EXHIBIT 10.19
CHECKERS DRIVE-IN RESTAURANTS, INC.
and
CERTAIN OF ITS SUBSIDIARIES
(collectively, the "BORROWERS")
and
TEXTRON FINANCIAL CORPORATION
("LENDER")
------------------------------
LOAN AGREEMENT
SENIOR CREDIT FACILITY A
------------------------------
Dated: June 15, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.......................................................1
1.1 Certain Defined Terms...........................................................................1
1.2 Accounting Terms................................................................................9
ARTICLE II LOAN COMMITMENT........................................................................9
2.1 Commitment......................................................................................9
2.2 Repayment.......................................................................................9
2.3 Obligations Joint and Several...................................................................9
2.4 Waiver of Subrogation...........................................................................9
ARTICLE III CONDITIONS PRECEDENT..................................................................10
3.1 Documents......................................................................................10
3.2 Termination of Liens...........................................................................11
3.3 Proposal Fee...................................................................................12
3.4 Origination Fee................................................................................12
3.5 Lender Costs and Expenses......................................................................12
3.6 Other Documents................................................................................12
3.7 No Default.....................................................................................12
3.8 Accuracy of Representations and Warranties.....................................................12
3.9 No Material Adverse Occurrence.................................................................12
3.10 Payoff of Existing Notes.......................................................................12
ARTICLE IV IDENTIFICATION AND SUBSTITUTION OF PLEDGED UNITS......................................13
4.1 Delivery of Documents..........................................................................13
4.2 Identification of Pledged Units................................................................15
4.3 Deadline for Identification of Pledged Units...................................................15
4.4 Amendment of Security Documents................................................................15
4.5 Costs and Expenses.............................................................................16
4.6 Substitution of Pledged Units..................................................................16
4.7 Sale of Units Under Contract...................................................................17
ARTICLE V REPRESENTATIONS AND WARRANTIES........................................................18
5.1 Organization, Qualification and Authorization..................................................18
5.2 Subsidiaries; Affiliates.......................................................................18
5.3 Power and Authority............................................................................18
5.4 Validity of Obligations........................................................................19
5.5 Financial Statements...........................................................................19
5.6 Litigation.....................................................................................19
5.7 Accuracy of Information........................................................................19
5.8 Taxes..........................................................................................20
5.9 ERISA..........................................................................................20
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5.10 Titles and Liens...............................................................................20
5.11 Environmental Compliance.......................................................................20
5.12 Permits and Franchises.........................................................................21
5.13 Franchise Agreements...........................................................................21
5.14 Leases.........................................................................................21
5.15 Location of Collateral.........................................................................21
5.16 Patents, Trademarks, Etc.......................................................................22
5.17 Labor Matters..................................................................................22
5.18 Securities Acts................................................................................22
5.19 Financial Solvency.............................................................................22
ARTICLE V AFFIRMATIVE COVENANTS.................................................................22
6.1 Reporting Requirements ........................................................................23
6.2 Maintain Assets ...............................................................................23
6.3 Taxes, Assessments and Charges.................................................................23
6.4 Notification of Changes........................................................................23
6.5 Preservation of Existence......................................................................24
6.6 Compliance with Law............................................................................24
6.7 Conduct of Business............................................................................24
6.8 Books and Records..............................................................................25
6.9 Reimbursement of Expenses......................................................................25
6.10 ERISA ........................................................................................25
6.11 Leases.........................................................................................26
6.12 Insurance .....................................................................................26
6.13 Further Acts, etc. ............................................................................26
6.14 Estoppel Certificates .........................................................................27
6.15 Fixed Charge Coverage..........................................................................27
6.16 Delivery of Documents Relating to the Initial Real Estate Collateral...........................27
6.17 Delivery of Nondisturbance Agreements..........................................................28
ARTICLE VII NEGATIVE COVENANTS....................................................................28
7.1 Liens and Encumbrances.........................................................................28
7.2 Consolidation, Merger, etc.....................................................................29
7.3 Arm's Length Transactions......................................................................29
7.4 Hazardous Materials............................................................................29
7.5 ERISA..........................................................................................29
7.6 Fiscal Year....................................................................................30
7.7 Subsidiaries...................................................................................30
7.8 Debt...........................................................................................30
7.9 Restricted Payments............................................................................30
7.10 Advances, Investments and Loans................................................................30
7.11 Average Senior Funded Debt to EBITDA...........................................................31
7.12 EBITDA.........................................................................................31
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ARTICLE VIII EVENTS OF DEFAULT; REMEDIES...........................................................32
8.1 Events of Default..............................................................................32
8.2 Remedies.......................................................................................33
ARTICLE IX MISCELLANEOUS.........................................................................34
9.1 Binding Effect; Assignment.....................................................................34
9.2 Governing Law; Venue...........................................................................34
9.3 Waiver of Jury Trial...........................................................................35
9.4 [Intentionally Omitted]........................................................................35
9.5 Notices........................................................................................35
9.6 Amendment and Waiver...........................................................................35
9.7 Headings.......................................................................................36
9.8 Judicial Interpretation........................................................................36
9.9 Severability...................................................................................36
9.10 Agreement Supersedes...........................................................................36
9.11 Acceptance.....................................................................................36
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9.12 Opinion of Counsel.............................................................................36
9.13 Secondary Market...............................................................................36
9.14 No Reliance; No Lender Obligations.............................................................37
9.15 Conflict Between Loan Documents................................................................38
LIST OF EXHIBITS
EXHIBIT A Eligible Unit Requirements
EXHIBIT B Title Policy Requirements
EXHIBIT C Form of Unit Schedule
EXHIBIT D-1 Form of Landlord's Consent
EXHIBIT D-2 Form of Nondisturbance Agreement
EXHIBIT E Form of Supplemental Opinion of Counsel
EXHIBIT F Form of Amendment to Security
EXHIBIT G Initial Real Estate Collateral
EXHIBIT H Unit Schedule Deletion Certificate
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LIST OF SCHEDULES
UNIT SCHEDULES
SCHEDULE 5.1 Prior Names; Chief Executive Office
SCHEDULE 5.2 Subsidiaries
SCHEDULE 5.6 Litigation
SCHEDULE 5.8 Taxes and Assessments
SCHEDULE 5.10 Units Subject to Purchase Agreements
SCHEDULE 5.11 Exceptions to Environmental Representations
SCHEDULE 5.13 Franchise Agreements
SCHEDULE 5.15 Units
SCHEDULE 5.17 Labor Matters
SCHEDULE 5.19 Financial Solvency Matters
SCHEDULE 7.8 Permitted Debt
SCHEDULE 7.10 Permitted Investments
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THIS LOAN AGREEMENT (this "LOAN AGREEMENT") is made and
entered into as of this 15th day of June, 2000 by and among CHECKERS DRIVE-IN
RESTAURANTS, INC., a Delaware corporation ("CHECKERS"), CHECKERS OF PUERTO RICO,
INC., a Puerto Rico corporation ("CHECKERS PUERTO RICO"), RALLY'S OF OHIO, INC.,
an Ohio corporation ("RALLY'S OHIO"), and RALLY'S MANAGEMENT, INC., a Kentucky
corporation ("RALLY'S MANAGEMENT"; Checkers, Checkers Puerto Rico, Rally's Ohio
and Rally's Management are sometimes referred to herein individually as a
"BORROWER" and collectively as the "BORROWERS") and TEXTRON FINANCIAL
CORPORATION, a Delaware corporation (the "LENDER").
WITNESSETH:
WHEREAS, the Borrowers have requested that Lender extend to
them a term loan in the original principal amount of up to $12,000,000, as more
particularly described herein; and
WHEREAS, Lender has agreed to extend such loan upon the terms
and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Borrowers and the Lender hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. CERTAIN DEFINED TERMS. When used in this
Agreement the following terms have the following meanings:
"AFFILIATE" means, at any time and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 25% or more of any class of voting or equity interests
of any Borrower or any of their respective Subsidiaries, or any Person of which
the Borrowers and their respective Subsidiaries own or hold, in the aggregate,
directly or indirectly, 25% or more of any class of voting interests. As used in
this definition, "CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the foregoing, the term "AFFILIATE" when used with
reference to any Borrower shall include the Persons identified on SCHEDULE 5.2
hereof as affiliates.
"AGREEMENT" means this Loan Agreement, as it may be amended,
modified or supplemented from time to time.
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"BUSINESS DAY" means any day other than a Saturday, Sunday,
legal holiday or other day on which Lender ordinarily does not conduct business.
"BUSINESS VALUE" shall mean, with respect to any Unit, the
value assigned to such Unit by the Lender in its reasonable discretion based
upon, among other things, the results of the business valuation prepared for the
Lender by Deloitte and Touche with respect to such Unit and, with respect to any
real property that is not related to a Unit, the value assigned to such real
property by Lender in its reasonable discretion based upon, among other things,
the capitalized value of any lease of such real property.
"CAPITAL STOCK" means (a) in the case of a corporation,
capital stock, (b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (c) in the case of a partnership, partnership
interests (whether general or limited), (d) in the case of a limited liability
company, membership interests, and (e) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CHANGE IN CONTROL" means the acquisition by any Person and
its Affiliates, or group of Persons and their respective Affiliates acting in
concert, of more than 35% percent of the issued and Capital Stock of Checkers as
a fully-diluted basis.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor statute, together with the regulations thereunder.
"COLLATERAL" means, collectively, the personal property
described in the Mortgage and in the Security Agreement.
"COLLATERAL CONVERSION DATE" shall have the meaning assigned
to that term in SECTION 4.4 hereof.
"CONSOLIDATED", when used in connection with any calculation,
means a calculation to be determined on a consolidated basis for a Person and
its Subsidiaries in accordance with GAAP.
"CONTROL EVENT" means (a) the execution by any Borrower of any
agreement or letter of intent with respect to any proposed transaction or event
or series of transactions or events which, individually or in the aggregate,
will likely be expected to result in a Change in Control, (b) the execution of
any written agreement which, when fully performed by the parties thereto, would
result in a Change in Control, or (c) the making of any written offer by any
person (as such term is used in section 13(d) and section 14(d)(2) of the
Securities Exchange Act of 1934 as in effect on the Closing Date) or related
persons constituting a group (as such term is used in Rule 13d-5 under the
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Securities Exchange Act of 1934 as in effect on the Closing Date) to the holders
of the Capital Stock of any Borrower or any of their respective Subsidiaries,
which offer, if accepted by the requisite number of holders, would result in a
Change in Control.
"CURRENT PORTION OF LONG TERM DEBT" shall have the meaning
assigned to that term under GAAP.
"DEBT" of any Person means all obligations of such Person
under capitalized leases, all debt created, issued, guaranteed, incurred or
assumed by such Person for money borrowed, all liability for the deferred
purchase price of property or services, all contingent liabilities including the
obligation to reimburse any financial institution for any drafts drawn on
letters of credit, and obligations secured by any lien on property owned by such
Person.
"DEFAULT" means any Event of Default and any event which would
be an Event of Default with the giving of notice or lapse of any applicable
grace period, or both.
"EBITDA" means, with regard to any Person for any applicable
computation period, such Person's consolidated net income PLUS (a) Interest
Expense, (b) income and franchise taxes paid or accrued during such period, (c)
depreciation, (d) amortization, and (e) other non-cash charges, MINUS (a)
extraordinary gains of such Person and its Subsidiaries, and (e) dividends,
disbursements and draws to owners/stockholders.
"EBITDAR" means, with regard to any Person for any applicable
computation period, such Person's consolidated net income PLUS (a) Interest
Expense, (b) income and franchise taxes paid or accrued during such period, (c)
depreciation, (d) amortization, (e) Rent Expense, and (f) other non-cash
charges, MINUS (a) extraordinary gains of such Person and its Subsidiaries, and
(b) dividends, disbursements and draws to owners/stockholders; and (c) until
such time as Related Liabilities are paid in full and the obligation of the
Lender to make any advance under the Related Loan Agreement is terminated,
amounts paid by such Person and its Subsidiaries to repurchase common stock of
such Person or its Subsidiaries.
"ELIGIBLE UNIT" means a Unit that satisfies the requirements
set forth on EXHIBIT A attached hereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is a member of a group of which any Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning given in ARTICLE VII
hereof.
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"EXISTING NOTES" means those certain $85,000,000 9 7/8%
Senior Notes due June 15, 2000 issued by Rally's Hamburgers, Inc. on March 9,
1993.
"FINANCING STATEMENT" means each UCC financing statement
executed by any Borrower in favor of the Lender covering all or any part of the
Collateral.
"FIXED CHARGE COVERAGE RATIO" means, for any applicable
computation period, the ratio of: (a) EBITDAR; to (b) Interest Expense, Rent
Expense and Current Portion of Long Term Debt.
"FRANCHISE AGREEMENT" means each franchise, license or similar
agreement between a Borrower and any other Person by which such Person obtains
the right to use or conduct business under any trademark or tradename of such
Borrower, including without limitation the "Checkers" or "Rally's" trademarks or
tradenames, as the same may be amended from time to time.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period indicated, except for
changes mandated by the Financial Accounting Standards Board or any similar
accounting authority of comparable standing.
