNMENT. Neither the Company nor the Executive shall assign
any of its or his rights under this Agreement to any other person, except that
the Company may assign its rights under this Agreement to any successor entity
in a merger with the Company or any entity that purchases all or substantially
all of the Company's assets, and except that the Company may assign its rights
and obligations hereunder to a subsidiary or affiliate, after which assignment
the Company will have no obligations hereunder.
9. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
11. NOTICES. Any notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in writing and
7
<PAGE>
shall be deemed to have been duly given (a) when delivered by hand or facsimile,
or (b) 3 days after deposit in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, as follows:
If to the Company: International Fast Food Corporation
1000 Lincoln Road, Suite 200
Miami Beach, Florida 33139
With a copy to: Greenberg, Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
If to the Executive: James F. Martin
1121 Crandon Boulevard
Unit D604
Key Biscayne, Florida 33149
or to such other addresses as either party hereto may from time to time give
notice of to the other.
12. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns.
13. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity shall be caused by the length of any
period of time or the size of any area set forth in any part hereof, such period
of time or such area, or both, shall be considered to be reduced to a period or
area to the extent and only to the extent that such reduction would cure such
invalidity.
8
<PAGE>
14. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach or violation.
15. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. SPECIFIC PERFORMANCE. The Executive agrees that a violation by him
of any of the covenants contained in Paragraphs 5 or 6 of this Agreement will
cause irreparable damage to the Company the amount of which will be virtually
impossible to ascertain, and with respect to which the Company may not have an
adequate remedy at law, and for those reasons the Executive agrees that the
Company shall be entitled to an injunction or a restraining order (both
temporary or permanent) from any court of competent jurisdiction restraining any
violation of any or all of said covenants by the Executive, all persons he
controls, and all persons acting for or with him, either directly or indirectly,
in addition to any other form of relief, at law or equity, to which the Company
may be entitled. When used in Paragraphs 5, 6 and 16 hereof, the term "Company"
shall include all its directly and indirectly owned subsidiaries and its
affiliates involved in the restaurant business in Poland.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9
<PAGE>
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. No
amendment or modification of this Agreement shall be valid or binding upon the
Company unless made in writing and signed by a duly authorized officer of the
Company other than the Executive, or upon the Executive unless made in writing
and signed by him.
19. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals as of
the day and year first above written.
COMPANY:
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Mitchell Rubinson
Chairman of the Board
& Chief Executive Officer
EXECUTIVE:
By: /s/ James F. Martin
-------------------
James F. Martin
11
Exhibit 10.2
AMENDMENT TO RESTAURANT DEVELOPMENT AGREEMENT
---------------------------------------------
AMENDMENT (the "Amendment") TO RESTAURANT DEVELOPMENT AGREEMENT to that
certain RESTAURANT DEVELOPMENT AGREEMENT dated as of March 14, 1997, as amended
(the "Development Agreement"), dated as of October 21, 1999, by and among
INTERNATIONAL FAST FOOD CORPORATION, a company organized under the laws of the
State of Florida, United States ("IFFC"), INTERNATIONAL FAST FOOD POLSKA S.P.
zo.o., a Polish limited liability company organized under the laws of Poland
("IFFP"), and BURGER KING CORPORATION, a company organized under the laws of
State of Florida, United States ("BKC").
WHEREAS, pursuant to the Development Agreement, BKC has granted IFFC
the right to develop new "Burger King" restaurants in the Republic of Poland;
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the Guarantee to a maximum aggregate amount of U.S. $10,000,000, upon
the terms, and subject to the conditions, of that certain Guarantee of Future
Advances Agreement dated of even date herewith by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to Mitchell
Rubinson, a principal shareholder of IFFC ("Rubinson");
WHEREAS, Rubinson has agreed to personally guarantee (i) his
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement and to secure such personal
guarantee by the grant of a security interest in, and a pledge to BKC of, an
aggregate of 5,000,000 shares of common stock of IFFC which are owned by
Rubinson;
<PAGE>
WHEREAS, IFFC, IFFP and BKC have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount of the Credit Agreement and the Guarantee and to
grant BKC additional security for the repayment of IFFC's and IFFP's obligations
under the Transaction Documents.
WHEREAS, BKC has agreed to defer all amounts currently owed by IFFC and
IFFP, including the development fee of $250,000, and those amounts falling due
after the execution of the Transaction Documents, including royalties and
franchise fees, until January 15, 2001.
WHEREAS, in connection with, and in consideration of, the foregoing,
BKC and IFFC desire to amend the Development Agreement upon the terms, and
subject to the conditions, hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, all capitalized terms used
herein shall have the respective meanings assigned to such terms in the
Development Agreement.
2. AMENDMENT.
2.1 The Development Agreement is hereby amended as follows:
The minimum development requirements for the purpose of maintaining
the Developer's exclusive rights under the Development Agreements
order to retain the exclusive rights to develop Burger King
Restaurants, the Developer must meet the following development
schedule:
Minimum Number of
Development Units
Open and Trading
----------------
December 31, 2000 31 Development Units
December 31, 2001 37 Development Units
December 31, 2002 43 Development Units
December 31, 2003 49 Development Units
December 31, 2004 55 Development Units
December 31, 2005 61 Development Units
December 31, 2006 67 Development Units
December 31, 2007 73 Development Units
If IFFP's development rights in Poland will cease to be exclusive on
December 31, 2000, then from that date and until the expiration of
the Development Agreement, the Developer's development rights shall
be non-exclusive. For any restaurant opened by a third party after
December 31, 2000, the Developer shall not be entitled to any service
fees or fees in any way connected to the opening or operation of any
Development Unit by any third party, unless such third party
franchisee has first agreed with such terms and such terms and
conditions have been fully disclosed to BKC and are deemed reasonable
and approved by BKC in writing in relation to the service rendered.
2
<PAGE>
2.2. The remaining terms of the Development Agreement, including the
requirement that in each year commencing on January 1, 2000, no fewer
than four Development Units in each calendar year shall be inline or
free standing restaurants within city centers or shopping mall
locations, shall continue in full force and effect.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF IFFC AND IFFP. Each of IFFC and
IFFP represents and warrants to BKC that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. Each of IFFC and IFFP is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of IFFC and IFFP has all required
power and authority to own its properties and to carry on its business as
presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY. This Amendment has been
duly executed and delivered by each of IFFC and IFFP, and each of IFFC and IFFP
has all requisite power and legal authority to execute and deliver this
Amendment, to consummate the transactions contemplated hereby, and to perform
its obligations hereunder. This Amendment constitutes the legal, valid and
binding obligation of each of IFFC and IFFP, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy laws or laws affecting the enforcement of creditors rights generally.
(c) NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and delivery
of this Amendment nor the effectuation of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws (or similar
organizational documents) of IFFC or IFFP;
(ii) violate any legal requirements applicable to IFFC or
IFFP;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or permit
applicable to IFFC or IFFP;
(iv) result in the creation of any lien, charge or other
encumbrance on any property of IFFC or IFFP (except as expressly contemplated
hereby); or
(v) require IFFC or IFFP to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party or any
governmental authority.
(d) No Proceedings. Except as disclosed in IFFC's filings with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, or for matters which are not, individually or in the
aggregate, material to IFFC, no suit, action or other proceeding is pending or,
to the knowledge of IFFC or IFFP, threatened, before any governmental authority
seeking to restrain such or prohibit its entry into this Amendment, or seeking
damages against IFFC or IFFP or their respective properties as a result of the
transactions contemplated by this Amendment.
3
<PAGE>
(e) Compliance with Laws. Each of IFFC and IFFP has all material
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of each of IFFC and IFFP have been and
are being conducted in accordance in all material respects with all applicable
laws, rules and regulations, and each of IFFC and IFFP is not in violation of
any judgment, law or regulation.
(f) Disclosure; Due Diligence. This Amendment, when taken as a whole
with other documents and certificates furnished by each of IFFC and IFFP to BKC
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
3.2 REPRESENTATIONS AND WARRANTIES BY BKC. BKC represents and
warrants to each of IFFC and IFFP that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. BKC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. BKC has all required power and authority to own
its properties and to carry on its business as presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY This Amendment has been
duly executed and delivered by BKC, and BKC has all requisite power and legal
authority to execute and deliver this Amendment, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Amendment
constitutes the legal, valid and binding obligation of BKC, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy laws or laws affecting the enforcement of
creditors rights generally.
(c) DISCLOSURE; DUE DILIGENCE. This Amendment, when taken as a whole
with other documents and certificates furnished by BKC to each of IFFC and IFFP
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
4. MISCELLANEOUS.
--------------
5.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Amendment.
5.2 BINDING ON SUCCESSORS, Transferees and Assigns; Assignment. This
Amendment shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto; provided, that BKC may assign its rights
and delegate its duties under this Amendment to one or more of its subsidiaries
or affiliates.
5.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions
of this Amendment, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
5.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
4
<PAGE>
5.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its legal,
accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder including, without limitation, the
reimbursement rights provided in Section 2 hereof.
5.6 JURISDICTION. Any claim arising out of this Amendment shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. Notwithstanding
the foregoing, at the option of BKC, any claims against IFFP hereunder shall be
settled by the Arbitration Court at the Polish Chamber of Commerce with its seat
in Warsaw in accordance with its rules, and all such proceedings will be
conducted in the English language.
5.7 GOVERNING LAW; SEVERABILITY. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
5.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
5.9 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Amendment.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
INTERNATIONAL FAST FOOD POLSKA
S.P. Z.O.O.
By: /S/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
--------------------
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President -
Financial Affairs
Fax no: 44 1895 206015
With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Miami, Florida 33131 U.S.A.
Fax no: (305) 789-8953
6
Exhibit 10.3
AMENDED AND RESTATED REIMBURSEMENT AGREEMENT
--------------------------------------------
AMENDED AND RESTATED REIMBURSEMENT AGREEMENT (this "Agreement"), dated
as of October 21, 1999, by and among INTERNATIONAL FAST FOOD CORPORATION, a
company organized under the laws of the State of Florida, United States
("IFFC"), INTERNATIONAL FAST FOOD POLSKA S.P. z.o.o., a Polish limited liability
company organized under the laws of Poland ("IFFP"), and BURGER KING
CORPORATION, a company organized under the laws of State of Florida, United
States ("BKC").
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the Guarantee to a maximum aggregate amount of U.S. $10,000,000, upon
the terms, and subject to the conditions, of that certain Guarantee of Future
Advances Agreement dated of even date herewith by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to Mitchell
Rubinson, a principal shareholder of IFFC ("Rubinson");
WHEREAS, Rubinson has agreed to personally guarantee (i) his
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement and to secure such personal
guarantee by the grant of a security interest in, and a pledge to BKC of, an
aggregate of 5,000,000 shares of common stock of IFFC which are owned by
Rubinson;
<PAGE>
WHEREAS, IFFC, IFFP and BKC have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount of the Credit Agreement and the Guarantee and to
grant BKC additional security for the repayment of IFFC's and IFFP's obligations
under the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT AND RESTATEMENT. This Agreement amends, supersedes and restates the
Reimbursement Agreement in its entirety.
2. REIMBURSEMENT. IFFC and IFFP agree, jointly and severally, to pay or
reimburse BKC within 72 hours of its written demand (which demand may be made
upon either IFFC or IFFP) for (i) any payments to be made or previously made by
BKC under the Guarantee (such amounts are hereinafter referred to as "Indemnity
Payments"), (ii) interest on the amount of any Indemnity Payment remaining
unpaid by IFFC or IFFP under clause (i) above, from (and including) the date of
such Indemnity Payment, until payment in full thereof (after as well as before
judgment) at a rate equal to the Base Rate (as defined below) from time to time
in effect plus two hundred basis points and (iii) all fees, costs and expenses
incurred by BKC in connection with the enforcement of its rights hereunder.
"Base Rate" means, on any date, a fluctuating rate of interest per annum equal
to the rate of interest published in the "Wall Street Journal" on such date as
the "prime rate" for U.S. dollar loans by major money center banks. Interest
accruing on the Base Rate shall be computed on the basis of the actual number of
days elapsed in a 365 day year.
(b) Any failure of IFFC or IFFP to perform its obligations pursuant to
this Section 2 shall constitute an event of Default within the meaning and for
purposes of the Agreement for the Transfer of Title to Share by way of Security
dated of even date herewith (the "Security Agreement") by and between IFFC, BKC
and IFFP.
3. COVENANTS. IFFC and IFFP agree that, except for actions previously taken and
actions taken solely and directly in connection with the repayment of amounts
outstanding under the Credit Agreement or due under this Agreement, from the
date hereof until the later to occur of (i) the date of repayment by IFFP of all
amounts borrowed under the Credit Agreement or (ii) the date of payment by IFFC
or IFFP of all amounts due and owing BKC under this Agreement, as follows:
(a) Neither IFFC nor IFFP shall incur any Indebtedness of other than
Indebtedness as in effect on the date hereof, without the prior
written c-onsent of BKC. BKC shall not unreasonably withhold its
consent in the case of Indebtedness proposed to be incurred by IFFC.
BKC may refuse to consent in its sole and absolute discretion for
any reason or for no reason in the case of Indebtedness proposed to
be incurred by IFFP.
(b) Upon the consummation by IFFC of the sale of any of its equity or
debt securities (including any securities convertible into any of
the foregoing), whether in a private transaction or through a public
offering, IFFC shall cause the proceeds, if any, from such sale
which are in excess of $10,000,000 first to be paid to BKC to the
extent required under the Reimbursement Agreement, and then to be
promptly paid to Citibank under the Credit Agreement to repay
outstanding borrowings thereunder, and shall use its best efforts to
cause the amount of the Guarantee to be reduced by the amount of
such payment(s).
2
<PAGE>
(c) BKC's authorized officers and representatives shall have the right
during normal business hours upon reasonable notice to examine the
books and records of IFFC and IFFP and to make copies and notes
therefrom for the purpose of ascertaining compliance with or
obtaining enforcement of the this Agreement or the Credit Agreement.
(d) Except with respect to operating leases entered into in the
ordinary course of business and consistent with past practices and
IFFP's development plans, neither IFFC nor IFFP shall become liable
with respect to any guarantee, including any reimbursement
obligation, whether contingent or matured under letters of credit or
otherwise (or become contractually committed to do so).
