SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 27, 1998
FRANCHISE FINANCE CORPORATION OF AMERICA
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-13116 86-0736091
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
17207 North Perimeter Drive, Scottsdale, AZ 85255
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (602) 585-4500
NONE
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(Former Name or Former Address, if Change Since Last Report)
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ITEM 5. OTHER EVENTS.
(a) On October 27, 1998, the Registrant entered into a Purchase
Agreement (the "Purchase Agreement") with Salomon Smith Barney Inc., Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and NationsBanc
Montgomery Securities LLC, with respect to the issue and sale by the Registrant
of its 8.25% Senior Notes Due 2003 (the "Notes"). The Notes are to be issued
pursuant to an Indenture, dated as of November 21, 1995, as amended or modified
from time to time, between the Registrant and Norwest Bank Arizona, National
Association, as trustee. The Purchase Agreement is attached hereto and
referenced as Exhibit 1.01. The Officers' Certificate establishing the form and
terms of the Notes is attached hereto as Exhibit 4.01
(b) Kutak Rock as counsel to the Registrant has issued its opinion as
to the legality with respect to the Notes. The opinion is attached hereto and
referenced as Exhibit 5.01.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
1.01 Purchase Agreement
4.01 Officers' Certificate
5.01 Legal Opinion of Kutak Rock
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRANCHISE FINANCE CORPORATION OF
AMERICA (Registrant)
Dated: October 29, 1998 By /s/ John Barravecchia
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John Barravecchia,
Executive Vice President
and Chief Financial Officer
FRANCHISE FINANCE CORPORATION OF AMERICA
(a Delaware corporation)
$150,000,000 8.25% Senior Notes due 2003
PURCHASE AGREEMENT
October 27, 1998
Salomon Smith Barney Inc.
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
NationsBanc Montgomery Securities LLC
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Ladies and Gentlemen:
Franchise Finance Corporation of America, a Delaware
corporation (the "Company"), confirms its agreement with Salomon Smith Barney
Inc. ("Salomon"), Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and NationsBanc Montgomery Securities LLC
("NationsBanc") (collectively, the "Underwriters," which term shall also include
any underwriter substituted as hereinafter provided in Section 10 hereof), with
respect to the issue and sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of the respective principal
amounts set forth in Schedule I of $150,000,000 aggregate principal amount of
the Company's 8.25% Senior Notes due 2003 (the "Securities"). The Securities
will mature on October 30, 2003. The Securities are to be issued pursuant to an
indenture dated as of November 21, 1995 (the "Indenture"), which term, as used
herein, includes the Officer's Certificate (as defined in the Indenture)
establishing the form and terms of the Securities pursuant to Sections 2.01 and
3.01 of the Indenture between the Company and Norwest Bank Arizona, National
Association, as trustee (the "Trustee").
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-26437) and pre-effective amendment no. 1 thereto relating to the offering
from time to time of debt securities, common stock or preferred stock in
accordance with Rule 415 under the Securities Act of 1933, as amended (the "1933
Act") and will file such additional amendments and supplements thereto as may
herein be required. Such registration statement has been declared effective by
the Commission and the Indenture has been qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act"). Such registration statement (as
amended), and the prospectus
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constituting a part thereof and each prospectus supplement relating to the
offering of the Securities (including in each case all documents incorporated or
deemed to be incorporated by reference therein, and the information, if any,
deemed to be part thereof pursuant to Rule 434 of the rules and regulations of
the Commission under the 1933 Act (the "1933 Act Regulations")), as from time to
time amended or supplemented pursuant to the 1933 Act, the Securities Exchange
Act of 1934, as amended (the "1934 Act"), or otherwise, are hereinafter referred
to as the "Registration Statement" and the "Prospectus," respectively, except
that if any revised prospectus shall be provided to the Underwriters by the
Company for use in connection with the offering of the Securities which differs
from the Prospectus on file (whether or not such revised prospectus is required
to be filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations),
the term "Prospectus" shall refer to such revised prospectus from and after the
time it is first provided to the Underwriters for such use. All references in
this Agreement to financial statements and schedules and other information which
is "described," "disclosed," "contained," "included" or "stated" in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the 1934 Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be. If the Company elects to rely on Rule 434 under the 1933 Act
Regulations, all references to the Prospectus shall be deemed to include,
without limitation, the form of prospectus and the term sheet, taken together,
provided to the Underwriters by the Company in reliance on Rule 434 under the
1933 Act (the "Rule 434 Prospectus"). If the Company files a registration
statement to register a portion of the Securities and relies on Rule 462(b) for
such registration statement to become effective upon filing with the Commission
(the "Rule 462 Registration Statement"), then any reference to "Registration
Statement" herein shall be deemed to be to both the registration statement
referred to above (No. 333-26437) and the Rule 462 Registration Statement, as
each such registration statement may be amended pursuant to the 1933 Act.
The Company understands that the Underwriters propose to sell
the Securities in a public offering as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered.
Section 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Underwriters as of the
date hereof and as of the Closing Time referred to in Section 2(b) hereof, and
agrees with the Underwriters, as follows:
(i) The Company meets the requirements for use of Form S-3
under the 1933 Act, and at the respective times the Registration
Statement became effective and any post-effective amendments thereto
become effective and on the date hereof, the Registration Statement did
and will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations and the 1939 Act and the rules
and regulations of the Commission under the 1939 Act, and did not and
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated
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therein or necessary to make the statements therein not misleading. The
Prospectus, on the date hereof (unless the term "Prospectus" refers to
a prospectus which has been provided to the Underwriter by the Company
for use in connection with the offering of the Securities which differs
from the Prospectus on file at the Commission at the time the
Registration Statement first becomes effective, in which case at the
time it is first provided to the Underwriter for such use), and at the
Closing Time, will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by the Underwriter expressly for use in the
Registration Statement or Prospectus. For purposes of this Section
l(a), all references to the Registration Statement, any post-effective
amendments thereto and the Prospectus shall be deemed to include,
without limitation, any electronically transmitted copies thereof,
including, without limitation, any copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis, and Retrieval
system ("EDGAR").
(ii) The accountants who certified the financial statements
and supporting schedules included or incorporated by reference in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) The financial statements included or incorporated by
reference in the Registration Statement and the Prospectus, together
with the related schedule and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at the dates
indicated and the statement of income, shareholders' equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; except as otherwise stated in the Registration Statement,
said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
("GAAP") throughout the periods involved. The supporting schedules, if
any, included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included
in the Prospectus present fairly in accordance with GAAP the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement. The pro forma financial information included in
the Prospectus presents fairly the information shown therein, has been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and has been properly
compiled on the bases described therein, and the assumptions used in
the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
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considered as one enterprise, whether or not arising in the ordinary
course of business ("Material Adverse Change"), (B) there have been no
transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the
common stock, par value $.01 per share, of the Company (the "Common
Stock") in amounts per share that are consistent with past practice,
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(v) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware and has the corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this
Agreement; the Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of Arizona and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to so qualify or to be in good standing would not, either
singly or in the aggregate, have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise (a "Material Adverse Effect").