"HAZARDOUS MATERIALS" means any material designated pursuant
to the Clean Water Act, Title 33 U.S.C. Section 1321, any element, compound,
mixture, solution or substance designated pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, Title 42 U.S.C. Section
9602, any hazardous waste having the characteristics identified under or listed
pursuant to the Solid Waste Disposal Act, Title 42, U.S.C. Section 6921, any
toxic pollutant listed under Section 307(a) of the Clean Water Act, Title 33
U.S.C. Section 1317(a), any hazardous air pollutant listed under Section 112 of
the Clean Air Act, Title 42 U.S.C. Section 7412, any imminently hazardous
chemical substance or mixture with respect to which the Administrator of the
Environmental Protection Agency has taken action pursuant to Section 7 of the
Toxic Substances Control Act, Title 15 U.S.C. Section 2606 and any "Hazardous
Waste," "Hazardous Material," "Pollutant or Contaminant" or similar term as
defined under laws of any state in which any Unit or Mortgaged Property is
located. The term also includes, but is not limited to, polychlorinated
biphenyls, asbestos, urea formaldehyde and related hazardous substances.
"INDEMNITY AGREEMENT" means each Environmental and ADA
Indemnity Agreement or similar agreement from any Borrower in favor of the
Lender relating to all or any portion of the Mortgaged Properties, as the same
may be amended, modified or supplemented from time to time.
"INITIAL REAL ESTATE COLLATERAL" means the real property
described on EXHIBIT G attached hereto and made a part hereof.
"INTEREST EXPENSE" means, for any applicable computation
period, all interest paid or accrued during such period by any Person and its
Subsidiaries, determined on a consolidated basis and in accordance with GAAP.
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"INVESTMENT" means the acquisition, purchase, making or
holding of any stock or other security, any loan, advance, contribution to
capital, extension of credit (except for trade and customer accounts receivable
for inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real and
personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of, or any interest in,
another Person or any integral part of any business or the assets comprising
such business or part thereof.
"LANDLORD'S CONSENT" means a Landlord's Consent or similar
agreement entered into by and among Lender, a Borrower and the fee owner of the
real property described in a Lease, as the same may be amended, modified or
supplemented from time to time.
"LEASE" means any real property lease relating to a Pledged
Unit including, without limitation, any leases described in the Unit Schedules,
as the same may be amended, modified or supplemented from time to time.
"LEASED PROPERTY" means real property relating to a Pledged
Unit if a Person other than a Borrower holds fee title to the land, or to both
the land and improvements, constituting such real property.
"LIABILITIES" means each and every Debt, liability and other
obligation of every type and description arising under or in connection with any
of the Loan Documents which a Borrower may now or at any time hereafter owe to
Lender including, without limitation, all indebtedness, liabilities and
obligations of the Borrowers arising under this Agreement or evidenced by the
Notes.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Financing Statements, the Mortgage, the Security Agreement, the Indemnity
Agreement and the Subordination Agreements, individually or collectively as the
case may be, as the same may hereafter be amended, modified, restated or renewed
from time to time. The term "LOAN DOCUMENTS" shall also include each
Subordination Agreement delivered to Lender under SECTION 6.16 hereof or
otherwise and each Financing Statement, Landlord's Consent and Nondisturbance
Agreement delivered to Lender under SECTION 4.1 hereof or otherwise.
"MATERIAL ADVERSE OCCURRENCE" means an occurrence of any kind,
whether or not insured against, which does or will materially adversely affect
the financial condition or operations of any Borrower, or materially impair the
ability of any Borrower, to perform its respective obligations under any Loan
Document.
"MINIMUM LOAN A BUSINESS VALUE" means, as of any date of
determination, an amount equal to (a) 200% of the principal balance of the
Note outstanding on such date; MINUS (b) the Business Value of that portion
of the Initial Real Estate Collateral that is not used in connection
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with the operation of any Pledged Unit and with respect to which the items
described in SECTION 6.16 have been received and approved by the Lender.
"MINIMUM LOAN B BUSINESS VALUE" means, as of any date of
determination, an amount equal to 200% of the "Revolving Credit Amount", as that
term is defined in the Related Loan Agreement, as of such date.
"MORTGAGE" means that certain Mortgage, Deed to Secure Debt,
Deed of Trust, Leasehold Mortgage, Leasehold Deed to Secure Debt, Leasehold Deed
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Financing Statement (Senior Credit Facility A) of even date herewith from the
Borrowers, as grantors, in favor of Lender, as mortgagee/grantee with First
Title Corporation or Fidelity National Title Insurance Corporation, as trustee,
as the same may be amended, modified or supplemented from time to time.
"NONDISTURBANCE AGREEMENT" means a nondisturbance or similar
agreement executed by a Borrower and any Person with an interest in the fee
title to Leased Property by which such Person agrees not to disturb the tenancy
of the Borrower with respect such Leased Property if such Borrower performs its
obligations under the related Lease, as such nondisturbance or similar agreement
may be amended, modified or supplemented from time to time.
"NOTE" shall have the meaning assigned to such term in SECTION
2.2 hereof.
"ORGANIZATIONAL DOCUMENTS" means (a) in the case of a
corporation, Articles of Incorporation, Bylaws and similar agreements, (b) in
the case of a partnership, Partnership Agreement and, if a limited partnership,
Certificate of Limited Partnership, and (c) in the case of a limited liability
company, Articles of Organization, Operating Agreement and Member Control and
similar agreements.
"ORIGINATION FEE" shall have the meaning set forth in
SECTION 3.4 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation,
established pursuant to Subtitle A of Title IV of ERISA, or any successor
thereto or to the functions thereof.
"PERMITTED EXCEPTIONS" shall have the meaning given such term
in SECTION 5.1 of the Mortgage.
"PERMITTED LIENS" means liens and encumbrances permitted by
SECTION 7.1 of this Agreement.
"PERSON" means any natural person, corporation, limited
liability company, partnership, limited partnership, limited liability
partnership, joint venture, organization or governmental entity.
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"PLAN" means each employee pension or benefit plan (as those
terms are defined in Section 3 of ERISA) maintained for the benefit of
employees, officers or directors of any Borrower or of any Subsidiary of any
Borrower or of any ERISA Affiliate.
"PLEDGED UNIT" means each Unit identified in a Unit Schedule
that has been signed by the Borrowers and the Lender.
"PROHIBITED TRANSACTION" shall have the respective meanings
assigned to such term in Section 4975 of the Code and Section 406 of ERISA.
"REAL PROPERTY" means, with respect to any Unit, the real
property owned or Leased by a Borrower in connection with the operation of such
Unit.
"RELATED LIABILITIES" means each and every Debt, liability and
other obligation of every type and description arising under or in connection
with any of the Related Loan Documents which a Borrower may now or at any time
hereafter owe to Lender including, without limitation, all indebtedness,
liabilities and obligations of the Borrower arising under the Related Loan
Agreement or evidenced by the Related Notes.
"RELATED LOAN AGREEMENT" means that certain Loan Agreement
(Subordinate Credit Facilities B and C) of even date herewith by and among the
Borrowers and the Lender, as the same may hereafter be amended, modified,
restated or renewed from time to time.
"RELATED LOAN DOCUMENTS" means, collectively, the Related Loan
Agreement and the other "Loan Documents", as that term is defined in the Related
Loan Agreement, as the same may be amended, modified, restated or renewed from
time to time.
"RELATED LOAN PLEDGED UNITS" means, collectively, the "Pledged
Units," as that term is defined in the Related Loan Agreement.
"RELATED NOTES" shall mean, collectively, that certain
Revolving Credit Note of even date herewith made jointly and severally payable
by the Borrowers to the order of the Lender in the original principal amount of
up to $8,000,000 and that certain Bridge Note of even date herewith made jointly
and severally payable by the Borrowers to the order of the Lender in the
original principal amount of up to $20,000,000, as the same may hereafter be
amended, modified, restated or renewed from time to time.
"RENT EXPENSE" means, for any applicable computation period,
amounts paid by a Person and its Subsidiaries in respect of rent under any real
property leases, determined on a consolidated basis and in accordance with GAAP.
"REPORTABLE EVENT" means a reportable event, as defined in
Section 4043 of ERISA and the regulations issued under such section, with
respect to a Plan, excluding, however, such
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events as to which the PBGC by regulation has waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event; PROVIDED, that for purposes of this Agreement, a failure to
meet the minimum funding standard of Section 412 of the Code and Section 302
of ERISA shall be a Reportable Event regardless of the issuance of any waiver
in accordance with Section 412(d) of the Code.
"RESTRICTED PAYMENT" shall mean (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any Borrower or any of its Subsidiaries, now or hereafter
outstanding, (b) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of Capital Stock of any Borrower or any of its Subsidiaries, now or
hereafter outstanding, (c) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of any Borrower or any of its Subsidiaries,
now or hereafter outstanding, or (d) any payment or prepayment of principal of,
premium, if any, or interest on, redemption, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Debt that is subordinated
in right of payment to the prior payment of all or any portion of Debt to the
Lender.
"SECURITY AGREEMENT" means that certain Security Agreement
(Senior Credit Facility A) of even date herewith from Borrowers in favor of the
Lender covering, prior to the Collateral Conversion Date, all personal property
and fixtures located at or used in connection with the Units, as the same may be
amended, modified, supplemented or renewed from time to time.
"SUBORDINATION AGREEMENT" means a Subordination and Attornment
Agreement or similar agreement executed by a Borrower and any other Person in
favor of Lender subordinating all right, title and interest of such Person in
real property leased by a Borrower to such Person to all right, title and
interest of the Lender in such property, as the same may be amended, modified or
supplemented from time to time.
"SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries, or any Person and one or more of its Subsidiaries, owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries, or such person and one or
more of its Subsidiaries. Unless the context otherwise clearly requires, any
reference to "Subsidiary" is a reference to a Subsidiary of Checkers.
"TERM LOAN" shall have the meaning assigned to such term in
SECTION 2.1 hereof.
"TITLE" means Fidelity National Title Insurance Company.
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"UNIT" means each restaurant facility owned and operated by a
Borrower under Checkers' comprehensive system for developing and operating a
"Checkers" or "Rally's" restaurant, which system includes trademarks, building
designs and layouts, equipment, ingredients, recipes and specifications for
authorized food products, methods of inventory control and operational and
business standards and policies.
"UNIT SCHEDULE" means, collectively, each unit schedule
attached to this Agreement and each unit schedule made a part of this Agreement
after the Closing Date pursuant to SECTION 4.2(B) hereof, each of which is
incorporated herein by reference.
Section 1.2 ACCOUNTING TERMS. All accounting terms not
otherwise specifically defined in this Agreement shall be construed in
accordance with GAAP.
ARTICLE II
TERM LOAN COMMITMENT
Section 2.1 COMMITMENT. The Lender agrees, upon the terms
and subject to the conditions set forth in this Agreement and the other Loan
Documents, to extend to the Borrowers on the Closing Date a term loan (the
"TERM LOAN") in the original principal amount of Twelve Million Dollars
($12,000,000). The entire Term Loan will be advanced in accordance with the
payment instructions referred to in SECTION 3.1 and will be used by the
Borrowers solely to refinance existing Debt of the Borrowers, and to finance
certain closing and related costs. The Lender shall have no obligation to
make any advance of the Term Loan after the Closing Date.
Section 2.2 REPAYMENT. The Term Loan shall be evidenced by
and payable in accordance with the terms of a promissory note of even date
herewith made payable jointly and severally by the Borrowers to the order of
the Lender in the original principal amount of $12,000,000 (as the same may
be amended, modified, supplemented, extended, restated or replaced from time
to time, the "NOTE"). Any principal of the Term Loan which is repaid may not
be reborrowed, and any prepayment of all or any part of the Term Loan shall
be made in strict accordance with the provisions of the Note.
Section 2.3 OBLIGATIONS JOINT AND SEVERAL. All obligations
of the Borrowers hereunder and under the other Loan Documents shall be joint
and several. Each Borrower hereby agrees to make payment upon the maturity of
the Liabilities, whether by acceleration or otherwise, and such obligation
and liability on the part of each Borrower shall in no way be affected by any
act or omission of the Lender including, without limitation any extension,
renewal or forbearance granted by the Lender to any Borrower, any failure of
the Lender to pursue or preserve its rights against any Borrower or the
release by the Lender of any collateral now or hereafter given as security
for all or any part of such obligations.
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Section 2.4 WAIVER OF SUBROGATION. Each Borrower expressly
waives any and all rights of subrogation, reimbursement, indemnity,
exoneration, contribution or any other claim which such Borrower may now or
hereafter have against the other Borrowers or any other person directly or
contingently liable for the Liabilities, or against or with respect to the
other Borrowers' property (including, without limitation, any property which
is collateral for the Liabilities), arising from the existence or performance
of this Agreement, until repayment in full of the Liabilities.