(e) Neither IFFC nor IFFP shall make any dividend or other distribution
with respect to its outstanding equity securities (or become
contractually committed to do so) except for dividends payable
solely in the securities of IFFC or IFFP or as permitted by the
Credit Agreement. Further, no payments of any description shall be
made to Rubinson, IFFC or any other investor, by way of salary or
consultancy fee, or in any other basis except under arrangements (if
any) which exist today and which may have been fully disclosed in
writing to BKC prior to the date hereof. By way of exception, fair
and reasonable salaries, bonuses and other benefits may be paid to
directors and other persons employed by IFFP and engaged full time
in the management of such company, and resident in Poland. A breach
of the terms of this paragraph shall be grounds for BKC withdrawing
the Guarantee in total. Additionally, IFFC will not repay any
inter-company loans while the Guarantee is outstanding, including
any inter-company loans which exist as of the date hereof and any
future inter-company loans.
(f) Neither IFFC nor IFFP shall enter into any agreement, instrument,
deed or lease which prohibits or limits the ability of IFFC or IFFP
to create, incur, assume or suffer to exist any Lien upon any of
their respective properties, assets or revenues, whether now owned
hereafter acquired, or which requires the grant of any collateral
for such obligation if such collateral is granted for another
obligation, except with respect to borrowings under the Credit
Agreement. Notwithstanding the foregoing, the covenants set forth in
this Section 3 shall not be deemed to preclude the sale and
leaseback of assets so long as the terms of such transaction are at
least as favorable to IFFC or IFFP and IFFC or IFFP, as the case may
be, could have obtained in an arms-length transaction with an
unaffiliated party.
(g) Neither IFFC nor IFFP shall effect any transaction with any of
their respective Affiliates (as such term is defined under the
Securities Act of 1933, as amended (except for IFFC and IFFP) on a
basis less favorable to IFFC and IFFP than would be the case if such
transaction had been effected with a non-Affiliate.
(h) IFFP shall not engage in any business other than the business in
which it is currently engaged on the date hereof.
(i) IFFC and IFFP shall observe and comply with all of the covenants
set forth in the Credit Agreement.
(j) For purposes of the foregoing covenants, the following terms shall
have the respective meanings set forth below:
"Indebtedness" means all obligations, contingent or otherwise, which in
accordance with U.S. generally accepted accounting principles are
required to be classified upon a balance sheet of the specified person
as liabilities.
"Lien" means, with respect to the specified person:
3
<PAGE>
(a) any lien, encumbrance, mortgage, pledge, charge, or security
interest of any kind upon any property or assets of such person,
whether now owned or hereafter acquired, or upon the income or
profits therefrom;
(b) the sale, assignment, pledge or transfer of any accounts or general
intangibles of such person for purposes of creating a security
interest; and
(c) the transfer of any tangible property or assets for the purpose of
creating or granting a security interest.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 REPRESENTATIONS AND WARRANTIES OF IFFC AND IFFP. Each of IFFC and
IFFP represents and warrants to BKC that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. Each of IFFC and IFFP is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of IFFC and IFFP has all required
power and authority to own its properties and to carry on its business as
presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each of IFFC and IFFP, and each of IFFC and IFFP
has all requisite power and legal authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby, and to perform
its obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of each of IFFC and IFFP, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy laws or laws affecting the enforcement of creditors rights generally.
(c) NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and delivery
of this Agreement nor the effectuation of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws (or similar
organizational documents) of IFFC or IFFP;
(ii) violate any legal requirements applicable to IFFC or IFFP;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or permit applicable to
IFFC or IFFP;
(iv) result in the creation of any lien, charge or other
encumbrance on any property of IFFC or IFFP (except as expressly contemplated
hereby); or
(v) require IFFC or IFFP to obtain or make any waiver, consent,
action, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any governmental
authority.
(d) NO PROCEEDINGS. Except as disclosed in IFFC's filings with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, or for matters which are not, individually or in the
aggregate, material to IFFC, no suit, action or other proceeding is pending or,
to the knowledge of IFFC or IFFP, threatened, before any governmental authority
seeking to restrain such or prohibit its entry into this Agreement, or seeking
damages against IFFC or IFFP or their respective properties as a result of the
transactions contemplated by this Agreement.
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(e) COMPLIANCE WITH LAWS. Each of IFFC and IFFP has all material
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of each of IFFC and IFFP have been and
are being conducted in accordance in all material respects with all applicable
laws, rules and regulations, and each of IFFC and IFFP is not in violation of
any judgment, law or regulation.
(f) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by each of IFFC and IFFP to BKC
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
4.2 REPRESENTATIONS AND WARRANTIES BY BKC. BKC represents and warrants
to each of IFFC and IFFP that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. BKC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. BKC has all required power and authority to own
its properties and to carry on its business as presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY This Agreement has been duly
executed and delivered by BKC, and BKC has all requisite power and legal
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of BKC, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy laws or laws affecting the enforcement of
creditors rights generally.
(c) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by BKC to each of IFFC and IFFP
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
5. MISCELLANEOUS.
5.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
5.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto; provided, that BKC may assign its rights
and delegate its duties under this Agreement to one or more of its subsidiaries
or affiliates.
5.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
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5.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
5.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its legal,
accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder including, without limitation, the
reimbursement rights provided in Section 2 hereof.
5.6 JURISDICTION. Any claim arising out of this Agreement shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. Notwithstanding
the foregoing, at the option of BKC, any claims against IFFP hereunder shall be
settled by the Arbitration Court at the Polish Chamber of Commerce with its seat
in Warsaw in accordance with its rules, and all such proceedings will be
conducted in the English language.
5.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
5.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
5.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL FAST FOOD CORPORATION
By:/s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
INTERNATIONAL FAST FOOD POLSKA
S.P. Z.O.O.
By: /s/ Mitchell Rubinson
----------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
--------------------
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President -
Financial Affairs
Fax no: 44 1895 206015
With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Miami, Florida 33131 U.S.A.
Fax no: (305) 789-8953
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Exhibit 10.4
AMENDED AND RESTATED AGREEMENT FOR THE TRANSFER OF TITLE
TO SHARES BY WAY OF SECURITY
---------------------------------------------------------
THIS AMENDED AND RESTATED AGREEMENT FOR THE TRANSFER OF TITLE TO SHARES BY WAY
OF SECURITY (hereinafter referred to as the "Agreement") is entered into as of
October 21, 1999, by and between INTERNATIONAL FAST FOOD CORPORATION, a company
organized under the laws of Florida, USA, having its principal place of business
at 1000 Lincoln Road, Suite 200, Miami Beach, Florida 33139, USA (hereinafter
referred to as "IFFC"), BURGER KING CORPORATION, a company organized under the
laws of Florida, USA, having its principal place of business at 17777 Old Cutler
Rd, Miami, Florida, USA (hereinafter referred to as "BKC"), and INTERNATIONAL
FAST FOOD POLSKA Sp. z o.o. , a Polish limited liability company organized under
the laws of Poland, having its registered office at 15 Jagiellonska Street,
Warsaw, Poland, hereinafter referred to as "IFFP").
WHEREAS, the IFFC is the owner of one issued share having a nominal
value of PLN 54,866,089.57 at present constituting 100% of entire share capital
(hereinafter referred to as the "Shares"), of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. agreed to provide
credit to IFFP in the total amount of U.S. $5,000,000 (hereinafter referred to
as the "Facility") pursuant to the Framework Agreement and the Credit Agreement
dated February 24, 1999 (as amended, the "Credit Agreement");
WHEREAS, as a condition of the disbursement of funds under the
Facility, BKC issued a guarantee for the benefit of Citibank (Poland) S.A. of
the repayment of amounts borrowed under the Facility (as amended, the
"Guarantee");
WHEREAS, IFFC and IFFP executed a certain Reimbursement Agreement dated
February 24, 1999 (such agreement, as amended from time to time, is referred to
herein as the "Reimbursement Agreement"), agreeing to reimburse BKC for any
loss, cost or expense which BKC may or might incur by reason of its execution of
or performance under the Guarantee;
WHEREAS, IFFC transferred title to the Shares to BKC as security for
the performance of the obligations of IFFC and IFFP under the Reimbursement
Agreement pursuant to an Agreement for the Transfer of Title to Shares by way of
Security dated February 24, 1999 (the "Security Agreement");
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event BKC
acquires the Shares pursuant to the exercise of its rights under the Security
Agreement, BKC will sell the Shares held by BKC to Rubinson;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
amount which may be borrowed under the Credit Agreement, BKC has agreed to
increase the amount of the Guarantee to a maximum aggregate amount of U.S.
$10,000,000, upon the terms, and subject to the conditions, of that certain
Guarantee of Future Advances Agreement dated of even date herewith by and among
BKC, IFFC and IFFP; and
<PAGE>
WHEREAS, Rubinson has agreed to personally guarantee (i) his
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement and to secure such personal
guarantee by the grant of a security interest in, and a pledge to BKC of, an
aggregate of 5,000,000 shares of common stock of IFFC which are owned by
Rubinson;
WHEREAS, IFFC, IFFP and BKC have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount of the Credit Agreement and the Guarantee and to
grant BKC additional security for the repayment of IFFC's and IFFP's obligations
under the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT AND RESTATEMENT
This Agreement amends, supersedes and restates the Security Agreement in its
entirety.
2. DEFINITIONS
"BUSINESS DAY" means a day (other than Saturday) when banks are open for
business in Miami Beach, Florida.
"COLLATERAL" means the Shares, together with all certificates, options or rights
of any nature that may be issued or granted by IFFP with respect thereto, any
property received or otherwise distributed in connection therewith, all
dividends and income with respect thereto, and all Proceeds thereof.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 7 hereof.
"LIEN" means a mortgage, pledge, lien, security interest or other charge or
encumbrance or any segregation of assets or revenues or other preferential
arrangement (whether or not constituting a security interest) with respect to
any present or future assets, including fixtures, revenues or rights to the
receipt of income of the Person referred to in the context in which the term is
used.
"PERSON" means any natural person, corporation, unincorporated organization,
trust, joint-stock company, joint venture, association, company, partnership or
government, or any agency or political subdivision of any government.
"PLN" OR "POLISH ZLOTYS" means the lawful currency of the Republic of Poland.
"PROCEEDS" means all "proceeds" as such term is defined in Section 679.306 of
the Uniform Commercial Code in effect in the State of Florida on the date
hereof.
"SECURED LIABILITIES" means all liabilities of IFFC to BKC which may arise under
the Reimbursement Agreement.
All capitalized terms not otherwise defined herein shall have the meanings given
to such terms in the Reimbursement Agreement.
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2. SECURITY
As security for the prompt payment and complete performance when due (whether by
acceleration or otherwise) of the Secured Liabilities, IFFC hereby transfers to
BKC the ownership title to the Shares.
3. REPRESENTATIONS AND WARRANTIES OF IFFC
IFFC represents and warrants to BKC as follows:
(a) The execution and performance of this Agreement does not violate
any provisions of any existing indenture, contract or agreement
to which IFFC is a party.
(b) The Shares have been duly and validly issued and are fully paid
and non-assessable.
(c) IFFC is the sole legal and beneficial owner of, and has good and
marketable title to, the Shares, free and clear of any and all
Liens or options in favor of, or claims of, any other Person,
except the Lien created by this Agreement, and has the
unqualified right and power to grant the security interest in the
Collateral granted hereby without the consent of any other
Person.
(d) The Shares are all of the shares of IFFP owned by IFFC, and
constitute 100% of the issued and outstanding share capital of
IFFP.
(e) IFFC has delivered to BKC all documents evidencing the Shares,
together with all documents permitting transfer of title of the
Shares to BKC.
(f) The Lien granted pursuant to this Agreement constitutes a valid,
perfected first priority Lien on the Collateral, enforceable as
such against all creditors of IFFC and any Persons purporting to
purchase any Shares from IFFC.
(g) IFFC is not in default under any agreement, obligation or duty to
which it is a party, which default would threaten the ability of
IFFC to fulfill its obligations under this Agreement;
(h) Neither the signing of this Agreement nor the performance of any
of the transactions contemplated in it does or will controvert or
constitute a default under, or cause to be exceeded, any
limitation imposed on IFFC by or contained in:
(i) any law by which it or any of its assets is bound or
affected; or
(ii) any agreement to which it is a party or is bound,
(i) The execution and delivery of this Agreement has been duly
authorized by all required corporate action and IFFC has received
all required consents and approvals from IFFP and its
shareholders to transfer the Shares to BKC according to this
Agreement;
(k) Except as otherwise disclosed in IFFC's periodic reports filed
with the United States Securities and Exchange Commission under
the Securities and Exchange Act of 1934, as amended, no
litigation, arbitration or administrative proceedings claim in
which there is a serious possibility of an adverse decision which
could by itself or together with any other such proceedings or
claims either have a material adverse effect on the business,
assets or condition thereof, or materially and adversely affect
its ability to observe or perform its obligations under this
Agreement, is currently in progress or pending against IFFC;
(l) Except as disclosed in IFFC's periodic reports filed under the
Securities Exchange Act of 1934, as amended, IFFC is not in
default in the payment of any taxes, or other public dues and no
material claim is being asserted with respect to taxes or other
public dues.
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4. UNDERTAKINGS OF IFFC
IFFC convenants and agrees with BKC that until its obligations under the
Reimbursement Agreement have been satisfied:
(a) Without the prior written consent of BKC, the IFFC shall not (i)
vote to enable, or take any other action to permit, IFFP to issue
any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of
any nature; (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral;
or (iii) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the Lien provided
for by this Agreement.
(b) At any time and from time to time, upon the written request of
BKC, and at the sole expense of the IFFC, IFFC will promptly and
duly execute and deliver such further instruments and documents
and take such further actions as BKC may reasonably request for
the purposes of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted.
(c) Without the prior written consent of BKC, IFFC shall not receive,
collect or have paid over any dividends or other distributions
declared or paid on the Shares, including, but not limited to,
(i) dividends or redistributions constituting dividends, (ii)
dividends or distributions in property other than cash or stock,
and (iii) liquidation dividends (either partial or complete), and
any and all such dividends and distributions shall constitute and
be additional security for the obligations hereby secured, shall
be held by the IFFC in trust for BKC without commingling such
dividends and distributions with any other funds of IFFC and
shall be paid over and/or pledged and deposited with BKC, duly
endorsed or accompanied by appropriate instruments of transfer
duly executed by IFFC, all in form and substance satisfactory to
BKC, and BKC shall have in respect thereof all of the other
powers and rights as are herein provided in respect of the Share.