(vi) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not, either singly or in the aggregate, have a Material
Adverse Effect; all of the issued and outstanding capital stock of each
such subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned directly by the Company, free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity, none of the outstanding shares of capital stock of the
subsidiaries was issued in violation of the preemptive or similar
rights of any stockholder of such corporation arising by operation of
law, under the charter or by-laws of any subsidiary or under any
agreement to which the Company or any subsidiary is a party. The
Company does not own, directly or indirectly through a "qualified REIT
subsidiary" (within the meaning of Section 856(i) of the Internal
Revenue Code of 1986, as amended (the "Code")), any partnership,
limited liability company, association or other entity, any shares of
stock or any other debt or equity securities of, or other interests in,
any corporation, firm, partnership, limited liability company,
association or other entity, other than (1) stock of a corporation or
equity of any entity that the Company has been advised by its legal
counsel qualifies as a "qualified REIT subsidiary" within the meaning
of Section 856(i) of the Code, (2) stock or other debt or equity
securities of any issuer (other than a
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partnership or limited liability company, the ownership of which is
governed by (3) below) where (i) the Company has been advised by legal
counsel that such ownership would not constitute ownership of more than
9.8% of the voting securities of such issuer (within the meaning of
Section 856(c)(5) of the Code) and (ii) the Company has determined in
good faith that the fair market value of the stock and securities of
any one such issuer does not exceed 4.8% of the value of the total
assets of the Company, or (3) interests in a partnership or limited
liability company where (i) the Company has received a written opinion
of its legal counsel that such a partnership or limited liability
company is properly treated as a partnership, rather than an
association or publicly traded partnership taxable as a corporation,
for federal income tax purposes and (ii) such partnership or limited
liability company does not itself own debt or equity securities of any
issuer that could cause the Company to violate the representation
contained in clause (2) above. As used in this Agreement, "subsidiary"
shall mean (i) any corporation, trust, association or other business
entity of which more than 50% of the total voting power of shares of
capital stock or other equivalent interests entitled to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by the Company or one or
more of the other subsidiaries of the Company (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the
managing general partner of which is the Company or a subsidiary of the
Company or (b) the only general partners of which are the Company or
one of more subsidiaries of the Company (or any combination thereof).
(vii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column entitled
"Historical" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to employee benefit plans referred to in
the Prospectus, pursuant to the exercise of options referred to in the
Prospectus or pursuant to the Company's dividend reinvestment plan),
and all of such outstanding shares of capital stock have been duly
authorized and validly issued and are fully paid and nonassessable and
were not issued in violation of, and are not subject to, preemptive or
other similar rights.
(viii) Neither the Company nor any of its subsidiaries is (a)
in violation of its charter or bylaws or (b) in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which any of them may be bound, or to which any of the property
or assets of the Company or any of its subsidiaries is subject, except
for, in the case of (b), any such defaults which would not, either
singly or in the aggregate, have a Material Adverse Effect; and the
execution, delivery and performance of this Agreement, the Indenture
and the Securities and the consummation of the transactions
contemplated herein and therein and compliance by the Company with its
obligations hereunder and thereunder (including the use of the proceeds
from the sale of the Securities as described in the Prospectus under
the caption "Use of Proceeds") have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, (i) conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of
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the Company or any of its subsidiaries pursuant to, any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound,
including the Second Amended and Restated Credit Agreement between the
Company and NationsBank of Texas, N.A. dated December 29, 1997 (the
"NationsBank Facility"), or to which any of the property or assets of
the Company or any of its subsidiaries is subject except for any such
conflict, breach, default or Repayment Event which would not, either
singly or in the aggregate, have a Material Adverse Effect, (ii)
violate Section 6.2 of the NationsBank Facility, or (iii) result in any
violation of the provisions of the charter or by-laws of the Company or
any of its subsidiaries or any applicable law, statute, rule or
regulation, or any judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
(ix) There is no existing labor dispute with the employees of
the Company or any of its subsidiaries that would have, either singly
or in the aggregate, a Material Adverse Effect.
(x) There is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its
subsidiaries, which is required to be disclosed in the Registration
Statement, or which might reasonably be expected to result in any
Material Adverse Change, or which might reasonably be expected to have
a Material Adverse Effect or materially and adversely affect the
consummation of this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Change.
(xi) There are no contracts or documents which are required to
be described in the Registration Statement, the Prospectus or the
documents incorporated by reference therein or to be filed as exhibits
thereto by the 1933 Act, the 1933 Act Regulations, the 1934 Act or the
rules and regulations of the Commission under the 1934 Act (the "1934
Act Regulations") which have not been so described and filed as
required.
(xii) To the extent applicable, the Company and its
subsidiaries own or possess, or can acquire on reasonable terms, the
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "patent and
proprietary rights") presently employed by them in connection with the
business now operated by them, and neither the Company nor any
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of its subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with
respect to any patent or proprietary rights or of any facts or
circumstances which would render any patent and proprietary rights
invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, either singly or in the aggregate, would result in any
Material Adverse Change.
(xiii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required in connection
with the offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by this Agreement, except
such as have already been obtained or as may be required under the 1933
Act or the 1933 Act Regulations or state securities laws.
(xiv) The Company and its subsidiaries possess such
certificates, authorities, permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess or comply with any such Governmental
License would not, either singly or in the aggregate, have a Material
Adverse Effect; the Company and its subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, either singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have,
either singly or in the aggregate, a Material Adverse Effect; and
neither the Company nor any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses which, either singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(xv) This Agreement has been duly authorized, executed and
delivered by the Company.
(xvi) The Indenture has been duly authorized by the Company
and has been duly qualified under the 1939 Act and duly executed and
delivered by the Company and (assuming the due authorization, execution
and delivery of the Indenture by the Trustee) will constitute a valid
and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditor's rights generally or by
general equitable principles.
(xvii) The Securities have been duly authorized and, at the
Closing Time, will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as specified on Exhibit
A hereto, will constitute valid and binding obligations of the
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Company, enforceable against the Company in accordance with their
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles, and will be in the form contemplated by, and entitled to
the benefits of, the Indenture.
(xviii) The Securities and the Indenture will conform in all
material respects to the respective statements relating thereto
contained in the Prospectus and will be in substantially the respective
forms filed or incorporated by reference, as the case may be, as
exhibits to the Registration Statement.
(xix) Except as set forth in the Prospectus, the Company and
its subsidiaries are in compliance in all material respects with all
applicable laws, statutes, ordinances, rules or regulations, the
violation of which, either singly or in the aggregate, would be
reasonably expected to have a Material Adverse Effect.
(xx) Except as otherwise disclosed in the Prospectus: (i) the
Company and its subsidiaries have good and marketable title to all
properties and assets (or a valid first lien as to mortgaged
properties) described in the Prospectus as being owned (or mortgaged)
by them, or reflected in the most recent consolidated balance sheet of
the Company contained in the Prospectus; (ii) all liens, charges,
claims, restrictions or encumbrances on or affecting the properties and
assets of the Company or any of its subsidiaries which are required to
be disclosed in the Prospectus are disclosed therein; (iii) no person
or entity, other than tenants under the leases or guarantors thereof
pursuant to which the Company and its subsidiaries lease all or a
portion of their properties, has an option or right of first refusal or
any other right to purchase any of such properties; (iv) each of the
properties of the Company and its subsidiaries, at the time such
property was acquired or at the time the loan by the Company with
respect to such property was made, had access to public rights of way,
either directly or through insured easements; (v) each of such
properties, at the time such property was acquired or at the time the
loan by the Company with respect to such property was made, was served
by all public utilities necessary for the current operations on such
property in sufficient quantities for such operations; (vi) each of
such properties complies with all applicable codes and zoning and
subdivision laws and regulations, except for such failures to comply
which would not, either singly or in the aggregate, have a Material
Adverse Effect; (vii) the real property leases and equipment leases, if
any, relating to each of such properties are in full force and effect,
except where the failure to be in full force and effect would not,
singly or in the aggregate, have a Material Adverse Effect; and (viii)
there is no pending or threatened condemnation, zoning change, or other
proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on or access to the properties of the
Company and its subsidiaries, except such proceedings or actions which
would not, either singly or in the aggregate, have a Material Adverse
Effect.
