-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ThnI9oTMYQ3ootwsnqb3dQ16U4pPWIxVqAt+dZbHvRbLlHZnhZuznw2znAChF0tc rXMDCA8V1zoJ7/Iiw1ySiQ== 0000950146-97-000818.txt : 19970520 0000950146-97-000818.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950146-97-000818 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICH CORP /DE/ CENTRAL INDEX KEY: 0000049588 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 436069928 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07697 FILM NUMBER: 97609014 BUSINESS ADDRESS: STREET 1: 9404 GEESEE AVE CITY: LA JOLLA STATE: CA ZIP: 92037 BUSINESS PHONE: 2149547111 MAIL ADDRESS: STREET 1: P.O. BOX 2699 STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 75221 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHWESTERN LIFE CORP DATE OF NAME CHANGE: 19940808 FORMER COMPANY: FORMER CONFORMED NAME: ICH CORP DATE OF NAME CHANGE: 19930506 FORMER COMPANY: FORMER CONFORMED NAME: ICH CORP/CONSOL NAT/RTS/CFR/MOD AMER LIFE INS/SW LIFE INS/CF DATE OF NAME CHANGE: 19930505 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934 For the quarter ended March 31, 1997 Commission file number 1-7697 --------------- ------ I.C.H. Corporation - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 43-6069928 - ------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 9404 Genesee Avenue, LaJolla, California 92037 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (619) 587-8533 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ___ No _x_ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _x_ No ___ Number of shares of common stock outstanding on April 30, 1997: 2,793,550* . ------------ * Assumes full conversion of all outstanding eligible shares of common stock and preferred stock of pre-reorganized I.C.H. Corporation. See Note 4 of Notes to Consolidated Financial Statement. I.C.H. Corporation and Subsidiaries Index Page Number Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - February 19, 1997 and March 31, 1997 3 Consolidated Statement of Operations and Retained Earnings (Deficit) for the period February 19, 1997 through March 31, 1997 4 Consolidated Statement of Cash Flows for the period February 19, 1997 through March 31, 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II. Other Information Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 17 Exhibit Index 18 2 Part I. Financial Information ----------------------------- Item 1. Financial Statements -------------------- ICH Corporation and Subsidiaries Consolidated Balance Sheets Assets
February 19, 1997 March 31, 1997 Current assets: Cash and cash equivalents $ 500,000 $ 3,000,077 Other assets 200,000 881,455 Accounts receivable 2,790,203 45,385 Deferred tax benefit -- 54,000 Subsidiary held for sale 5,000,000 5,000,000 Real estate held for sale 3,700,000 -- ------------ ------------ Total current assets 12,190,203 8,980,917 Property, Equipment and Land Held for Future Development -- 3,766,242 ------------ ------------ Total assets $ 12,190,203 $ 12,747,159 ============ ============ Liability and Stockholders' Equity Current liabilities - Accounts payable and accrued liabilities $ -- $ 659,184 Preferred stock, $0.01 par value, 1,000,000 authorized none issued and outstanding -- -- Common stock, $0.01 par value, 9,000,000 authorized (see Note 2) -- -- Paid-in capital 12,190,203 12,190,203 Retained earnings (deficit) -- (102,228) ------------ ------------ Total liabilities and stockholders' equity $ 12,190,203 $ 12,747,159 ============ ============
See accompanying notes to consolidated financial statements. 3 I.C.H. Corporation and Subsidiaries Consolidated Statement of Operations and Retained Earnings (Deficit) For the Period February 19, 1997 through March 31, 1997 Revenues: Real estate operations $ 31,356 Interest 9,350 ----------- Total revenues 40,706 ----------- Costs and expenses: Real estate operations 100,144 General and administrative 96,790 ----------- Total costs and expenses 196,934 ----------- Income (Loss) Before Income taxes (156,228) Provision (Benefit) for Income Taxes (54,000) ----------- Net Income (Loss) (102,228) Retained earnings - beginning of period -- ----------- Retained earnings (deficit) - end of period $ (102,228) =========== Per Share Data: Income (Loss) Per Share (Note 4) $ (.04) =========== Average Common Shares Outstanding (Note 4) 2,793,550 =========== See accompanying notes to consolidated financial statements. 4 I.C.H. Corporation and Subsidiaries Consolidated Statement of Cash Flows For the Period February 19, 1997 through March 31, 1997 Cash flow from operating activities: Net income(loss) $ (102,228) Changes in current assets and liabilities: Accounts receivable 2,744,818 Deferred tax benefit (54,000) Other assets (681,455) Real estate held for sale 3,700,000 Accounts payable and accrued liabilities 659,184 ----------- Net cash provided by operating activities 6,266,319 ----------- Cash flows from (used in) investing activities - Property, Equipment and Land Held for Future Development (3,766,242) ----------- Net changes 2,500,077 Cash and cash equivalents at beginning of period 500,000 ----------- Cash and cash equivalents at end of period $ 3,000,077 =========== See accompanying notes to consolidated financial statements. 5 I.C.H. Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Organization and Basis of Presentation ICH Corporation (the "Company") is the post-reorganization successor to ICH Corporation (the "Predecessor Company"). On October 10, 1995, the Predecessor Company and three of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (the "Code") in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court"). Throughout the Chapter 11 case, the Predecessor Company continued to operate and manage its assets and business as a debtor in possession as authorized by Chapter 11 of the Code. During the Chapter 11 case, the Predecessor Company also sold seven of its eight insurance subsidiaries and sold all of the business of Bankers Multiple Line Insurance Company ("BML"), its remaining insurance subsidiary, through an assumption reinsurance agreement. The Predessor Company's First Amended Joint Plan of Reorganization under Chapter 11 (the "Reorganization Plan") was confirmed by the Bankrutpcy Court on February 7, 1997 and became effective on February 19, 1997 (the "Effective Date"). The Company, as of the Effective Date, had no significant business operations and the activities subsequent to that date have been devoted to the acquisition of Sybra, Inc. (See Note 6) and the evaluation and operation of the Perry Park Real Estate. The Lone Star Liquidating Trust (the "Trust") was created on the Effective Date as the vehicle to liquidate and distribute certain assets owned by the Predecessor Company for the benefit of its creditors. The confirmation of the Reorganization Plan resulted in the complete satisfaction, discharge and release of all claims against and interests in the Company. The Company retained certain designated assets of the Predecessor Company and emerged from Chapter 11 owned by all but certain de minimus holders of the preferred and common stock of the Predecessor Company. Pursuant to the Reorganization Plan, all shares of the Predecessor Company's preferred and common stock were canceled as of the Effective Date, and the Company has issued new common stock for distribution to eligible holders of the former preferred and common shares. See Note 4. Assets of the Predecessor Company which were retained by the Trust and postpetition and other liabilities are not reflected in these consolidated financial statements as the Company does not have legal title to the assets nor any obligations to satisfy the liabilities. 6 The consolidated balance sheet, at February 19, 1997 included herein has been prepared from the Company's audited consolidated balance sheet at that date, includes the accounts of the Company and its wholly-owned subsidiaries, SWL Holding Corporation ("SWL Holding") Perry Park Resorts, Inc. ("PPRI") and Care Financial Corporation ("Care") which owns 100% of BML. At March 31, 1997 the Company and its wholly-owned subsidiaries had no significant ongoing business operations. The consolidated balance sheet at March 31, 1997 and the consolidated statements of operations and retained earnings (deficit) and cash flows and stockholders' equity for the interim periods ended March 31, 1997 have been prepared by the Company, without audit. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations. See Note 6. As the holders of existing voting shares in the Predecessor Company immediately prior to confirmation of the Reorganization Plan received less than 50% of the voting shares of the emerging entity, and as reorganization value was estimated to be less than postpetition liabilities and allowed claims, the Company adopted "fresh-start" reporting in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7. Accordingly, assets have been restated to reflect reorganization value, which approximates fair value at the Effective Date. In determining the applicability of fresh-start reporting, the reorganization value of the Company was determined based on reorganization value of the Predecessor Company prior to the confirmation of the Reorganization Plan. As the Company had no significant, ongoing business operations at March 31, 1997 management did not anticipate future earnings in determining reorganization value. Accordingly, reorganization value equals management's estimate of the fair value of assets as of the Effective Date of the Reorganization Plan. As a result of adjusting the assets to fair value with the adoption of fresh-start reporting, the Company increased the carrying value of Perry Park Real Estate by $961,000. 2. Other Assets, Accounts Payable and Accrued Liabilities Other assets, the accounts payable and accrued liabilities relate primarily to the Company's acquisition of Sybra, Inc. 7 3. Income Taxes Differences exist between the Company's carrying amounts of assets for financial reporting purposes and the amounts used for tax purposes. The Company's tax basis in the BML stock, a subsidiary held for sale, significantly exceeds its carrying value for financial reporting purposes; however, as any tax loss generated on the sale of BML stock could be limited pursuant to the Internal Revenue Code and Treasury regulations thereunder, no deferred tax asset has been recorded for the difference. The Company's tax basis in Perry Park Real Estate is approximately $8,000,000, resulting in a deferred tax asset of $1,460,000 using a 34% federal rate. The Company recorded a full valuation allowance against this deferred tax asset due to the uncertainty surrounding its realization as of February 19, 1997. The Company recorded a deferred tax asset during the period ended March 31, 1997 for the expected future tax benefits of the operating loss as the ultimate realization is probable. 4. Equity and Earnings Per Common Share On the Effective Date, all of the outstanding equity securities ("Predecessor Common Stock" and "Predecessor Preferred Stock" and collectively, the "Predecessor Stock") of the Predecessor Company were canceled. The Company's Restated Certificate of Incorporation authorizes the issuance of 9,000,000 shares of common stock (the "Company's common stock") and 1,000,000 shares of preferred stock. Holders of the Predecessor Stock have two-years from the Effective Date in which to exchange the canceled shares for the Company's common stock. With the exception of de minimus holders of Predecessor Stock, holders of Predecessor Stock will receive 0.0269 shares of the Company's common stock for each share of Predecessor Common Stock and 0.2 shares of the Company's common stock for each share of Predecessor Preferred Stock held as of the Effective Date. Until March 30, 1997, holders of Predecessor Preferred Stock could elect to surrender their cancelled shares in exchange for a single cash payment of $0.36 per share, to a maximum of $234, in lieu of receiving shares of the Company's common stock. For that same 40 day period, holders of Predecessor Common Stock could elect to receive a single cash payment of $0.05 per share, to a maximum of $250, in lieu of receiving shares of the Company's common stock. See Note 6. Pursuant to the Reorganization Plan, holders of less than 101 shares of Predecessor Common Stock or less than 14 shares of Predecessor Preferred Stock (collectively, the "Nominal Shareholders") are not entitled either to convert their Predecessor Stock into the Company's common stock or to receive any cash payments for their Predecessor Stock. Based on the number of outstanding shares of Predecessor Common Stock and Predecessor Preferred Stock on the Effective Date, and after considering the Nominal Shareholders of record and the shares 8 which were exchanged for cash as described above, the Company estimates that a maximum of approximately 2,793,550 shares of the Company's common stock could be issued, although the amount could be lower. Upon conversion, the par value of the issued common stock will be transferred from paid-in capital to common stock. As a result of the cash payment option described above and the likelihood that certain eligible holders of Predecessor Stock will not exercise their conversion option during the two-year period, management has not determined and cannot currently determine, the ultimate number of shares of the Company's common stock which will be issued upon completion of the stock conversion. For the reasons set out above, the Company has used 2,793,550 shares in computing earnings per share. Common stock equivalents are excluded from the computation because the effect is antidilutive. As of February 19, 1997, the Company declared a dividend of one right (collectively, the "Rights") for each share of the Company's common stock. Each Right represents the right to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock (the "Junior Preferred Stock"). The Rights have an exercise price of $10.07 per right and are exercisable until February 19, 1999. Ten thousand shares of the Company's authorized preferred stock have been designated as the Junior Preferred Stock and have been reserved for issuance upon the exercise of the Rights. The Rights are not exercisable until the occurrence of those "triggering events" detailed in the Rights Agreement by and between the Company and the Mid-America Bank of Louisville and Trust Company. Upon the occurrence of any of such triggering events, all holders of Rights (other than the holder that caused the triggering event to occur) will thereafter have the right to receive upon exercise that number of shares of the Company's common stock having a market value of two times the exercise price of the Right. The Junior Preferred Stock has voting rights equal to 1,000 votes per share and is entitled to receive dividends, on a cumulative basis, payable in cash, equal to 1,000 times the aggregate per share amount of all cash dividends or all non-cash dividends or other distributions declared on the Company's common stock. Upon liquidation, the Junior Preferred Stock is entitled to receive an aggregate amount per share equal to 1,000 times the aggregate amount to be distributed per share to the holders of shares of common stock plus any accrued and unpaid dividends. Reference is hereby made to the Company's Registration Statement on Form 8-A, dated May 14, 1997, for a more complete description of the Rights. 