ARTICLE III
CONDITIONS PRECEDENT
In addition to the other conditions to the extension of
credit contained in this Agreement, the obligation of the Lender to make the
Term Loan is subject to the satisfaction of the following conditions:
Section 3.1 DOCUMENTS. The Borrowers shall have
delivered or caused the delivery of the following documents and instruments
to the Lender or such third parties as Lender may instruct, each in form and
substance acceptable to Lender:
(a) This Loan Agreement, the Note and the Security Agreement,
each duly executed by the parties thereto.
(b) UCC Financing Statements from each Borrower in form and
substance acceptable to lender for filing in such jurisdictions as
Lender may require.
(c) With respect to the Initial Real Estate Collateral, the
following:
(i) the Mortgage;
(ii) a copy of each lease agreement covering all or
any portion of the Initial Real Estate Collateral, including
all amendments and supplements thereto;
(iii) a title policy or marked-up title commitment
covering the Initial Real Estate Collateral which satisfies
the requirements set forth on EXHIBIT B and is otherwise in
form and substance reasonably acceptable to Lender, together
with copies of all documents, instruments, agreements and
other items shown as exceptions on said title policy or
commitment; and
(iv) Current evidence of hazard and extended coverage
insurance acceptable to Lender covering the improvements
located on the Initial Real Estate Collateral, such insurance
to name the Borrowers as insured, as their respective
interests appear, and Lender as mortgagee and loss payee with
long form Lender's
10
endorsement to be in an amount not less than the full
replacement value of the improvements, to provide for thirty
(30) days' prior written notice to the Lender of cancellation
or nonrenewal and to otherwise comply with the requirements
of the Mortgage.
(v) Supplemental Opinions of counsel in substantially
the form of EXHIBIT E from counsel to the Borrowers in each
jurisdiction where Initial Real Estate Collateral is located
in form and substance acceptable to Lender.
(d) Copies of the Organizational Documents of each Borrower,
together with all amendments and restatements to date, certified by an
appropriate officer of such Borrower.
(e) Certified copies of the resolutions of the Board of
Directors of each Borrower authorizing its execution and delivery of
the relevant Loan Documents and identifying the officers authorized to
execute the Loan Documents and request an advance of the proceeds of
the Term Loan, together with an incumbency certificate listing the
names and titles of the officers of such Borrower.
(f) Certificates of good standing, existence or its equivalent
with respect to each Borrower certified as of a recent date by the
appropriate governmental authorities of the state of incorporation and
each other state in which the failure to so qualify and be in good
standing could reasonably be expected to constitute a Material Adverse
Occurrence.
(g) Opinion(s) of legal counsel to the Borrowers in form and
substance acceptable to Lender and its counsel.
(h) Evidence of: (i) hazard and extended coverage insurance
acceptable to Lender covering the Collateral; such insurance to name
the Borrowers as insured, as their respective interests appear, and
Lender as loss payee with long form lender's endorsement to be in an
amount not less than the full replacement value of the Collateral, to
provide for thirty (30) days' prior written notice to the Lender of
cancellation or nonrenewal and to otherwise comply with the
requirements of the Mortgage and the Security Agreement; and (ii)
liability insurance acceptable to Lender naming each Borrower as
insured and Lender as additional insured and to provide for thirty (30)
days' prior written notice to the Lender of cancellation or renewal.
(i) UCC, state/federal tax lien and bankruptcy searches on
such parties and in such locations as the Lender may require.
(j) Payment instructions regarding the advance of funds
against the Note.
Section 3.2 TERMINATION OF LIENS. Borrowers shall have
provided evidence satisfactory to Lender of the termination and satisfaction
of all liens and encumbrances (other than
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Permitted Liens and Permitted Exceptions) against the Initial Real Estate
Collateral and the Collateral.
Section 3.3 PROPOSAL FEE. Borrowers shall have paid to
Lender, in connection with the transactions contemplated hereunder and under
the Related Loan Agreement, a proposal fee of $100,000 (the "PROPOSAL FEE"),
which fee lender acknowledges was received prior to the Closing Date and
agrees will be applied to customary closing costs and expenses such as
reasonable attorneys' fees, business valuations and title insurance charges.
Section 3.4 ORIGINATION FEE. Borrowers shall have paid to
Lender a fully earned, nonrefundable origination fee of $120,000 (the
"ORIGINATION FEE"). Borrowers acknowledge that the Origination Fee is
separate and distinct from any origination fee due under the Related Loan
Agreement and that $100,000 of the Origination Fee is due from the Lender to
Citicorp North America, Inc.
Section 3.5 LENDER COSTS AND EXPENSES. Borrowers shall
have paid all costs and expenses incurred by the Lender in connection with
the documentation and closing of the Term Loan including, without limitation,
reasonable attorney's fees, and shall have deposited with Lender such amounts
as Lender may reasonably require to pay the costs and expenses, including
reasonable attorney's fees, the Lender estimates it will incur after the
Closing Date in connection with its review and approval of Pledged Units
under ARTICLE IV hereof.
Section 3.6 OTHER DOCUMENTS. Borrowers shall have
delivered to Lender such other documents as the Lender may reasonably require.
Section 3.7 NO DEFAULT. No Default exists or will result
from the making of the initial advance.
Section 3.8 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in ARTICLE V shall be true and
correct as of the date of the Closing Date
Section 3.9 NO MATERIAL ADVERSE OCCURRENCE. No Material
Adverse Occurrence shall have occurred.
Section 3.10 PAYOFF OF EXISTING NOTES. Evidence reasonably
satisfactory to Lender that (a) the proceeds of the advances to be made
against the Note and the Related Notes on the Closing Date, together with
such additional cash payments to be made by the Borrowers on the Closing
Date, are sufficient to pay the Existing Notes in full and then finally
satisfy all obligations of the Borrowers with respect thereto, and (b) such
advances and cash payments will be paid on the Closing Date to the holders of
the Existing Notes or their trustee or designee in full and final payment of
the Existing Notes.
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ARTICLE IV
IDENTIFICATION AND SUBSTITUTION OF PLEDGED UNITS
Section 4.1 DELIVERY OF DOCUMENTS. Borrowers may from time
to time request that the Lender approve an Eligible Unit as a Pledged Unit in
accordance with the provisions of SECTION 4.2 below by delivering or causing
to be delivered to Lender the following documents, instruments and agreements:
(a) the address of the Unit, including street address, city,
state and zip code;
(b) a legal description of the Real Property relating to the
Unit;
(c) if the Real Property relating to the Unit is Leased
Property (a) a copy of the applicable Lease, including all amendments
and supplements thereto, and (b) a copy of a memorandum of lease
describing the applicable Lease in detail reasonably acceptable to
Lender and evidence acceptable to Lender that such memorandum has been
recorded in all appropriate recording offices;
(d) a title policy or marked-up title commitment covering the
Real Property relating to the Unit which satisfies the requirements set
forth on EXHIBIT B and is otherwise in form and substance reasonably
acceptable to Lender, together with copies of all documents,
instruments, agreements and other items shown as exceptions on said
title policy or commitment;
(e) if a Borrower is the fee owner of the land and/or
improvements constituting the Real Property relating to the Unit, a
policy of flood insurance naming the Lender as an additional insured
covering the improvements located on the Real Property relating to the
Unit in an amount equal to the maximum limit of coverage available for
such property under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 and the National Flood Insurance Act of
1994, as each may be amended (the "FLOOD INSURANCE ACTS"), or proof
reasonably satisfactory to Lender that no portion of the improvements
located on the Real Property relating to the Unit is located in an area
identified by the Federal Emergency Management Agency or any successor
thereto as having special flood hazards pursuant to the Flood Insurance
Acts;
(f) a properly completed and acknowledged environmental
questionnaire in the form required by Lender relating to the Unit, such
environmental searches and assessments as Lender may require and, if
required by Lender, environmental insurance in such form and amount as
Lender may reasonably require;
(g) a Mortgage Supplement covering the Real Property relating
to the Unit in the form attached to the Mortgage and otherwise in form
and substance reasonably acceptable
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to Lender, properly executed and acknowledged by all
appropriate parties and filed of record in the appropriate recording
offices;
(h) a UCC financing statement and a UCC fixture financing
statement in such form as Lender may reasonably require covering all
now existing or hereafter acquired furniture, fixtures and equipment of
the Borrower relating to the Unit, properly executed and acknowledged
by all appropriate parties and filed of record in the appropriate
recording offices;
(i) a UCC fixture financing statement in such form as Lender
may reasonably require covering all now existing or hereafter acquired
fixtures of the Borrower relating to the Unit, properly executed and
acknowledged by all appropriate parties and filed of record in the
appropriate recording offices;
(j) if the Real Property relating to the Unit is Leased
Property, (i) a Landlord's Consent in substantially the form attached
hereto as EXHIBIT D-1 properly executed by such parties as the Lender
may reasonably require and (ii) evidence reasonably satisfactory to
Lender that Borrowers have used their best efforts to obtain a
Nondisturbance Agreement in substantially the form attached hereto as
EXHIBIT D-2 properly executed by such parties as the Lender may
reasonably require;
(k) Current evidence of: (i) hazard and extended coverage
insurance acceptable to Lender covering the improvements located on the
Real Property relating to the Unit, such insurance to name the
Borrowers as insured, as their respective interests appear, and Lender
as mortgagee and loss payee with long form Lender's endorsement to be
in an amount not less than the full replacement value of the
improvements, to provide for thirty (30) days' prior written notice to
the Lender of cancellation or nonrenewal and to otherwise comply with
the requirements of the Mortgage; and (ii) hazard and extended coverage
insurance acceptable to Lender covering the Collateral relating to the
Unit; such insurance to name the Borrowers as insured, as their
respective interests appear, and Lender as loss payee with long form
lender's endorsement to be in an amount not less than the full
replacement value of the Collateral, to provide for thirty (30) days'
prior written notice to the Lender of cancellation or nonrenewal and to
otherwise comply with the requirements of the Mortgage and the Security
Agreement;
(l) a supplemental opinion of counsel relating to the Unit and
the Mortgage Supplement relating thereto in substantially the form
attached hereto as EXHIBIT E and otherwise in form and substance
reasonably acceptable to Lender;
(m) two (2) original counterparts a completed Unit Schedule
with respect to the Unit in the form attached hereto as EXHIBIT C,
properly executed by the Borrowers;
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(n) a business Valuation with respect to the Unit prepared by
Deloitte & Touche or other accounting firm acceptable to Lender; and
(o) such other documents, instruments and agreements relating
to the Unit and the Borrowers as the Lender may reasonably require.
Section 4.2 IDENTIFICATION OF PLEDGED UNITS. Upon
delivery of the items described in SECTION 4.1 above with respect to any
Eligible Unit, Lender shall review the same and use its reasonable efforts to
promptly advise the Borrowers of any deficiencies with respect thereto.
Lender reserves the right to reject any deliverable that does not conform to
the Lender's underwriting or due diligence standards. In the event that the
Lender in its reasonable discretion determines that an Eligible Unit does not
meet the Lender's underwriting standards or is unacceptable for any other
reason, whether based on information obtained from the Borrowers pursuant to
SECTION 4.1 above or otherwise, such Unit shall no longer constitute an
Eligible Unit, and Lender shall use its reasonable efforts to promptly advise
the Borrowers of the same. Upon receipt and review by the Lender of all of
the items required to be delivered pursuant to SECTION 4.1 above with respect
to any Eligible Unit and Lender's satisfaction in its reasonable discretion
with the form, substance and content of the same, Lender shall execute the
Unit Schedule relating to such Eligible Unit and promptly deliver an original
counterpart of the same to the Borrowers. Each Unit Schedule shall, upon
execution by the Borrowers and the Lender, constitute an addendum to this
Agreement and each Unit described therein be identified as and constitute a
Pledged Unit.
Section 4.3 DEADLINE FOR IDENTIFICATION OF PLEDGED UNITS.
The Borrowers agree to promptly:
(a) identify Pledged Units which have a Business Value equal
to or in excess of the Minimum Loan A Business Value; and
(b) identify Related Loan Pledged Units which have a Business
Value equal to or in excess of the Minimum Loan B Business Value.
In the event that, on or before the date which is sixty (60) days following
the date hereof, the borrowers have failed to identify Pledged Units that
satisfy the requirements of SECTION 4.3(a) above, or have failed to identify
Related Loan Pledged Units that satisfy the requirements of SECTION 4.3(b)
above, then the Borrowers shall immediately, and without notice or demand,
pay to Lender a wholly earned, non-refundable fee of $200,000. If such
failure is continuing on the date which is ninety (90) days following the
date hereof, or on the last day of each thirty (30) day period thereafter,
the Borrowers shall pay to Lender an additional wholly earned, nonrefundable
fee in the amount of $100,000 on each such date.