(d) IFFC shall take, at its own expense, whatever action BKC may
require for establishing, maintaining, or enforcing the Security
over the Shares, and the giving of any notice, order or
direction, and the making of any registration, which BKC may
think expedient. Specifically, IFFC shall execute and file with
the Florida Secretary of State a UCC-1 financing statement, which
shall be in form and substance satisfactory to BKC and shall
execute and file with the Polish Antimonopoly Office a
notification of transfer of the Shares to BKC.
(e) IFFC shall not do or knowingly permit to be done any act or thing
which might reasonably be expected to jeopardize the right of BKC
as owner of the Shares.
5. UNDERTAKINGS OF IFFP
IFFP recognizes the transfer evidenced by this Agreement and undertakes, upon
the execution hereof, to enter BKC into IFFP's register of shares as beneficiary
of the security interest with respect to the Shares. IFFP further undertakes
that after BKC is entered into share register, it will deliver the share
register to BKC or its designated agent in Warsaw to hold in trust for the term
of this Agreement. IFFP further undertakes to maintain its existence, keep its
properties in good repair, maintain insurance as reasonably required by the
conduct of its business and defend BKC's security interests in the Collateral
against claims of third parties. IFFP shall provide BKC with proof of the
keeping of this undertaking from time to time, as reasonably requested by BKC.
6. UNDERTAKINGS OF BKC
BKC hereby undertakes to transfer and or release the ownership title to, or any
security interest in, the Shares and all other Collateral to IFFC immediately
after expiration of the Guarantee (including the termination or the Guarantee
upon the termination of the Facility), unless and to the extent that BKC shall
have any obligations under the Guarantee.
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7. EVENTS OF DEFAULT
As used herein, the term "Event of Default" shall include any or all of the
following:
(a) The filing or issuance of a notice of any lien, warrant or notice
of levy for taxes or assessment against the assets of IFFC or
IFFP (except as disclosed in IFFC's most recent Quarterly Report
on Form 10-Q and for those which relate to claims which are not,
individually or in the aggregate, material to IFFC or IFFC or
those which are being contested in good faith and for which
adequate reserves have been created); or
(b) The occurrence of a default under the Reimbursement Agreement; or
(c) The adjudication of IFFC or IFFP as bankrupt, or the taking of
any voluntary action by IFFC or IFFP or any involuntary action
against IFFC or IFFP seeking an adjudication of IFFC or IFFP as
bankrupt, or seeking relief by or against IFFC or IFFP under any
provision of the United States Bankruptcy Code or analogous code
of the Republic of Poland.
8. REMEDIES
Subject to the provisions of that certain Amended and Restated Purchase
Agreement of even date herewith (the "Purchase Agreement"), by and among IFFC,
Mitchell Rubinson, IFFP and BKC, upon the occurrence any Event of Default, BKC
may, without demand of performance or other demand, advertisement or notice
(except, the notice specified below with respect to sales) to or upon IFFC or
IFFP, all of which are expressly hereby waived, and in addition to other rights
it may have, or hereafter acquire, (i) immediately collect, receive,
appropriate, retain and, if it so chooses, realize upon, the Shares, or any part
thereof, have such Shares registered in the name of BKC or its nominee, and
thereafter exercise all voting and other rights with respect to the Shares; (ii)
sell, assign, give options to purchase, or otherwise dispose of, in one or more
parcels, the Shares, or (iii) exercise the rights of a secured creditor under
the Uniform Commercial Code of Florida or similar law in any applicable
jurisdiction. Without limiting the foregoing, subject to the provisions of the
Purchase Agreement, BKC shall have the right to retain the Collateral in
discharge of the indebtedness secured thereby. Any notice of sale, disposition,
or other intended action by BKC, mailed by ordinary mail to the address of IFFC
as shown on the records of BKC at least five (5) days before the action, shall
constitute reasonable notice. In case of any sale or other disposition of any of
the Collateral aforesaid, after deducting all costs and expenses of every kind
for care, safekeeping, collection, sale, delivery and for reasonable attorneys'
fees for legal services in connection therewith, BKC shall apply the residue of
the proceeds of the sale or sales or other disposition of the Collateral, in
full or partial payment of the obligations hereby secured, as it may deem
proper, and returning the surplus, if any, to IFFC.
9. REALIZATION
BKC may, if it deems it advisable to do so, restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the resale or
distribution of any of the Collateral and, in particular may restrict the
prospective bidders of purchasers to Persons which, in its judgment will have
the capacity to perform the commitments required by an owner of IFFP as the
holder of rights under any development or franchise agreement with BKC.
10. ASSIGNMENT
BKC may assign or transfer this Agreement, or any instrument evidencing the
obligations hereby secured, and may transfer and/or deliver any and/or all of
the Collateral, whether now owned or hereafter acquired, held as security
hereunder, or any part hereof, to any subsidiary or affiliate of BKC, which
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<PAGE>
shall thereupon become vested with all the powers and rights and obligations in
respect thereto given to BKC in this Agreement or in the instruments so
transferred. BKC shall thereafter be forever relieved and fully discharged from
any liability or responsibility with respect to such Collateral, but BKC shall
retain all rights and powers hereby given with respect to any and all
instruments, rights or Collateral not so transferred. No delay on the part of
BKC shall operate as a waiver of such rights, nor shall the waiver of any breach
hereunder operate as a waiver of any subsequent breach. IFFC hereby agrees that
its obligations under this Agreement shall be absolute and unconditional,
irrespective of:
(i) any lack of validity or enforceability of the Reimbursement
Agreement, the Guarantee, or any other agreement or instrument
relating to any of the foregoing;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations secured
hereunder, or any other amendment or waiver of or any consent
to any departure from the Reimbursement Agreement, the
Guarantee, or any other agreement or instrument relating to
any of the foregoing, in each case so long as IFFC shall have
received written notice thereof; or
(iii) any exchange, release or non-perfection of any other
collateral securing the obligations secured hereby, or any
release or amendment or waiver of or consent to departure from
any guaranty, for all or any of such obligations.
11. POWER OF ATTORNEY TO BKC
IFFC hereby appoints BKC as IFFC's attorney-in-fact for the purpose of carrying
out the provisions of this Agreement and taking any action contemplated or
permitted hereby and executing any instrument that BKC may deem necessary or
advisable to accomplish the purposes hereof. Without limiting the generality of
the foregoing, if an Event of Default shall have occurred, BKC shall have the
right and power to receive, endorse and collect all checks and other orders for
the payment of money made payable to IFFC representing any dividend, payment or
other distribution payable in respect of the Shares or any part thereof and to
give full discharge for the same.
12. POWER OF ATTORNEY TO IFFC
Until the transfer of ownership title to the Shares under this Agreement is
effective, BKC hereby gives IFFC the Power of Attorney subject to the covenants
contained at Paragraph 4, above, to vote in the name and on behalf of BKC at
the ordinary and extraordinary Shareholders' Meetings of IFFP in all matters
which may be placed on the agenda of these meetings. BKC has the right to
revoke this Power of Attorney at any time during the term of this Agreement
upon the occurrence of an Event of Default. This power of attorney does not
give the right:
a) to receive notices of convening the Shareholders' Meeting (IFFP
should separately notify IFFC and BKC on the convening of any
Shareholders' Meeting); and
b) to vote at the Shareholders' Meeting held without formal
convening.
13. BKC's DUTIES WITH RESPECT TO COLLATERAL
Except as may result from BKC's gross negligence or willful misconduct, BKC
shall not be under any liability or obligation to take any steps whatsoever to
preserve the value of any Collateral pledged hereunder, to fix any liability
upon, or to collect or to enforce payment of the obligations hereby secured,
whether by giving any notice, presenting, demanding payment, protesting,
instituting suit or otherwise.
14. EXPENSES AND INDEMNITY
IFFC will indemnify BKC with respect to all liabilities and expenses incurred by
it in good faith in the execution or purported execution of any right, powers,
or discretion vested in it pursuant hereto. BKC shall not be liable for any
losses arising in connection with the exercise or purported execution of any of
its rights hereunder.
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15. NOTICES
Except as otherwise expressly provided herein, all notices, requests, demands or
other communications required or contemplated by the provisions hereof shall be
in writing, or by telex or facsimile transmission, and shall be deemed to have
been given or made on the third Business Day after the deposit thereof in the
United States mail, registered mail postage prepaid, or when received if sent by
telex or facsimile transmission or delivered by hand, addressed to the
appropriate party at its address set forth next to such party's signature
hereto, or at such other address as may be designated by such party by notice to
the other parties hereto given pursuant to this Section 15.
The addresses, and facsimile number of the for all notices under or in
connection with this Agreement are as follows:
As to BKC:
Burger King Corporation
P.O. Box 020783
17777 Old Cutler Rd,
Miami, Florida 33102-0783,
USA
telephone: __________________
facsimile: __________________
As to IFFC:
International Fast Food Corporation
1000 Lincoln Road, Suite 200,
Miami Beach, Florida 33139,
USA
telephone: (305) 531 58 00
facsimile: (305) 538 50 37
As to IFFP:
International Fast Food Polska
15 Jagiellonska Street,
03-719 Warsaw,
Poland
telephone: (22) 670 01 22
facsimile: (22) 670 01 32
or such other as such party may notify to the others by not less than 5 Business
Days' notice.
16. NON-EXCLUSIVITY OF REMEDIES
No remedy herein conferred upon or reserved to BKC is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity. No delay or omission
to exercise any right or power accruing upon any default, omission or failure of
7
<PAGE>
performance hereunder shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle BKC to
exercise any remedy reserved to it in this Agreement, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
In the event any provision contained in this Agreement should be breached by
IFFC and hereafter duly waived by BKC, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Agreement shall
be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by BKC.
17. ENTIRE AGREEMENT
This Agreement, together with the Reimbursement Agreement, the Purchase
Agreement and the Guarantee, constitute the entire agreement with respect to the
pledge of the Collateral, and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and may be executed simultaneously in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
18. SEVERABILITY
The invalidity or unenforceability of any one or more phrases, sentences,
clauses or sections in this Agreement shall not affect the validity or
enforceability of the remaining portions of this Agreement, or any part thereof.
This Agreement shall be governed and construed exclusively by the laws of the
State of Florida without reference to the conflict of laws rules thereof.
19. BINDING EFFECT
The terms and provisions of this Agreement shall be binding upon and shall inure
to the benefit of IFFC and BKC, and their respective successors, assigns, heirs,
devisees, and personal representatives. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party hereto;
provided, that BKC may assign its rights and delegate its duties hereunder to
one of its subsidiaries or affiliates.
21. LANGUAGE
All notices or communications under or in connection with this Agreement shall
be in English. This Agreement shall be executed in English Language.
22. WAIVER OF TRIAL BY JURY
IFFC AND BKC, BY THEIR ACCEPTANCE OF THIS AGREEMENT, EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BKC ACCEPTING THIS AGREEMENT.
23. SETTLEMENT OF DISPUTES
Any claim arising out of this Agreement shall be brought in any state
or federal court located in Miami-Dade County, Florida, United States. For the
purpose of any suit, action or proceeding instituted with respect to any such
claim, each of the parties hereto irrevocably submits to the jurisdiction of
such courts in Miami-Dade County, Florida, United States. Each of the parties
hereto further irrevocably consents to the service of process out of said courts
by mailing a copy thereof by registered mail, postage prepaid, to such party and
agrees that such service, to the fullest extent permitted by law, (i) shall be
deemed in every respect effective service of process upon it in any such suit,
action or proceeding and (ii) shall be taken and held to be a valid personal
service upon and a personal delivery to it. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court located in Miami-Dade County, Florida,
United States, and any claim that any such suit, action or proceeding brought in
such court has been brought in an inconvenient forum.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day first above written.
Burger King Corporation
By: /s/ Philip Kinnersly
--------------------
International Fast Food Corporation
By: /s/ Mitchell Rubinson - Chairman and CEO
-----------------------------------------
International Fast Food Polska Sp. z o.o.
By: /s/ Mitchell Rubinson - Authorized Signature
--------------------------------------------
9
Exhibit 10.5
GENERAL RELEASE
THIS GENERAL RELEASE, dated as of October 21, 1999 ("Agreement"), is
entered into by and among Burger King Corporation, a Florida corporation
("BKC"), International Fast Food Corporation, a Florida corporation ("IFFC"),
International Fast Food Polska S.P. z.o.o., a limited liability company
organized under the laws of Poland ("IFFP"), and Mitchell Rubinson ("Rubinson",
and together with IFFP and IFFC, the "IFFC Parties").
WHEREAS, pursuant to a Development Agreement by and among BKC and IFFC
(the "Development Agreement") BKC has granted IFFC the right to develop new
"Burger King" restaurants in the Republic of Poland;
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, in consideration of the Guarantee, IFFC granted BKC a
perfected security interest in the IFFP Shares to secure BKC's claims which may
arise as a result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, pursuant to a Reimbursement Agreement dated February 24, 1999
(such agreement, as amended from time to time, is referred to herein as the
"Reimbursement Agreement") by and among IFFC, IFFP and BKC, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth therein;
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (such agreement, as amended from time
to time, is referred to herein as the "Security Agreement") by and between IFFC,
BKC and IFFP, IFFC granted BKC a security interest in and to the IFFP Shares,
which permits BKC to retain the IFFP Shares in the event that BKC is required to
make any payment under the Guarantee and neither IFFC nor IFFP reimburse BKC for
the amount of such payment and other items under the Reimbursement Agreement;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (the
"Purchase Agreement"), the parties agreed that, in the event that BKC acquires
the IFFP Shares pursuant to the exercise of its rights under the Security
Agreement, BKC will sell the IFFP Shares held by BKC to Rubinson;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S.$8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
amount which may be borrowed under the Credit Agreement, BKC has agreed to
increase the amount of the Guarantee to a maximum aggregate amount of
U.S.$10,000,000, upon the terms, and subject to the conditions, of that certain
Future Advances Agreement dated of even date herewith by and among BKC, IFFC and
IFFP; and
<PAGE>
WHEREAS, the parties hereto have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount available under the Credit Agreement and the
Guarantee and to grant BKC additional security for the performance of IFFC's,
IFFP's and Rubinson's obligations under the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
1. GENERAL RELEASE.
---------------
(a) As a material inducement to enter into the Guarantee, the
IFFC Parties hereby irrevocably and unconditionally release, acquit and forever
discharge BKC, including its shareholders, officers, directors, consultants,
agents, predecessors, successors, assigns, employees, representatives,
affiliates, and all persons acting by, through, under or in concert with any of
them (such persons are collectively referred to herein as the "BKC Parties"),
whether in their individual or professional capacities, from any and all
charges, complaints, claims, liabilities, obligations, promises, agreements
(including, without limitation, the Development Agreement and any franchise
agreements), controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including reasonable attorney's fees
and costs incurred) of any nature whatsoever, known or unknown, suspected or
unsuspected, relating to any matter up to and through the date hereof; provided,
that nothing contained herein shall be deemed to relieve the parties to the
Development Agreement and/or Franchise Agreements from their obligations under
the Development Agreement and/or Franchise Agreements, as amended from time to
time, from and after the date hereof.