5. Stock Options The Company has two stock option plans, the ICH Corporation 1997 Employee Stock Option Plan (the "ESP") and the ICH Corporation 1997 Director Stock Option Plan (the "DSP"), (collectively the "Option Plans"). The ESP provides for the grant of incentive stock options and non-qualifying options to eligible officers and employees. The DSP authorizes grants of non-qualifying options to eligible directors subject to an individual maximum of 40,000 options and an aggregate maximum of 280,000 options. The DSP also authorizes grants to individuals who have provided special services to the Company, at the discretion of the Compensation and Stock Option Committee of the Board of Directors. Options granted under the Option Plans expire ten years from the date of grant. The Company has reserved 9 1,000,000 shares and 400,000 shares of the Company's common stock for the ESP and the DSP, respectively. Effective February 11, 1997, the Company granted 221,000 options under the ESP, including 176,000 to an officer and director of the Company as part of his two-year employment agreement, and 35,000 options under the DSP. The options were granted at the estimated fair value of the stock on February 11, 1997 with an exercise price of $2.17 per share. See Note 6. 6. Subsequent Events Pursuant to the terms of the Reorganization Plan, the Company purchased shares of Predecessor Preferred Stock and shares of Predecessor Common Stock for aggregate cash consideration of approximately $105,000. On April 25, 1997, the Company exercised its option pursuant to the Reorganization Plan, to sell all of the outstanding capital stock of BML, an indirect wholly-owned subsidiary, to the Trust for cash consideration of $5,000,000 from the Trust. On April 30, 1997, the Company completed its previously announced agreement of February 7, 1997 to acquire all of the outstanding capital stock of Sybra, Inc., a Michigan corporation ("Sybra"). The aggregate purchase price was approximately 37.7 million (including the repayment of $23.7 million of Sybra indebtedness) with an additional $2 million contingent payment obligation due within two years if certain leasing arrangements are finalized. Concurrently with such acquisition, Sybra entered into a sale/lease-back transaction on 63 of its restaurant sites with U.S. Restaurant Properties Operating L.P. ("USRP"). For the fiscal year ended December 28, 1996, Sybra had total revenues of approximately $116 million and at December 28, 1996, Sybra had total assets of approximately $75 million. The Company funded the acquisition through the use of approximately $2.0 million of its available cash resources, $5.0 million of the proceeds received from the sale of BML to the Trust, and a $35 million fixed-rate term loan from Atherton Capital, Incorporated, ("Atherton"), which loan matures in approximately 12 years, bears interest at a rate of 10.63% per annum and is guaranteed by the Company. The Atherton loan agreement contains certain customary affirmative, negative and financial covenants, including without limitation, (1) a fixed charge coverage ratio of 1.30:1.00, as defined in the Atherton loan agreement, (2) a restriction on borrower distributions or dividends unless the fixed charge coverage ratio is at least 1.30:1.00 after giving account to such dividend or distribution, and (3) a prohibition against additional debt being incurred by Sybra in excess of $1 million per year, except for capital leases and debt secured solely by purchase money security interests, without the prior written consent of Atherton. In connection with the acquisition of Sybra, the Company entered into two-year employment agreements with each of Charles N. Hyslop, Chief Executive Officer of Sybra, and Donald P. Zima, Chief Financial Officer of Sybra. The employment agreements provide for, among 10 other things, the grant of stock options which vest, in the case of Mr. Hyslop, over a two-year period, and, in the case of Mr. Zima, over a four-year period. The foregoing description of the Sybra acquisition, the USRP leases, the Atherton term loan and the employment agreements are not intended to be complete and are qualified in their entirety by the complete text of the material agreements setting forth the specific terms of such transactions, which material agreements are filed as Exhibits 10.02 through 10.10 hereto and are incorporated herein by reference. On April 30, 1997, the Compensation and Stock Option Committee granted options under the ESP Plan to purchase 368,200 shares of the common stock of the Company to various employees of Sybra at an exercise price of $3.80 per share, the estimated fair value of the common stock. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations On April 30, 1997, the Company closed its previously announced agreement of February 7, 1997 to acquire all of the outstanding capital stock of Sybra. The aggregate purchase price was approximately 37.7 million (including the repayment of $23.7 million of Sybra indebtedness) with an additional $2 million contingent payment obligation due within two years if certain leasing arrangements are finalized. Concurrently with such acquisition, Sybra entered into a sale/lease-back transaction on 63 of its restaurant sites with U.S. Restaurant Properties Operating L.P. For the fiscal year ended December 28, 1996, Sybra had total revenues of approximately $116 million and at December 28, 1996, Sybra had total assets of approximately $75 million. See Note 6 of Notes to Financial Statements for a more complete description of the Sybra acquisition and related transactions. Results of Operations: As indicated in Note 1 of Notes to Financial Statements, the Company is the post-reorganization successor to the Predecessor Company which together with three of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 in the Bankruptcy Court on October 10, 1995. The Reorganization Plan was confirmed on February 7, 1997 and became effective on February 19, 1997, the Effective Date. The Company adopted "fresh start" reporting at the Effective Date since the holders of existing voting shares immediately before filing and confirmation of the Reorganization Plan received less than 50% of the voting shares of the emerging entity and the reorganization value was estimated to be less than postpetition liabilities and allowed claims. As the Company had no significant business operations, as of March 30, 1997 management did not anticipate future earnings in determining reorganization value. The Company's principal activities since the Reorganization Date have been devoted to (1) the acquisition of Sybra, (2) a review of the operations of its real estate property, Perry Park, 11 located in Owen County, Kentucky and (3) evaluation of the alternatives available with respect to BML, a property and casualty insurer licensed in all fifty states. On April 25, 1997, BML was sold to the Trust for cash consideration of $5 million. The Perry Park Real Estate consists of an approximately 2,600 acre planned development including an 18 hole golf course, club house, restaurant, salable lots, three lakes, additional platted but undeveloped lots and vacant acreage. The platted undeveloped lots and vacant acreage are estimated to be approximately 1,800 acres. The Perry Park development is held in a wholly owned subsidiary of the Company, Perry Park Resorts, Inc., a Kentucky corporation. The principal sources of revenue for Perry Park during 1996 were as follows: Golf 48% Restaurant 23% Water and Sewer 6% Maintenance 15% Other 8% The operations of Perry Park are seasonal in nature (golf and restaurant revenues are the highest from April to October) and are expected to approximate break-even for 1997. These operations are not expected to be material to the Company's future operations. The Company's principal focus, following its emergence from bankruptcy, will be the management and operation of its recent acquisition, Sybra. Sybra is the second largest Arby's franchisee in the United States and currently operates 150 restaurants clustered in four regions, as follows: Southwestern (Dallas) 58 Northern (primarily Michigan) 45 Eastern (Pennsylvania, Maryland and Virginia) 27 Southeastern (Florida) 20 The historical and pro forma financial statements of Businesses to be Acquired ((delta)210.3-05 and (delta)210.11 of Regulation S-X) as required by Item 7 Financial Statements and Exhibits of Form 8-K, will be filed no later than July 9, 1997. 12 Liquidity and Capital Resources Cash Flows - ---------- Cash used in operations reflects the Company's initial operations after emerging from bankruptcy and results of the real estate operations which were offset by limited interest income after available cash was reduced for costs incurred in connection with the Sybra acquisition. The BML investment generated no revenue for the Company. Inventory and Financing Activities - ---------------------------------- The Company had no material investing (other than Perry Park Real Estate) or financing activities during the period from February 19, 1997 through March 31, 1997. See Note 6 of Notes to Financial Statements for subsequent investing and financing activities. Liquidity and Capital Resources - ------------------------------- The increase in cash equivalents during the period ended March 31, 1997 is primarily attributable to the receipt of cash from the Trust in payment of a receivable as of the Effective Date of $2.5 million and $.5 million from the settlement of a claim with Tenneco, Inc. The principal source of capital for the Company is the subsidiary held for sale (which was converted to cash prior to the Sybra acquisition) and cash retained by the Company pursuant to the Reorganization Plan, which was substantially reduced following the purchase of Sybra. In the future, the Company's liquidity and capital resources will primarily depend on the operations of Sybra which, under the term of its loan agreement, would permit, under certain conditions, distributions and dividends to ICH. The Company believes that, based upon past performance, Sybra's net cash flow provided by operations will be adequate to meet its operating requirements, as well as scheduled debt service on its term loans, scheduled lease payments and required capital expenditures, although no assurances can be given. If necessary, the Company believes that it would be able to secure additional credit facilities, or issue additional debt or equity securities, on acceptable terms to meet its future cash requirements, although no assurances can be given. Recent Accounting Pronouncements In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". This Statement defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value base method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees". The Company applies the intrinsic value method permitted by SFAS No. 123 in accounting for the DSP Plan and the ESP Plan and accordingly, no compensation expense has been recognized but if the compensation costs for stock option awards under the Plan had been determined 13 based on the fair value at the grant date, the effect on the Company's earnings would not be material. 14 I.C.H. CORPORATION Part II Other Information Item 5. Other Information ----------------- On April 30, 1997, the Company closed its previously announced agreement of February 7, 1997 to acquire all of the outstanding capital stock of Sybra, Inc., a Michigan corporation ("Sybra"). The aggregate purchase price was approximately 37.7 million (including the repayment of $23.7 million of Sybra indebtedness) with an additional $2 million contingent payment obligation due within two years if certain leasing arrangements are finalized. Concurrently with such acquisition, Sybra entered into a sale/lease-back transaction on 63 of its resaurant sites with U.S. Restaurant Properties Operating L.P. For the fiscal year ended December 28, 1996, Sybra had total revenues of approximately $116 million and at December 28, 1996, Sybra had total assets of approximately $75 million. See Note 6 of Notes to Financial Statements for a more complete description of the Sybra acquisition and related transactions. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) The following exhibits are filed herewith: Exhibit Number Exhibit Title - ------- ------------- 10.02 Stock Purchase Agreement, dated as of February 7, 1997, by and between I.C.H. Corporation and Valcor, Inc. 10.03 First Amendment to Stock Purchase Agreement, dated as of April 18, 1997, by and between I.C.H. Corporation and Valcor, Inc. 10.04 Form of Loan Agreement by and between Sybra, Inc. and Atherton Capital Incorporated. 10.05 Form of Promissory Note executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.06 Form of Leasehold/Deed of Trust Mortgage executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.07 Form of Security Agreement executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.08 Form of Master Lease by and between Sybra, Inc. and U.S. Restaurant Properties Operating L.P. 10.09 Employment Agreement, dated as of April 30, 1997, by and between I.C.H. Corporation and Charles N. Hyslop. 10.10 Employment Agreement, dated as of April 30, 1997, by and between I.C.H. Corporation and Donald P. Zima. 27 Financial Data Schedule 15 (b) Reports on Form 8-K On March 6, 1997, the Company filed a Current Report on Form 8-K regarding the confirmation of its Plan of Reorganization (the "Plan") pursuant to Chapter 11 of the United States Bankruptcy Code and the date of the Plan becoming effective. No financial statements were filed. 16 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, I.C.H. Corporation has duly cause this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 15, 1997 I.C.H. Corporation By: /s/James R. Arabia ------------------------- James R. Arabia Chairman and Chief Executive Officer By: /s/Kenneth P. Giddens ------------------------- Kenneth P. Giddens Chief Accounting Officer 17 EXHIBIT INDEX ------------- Exhibit Number Exhibit Title - ------- ------------- 10.02 Stock Purchase Agreement, dated as of February 7, 1997, by and between I.C.H. Corporation and Valcor, Inc. 10.03 First Amendment to Stock Purchase Agreement, dated as of April 18, 1997, by and between I.C.H. Corporation and Valcor, Inc. 10.04 Form of Loan Agreement by and between Sybra, Inc. and Atherton Capital Incorporated. 10.05 Form of Promissory Note executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.06 Form of Leasehold/Deed of Trust Mortgage executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.07 Form of Security Agreement executed by Sybra, Inc. in favor of Atherton Capital Incorporated. 10.08 Form of Master Lease by and between Sybra, Inc. and U.S. Restaurant Properties Operating L.P. 10.09 Employment Agreement, dated as of April 30, 1997, by and between I.C.H. Corporation and Charles N. Hyslop. 10.10 Employment Agreement, dated as of April 30, 1997, by and between I.C.H. Corporation and Donald P. Zima. 27 Financial Data Schedule 18 EX-10.2 2 STOCK PURCHASE AGREEMENT EXECUTION COPY STOCK PURCHASE AGREEMENT BETWEEN VALCOR, INC. AND I.C.H. CORPORATION FEBRUARY 7, 1997 TABLE OF CONTENTS 1. Definitions ........................................................... 1 2. Purchase and Sale of Sybra Shares ..................................... 6 (a) Basic Transaction ............................................. 6 (b) Purchase Price ................................................ 6 (c) Pre-Closing Dividends and Distributions to Seller ............. 6 (d) The Closing ................................................... 6 (e) Deliveries at the Closing ..................................... 6 (f) Adjustment to Purchase Price ................................. 7 (g) Contingent Consideration ...................................... 7 3. Representations and Warranties Concerning the Transaction ............. 8 (a) Representations and Warranties of the Seller .................. 8 (i) Organization of the Seller ......................... 8 (ii) Authorization of Transaction ....................... 9 (iii) Noncontravention ................................... 