Section 4.4 AMENDMENT OF SECURITY DOCUMENTS. Provided no
Default has occurred and is continuing, the Borrowers and the Lender shall
execute an amendment to the Security Agreement in substantially the form of
EXHIBIT F attached hereto to cover only the Pledged Units and the Units
identified on SCHEDULE 5.10 as subject to a commitment or agreement for sale
15
which have not been released by the Lender pursuant to SECTION 4.7 or
otherwise, promptly following the initial identification of Pledged Units as
evidenced by Unit Schedules executed by the Borrowers and the Lender, which
satisfy the requirements of SECTIONS 4.3(a) and 4.3(b). The date on which
such amendments are executed by the Borrowers and the Lender shall be
referred to as the "COLLATERAL CONVERSION DATE".
Section 4.5 COSTS AND EXPENSES. Without limiting any other
provision hereof, the Borrowers agree to reimburse the Lender, upon written
demand of Lender (which demand shall be accompanied by reasonable supporting
documentation; it being agreed that such documentation need not in any event
include attorney/client privileged materials), for (a) any out-of-pocket
expenses incurred by the Lender, including reasonable attorneys' fees, in
connection with the matters contemplated by this ARTICLE IV; and (b) any and
all recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, this Agreement or the other Loan Documents; together with interest on any
amount not paid within thirty (30) DAYS OF DEMAND AT THE RATE OF INTEREST
THEN ACCRUING ON THE NOTE.
Section 4.6 SUBSTITUTION OF PLEDGED UNITS. From and after the
Collateral Conversion Date, and provided no Default has occurred and is
continuing, the Lender will consent to the substitution of an Eligible Unit, or
more than one Eligible Unit, for an existing Pledged Unit, or more than one
existing Pledged Unit, upon the following terms and subject to satisfaction of
the following conditions:
(a) The Borrowers shall have identified to the Lender the
Eligible Unit(s) and Pledged Unit(s) to be included as part of the
substitution and provided to the Lender, with respect to each such
Eligible Unit, the documents, instruments and agreements described in
SECTION 4.1.
(b) The Lender shall have completed its review of the
documents, instruments and agreements delivered pursuant to SECTION
4.6(a) and determined, in its reasonable discretion, that the Eligible
Unit(s) to be substituted conforms to the Lender's then-existing
underwriting and due diligence standards.
(c) The Borrowers shall have provided the Lender with such
other documentation regarding the substitution of collateral as the
Lender may reasonably request including, without limitation, such
Uniform Commercial Code, judgment, bankruptcy and tax lien searches
covering such persons and entities and in such jurisdictions as the
Lender may require, and the Lender shall be satisfied in its sole
discretion with the matters disclosed therein.
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(d) The Business Value of the Eligible Unit(s) to be
substituted shall, in the sole opinion of the Lender, equal or exceed
the Business Value attributed by the Lender at such time to the Pledged
Unit(s) such Eligible Unit is/are to replace.
(e) The Borrowers shall pay the Lender a wholly-earned
collateral substitution fee of $500 per Eligible Unit to be
substituted.
(f) The Borrowers shall have executed and delivered to the
Lender, or caused the execution and delivery to the Lender of, all
documents and instruments which the Lender deems reasonably necessary
or desirable in accordance with prudent lending practices to consummate
the substitution of collateral including, without limitation, such
amendments to the Mortgage, Security Agreement and Financing Statements
as may be necessary or desirable to acquire, perfect and maintain the
interest of the Lender in and to such substitute collateral, subject
only to such liens and encumbrances as may be permitted hereunder.
(g) The Lender shall have received a supplemental opinion or
opinions of counsel for the Borrowers in such form and content as
Lender may reasonably require.
(h) The Borrowers shall have paid all costs and expenses of
the Lender, including attorneys' fees incurred by the Lender in
reviewing and processing such substitution of collateral.
(i) If the Real Property relating to the Pledged Unit to be
substituted for constitutes Initial Real Estate Collateral, or if both
the land and improvements constituting the Real Property relating to
the Unit are otherwise owned by the Borrower, the Lender shall have
consented in writing to such substitution.
Upon satisfaction of all of the foregoing conditions, the Borrowers and Lender
shall (a) execute two counterparts of the Unit Schedule relating to the Eligible
Unit or Eligible Units to be added as Pledged Units, which schedule shall
thereafter constitute an addendum to this Agreement and each Unit described
therein shall be identified as and constitute a Pledged Unit; and (b) execute
two counterparts of a Unit Schedule Deletion Certificate in the form of EXHIBIT
H attached hereto with respect to each Unit Schedule relating to the Pledged
Unit or Pledged Units to be released, which report shall operate to delete the
Unit Schedules identified therein from this Agreement and thereafter the Unit or
Units described in such deleted schedules shall no longer be identified as or
constitute a Pledged Unit or Pledged Units.
Section 4.7 SALE OF UNITS UNDER CONTRACT. In the event that
any of the Units identified on SCHEDULE 5.10 as being subject to an agreement,
commitment or option providing for the sale thereof are sold, the Borrowers
shall cause the net sale proceeds with respect to each such Unit to be delivered
directly to the Lender for application to the obligations of the Borrowers
hereunder and under the Related Loan Agreement. Lender agrees to release the
lien of the Security Agreement against such Units provided that no Default shall
have occurred and be continuing and
17
the Borrowers shall have delivered to the Lender net sale proceeds with
respect to such Units in an amount not less than the following amounts:
(a) With respect to the Units identified on SCHEDULE 5.10
as the "St. Louis, Little Rock and Virginia Beach Units", $10,750,000;
(b) With respect to the Units identified on SCHEDULE 5.10 as
the "Indianapolis and Toledo Units", $5,000,000;
(c) With respect to the Units identified on SCHEDULE 5.10 as
the "Cincinnati Units", $700,000; and
(d) With respect to the Units identified on SCHEDULE 5.10 as
the "Louisville and Lexington Units", $7,250,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, each
Borrower hereby represents and warrants to the Lender that:
Section 5.1 ORGANIZATION, QUALIFICATION AND AUTHORIZATION.
Borrower and each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its state of organization;
has the power and authority to own its property and to carry on its business
as now being conducted; and is duly qualified and licensed to do business,
and is in good standing, in every jurisdiction where the failure to qualify
would, or would reasonably be expected, to constitute a Material Adverse
Occurrence. Borrower and each Subsidiary has all requisite power and
authority to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents.
Within the last twelve (12) months, Borrower and each Subsidiary has done
business solely under the names set forth in SCHEDULE 5.1 hereto. The chief
executive office and principal place of business of Borrower is located at
the address set forth in SCHEDULE 5.1 hereto, and all records relating to the
business of such Borrower are kept at that location and at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The taxpayer
identification number of Borrower is set forth on SCHEDULE 5.1 hereto.
Section 5.2 SUBSIDIARIES; AFFILIATES. All Subsidiaries and
Affiliates of Borrower are set forth and described on SCHEDULE 5.2 attached
hereto. Except as set forth and described on SCHEDULE 5.2 attached hereto,
neither Borrower nor any Subsidiary is a general partner in any general or
limited partnership, or a joint venturer in any joint venture or a member of
any limited liability company.
18
Section 5.3 POWER AND AUTHORITY. The execution, delivery
and performance by Borrower and each Subsidiary of the Loan Documents to
which it is a party, and the advances from time to time obtained hereunder,
have been duly authorized by all necessary corporate, company or partnership
action, as the case may be, and do not and will not (a) require any consent
or approval which has not been obtained prior to the date hereof, (b) require
any authorization, consent or approval by, or registration, declaration or
filing (other than filings contemplated hereunder to perfect liens in favor
of Lender) with, or notice to, any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any third
party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given
prior to the date hereof; (c) to Borrower's knowledge, violate any provision
of law, rule or regulation, or of any order, writ, injunction or decree
presently in effect having applicability to Borrower or any Subsidiary, or
the articles of incorporation, bylaws or other organizational documents of
Borrower or any Subsidiary; (d) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Borrower or any Subsidiary may be
bound or affected, and such breach or default constitutes a Material Adverse
Occurrence; (e) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by Borrower or any Subsidiary (other than as
required hereunder in favor of the Lender).
Section 5.4 VALIDITY OF OBLIGATIONS. Each of the Loan
Documents to which Borrower or any Subsidiary is a party constitutes the
legal, valid and binding obligations of Borrower or such Subsidiary, as
applicable, enforceable in accordance with its terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy, insolvency
or similar laws now or hereafter in effect affecting creditors' rights
generally, and by general principles of equity.
Section 5.5 FINANCIAL STATEMENTS. Checkers has furnished
the Lender with its audited balance sheet, statement of income and retained
earnings, and statement of cash flow the year ended January 3, 2000 and its
interim financial statement dated March 27, 2000. Such financial statements
(including any related schedules and/or notes) and show all liabilities,
direct and contingent, of Checkers and its Subsidiaries have been prepared in
accordance with GAAP on a consolidated basis. The balance sheets fairly
present the financial condition of Checkers and its Subsidiaries as of the
dates thereof, and the statements of income and retained earnings fairly
present the results of the operations of Checkers and its Subsidiaries for
the periods indicated. Since the date of the financial statements described
above, there has been no Material Adverse Occurrence. Checkers and its
Subsidiaries have good and marketable title to all of the property and assets
reflected in the interim balance sheet and any purported to have been
acquired after said date, subject to exceptions and encumbrances as therein
detailed.
Section 5.6 LITIGATION. Except as disclosed to the Lender
on SCHEDULE 5.6 hereto, there is no proceeding at law or in equity, or before
or by any federal, state, local or other governmental entity, domestic or
foreign, pending, or to their knowledge threatened, against
19
Borrower or its Subsidiaries which, if determined adversely to such party,
would constitute a Material Adverse Occurrence.
Section 5.7 ACCURACY OF INFORMATION. All factual
information furnished or to be furnished to the Lender by or on behalf of
Borrower or its Subsidiaries in connection with this Agreement is, to the
Borrower's knowledge, and will be, to the Borrower's knowledge, true and
accurate in every material respect on the date as of which such information
is dated or certified and not incomplete by omitting to state any material
fact necessary to make such information not misleading on such date.
Section 5.8 TAXES. Except as set forth and described on
SCHEDULE 5.8 hereto, Borrower and its Subsidiaries have paid or caused to be
paid to the proper authorities when due all federal, state and local taxes
required to be withheld by them. Borrower and its Subsidiaries have filed all
federal, state and local tax returns which, to the knowledge of the officers
of Borrower are required to be filed, and have paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on
any assessment received by it to the extent such taxes have become due,
except (a) for any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested by Borrower or its Subsidiary,
as applicable, in good faith and by proper proceedings and for which Borrower
or such Subsidiary shall have set aside adequate reserves, and (b) as set
forth and described on SCHEDULE 5.8 hereto.
Section 5.9 ERISA. Each Plan is in substantial compliance
with all applicable requirements of ERISA and the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and
the Code setting forth those requirements. No Reportable Event has occurred
and is continuing with respect to any Plan. All of the minimum funding
standards applicable to such Plans have been satisfied and there exists no
event or condition which would reasonably be expected to result in the
institution of proceedings to terminate any Plan under Section 4042 of ERISA.
With respect to each Plan subject to Title IV of ERISA, as of the most recent
valuation date for such Plan, the present value (determined on the basis of
reasonable assumptions employed by the independent actuary for such Plan and
previously furnished in writing to the Lender) of such Plan's projected
benefit obligations did not exceed the fair market value of such Plan's
assets. Except as required under Section 4890B of the Code, Section 601 of
ERISA or applicable state law, no Borrower or Subsidiary is obligated to
provide post-retirement medical or insurance benefits with respect to
employees or former employees.
Section 5.10 TITLES AND LIENS. Checkers and its
Subsidiaries have good and marketable title to its real property and good and
sufficient title to its other property, including without limitation all
properties and assets reflected in the latest consolidated balance sheet
referred to in SECTION 5.5 hereof, free and clear of all mortgages, security
interests, liens and encumbrances, except for (a) mortgages, security
interests, liens and encumbrances permitted by SECTION 7.1 hereof, and (b)
covenants, restrictions, easements and minor irregularities which do not (i)
materially interfere with the business or operations of Checkers Subsidiaries
as presently conducted, or (ii) materially impair the value of the property
to which they attach. In addition, no financing statement naming Borrower or
its Subsidiaries as debtor is on file in any office except to perfect only
security
20
interests permitted by SECTION 7.1 hereof. Except as set forth in SCHEDULE
5.10 hereof, no Unit is subject to any commitment or agreement providing for
the sale of such Unit to any Person or giving any Person the right or option
to purchase such Unit.