(xxi) The Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of
the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
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(xxii) The Company is not, and upon the issuance and sale of
the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under the caption
"Use of Proceeds" will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxiii) Except as described in the Registration Statement, (A)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign laws or regulations relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), except where the Company or its subsidiaries have obtained one
or more policies of environmental insurance to cover such risks, with
deductible amounts, loss limits and aggregate liability limitations
which were deemed reasonably appropriate by the Company under the
circumstances, and, except such violations as would not, either singly
or in the aggregate, have a Material Adverse Effect, and (B) there are
no events or circumstances that could form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to any Hazardous Materials
or the violation of any Environmental Laws, which, either singly or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect (after taking into account any amounts to which the Company
would be entitled under its environmental liability insurance
policies).
(xxiv) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, when they became effective or at the
time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1933
Act or the 1934 Act, as applicable, and the rules and regulations of
the Commission thereunder, and, when read together with the other
information in the Prospectus, at the time the Registration Statement
and any post-effective amendments thereto become effective and at the
Closing Time, will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(xxv) The Company and its subsidiaries have filed all federal,
state, local and foreign tax returns that are required to be filed or
have duly requested extensions thereof and have paid all taxes required
to be paid by any of them and any related assessments, fines or
penalties, except for any such tax, assessment, fine or penalty that is
being contested in good faith and by appropriate proceedings; and
adequate charges, accruals and reserves have been provided for in the
financial statements referred to in Section 1(a)(iii) above in respect
of all federal, state, local and foreign taxes for all periods as to
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which the tax liability of the Company or any of its subsidiaries has
not been finally determined or remains open to examination by
applicable taxing authorities.
(xxvi) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's
general and specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxvii) The Company and its subsidiaries have not (i) taken,
directly or indirectly, any action designed to cause or to result in,
or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (ii) since the initial filing of the Registration
Statement (A) sold, bid for, purchased or paid anyone (other than, to
the extent applicable, payments made by the Company pursuant to the
terms of, and in accordance with, the Company's dividend reinvestment
plan) any compensation for soliciting purchases of, the Securities, or
(B) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(xxviii) No relationship, direct or indirect, exists between
or among any of the Company or any affiliate of the Company, on the one
hand, and any director, officer, stockholder, customer or supplier of
any of them, on the other hand, which is required by the 1933 Act or by
the 1933 Act Regulations to be described in the Registration Statement
or the Prospectus which is not so described or is not described as
required.
(xxix) The Company has not distributed and, prior to the later
to occur of (i) the Closing Time and (ii) completion of the
distribution of the Securities, will not distribute any prospectus (as
such term is defined in the 1933 Act and the 1933 Act Regulations) in
connection with the offering and sale of the Securities other than the
Registration Statement, any preliminary prospectus, the Prospectus or
other materials, if any, permitted by the 1933 Act or by the 1933 Act
Regulations and approved by the Underwriters.
(xxx) The Company has been and is organized in conformity with
the requirements for qualification and taxation as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"), and its method of operation has at all times
enabled, and its proposed method of operation will enable, the Company
to qualify as a REIT under the Code.
(xxxi) The Company and each of its subsidiaries has title
insurance on all real property described in the Prospectus as being
owned (or held under a ground lease) or financed by any of them in an
amount at least equal to the cost of acquisition of such property or
the original principal amount of the loan provided by any of them, as
the case may be, and each such property is insured by extended coverage
hazard and casualty
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insurance in an amount not less than 90% of the full replacement cost
of the improvements located thereon (exclusive of excavation and
foundations), except for such properties which are covered by insurance
in an amount less than 90%, the total loss of which would not have,
either singly or in the aggregate, a Material Adverse Effect, and there
are in effect for such properties and assets insurance policies
covering risks and in amounts that are commercially reasonable for such
types of properties and assets and that are consistent with the types
and amounts of insurance typically maintained by prudent owners of
similar properties or assets or required by commercial lenders with
respect to similar properties or assets and all such insurance is in
full force and effect.
(b) Any certificate signed by any officer of the Company and delivered
to the Underwriters or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
Section 2. SALE AND DELIVERY TO UNDERWRITER; CLOSING.
(a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
sell to each of the Underwriters, severally and not jointly, and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company, at
the prices set forth on Exhibit A hereto (which is a part hereof), the aggregate
principal amount of Securities set forth in Schedule I hereto opposite the name
of such Underwriter. The initial public offering price and the purchase price to
be paid by the Underwriters for the Securities, and the interest rate on the
Securities are set forth on Exhibit A hereto and a prospectus supplement will be
filed in accordance with Rule 424(b) of the 1933 Act.
(b) Payment of the purchase price for, and delivery of certificates
for, the Securities shall be made at the office of Franchise Finance Corporation
of America, 17207 North Perimeter Drive, Scottsdale, Arizona, or at such other
place as shall be agreed upon by the Underwriters and the Company, at 9:00 A.M.
on the third business day (unless postponed in accordance with the provisions of
Section 10) following the date after execution of this Agreement, or such other
time not later than ten business days after such date as shall be agreed upon by
the Underwriters and the Company (such time and date of payment and delivery
being herein called "Closing Time"). Payment shall be made to the Company in
immediately available funds against delivery to the Underwriters for their
respective accounts of certificates for the Securities to be purchased by them.
Certificates for the Securities shall be in such denominations and registered in
such names as the Underwriters may request in writing at least one business day
before the Closing Time. The certificates for the Securities will be made
available for examination and packaging by the Underwriters in The City of New
York not later than 3:00 P.M. on the last business day prior to the Closing
Time.
Section 3. COVENANTS OF THE COMPANY. The Company covenants with the
Underwriters as follows:
(a) Promptly following the execution of this Agreement, the
Company will prepare a prospectus supplement setting forth the terms of
such Securities not otherwise specified in the Prospectus or the
Indenture, the price at which the Securities are to be purchased by the
Underwriters from the Company, the initial public offering price, the
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selling concession and reallowances, if any, and such other information
as the Underwriters and the Company deem appropriate in connection with
the offering of the Securities. The Company will promptly transmit
copies of the prospectus supplement to the Commission for filing
pursuant to Rule 424(b) of the 1933 Act Regulations and will furnish to
the Underwriters as many copies of the Prospectus and such prospectus
supplement as the Underwriters shall reasonably request.
(b) The Company will notify each Underwriter immediately, and
confirm the notice in writing, (i) of the effectiveness of any
amendment to the Registration Statement, or when any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional
information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary
prospectus supplement, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes.
The Company will make every reasonable effort to prevent the issuance
of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment. If the Company elects
to rely on Rule 434, the Company will provide each Underwriter with
copies of the form of Rule 434 Prospectus, in such number as each
Underwriter may reasonably request, and file or transmit for filing
with the Commission the form of Prospectus complying with Rule
434(c)(2) of the 1933 Act in accordance with Rule 424(b) of the 1933
Act by the close of business in New York on the business day
immediately succeeding the date of this Agreement.
(c) At any time when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act in connection with sales
of the Securities, the Company will give each Underwriter notice of its
intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any amendment or
supplement to the Prospectus, whether pursuant to the 1933 Act, the
1934 Act or otherwise (including any revised prospectus which the
Company proposes for use by the Underwriters in connection with the
offering of the Securities which differs from the prospectus on file at
the Commission at the time the Registration Statement first becomes
effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the 1933 Act Regulations or any term
sheet prepared in reliance on Rule 434 of the 1933 Act Regulations),
will furnish each Underwriter with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Underwriters or
counsel for the Underwriters shall reasonably object.