9 (iv) Brokers' Fees ...................................... 9 (v) Sybra Shares ....................................... 9 (b) Representations and Warranties of the Buyer ................... 10 (i) Organization of the Buyer .......................... 10 (ii) Authorization of Transaction ....................... 10 (iii) Noncontravention ................................... 10 (iv) Brokers' Fees ...................................... 11 (v) Investment ......................................... 11 (vi) Financing .......................................... 11 (vii) Due Diligence ...................................... 11 4. Representations and Warranties Concerning Sybra ....................... 11 (a) Organization, Qualification, and Corporate Power .............. 11 (b) Capitalization ................................................ 12 (c) Noncontravention .............................................. 12 (d) Brokers' Fees ................................................. 12 (e) Title to Tangible Assets Other than the Real Property Assets .. 12 (f) Subsidiaries .................................................. 12 (g) Financial Statements .......................................... 13 (h) Events Subsequent to Most Recent Fiscal Quarter End ........... 13 (i) Legal Compliance .............................................. 13 (j) Income Tax Matters ............................................ 13 (k) Intellectual Property ......................................... 14 (l) Contracts ..................................................... 14 (m) Litigation .................................................... 14 (n) Employee Benefits ............................................. 15 i 5. Pre-Closing Covenants ................................................. 16 (a) General ....................................................... 16 (b) Notices and Consents .......................................... 16 (c) Operation of Business ......................................... 16 (d) Access ........................................................ 16 (e) Notice of Developments ........................................ 17 (f) Other Transactions ............................................ 17 (g) Estoppel Certificates ......................................... 17 6. Post-Closing Covenants ................................................ 18 (a) General ....................................................... 18 (b) Litigation Support ............................................ 18 (c) Employee Benefits Matters ..................................... 18 7. Conditions to Obligation to Close ..................................... 19 (a) Conditions to Obligation of the Buyer ......................... 19 (b) Conditions to Obligation of the Seller ........................ 20 8. Remedies for Breaches of this Agreement ............................... 21 (a) Survival of Representations and Warranties .................... 21 (b) Indemnification Provisions for Benefit of the Buyer ........... 22 (c) Indemnification Provisions for Benefit of the Seller .......... 22 (d) Matters Involving Third Parties ............................... 22 (e) Determination of Adverse Consequences ......................... 23 (f) Other Indemnification Provisions .............................. 23 9. Termination ........................................................... 23 (a) Termination of Agreement ...................................... 23 (b) Effect of Termination ......................................... 24 10. Income Tax Matters .................................................... 24 (a) Income Tax Sharing Agreements ................................. 25 (b) Income Taxes of Other Persons ................................. 25 (c) Returns for Periods Through the Closing Date .................. 25 (d) Audits ........................................................ 25 (e) Carrybacks .................................................... 25 (f) Post-Closing Elections ........................................ 26 (g) Indemnification for Post-Closing Transactions ................. 26 (h) Post-Closing Transactions not in the Ordinary Course .......... 26 11. Miscellaneous ......................................................... 26 (a) Press Releases and Public Announcements ....................... 26 (b) No Third Party Beneficiaries Other than Affiliated Group Parent 26 (c) Entire Agreement .............................................. 27 ii (d) Succession and Assignment ............................................ 27 (e) Counterparts ......................................................... 27 (f) Headings ............................................................. 27 (g) Notices .............................................................. 27 (h) Governing Law; Jurisdiction .......................................... 28 (i) Amendments and Waivers ............................................... 29 (j) Severability ......................................................... 29 (k) Expenses ............................................................. 29 (l) Construction ......................................................... 29 (m) Incorporation of Exhibits ............................................ 29 EXHIBITS EXHIBIT A Agreed Value EXHIBIT B Disclosure Schedule EXHIBIT C Financial Statements EXHIBIT D Form of Estoppel Certificate iii STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is entered into as of February 7, 1997, by and between I.C.H. CORPORATION, a Delaware corporation (the "Buyer"), and VALCOR, INC., a Delaware corporation (the "Seller"). The Buyer and the Seller are referred to individually as a "Party" and collectively as the "Parties." The Seller holds all of the outstanding capital stock of Sybra, Inc., a Michigan corporation (the "Sybra"). This Agreement contemplates a transaction in which the Buyer will purchase for cash consideration from the Seller, and the Seller will sell to the Buyer, all of the outstanding capital stock of Sybra. Now, therefore, in consideration of the premises and the mutual promises, representations, warranties and covenants set forth below, the Parties agree as follows. 1. Definitions. "Accrued Expenses and Payables" means any liability of Sybra classified as a current liability in its financial statements prepared in accordance with GAAP, excluding any current liability classified as (i) current portion of long-term debt, (ii) current portion of a capital lease obligation, (iii) payable to affiliates, (iv) current or deferred income taxes payable or (v) current portion of a reserve for store closures. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group of companies within the meaning of Code [section]1504(a). "Affiliated Group Parent" means, during the period from October 1, 1987 to present, Contran. "Applicable Rate" means the "Prime Rate" as identified in the Wall Street Journal Money Rates section from time to time as the base rate of interest for corporate loans. "Buyer" has the meaning set forth in the preface above. 1 "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Closing" has the meaning set forth in [section]2(d) below. "Closing Date" has the meaning set forth in [section]2(d) below. "Code" means the Internal Revenue Code of 1986, as amended. "Confidential Information" means any information concerning the businesses and affairs of Sybra that is not already generally available to the public. "Contran" means Contran Corporation, a Delaware corporation. "Debt Repayment" has the meaning set forth in [section]2(b) below. "Determination Date" has the meaning set forth in [section]2(g)(ii) below. "Disclosure Schedule" has the meaning set forth in [section]3 below. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA [section]3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA [section]3(1). "Environmental Law" means any national or local statute, law, ordinance, rule, regulation, order, consent, decree, judicial or administrative decision or directive of applicable law at any time relating to (A) pollution or protection of the environment, including natural resources, (B) exposure of persons, including employees, to hazardous substances or other products, materials or chemicals, or (C) protection of the public health or welfare from the effects of products, by-products, waste, emissions, discharges or releases of chemical or other substances from industrial or commercial activities. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Financial Statements" has the meaning set forth in [section]4(g) below. 2 "Fiscal Month" means, as applicable, the four or five consecutive weeks within an accounting cycle for Sybra for Unit #740. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Gross Revenues" means all revenues and other items of income as those terms are normally used in accordance with GAAP. "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Income Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto. "Indemnified Party" has the meaning set forth in [section]8(d) below. "Indemnifying Party" has the meaning set forth in [section]8(d) below. "Inventories" means inventories, including supplies, calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Knowledge" means actual knowledge without independent investigation of the referenced person or, if an entity, the executive officers of the referenced entity and, in the case of Sybra, the executive officers and regional vice presidents of Sybra. "Lease" means a lease by and between Sybra and USRP pursuant to which Sybra leases from USRP the Acquired Assets as defined in the USRP Agreement. "Monthly Free Cash Flow" means, for each Fiscal Month, or portion thereof, the excess of Gross Revenues over Operating Expenses. "Most Recent Financial Statements" has the meaning set forth in [section]4(g) below. "Most Recent Fiscal Month End" has the meaning set forth in [section]4(g) below. "Multiemployer Plan" has the meaning set forth in ERISA [section]3(37). "Operating Expenses" shall mean reasonably necessary and customary costs and other types of expenses, provided, however, that Operating Expenses shall 3 exclude (x) depreciation, amortization and other non-cash expenses, (y) interest expense and (z) provision for income taxes, as all of those terms are normally used in accordance with GAAP. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including, without limitation, with respect to quantity and frequency). "Party" has the meaning set forth in the preface above. "PBGC" means the Pension Benefit Guaranty Corporation. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Purchase Price" has the meaning set forth in [section]2(b) below. "Real Property Assets" means the real property assets that Sybra intends to sell to USRP and USRP intends to purchase from Sybra as described in the USRP Agreement. "Reportable Event" has the meaning set forth in ERISA [section]4043. "Required Consents of Seller" has the meaning set forth in [section]3(a)(iii) below. "Required Consents of Buyer" has the meaning set forth in [section]3(b)(iii) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "Seller" has the meaning set forth in the preface above. 4 "Subsidiary" means any corporation or other entity with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or other equity interests, or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors or other persons performing similar functions with respect to such entity. "Sybra" has the meaning set forth in the preambles above. "Sybra Share" means any share of the Common Stock, par value $.50 per share, of Sybra. "Tax" means any federal, state, local, or foreign tax, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto. "Third Party Claim" has the meaning set forth in [section]8(d) below. "Unit #740" means Sybra's Unit #740 located at the Park City Mall in Lancaster, Pennsylvania. "Units Purchase Agreement" means the Units Purchase Agreement by and between Valhi and USRP, as amended, supplemented or modified. "USRP" means U.S. Restaurant Properties Master L. P., a Delaware limited partnership. "USRP Agreement" means the Asset Purchase Agreement dated December 23, 1996 by and between Sybra and USRP, as amended, supplemented or modified. "Valcor" means Valcor, Inc., a Delaware corporation. "Valhi" means Valhi, Inc., a Delaware corporation. 2. Purchase and Sale of Sybra Shares. (a) Basic Transaction. On the terms and subject to the conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, at Closing, all of its Sybra Shares for the consideration specified below in this [section]2. (b) Purchase Price. The Buyer agrees (i) to pay to the Seller at the Closing $14,000,000 (the "Purchase Price"), subject to adjustment as provided in [section][section]2(f) and (g) 5 below, by delivery of cash in the amount of the Purchase Price payable by wire transfer or delivery of other immediately available funds, and (ii) to pay in full indebtedness of Sybra, in an amount not to exceed $23,772,000, more particularly described in [section]2(b) of the Disclosure Schedule (the "Debt Repayment"). (c) Pre-Closing Dividends and Distributions to Seller. Immediately prior to or concurrently with the Closing, the Seller will cause Sybra to pay to the Seller an aggregate amount equal to Sybra's good faith estimate of the consolidated Cash of Sybra as of the Closing, including, without limitation, all of the net cash proceeds of Sybra's sale of certain of its assets to USRP pursuant to the USRP Agreement, provided however, Seller shall not permit Sybra to dividend Cash to the extent that, based on Sybra's good faith estimate, remaining Cash and Inventories as of the Closing Date and after such dividend would be less than $2,605,000. The Seller may cause Sybra to make any such payment to it in the form of a dividend or a redemption of capital stock. In addition, prior to the Closing, the Seller will cause Sybra to dividend to Seller all of its right, title and interest in and to the real property described in [section]2(c) of the Disclosure Schedule. (d) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Valcor in Dallas, Texas, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated by this Agreement (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however that the Closing Date shall be no later than April 14, 1997. (e) Deliveries at the Closing. At the Closing, (i) the Seller will execute, acknowledge (if appropriate), and deliver to the Buyer the various certificates, instruments, and documents to be delivered by Seller as referred to in [section]7(a) below, (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents to be delivered by Buyer as referred to in [section]7(b) below, (iii) the Seller will deliver to the Buyer stock certificates representing all of its Sybra Shares, endorsed in blank or accompanied by duly executed assignment documents, (iv) the Buyer will deliver to the Seller the Purchase Price specified in [section]2(b) above, and (v) the Buyer will pay or cause to be paid the Debt Repayment described in [section]2(b) above. (f) Adjustment to Purchase Price. The Purchase Price shall be increased by the Agreed Value set forth on Exhibit A of each restaurant unit that is not purchased by USRP under the USRP Agreement and Buyer shall pay such increase at Closing. The Purchase Price also shall be adjusted as provided in [section]5(g)(ii). In addition, as promptly as practicable, but no later than 90 days following the Closing Date, Seller and Buyer shall jointly prepare, or cause to be prepared, in accordance with GAAP financial statements of Sybra, including a consolidated balance sheet as of the close of business on the Closing Date (after giving effect to the transactions contemplated in the USRP 6 Agreement and all dividends contemplated by this [section]2) (the "Closing Balance Sheet"). Within ten (10) days after completion of the Closing Balance Sheet, if the aggregate amount of Accrued Expenses and Payables as set forth in the Closing Balance Sheet, net of the aggregate amount of Cash and Inventories as set forth in the Closing Balance Sheet, is greater than $6,895,000, the Purchase Price shall be adjusted and the Seller shall make a cash payment in immediately available funds to the Buyer in an amount (the "Payment Amount") equal to the difference between U.S.