(b) The IFFC Parties agree not to bring any action, suit or
proceeding whatsoever (including the initiation of governmental proceedings or
investigations of any type) against any of the BKC Parties hereto for any matter
or circumstance concerning which the IFFC Parties have released the BKC Parties
under this Agreement. Furthermore, the IFFC Parties agree not to encourage any
other person or suggest to any other person that he or it institute any legal
action against the BKC Parties.
2. LEGAL ADVICE; RELIANCE.
-----------------------
(a) The parties represent and acknowledge that they have been
given adequate time with which to consider this Agreement and have been advised
to discuss all aspects of this Agreement with their private attorney and that
each party has in fact done so, that each party has carefully read and fully
understands all the provisions of this Agreement and that each party has
voluntarily entered into this Agreement, without duress or coercion.
(b) Each party represents and acknowledges that in executing
this Agreement they have not relied and do not rely upon any representation or
statements which are not set forth in this Agreement made by any other party
hereto or by any of the agents, representatives or attorneys of such party or
parties with regard to the subject matter, or relating to the basis or effect,
of this Agreement.
3. MISCELLANEOUS.
-------------
(a) THIRD PARTY BENEFICIARIES. All releasees under Section 1
who are not signatories to this Agreement shall be deemed to be third party
beneficiaries of this Agreement to the same extent as if they were signatories
hereto.
2
<PAGE>
(b) FURTHER ASSURANCES. Each of the parties hereto agrees with
the other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
(c) BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. This Agreement shall be binding upon the parties hereto and their
respective successors, transferees and assigns. Notwithstanding the foregoing,
none of the parties hereto may assign any of its obligations hereunder without
the prior written consent of the other parties hereto; provided, that BKC may
assign its rights and delegate its duties under this Agreement to one or more of
its subsidiaries or affiliates.
(d) AMENDMENTS; WAIVERs. No amendment to or waiver of any
provisions of this Agreement, nor consent to any departure therefrom by any
party hereto, shall in any event be effective unless the same shall be in
writing and signed by such party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(e) NO WAIVER; REMEDIES. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any right. The remedies herein provided are cumulative and not exclusive of
any remedy provided by law.
(f) EXPENSES. IFFC shall pay or reimburse BKC for all of its
legal, accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder.
(g) JURISDICTION. Any claim arising out of this Agreement
shall be brought in any state or federal court located in Miami-Dade County,
Florida, United States. For the purpose of any suit, action or proceeding
instituted with respect to any such claim, each of the parties hereto
irrevocably submits to the jurisdiction of such courts in Miami-Dade County,
Florida, United States. Each of the parties hereto further irrevocably consents
to the service of process out of said courts by mailing a copy thereof by
registered mail, postage prepaid, to such party and agrees that such service, to
the fullest extent permitted by law, (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(ii) shall be taken and held to be a valid personal service upon and a personal
delivery to it. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court located in Miami-Dade County, Florida, United States, and any
claim that any such suit, action or proceeding brought in such court has been
brought in an inconvenient forum. Notwithstanding the foregoing, at the option
of BKC, any claims against IFFP hereunder shall be settled by the Arbitration
Court at the Polish Chamber of Commerce with its seat in Warsaw in accordance
with its rules, and all such proceedings will be conducted in the English
language.
(h) GOVERNING LAW; SEVERABILITY. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Florida, United States, without regard to any conflict of law, rule or principle
that would give effect to the laws of another jurisdiction.
(i) NOTICES. All notices, requests and other communications to
any party hereunder shall be writing (including facsimile transmission or
similar writing) and shall be given to such party, addressed to it, at its
address or facsimile number set forth on the signature pages below, or at such
other address or facsimile number as such party may hereafter specify for such
purpose by notice to the other party. Each such notice, request or communication
shall be deemed effective when received at the address or facsimile number
specified below.
(j) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original, and all of which counterparts, when taken
together, shall constitute one and the same Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date indicated.
BURGER KING CORPORATION
By:
Name:
Title:
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, Florida 33139,
USA
INTERNATIONAL FAST FOOD POLSKA
S.P. Z.O.O.
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
/s/ Mitchell Rubinson
----------------------
Mitchell Rubinson
c/o International Fast Food
Corporation
1000 Lincoln Road, Suite 200
Miami Beach, Florida 33139,
USA
4
Exhibit 10.6
AMENDED AND RESTATED PURCHASE AGREEMENT
---------------------------------------
AMENDED AND RESTATED PURCHASE AGREEMENT (this "Agreement"), dated as of
October 21, 1999, by and among INTERNATIONAL FAST FOOD CORPORATION, a company
organized under the laws of the State of Florida, United States ("IFFC"),
MITCHELL RUBINSON ("Rubinson"), INTERNATIONAL FAST FOOD POLSKA S.P. z.o.o., a
Polish limited liability company organized under the laws of Poland ("IFFP"),
and BURGER KING CORPORATION, a company organized under the laws of State of
Florida, United States ("BKC").
WHEREAS, Rubinson is a principal shareholder, and an officer and
director, of IFFC;
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, in consideration of the Guarantee, IFFC granted BKC a
perfected security interest in the IFFP Shares to secure BKC's claims which may
arise as a result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, pursuant to a Reimbursement Agreement dated February 24, 1999
(such agreement, as amended from time to time, is referred to herein as the
"Reimbursement Agreement") by and among IFFC, IFFP and BKC, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth therein;
WHEREAS, pursuant to an Agreement for the Transfer of Title to Share by
way of Security dated February 24, 1999 (such agreement, as amended from time to
time, is referred to herein as the "Security Agreement") by and between IFFC,
BKC and IFFP, IFFC granted BKC a security interest in and to the IFFP Shares,
which permits BKC to retain the IFFP Shares in the event that BKC is required to
make any payment under the Guarantee and neither IFFC nor IFFP reimburse BKC for
the amount of such payment and other items under the Reimbursement Agreement;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (the
"Purchase Agreement"), the parties agreed that, in the event that BKC acquires
the IFFP Shares pursuant to the exercise of its rights under the Security
Agreement, BKC will sell the IFFP Shares held by BKC to Rubinson;
WHEREAS, Rubinson has agreed to personally guarantee (i) his
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement and to secure such personal
guarantee by the grant of a security interest in, and a pledge to BKC of, an
aggregate of 5,000,000 shares of common stock of IFFC which are owned by
Rubinson;
<PAGE>
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S.$8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
amount which may be borrowed under the Credit Agreement, BKC has agreed to
increase the amount of the Guarantee to a maximum aggregate amount of
U.S.$10,000,000, upon the terms, and subject to the conditions, of that certain
Guarantee of Future Advances Agreement dated of even date herewith by and among
BKC, IFFC and IFFP; and
WHEREAS, the parties hereto have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount available under the Credit Agreement and the
Guarantee and to grant BKC additional security for the performance of IFFC's,
IFFP's and Rubinson's obligations under the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT AND RESTATEMENT. This Agreement amends, supersedes and restates the
Purchase Agreement in its entirety.
2. SALE AND PURCHASE OF IFFP SHARES. In the event that BKC is required to make
any payment under the Guarantee and neither IFFC nor IFFP reimburse BKC in full
for the amount of such payment and the other items specified under the
Reimbursement Agreement within fifteen days following written demand therefor by
BKC to either IFFC or IFFP, then BKC shall sell to IFFC, and IFFC shall purchase
from BKC, the IFFP Shares for a purchase price (the "Purchase Price") equal to
(i) any payments to be made or previously made by BKC under the Guarantee (such
amounts are hereinafter referred to as "Indemnity Payments"), (ii) interest on
the amount of any Indemnity Payment remaining unpaid by IFFC or IFFP under
clause (i) above, from (and including) the date of such Indemnity Payment, until
payment in full thereof (after as well as before judgment) at a rate equal to
the Base Rate (as defined below) from time to time in effect plus two hundred
basis points and (iii) all fees, costs and expenses incurred by BKC in
connection with the enforcement of its rights hereunder. "Base Rate" means, on
any date, a fluctuating rate of interest per annum equal to the rate of interest
published in the "Wall Street Journal" on such date as the "prime rate" for U.S.
dollar loans by major money center banks. Interest accruing on the Base Rate
shall be computed on the basis of the actual number of days elapsed in a 365 day
year. In the event that IFFC defaults in its obligation to purchase the IFFP
Shares in accordance with this Section 2, then BKC shall send IFFC a written
notice (the "Default Notice") informing IFFC and Rubinson of such default, and
BKC shall sell to Rubinson, and Rubinson shall purchase from BKC, the IFFP
Shares for the Purchase Price. The closing of the sale by BKC and purchase by
Rubinson of the IFFP Shares in accordance with this Section 2 shall occur within
15 days following the delivery by BKC to Rubinson of the Default Notice. The
Purchase Price shall be payable by wire transfer of immediately available funds
to an account designated in writing by BKC to Rubinson.
(b) In the event that neither IFFC nor Rubinson purchase the IFFP
Shares in accordance with, and subject to the limitations set forth in, Section
2(a), above, then BKC shall have the right, but not the obligation, to terminate
without any additional consideration that certain Restaurant Development
Agreement dated as of March 14, 1997, as amended, by and among BKC and IFFP and
to retain the IFFP Shares for its own account or to sell the IFFP Shares to a
third party, subject to compliance with the terms and conditions of the Security
Agreement.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF IFFC, IFFP AND RUBINSON. Each of
IFFC, IFFP and Rubinson represents and warrants to BKC that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. Each of IFFC and IFFP is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of IFFC and IFFP has all required
power and authority to own its properties and to carry on its business as
presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each of IFFC, IFFP and Rubinson, and each of
IFFC, IFFP and Rubinson has all requisite power and legal authority to execute
and deliver this Agreement, to consummate the transactions contemplated hereby,
and to perform its obligations hereunder. This Agreement constitutes the legal,
valid and binding obligation of each of IFFC, IFFP and Rubinson, enforceable in
accordance with its terms, except to the extent that such enforceability may be
limited by bankruptcy laws or the application of laws limiting the enforcement
of creditors' rights generally.
(c) NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and delivery
of this Agreement nor the effectuation of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws (or similar
organizational documents) of IFFC or IFFP;
(ii) violate any legal requirements applicable to IFFC or IFFP or
Rubinson;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or permit applicable to
IFFC or IFFP;
(iv) result in the creation of any lien, charge or other
encumbrance on any property of IFFC or IFFP (except as expressly contemplated
hereby); or
(v) require IFFC or IFFP to obtain or make any waiver, consent,
action, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any governmental
authority.
(d) NO PROCEEDINGS. Except as disclosed in IFFC's periodic reports on
Form 10-K and 10-Q filed with the Securities and Exchange Commission or for
matters which are not, individually or in the aggregate, material to IFFC, no
suit, action or other proceeding is pending or, to the knowledge of IFFC, IFFP
or Rubinson, threatened, before any governmental authority seeking to restrain
such or prohibit its entry into this Agreement, or seeking damages against IFFC,
IFFP or Rubinson or their respective properties, as a result of the transactions
contemplated by this Agreement.
(e) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by each of IFFC, IFFP or
Rubinson to BKC or its counsel have been furnished in good faith and, do not
contain any untrue statement of material fact or omit any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they are made not misleading.
3.2 REPRESENTATIONS AND WARRANTIES BY BKC. BKC represents and warrants
to each of IFFC and IFFP that:
3
<PAGE>
(a) CORPORATE EXISTENCE AND QUALIFICATION. BKC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. BKC has all required power and authority to own
its properties and to carry on its business as presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY This Agreement has been duly
executed and delivered by BKC, and BKC has all requisite power and legal
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of BKC, enforceable in
accordance with its terms, except to the extent that such enforceability may be
limited by bankruptcy laws or the application of laws limiting the enforcement
of creditors' rights generally.
(c) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by BKC to each of IFFC, IFFP or
Rubinson or their counsel have been furnished in good faith and, do not contain
any untrue statement of material fact or omit any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made not misleading.
4. MISCELLANEOUS.
-------------
4.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that they will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
4.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing, none of the
parties hereto may assign any of its obligations hereunder without the prior
written consent of the other parties hereto; provided, that BKC may assign its
rights and delegate its duties under this Agreement to one or more of its
subsidiaries or affiliates.
4.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
4.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
4.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its legal,
accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder and under the Transaction Documents.
4
<PAGE>
4.6 JURISDICTION. Any claim arising out of this Agreement shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. Notwithstanding
the foregoing, at the option of BKC, any claims against IFFP hereunder shall be
settled by the Arbitration Court at the Polish Chamber of Commerce with its seat
in Warsaw in accordance with its rules, and all such proceedings will be
conducted in the English language.
4.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
4.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
4.10 INDEMNIFICATION. IFFC, IFFP and Rubinson, jointly and severally,
agree to indemnify and hold harmless BKC and its officers, directors, employees,
agents, subsidiaries and affiliates (collectively, the "BKC Parties") from and
against all losses, liabilities, damages, deficiencies, costs or expenses
(including, without limitation, interest, penalties and actual attorneys' fees
and disbursements) (collectively, "Losses") based upon any claim by any
shareholder, creditor or employee of IFFC or IFFP arising from or relating to
the purchase and sale of the IFFP Shares described in Section 2 hereof.