(d) The Company has furnished or will deliver to each
Underwriter and counsel for the Underwriters, without charge, signed
copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated
by reference therein and documents incorporated or deemed to be
incorporated by reference therein) and signed copies of all consents
and certificates of
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experts, and will also deliver to each Underwriter a conformed copy of
the Registration Statement as originally filed and of each amendment
thereto (without exhibits).
(e) The Company will furnish to each Underwriter, without
charge, from time to time during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as each
Underwriter may reasonably request for the purposes contemplated by the
1933 Act or the 1934 Act or the respective applicable rules and
regulations of the Commission thereunder.
(f) If any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of counsel for the
Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will
not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion
of such counsel, at any such time to amend the Registration Statement
or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company
will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish
to each Underwriter such number of copies of such amendment or
supplement as each Underwriter may reasonably request.
(g) The Company will use its best efforts, in cooperation with
the Underwriters, to qualify the Securities for offering and sale under
the applicable securities laws of such states and other jurisdictions
of the United States as the Underwriters may designate and to maintain
such qualifications in effect for a period of not less than one year
from the effective date of the Registration Statement; provided,
however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for
a period of not less than one year from the effective date of the
Registration Statement.
(h) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve month period beginning not later than the first day
of the Company's fiscal quarter next following the "effective date" (as
defined in said Rule 158) of the Registration Statement.
(i) The Company will use the net proceeds received by it from
the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
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(j) In accordance with the Cuba Act and without limitation to
the provisions of Sections 6 and 7 hereof, the Company agrees to
indemnify and hold harmless each Underwriter from and against any and
all loss, liability, claim, damage and expense whatsoever (including
fees and disbursements of counsel), as incurred, arising out of any
violation by the Company of the Cuba Act.
(k) The Company, during the period when the Prospectus, is
required to be delivered under the 1933 Act or the 1934 Act, will file
all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the 1934
Act Regulations.
(l) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the 1934 Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
Section 4. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement as originally filed
and of each amendment thereto, (ii) the preparation, printing and delivery to
the Underwriters of this Agreement, the Indenture and such other documents as
may be required in connection with the offering, purchase, sale and delivery of
the Securities, (iii) the preparation, issuance and delivery of the certificates
for the Securities to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(g) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey, any supplement thereto and any Legal
Investment Survey, (vi) the printing and delivery to the Underwriters of copies
of the Prospectus and any amendments or supplements thereto including any term
sheet delivered by the Company pursuant to Rule 434 of the 1933 Act Regulations,
(vii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey, any supplement thereto and any Legal Investment Survey,
(viii) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee, (xi) the fee of any filing for review
of the offering with the National Association of Securities Dealers, Inc., if
any, including the fees and expenses of counsel for the Underwriters in
connection therewith, and (xii) any fees payable in connection with the rating
of the Securities.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
Section 5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties of the Company herein contained, to the performance by the
Company of its obligations hereunder and to the following further conditions:
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(a) The Registration Statement shall be effective prior to the
date hereof, and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus supplement
shall have been transmitted to the Commission for filing in accordance
with Rule 424(b) of the 1933 Act Regulations within the prescribed time
period and prior to Closing Time the Company shall have provided
evidence satisfactory to the Underwriters of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the
requirements of the 1933 Act Regulations. The Indenture shall have been
qualified under the 1939 Act.
(b) At the Closing Time the Underwriters shall have received:
(1) The favorable opinion, dated as of the Closing
Time, of Kutak Rock, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the
effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the State of Delaware.
(ii) The Company has the corporate power and
authority to own, lease and operate its properties
and to conduct its business as described in the
Registration Statement and to enter into and perform
its obligations under this Agreement.
(iii) The Company is duly qualified as a
foreign corporation to transact business and is in
good standing in Arizona and in each other
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of
property or the conduct of business, except in the
case of jurisdictions other than Arizona, where the
failure to so qualify or to be in good standing would
not, either singly or in the aggregate, have a
Material Adverse Effect.
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the
Prospectus in the column entitled "Historical" under
the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to employee benefit plans
referred to in the Prospectus, pursuant to the
exercise of options referred to in the Prospectus or
pursuant to the Company's dividend reinvestment plan)
and, to the best of their knowledge, all of such
outstanding shares of capital stock have been duly
authorized and validly issued and are fully paid and
nonassessable.
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(v) Each subsidiary of the Company has been
duly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its
properties and to conduct its business as described
in the Registration Statement and is duly qualified
as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such
qualification is required, whether by reason of the
ownership or leasing of property or the conduct of
its business, except where the failure to so qualify
or to be in good standing would not, either singly or
in the aggregate, have a Material Adverse Effect; all
of the issued and outstanding capital stock of each
such subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and, to the
best of their knowledge and information, is owned
directly by the Company, free and clear of any
security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(vi) This Agreement has been duly
authorized, executed and delivered by the Company.
(vii) The Indenture has been duly
authorized, executed and delivered by the Company and
(assuming the due authorization, execution and
delivery thereof by the Trustee) constitutes a valid
and binding agreement of the Company, enforceable
against the Company in accordance with its terms,
except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting
creditors' rights generally or by general equitable
principles.
(viii) The Securities are in the form
contemplated by the Indenture, have been duly
authorized by the Company and, when executed by the
Company and authenticated by the Trustee in the
manner provided in the Indenture (assuming the due
authorization, execution and delivery of the
Indenture by the Trustee) and delivered against
payment of the purchase price therefor as specified
in Exhibit A hereto, will constitute valid and
binding obligations of the Company, enforceable
against the Company in accordance with their terms,
except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting
creditor's rights generally or by general equitable
principles, and will be entitled to the benefits of
the Indenture.
(ix) The Indenture has been qualified under
the 1939 Act.
(x) The Securities and the Indenture conform
in all material respects to the descriptions thereof
contained in the Prospectus.
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(xi) The Registration Statement has been
declared effective under the 1933 Act; any required
filing of the Prospectus pursuant to Rule 424(b) has
been made in the manner and within the time period
required by Rule 424(b); and, to the best of their
knowledge and information, no stop order suspending
the effectiveness of the Registration Statement has
been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission.
(xii) The Registration Statement, the
Prospectus and each amendment or supplement to the
Registration Statement and Prospectus, as of their
respective effective or issue dates (other than the
financial statements and schedules and other
financial data included or incorporated by reference
therein and the Trustee's Statement of Eligibility on
Form T-1 (the "Form T-1"), as to which no opinion
need be rendered) complied as to form in all material
respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(xiii) To the best of their knowledge and
information, there is not pending, and the Company
has not received any notice of any threatened,
action, suit, proceeding, inquiry or investigation,
to which the Company or any of its subsidiaries is a
party, or to which the property of the Company or any
of its subsidiaries is subject, before or brought by
any court or governmental agency or body, which might
reasonably be expected to result in any Material
Adverse Change, or which might reasonably be expected
to materially and adversely affect the properties or
assets thereof or the consummation of this Agreement
or the performance by the Company of its obligations
hereunder; and all pending legal or governmental
proceedings to which the Company or any of its
subsidiaries is a party or that affect any of their
respective properties that are not described in the
Prospectus, including ordinary routine litigation
incidental to the business, could not reasonably be
expected to result in a Material Adverse Change.