$6,895,000 and the aggregate amount of Accrued Expenses and Payables as set forth in the Closing Balance Sheet, net of the aggregate of Cash and Inventories as set forth in the Closing Balance Sheet, plus interest on the Payment Amount at the rate of eight percent (8%) per annum calculated from the Closing Date through the date of such cash payment. Any payment pursuant to the foregoing provisions shall be an adjustment (net of any interest included in such payment) to the Purchase Price. (g) Contingent Consideration. Buyer agrees to pay Seller additional, contingent consideration computed in accordance with this [section]2(g). (i) Commencing on the Closing Date and continuing through the date of payment in full of the amounts due under [section]2(g)(ii) and/or [section]2(g)(iii), as applicable, Buyer shall pay Seller an amount equal to 50% of the Monthly Free Cash Flow of Unit #740 for each Fiscal Month, or portion thereof. Buyer shall pay such amount to Seller by wire transfer or delivery of other immediately available funds within 15 business days after the last business day of each such Fiscal Month, or portion thereof. (ii) In the event that, after the Closing Date, (a) Sybra enters into a lease having a duration of one year or more for Unit #740, (b) Sybra enters into a lease for another location at the Park City Mall, Lancaster, Pennsylvania or (c) neither of the events described in (a) or (b) has occurred and Sybra has not been forced by the lessor to vacate Unit #740 on or before the second anniversary of the Closing Date (the "Determination Date"), Buyer shall pay Seller the sum of $2,000,000. At Buyer's option, the Determination Date may be extended from the second anniversary of the Closing Date to the third anniversary of the Closing Date, provided that Buyer shall have given Seller written notice of such extension on or before 30 days prior to the second anniversary of the Closing Date, and provided further that Buyer has paid and continues to pay all amounts due pursuant to [section]2(g)(i). Buyer shall pay the amount due pursuant to this [section]2(g)(ii) to Seller by wire transfer or delivery of other immediately available funds within 5 business days after the Determination Date. Upon and after the date of payment in full of the amount due pursuant to this [section]2(g)(ii), Buyer shall not be obligated to pay Seller any amounts pursuant to [section]2(g)(iii) nor, pursuant to [section]2(g)(i), any amounts for periods commencing after the date of such payment pursuant to this [section]2(g)(ii). 7 (iii) If, prior to the payment of amounts due pursuant to [section]2(g)(ii), the lease for Unit #740 is terminated, Sybra is forced by the lessor to vacate Unit #740 and Sybra has not entered into a lease for another location at the Park City Mall, Lancaster, Pennsylvania, Buyer shall pay Seller cash in an amount equal to 50% of the cumulative Monthly Free Cash Flow of Unit #740 (in addition to amounts payable pursuant to [section]2(g)(i)), calculated from the Closing Date to the date upon which Sybra vacates Unit #740. Buyer shall pay the amount due pursuant to this [section]2(g)(iii) to Seller by wire transfer or delivery of other immediately available funds, within 5 business days after the date Buyer vacates Unit #740. Unless Buyer subsequently enters into a lease for another location at the Park City Mall, Lancaster, Pennsylvania upon and after the date of payment in full of the amount due pursuant to this [section]2(g)(iii), Buyer shall not be obligated to pay Seller any amounts pursuant to [section]2(g)(ii) nor, pursuant to [section]2(g)(i), any amounts for periods commencing after the date of such payment pursuant to this [section]2(g)(iii). In the event that Buyer subsequently enters into a lease for another location at the Park City Mall, Lancaster, Pennsylvania, Buyer shall be obligated to pay the amounts due pursuant to [section]2(g)(ii) and, pursuant to [section]2(g)(i), amounts due for all periods prior to payment in full pursuant to [section]2(g)(ii). 3. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this [section]3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this [section]3(a)), except as set forth in the disclosure schedule attached hereto as Exhibit B and incorporated in this Agreement by this reference (the "Disclosure Schedule"). (i) Organization of the Seller. The Seller is a corporation validly existing, and in good standing under the laws of Delaware. (ii) Authorization of Transaction. The Seller has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement has been approved by the Seller's Board of Directors. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement, will (A) violate any valid constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or any provision of its charter or bylaws or (B) conflict with, result in a breach of, 8 constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Seller is a party or by which it is bound or to which any of its assets is subject, except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a material adverse effect the ability of the Parties to consummate the transactions contemplated by this Agreement. To the Knowledge of the Seller, and other than in connection with the provisions of the Hart-Scott-Rodino Act and those required notices, consents and approvals relating to the Seller as described in the Disclosure Schedule (the "Required Consents of Seller"), the Seller does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the financial condition of Sybra or on the ability of the Parties to consummate the transactions contemplated by this Agreement. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Sybra Shares. The Seller holds of record and owns beneficially the number of Sybra Shares set forth in the Disclosure Schedule, free and clear of any restrictions on transfer (other than restrictions on transfer imposed by the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment (other than this Agreement) that could require the Seller to sell, transfer, or otherwise dispose of any capital stock of Sybra. The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of Sybra that will exist after the Closing. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this [section]3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this [section]3(b)), except as set forth in the Disclosure Schedule. 9 (i) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) Authorization of Transaction. The Buyer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery of this Agreement has been approved by the Buyer's Board of Directors. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement, will (A) violate any valid constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject. To the Knowledge of the Buyer, and other than in connection with the provisions of the Hart-Scott-Rodino Act and those required notices, consents and approvals relating to the Buyer or any of its Subsidiaries as described in the Disclosure Schedule (the "Required Consents of Buyer"), the Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement. (iv) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Seller could become liable or obligated. (v) Investment. The Buyer is acquiring Sybra Shares for investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. (vi) Financing. Buyer will have, on the Closing Date, all funds necessary to pay the Purchase Price and related fees and expenses, and has, or will have on the Closing Date, the financial capacity to perform all of its other obligations under this Agreement. 10 (vii) Due Diligence. Subject to Buyer's thirty-five (35) day due diligence period following the execution of this Agreement, Buyer acknowledges and agrees (A) that Buyer has had access to and the opportunity to perform unrestricted due diligence with respect to Sybra; (B) Buyer is acquiring the Sybra Shares without reliance on any representations or warranties of Seller except as expressly set forth in [section]4 of this Agreement, and subject to all of the limitations provided in this Agreement. 4. Representations and Warranties Concerning Sybra. The Seller represents and warrants to the Buyer that the statements contained in this [section]4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this [section]4), except as set forth in Disclosure Schedule. (a) Organization, Qualification, and Corporate Power. Sybra is a corporation validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Sybra is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a material adverse effect on the financial condition or results of operations of Sybra. Sybra has the corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. [section]4(a) of the Disclosure Schedule lists the directors and executive officers of Sybra. (b) Capitalization. The entire authorized capital stock of Sybra consists of 200,000 Sybra Shares, all of which are common shares, par value $.50 per share. There are 55,199 Sybra Shares issued and outstanding. No Sybra Shares are held in treasury. All of the issued and outstanding Sybra Shares have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record by the Seller. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Sybra to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to Sybra. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement, will (i) violate any valid constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Sybra is subject or any provision of the charter or bylaws of Sybra or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Sybra is a party or by which it is bound or to which any of its 11 assets is subject (or result in the imposition of any Security Interest upon any of its assets), except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a material adverse effect on the financial condition of Sybra or on the ability of the Parties to consummate the transactions contemplated by this Agreement. To the Knowledge of the Seller, and other than in connection with the provisions of the Hart-Scott-Rodino Act and the Required Consents of Seller, Sybra does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a material adverse effect on the financial condition or results of operations of Sybra or on the ability of the Parties to consummate the transactions contemplated by this Agreement. (d) Brokers' Fees. Sybra does not have any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (e) Title to Tangible Assets Other than the Real Property Assets. Sybra has good title to, or a valid leasehold interest in, the material tangible assets they use regularly in the conduct of its businesses other than the Real Property Assets. (f) Subsidiaries. Sybra does not have any Subsidiaries. (g) Financial Statements. Attached hereto as Exhibit C are the following financial statements (collectively the "Financial Statements"): (i) audited consolidated balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended December 25, 1993, December 31, 1994, and December 30, 1995 for Sybra; and (ii) unaudited consolidated balance sheets and statements of income, changes in stockholders' equity, and cash flow (the "Most Recent Financial Statements") as of and for the nine months ended September 28, 1996 (the "Most Recent Fiscal Quarter End") for Sybra. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of Sybra as of such dates and the results of operations of Sybra for such periods; provided, however, that the Most Recent Financial Statements are subject to normal year-end adjustments and lack footnotes and other presentation items. (h) Events Subsequent to Most Recent Fiscal Quarter End. Since the Most Recent Fiscal Quarter End, there has not been any material adverse change in the financial condition or results of operations of Sybra except as contemplated in the USRP Agreement and this Agreement. Without limiting the generality of the foregoing and except as contemplated in the USRP Agreement and in this Agreement, including in [section]2(c) of this Agreement, since that date Sybra has not engaged in any practice, taken any action, or entered into any transaction outside the Ordinary Course of 12 Business the primary purpose or effect of which has been to generate or preserve Cash. (i) Legal Compliance. To the Knowledge of the Seller, Sybra has complied with all applicable and valid laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), except where the failure to comply would not have a material adverse effect upon the financial condition or results of operations of Sybra and except that Seller makes no representation regarding Environmental Laws. (j) Income Tax Matters. (i) Sybra has filed, or its Affiliated Group Parent has filed on behalf of Sybra, all Tax Returns that it was required to file prior to the Closing, and has paid all Income Taxes due and payable prior to Closing, except where the failure to file Tax Returns or to pay Taxes would not have a material adverse effect on the financial condition or results of operations of Sybra. (ii) [section]4(j) of the Disclosure Schedule lists all Income Tax Returns filed with respect to Sybra for taxable periods ended on or after December 31, 1988, indicates those Income Tax Returns that have been audited, and indicates those Income Tax Returns that currently are the subject of audit. The Seller has delivered to the Buyer correct and complete copies of all federal Income Tax Returns of Sybra, examination reports relating to Sybra, and statements of deficiencies assessed against or agreed to by Sybra since December 31, 1988. (iii) Sybra has not waived any statute of limitations in respect of Income Taxes or agreed to any extension of time with respect to an Income Tax assessment or deficiency. (iv) Sybra is not a party or subject to any Income Tax allocation or sharing agreement except with its Affiliated Group Parent. (v) To the Knowledge of the Seller, since October 1, 1987, Sybra has not been a member of an Affiliated Group filing a consolidated federal Income Tax Return (other than a group the common parent of which was Contran). (k) Intellectual Property. [section]4(k) of the Disclosure Schedule identifies each patent or trademark registration which has been issued to Sybra with respect to any of its intellectual property, identifies each pending patent application or application for trademark registration which Sybra has made with respect to any of its intellectual property, and, to the Knowledge of the Seller, identifies each material license, agreement, or other permission which Sybra has granted to any third party with respect to any of its intellectual property. 