Notwithstanding the foregoing, neither IFFC, IFFP nor Rubinson shall be required
to indemnify the BKC parties to the extent it is judicially determined that such
Losses resulted from the gross negligence or willful misconduct of BKC; and
provided, further, that the obligation of Rubinson to indemnify the BKC Parties
hereunder shall only arise in the event that Rubinson acquires the IFFP Shares
pursuant to Section 2 hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Mitchell Rubinson
---------------------
Mitchell Rubinson
c/o International Fast Food Corporation
1000 Lincoln Road, Suite 200
Miami Beach, Florida 33139, USA
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, Florida 33139, USA
INTERNATIONAL FAST FOOD POLSKA S.P. Z.O.O.
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
--------------------
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President - Financial Affairs
<PAGE>
Exhibit 10.7
GUARANTEE OF FUTURE ADVANCES AGREEMENT
--------------------------------------
GUARANTEE OF FUTURE ADVANCES AGREEMENT (this "Agreement"), dated as of
October 21, 1999, by and among INTERNATIONAL FAST FOOD CORPORATION, a company
organized under the laws of the State of Florida, United States ("IFFC"),
INTERNATIONAL FAST FOOD POLSKA S.P. z.o.o., a Polish limited liability company
organized under the laws of Poland ("IFFP"), MITCHELL RUBINSON ("Rubinson"), and
BURGER KING CORPORATION, a company organized under the laws of State of Florida,
United States ("BKC").
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, in consideration of the Guarantee, IFFC granted BKC a
perfected security interest in the IFFP Shares to secure BKC's claims which may
arise as a result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the available credit under the
Credit Agreement to an aggregate amount of U.S. $8,000,000, and BKC has agreed
to increase the amount of the Guarantee to secure the repayment by IFFP of
amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
amount which may be borrowed under the Credit Agreement, BKC has agreed to
increase the amount of the Guarantee to a maximum aggregate amount of U.S.
$10,000,000, upon the terms, and subject to the conditions, of this Agreement;
and
WHEREAS, concurrently herewith, IFFC, IFFP and BKC have agreed to amend
and restate the documents executed in connection with the transactions described
above (such documents are collectively referred to herein as the "Transaction
Documents") to reflect the increased amount of the Credit Agreement and the
Guarantee and to grant BKC additional security for the repayment of IFFC's and
IFFP's obligations under the Transaction Documents.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. GUARANTEE OF FUTURE ADVANCES. In the event that Citibank agrees to increase
the amount which may be borrowed under the Credit Facility, BKC shall guarantee
the repayment to Citibank, upon the terms and subject to the conditions set
forth herein.
<PAGE>
2. MAXIMUM AMOUNT OF GUARANTEE. The maximum amount that BKC shall guarantee
under the Credit Agreement shall not exceed U.S.$10,000,000 (the "Maximum
Guarantee").
3. INCREMENTAL INCREASE OF GUARANTEE. Any increase in the Guarantee from U.S.
$8,000,000 up to the Maximum Guaranty shall be in incremental amounts of U.S.
$500,000 (each such increase is referred to herein as an "Incremental Guarantee
Increase"), up to the Maximum Guarantee and subject to Section 4 below.
4. CONDITIONS TO INCREMENTAL GUARANTEE INCREASE. Each Incremental Guarantee
Increase is subject the occurrence of each of the following events:
4.1 SATISFACTION OF PERFORMANCE CRITERIA. IFFP shall have satisfied the
performance criteria (the "Performance Criteria") set forth on Schedule 1 hereto
prior to each Incremental Guarantee Increase. BKC makes no assurance or
representation that the performance criteria specified on Schedule will be met.
In addition, IFFP shall conduct its business in the ordinary course and shall
take no action other than in the ordinary course which would affect the cash
flows, financial condition or results of operations. IFFP shall be required to
provide BKC with a statement of cash flows of IFFP on a monthly basis during the
12-month period ending September 30, 2000, and thereafter such statements shall
be provided to BKC on a quarterly basis for so long as the Guaranty shall remain
in effect. Such statement of cash flows shall be provided to BKC on or before
the date which is 20 days from the end of such reporting period. BKC shall have
the right from time to time at its expense during normal business hours and upon
reasonable notice to conduct an audit of IFFP's books and records to evaluate
IFFP's financial performance.
4.2 APPROVAL OF ADVANCES. IFFP shall indicate in writing to BKC the
proposed use of the requested additional advances under the Credit Agreement,
and BKC shall have determined, in the exercise of its reasonable business
judgement, that such advances are reasonable and necessary to meet IFFP's
business requirements.
4.3 GUARANTEE MUST BE REQUIRED. Citibank shall have indicated in
writing to BKC that it is not willing to make future advances under the Credit
Agreement unless BKC guarantee the repayment in full of such advances.
4.4 NO DEVELOPMENT OF NEW BKC RESTAURANTS. IFFP shall have agreed in
writing that it will not use the advances relating to the requested Incremental
Guarantee Increase to fund the development of new Burger King restaurants.
5. WITHDRAWAL OF GUARANTEE. Notwithstanding anything to the contrary contained
herein or in the Transaction Documents, this Agreement shall terminate (i)
automatically on October 21, 2002, or (ii) at such time as BKC terminates the
Guarantee in accordance with the terms therewith, if earlier or (iii) upon 30
days prior notice in the event that the cumulative net cash flow position as
defined as the net movement of total debt of IFFP during the 12-month period
ending October 30, 2001 is more than 10% less than the Performance Criteria for
such period as specified on Schedule 1. Further, any Incremental Guarantee
Increase may be terminated and withdrawn in the event that the cumulative net
cash flow position as defined as the net movement of total debt of IFFP are more
than 30% less than the Performance Criteria specified on Schedule 1.
6. REPRESENTATIONS AND WARRANTIES
------------------------------
6.1 REPRESENTATIONS AND WARRANTIES OF IFFC AND IFFP. Each of Rubinson,
IFFC and IFFP represents and warrants to BKC that:
2
<PAGE>
(a) CORPORATE EXISTENCE AND QUALIFICATION. Each of IFFC and IFFP is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of IFFC and IFFP has all required
power and authority to own its properties and to carry on its business as
presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each of IFFC, IFFP and Rubinson, and each of
IFFC, IFFP and Rubinson has all requisite power and legal authority to execute
and deliver this Agreement, to consummate the transactions contemplated hereby,
and to perform its or his obligations hereunder. This Agreement constitutes the
legal, valid and binding obligation of each of IFFC, IFFP and Rubinson,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy laws or similar laws in affect from time to
time affecting creditors' rights generally.
(c) NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and delivery
of this Agreement nor the effectuation of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws (or similar
organizational documents) of IFFC or IFFP;
(ii) violate any legal requirements applicable to IFFC, IFFP or
Rubinson;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or permit applicable to
IFFC or IFFP;
(iv) result in the creation of any lien, charge or other
encumbrance on any property of IFFC or IFFP (except as expressly contemplated
hereby); or
(v) require IFFC, IFFP or Rubinson to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party or any
governmental authority.
(d) NO PROCEEDINGS. Except as disclosed in IFFC's filings with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, or for matters which are not, individually or in the
aggregate, material to IFFC or Rubinson, no suit, action or other proceeding is
pending or, to the knowledge of IFFC or IFFP, threatened, before any
governmental authority seeking to restrain such or prohibit its entry into this
Agreement, or seeking damages against IFFC, IFFP or Rubinson or their respective
properties as a result of the transactions contemplated by this Agreement.
(e) COMPLIANCE WITH LAWS. Each of IFFC and IFFP has all material
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of each of IFFC and IFFP have been and
are being conducted in accordance in all material respects with all applicable
laws, rules and regulations, and each of IFFC and IFFP is not in violation of
any judgment, law or regulation.
(f) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by each of IFFC, IFFP and
Rubinson to BKC or its counsel have been furnished in good faith and, do not
contain any untrue statement of material fact or omit any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
3
<PAGE>
6.2 REPRESENTATIONS AND WARRANTIES BY BKC. BKC represents and warrants
to each of IFFC, IFFP and Rubinson that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. BKC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. BKC has all required power and authority to own
its properties and to carry on its business as presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY This Agreement has been duly
executed and delivered by BKC, and BKC has all requisite power and legal
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of BKC, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy laws or similar laws in affect from time to time affecting
creditors' rights generally.
(c) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by BKC to each of IFFC, IFFP and
Rubinson or their counsel have been furnished in good faith and, do not contain
any untrue statement of material fact or omit any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
7. MISCELLANEOUS.
-------------
7.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
7.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto; provided, that BKC may assign its rights
and delegate its duties under this Agreement to one or more of its subsidiaries
or affiliates subject to the approval of Citibank, if required.
7.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
7.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
7.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its legal,
accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder and under the Transaction Documents.
4
<PAGE>
7.6 JURISDICTION. Any claim arising out of this Agreement shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. Notwithstanding
the foregoing, at the option of BKC, any claims against IFFP hereunder shall be
settled by the Arbitration Court at the Polish Chamber of Commerce with its seat
in Warsaw in accordance with its rules, and all such proceedings will be
conducted in the English language.
7.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
7.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
INTERNATIONAL FAST FOOD POLSKA
S.P. Z.O.O.
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
/s/ Mitchell Rubinson
---------------------
Mitchell Rubinson, in his
individual capacity
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President -
Financial Affairs
Fax no: 44 1895 206026
With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Miami, Florida 33131 U.S.A.
Fax no: (305) 789-8953
6
Exhibit 10.8
DEFERRED PAYMENT AGREEMENT
--------------------------
DEFERRED PAYMENT AGREEMENT (this "Agreement"), dated as of October 21,
1999, by and among INTERNATIONAL FAST FOOD CORPORATION, a company organized
under the laws of the State of Florida, United States ("IFFC"), INTERNATIONAL
FAST FOOD POLSKA S.P. zo.o., a Polish limited liability company organized under
the laws of Poland ("IFFP"), and BURGER KING CORPORATION, a company organized
under the laws of State of Florida, United States ("BKC").
WHEREAS, IFFC is the owner of all the issued and outstanding shares
(the "IFFP Shares") of IFFP;
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the Guarantee to a maximum aggregate amount of U.S. $10,000,000, upon
the terms, and subject to the conditions, of that certain Guarantee of Future
Advances Agreement dated of even date herewith by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to Mitchell
Rubinson, a principal shareholder of IFFC ("Rubinson");
WHEREAS, Rubinson has agreed to personally guarantee (i) his
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement and to secure such personal
guarantee by the grant of a security interest in, and a pledge to BKC of, an
aggregate of 5,000,000 shares of common stock of IFFC which are owned by
Rubinson;
<PAGE>
WHEREAS, IFFC, IFFP and BKC have agreed to amend and restate the
documents executed in connection with the transactions described above (such
documents are collectively referred to herein as the "Transaction Documents") to
reflect the increased amount of the Credit Agreement and the Guarantee and to
grant BKC additional security for the repayment of IFFC's and IFFP's obligations
under the Transaction Documents.
WHEREAS, BKC has agreed to defer all amounts currently owed by IFFC and
IFFP, including the development fee of $250,000, and those amounts falling due
after the execution of the Transaction Documents, including royalties and
franchise fees, until January 15, 2001.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. DEFERRAL OF FEES. BKC hereby agrees that all royalties, franchise fees and,
if required, development fees owed by IFFC and/or IFFP falling due after the
date hereof (including, for the avoidance of doubt, seven franchise fees
totaling $280,000, previously rolled up and payable on December 31, 1999,
together with the development fee of $250,000 which fell due on September 14,
1999 (collectively, the "Fees")) will be rolled-up and be paid in one lump sum
on the date (the "Payment Date") which is the earlier to occur of (i) January
15, 2001 or (ii) such date BKC is require to make a payment to Citibank pursuant
to the Guarantee. After the Payment Date, all Fees will be paid in accordance
with the agreements under which such Fees are required to be paid.
2. DEFINITIONS. For purposes hereof, the following terms shall have the
respective meanings set forth below:
"Indebtedness" means all obligations, contingent or otherwise, which in
accordance with U.S. generally accepted accounting principles are
required to be classified upon a balance sheet of the specified person
as liabilities.
"Lien" means, with respect to the specified person:
(a) any lien, encumbrance, mortgage, pledge, charge, or
security interest of any kind upon any property or
assets of such person, whether now owned or hereafter
acquired, or upon the income or profits therefrom;
(b) the sale, assignment, pledge or transfer of any accounts
or general intangibles of such person for purposes of
creating a security interest; and
(c) the transfer of any tangible property or assets for the
purpose of creating or granting a security interest.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF IFFC AND IFFP. Each of IFFC and
IFFP represents and warrants to BKC that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. Each of IFFC and IFFP is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of IFFC and IFFP has all required
power and authority to own its properties and to carry on its business as
presently conducted.
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each of IFFC and IFFP, and each of IFFC and IFFP
has all requisite power and legal authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby, and to perform
its obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of each of IFFC and IFFP, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy laws or laws affecting the enforcement of creditors rights generally.
2
<PAGE>
(c) NO COMPANY DEFAULTS OR CONSENTS. Neither the execution and delivery
of this Agreement nor the effectuation of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws (or similar
organizational documents) of IFFC or IFFP;
(ii) violate any legal requirements applicable to IFFC or IFFP;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or permit applicable to
IFFC or IFFP;
(iv) result in the creation of any lien, charge or other
encumbrance on any property of IFFC or IFFP (except as expressly contemplated
hereby); or
(v) require IFFC or IFFP to obtain or make any waiver, consent,
action, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any governmental
authority.
(d) NO PROCEEDINGS. Except as disclosed in IFFC's filings with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, or for matters which are not, individually or in the
aggregate, material to IFFC, no suit, action or other proceeding is pending or,
to the knowledge of IFFC or IFFP, threatened, before any governmental authority
seeking to restrain such or prohibit its entry into this Agreement, or seeking
damages against IFFC or IFFP or their respective properties as a result of the
transactions contemplated by this Agreement.
(e) COMPLIANCE WITH LAWS. Each of IFFC and IFFP has all material
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of each of IFFC and IFFP have been and
are being conducted in accordance in all material respects with all applicable
laws, rules and regulations, and each of IFFC and IFFP is not in violation of
any judgment, law or regulation.