Section 5.11 ENVIRONMENTAL COMPLIANCE. Borrower and its
Subsidiaries have obtained, to the Borrower's knowledge after due inquiry,
all permits, licenses and other authorizations which are required under
federal, state and local laws (the "ENVIRONMENTAL LAWS") and regulations
relating to emissions, discharges, releases of Hazardous Materials into
ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials at the facilities of Borrower or
its Subsidiaries, or in connection with the operation of such facilities
except where its failure to obtain such permits, licenses and other
authorizations would not constitute a Material Adverse Occurrence. Except as
disclosed in SCHEDULE 5.11 hereof, Borrower and its Subsidiaries, and all
activities of Borrower and its Subsidiaries at its facilities, comply, to the
Borrower's knowledge after due inquiry, with all Environmental Laws and with
the terms and conditions of any required permits, licenses and authorizations
applicable to Borrower or such Subsidiary, except where its noncompliance
would not constitute a Material Adverse Occurrence. Except as disclosed in
SCHEDULE 5.11 hereof, Borrower and its Subsidiaries are in material
compliance, to the Borrower's knowledge after due inquiry with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in Environmental Laws or
contained in any plan, order, decree, judgment or notice of which Borrower or
any Subsidiary is aware and with respect to which noncompliance would
constitute a Material Adverse Occurrence. Except as disclosed in SCHEDULE
5.11 hereto, Borrower is not aware of, nor has Borrower received notice of,
any events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent continued compliance
with, or which may give rise to liability under, any Environmental Laws.
Section 5.12 PERMITS AND FRANCHISES. To Borrower's
knowledge, all certificates, permits, licenses and other authorizations from
government bodies or authorities which are necessary to permit the operation
of the business of the Borrower and its Subsidiaries have been obtained and
are in full force and effect except where the failure to obtain or maintain
such permits, licenses and authorizations would not constitute a Material
Adverse Occurrence.
Section 5.13 FRANCHISE AGREEMENTS. Set forth on SCHEDULE
5.13 is a complete and accurate description of each Franchise Agreement to
which any Borrower is a party. Checkers is the sole party with an interest in
the rights of the franchisor under the Franchise Agreements. Except as
disclosed in SCHEDULE 5.13 and to the knowledge of the Borrower, no material
default exists under the terms of any Franchise Agreement as currently in
effect, and neither Checkers nor any other Borrower has received any notice
of a material default under any Franchise Agreement within the preceding six
months.
Section 5.14 LEASES. Set forth on the Unit Schedules is a
complete and accurate list of each real property lease covering all or any
portion of the Real Property relating to each Pledged
21
Unit. The Borrowers have delivered to the Lender true, correct and complete
copies of the Leases as currently in effect. No default currently exists
under any term of any Lease. Borrowers are the sole parties with an interest
in each Lease and are reflected as such in the records of the lessor.
Section 5.15 LOCATION OF COLLATERAL. Set forth on SCHEDULE
5.15 is a complete list of each Unit operated by Borrower and each other
location where any tangible real or personal property of the Borrower is
located, and set forth on each Unit Schedule is a complete and accurate
description of the location(s) where Collateral relating to the Unit
described on such schedule is located.
Section 5.16 PATENTS, TRADEMARKS, ETC. Borrower and each
Subsidiary possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of
others. All such licenses, patents, trademarks, trade names, service marks
and copyrights, and applications therefor existing on the date hereof are
listed on SCHEDULE 5.16.
Section 5.17 LABOR MATTERS. To the knowledge of the
Borrower, no Borrower nor any Subsidiary is a party to any contract or
agreement, or subject to any charge, corporate restriction, judgment, decree
or order, the performance of which would constitute a Material Adverse
Occurrence; no labor contract to which Borrower or Subsidiary is subject is
scheduled to expire during the original term of this Agreement; and, except
as set forth on SCHEDULE 5.17, on the date of this Agreement neither Borrower
nor any Subsidiary is a party to any labor dispute and there are no strikes
or walkouts relating to any labor contracts to which Borrower or any
Subsidiary is subject.
Section 5.18 SECURITIES ACT. Borrower has not issued any
unregistered securities in violation of the registration requirements of
Section 5 of the Securities Act of 1933, as amended, or any other law, and is
not violating any rule, regulation or requirement under the Securities Act of
1933, as amended, or the Securities Act of 1934, as amended, in any material
respect.
Section 5.19 FINANCIAL SOLVENCY. Except as set forth on
SCHEDULE 5.19, both before and after giving effect to all of the transactions
contemplated in the Loan Documents, Borrower and each of its Subsidiaries (a)
was not and will not be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act, (b) does not have unreasonably small capital
and is not engaged or about to engage in a business or transaction for which
any remaining assets of Borrower or such Subsidiary are unreasonably small,
(c) does not, by executing, delivering or performing its obligations under
the Loan Documents or by taking any action with respect thereto, intend to,
nor believe that it will, incur debts beyond its ability to pay them as they
mature, (d) does not, by executing, delivering or performing its obligations
under the Loan Documents or by taking any action with respect thereto, intend
to hinder, delay or defraud either its present or future creditors; and (e)
does not contemplate filing a petition in bankruptcy or for an arrangement or
reorganization or similar proceeding under any law of any jurisdiction or
country and, to the best knowledge of Borrower, is not the subject of
22
any bankruptcy or insolvency proceeding or similar proceeding under any law
of any jurisdiction or country threatened or pending against Borrower or any
of its Subsidiaries.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower hereby covenants and agrees with the Lender that
on the Closing Date, and thereafter for so long as the Liabilities or any
portion thereof remain unpaid or the Lender has any obligation to make advances
against the Note, such Borrower shall, and shall cause each of its Subsidiaries,
to comply with the following requirements:
Section 6.1 REPORTING REQUIREMENTS. Furnish to the Lender:
(a) As soon as available and in any event within 120 days
after the close of each fiscal year of Checkers, the annual
consolidated balance sheet of Checkers and its Subsidiaries as at the
end of such year and a statement of its income and retained earnings
and statement of cash flow for such year audited by independent
certified public accountants of recognized standing selected by
Checkers and acceptable to the Lender. Such statements shall be
prepared on a consolidated basis in accordance with GAAP in a manner
consistent with the financial statements referred to in SECTION 5.5 and
shall be accompanied by the report of such accountants in form and
substance reasonably satisfactory to the Lender;
(b) As soon as available and in any event within 45 days after
the close of each fiscal quarter of Checkers, a company-prepared
quarterly balance sheet of Checkers and its Subsidiaries as at the end
of such quarter and a statement of its income and retained earnings and
statement of cash flow for such quarter certified to Lender by the
chief financial officer of Checkers. Such statements shall be prepared
on a consolidated basis in accordance with GAAP in a manner consistent
with the financial statements referred to in SECTION 5.5.
(c) Within ten (10) days after Lender's written request,
copies of each tax return (together with supporting schedules) of
Checkers and its Subsidiaries requested by Lender.
(d) From time to time such other information pertaining to
each Borrower and their respective Subsidiaries and their financial
conditions, as the Lender may reasonably request in writing.
Section 6.2 MAINTAIN ASSETS. Keep and maintain in good
repair, working order and condition all of its assets and properties which
are necessary or useful in its business (ordinary wear and tear excepted).
Section 6.3 TAXES, ASSESSMENTS AND CHARGES. Promptly pay or
discharge when due (a) all taxes, assessments and other governmental charges
levied or imposed upon it or upon its income or profits or upon any
properties belonging to it, prior to the date on which penalties attach
23
thereto, (b) all federal, state and local taxes required to be withheld by it,
and (c) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien or charge upon any of its properties; PROVIDED,
however, that each Borrower and its Subsidiaries shall not be required to pay
any such tax, assessment, charge or claim the amount, applicability or validity
of which is being contested in good faith by appropriate proceedings and for
which such Borrower or Subsidiary has established adequate reserves in
accordance with GAAP.
Section 6.4 NOTIFICATION OF CHANGES. Promptly provide the
Lender with written notice of any of the following:
(a) any litigation which might materially and adversely
affect it;
(b) the occurrence of any Default under this Agreement;
(c) any Material Adverse Occurrence;
(d) its receipt of (and promptly furnish the Lender with a
copy of) any citation relating to Hazardous Materials;
(e) its receipt of any notice of default from, or its
provision of any notice of default to, any Person under any Franchise
Agreement;
(f) the occurrence of a Reportable Event or Prohibited
Transaction with respect to any Plan, together with a notice specifying
the nature thereof and what action the Borrowers propose to take with
respect thereto, and, when received, copies of any notice from PBGC of
intention to terminate or have a trustee appointed for any Plan;
(g) any change in location of any of the Collateral to
locations other than those identified in this Agreement or in SCHEDULE
5.15, together with a list of such new location(s), the legal
description of the location and the name and address of any landlord
and/or mortgagee;
(h) any change in the name of any Borrower or any of their
Subsidiaries; or
(i) any addition to the list of patents, trademarks,
copyrights and other information set forth on SCHEDULE 5.16.
Section 6.5 PRESERVATION OF EXISTENCE. Maintain and
preserve, and cause each Subsidiary to maintain and preserve (a) its
existence and good standing as a corporation or other form of business
organization, as the case may be, in the jurisdiction of its formation, (b)
its qualification to do business in every other jurisdiction in which the
nature of its business makes such qualification necessary, and (c) all
rights, privileges, licenses, patents, patent rights, copyrights,
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trademarks, trade names, franchises and other authority to the extent
material and necessary for the conduct of its respective business in the
ordinary course as conducted from time to time.
Section 6.6 COMPLIANCE WITH LAW. Comply in all material
respects with all applicable statutes, laws, rules and regulations, and use
and keep its assets, and will require that others use and keep its assets,
only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
Section 6.7 CONDUCT OF BUSINESS. Continue to engage in a
reasonably efficient and economical manner in the business of, and solely in the
business of owning, operating, leasing and franchising the Units and other
Checkers and Rally's restaurants. The Units shall be operated as Checkers or
Rally's restaurants unless the Lender consents in writing to a change in
concept, which consent the Lender may grant or withhold in its sole discretion.
Section 6.8 BOOKS AND RECORDS. Keep true and accurate
records and books of account in accordance with sound accounting principles;
and permit any agent or representative of the Lender at any reasonable time
upon reasonable prior notice to visit, inspect and make copies of any of
their books and financial records and discuss their business with its
officers, directors, managers, legal counsel or accountants. Lender agrees to
use its reasonable efforts to maintain in confidence all information provided
by any Borrower to Lender which is specifically designated in writing as
privileged or confidential ("CONFIDENTIAL INFORMATION"), and not to disclose
any such information to anyone except (a) to employees, agents, auditors and
counsel of the Lender, its parent, its subsidiaries and its affiliates
(collectively, the "LENDER RELATED Parties"), (b) to regulatory agencies in
connection with examinations of the records of any Lender Related Party, (c)
pursuant to a subpoena, court order or otherwise as may be required by law,
(d) in connection with any court or arbitration proceeding to which any
Lender Related Party is a party, to the extent such information is relevant
to matters at issue in such proceeding, and (e) any Investor (as defined in
SECTION 9.13), Rating Agency (as defined in SECTION 9.13), prospective
Investor or organization maintaining databases on the underwriting and
performance of commercial loans. Confidential Information shall not include
any information that is rightfully received from a third party without
accompanying use or disclosure restrictions, is independently developed by
employees of the Lender or its affiliates who have not had access to such
confidential information, is or becomes publicly available through no
wrongful act of the Lender or its affiliates, or is already known to the
Lender, or is approved for release by a Borrower.
Section 6.9 REIMBURSEMENT OF EXPENSES. Reimburse the Lender
on written demand (which demand shall be accompanied by reasonable supporting
documentation, it being agreed that such documentation need not in any event
include attorney/client privileged materials) for (a) any out-of-pocket
expenses incurred by the Lender, including reasonable attorneys' fees, in the
preparation, performance or amendment of any of the Loan Documents; and (b)
any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or
administration of any
25
of the transactions contemplated by, or any amendment, supplement or
modification of, this Agreement or the other Loan Documents; together with
interest on any amount not paid within thirty (30) days of demand at the rate
of interest then accruing on the Note. The Borrowers agree that Lender's
out-of-pocket expenses for customary closing costs and fees, and for the
preparation of the Loan Documents, will be reimbursed to the Lender from the
Proposal Fee; all out-of-pocket expenses in excess of the Proposal Fee shall
be reimbursed to the Lender or paid by the Borrowers at closing or upon
demand by the Lender.
Section 6.10 ERISA. Maintain, and cause each ERISA
Affiliate to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and not
permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which any Borrower or ERISA Affiliate would be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code, in either case in an amount exceeding
$50,000, (b) fail to make full payment when due of all amounts which, under
the provisions of any Plan, any Borrower or ERISA Affiliate is required to
pay as contributions thereto, or permit to exist any accumulated funding
deficiency (as such term is defined in Section 302 of ERISA and Section 412
of the Code), whether or not waived, with respect to any Plan in an aggregate
amount exceeding $50,000, or (c) fail to make any payments in an aggregate
amount exceeding $50,000, to any Multiemployer Plan that any Borrower or
ERISA Affiliate may be required to make under any agreement relating to such
Multiemployer Plan or any law pertaining thereto.
Section 6.11 LEASES. Comply in all material respects with
the terms of the Leases and take all such actions as may be reasonably
required to maintain the Leases for the respective terms thereof.