13 (l) Contracts. [section]4(l) of the Disclosure Schedule lists all written contracts and other written agreements to which Sybra is a party the performance of which will involve consideration in excess of $50,000 on an annual basis. The Seller has delivered to the Buyer a correct and complete copy of each contract or other agreement listed in [section]4(l) of the Disclosure Schedule (as amended to date). To the Knowledge of Seller, no party to any of such contracts has asserted that Sybra is in breach or default as to any such contract. To the Knowledge of Seller, none of the parties (other than Sybra) to any of such contracts is in breach or default as to any such contract. (m) Litigation. [section]4(m) of the Disclosure Schedule sets forth each instance in which Sybra or any Employee Benefit Plan or other arrangement listed on [section]4(n) of the Disclosure Schedule (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction, except where the injunction, judgment, order, decree, ruling, action, suit, proceeding, hearing, or investigation would not reasonably be expected to involve consideration in excess of $10,000. (n) Employee Benefits. (i) [section]4(n) of the Disclosure Schedule lists each Employee Benefit Plan that Sybra maintains or to which Sybra contributes and any employment agreements, collective bargaining agreements, severance agreements or stock-based compensation or other incentive, insurance or similar, programs which cover current or former employees of Sybra. (ii) To the Knowledge of the Seller, each such Employee Benefit Plan or other arrangement listed on [section]4(n) of the Disclosure Schedule (and each related trust, insurance contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA and the Code, except where the failure to comply would not have a material adverse effect on the financial condition or results of operations of Sybra, and there has been no transaction or any act or omission which would subject an Employee Benefit Plan or any party dealing with an Employee Benefit Plan to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax under Sections 4971 through 4980B of the Code, inclusive. (iii) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is either an Employee Pension Benefit Plan or an Employee Welfare Benefit Plan. (iv) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan has received a post-Tax reform Act of 1986 determination letter 14 from the Internal Revenue Service to the effect that it meets the requirements of Code [section]401(a). (v) Sybra does not currently contribute, not has Sybra contributed to a Multiemployer Plan since 1990, and Sybra is not currently responsible for any "withdrawal liability" as that term is defined in Section 4201 of ERISA with respect to any Multiemployer Plan. (vi) The Sybra, Inc. Retirement Income Plan does not have any "amount of unfunded benefit liabilities" as such term is described in Section 4008(a)(18) of ERISA. (vii) Except as required by applicable law, no Employee Welfare Benefit Plan has any obligation for post-retirement or post employment benefits that cannot be terminated upon no more than sixty (60) days' notice without incurring a liability thereunder. 5. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use its reasonable efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in [section]7 below). (b) Notices and Consents. Each Party will give any notices (and cause each of its Subsidiaries, if any, to give any notices) to third parties, and each Party will use its reasonable efforts to obtain (and will cause each of its Subsidiaries, if any, to use its reasonable efforts to obtain) any third party consents including the Required Consents of Seller and the Required Consents of Buyer, that the other Party reasonably may request in connection with the matters referred to in [section]3(a)(iii), [section]3(b)(iii) and [section]4(c) above and the related Disclosure Schedule. Each of the Parties will (and will cause each of its Subsidiaries, if any, to) give any notices to, make any filings with, and use its reasonable efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in [section]3(a)(iii), [section]3(b)(iii) and [section]4(c) above and the related Disclosure Schedule. Without limiting the generality of the foregoing, each of the Parties will file (and will cause each of its Subsidiaries, if any, to file as applicable) any notification and report forms and related material that it may be required to file with the Internal Revenue Service, the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act or otherwise, will use its reasonable efforts to obtain (and will cause each of its Subsidiaries, if any, to use its reasonable efforts to obtain) early termination of the applicable waiting period, and will make (and will cause each of its Subsidiaries, if any, to use its reasonable efforts to obtain) any further filings pursuant thereto that may be necessary. 15 (c) Operation of Business. The Seller will not permit Sybra to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business except (i) as contemplated in the USRP Agreement or this Agreement, (ii) Sybra may pay dividends or make other distributions to Valcor as permitted by Sybra's bank credit agreements, (iii) Sybra may repay intercompany loans from Valcor, and (iv) Sybra may make the dividends and distributions contemplated by [section]2(c). (d) Access. The Seller will permit representatives of the Buyer to have access at all reasonable times, and in a manner so as not to interfere with the normal business operations of Sybra, to all premises, properties, personnel, books, records (including tax records), contracts, and documents of or pertaining to Sybra as Buyer may reasonably request from time to time solely for the purpose of confirming Seller's compliance with [section]5(c) above. The Buyer will treat and hold in confidence any Confidential Information it receives or has received from the Seller or Sybra in the course of due diligence review or the reviews contemplated by this [section]5(d), will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to the Seller and or destroy, at Seller's or Sybra's request, all tangible embodiments (and all copies) including, without limitation, all electronic media, of the Confidential Information which are in its possession. (e) Notice of Developments. (i) The Seller may elect at any time to notify the Buyer of any development causing a breach of any of its representations and warranties in [section]4 above. Unless the Buyer has the right to terminate this Agreement pursuant to [section]9(a)(ii) below by reason of the development and exercises that right within the period of ten (10) business days referred to in [section]9(a)(ii) below, the written notice pursuant to this [section]5(e)(i) will be deemed to have amended the Disclosure Schedule, to have qualified the representations and warranties contained in [section]4 above, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the development. (ii) Each Party will give prompt written notice to the other Party of any material adverse development causing a breach of any of its own representations and warranties in [section]3 above. No disclosure by any Party pursuant to this [section]5(e)(ii), however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation or breach of warranty. (f) Other Transactions. Prior to the expiration of the time periods specified in [section]7(a)( x) and (xi), the Seller agrees, on behalf of itself and each of its Affiliates, that, prior to Closing it will not, and will cause each of its officers, directors, representatives and agents not to, directly or indirectly, take any action to solicit, encourage, initiate or facilitate (including by way of making available or furnishing information) any inquiries, 16 proposals or offers with respect to any merger or consolidation involving Sybra, the acquisition of Sybra Shares or the acquisition of all or substantially all of the assets of Sybra other than the Real Property Assets by any person other than the Buyer or its permitted assigns. After the expiration of the time periods specified in [section]7(a)( x) and (xi), Seller shall no longer be subject to the limitations of the foregoing sentence unless Buyer has provided evidence reasonably satisfactory to Seller that Buyer has obtained the formal commitment letters specified in [section]7(a)(xi). (g) Estoppel Certificates. (i) By no later than five (5) business days following the date of this Agreement, Seller shall cause Sybra to send out for execution estoppel certificates, in the form of Exhibit D, to each of its lessors or sublessors, as the case may be. (ii) Seller agrees to cause Sybra to use commercially reasonable efforts, without incurring any additional expenses to any lessor or sublessor unless such expenditure is required by the terms of a particular lease (a "Consent Fee"), to obtain the maximum number of estoppel certificates prior to the Closing Date. Buyer agrees to pay to Seller, prior to expenditure by Seller, an amount equal to each Consent Fee. At Closing, Seller shall credit Buyer against the Purchase Price an amount equal to the aggregate amount paid by Buyer to Seller in respect of Consent Fees. (iii) Seller agrees to cause Sybra to promptly deliver to Buyer copies of the executed estoppel certificates as they are received by Sybra prior to and on the Closing Date. 6. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing. (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, all at the sole cost and expense of the requesting Party (except to the extent that the requesting Party is entitled to indemnification therefor under [section]8 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving Sybra, the other Party shall cooperate with it and its counsel in the defense or contest, make available its personnel, and provide such 17 testimony and access to its books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (except to the extent that the contesting or defending Party is entitled to indemnification therefor under [section]8 below). (c) Employee Benefits Matters. The Buyer will adopt and assume at and as of the Closing each of the Employee Benefit Plans identified in [section]4(n) of the Disclosure Schedule that Sybra maintains and each trust, insurance contract, annuity contract, or other funding arrangement that the Seller has established with respect thereto. The Buyer will ensure that on and after the Closing Date the Employee Benefit Plans credit employment with Sybra in the same manner that employment with Sybra prior to the Closing Date was credited for purposes of eligibility, vesting, and benefit accrual. The Seller will transfer (or cause the plan administrators to transfer) at and as of the Closing all of the corresponding assets associated with the Employee Benefit Plans that the Buyer is adopting and assuming, with such transfers to occur at or as soon as administratively possible after the Closing without imposition of any conditions. 7. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in [section]3(a) and [section]4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Seller shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Seller shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in [section]7(a)(i)-(iii) is satisfied in all respects; (v) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Buyer shall have received the Required Consents of Buyer and all other authorizations, consents, and approvals of governments and governmental agencies referred to in [section]3(a)(iii), [section]3(b)(iii), and [section]4(c) above; (vi) all conditions have been satisfied or waived to the obligations of the parties to the USRP Agreement and the Units Purchase Agreement and the 18 closings of the transactions contemplated in the USRP Agreement shall occur simultaneously with the Closing; (vii) all conditions have been satisfied to the obligations of the parties to the Lease and the closings of the transactions contemplated in the Lease shall occur simultaneously with the Closing; (viii) all actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; (ix) Passage of the Effective Date of the First Amended Joint Plan of Reorganization under Chapter 11, filed in the Chapter 11 cases of I.C.H. Corporation and its related debtors, pending in the United States Bankruptcy Court for the Northern District of Texas as Jointly Administered Case Number 395-36351-RCM-11; (x) Buyer shall have completed a satisfactory business and due diligence review of Sybra; provided, however, that the condition to closing set forth in this clause (x) shall expire on the thirty-fifth day following the date of this Agreement; (xi) Buyer shall have obtained formal commitment letters for the financing of at least $31,000,000, which commitment letters shall be on terms and conditions that are reasonably satisfactory to Buyer from a commercial point of view; provided, however, that the condition to closing set forth in this clause (xi) shall expire on the thirty-fifth day following the date of this Agreement; and (xii) Buyer shall have received the 1996 audited financial statements of Sybra, including the unqualified opinion of Sybra's independent public accountants. The Buyer may waive any condition specified in this [section]7(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in [section]3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; 19 (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in [section]7(b)(i)-(iii) is satisfied in all respects; (v) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Seller and Sybra shall have received the Required Consents of Seller and all other authorizations, consents, and approvals of governments and governmental agencies referred to in [section]3(a)(ii), [section]3(b)(ii), and [section]4(c) above; (vi) all conditions have been satisfied to the obligations of the parties to the USRP Agreement and the Units Purchase Agreement and the closings of the transactions contemplated in the USRP Agreement and the Units Purchase Agreement shall occur simultaneously with the Closing; (vii) all conditions have been satisfied to the obligations of the parties to the Lease and the closings of the transactions contemplated in the Lease shall occur simultaneously with the Closing; and (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby, which may include any instruments or documents required by Arby's, Inc. to be executed by the Buyer, will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this [section]7(b) if it executes a writing so stating at or prior to the Closing. 8. Remedies for Breaches of this Agreement. (a) Survival of Representations and Warranties. Except with respect to the representations and warranties of the Seller contained in [section][section]4(b), (j), (m) and (n), which shall survive for the applicable statute of limitations, none of the representations and warranties of the Seller contained in [section]4 above shall survive the Closing. All of the representations and warranties of the Parties contained in [section]3 above shall survive the Closing (unless the damaged Party knew or had reason to know of any misrepresentation or breach of warranty contained in [section]3 above at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations). 20 (b) Indemnification Provisions for Benefit of the Buyer. In the event the Seller breaches any of its representations and warranties contained in [section]3(a) and [section]4 of this Agreement, any covenants contained in this Agreement or any representations and warranties contained in any stock transfer or other conveyance executed pursuant to this Agreement, and, if there is an applicable survival period pursuant to [section]8(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to [section]11(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification (but excluding any Adverse Consequences the Buyer shall suffer after the end of any applicable survival period) caused proximately by the breach; provided, however, that the Seller shall not have any obligation to indemnify the Buyer from and against any Adverse Consequences caused by the breach of any representation or warranty of the Seller contained in [section]4 of this Agreement other than those contained in [section]4(j), (m) and (n). Seller's indemnification obligation to the Buyer pursuant to this Subsection and [section]10 (other than with respect to breaches of the representations and warranties of Seller contained in [section][section]3(a) and 4(b)) together with Valcor's indemnification obligations under the USRP Agreement shall not exceed $4,000,000 in the aggregate, determined, as of any relevant date, based upon claims actually paid as of such date by Valcor to Buyer or USRP. Buyer agrees that it will not seek indemnification for any claim under this Subsection unless the aggregate of all claims under this Subsection together with all claims under the USRP Agreement , determined as of the date any claim is made, will result in loss to Buyer and/or USRP in excess of $250,000 in the aggregate, and then only to the extent of such excess, up to and subject to the $4,000,000 limitation specified above. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations in [section]3 above or any of its covenants contained in this Agreement, the Buyer agrees to indemnify the Seller from and against any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this [section]8, then the Indemnified Party shall promptly (and in any event within ten (10) business days after receiving notice of the Third Party Claim) notify the Indemnifying Party thereof in writing. (ii) The Indemnifying Party will have the right to assume and thereafter conduct the defense of the Third Party Claim with counsel of its choice; provided, however, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim 21 without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party. (iii) Unless and until the Indemnifying Party assumes the defense of the Third Party Claim as provided in [section]8(d)(ii) above, however, the Indemnified Party may defend against the Third Party Claim in any manner it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party except to the extent that the Indemnified Party elects to waive its right to indemnification hereunder with respect to such claim. (e) Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax benefits and insurance coverage and take into account the time cost of money (using the Applicable Rate as the discount rate) in determining Adverse Consequences for purposes of this [section]8. All indemnification payments under this [section]8 shall be deemed adjustments to the Purchase Price. (f) Other Indemnification Provisions. The indemnification provisions in this [section]8 are the sole remedy any Party may have after the Closing for breach of representation or warranty in this Agreement, any covenant in this Agreement (excluding those set forth in [section]6 of this Agreement) or any representations and warranties contained in any stock transfer or other conveyance executed pursuant to this Agreement; provided, however, that the Buyer acknowledges and agrees that it shall not have any remedy after the Closing for any breach of the representations and warranties in [section]4 above (other than [section]4(j), (m) and (n)); and provided further, either Party shall be entitled to specific performance of all covenants. 9. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing in the event (A) the Seller has within the then previous ten (10) business days given the Buyer any notice pursuant to [section]5(e)(i) above and (B) the development that is the subject of the notice has had 22 or is reasonably expected to have a material adverse effect upon the financial condition or results of operations of Sybra; (iii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach, or (B) if the Closing shall not have occurred on or before April 14, 1997, by reason of the failure of any condition precedent under [section]7(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); (iv) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or (B) if the Closing shall not have occurred on or before April 14, 1997, by reason of the failure of any condition precedent under [section]7(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement); and (v) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the expiration of the time periods provided in [section]7(a)(x) and (xi) if Buyer is not satisfied with its business and due diligence review of Sybra as provided in [section]7(a)(x) or Buyer has not obtained formal commitment letters as provided in [section]7(a)(xi). (b) Effect of Termination. If any Party terminates this Agreement pursuant to [section]9(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the confidentiality provisions contained in [section]5(d) above shall survive termination. 10. Income Tax Matters. (a) Income Tax Sharing Agreements. Any Income Tax sharing agreement between Affiliated Group Parent or any of its Subsidiaries and Sybra is terminated as of the Closing Date and will have no further effect for any future taxable year. (b) Income Taxes of Other Persons. The Seller agrees to indemnify the Buyer from and against any Adverse Consequences the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Liability of Sybra for Income 23 Taxes of any Person other than Sybra under (i) Reg. [section]1.1502-6 (or any similar provision of state, local or foreign law), or (ii) any Income Tax sharing agreement. (c) Returns for Periods Through the Closing Date. Affiliated Group Parent will include the income of Sybra (including any deferred income triggered into income by Reg. [section]1.1502-13 and Reg. [section]1. 1502-14 and any excess loss accounts taken into income under Reg. [section]1.1502-19) on the Affiliated Group Parent consolidated federal Income Tax Returns for all periods through the Closing Date and pay any Income Taxes attributable to such income, including without limitation any Income Tax on any income or gain Sybra may realize in respect of the transactions contemplated by the USRP Agreement. Sybra will furnish Income Tax information to Affiliated Group Parent for inclusion in Affiliated Group Parent's federal consolidated Income Tax Return for the period which includes the Closing Date and will pay to Affiliated Group Parent its separate company Income Tax liability for such period, computed in accordance with the Affiliated Group Parent tax sharing agreement in effect through the Closing Date in accordance with Sybra's past custom and practice, including without limitation any Income Tax on any income or gain Sybra may realize in respect of the transactions contemplated by the USRP Agreement. The income of Sybra for the period up to and including the Closing Date and for the period after the Closing Date shall be determined by closing the books of Sybra as of the end of the Closing Date. (d) Audits. Affiliated Group Parent will allow Sybra and its counsel to participate at its own expense in any audits of Affiliated Group Parent consolidated Income Tax Returns to the extent that such returns relate to Sybra tax periods ending on or prior to the Closing Date. Affiliated Group Parent will cooperate with Sybra and its counsel and provide access to books and records relating to Sybra reasonably related to such audit. Affiliated Group Parent will not settle any such audit in a manner which would adversely affect Sybra after the Closing Date without the prior written consent of the Buyer or Sybra, which consent shall not unreasonably be withheld. (e) Carrybacks. Affiliated Group Parent will immediately pay to the Buyer any Income Tax refund (or reduction in Income Tax liability) resulting from a carryback of a post-Closing Date Income Tax attribute of Sybra into the Affiliated Group Parent consolidated Income Tax return, when such refund or reduction is realized by the Affiliated Group Parent group. Affiliated Group Parent will cooperate with Sybra in obtaining such refunds (or reduction in Income Tax liability), including through the filing of amended Income Tax returns or refund claims. The Buyer agrees to indemnify Affiliated Group Parent for any Income Taxes resulting from the disallowance of such post-Closing Date Income Tax attribute on audit or otherwise. (f) Post-Closing Elections. At Affiliated Group Parent's request, the Buyer will cause Sybra to make and/or join with Affiliated Group Parent in making certain tax return elections after Closing, as required under the Affiliated Group Parent tax sharing agreement in effect through the Closing Date. At Affiliated Group Parent's request, the Buyer will cause Sybra to make or join with Affiliated Group Parent in making any other 24 election if the making of such election does not have a material adverse impact on the Buyer (or Sybra) for any postacquisition Income Tax period. Seller agrees to indemnify Buyer for any liability resulting from such elections. (g) Indemnification for Post-Closing Transactions. Buyer agrees to indemnify Seller and Affiliated Group Parent for any additional Income Tax owed by Seller and/or Affiliated Group Parent (including Income Tax owed by Seller and/or Affiliated Group Parent due to this indemnification payment) resulting from any transaction not in the ordinary course of business occurring on or after the Closing Date following Buyer's purchase of Seller's Sybra Shares. (h) Post-Closing Transactions not in the Ordinary Course. Buyer and Seller agree to report all transactions not in the Ordinary Course of Business occurring on the Closing Date after Buyer's purchase of Seller's Sybra Shares on Buyer's Income Tax Return to the extent permitted by Reg. [section]1.1502-76(b)(1)(B). 11. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Party; provided, however, that any Party or any affiliate of such Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the Party which intends, or which has an affiliate that intends, to issue such press release or make such public announcement will advise the other Party prior to making the disclosure and provide the other Party opportunity to comment upon the release or announcement). (b) No Third Party Beneficiaries Other than Affiliated Group Parent. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns, and as otherwise set forth in this [section]11(b). The Buyer acknowledges and agrees that Affiliated Group Parent is intended to be and shall be a beneficiary of Buyer's representations, warranties, covenants and indemnification obligations in [section]10 of this Agreement. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party; provided however, that (i) Buyer may collaterally assign its rights, interests and 25 obligations hereunder to its lenders providing the financing to complete the transactions contemplated by this Agreement, and (ii) after the Closing, Seller may assign its rights, interests, or obligations under this Agreement to any successor of Seller's business or any affiliate of Seller, provided that, concurrently with such assignment Valhi, Inc. enters into an assumption agreement with respect to Seller's obligations under this Agreement in form and substance reasonably satisfactory to Buyer. (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Valcor, Inc. ---------------- Three Lincoln Centre, Suite 1700 5430 LBJ Freeway Dallas, TX 75240-2697 Attention: Bobby D. O'Brien Tel: 972-233-1700 Fax: 972-239-0142 Copy to: James L. Palenchar ------- Bartlit Beck Herman Palenchar & Scott 511 16th Street, Suite 500 Denver, Colorado 80202 Tel: 303-592-3100 Fax: 303-592-3140 If to the Buyer: I.C.H. Corporation --------------- c/o James R. Arabia 9404 Genesee Avenue, Suite 330 La Jolla, CA 92037 Tel: 619-587-8533 Fax: 619-535-1687 26 Copy to: Selig D. Sacks, Esq. ------- Pryor, Cashman, Sherman & Flynn 410 Park Avenue, 10th floor New, York, NY 10022 Tel: 212-421-4100 Fax: 212-326-0806 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited (next-day) courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient; provided, however, that any such notice sent by expedited (next-day) courier shall be deemed to have been duly given when delivered to the address set forth above for the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (h) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any judicial proceeding brought by or against any party to this Agreement in respect of claims arising under or relating to this Agreement shall be brought only in a court of competent jurisdiction located in the State of Delaware, United States of America. By execution and delivery of this Agreement, each party accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Each party to this Agreement waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Nothing in this subsection shall affect the right to serve process in any manner permitted by law. (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence. (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or 27 enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Expenses. Each of the Buyer and the Seller will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing sentence, Buyer shall bear the costs of any and all transfer taxes, including without limitation any use or sales taxes, associated with or related to the sale of the Sybra Shares. (l) Construction. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (m) Incorporation of Exhibits. The Exhibits and any annexes and schedules identified in this Agreement are incorporated herein by reference and made a part hereof. ***** IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. I.C.H. CORPORATION By: ________________________________ Title: _____________________________ VALCOR, INC., a Delaware corporation By: ________________________________ Title: _____________________________ 20815.d9 28 EX-10.03 3 FIRST AMENDMENT TO S.P.A. FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT BY AND BETWEEN VALCOR, INC. AND I.C.H. CORPORATION THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT BETWEEN VALCOR, INC. AND I.C.H. CORPORATION dated and effective as of April 18, 1997 (the "Amendment") is by and between I.C.H. CORPORATION, a Delaware corporation (the "Buyer"), and VALCOR, INC., a Delaware corporation (the "Seller"). RECITALS -------- WHEREAS, Seller and Buyer entered into a Stock Purchase Agreement dated as of February 7, 1997 (the "Purchase Agreement"); and WHEREAS, Seller and Buyer desire to amend certain provisions of the Purchase Agreement as set forth in this Amendment; COVENANTS --------- NOW, THEREFORE, in consideration of the foregoing, and in further consideration of the mutual covenants and considerations herein contained, Seller and Buyer hereby agree as follows: 1. Exhibit A. Exhibit A attached to the Agreement is hereby deleted and Exhibit A attached hereto is substituted for the original Exhibit A and incorporated into the Agreement as if attached thereto. For all purposes related to the Agreement, the term "Agreed Value" shall mean and refer to such information as set forth on Exhibit A attached hereto. 2. Exhibit B. Exhibit B attached to the Agreement is hereby amended by deleting the existing Section 2(b) and substituting the following: "List of Sybra indebtedness to be repaid in full on the Closing date by Buyer: Valcor Credit Facility $20,000,000 Such Sybra indebtedness may be increased on or prior to the Closing date and shall be repaid in full on the Closing Date by Buyer in an aggregate amount of $23,772,000." Exhibit B attached to the Agreement is further amended by inserting under Section 4(c) thereof the following: Consents required for assignment and sublease of sandwich leases: Unit 518 Unit 995 Unit 630 Unit 1172 Unit 785 Unit 5711" Unit 984 Exhibit B attached to the Agreement is further amended by deleting existing Schedule B-3 and substituting new Schedule B-3 attached hereto. 3. Section 2(d). Section 2(d) of the Agreement is amended by deleting the phrase "April 14, 1997" and substituting the phrase "April 30, 1997." 