(f) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by each of IFFC and IFFP to BKC
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
3.2 REPRESENTATIONS AND WARRANTIES BY BKC. BKC represents and warrants
to each of IFFC and IFFP that:
(a) CORPORATE EXISTENCE AND QUALIFICATION. BKC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. BKC has all required power and authority to own
its properties and to carry on its business as presently conducted.
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<PAGE>
(b) AUTHORITY, APPROVAL AND ENFORCEABILITY This Agreement has been duly
executed and delivered by BKC, and BKC has all requisite power and legal
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of BKC, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy laws or laws affecting the enforcement of
creditors rights generally.
(c) DISCLOSURE; DUE DILIGENCE. This Agreement, when taken as a whole
with other documents and certificates furnished by BKC to each of IFFC and IFFP
or its counsel have been furnished in good faith and, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
4. MISCELLANEOUS.
-------------
5.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
5.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto; provided, that BKC may assign its rights
and delegate its duties under this Agreement to one or more of its subsidiaries
or affiliates.
5.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
5.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
5.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its legal,
accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights hereunder including, without limitation, the
reimbursement rights provided in Section 2 hereof.
5.6 JURISDICTION. Any claim arising out of this Agreement shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. Notwithstanding
the foregoing, at the option of BKC, any claims against IFFP hereunder shall be
settled by the Arbitration Court at the Polish Chamber of Commerce with its seat
in Warsaw in accordance with its rules, and all such proceedings will be
conducted in the English language.
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<PAGE>
5.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
5.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
5.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman and CEO
c/o Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
INTERNATIONAL FAST FOOD POLSKA
S.P. Z.O.O.
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Authorized Signature
15 Jagiellonska Street
Warsaw, Poland
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President -
Financial Affairs
Fax no: 44 1895 206026
With a copy to:
Baker & McKenzie
1200 Brickell Avenue
Miami, Florida 33131 U.S.A.
Fax no: (305) 789-8953
6
Exhibit 10.9
WARRANT
-------
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON
THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES
MAY NOT BE OFFERED OR SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND IN COMPLIANCE WITH
APPLICABLE STATE LAWS.
WARRANT TO SUBSCRIBE FOR AND PURCHASE
4,000,000 SHARES OF COMMON STOCK
INTERNATIONAL FAST FOOD CORPORATION
THIS WARRANT CERTIFIES THAT, for value received, BURGER KING
CORPORATION or its registered assigns, is entitled to subscribe for and purchase
from INTERNATIONAL FAST FOOD CORPORATION, a Florida corporation (the "Company"),
during the period commencing on October 21, 1999 and expiring on October 21,
2004 (the "Expiration Date"), four million (4,000,000) fully paid and
non-assessable shares of the Common Stock, par value $.01 per share (the "Common
Stock"), of the Company at a price of $2.00 per share, subject to adjustment as
provided herein.
METHOD OF EXERCISE; PAYMENT; PRICE; ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE. This Warrant (the "Warrant") may be exercised by the holder
hereof, for increments of no less than 50,000 shares during the period set forth
above, in whole or in part (but not as to a fractional shares of Common Stock),
by the surrender of this Warrant, together with the exercise form attached
hereto as Exhibit A (the "Exercise Form") duly completed and signed, at the
principal office of the Company, and by payment to the Company by certified or
cashier's check of the Warrant Price. For the purposes of this Warrant, the term
"Warrant Price" shall mean $2.00 per share of Common Stock, or such other price
as shall result from the adjustments specified in Section 2 hereof.
The Company agrees that the shares so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment for such shares as aforesaid shall have been made. In the event of any
exercise of this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to the holder hereof within a reasonable time after
this Warrant shall have been so exercised. Unless this Warrant has expired, a
new warrant representing the right to purchase the number of shares of Common
Stock, if any, with respect to which this Warrant shall not then have been
exercised, shall also be issued to the holder hereof at such time.
The Warrant shall be transferable only on the books of the Company
maintained at its principal office upon delivery thereof by the holder or by its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer, together with the form of the
assignment, attached hereto as Exhibit B (the "Assignment Form") duly completed
and signed.
1. STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Common Stock shall, upon issuance pursuant to the
exercise of this Warrant and payment, as the case may be, of the Warrant Price
be fully paid and non-assessable and free from all liens and encumbrances with
respect to the issuance thereof. The Company further covenants and agrees that
during the period within which this Warrant may be exercised, the Company shall
at all times have authorized and reserved, for the purpose of the issuance upon
exercise of this Warrant, at least the maximum number of shares of Common Stock
as are issuable upon the exercise of this Warrant.
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES OF COMMON STOCK.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Warrant Price shall be subject to adjustment from time to time as
follows:
<PAGE>
(a) If the Company shall (i) subdivide its outstanding shares
of Common Stock, (ii) combine its outstanding shares of Common Stock into a
smaller number of shares, (iii) issue a stock dividend on the Common Stock, or
(iv) issue by reclassification of its shares of Common Stock any shares or other
securities of the Company, then, in each such event, the number of shares of
Common Stock purchasable upon exercise of this Warrant immediately prior
thereto, shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of shares of Common Stock or other securities of
the Company which it would have owned or have been entitled to receive after the
occurrence of any of the events described above, had such Warrant been exercised
immediately prior to the occurrence of such event (or any record date with
respect thereto). Such adjustment shall be made whenever any of the events
listed above shall occur. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of the event
retroactive to the record date, if any, for such event.
(b) No adjustment in the number of shares of Common Stock
purchasable under this Warrant shall be required unless the adjustment would
require an increase or decrease of at least one percent in the number of shares
of Common Stock purchasable upon the exercise of this Warrant. Any adjustments
which by reason of this paragraph (b) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest one tenth of a
share or to the nearest cent, as the case may be.
(c) Unless otherwise provided, whenever the number of shares
of Common Stock purchasable upon the exercise of this Warrant is adjusted, the
Warrant Price per share of Common Stock payable upon exercise of each Warrant
shall be adjusted by multiplying such Warrant Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Common Stock purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and the denominator of which shall be the number of shares
of Common Stock purchasable immediately after such adjustment.
(d) Whenever the number of shares of Common Stock purchasable
upon the exercise of this Warrant or the Warrant Price of such shares of Common
Stock is adjusted, the Company shall promptly mail by first class mail, postage
prepaid, to the holder of this Warrant notice of such adjustment or adjustments,
together with a certificate setting forth the number of shares of Common Stock
purchasable upon the exercise of this Warrant and the Warrant Price of the
shares of Common Stock after the adjustment, a brief statement of the facts
requiring such an adjustment, and the computation by which such adjustment was
made.
(e) For the purpose of this Section 2, the term "shares of
Common Stock" means the Common Stock of the Company of the class authorized at
the date of this Warrant and stock of any other class into which such presently
authorized shares of Common Stock may be changed and any other shares of stock
of the Company which do not have priority in the payment of dividends or upon
liquidation over any other class of stock. In the event that at any time, as a
result of an adjustment made pursuant to this Section 2, the holders of this
Warrant become entitled to purchase any shares of Common Stock or other
securities of the Company other than shares of Common Stock, thereafter the
number of such other shares or other securities so purchasable upon exercise of
this Warrant and the Warrant Price of such shares or other securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in this Section 2 and the provisions of this Section 2 and all other applicable
sections of this Warrant shall apply on like terms to any such other shares or
securities.
(f) Except as provided in paragraphs (a) through (e), no
adjustment for any dividends, or any distribution or sale of securities, shall
be made during the term of this Warrant or upon the exercise of this Warrant.
(g) In case of any capital reorganization, or any
reclassification of the shares of Common Stock of the Company, or in case of the
consolidation or merger of the Company with or into any other corporation or the
sale, lease, conveyance or other disposition of all or substantially all of the
properties and assets of the Company to any other corporation, the Company or
2
<PAGE>
such successor or purchasing corporation, as the case may be, shall execute with
the holder of this Warrant an agreement to the effect that this Warrant shall,
after such capital reorganization, reclassification, consolidation, merger or
sale, lease, conveyance or other disposition, be exercisable into the kind and
amount of shares of stock or other securities or property (including cash) to
which the holder of the number of shares of Common Stock deliverable
(immediately prior to the happening of such capital reorganization,
reclassification, consolidation, merger, sale, lease, conveyance or other
disposition) upon exercise of a Warrant would have been entitled upon the
happening of such event. The Company shall mail by first class mail, postage
prepaid, to the holder of this Warrant a notice of any event requiring such
agreement at least 30 days prior to the effective date of such event. Such
agreement shall provide for all appropriate adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2. The provisions of this paragraph (g) shall also apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, leases,
conveyances and other dispositions.
(h) The Company shall not be required to issue fractional
shares of Common Stock on the exercise of Warrants. If any fraction of a share
would, except for the provisions of this Section 2, be issuable on the exercise
of this Warrant (or specified portion thereof), the Company shall pay an amount
in cash equal to the current market price per share of Common Stock, multiplied
by such fraction. For the purpose of this Section 2, the current or closing
market price per share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for the 15 consecutive trading days,
commencing 20 days before the date of computation. The closing price for each
day shall be (i) if the shares of Common Stock are listed or admitted to trading
on a principal national securities exchange or the National Market System of
NASDAQ, the last reported sales price on the principal national securities
exchange on which the shares of Common stock are listed or admitted to trading
or on the National Market System of NASDAQ, (ii) if the shares of Common Stock
are not listed or admitted to trading on any such exchange, the average of the
highest bid and lowest asked prices, as reported on the Automated Quotation
System of the National Quotations Bureau, Incorporated or an equivalent,
generally accepted reporting service, or (iii) if the shares of Common Stock are
not publicly traded, a price determined in good faith by the Board of Directors
of the Company.
3. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Company.
4. GENDER AND NUMBER. As used herein, the use of any of the masculine,
feminine, or neuter gender and the use of singular or plural numbers shall
include any of all of the other, wherever and whenever appropriate in the
context.
5. NOTICES. Except as otherwise provided herein, any notice pursuant to
this Warrant by the Company or any Holder of the Warrant shall be in writing and
shall be deemed to have been duly given when personally delivered or five days
after such notice is mailed by certified mail, return receipt requested, postage
prepaid (a) if to the Company, to International Fast Food Corporation, 1000
Lincoln Road, Miami Beach, Florida 33139 Attention: Mitchell Rubinson, with a
copy to Gary Epstein, Esq, Greenberg Traurig P.A., 1221 Brickell Avenue, Miami,
Florida 33131, and (b) if to the Holder of this Warrant, to such person at his
address listed on the Company's books and records, or to such other address as
it may be changed from time to time on the books of the Company by written
notice, with a copy to Andrew Hulsh, Esq., Baker & McKenzie, 1200 Brickell
Avenue, 19th Floor, Miami, Florida 33131. Each party hereto may from time to
time change the address to which notices to it are to be delivered or mailed
hereunder by notice in writing to the other party.
6. BENEFITS. Nothing in the Warrant shall be construed to give to any
person or corporation other than the Company and the holder of this Warrant any
legal or equitable right, remedy, or claim hereunder; but this Warrant shall be
for the sole and exclusive benefit of the Company and the holder of this
Warrant.
7. INVESTMENT. The Holder hereof covenants and agrees that this Warrant
has been taken for investment and for its own account and not with a view
towards resale or distribution within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). The Holder of this Warrant, by acceptance
hereof, agrees to give written notice to the Company before exercising or
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<PAGE>
transferring this Warrant or any part hereof or transferring any Common Stock
issuable or issued upon the exercise hereof, of such Holder's intention to do
so, describing briefly the manner of any proposed transfer of this Warrant or
such Holder's intention as to the disposition to be made of shares of Common
Stock issued upon the exercise hereof. If in the opinion of counsel to the
holder the proposed transfer, or exercise and disposition of this Warrant or any
part hereof, or disposition of shares of Common Stock may be effected without
registration or qualification (under any Federal or State law) of this Warrant
or the shares of Common Stock issuable or issued on the exercise hereof, the
Holder, as promptly as practicable, shall notify the Company of such opinion and
deliver a copy thereof to the Company, whereupon the Holder shall be entitled to
transfer this Warrant or any part hereof, or to exercise this Warrant or any
part hereof in accordance with its terms and/or dispose of the shares received
upon such exercise or to dispose of shares of Common Stock received upon the
previous exercise of this Warrant, all in accordance with the terms of the
notice delivered by such Holder to the Company; provided that the Holder shall
provide to the Company a written opinion of counsel reasonably acceptable to the
Company stating that such exercise or disposition is in compliance with
applicable U.S. securities laws.
8. EXCHANGE. This Warrant is exchangeable, upon the surrender hereof by
the Holder hereof at the principal office of the Company, for new Warrants of
like tenor representing in the aggregate the right to subscribe for and purchase
the number of shares which may be subscribed for and purchased hereunder, each
of such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said Holder hereof at the time of
such surrender, but the Company shall not be required to issue a new Warrant
representing the right to purchase less than 25,000 shares of Common Stock.
9. GOVERNING LAW. Except as otherwise expressly provided herein, this
Warrant shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of Florida, United
States. The Company (i) agrees that any legal suit, action or proceeding arising
out of or relating to this Warrant Agreement shall be instituted exclusively in
the federal or state courts located in the County of Miami-Dade of the State of
Florida, (ii) waives any objection to the venue of any such suit, action or
proceeding and the right to assert that such forum is not a convenient forum,
and (iii) irrevocably consents to the jurisdiction of the federal or state
courts located in the County of Miami-Dade of the State of Florida in any such
suit, action or proceeding.
DATED as of October 18, 1999
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
---------------------
Name: Mitchell Rubinson
Title: Chairman of the Board and Chief
Executive Officer
4
<PAGE>
EXHIBIT A
EXERCISE FORM
(To be Executed by the Registered Holder
to Exercise the Rights to Purchase
Common Shares Evidenced by the Warrant)
INTERNATIONAL FAST FOOD CORPORATION
1000 Lincoln Road
Miami Beach, Florida 33131
Attn: Mitchell Rubinson
The undersigned hereby irrevocably subscribes for _________ shares of
your Common Stock pursuant to and in accordance with the terms and conditions of
that certain Warrant dated as of October 21, 1999, and herewith makes payment of
$____________ therefor (by certified or cashier's check), and requests that a
certificate for such shares be issued in the name of the undersigned and be
delivered to the undersigned at the address stated below. The undersigned
further requests that if the number of shares subscribed for herein shall not be
all of the shares purchasable hereunder, that a new Warrant of like tenor for
the balance of the shares purchasable hereunder be delivered to the undersigned.