(xiv) The information in the Prospectus
under "Business and Properties--Properties,"
"Business and Properties--Regulation," "Business and
Properties--Legal Proceedings," "Description of the
Notes," "Description of Debt Securities," "Certain
Federal Income Tax Considerations," "Restrictions on
Transfers of Capital Stock," "Description of
Preferred Stock" and "Description of Common Stock"
and in the Registration Statement under Item 15 of
Part II thereof, to the extent that it constitutes
matters of law, summaries of legal matters, documents
or proceedings, or legal conclusions, has been
reviewed by them and is correct in all material
respects; to the best of such counsel's knowledge,
there are no statutes or regulations, and no legal or
governmental actions, suits or proceedings pending or
threatened against the Company that are required to
be described in the Prospectus that are not described
as required and the
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opinion of such firm set forth under "Certain Federal
Income Tax Considerations" is confirmed.
(xv) All descriptions in the Prospectus of
contracts and other documents to which the Company or
its subsidiaries are a party are accurate in all
material respects; to the best of their knowledge and
information, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described or
referred to in the Registration Statement or to be
filed as exhibits thereto other than those described
or referred to therein or filed or incorporated by
reference as exhibits thereto, the descriptions
thereof or references thereto are correct in all
material respects, and, to the best of their
knowledge or information, no default exists in the
due performance or observance of any material
obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument so
described, referred to, filed or incorporated by
reference.
(xvi) No authorization, approval, consent or
order of any court or governmental authority or
agency (other than under the 1933 Act and the 1933
Act Regulations, which have been obtained, or as may
be required under the securities or blue sky laws of
the various states and except for the qualification
of the Indenture under the 1939 Act, which has been
obtained) is required in connection with the due
authorization, execution and delivery of this
Agreement and the Indenture or for the offering,
issuance or sale of the Securities to the
Underwriters; and the execution, delivery and
performance of this Agreement, the Indenture and the
Securities and the consummation of the transactions
contemplated herein and therein and compliance by the
Company with its obligations hereunder and thereunder
(including the use of the proceeds from the sale of
the Securities as described in the Prospectus under
the caption "Use Of Proceeds") will not, whether with
or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or
default or Repayment Event under or result in the
creation or imposition of any lien, charge or
encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to (A)
the NationsBank Facility or (B) to the best of their
knowledge and information, any other contract,
indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or
instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them
may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is
subject except for any such conflict, breach, default
or Repayment Event which would not, either singly or
in the aggregate, have a Material Adverse Effect, nor
will such action result in any violation of the
provisions of the charter or by-laws of the Company,
or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government,
government instrumentality or court, domestic or
foreign, having jurisdiction over the
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Company or any of its subsidiaries or any of their
respective properties, assets or operations.
(xvii) The documents incorporated by
reference in the Prospectus (other than the financial
statements and schedules and other financial or
statistical data included or incorporated by
reference therein, as to which no opinion need be
rendered), when they became effective or were filed
with the Commission, as the case may be, complied as
to form in all material respects with the
requirements of the 1933 Act or the 1934 Act, as
applicable, and the rules and regulations of the
Commission thereunder.
(xviii) The Company is not an "investment
company" or an entity "controlled" by an "investment
company," as such terms are defined in the 1940 Act.
(xix) To the best of such counsel's
knowledge, neither the Company nor its subsidiaries
are in violation of their charter or bylaws; and the
Company and its subsidiaries are in compliance with
all laws, rules, regulations, judgments, decrees,
orders and statutes in the jurisdictions in which
they are conducting their business.
(xx) The Company has been and is organized
in conformity with the requirements for qualification
and taxation as a REIT under the Code and its method
of operation has at all times enabled, and its
proposed method of operation will enable, the Company
to qualify as a REIT under the Code.
Such opinion shall be to such further effect with
respect to legal matters relating to this Agreement and the
sale of the Securities as counsel to the Underwriters may
reasonably request. In rendering such opinion, such counsel
may rely as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
(2) The favorable opinion, dated as of the Closing
Time, of Latham & Watkins, counsel for the Underwriters, with
respect to the matters set forth in clauses (i) and (vi)
through (xii), inclusive, of subsection (b)(1) of this
Section, except that, with respect to the matters referred to
in (xii), no opinion need be expressed as to the documents
incorporated by reference in the Registration Statement.
(3) In giving their opinions required by subsections
(b)(1) and (b)(2), respectively, of this Section, Kutak Rock
and Latham & Watkins shall each additionally state that
nothing has come to their attention that led them to believe
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that the Registration Statement (except for financial
statements and schedules and other financial data included or
incorporated by reference therein and the Form T-1, as to
which such counsel need make no statement), at the time it
became effective or on the date hereof, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus
(except for financial statements and schedules and other
financial data included or incorporated by reference therein,
as to which such counsel need make no statement), on the date
hereof (unless the term "Prospectus" refers to a prospectus
which has been provided to the Underwriters by the Company for
use in connection with the offering of the Securities which
differs from the Prospectus on file at the Commission at the
time the Registration Statement becomes effective, in which
case at the date of such prospectus), or at the Closing Time,
included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) At the Closing Time there shall not have been, since the
date hereof or since the respective dates as of which information is
given in the Prospectus, any Material Adverse Change, whether or not
arising in the ordinary course of business, and the Underwriter shall
have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the
Company, dated as of the Closing Time, to the effect that (i) there has
been no such Material Adverse Change, (ii) the representations and
warranties in Section 1 hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time, (iii)
the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission. As used in
this Section 5(c) the term "Prospectus" means the Prospectus in the
form first used by the Underwriters to confirm sales of the Securities.
(d) At the time of the execution of this Agreement, the
Underwriters shall have received from Arthur Andersen LLP a letter
dated such date, in form and substance satisfactory to the
Underwriters, to the effect that (i) they are independent public
accountants with respect to the Company and its subsidiaries within the
meaning of the 1933 Act and the 1934 Act and the applicable published
rules and regulations thereunder; (ii) in their opinion, the
consolidated financial statements and financial statement schedules
audited by them and included or incorporated by reference in
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the Registration Statement comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
1934 Act and the related published rules and regulations; (iii) based
upon limited procedures set forth in detail in such letter (which shall
include, without limitation, the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim Financial
Information, with respect to the unaudited consolidated financial
statements of the Company and its subsidiaries included or incorporated
by reference in the Registration Statement), nothing has come to their
attention which causes them to believe that (A) any material
modifications should be made to the unaudited consolidated financial
statements included or incorporated by reference in the Registration
Statement for them to be in conformity with generally accepted
accounting principles or (B) the unaudited consolidated financial
statements included or incorporated by reference in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the 1934 Act as it applies to
Form 10-Q and the related published rules and regulations or (C) at a
specified date not more than three days prior to the date of this
Agreement, there has been any change in the consolidated capital stock
of the Company or any increase in total liabilities or any decrease in
total assets as compared with the amounts shown in the June 30, 1998
balance sheet included in the Registration Statement or, during the
period from June 30, 1998 to a specified date not more than three days
prior to the date of this Agreement, there were any decreases as
compared with the corresponding period in the preceding year, in total
revenues, net income, net income per share or funds from operations of
the Company and its subsidiaries, except in all instances for changes,
increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur; (iv) in addition to the
examination referred to in their opinions and the limited procedures
referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are
specified by the Underwriters, and have found such amounts, percentages
and financial information to be in agreement with the relevant
accounting, financial and other records of the Company and its
subsidiaries identified in such letter; (v) based upon limited
procedures set forth in detail in such letter, nothing came to their
attention that caused them to believe that the pro forma financial
information included in the Registration Statement and the Prospectus
does not comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of the unaudited pro forma information
included in the Prospectus; (vi) they have compared the information in
the Prospectus under selected captions with the disclosure requirements
of Regulation S-K and on the basis of limited procedures specified in
such letter nothing came to their attention as a result of the
foregoing procedures that caused them to believe that this information
does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K; (vii) based upon limited procedures set forth in detail
in such letter, nothing has come to their attention which causes them
to believe that (A) any material modifications should be made to the
unaudited consolidated financial statements incorporated by reference
in the Registration Statement for them to be in conformity with
generally accepted accounting principles or (B) the unaudited
consolidated financial statements included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1934 Act
Regulations, and (viii) the unaudited amounts set forth under "Summary
Financial Information" and "Selected Financial Information" in the
Prospectus agree with the amounts set forth in the unaudited
consolidated financial statements for those periods or were determined
on a
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<PAGE>
basis substantially consistent with that of the corresponding amounts
in the audited consolidated financial statements included in the
Registration Statement and Prospectus.