Section 6.12 INSURANCE. Obtain and at all times maintain
insurance with financially sound and reputable insurers in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general area in which it
operates. Without limiting the foregoing, at all times each Borrower shall,
and shall cause its Subsidiaries to, keep all tangible Collateral insured
against such risks and in such amounts as required by the Mortgage and the
Security Agreement and keep the Mortgaged Properties insured against such
risks and in such amounts as required by the Mortgage and, if the Mortgaged
Property is a Leased Property, the applicable Lease. In the case of any
material loss, damage to or destruction of the Collateral or the Mortgaged
Properties, or any part thereof, the Borrowers shall promptly give written
notice thereof to the Lender generally describing the nature and extent of
such loss, damage or destruction.
Section 6.13 FURTHER ACTS, ETC. At Borrowers' sole cost and
expense, do, perform, execute, acknowledge and deliver such further acts,
deeds, conveyances, mortgages, assignments, notices of assignments, transfers
and assurances as Lender may, from time to time, reasonably require for (a)
the better, conveying, assigning, transferring, and confirming unto Lender
the
26
Properties, the Leases, the Collateral and the other rights granted or to be
granted to the Lender hereunder or under any of the other Loan Documents, (b)
carrying out the intention of, or facilitating the performance of, the terms
of this Loan Agreement and the other Loan Documents, (c) filing, registering
or recording any Loan Document, or (d) for complying with all applicable
state or federal law. Borrower will, on written demand, execute and deliver
to Lender, and hereby authorizes Lender, following 10 days' written notice to
Borrowers, to execute in the name of any Borrower or without the signature of
any Borrower to the extent Lender may lawfully do so, one or more financing
statements, chattel mortgages or other instruments, to evidence or perfect
more effectively the security interest of Lender in the Mortgaged Properties,
the Leases and the Collateral. Each Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of exercising and
perfecting any and all rights and remedies available to Lender pursuant to
this SECTION 6.13.
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Section 6.14 ESTOPPEL CERTIFICATES.
(a) Furnish to Lender or any proposed assignee, within ten
(10) days after receipt of a request therefor, with a statement, duly
acknowledged and certified by Borrower setting forth to Borrower's
knowledge (i) the original principal amount of each Note, (ii) the
unpaid principal amount of each Note, (iii) the rate of interest of
each Note, (iv) the terms of payment and maturity date of each Note,
(v) the date installments of interest and/or principal were last paid,
(vi) that, except as provided in such statement, there are no defaults
or events which with the passage of time or the giving of notice or
both, would constitute an event of default under this Loan Agreement,
(vii) this Loan Agreement, each Note and each of the other Loan
Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification,
(viii) whether any offsets or defenses exist against the obligations
secured hereby and, if any are alleged to exist, a detailed description
thereof, (ix) that all Leases are in full force and effect have not
been modified (or if modified, setting forth all modifications), (x)
the date to which the rents under each Lease have been paid, (xi)
whether or not, to the best knowledge of such Borrower, any default
exists under any Lease and setting forth the specific nature of any
such default, (xii) the amount of security deposits held or paid by
such Borrower under each Lease and that such amounts are consistent
with the amounts required under each Lease, and (xiii) as to any other
matters reasonably requested by Lender and reasonably related to this
Loan Agreement, the obligations secured hereby, the Properties, the
Leases or the Collateral.
(b) Upon any transfer or proposed transfer contemplated by
SECTION 9.13, at Lender's request, Borrower shall provide, an estoppel
certificate to the Investor (defined in SECTION 9.13) or any
prospective Investor in such form, substance and detail as Lender, such
Investor or prospective Investor may require.
Section 6.15 FIXED CHARGE COVERAGE. At all times from and
after December 31, 2001, cause Checkers to maintain on a consolidated basis,
a Fixed Charge Coverage Ratio for the period of four consecutive fiscal
quarters ending on, or most recently ended prior to such time, of not less
than 1.25 to 1.0.
Section 6.16 DELIVERY OF DOCUMENTS RELATING TO THE INITIAL
REAL ESTATE COLLATERAL. As soon as available but in any event not more than
sixty (60) days following the Closing Date, deliver or cause the delivery to
Lender of the following with respect to the Initial Real Estate Collateral:
(a) a policy of flood insurance naming Lender as an additional
inured covering the improvements located on each parcel of land
constituting the Initial Real Estate Collateral in an amount equal to
the maximum level of coverage available for such parcel under the Flood
Insurance Acts, or proof reasonably satisfactory to Lender that no
protection of the improvements located on such parcel are located in an
area identified by the Federal
28
Emergency Management Agency or any successor thereto as having special
flood hazards pursuant to the Flood Insurance Acts;
(b) properly completed and acknowledged environmental
questionnaires in the form required by Lender relating to the Initial
Real Estate Collateral such environmental assessments and searches as
Lender may require and, if required by Lenders, environmental insurance
in such form and amount as Lender may reasonably require; and
(c) a Subordination Agreement covering the interest of any
Person other than the Borrowers in the Initial Real Estate Collateral
property executed by such parties as Lender may reasonably require.
Section 6.17 DELIVERY OF NONDISTURBANCE AGREEMENTS. In the
event that the Borrowers are unable to obtain any Nondisturbance Agreement
required under SECTION 4.1(J) with respect to any Pledged Unit, and the Lender
reasonably determines that the interest of any Borrower or the Lender in and to
the Real Property relating to such Pledged Unit could be extinguished or
impaired if such Nondisturbance Agreement is not obtained, the Lender may
provide the Borrowers with written notice requiring delivery of such
Nondisturbance Agreements, in substantially the form attached hereto as EXHIBIT
D-2 and otherwise in form and substance reasonably acceptable to Lender,
properly executed by such parties as the Lender may require. The Borrowers shall
have sixty (60) days from the date of such written notice to either deliver such
Nondisturbance Agreements to the Lender or to substitute an alternative Eligible
Unit for such Pledged Unit in accordance with the procedures set forth in
SECTION 4.6 hereof.
ARTICLE VII
NEGATIVE COVENANTS
Each Borrower hereby covenants and agrees with the Lender that
on the Closing Date, and thereafter for so long as the Liabilities or any
portion thereof remain unpaid or the Lender has any obligation to make advances
against the Notes, it will comply with the following requirements:
Section 7.1 LIENS AND ENCUMBRANCES. Borrower will not, and
will not permit any Subsidiary to, create, assume, incur or suffer to exist
any lien or encumbrance of any kind, upon all or any portion of the Mortgaged
Property, any Lease, the Collateral or any Franchise Agreement, whether now
owned or hereafter acquired, or of or upon the income or profits therefrom,
except for:
(a) Liens for taxes, assessments and other governmental
charges which are not delinquent or which are being contested in good
faith by appropriate proceedings diligently conducted, against which
reserves have been set up;
(b) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other similar laws or
29
to secure the performance of statutory obligations of a like nature
(exclusive of obligations for the payment of money borrowed);
(c) Liens imposed by law in connection with transactions in
the ordinary course of business, such as liens of carriers,
warehousemen, mechanics and materialmen for sums not yet due or being
contested in good faith and by appropriate proceedings diligently
conducted, against which adequate reserves have been set up;
(d) Liens in favor of the Lender;
(e) The Permitted Exceptions (as defined in SECTION 5.1 of
the Mortgage);
(f) Purchase money liens securing Debt incurred to finance all
or part of the purchase price of personal property, provided that the
liens attach only to such property;
(g) easements, rights of way, restrictions and other similar
charges or encumbrances on Mortgaged Property, in each case incidental
to, and not interfering with, the ordinary conduct of the business of
the Borrower and its Subsidiaries, PROVIDED, that such easements,
rights of way, restrictions and other similar charges or encumbrances
do not, in the aggregate, materially detract from the value of such
property; and
(h) licenses of copyrights, patents and trademarks to
franchisees in the ordinary course of business.
Section 7.2 CONSOLIDATION, MERGER, ETC. Borrower will not,
and will not permit any Subsidiary to, (a) lease, assign or sell all or
substantially all of its property or business to any other Person, (b) merge
or consolidate with or into any other Person, (c) purchase or lease or
otherwise acquire all or substantially all of the assets of any other Person,
(d) sell, transfer, pledge or otherwise dispose of Capital Stock in any of
its Subsidiaries, (e) liquidate, suspend or dissolve its business operations,
(f) change its name, identity (including its trade name(s)) or corporate,
partnership or other structure, or (g) change the principal place of business
or chief executive office set forth in SECTION 5.1 hereof, in each case
without the prior written consent of Lender.
Section 7.3 ARM'S LENGTH TRANSACTIONS. Borrower will not,
and will not permit any Subsidiary to, enter into any transaction with an
affiliate or other Person except on terms consistent with those available in
an arm's length transaction.
Section 7.4 HAZARDOUS MATERIALS. Borrower will not, and
will not permit any Subsidiary to, use or cause to be used Hazardous
Materials, except in substantial compliance with all applicable federal,
state and local laws and regulations and except to the extent legally
adequate remedial action has been taken.
30
Section 7.5 ERISA. Permit any event to occur or condition
to exist which would permit any Plan to terminate under any circumstances
which would cause the Lien provided for in Section 4068 of ERISA to attach to
any assets of the Borrower; and the Borrower will not permit, as of the most
recent valuation date for any Plan subject to Title IV of ERISA, the present
value (determined on the basis of reasonable assumptions employed by the
independent actuary for such Plan and previously furnished in writing to the
Lender) of such Plan's projected benefit obligations to exceed the fair
market value of such Plan's assets.
Section 7.6 FISCAL YEAR. Change the end of any fiscal
year to any date other than the date which is 364 or 371 calendar days, as
appropriate, following the last day of its prior fiscal year.
Section 7.7 SUBSIDIARIES. Borrower will not, and will not
permit any Subsidiary to, form or acquire any corporation or other entity
which would thereby become a Subsidiary, or form or enter into any
partnership as a general or limited partner or into any joint venture or any
limited liability company or similar entity, in each case without the prior
written consent of the Lender and execution of such amendments and
supplements to the Loan Documents as the Lender may reasonably require by the
entity forming the subsidiary and such other Persons as Lender may require.
Section 7.8 DEBT. At any time prior to the "Revolving
Credit Conversion Date", as that term is defined in the Related Loan
Agreement, Borrower will not, and will not permit any Subsidiary to, directly
or indirectly, incur, create, issue, assume or suffer to exist any Debt,
except: (a) Debt under the terms of this Agreement and the Related Loan
Agreement; (b) trade payables arising from the purchase by Borrower or its
Subsidiaries of goods and services in the ordinary course of business, (c)
Debt in the aggregate amount incurred during the term hereof with respect to
the acquisition of point of sale equipment by the Borrower not to exceed
$4,000,000, (d) Debt outstanding on the date hereof and listed on SCHEDULE
7.8; (e) other Debt approved in writing by the Lender, and (f) Debt not
otherwise excepted above in the aggregate amount at any time outstanding of
not more than $1,000,000.
Section 7.9 RESTRICTED PAYMENTS. At any time prior to full
and final payment of the Related Liabilities, and termination of any
obligation or commitment of the Lender under the Related Loan Agreement,
Borrower will not, and will not permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment without the prior written consent of the Lender, except
(a) to make dividends payable solely in the same class of Capital Stock of
such Person, (b) to make dividends or other distributions payable to any
other Borrower, and (c) to make regularly scheduled payments of principal and
interest under the Related Loan Agreement and on the Related Notes to the
extent permitted thereby and subject to the subordination provisions
applicable thereto. Salary and bonuses paid in the ordinary course of
business to employees of the Borrower who are also shareholders of such
Borrower shall not constitute Restricted Payments.
31
Section 7.10 ADVANCES, INVESTMENTS AND LOANS. At any time
prior to full and final payment of the Related Liabilities, and termination
of any obligation or commitment of the Lender under the Related Loan
Agreement, Borrower will not, nor will it permit any Subsidiary to, acquire
for value, make, have or hold any Investments, except: (a) advances to
employees of the Borrower or any Subsidiary for (i) travel or other ordinary
business expenses, provided that the aggregate amount outstanding at any one
time shall not exceed $100,000 in the aggregate for all employees and (ii)
other purposes, including without limitation loans to employees, provided
that the aggregate amount outstanding at any one time shall not exceed
$200,000; (b) advances to subcontractors and suppliers in maximum aggregate
amount not to exceed $250,000 at any one time outstanding; (c) extensions of
credit in the nature of accounts receivable or notes receivable arising from
the sale of goods and services in the ordinary course of business; (d) shares
of stock, obligations or other securities received in settlement of claims
arising in the ordinary course of business; (e) Investments (other than
Investments in the nature of loans or advances) outstanding on the date
hereof in Subsidiaries by the Borrower and other Subsidiaries; (f) other
Investments outstanding on the date hereof with a fair market value in excess
of $500,000 each and listed on SCHEDULE 7.10; (g) seller financing provided
to the Purchasers of the Units identified on SCHEDULE 5.10 as being subject
to an agreement, commitment or option providing for the sale thereof,
PROVIDED that in connection with such sale net proceeds in the amount
required under SECTION 4.7 have been delivered to Lender; and (h) other
Investments consented to by the Lender in writing.