4. Section 2(g). Section 2(g) of the Agreement is amended and restated as follows: "(g) Contingent Consideration. Buyer agrees to pay Seller additional, contingent consideration computed in accordance with this ss.2(g). (i) Subject to the other provisions of this ss.2(g)(i), commencing on the Closing Date and continuing through the earliest of (a) the date Sybra enters into a lease for Unit #740 or for another location at the Park City Mall, Lancaster, Pennsylvania, which lease is for a term of one year or more and requires Sybra to make expenditures for tenant improvements in an amount in excess of $350,000 (a "Qualifying Lease"), (b) the date upon which Buyer pays in full all of the amounts due under ss.2(g)(ii) and/or ss.2(g)(iii), as applicable, Buyer shall pay Seller an amount equal to 50% of the Monthly Free Cash Flow of Unit #740 for each Fiscal Month, or portion thereof (the "Monthly Contingent Consideration"). Buyer shall pay all amounts due to Seller for Monthly Contingent Consideration under this ss.2(g)(i) by wire transfer or delivery of other immediately available funds within 15 business days after the last business day of each such Fiscal Month, or portion thereof; provided however, that with respect to the period commencing on the Closing Date and ending on July 31, 1997 (the "Initial Period"), no payments shall be due and payable until August 15, 1997 and, provided further, if Sybra enters into a Qualifying Lease within the Initial Period, no payments of Monthly Contingent Consideration under this ss.2(g)(i) shall be due or payable. If Sybra does not enter into a Qualifying Lease during the Initial Period, Buyer shall pay Seller on August 15, 1997 an aggregate amount equal to the Monthly Contingent Consideration for each Fiscal Month during the Initial Period. If Sybra enters into a Qualifying Lease after the Initial Period, then any Monthly Contingent Consideration previously paid shall be reimbursed to Buyer by Seller by wire transfer or delivery of other immediately available funds within 15 business days after Buyer notifies Seller that Sybra has entered into a Qualifying Lease. -2- (ii) In the event that, after the Closing Date, (a) Sybra enters into a lease for Unit #740 or for another location at the Park City Mall, Lancaster, Pennsylvania, or (b) Sybra has not been forced by the lessor to vacate Unit #740 on or before the second anniversary of the Closing Date, Buyer shall pay Seller the sum of $2,000,000 (the "Lump Sum Contingent Consideration") on the second anniversary of the Closing Date (the "Determination Date"). At Buyer's option, if Sybra has not entered into a lease for Unit #740 or for another location at the Park City Mall, Lancaster, Pennsylvania and Sybra has not been forced by the lessor to vacate Unit #740 on or before the second anniversary of the Closing Date, the Determination Date may be extended from the second anniversary of the Closing Date to the third anniversary of the Closing Date, provided that Buyer shall have given Seller written notice of such extension on or before 30 days prior to the second anniversary of the Closing Date, and, provided further, that Buyer shall pay Seller an amount equal to 50% of the Monthly Free Cash Flow of Unit #740 for each Fiscal Month, or portion thereof (the "Additional Monthly Contingent Consideration"), during the period from the second anniversary of the Closing Date to the date of payment in full of the Lump Sum Contingent Consideration. In the event Buyer makes payments of Additional Monthly Contingent Consideration in respect of a Fiscal Month, no amounts shall be due from Buyer to Seller for Monthly Contingent Consideration for the same Fiscal Month. Buyer shall pay the Lump Sum Contingent Consideration to Seller by wire transfer or delivery of other immediately available funds within 5 business days after the Determination Date. Buyer shall pay all amounts due to Seller for Additional Monthly Contingent Consideration under this ss.2(g)(ii) by wire transfer or delivery of other immediately available funds within 15 business days after the last business day of each applicable Fiscal Month. Upon and after the date of payment in full of all amounts due pursuant to this ss.2(g)(ii), Buyer shall not be obligated to pay Seller any amounts pursuant to ss.2(g)(iii). (iii) If, prior to the payment of the Lump Sum Contingent Consideration due pursuant to ss.2(g)(ii), (a) the lease in effect as of the Closing Date for Unit #740 is terminated and, as a result, Sybra is forced by the lessor to vacate Unit #740, and (b) Sybra has not entered into a lease for another location at the Park City Mall, Lancaster, Pennsylvania, Buyer shall pay Seller cash in an amount equal to 50% of the cumulative Monthly Free Cash Flow of Unit #740, calculated from the Closing Date to the date upon which Sybra vacates Unit #740 (the "Supplemental Consideration"). Buyer shall pay the amount due for Supplemental Consideration pursuant to this ss.2(g)(iii) to Seller by wire transfer or delivery of other immediately available funds, within 5 business days after the date Buyer vacates Unit #740. Unless Buyer subsequently enters into a lease for another location at the Park City Mall, Lancaster, Pennsylvania upon and after the date of payment in full of the Supplemental Consideration due pursuant to this ss.2(g)(iii), Buyer shall not be obligated to pay Seller the Lump Sum Contingent Consideration pursuant to ss.2(g)(ii) nor, pursuant to ss.2(g)(i) and (ii), any amounts for Monthly Contingent Consideration or Additional Monthly Contingent Consideration for periods commencing after the date of such -3- payment in full of the Supplemental Consideration due pursuant to this ss.2(g)(iii). In the event that Buyer subsequently enters into a lease for another location at the Park City Mall, Lancaster, Pennsylvania, Buyer shall be obligated to pay the Lump Sum Contingent Consideration due pursuant to ss.2(g)(ii) and, pursuant to ss.2(g)(i) and (ii), amounts due for Monthly Contingent Consideration or Additional Monthly Contingent Consideration for all periods prior to payment in full of the Lump Sum Contingent Consideration pursuant to ss.2(g)(ii). (iv) The foregoing notwithstanding, in the event that Sybra's lease with respect to Unit #5666 is terminated as a result of Seller's failure to obtain the consent of the landlord for Unit #5666 with respect to the transactions contemplated by this Agreement, the Lump Sum Contingent Consideration, if and when due and payable to Seller, shall be reduced by $158,000." 5. Section 11(d). Section 11(d) of the Agreement is hereby amended by deleting the word "and" on the seventh line and inserting the following language at the end thereof: "and (iii) Buyer may assign its right to purchase the Sybra Shares pursuant to Section 2 to any wholly-owned subsidiary of Buyer; provided, however, that any such assignment shall not in any way affect (a) Buyer's right to receive, under certain circumstances, certain post-closing payments from Seller pursuant to Section 2(f), (b) Buyer's obligation, under certain circumstances, to make certain post-closing payments to Seller pursuant to Section 2(g) or (c) any other rights or obligations of Buyer under this Agreement." 6. Except as amended, modified or supplemented by this Amendment, the parties confirm and ratify the terms and provisions of the Purchase Agreement. * * * * * IN WITNESS WHEREOF, this Amendment is entered into by the duly authorized representatives of the parties hereto as of the date first above written. I.C.H. CORPORATION By: ________________________________ Title: _____________________________ VALCOR, INC., a Delaware corporation By: ________________________________ Title: _____________________________ -4- 23152.d7 -5- EX-10.04 4 LOAN AGREEMENT [EXECUTION COPY] LOAN AGREEMENT between SYBRA, INC. and ATHERTON CAPITAL INCORPORATED Dated as of ____________________, 1997 LOAN TRANCHE A ARBY'S RESTAURANTS LOAN AGREEMENT Table of Contents SECTION I. INTERPRETATION..................................................................... 1 -------------- 1.01. Definitions........................................................................ 1 ----------- 1.02. GAAP............................................................................... 1 ---- 1.03. Governing Law...................................................................... 1 ------------- 1.04. Construction....................................................................... 1 ------------ 1.05. Entire Agreement................................................................... 1 ---------------- 1.06. Other Interpretive Provisions...................................................... 1 ----------------------------- SECTION II. CREDIT FACILITY.................................................................... 1 --------------- 2.01. Term Loan.......................................................................... 1 --------- (a) Loan..................................................................... 1 ---- (b) Interest Rate............................................................ 2 ------------- (c) Scheduled Payments....................................................... 2 ------------------ (d) Maximum Interest Rate.................................................... 2 --------------------- 2.02. Origination Fee.................................................................... 2 --------------- 2.03. Prepayments........................................................................ 2 ----------- (a) Prepayment in Whole...................................................... 2 ------------------- (b) Borrower Acknowledgement................................................. 2 ------------------------ 2.04. Other Payment Terms................................................................ 3 ------------------- (a) Place and Manner......................................................... 3 ---------------- (b) Date..................................................................... 3 ---- (c) Late Payments............................................................ 3 ------------- (d) Application of Payments.................................................. 3 ----------------------- 2.05. Note(s)............................................................................ 3 ------- 2.06. Taxes on Payments.................................................................. 3 ----------------- 2.07. Credit Support..................................................................... 3 -------------- (a) Security................................................................. 3 -------- (b) Further Assurances....................................................... 3 ------------------ (c) Partial Release of Security Interest against Primary Collateral.......... 4 --------------------------------------------------------------- (d) Release of Negative Pledge Agreement - Secondary Collateral.............. 5 ----------------------------------------------------------- 2.08. Loan Assignment and Assumption..................................................... 5 ------------------------------ SECTION III. CONDITIONS PRECEDENT............................................................... 5 -------------------- 3.01. Documentary and Related Conditions Precedent....................................... 6 -------------------------------------------- SECTION IV. REPRESENTATIONS AND WARRANTIES..................................................... 6 ------------------------------ 4.01. Borrower's Representations and Warranties.......................................... 6 ----------------------------------------- (a) Legal Status............................................................. 6 ------------ (b) Authorization and Validity............................................... 6 -------------------------- (c) Formation and Organizational Documents................................... 6 -------------------------------------- (d) No Violation............................................................. 6 ------------ (e) Permits and Licenses..................................................... 6 -------------------- (f) Litigation............................................................... 6 ---------- (g) Title.................................................................... 6 ----- (h) Financial Statements..................................................... 7 -------------------- (i) Solvency, Etc............................................................ 7 ------------- (j) Franchise Agreement and Lease............................................ 7 ----------------------------- (k) Leasehold Mortgage....................................................... 7 ------------------ (l) Taxes.................................................................... 8 ----- (m) Compliance with Laws..................................................... 8 -------------------- i (n) ERISA.................................................................... 8 ----- (o) Accuracy of Information Furnished........................................ 8 --------------------------------- SECTION V. COVENANTS.......................................................................... 8 --------- 5.01. Affirmative Covenants.............................................................. 8 --------------------- (a) Compliance Certificates.................................................. 8 ----------------------- (b) Communications with Franchisor........................................... 9 ------------------------------ (c) Other Documents.......................................................... 9 --------------- (d) Books and Records........................................................ 9 ----------------- (e) Inspections.............................................................. 9 ----------- (f) Insurance................................................................ 9 --------- (g) Governmental Charges and Other Indebtedness.............................. 10 ------------------------------------------- (h) Use of Proceeds.......................................................... 10 --------------- (i) General Business Operations.............................................. 10 --------------------------- (j) Additional Debt.......................................................... 10 --------------- (k) Notices.................................................................. 11 ------- (l) Loan Documents........................................................... 11 -------------- (m) Permitted Contests....................................................... 11 ------------------ (n) Performance by Lender.................................................... 11 --------------------- (o) Casualty and Condemnation................................................ 11 ------------------------- (p) Extension and Renewal of Franchise Agreements and Lease Agreement........ 12 ----------------------------------------------------------------- (q) Financial Statements and Reports......................................... 12 -------------------------------- (r) ERISA.................................................................... 13 ----- (s) Minimum Liquidity Level.................................................. 13 ----------------------- (t) Capital Expenditures..................................................... 13 -------------------- (u) Landlord Estoppel Agreements; Leasehold Mortgages........................ 13 ------------------------------------------------- (v) Mortgage Non-Disturbance Agreements...................................... 13 ----------------------------------- 5.02. Negative Covenants................................................................. 13 ------------------ (a) Liens.................................................................... 13 ----- (b) Asset Dispositions....................................................... 13 ------------------ (c) Franchise Agreements; Leases & Material Contracts........................ 