(e) At the Closing Time the Underwriters shall have received
from Arthur Andersen LLP a letter, dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (d) of this Section, except that the specified
date referred to shall be a date not more than three days prior to the
Closing Time.
(f) At the Closing Time, the Securities shall be rated at
least Baa3 by Moody's Investor's Service Inc. and BBB- by Standard &
Poor's Corporation; and since the date of this Agreement, there shall
not have occurred a downgrading in the rating assigned to any of the
Company's other debt by any nationally recognized securities rating
agency, and no such securities rating agency shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the
Company's other debt.
(g) At the Closing Time, counsel for the Underwriters shall
have been furnished with such documents and opinions as they may
require for the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated and related proceedings,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein
contained; and all proceedings taken by the Company in connection with
the issuance and sale of the Securities as herein contemplated shall be
satisfactory in form and substance to the Underwriters and counsel for
the Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriters by notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 3(k), 6
and 7 shall survive any such termination and remain in full force and effect.
Section 6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 434 of the 1933 Act Regulations, if applicable, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the
22
<PAGE>
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to the third sentence of Section 6(c) hereof, the
reasonable fees and disbursements of counsel chosen by Salomon),
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Salomon expressly for use in the Registration Statement (or
any amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(b) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Salomon expressly for use in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) be counsel to the indemnified
party. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of
23
<PAGE>
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) For purposes of this Section 6, all references to the Registration
Statement, any preliminary prospectus or the Prospectus, or any amendment or
supplement to any of the foregoing, shall be deemed to include, without
limitation, any electronically transmitted copies thereof, including, without
limitation, any copies filed with the Commission pursuant to EDGAR.
Section 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, bear to the aggregate
initial public offering price of the Securities as set forth on such cover. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution
24
<PAGE>
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total underwriting discount received by it as
set forth on the cover of the Prospectus exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company.
Section 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Underwriters.
Section 9. TERMINATION OF AGREEMENT.
(a) The Underwriters may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or elsewhere, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Underwriters, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in the
Common Stock has been suspended or limited by the Commission or the New York
Stock Exchange or if trading generally on the American Stock Exchange or the New
York Stock Exchange or in the over-the-counter market has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium
25
<PAGE>
has been declared by either Federal, New York or Arizona authorities. As used in
this Section 9(a), the term "Prospectus" means the Prospectus in the form first
used by the Underwriters to confirm sales of the Securities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 3(k), 6 and 7
shall survive such termination and remain in full force and effect.
Section 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time to purchase the Securities which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the other Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, such arrangements shall not have been
completed within such 24-hour period; then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters; or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either (i) the other Underwriters or (ii) the
Company shall have the right to postpone Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section 10.
Section 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to Salomon Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, attention of Brad Ganz, Director and General
Counsel; notices to the Company shall be directed to it at 17207 North Perimeter
Drive, Scottsdale, Arizona 85255, attention of Morton H. Fleischer, with a copy
to Dennis L. Ruben at the same address.
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<PAGE>
Section 12. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein or therein
contained. This Agreement and all conditions and provisions hereof and thereof
are intended to be for the sole and exclusive benefit of the Underwriters and
the Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
Section 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
FRANCHISE FINANCE CORPORATION OF
AMERICA
By: /s/ Morton H. Fleischer
--------------------------------------------
Name: Morton H. Fleischer
Title: President and Chief Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
By: SALOMON SMITH BARNEY INC.
By /s/ Gregory S. Wright
---------------------------
Authorized Signatory
S-1
<PAGE>
SCHEDULE I
to
PURCHASE AGREEMENT
PRINCIPAL AMOUNT
UNDERWRITER OF THE NOTES
- ----------- ----------------
Salomon Smith Barney Inc................................. $ 50,000,000
Merrill Lynch, Pierce, Fenner & Smith 50,000,000
Incorporated.................................
NationsBanc Montgomery Securities LLC.................... 50,000,000
------------
Total........................................... $150,000,000
============
A-1
<PAGE>
EXHIBIT A
The initial public offering price of the Securities is 99.899% of the principal
amount thereof, plus accrued interest, if any, from the date of issuance. The
purchase price to be paid by the Underwriters for the Securities shall be
9.299% of the principal amount thereof.
The interest rate on the Securities shall be 8.25% per annum.
2
FRANCHISE FINANCE CORPORATION OF AMERICA
OFFICERS' CERTIFICATE
The undersigned, Christopher H. Volk and John Barravecchia, do
hereby certify that they are the duly appoint and acting Executive Vice
President, Chief Operating Officer, and Secretary and Executive Vice President,
Chief Financial Officer and Treasurer, respectively, of Franchise Finance
Corporation of America, a Delaware corporation (the "Company"). Each of the
undersigned also hereby certifies, pursuant to the Indenture dated as of
November 21, 1995 (the "Indenture"), between the Company and Norwest Bank
Arizona, National Association, as Trustee, that:
A. Pursuant to the resolutions adopted by the Executive
Committee of the Company on October 28, 1998, a series of Debt Securities (as
defined in the Indenture) to be issued under the Indenture has been established:
the 8.25% Senior Notes due 2003 (the "Notes"), and such series is to have the
following terms:
(1) The Notes shall constitute a series of Securities having
the title "8.25% Senior Notes due 2003."
(2) The aggregate principal amount of Notes that may be
authenticated and delivered under the Indenture (except for Notes
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Sections 3.04,
3.05, 3.06 or 9.06 of the Indenture) shall be $150,000,000.
(3) The entire outstanding principal of the Notes shall be
payable on October 30, 2003 (the "Maturity Date").
(4) The rates at which the Notes shall bear interest shall be
8.25% per annum; the date from which such interest shall accrue shall
be October 30, 1998; the Interest Payment Dates on which such interest
will be payable shall be April 30 and October 30 of each year,
beginning April 30, 1999; the Regular Record Dates for the interest
payable on the Notes on any Interest Payment Date shall be the
preceding April 15 (in the case of interest payable on any April 30)
and October 15 (in the case of interest payable on any October 30); and
the basis upon which interest shall be calculated shall be that of a
360-day year consisting of twelve 30-day months.
(5) The place in addition to the Borough of Manhattan, The
City of New York, where the principal of and interest on the Notes
shall be payable and Notes may be surrendered for the registration of
transfer or exchange shall be the Corporate Trust Office of the Trustee
at 3300 North Central Avenue, MS 9030, Phoenix, Arizona 85012. The
place in addition to the Borough of Manhattan, The City of New York,
where notices or demands to or upon the Company in respect of the Notes
and this Indenture may be served shall be the Corporate Trust Office of
the Trustee at 3300 North Central Avenue, MS 9030, Phoenix, Arizona
85012.