Section 7.11 AVERAGE SENIOR FUNDED DEBT TO EBITDA.
Borrower will not at any time permit the ratio of (a) Average Senior Funded
Debt for the period of four fiscal quarters ending on, or most recently ended
prior to such time, to (b) EBITDA for the period of four fiscal quarters
ending on, or most recently ended prior to such time; to exceed 4.0 to 1. For
purposes of this SECTION 7.11, the term "AVERAGE SENIOR FUNDED DEBT" shall
mean the average outstanding principal balance of the Term Loan during the
period of four fiscal quarters ending on, or most recently ended prior to,
such date.
Section 7.12 EBITDA. Borrower shall not permit the
aggregate EBITDA of the Borrowers, calculated on a consolidated basis, to
be less than the following amounts for the following periods:
PERIOD AMOUNT
June 19, 2000 through $3,300,000
September 10, 2000
June 19, 2000 through $8,200,000
January 1, 2001
June 19, 2000 through $10,200,000
March 16, 2001
32
June 19, 2000 through $13,400,000
June 18, 2001
From and after June 18, 2001, Borrower shall not at any time permit consolidated
EBITDA of the Borrowers for the period of four fiscal quarters ending on, or
most recently ended prior to such time to be less than $13,400,000.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section8.1 EVENTS OF DEFAULT. The occurrence of any one
or more of the following events shall constitute an Event of Default:
(a) default in the payment of any installment of
principal or interest on the Note when it becomes due and payable; or
(b) default in the payment of any fees, costs or expenses
required to be paid by the Borrowers, or any one or more of them, under
this Agreement or any other Loan Document and the continuance of such
default for a period of five (5) calendar days following written notice
from Lender; or
(c) default in the performance, or breach, of any covenant on
the part of the Borrowers, or any one or more of them, contained in
ARTICLE VII; and, if such default or breach is susceptible to cure,
continuance of such default for a period of ten (10) calendar days
following written notice from Lender; or
(d) default in the performance, or breach, of any covenant or
agreement of the Borrowers, or any one or more of them, in this
Agreement (other than a covenant or agreement the performance or breach
of which is elsewhere in this SECTION 8.1 specifically dealt with) and
the continuance of such default or breach for a period of thirty (30)
calendar days after notice thereof to the Borrowers from Lender; or if
such default or breach is cureable but cannot be cured within the
above-mentioned thirty (30) days, the Borrowers will upon proving
diligence to cure, have an additional fifteen (15) days to cure such
failure or occurrence but only if it does not diminish the security
given under the Loan Documents and no other default exists hereunder.
(e) default in the performance, or breach, of any covenant or
agreement of the Borrowers (or any one or more of them), any of their
respective Subsidiaries under any Loan Document other than this
Agreement (other than a covenant or agreement the performance or breach
of which is elsewhere in this SECTION 8.1 specifically dealt with) and
the continuance of such default beyond the applicable period of grace,
if any, specified in such Loan Document; or
33
(f) any Borrower or any Subsidiary or Affiliate of any
Borrower shall fail to pay when due, or any event shall occur resulting
in the acceleration of, (i) any Debt to Lender or any of its
subsidiaries or affiliates (other than the Liabilities); or (ii) any
Debt to any person or entity other than the Lender or any of its
subsidiaries or affiliates aggregating at least $250,000; or
(g) any Borrower or any Subsidiary or Affiliate of any
Borrower shall liquidate, dissolve, terminate or suspend its business
operations or otherwise fail to operate its business in the ordinary
course, or shall sell all or substantially all of its assets; or any
Borrower shall terminate or suspend its business operations or
otherwise fail to operate its business operations with respect to any
Pledged Unit and shall not have substituted an Eligible Unit therefor
within sixty (60) calendar days after such termination, suspension or
failure;
(h) any representation or warranty contained in or delivered
pursuant to any of the Loan Documents shall prove false in any material
respect as of the time made; or
(i) any event shall occur which entitles any Franchisee,
immediately or following the giving of notice or lapse of any
applicable grace period, to terminate any Franchise Agreement and such
termination would, or would reasonably be expected to, constitute a
Material Adverse Occurrence; or
(j) any Borrower shall sell, encumber, or otherwise transfer
all or any material part of its interest in the Mortgaged Properties,
any Lease, the Collateral or any Franchise Agreement, in each case
without the prior written consent of the Lender; or
(k) any Borrower or any Subsidiary or Affiliate of any
Borrower shall (i) become insolvent or unable to pay its debts
generally as they mature, (ii) suspend its ordinary course of business,
(iii) make a general assignment for the benefit of creditors; (iv)
admit in writing its inability to pay its debts generally as they
mature, (v) file or have filed against it a petition in bankruptcy or a
petition or answer seeking a reorganization, arrangement with creditors
or other similar relief under the Federal bankruptcy laws or under any
other applicable law of the United States of America or any state
thereof, and such petition or answer shall remain undismissed for a
period of more than sixty (60) days (vi) consent to the appointment of
a trustee or receiver for it, or for a substantial part of its
property, or (vii) take any corporate or other action for the purpose
of effecting or consenting to any of the foregoing; or
(l) Judgments against the Borrowers and their respective
Subsidiaries and Affiliates, or any one or more of them, for the
payment of money totaling in excess of $250,000 shall be outstanding
for a period of sixty (60) days without a stay of execution; or
(m) a Change in Control or Control Event shall occur; or
34
(n) an Event of Default shall occur under the Related Loan
Agreement.
Section 8.2 REMEDIES. Upon the occurrence of an Event of
Default the Lender may, at its option, (a) terminate its obligation to make
any further advances against the Note, if any such obligation exists; (b)
declare the Liabilities to be immediately due and payable, whereupon the same
shall become immediately due and payable together with accrued interest
thereon; (c) until payment in full of the liabilities or final sale or
disposition of all Collateral, take possession of all premises owned, leased
or held by the Borrower upon which any Collateral is or may be located (the
"PREMISES") for the purpose of holding, processing, manufacturing, selling or
otherwise disposing of goods which are inventory, or providing services under
contracts for receivables, or using, operating, storing, liquidating or
realizing upon any Collateral and for other purposes which the Lender may in
good ▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes, and without liability
to the Borrower for the payment of rent or performance of any other of their
obligations under any lease of the Premises; and (d) exercise any other of
its rights and remedies under the Loan Documents or otherwise available at
law or in equity. Upon the occurrence of an Event of Default described in
SECTION 8.1(K), the obligation, if any, of the Lender to make any advance
against the Notes shall automatically terminate, and the Liabilities shall
immediately become due and payable, without any election or action on the
part of the Lender. In addition, the Lender may, at any time whether before
or after the occurrence of a Default and whether before or after expiration
of any applicable cure period, (but if no Default has occurred and is
continuing, following five (5) days prior written notice to Borrowers)
advance funds and take other action necessary to cure any default under any
Franchise Agreement or Lease, or to enforce or preserve the rights of the
Lender under this Agreement or any other Loan Document, or to enforce or
preserve the rights and interest of the Lender in all or any part of the
Mortgaged Properties, the Leases or the Collateral, which amounts the
Borrower agrees to repay upon demand together with interest at the highest
rate provided for in the Notes.
ARTICLE IX
MISCELLANEOUS
Section 9.1 BINDING EFFECT; ASSIGNMENT. The parties hereto
agree that this Agreement shall be binding upon and inure to the benefit of
their respective successors in interest and assigns including any holder of
any Note; provided however, that no Borrower may assign or transfer its
interest hereunder without the prior written consent of the Lender. The
Lender may, without notice, assign, or sell participations in, the Note and
the other Loan Documents and may provide such participants and purchasers
with any financial and other information concerning the Borrowers which has
been provided to the Lender by the Borrower or which the Lender has otherwise
obtained.
Section 9.2. GOVERNING LAW; VENUE. The Loan Documents shall
be interpreted and construed in accordance with and governed by the laws of
the State of Arizona, without regard to its law governing choice of law or
conflict of law, except as otherwise provided and except to the
35
extent the laws of other jurisdictions apply to the creation, perfection and
foreclosure of real estate and personal property liens. THE BORROWER HEREBY
CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN THE STATE OF ARIZONA IN CONNECTION WITH ANY CONTROVERSY INVOLVING OR
RELATED TO ANY OF THE LOAN DOCUMENTS, WAIVES ANY ARGUMENT THAT VENUE IN SUCH
FORUMS IS NOT CONVENIENT, AND AGREES THAT ANY LITIGATION INITIATED BY IT OR
ON ITS BEHALF AGAINST THE LENDER IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS
SHALL BE VENUED IN EITHER THE SUPERIOR COURT OF MARICOPA COUNTY, ARIZONA, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA.
Section 9.3 WAIVER OF JURY TRIAL. EACH BORROWER AND THE
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
Section 9.4 [Intentionally Omitted]
Section 9.5 NOTICES.
(a) Except as otherwise expressly provided herein, all
notices, requests and demands and other communications provided for
under the Loan Documents shall be in writing and mailed or delivered to
the applicable parties at their respective addresses set forth on the
execution pages hereto or, as to each party, at such other address as
shall be designated by such party in a written notice to the other
party complying with the terms of this SECTION 9.5. All such notices,
requests, demands and other communications shall be deemed to have been
duly given or made (a) when delivered by hand, (b) when transmitted via
telecopy (or other facsimile device) to the number set out on the
execution page hereto of such party, (c) the day following the day on
which the same is delivered prepaid to a reputable national overnight
air courier service, or (d) the third business day following the day on
which the same is placed in the United States mails, certified or
registered, postage prepaid, addressed to such party at the address set
out on the execution page hereto of such party.
(b) Copies of all notices, requests, demands and other
communications sent to any Borrower shall also be sent to ▇▇▇▇▇ ▇▇▇▇▇,
Esq. at Christensen, Miller, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, or to such other individual
or at such other address and telecopy number as shall be designated by
the Borrowers in a written notice to the Lender complying with the
terms of this SECTION 9.5.
36
(c) Copies of all notices, requests, demands and other
communications sent to the Lender shall also be sent to Textron
Financial Corporation, Legal Department, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attn: Division Counsel - Franchise
Finance Division, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, or to such other individual
or at such other address and telecopy number as shall be designated by
the Lender in a written notice to the Borrowers complying with the
terms of this SECTION 9.5.
Section 9.6 AMENDMENT AND WAIVER. No failure or delay on
the part of the Lender in exercising any right, power or privilege hereunder
and no course of dealing between any Borrower and the Lender shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. Neither this
Agreement nor any provision hereof may be modified, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
Section 9.7 HEADINGS. The headings of various sections of
this Agreement have been inserted for reference only and shall not be deemed
to be a part of this Agreement.
Section 9.8 JUDICIAL INTERPRETATION. Should any provision
of this Agreement or any of the other Loan Documents require interpretation,
it is agreed that the interpreting Person shall not apply a presumption that
the terms hereof shall be more strictly construed against any Person, whether
by reason of the rule of construction that a documents is to be construed
more strictly against the Person who prepared the same or otherwise, it being
agreed that all parties hereto have participated in the preparation of this
Agreement and the other Loan Documents.
Section 9.9 SEVERABILITY. All provisions of this Agreement
and any other of the Loan Documents are severable and if any provision shall
be held invalid or unenforceable, the validity and enforceability of the
remaining provisions shall in no way be affected.
Section 9.10 AGREEMENT SUPERSEDES. This Agreement
supersedes and has merged into it all prior oral and written agreements
(including the commitment letter dated June 5, 2000) on the same subjects
with the effect that this Agreement shall control the subject matter covered
by it.
Section 9.11 ACCEPTANCE. The Loan Documents shall not be
effective until accepted by the Lender in Tempe, Arizona. Notice of
acceptance need not be given to any Borrower.
Section 9.12 OPINION OF COUNSEL. Borrowers acknowledge and
agree that (a) the Lender has offered to retain special legal counsel to the
Lender to render an opinion, at the Borrowers' costs and expense, in relation
to the validity, binding effect and enforceability of the loan documents and
the availability of remedies thereunder, (b) the Lender has not required,
directly or indirectly as a condition of any loan or advance, any attorney
representing the Borrowers to give such an opinion, and (c) to the extent the
opinion delivered pursuant to SECTION 2.12 hereof includes opinions in
relation to the validity, binding effect and enforceability of the loan
documents and the
37
availability of remedies thereunder, such opinions were provided by the
Borrowers to the Lender voluntarily in lieu of retention by the Lender of
special legal counsel to render such opinions.
Section 9.13 SECONDARY MARKET.