Name:________________________
Signed:______________________
Address:_____________________
-------------------------------
Tax identification number
Dated:___________________
-------------------------------
5
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ___________________________________
hereby sells, assigns and transfers unto , _____________________________________
of the ____________ Warrants represented by the within Warrant, together with
all rights, title and interest therein, and does hereby irrevocably constitute
and appoint the Company, attorney, to transfer said Warrant on the books of such
Company with full power of substitution in the premises.
Dated:__________________________________
Name of Existing Warrant Holder: _______________________________________________
Social Security or Federal ID Number:___________________________________________
Address: _______________________________________________________________________
Signature: _____________________________________________________________________
Name of New Warrant Holder: ____________________________________________________
Social Security or Federal ID Number: __________________________________________
Address: _______________________________________________________________________
Signature:______________________________________________________________________
Exhibit 10.10
GUARANTY
--------
GUARANTY (the "Agreement"), dated this 21st day of October, 1999, by and between
Mitchell Rubinson (hereinafter referred to as "Rubinson" or the "Guarantor"),
and Burger King Corporation (hereinafter referred to as "BKC" or the "Secured
Party").
WHEREAS, International Fast Food Corporation ("IFFC") is the owner of
all the issued and outstanding shares (the "IFFP Shares") of International Fast
Food Polska S.P. z.o.o. ("IFFP");
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the Guarantee to a maximum aggregate amount of U.S. $10,000,000, upon
the terms, and subject to the conditions, of that certain Guarantee of Future
Advances Agreement dated of even date herewith by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to Rubinson
(subject to Section 1 hereof);
WHEREAS, Rubinson has agreed to personally guarantee the following
obligations: (i) Rubinson's obligations to BKC under the Purchase Agreement and
(ii) IFFC's and IFFP's obligations under the Reimbursement Agreement, and to
secure such personal guarantee by the grant of a security interest in, and a
pledge to BKC of, an aggregate of 5,000,000 shares of common stock of IFFC (the
"Shares") which are owned by Rubinson.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
<PAGE>
1. GUARANTY The Guarantor guarantees to BKC and its successors,
participants, endorsees and/or assigns, the due performance and full and prompt
payment, the following obligations (the "Obligations"): (i) the Guarantor's
obligations to BKC under the Purchase Agreement and (ii) IFFC's and IFFP's
obligations under the Reimbursement Agreement; provided, however, that
contemporaneous with the full performance by the Guarantor of its obligations
hereunder, BKC shall sell the IFFP Shares to Rubinson pursuant to the Purchase
Agreement. Any payments made by the Guarantor to BKC hereunder shall be credited
to the purchase price of the IFFP Shares under the Purchase Agreement.
2. GUARANTEE OF PAYMENT This is a guaranty of payment and
not of collection.
3. WAIVERS Guarantor waives any right to require BKC to (a) commence
legal proceedings against Guarantor, IFFC or IFFP or (b) pursue any other remedy
whatsoever available to BKC. Guarantor waives any defense arising by reason of
any disability or other defense of Guarantor, IFFC or IFFP or by reason of the
cessation from any cause whatsoever of Guarantor's, IFFC's or IFFP's liability
or by reason of BKC releasing any security held from Guarantor, IFFC or IFFP.
Guarantor covenants that it will for himself, and that he will use his best
efforts to cause IFFC and IFFP to, maintain and preserve the enforceability of
any instruments now or hereafter executed in favor of BKC and to take no action
of any kind that might be the basis for a claim that Guarantor has any defense
hereunder other than payment in full of all the Obligations. Guarantor hereby
indemnifies BKC against any loss, cost, or expense by reason of the assertion by
Guarantor of any defense hereunder based upon any such action or inaction of
Guarantor, IFFC or IFFP. No delay on the part of BKC in the exercise of any
right, power or privilege under the terms of any documentation between BKC and
Guarantor, IFFC or IFFP or under this Guaranty shall operate as a waiver of any
such privilege, power or right. Guarantor understands and agrees that Guarantor
is fully responsible for being and keeping informed of the financial condition
of IFFC and IFFP and of all circumstances bearing on the risk of failure to
perform the Obligations.
4. FEES AND EXPENSES Guarantor agrees to pay all reasonable attorneys'
fees and all other costs and expenses that may be incurred or expended by BKC in
the enforcement of the Obligations under this Guaranty, whether suit be brought
or not.
5. CONTINUING GUARANTY Guarantor acknowledges and agrees that this
Guaranty shall remain in full force and effect until all of the Obligations are
paid in full. Furthermore, Guarantor agrees that this Guaranty shall continue to
be effective or shall be reinstated, as the case may be, at any time payment, or
any part thereof, of principal or interest charges, or other related expenses of
the Obligations are rescinded or otherwise forgiven by BKC upon the bankruptcy
or reorganization of IFFC, IFFP or Guarantor.
6. MISCELLANEOUS.
6.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
6.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto; provided, that BKC may assign its rights
and delegate its duties under this Agreement to one or more of its subsidiaries
or affiliates.
6.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
6.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
2
<PAGE>
6.5 EXPENSES. Guarantor shall cause IFFC to pay or reimburse BKC for
all of its legal, accounting and other expenses directly related to the
consummation of the transactions contemplated hereby, together with the costs
and expenses of enforcing any of its rights hereunder.
6.6 JURISDICTION. Any claim arising out of this Agreement shall be
brought in any state or federal court located in Miami-Dade County, Florida,
United States. For the purpose of any suit, action or proceeding instituted with
respect to any such claim, each of the parties hereto irrevocably submits to the
jurisdiction of such courts in Miami-Dade County, Florida, United States. Each
of the parties hereto further irrevocably consents to the service of process out
of said courts by mailing a copy thereof by registered mail, postage prepaid, to
such party and agrees that such service, to the fullest extent permitted by law,
(i) shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be a valid
personal service upon and a personal delivery to it. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade County,
Florida, United States, and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum.
6.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
United States, without regard to any conflict of law, rule or principle that
would give effect to the laws of another jurisdiction.
6.8 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it, at its address or
facsimile number set forth on the signature pages below, or at such other
address or facsimile number as such party may hereafter specify for such purpose
by notice to the other party. Each such notice, request or communication shall
be deemed effective when received at the address or facsimile number specified
below.
7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Mitchell Rubinson
---------------------
Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
--------------------
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President - Financial Affairs
4
Exhibit 10.11
SECURITY AND PLEDGE AGREEMENT
-----------------------------
THIS SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated this 21st
day of October, 1999, by and between Mitchell Rubinson (hereinafter referred to
as "Rubinson" or the "Debtor"), and Burger King Corporation (hereinafter
referred to as "BKC" or the "Secured Party").
WHEREAS, International Fast Food Corporation ("IFFC") is the owner of
all the issued and outstanding shares (the "IFFP Shares") of International Fast
Food Polska S.P. z.o.o. ("IFFP");
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to IFFP in the aggregate amount of U.S. $5,000,000,
pursuant to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, BKC issued a guarantee in favor of Citibank to secure the repayment
by IFFP of amounts borrowed under the Credit Agreement (as amended, the
"Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the Guarantee;
WHEREAS, as a condition to the making of the Guarantee, IFFC agreed to
reimburse BKC for any payments that it may be required to make to Citibank under
the Guarantee, together with related costs, expenses and interest, as more fully
said forth in that certain Reimbursement Agreement dated as of February 24, 1999
(as amended, the "Reimbursement Agreement"), by and among IFFC, IFFP and BKC;
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the Guarantee to a maximum aggregate amount of U.S. $10,000,000, upon
the terms, and subject to the conditions, of that certain Guarantee of Future
Advances Agreement dated of even date herewith by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to Rubinson;
WHEREAS, pursuant to a Guaranty of even date herewith (the "Rubinson
Guaranty:), Rubinson has agreed to personally guarantee the Obligations (as
hereinafter defined, and to secure such personal guarantee by the grant of a
security interest in, and a pledge to BKC of, an aggregate of 5,000,000 shares
of common stock of IFFC (the "Shares") which are owned by Rubinson.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
<PAGE>
1. SECURITY INTEREST. For value received, Debtor hereby sells,
transfers, conveys, sets over, delivers, bargains, pledges, assigns and grants
to Secured Party, upon the terms and conditions of this Agreement, a security
interest in and to any and all present or future rights of Debtor in and to all
of the following rights, interests and property (all of the following being
herein sometimes called the "Collateral"):
(a) Five million (5,000,000) shares (the "Shares") of the
common stock, par value $.01 per share, of IFFC which are owned by
Debtor;
(b) All rights, powers, privileges and preferences pertaining
to the Shares described in Section 1(a) above and any stock rights,
rights to subscribe, cash distributions, dividends, stock dividends,
liquidating dividends, new securities (whether certificated or
uncertificated) and other property to which the Obligor may become
entitled by reason of the ownership of any Securities pledged and
assigned hereunder from time to time; and
(c) All Proceeds of any of the foregoing Collateral described
above in this Section 1.
All capitalized terms used but not otherwise defined in this Agreement shall
have the respective meanings given them in the Florida Uniform Commercial Code.
As used in this Agreement, the term "Securities" means any notes, stocks,
treasury stocks, bonds, debentures, evidences of indebtedness, warrants,
partnership interests, stock options, beneficial interests in trusts, or equity
interests of any nature whatsoever in any legal entity or, in general, any
interest or instrument commonly known as a "security," or any warrant or right
to subscribe to or purchase any of the foregoing; and the term "issuer" means,
with respect to any Securities, the legal entity in which such Securities
evidence an ownership or beneficial interest.
2. RUBINSON GUARANTY. This Agreement is being executed and delivered
pursuant to the terms, conditions and requirements of the Rubinson Guaranty. The
security interest herein granted ("Security Interest") shall secure full payment
and performance of (i) Rubinson's obligations to BKC under the Purchase
Agreement, (ii) IFFC's and IFFP's obligations under the Reimbursement Agreement,
and (iii) the due and punctual observance and performance of each and every
agreement, covenant and condition on Debtor's part to be observed or performed
under this Agreement and the Rubinson Guarantee (all of which debts, duties,
liabilities and obligations are referred to as the "Obligations").
3. PRIORITY. Debtor represents and warrants that the Security Interest
is a first and prior security interest in and to all of the Collateral.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor hereby
represents and warrants to Secured Party and covenants for the benefit of
Secured Party as follows:
(a) Debtor is the sole legal and equitable owner of the Shares
free from any adverse claim, lien, security interest, encumbrance or other
right, title or interest of any person, except for the security interest created
hereby. Debtor has the right and power to grant a security interest in the
Collateral to Secured Party without the consent of any other person, and Debtor
shall at his expense defend the Collateral against all claims and demands of all
persons at any time claiming the Collateral or any interest therein adverse to
Secured Party. So long as any Obligation to the Secured Party is outstanding,
Debtor will not without the prior written consent of Secured Party grant to any
person a security interest in any of the Collateral or permit any lien or
encumbrance to attach to any of the Collateral, or suffer or permit any levy or
garnishment, or attachment to be made on any part of the Collateral, or permit
any financing statement to reflect an interest in any part of the Collateral,
except that of Secured Party, to be on file with respect thereto.
(b) Debtor has delivered to Secured Party all stock
certificates evidencing the Shares pledged and assigned under this Agreement
(and the Debtor shall promptly deliver the same with respect to all certificated
Securities pledged and assigned to Secured Party hereafter, together with duly
executed stock powers in blank and all other assignments or endorsements
reasonably requested by Secured Party.
2
<PAGE>
(c) If new or additional Securities are issued to Debtor (as a
stock dividend, stock split, or pursuant to any reclassification or
recapitalization of the capital of any issuer of Securities pledged and assigned
hereunder, or the reorganization or, merger, acquisition or consolidation of any
such issuer or otherwise) with respect to the Collateral, then the same shall be
deemed an increment to the Collateral and under pledge and assignment to Secured
Party hereunder. If evidenced by a stock certificate, bond, warrant, debenture,
certificate, or other Instrument or writing, then such Securities shall (to the
extent acquired or received by or placed under Debtor's control) be held in
trust for and promptly delivered to Secured Party, together with duly executed
stock powers in blank and any other assignments or endorsements as Secured Party
may request. If any such Securities are uncertificated, then Debtor shall
immediately upon acquisition of such Securities cause Secured Party to be
registered as the transferee thereof on the books of the depository, custodian
bank, clearing corporation, brokerage house, issuer or otherwise, as may be
requested by Secured Party.
(d) Without the prior consent of Secured Party, Debtor shall
not sell, transfer, assign, convey, lease or otherwise dispose of any part of
the Collateral, nor enter into any contract or agreement to do so. Debtor will
not compromise, release, surrender or waive any rights of any nature whatsoever
in respect of any of the Collateral without Secured Party's prior written
consent.
5. DEBTOR'S OBLIGATIONS. So long as the Obligations are outstanding,
Debtor covenants and agrees with Secured Party (a) not to permit any material
part of the Collateral to be levied upon under any legal process; (b) not to
dispose of or pledge any of the Collateral without the prior written consent of
Secured Party; (c) to comply with all applicable federal, state and local
statutes, laws, rules and regulations, the noncompliance with which could
reasonably be likely to have a material and adverse effect on the value of the
Collateral; and (d) to pay all taxes accruing after the Closing Date which
constitute, or may constitute, a lien against the Collateral, prior to the date
when penalties or interest would attach to such taxes; provided, that Debtor may
contest any such tax claim if done diligently and in good faith.
6. EVENT OF DEFAULT. As used herein, the term "Event of Default" shall
include any or all of the following if same exist on the 10th day after written
notice by Secured Party to Debtor which certifies such default:
(a) The assignment, voluntary or involuntary conveyance of
legal or beneficial interest, mortgage, pledge or grant of a security interest
in any of the Collateral; or
(b) The filing or issuance of a notice of any lien or notice
of levy for taxes or assessment against the Collateral; or
(c) Nonpayment of any amounts due under the Rubinson Guarantee
upon the date same shall be due and payable; or
(d) The adjudication of Debtor as bankrupt, or the taking of
any voluntary action by Debtor or any involuntary action against Debtor seeking
an adjudication of Debtor as bankrupt, or seeking relief by or against Debtor
under any provision of the Bankruptcy Code.