A-1
<PAGE>
(6) The Notes will be redeemable, at the option of the
Company, in whole or in part at any time or from time to time, upon not
less than 30 and not more than 60 days' notice, on any date prior to
maturity (the "Redemption Date") at a redemption price equal to 100% of
the principal amount of the Notes to be redeemed plus accrued interest
to the Redemption Date (subject to the right of holders of record on
the relevant record date to receive interest due on an interest payment
date that is on or prior to the Redemption Date) plus a Make-Whole
Premium, if any (the "Redemption Price"). In no event will the
Redemption Price ever be less than 100% of the principal amount of the
Notes plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Note
(or portion thereof) to be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of the
Redemption Date, of:
(a) each interest payment that, but for such
redemption, would have been payable on the Note (or
portion thereof) being redeemed on each interest payment
date occurring after the Redemption Date (excluding any
accrued interest for the period prior to the Redemption
Date); and
(b) the principal amount that, but for such
redemption, would have been payable at the final maturity
of the Note (or portion thereof) being redeemed;
over
(2) the principal amount of the Note (or portion thereof)
being redeemed.
The present values of interest and principal payments referred
to in clause (1) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined
below) plus 25 basis points.
The Make-Whole Premium will be calculated by an independent
investment banking institution of national standing appointed by the Company;
PROVIDED, that if the Company fails to make such appointment at least 30
calendar days prior to the Redemption Date, or if the institution so appointed
is unwilling or unable to make such calculation, such calculation will be made
by Salomon Smith Barney Holdings Inc., or an affiliate thereof, or, if such firm
is unwilling or unable to make such calculation, by an independent investment
banking institution of national standing appointed by the Trustee (in any such
case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury
Yield" means a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the Notes, calculated to the
nearest 1/12th of a year (the "Remaining Term"). The Treasury Yield will be
determined as of the third business day immediately preceding the applicable
Redemption Date.
A-2
<PAGE>
The weekly average yields of United States Treasury Notes will
be determined by reference to the most recent statistical release published by
the Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation. On a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
Any notice to the holders of Notes of such a redemption need
not set forth the redemption price of such Notes but need only set forth the
calculation thereof as described in the immediately preceding paragraph. The
redemption price, calculated as aforesaid, shall be set forth in an Officers'
Certificate delivered to the Trustee no later than two business days prior to
the Redemption Date.
In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note.
(7) The Notes shall not be redeemable at the option of any
Holder thereof, upon the occurrence of any particular circumstances or
otherwise. The Notes will not have the benefit of any sinking fund.
(8) The Notes shall be issued in denominations of $1,000 and
any integral multiple thereof.
(9) The Trustee shall be the Security Registrar and Paying
Agent.
(10) The entire outstanding principal amount of the Notes
shall be payable upon declaration of acceleration of their maturity
pursuant to Section 5.02 of the Indenture.
(11) Payments of the principal of and interest on the Notes
shall be made in Dollars, and the Notes shall be denominated in
Dollars.
A-3
<PAGE>
(12) The Notes will be payable on the Maturity Date in an
amount equal to the principal amount thereof plus unpaid interest
accrued to such Maturity Date.
(13) The Holders of the Notes shall have no special rights in
addition to those provided in the Indenture upon the occurrence of any
particular events.
(14) (A) There shall be no deletions from, modifications of or
additions to the Events of Default with respect to the Notes set forth
in the Indenture.
(B) There shall be the following additions to the
covenants set forth in the Indenture with respect to the Notes:
LIMITATIONS ON INCURRENCE OF TOTAL DEBT. The Company will not,
and will not permit any Subsidiary to, incur any Debt (as defined below) if,
immediately after giving effect to the incurrence of such additional Debt and
the application of the proceeds therefrom, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles is
greater than 60% of the sum of (i) the Company's Total Assets as of the end of
the calendar quarter prior to the incurrence of such additional Debt and (ii)
the increase in Total Assets from the end of such quarter including, without
limitation, any increase in Total Assets caused by the incurrence of such
additional Debt.
LIMITATION ON INCURRENCE OF SECURED DEBT. In addition to the
foregoing limitation on the incurrence of Debt, the Company will not, and will
not permit any Subsidiary to, incur any Debt secured by any mortgage, lien,
charge, pledge, encumbrance or security interest of any kind on any of its
properties, and will not otherwise grant or convey any such mortgage, charge,
pledge, encumbrance or security interest of any kind, if immediately after
giving effect thereto, the aggregate principal amount of all outstanding Debt of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles which is secured by any
mortgage, charge, pledge, encumbrance or security interest of any kind on
property of the Company or any Subsidiary is greater than 40% of the sum of (i)
the Company's Total Assets as of the end of the calendar quarter prior to the
incurrence of such Debt, and (ii) any increase in Total Assets from the end of
such quarter including, without limitation, any increase in Total Assets caused
by the incurrence of such additional Debt.
DEBT SERVICE COVERAGE. In addition to the foregoing
limitations on the incurrence of Debt, the Company will not, and will not permit
any Subsidiary to, incur any Debt if the ratio of Consolidated Income Available
for Debt Service (as defined below) to Annual Service Charge (as defined below)
for the four consecutive calendar quarters most recently ended prior to the date
on which such additional Debt is to be incurred is less than 1.5 to 1.0 on a pro
forma basis after giving effect to the incurrence of such Debt and the
application of the proceeds therefrom.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Company will
maintain at all times Total Unencumbered Assets (as defined below) of not less
than 150% of the aggregate outstanding principal amount of all outstanding
unsecured Debt of the Company and its Subsidiaries.
A-4
<PAGE>
As used herein:
"ANNUAL SERVICE CHARGE" means the interest expense of the
Company and its Subsidiaries for the four consecutive fiscal quarters
most recently ended, including, without limitation, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, net costs pursuant to hedging
obligations, the interest component of all payments associated with
Capitalized Leases, amortization of debt issuance costs, amortization
of original issue discount, non-cash interest payments and the interest
component of any deferred payment obligations.
"CAPITALIZED LEASE" means any lease of property by the Company
or any Subsidiary as lessee that is reflected on the Company's
consolidated balance sheet as a capitalized lease in accordance with
generally accepted accounting principles.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any
period means Consolidated Net Income (as defined below) of the Company
and its Subsidiaries plus amounts which have been deducted, and minus
amounts which have been added, for (a) interest on Debt of the Company
and its Subsidiaries, (b) provision for taxes of the Company and its
Subsidiaries based on income, (c) amortization of debt discount, (d)
provisions for gains and losses on properties, (e) depreciation, (f)
the effect of any non-cash charge resulting from a change in accounting
principles in determining Consolidated Net Income for such period and
(g) amortization of deferred charges.
"CONSOLIDATED NET INCOME" for any period means the amount of
consolidated net income (or loss) of the Company and its Subsidiaries
for such period determined on a consolidated basis in accordance with
generally accepted accounting principles.
"DEBT" means any indebtedness of the Company or any
Subsidiary, whether or not contingent, in respect of (a) borrowed money
or evidenced by bonds, notes, debentures or similar instruments, (b)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance
or any security interest existing on property owned by the Company or
any Subsidiary, (c) letters of credit or amounts representing the
balance deferred and unpaid of the purchase price of any property
except any such balance that constitutes an accrued expense or trade
payable or (d) Capitalized Leases, in the case of items of indebtedness
under (a) through (c) above to the extent that any such items (other
than letters of credit) would appear as liability on the Company's
consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise
included, any obligation by the Company or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Company or any
Subsidiary) (it being understood that Debt shall be deemed to be
incurred by the Company or any Subsidiary whenever the Company or such
Subsidiary shall create, assume, guarantee or otherwise become liable
in respect thereof).