(a) Lender may, at any time, sell, transfer or assign all or
any portion of its right, title and interest in and to this Loan
Agreement, the Note and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein
(the "PARTICIPATIONS") or issue mortgage pass-through certificates or
other securities evidencing a beneficial interest in a rated or unrated
public offering or private placement (the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee or servicer of, or
participant or investor in, such Participations or Securities
(collectively, the "INVESTOR"), any agency rating such Securities
(collectively, the "RATING AGENCY"), any prospective Investor and any
organization maintaining databases on the underwriting and performance
of commercial loans, all documents and information which Lender, or its
Subsidiaries or Affiliates, now has or may hereafter acquire relating
to the Liabilities, any Borrower, any Subsidiary or Affiliate of any
Borrower, any surety, indemnitor or other Person obligated with respect
to all or any portion of the Liabilities, the Mortgaged Properties, the
Collateral or the Leases, whether furnished by the Borrowers, any
Subsidiary or Affiliate of the Borrowers, any such guarantor,
indemnitor or other obligated Person, or otherwise, as Lender
determines necessary or desirable. Each Borrower irrevocably waives any
and all rights it may have under applicable state or federal law to
prohibit such disclosure, including but not limited to any right of
privacy.
(b) Each Borrower agrees to cooperate in all reasonable
respects with Lender in connection with any transfer made, or any
Securities created, pursuant to this SECTION 9.13, including, without
limitation, the delivery of such estoppel certificates, amendments and
other documents as may be reasonably requested by Lender. Each Borrower
shall also furnish, and cause each of its Subsidiaries and Affiliates
to furnish, and each Borrower, its Subsidiaries and Affiliates, and any
guarantor, indemnitor or other Person obligated with respect to the
Liabilities consent to Secured Party furnishing to such Investors or
such prospective Investors or such Rating Agency, any and all
information concerning the Mortgaged Properties, the Leases and the
Collateral, the financial condition of the Borrowers and their
respective Subsidiaries and Affiliates, and any guarantor, indemnitor
or other person obligated with respect to the Liabilities as may be
requested by Lender, any Investor, any prospective Investor or any
Rating Agency in connection with any sale, transfer or Participations
or Securities.
Section 9.14 NO RELIANCE; NO LENDER OBLIGATIONS. The
relationship between Borrower and Lender is solely that of debtor and
creditor, and Lender has no fiduciary or other special relationship with
Borrower, and no term or condition of this Loan Agreement or any other Loan
Document shall be construed so as to deem the relationship between Borrower
and Lender to be other than that of debtor and creditor. By accepting or
approving anything required to be
38
observed, performed or fulfilled or to be given to Lender pursuant to this
Loan Agreement or any other Loan Document (including without limitation, any
officer's certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy), Lender shall
not be deemed to have warranted, consented to, or affirmed the sufficiency,
the legality or effectiveness of same, and such acceptance or approval
thereof shall not constitute any warranty or affirmation with respect thereto
by Lender. Borrowers recognize and acknowledge that, in accepting this Loan
Agreement and the other Loan Documents, Lender is expressly and primarily
relying on the truth and accuracy of the warranties and representations set
forth herein and in the other Loan Documents, without any obligation on the
part of the Lender to investigate the Mortgaged Properties, the Leases or the
Collateral.
Section 9.15 CONFLICT BETWEEN LOAN DOCUMENTS. In the event
of a conflict between the terms of this Agreement and the terms of any other
Loan Document, the terms of this Agreement shall control.
[Remainder of this page intentionally left blank;
signature pages follow]
39
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed and delivered the date and year first above written.
Address: CHECKERS DRIVE-IN RESTAURANTS, INC.,
▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ North a Delaware corporation
Building 1
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By
-------------------------------------
Its
-----------------------------------
Address: CHECKERS PUERTO RICO, INC.,
14255 - 49th Street North a Puerto Rico corporation
Building 1
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By
-------------------------------------
Its
-----------------------------------
Address: RALLY'S OF OHIO, INC.,
▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ an Ohio corporation
Building 1
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By
-------------------------------------
Its
-----------------------------------
Address: RALLY'S MANAGEMENT, INC.
▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ a Kentucky corporation
Building 1
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By
-------------------------------------
Its
-----------------------------------
40
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be executed and delivered the date and year first above written.
Address: TEXTRON FINANCIAL CORPORATION, a
c/o Franchise Finance Division Delaware corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By
-------------------------------------
Its
-----------------------------------
41
EXHIBIT A
ELIGIBLE UNIT REQUIREMENTS
1. The Unit is owned by a Borrower and no other Person, and is
not subject to or part of any joint venture or similar arrangement.
2. The Borrower's interest in the Unit, the furniture,
fixtures, equipment and other personal property used in connection
therewith, the real property owned or leased by the Borrower in
connection therewith and the income and profits therefrom are not
subject to any lien or encumbrance of any kind, other than liens and
encumbrances permitted under SECTION 7.1(a), (b), (c), (d), (f) and
(g).
3. The Unit is not subject to any commitment or agreement
providing for the sale of such Unit to any Person other than a
Borrower.
4. If the Property relating to the Unit is Leased Property,
(a) the lessor under any Lease relating thereto is not a Borrower or an
Affiliate of any Borrower; and (b) each Lease relating thereto has an
expiration date (including all renewal options) not earlier than
fifteen (15) years from the date hereof or, if shorter, the average
term of such Lease and all other Leases relating to Pledged Units, is
not less than fifteen (15) years from the date hereof.
5. The Unit otherwise satisfies the Lender's then-existing
underwriting standards applicable thereto for franchise finance loans
to operators of similar franchised restaurant facilities.
6. The Unit is not a "Pledged Unit", as that term is defined
in the Related Loan Agreement.
42
EXHIBIT B
TITLE POLICY REQUIREMENTS
ALTA Loan Policy of Title Insurance (10-17-92) or its
equivalent issued by Title naming "Textron Financial Corporation, its successors
and assigns" as insured in such amount as Lender may reasonably require and
otherwise in form and substance acceptable to Lender. Said policy must
specifically insure that the Mortgage is a first lien upon the fee interest of
the Borrower in the Real Property subject only to such exceptions as may be
reasonably acceptable to Lender. Without limiting the foregoing, said policy
shall waive the all standard exceptions and insure over, among other things, (a)
rights and claims of parties in possession, (b) mechanic's, contractor's or
materialmen's liens and lien claims, (c) easements, or claims of easements, not
shown by the public records, and (d) taxes or special assessments which are not
shown as existing liens by the public records. Said policy shall also include
the following endorsements or their equivalent:
(a) ALTA Form 9 Comprehensive Endorsement
(b) If a Borrower is the owner of the fee interest in the
land and improvements constituting the Real Property,
an ALTA Form 3.1 Broad Form Zoning Endorsement;
otherwise a zoning letter in form and substance
reasonably acceptable to Lender from the applicable
governmental authority
(c) ALTA Form 116 Location Endorsement
(e) ALTA Form 100 Access Endorsement
(f) Tax Parcel Endorsement
(g) Creditor's Rights Endorsement
(h) Tie-in Endorsement (referring to each other policy of
title insurance covering all or any portion of the
real property described in the Mortgage)
43
EXHIBIT C
FORM OF UNIT SCHEDULE
UNIT SCHEDULE
UNIT DESCRIPTION: [_____________________]
STREET ADDRESS: [_______________]
[_______________]
CONCEPT: [Rally's/Checkers]
DESCRIPTION OF REAL
PROPERTY: Real property located in [____________] County,
[____________], more particularly described as follows:
[Insert legal description]
LEASES: Lease dated as of [____________], between
[_________], as landlord, and [_______________], as
tenant, covering the above-described property.
LOCATION OF COLLATERAL: All Collateral used in connection with the operation
of the Unit described on this Unit Schedule is located
on the above-described property at the
street address set forth above.
[Remainder of page intentionally left blank]
44
THIS UNIT SCHEDULE is hereby incorporated into and made a part of that certain
Loan Agreement (Senior Credit Facility A) dated June 15, 2000 by and among
Checkers Drive-In Restaurants, Inc., certain of its subsidiaries (collectively,
the "BORROWERS") and Textron Financial Corporation (the "LOAN AGREEMENT").
Borrowers hereby reaffirm, as of the date hereof, the representations and
warranties set forth in ARTICLE V of the Loan Agreement to the extent they
pertain to the Unit described above.
Dated this day of , 2000.
--- ---------
CHECKERS DRIVE-IN RESTAURANT, INC.
By
-------------------------------------
Its
----------------------------------
CHECKERS PUERTO RICO, INC.
By
-------------------------------------
Its
----------------------------------
RALLY'S OF OHIO, INC.
By
-------------------------------------
Its
----------------------------------
RALLY'S MANAGEMENT, INC.
By
-------------------------------------
Its
----------------------------------
Accepted this day of , 200 .
--- --------
TEXTRON FINANCIAL CORPORATION
By
-------------------------------------
Its
----------------------------------
45
EXHIBIT D-1
FORM OF LANDLORD'S CONSENT
46
EXHIBIT D-2
FORM OF NONDISTURBANCE AGREEMENT
47
EXHIBIT E
FORM OF SUPPLEMENTAL OPINION OF COUNSEL
48
EXHIBIT F
FORM OF AMENDMENT TO SECURITY AGREEMENT
49
EXHIBIT G
INITIAL REAL ESTATE COLLATERAL
50
EXHIBIT H
UNIT SCHEDULE DELETION CERTIFICATE
THIS UNIT SCHEDULE DELETION CERTIFICATE is hereby incorporated
into and made a part of that certain Loan Agreement (Senior Credit Facility A)
dated June 15, 2000 by and among Checkers Drive-In Restaurants, Inc., certain of
its subsidiaries (collectively, the "BORROWERS") and Textron Financial
Corporation (the "LOAN AGREEMENT"). Capitalized terms not otherwise defined in
this certificate shall have the meanings assigned to such terms in the Loan
Agreement.
The Borrowers and the Lender hereby delete the Unit Schedule
attached to the Loan Agreement pertaining to the following described Unit:
UNIT DESCRIPTION: [_____________________]
STREET ADDRESS: [_______________]
[_______________]
[_______________]
CONCEPT: [Rally's/Checkers]
The Borrowers hereby certify that as of the date of the
execution of this certificate, no Default has occurred and is continuing.
[Remainder of page intentionally
left blank]
51
Dated this ____ day of ____________, 2000.
CHECKERS DRIVE-IN RESTAURANT, INC.
By___________________________________
Its __________________________________
CHECKERS PUERTO RICO, INC.
By___________________________________
Its __________________________________
RALLY'S OF OHIO, INC.
By___________________________________
Its __________________________________
RALLY'S MANAGEMENT, INC.
By___________________________________
Its __________________________________
Accepted this ___ day of _________, 20___.
TEXTRON FINANCIAL CORPORATION
By___________________________________
Its__________________________________
52
SCHEDULE 5.1
NAMES UNDER WHICH BORROWERS AND SUBSIDIARIES HAVE CONDUCTED BUSINESS
Checkers Drive-In Restaurants, Inc.
Rally's Hamburgers, Inc.
Rally's of Ohio, Inc.
Rally's Management, Inc.
Checkers of Puerto Rico, Inc.
Hampton Road Foods
ZDT Corporation
Rally's National Advertising Fund, Inc.
Checkers National Production Fund, Inc.
Merger Acquisition Corp.
LOCATION OF CHIEF EXECUTIVE ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
53
SCHEDULE 5.2
SUBSIDIARIES
NAME OF BORROWER NAMES OF SUBSIDIARIES
Checkers Checkers of Puerto Rico, Inc.
Checkers of Chicago, Inc.
Rally's of Ohio, Inc.
Rally's Management, Inc.
Rally's National Advertising Fund, Inc.
Checkers National Production Fund, Inc.
Checkers of Puerto Rico, Inc. None.
Rally's of Ohio, Inc. None.
Rally's Management, Inc. None.
AFFILIATES
None.
GENERAL OR LIMITED PARTNERSHIP INTERESTS;
JOINT VENTURES;
LIMITED LIABILITY COMPANY INTERESTS
CHA Partners
Skipper Road Checkers Partnership
54
SCHEDULE 5.6
LITIGATION
See attached.
55
SCHEDULE 5.8
UNPAID TAXES AND ASSESSMENTS
See attached.
56
SCHEDULE 5.10
UNITS SUBJECT TO PURCHASE AGREEMENT
57
SCHEDULE 5.11
EXCEPTIONS TO ENVIRONMENTAL REPRESENTATIONS
See attached.
58
SCHEDULE 5.13
FRANCHISE AGREEMENTS
DEFAULTS UNDER FRANCHISE AGREEMENTS
59
SCHEDULE 5.15
UNITS
60
SCHEDULE 5.17
LABOR MATTERS
61
SCHEDULE 5.19
FINANCIAL SOLVENCY MATTERS
On January 7, 2000, Checkers of Chicago, Inc., a wholly owned subsidiary
of Checkers Drive-In Restaurants, Inc. filed for relief under Chapter 7 of
the United States Bankruptcy Code. Checkers of Chicago, Inc. had operated
eight restaurants as a general partner of certain limited partnerships and
three Company-owned restaurants, all of which are now closed.
62
SCHEDULE 7.8
PERMITTED DEBT
63
SCHEDULE 7.10
PERMITTED INVESTMENTS
64