7. REMEDIES. Upon the occurrence and during the continuation of an
Event of Default as defined herein, in addition to any and all other rights and
remedies which Secured Party may then have hereunder or under the Note, under
the Uniform Commercial Code of the State of Florida or of any other pertinent
jurisdiction (the "Code"), or otherwise, Secured Party may, at its option: (a)
reduce its claim to judgment or foreclosure or otherwise enforce the Security
Interests, in whole or in part, by any available judicial procedure; (b) sell,
or otherwise dispose of, at the office of Secured Party, or elsewhere, all or
any part of the Collateral, and any such sale or other disposition may be as a
unit or in parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral shall not
exhaust the Secured Party's power of sale, but sales may be made from time to
time, and at any time, until all of the Collateral has been sold or until the
Obligation has been paid and performed in full); (c) at his discretion, retain
the Collateral in satisfaction of the Obligation whenever the circumstances are
such that Secured Party is entitled to do so under the Code or otherwise; (d)
exercise all voting or consensual rights of the Collateral upon notice to Debtor
of such election and otherwise act with respect to the Collateral as though it
were the outright owner thereof (Debtor hereby irrevocably constitutes and
appoints Secured Party as the proxy and attorney-in-fact of Debtor, with full
power of substitution, to do so); and (e) exercise any and all other rights,
remedies and privileges he may have under the Note and the other documents
defining the Obligation. Until such time, if any, as an Event of Default has
occurred and shall be continuing, the Debtor shall retain all voting rights with
respect to the Collateral
3
<PAGE>
8. APPLICATION OF PROCEEDS BY SECURED PARTY. Any and all proceeds ever
received by Secured Party from any sale or other disposition of the Collateral,
or any part thereof, or the exercise of any other remedy pursuant hereto shall
be applied by Secured Party to the Obligations in such order and manner as
Secured Party, in its sole discretion, may deem appropriate, notwithstanding any
directions or instructions to the contrary by Debtor; provided that (a) the
proceeds and/or accounts shall be applied toward satisfaction of the
Obligations; and (b) if such proceeds and/or accounts are not sufficient to pay
the Obligations in full, Debtor shall remain liable to Secured Party for the
deficiency. Any proceeds received by Secured Party under this Agreement in
excess of those necessary to fully and completely satisfy the Obligations shall
be distributed to Debtor.
9. NOTICE OF SALE. Reasonable notification of the time and place of any
public sale of the Collateral, or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to be
made, shall be sent to Debtor and to any other persons entitled under the
Uniform Commercial Code, as in effect from time to time in the State of Florida,
to notice; provided, that if any of the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
may sell, pledge, assign or otherwise dispose of the Collateral without
notification, advertisement or other notice of any kind. It is agreed that
notice sent or given not less than ten (10) calendar days prior to the taking of
the action to which the notice relates is reasonable notification and notice for
the purpose of this paragraph.
10. MISCELLANEOUS.
--------------
10.1 FURTHER ASSURANCES. Each of the parties hereto agrees
with the other parties hereto that it will cooperate with such other
parties and will execute and deliver, or cause to be executed and
delivered, all such other instruments and documents, and will take such
other actions, as such other parties may reasonably request from time
to time to effectuate the provisions and purposes of this Agreement.
10.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS;
ASSIGNMENT. This Agreement shall be binding upon the parties hereto and
their respective successors, transferees and assigns. Notwithstanding
the foregoing no party hereto may assign any of its obligations
hereunder with the prior written consent of the other parties hereto;
provided, that BKC may assign its rights and delegate its duties under
this Agreement to one or more of its subsidiaries or affiliates.
10.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any
provisions of this Agreement, nor consent to any departure therefrom by
any party hereto, shall in any event be effective unless the same shall
be in writing and signed by such party, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
10.4 NO WAIVER; REMEDIES. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any right. The remedies herein provided are
cumulative and not exclusive of any remedy provided by law.
10.5 EXPENSES. IFFC shall pay or reimburse BKC for all of its
legal, accounting and other expenses directly related to the
consummation of the transactions contemplated hereby, together with the
costs and expenses of enforcing any of its rights hereunder.
10.6 JURISDICTION. Any claim arising out of this Agreement
shall be brought in any state or federal court located in Miami-Dade
County, Florida, United States. For the purpose of any suit, action or
proceeding instituted with respect to any such claim, each of the
parties hereto irrevocably submits to the jurisdiction of such courts
4
<PAGE>
in Miami-Dade County, Florida, United States. Each of the parties
hereto further irrevocably consents to the service of process out of
said courts by mailing a copy thereof by registered mail, postage
prepaid, to such party and agrees that such service, to the fullest
extent permitted by law, (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and
(ii) shall be taken and held to be a valid personal service upon and a
personal delivery to it. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it
may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court located in Miami-Dade
County, Florida, United States, and any claim that any such suit,
action or proceeding brought in such court has been brought in an
inconvenient forum.
10.7 GOVERNING LAW; SEVERABILITY. This Agreement shall be
governed by and construed in accordance with the internal laws of the
State of Florida, United States, without regard to any conflict of law,
rule or principle that would give effect to the laws of another
jurisdiction.
10.8 NOTICES. All notices, requests and other communications
to any party hereunder shall be writing (including facsimile
transmission or similar writing) and shall be given to such party,
addressed to it, at its address or facsimile number set forth on the
signature pages below, or at such other address or facsimile number as
such party may hereafter specify for such purpose by notice to the
other party. Each such notice, request or communication shall be deemed
effective when received at the address or facsimile number specified
below.
10.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be
an original, and all of which counterparts, when
taken together, shall constitute one and the same
Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Mitchell Rubinson
---------------------
Mitchell Rubinson
1000 Lincoln Road, Suite 200
Miami Beach, FL 33139, USA
BURGER KING CORPORATION
By: /s/ Philip Kinnersly
--------------------
Name: Philip Kinnersly
Title: Vice President
c/o Burger King EMA
Charter Place
Vine Street
Uxbridge, England UB81BZ
Attn: General Counsel and
Vice President - Financial Affairs
6
Exhibit 10.12
REIMBURSEMENT AND FEE AGREEMENT
-------------------------------
THE REIMBURSEMENT AND FEE AGREEMENT (this "Agreement"), is dated as of
October 14, 1999, by and among INTERNATIONAL FAST FOOD CORPORATION, a company
organized under the laws of the State of Florida ("IFFC"), and Mitchell
Rubinson, Chairman of the Board and Chief Executive Officer of IFFC
("Rubinson").
WHEREAS, on February 24, 1999, Citibank (Poland) S.A. ("Citibank")
agreed to provide credit to International Fast Food Polska, a wholly owned
subsidiary of IFFC ("IFFP"), in the aggregate amount of U.S.$5,000,000, pursuant
to a credit agreement dated February 24, 1999 (as amended, the "Credit
Agreement");
WHEREAS, as a condition to the disbursement of funds under the Credit
Agreement, Burger King Corporation ("BKC") issued a guarantee in favor of
Citibank to secure the repayment by IFFP of amounts borrowed under the Credit
Agreement (as amended, the "BKC Guarantee");
WHEREAS, pursuant to an Agreement for the Transfer of Title to Shares
by way of Security dated February 24, 1999 (as amended, the "Security
Agreement"), in consideration of the BKC Guarantee, IFFC granted BKC a perfected
security interest in the IFFP Shares to secure BKC's claims which may arise as a
result of the payment by BKC of any amounts under the BKC Guarantee;
WHEREAS, as a condition to the making of the BKC Guarantee, IFFC agreed
to reimburse BKC for any payments that it may be required to make to Citibank
under the BKC Guarantee, together with related costs, expenses and interest, as
more fully said forth in that certain Reimbursement Agreement by and among IFFC,
IFFP and BKC (as amended, the "Reimbursement Agreement");
WHEREAS, Citibank has agreed to increase the amount which may be
borrowed under the Credit Agreement to an aggregate amount of U.S. $8,000,000,
and BKC has agreed to increase the amount of the BKC Guarantee to secure the
repayment by IFFP of amounts borrowed under the Credit Agreement;
<PAGE>
WHEREAS, in the event that Citibank is willing to further increase the
available credit under the Credit Agreement, BKC has agreed to increase the
amount of the BKC Guarantee to a maximum aggregate amount of U.S.$10,000,000,
upon the terms, and subject to the conditions, of that certain Guarantee of
Future Advances Agreement by and among BKC, IFFC and IFFP;
WHEREAS, pursuant to a Purchase Agreement dated February 24, 1999 (as
amended, the "Purchase Agreement"), the parties agreed that, in the event that
BKC acquires the IFFP Shares pursuant to the exercise of its rights under the
Security Agreement, BKC will sell the IFFP Shares held by BKC to IFFC and if
IFFC is unable to purchase such shares, then to Rubinson;
WHEREAS, Rubinson has agreed to personally guarantee (the "Rubinson
Guarantee") (i) his obligations to BKC under the Purchase Agreement and (ii)
IFFC's and IFFP's obligations under the Reimbursement Agreement and to secure
such personal guarantee by the grant of a security interest in, and a pledge to
BKC of, an aggregate of 5,000,000 shares of common stock of IFFC which are owned
by Rubinson;
WHEREAS, IFFC has agreed to reimburse Rubinson for certain payments
that he may be required to make to BKC under the Rubinson Guarantee, in excess
of the net worth of the IFFP Shares received by Rubinson pursuant to the
Purchase Agreement;
WHEREAS, IFFC has agreed to pay Rubinson a fee in connection with his
personal guaranty of the obligations of IFFC and IFFP; and
WHEREAS, IFFC has agreed to forgive all intercompany debts and
liabilities if Rubinson is required to purchase the IFFP Shares pursuant to the
Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. REIMBURSEMENT. IFFC agrees to pay or reimburse Rubinson within 72
hours of his written demand for (i) any payments to be made or previously made
by Rubinson under the Rubinson Guarantee, less the net worth of IFFP as of the
month-end immediately prior to the payment by Rubinson under the Rubinson
Guarantee (such amounts are hereinafter referred to as "Indemnity Payments"),
(ii) interest on the amount of any Indemnity Payment remaining unpaid by IFFC
under clause (i) above, from (and including) the date of such Indemnity Payment,
until payment in full thereof (after as well as before judgment) at a rate equal
to the Base Rate (as defined below) from time to time in effect plus two hundred
basis points and (iii) all fees, costs and expenses incurred by Rubinson in
connection with the enforcement of its rights hereunder. "Base Rate" means, on
any date, a fluctuating rate of interest per annum equal to the rate of interest
published in the "Wall Street Journal" on such date as the "prime rate" for U.S.
dollar loans by major money center banks. Interest accruing on the Base Rate
shall be computed on the basis of the actual number of days elapsed in a 365 day
year.
2. FEE. IFFC agrees to pay Rubinson a fee in connection with his
personal guaranty of the obligations of IFFC and IFFP equal to 3% of the
aggregate amount guaranteed by Rubinson pursuant to the Rubinson Guarantee
multiplied by the number of years during which the Rubinson Guarantee is
outstanding, such fee to be paid upon the execution of this Agreement or such
other time as determined by mutual agreement of the parties hereto.
2
<PAGE>
3. FORGIVENESS OF INTER-COMPANY LIABILITIES. IFFC hereby agrees that if
Rubinson is required to purchase the IFFP Shares pursuant to the Purchase
Agreement, it will forgive and/or eliminate all indebtedness and liabilities of
IFFP to IFFC upon such purchase of the IFFP Shares.
4. MISCELLANEOUS.
-------------
4.1 FURTHER ASSURANCES. Each of the parties hereto agrees with the
other parties hereto that it will cooperate with such other parties and will
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and will take such other actions, as such other
parties may reasonably request from time to time to effectuate the provisions
and purposes of this Agreement.
4.2 BINDING ON SUCCESSORS, TRANSFEREES AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the parties hereto and their respective
successors, transferees and assigns. Notwithstanding the foregoing no party
hereto may assign any of its obligations hereunder without the prior written
consent of the other parties hereto.
4.3 AMENDMENTS; WAIVERS. No amendment to or waiver of any provisions of
this Agreement, nor consent to any departure therefrom by any party hereto,
shall in any event be effective unless the same shall be in writing and signed
by such party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
4.4 NO WAIVER; REMEDIES. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any right. The
remedies herein provided are cumulative and not exclusive of any remedy provided
by law.
4.5 EXPENSES. IFFC shall pay or reimburse Rubinson for all of his
legal, accounting and other expenses directly related to the consummation of the
transactions contemplated hereby, together with the costs and expenses of
enforcing any of its rights.
4.6 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Florida,
without regard to any conflict of law, rule or principle that would give effect
to the laws of another jurisdiction.
4.7 NOTICES. All notices, requests and other communications to any
party hereunder shall be writing (including facsimile transmission or similar
writing) and shall be given to such party, addressed to it at such address or
facsimile number as such party may hereafter specify for such purpose by notice
to the other party. Each such notice, request or communication shall be deemed
effective when received at the address or facsimile number specified below.
3
<PAGE>
4.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, when taken together,
shall constitute one and the same Agreement.
[Signatures on following page]
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTERNATIONAL FAST FOOD
CORPORATION
By: /s/ Larry Schatz
-----------------
Name: Larry Schatz
Title: Vice Chairman
/s/ Mitchell Rubinson
---------------------
Mitchell Rubinson
5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,608,041
<SECURITIES> 0
<RECEIVABLES> 250,227
<ALLOWANCES> 0
<INVENTORY> 818,432
<CURRENT-ASSETS> 3,491,516
<PP&E> 27,626,933
<DEPRECIATION> (6,897,692)
<TOTAL-ASSETS> 28,815,745
<CURRENT-LIABILITIES> 11,632,151
<BONDS> 11,341,567
0
1,911
<COMMON> 453,241
<OTHER-SE> 3,705,511
<TOTAL-LIABILITY-AND-EQUITY> 28,815,745
<SALES> 11,589,343
<TOTAL-REVENUES> 11,589,343
<CGS> 4,413,430
<TOTAL-COSTS> 12,535,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,218,214
<INCOME-PRETAX> (6,505,713)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,505,713)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (620,000)
<NET-INCOME> (7,125,713)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