"SUBSIDIARY" means (a) any corporation, association, joint
venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interests entitled
to vote in the election of the directors, managers,
A-5
<PAGE>
trustees or other persons having the power to direct or cause the
direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by the Company or one or more
of the other Subsidiaries of the Company, and (b) any partnership or
limited liability company in which the Company or one or more of the
other Subsidiaries of the Company, directly or indirectly, possesses
more than a 50% interest in the total capital or total income of such
partnership or limited liability company.
"TOTAL ASSETS" as of any date means the sum of (a) the
Undepreciated Real Estate Assets and (b) all other assets of the
Company and its Subsidiaries determined in accordance with generally
accepted accounting principles (but excluding accounts receivable and
intangibles).
"TOTAL UNENCUMBERED ASSETS" means Total Assets minus the value
of any properties of the Company and its Subsidiaries that are
encumbered by any mortgage, charge, pledge, lien, security interest or
other encumbrance of any kind, including the value of any stock of any
Subsidiary that is so encumbered. For purposes of this definition, the
value of each property shall be equal to the purchase price or cost of
each such property and the value of any stock subject to any
encumbrance shall be determined by reference to the value of the
properties owned by the issuer of such stock as aforesaid.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the
amount of real estate assets of the Company and its Subsidiaries on
such date, before depreciation and amortization determined on a
consolidated basis in accordance with generally accepted accounting
principles.
(C) There shall be the following modification to the
definition of "Subsidiary" set forth in the Indenture with respect to
the Notes:
"SUBSIDIARY" means (a) any corporation, association, joint
venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interests entitled
to vote in the election of the directors, managers, trustees or other
persons having the power to direct or cause the direction of the
management and policies thereof is at the time owned or controlled,
directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company, and (b) any partnership or limited
liability company in which the Company or one or more of the other
Subsidiaries of the Company, directly or indirectly, possesses more
than a 50% interest in the total capital or total income of such
partnership or limited liability company.
(15) The Notes shall be issuable only as Registered Securities
in permanent global form (without coupons). Beneficial owners of
interests in the permanent global Note may exchange such interests for
Notes of like tenor or any authorized form and denomination only in the
manner provided in Section 3.05 of the Indenture. DTC shall be the
depository with respect to each permanent global Note.
(16) The Notes shall not be issuable as Bearer Securities.
A-6
<PAGE>
(17) Interest on the Notes shall be payable only to the Person
in whose name the Note (or one or more predecessor Notes thereof) is
registered at the close of business on the Regular Record Date for such
interest.
(18) Sections 14.02 and 14.03 of the Indenture shall be
applicable to the Notes.
(19) The Notes shall not be issuable in definitive form except
under the circumstances described in Section 3.05 of the Indenture.
(20) The Notes will be authenticated and delivered as provided
in Section 3.03 of the Indenture.
(21) The Company shall not pay Additional Amounts with respect
to the Notes as contemplated by Section 10.10 of the Indenture.
(22) The Notes shall not be convertible into Common Stock or
Preferred Stock.
(23) The Notes shall not be subordinated to any other Debt of
the Company, and shall constitute senior unsecured obligations of the
Company.
B. The foregoing form and terms of the Notes have been
established in conformity with the provisions of the Indenture.
C. Each of the undersigned has read the Indenture and the
definitions relating thereto and has examined the resolutions referred to in
paragraph A above and the Notes and has made such examination or investigation
as is necessary to enable the undersigned to represent as to whether or not all
conditions precedent provided in the Indenture relating to the establishment,
authentication and delivery of the Notes have been complied with. On the basis
of the foregoing, all such conditions precedent have been complied with.
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<PAGE>
IN WITNESS WHEREOF, we have hereunto signed our names this
28th day of October, 1998.
/s/ Christopher H. Volk
--------------------------------------------------
Name: Christopher H. Volk
Title: Executive Vice President, Chief Operating
Officer and Secretary
/s/ John Barravecchia
--------------------------------------------------
Name: John Barravecchia
Title: Executive Vice President, Chief Financial
Officer and Treasurer
A-8
KUTAK ROCK
SUITE 2900 ATLANTA
717 SEVENTEENTH STREET KANSAS CITY
LITTLE ROCK
DENVER, COLORADO 80202-3329 NEW YORK
NEWPORT BEACH
303-297-2400 OKLAHOMA CITY
FACSIMILE 303-292-7799 OMAHA
PHOENIX
http://www.kutakrock.com PITTSBURGH
WASHINGTON
October 27, 1998
Franchise Finance Corporation
of America
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Re: $150,000,000 8.25% Senior Notes due 2003
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation of the
Registration Statement on Form S-3, File No. 333-26437, as amended (the
"Registration Statement"), filed by Franchise Finance Corporation of America
(the "Company"), with the Securities and Exchange Commission (the "SEC") in
connection with the registration of $1,000,000,000 aggregate offering price of
securities. The Registration Statement was declared effective under the
Securities Act of 1933, as amended, on March 25, 1998. Further, we have acted as
your counsel in connection with the preparation of the Prospectus dated April
16, 1998 (the "Prospectus") and Prospectus Supplement dated October 27, 1998
(the "Prospectus Supplement") relating to the issuance of $150,000,000 8.25%
Senior Notes due 2003 (the "Senior Notes"). We are familiar with the proceedings
taken by the Company in connection with the authorization and registration, and
in preparation for the issuance and sale, of the Senior Notes.
For the purpose of rendering this opinion, we have examined such
corporate records, certificates and other documents of the Company, and have
made such investigations of law as we deemed necessary or appropriate and we are
familiar with the procedures taken or proposed to be taken by the Company in
connection with the issuance and sale of the Senior Notes. We have examined the
Registration Statement, the Prospectus included therein and the Prospectus
Supplement. Except as otherwise indicated herein, all terms defined in the
Registration Statement, Prospectus and Prospectus Supplement are used herein as
so defined.
We have assumed for purposes of the opinions set forth below (a) that
no stop orders relating to the Registration Statement have been issued by the
SEC from the date of this opinion to the date of the issuance and sale of the
Senior Notes; (b) the genuineness of all signatures and the authenticity and
completeness of all documents submitted to us as originals; (c) the due
authorization, execution and delivery of the Indenture by the Trustee; (d) the
conformity to the originals and the authenticity of all documents supplied to us
as certified, photocopied, conformed or facsimile copies and the authenticity
and completeness of the originals of any such
<PAGE>
KUTAK ROCK
October 27, 1998
Page 2
documents; (e) that the Senior Notes will be duly executed, authenticated and
delivered in accordance with the provisions of the Indenture and related
corporate documents; and (f) the due receipt of payment of the purchase price
for the Senior Notes.
On the basis of and subject to the foregoing, it is our opinion that
the Senior Notes will, upon issuance and sale thereof in the manner referred to
in the Registration Statement, Prospectus and Prospectus Supplement, constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law and will be entitled to the benefits of the
Indenture.
This opinion is given for the sole benefit of the addressee hereof and
may not be relied upon by or delivered to any other person. In addition, this
opinion relates only to the matters and the transactions specifically referred
to, and no other opinions should be implied therefrom.
Respectfully submitted,
/s/ Kutak Rock
Kutak Rock