14 ------------------------------------------------- (d) Change in Control........................................................ 14 ----------------- (e) Merger and Purchase Transactions......................................... 14 -------------------------------- (f) Transactions with Affiliates............................................. 14 ---------------------------- (g) Contingent Liabilities................................................... 14 ---------------------- (h) Restrictions on Dividends & Distributions................................ 14 ----------------------------------------- (i) Investment Limitation.................................................... 15 --------------------- (j) Change in Nature of Business............................................. 15 ---------------------------- (k) Pre Distribution Fixed Charge Ratio...................................... 15 ----------------------------------- SECTION VI. DEFAULT............................................................................ 15 ------- 6.01. Events of Default.................................................................. 15 ----------------- (a) Monetary................................................................. 15 -------- (b) Performance of Obligations............................................... 15 -------------------------- (c) Representations and Warranties........................................... 16 ------------------------------ (d) Liens, Attachment; Condemnation.......................................... 16 ------------------------------- (e) ......................................................................... 16 (f) Transfer of Property or Interest in Borrower............................. 16 -------------------------------------------- (g) Adverse Financial Condition.............................................. 16 --------------------------- (h) Termination or Revocation of Guaranty.................................... 16 ------------------------------------- (i) Default under Franchise Agreements....................................... 16 ---------------------------------- (j) Default under Lease...................................................... 16 ------------------- (k) Default under Other Material Restaurant Agreements....................... 16 -------------------------------------------------- (l) Voluntary Bankruptcy; Insolvency; Dissolution............................ 17 --------------------------------------------- (m) Involuntary Bankruptcy................................................... 17 ---------------------- ii 6.02. Remedies........................................................................... 17 -------- SECTION VII. MISCELLANEOUS...................................................................... 17 ------------- 7.01. Notices............................................................................ 17 ------- 7.02. Expenses........................................................................... 18 -------- 7.03. Indemnification.................................................................... 18 --------------- 7.04. Waivers; Amendments................................................................ 18 ------------------- 7.05. Successors and Assigns............................................................. 19 ---------------------- (a) Binding Effect........................................................... 19 -------------- (b) Loan Sales and Participation; Disclosure of Information.................. 19 ------------------------------------------------------- 7.06. Setoff............................................................................. 19 ------ 7.07. No Third Party Rights.............................................................. 19 --------------------- 7.08. Partial Invalidity................................................................. 19 ------------------ 7.09. JURY TRIAL......................................................................... 20 ---------- 7.10. Counterparts....................................................................... 20 ------------ 7.11. Recourse........................................................................... 20 -------- 7.12. Cumulative Rights.................................................................. 20 ----------------- 7.13. Survival........................................................................... 20 -------- 7.14. Lender Discussions with the Franchisor............................................. 20 -------------------------------------- SCHEDULES: 1.01 Definitions 2.01 Liens Existing on the Closing Date 3.01 Initial Conditions Precedent 4.01(f) Litigation 4.01(j) List of Affiliates, Subsidiaries and Other Franchise Ownership Interests 5.01(h) Use of Proceeds 5.02(g) Contingent Obligations EXHIBITS: A Note B Matters to be Covered by Opinion of Borrower's Counsel C Compliance Certificate D Calculation of Adjusted Free Cash Flow E Lease Summary F Leasehold/Deed of Trust Mortgage G Security Agreement H Negative Pledge Agreement I Mortgage Non-Disturbance Agreement J Environmental Indemnity K Guaranty Agreement L Solvency Certificate M Escrow Agreement ATTACHMENTS: 1 List of Restaurants 2 Primary Collateral 3 Secondary Collateral 4 USRP Restaurant Leases 5 Franchise Agreements to be Extended 6 Illustration of Pre Distribution Fixed Charge Ratio iii 7 Illustration of Post Distribution Fixed Charge Ratio 8 Restaurants which may be closed/Restaurants Where Consent to Merger Not Obtained 9 Salary, Wage and Bonus
LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of _________________, 1997 (this "Agreement"), is entered into by and between: (1) SYBRA, INC., a Michigan corporation, being the surviving entity of a merger with Newco ("Borrower"); and (2) ATHERTON CAPITAL INCORPORATED, a Delaware corporation (together with its successors and assigns, "Lender"). AGREEMENT In consideration of the mutual covenants herein contained, Borrower and Lender hereby agree as follows: SECTION I. INTERPRETATION. 1.01. Definitions. Unless otherwise indicated in this Agreement or any other Loan Document, each term set forth in Schedule 1.01, when used in this Agreement or any other Loan Document, shall have the respective meaning given to that term in Schedule 1.01 or in the provision of this Agreement or other Loan Document referenced in Schedule 1.01, and terms defined in the singular shall have the same meaning when used in the plural and vice versa. 1.02. GAAP. Unless otherwise indicated in this Agreement or any other Loan Document, all accounting terms used in this Agreement or any other Loan Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. 1.03. Governing Law. This Agreement and each of the other Loan Documents shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. 1.04. Construction. Each of this Agreement and the other Loan Documents is the result of negotiations among, and has been reviewed by, Borrower, Lender and their respective counsel. Accordingly, this Agreement and the other Loan Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender. 1.05. Entire Agreement. This Agreement and each of the other Loan Documents, taken together, constitute and contain the entire agreement of Borrower and Lender and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof. 1.06. Other Interpretive Provisions. References in this Agreement and each of the other Loan Documents to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Loan Document shall not be construed to be limiting or exclusive. SECTION II. CREDIT FACILITY. 2.01. Term Loan. (a) Loan. Subject to the terms and conditions of the Loan Documents, Lender agrees to advance to Borrower on the Closing Date a term loan in the principal amount of FOUR MILLION SEVEN HUNDRED FOUR THOUSAND AND NO/100'S Dollars and No/100 ($4,704,000) (the "Loan"). Lender shall advance the Loan to Borrower in a single advance. Borrower may not reborrow the principal amount of the Loan after repayment or prepayment thereof. (b) Interest Rate. Borrower shall pay interest on the unpaid principal amount of the Loan from the Closing Date until the Loan Maturity Date (as defined below), at the rate of _________________________________________ percent (______._____%) per annum. All computations of interest shall be based upon a 360-day year of twelve 30-day months and, in the case of any partial month, on the actual number of days elapsed in such month. (c) Scheduled Payments. Principal and interest payments shall be payable in accordance with the terms of each Note, and on the loan maturity date (each as a "Loan Maturity Date" as such term is defined in each Note). (d) Maximum Interest Rate. In the event that the applicable interest rate on the Loan is determined to be in excess of the legal maximum rate, the portion of any interest payments made by Borrower representing the amount in excess of the applicable legal maximum rate shall be deemed a payment of principal and applied against the principal of the Loan. Neither this Agreement nor any other Loan Document shall require the payment or permit the collection of interest or any late payment charge in excess of the maximum rate permitted by law. If herein or any other Loan Document any excess of interest or late payment charge in such respect is provided for or shall be adjudicated to be so provided for, neither Borrower, nor its successors or assigns shall be obligated to pay such interest or late payment charge in excess of the maximum amount permitted by law, and the right to demand the payment of any such excess shall be and hereby is waived, and this provision shall control any other provision of this Agreement or any other Loan Document. 2.02. Origination Fee. In connection with the Loan, Borrower shall pay to Lender an origination fee (the "Origination Fee") equal to one point seven five percent (1.75%) of the principal amount of the Loan. Borrower shall be credited with the application deposit and commitment fee previously paid to Lender with Borrower's loan application. 2.03. Prepayments. (a) Prepayment in Whole. Borrower acknowledges that any prepayment of the Loan under this Agreement will cause Lender to lose its interest rate yield on the Loan and will possibly require that Lender reinvest any such prepayment amount in loans of a lesser interest rate yield. As a consequence, Lender and Borrower agree as an integral part of the consideration for Lender making the Loan under this Agreement, that Borrower may prepay the principal balance of a Note in full but not in part on a Payment Date, provided that Borrower is not in default of any term, condition or provision of any Loan Documents. Borrower understands that any prepayment shall require payment of the Yield Maintenance Amount on such Payment Date and, if Borrower elects to prepay, Borrower agrees to pay such Yield Maintenance Amount. In the event that Borrower elects to prepay the principal balance of a Note, Borrower will notify Lender in writing of Borrower's election to prepay such Note in full and agrees to specify in such notice the proposed Payment Date (for purposes of being a date on which prepayment occurs, the "Prepayment Date") for prepayment (which date shall not be less than thirty (30) days nor more than sixty (60) days from the date of said notice). Lender will notify Borrower within twenty (20) days of its receipt of such notice from Borrower in respect of the Note to be prepaid: the estimated total amount of accrued and unpaid interest, the unpaid principal balance, and Yield Maintenance Amount payable on the proposed Prepayment Date, subject to adjustment in the event of changes in the Treasury Rate, all of which shall be paid by Borrower to Lender on the Prepayment Date. (b) Borrower Acknowledgement. Borrower hereby acknowledges that the Lender would not have agreed to make the Loan without the prepayment provisions set forth in Section 2.03(a) and hereby waives any right or claim to the prepayment of the Loan (whether such prepayment is any optional prepayment under Section 2.03(a) or a mandatory prepayment required by any other provision of this Agreement or the other Loan Documents, including, without limitation, a prepayment upon acceleration) other than as set forth in this Section 2.03. Borrower hereby acknowledges that the inclusion of this waiver of prepayment rights and agreement to pay the Yield Maintenance Amount for voluntary or involuntary prepayment was separately negotiated with Lender, that the economic value of the various elements of this waiver and agreement was discussed, that the consideration given by Borrower for the Loan was adjusted to reflect the specific waiver and agreement negotiated between Borrower and Lender and contained herein. Borrower's Initials ____ 2.04. Other Payment Terms. (a) Place and Manner. Borrower shall make all payments due to Lender hereunder, without setoff or counterclaim as against Lender, by payments at Lender's office, located at the address specified in Section 7.01, or at such other office designated in 2 writing by Lender, in lawful money of the United States not later than 12:00 noon, San Francisco, California time, on the date due. Following an Event of Default, Lender shall have the right, at Lender's sole option, to require Borrower to make payment by means of the ACH System or other similar electronic funds transfer system. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. (c) Late Payments. If any amounts required to be paid by Borrower under this Agreement or the other Loan Documents (including, without limitation, principal or interest payable on the Loan, any Yield Maintenance Amount, any fees or other amounts) remain unpaid for five (5) calendar days after such amounts are due, Borrower shall pay interest on the aggregate, outstanding balance of such amounts from the date due until those amounts are paid in full at a per annum rate equal to the Default Rate. In addition, Borrower shall pay promptly to Lender, as liquidated damages, a late payment charge of five percent (5%) of the amount of any such late payment. Borrower acknowledges that Lender will incur additional expenses as a result of any late payments hereunder, which expenses would be impracticable to quantify, and that Borrower payments under this Section 2.04(c) are a reasonable estimate of such expenses. (d) Application of Payments. All payments hereunder shall be applied first to unpaid fees, costs and expenses then due and payable under this Agreement or the other Loan Documents, second to accrued interest and the Yield Maintenance Amount, if any, then due and payable under this Agreement or the other Loan Documents, and finally to reduce the principal amount outstanding of the Loan in inverse order of maturity. 2.05. Note. The obligation of Borrower to repay the Loan and to pay interest thereon at the rate provided herein shall be evidenced by those certain promissory notes, each in the form of Exhibit A (individually a "Note" and collectively a "Note") and each such Note shall be collectively (a) in an aggregate amount equal to the amount of the Loan, (b) dated the date hereof, and (c) otherwise appropriately completed. 2.06. Taxes on Payments. All payments made by Borrower under this Agreement and the other Loan Documents shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority (collectively called "Taxes"). If Borrower fails to pay any Taxes when due to the appropriate taxing authority, Borrower shall indemnify Lender for any incremental taxes, interest or penalties that may become payable by Lender as a result of any such failure. The agreements in this Section 2.06 shall survive the termination of this Agreement. 2.07. Credit Support. (a) Security. The Obligations shall be secured by the following: (i) The Security Agreement; (ii) Each Leasehold Mortgage; (iii) The Guaranty; and (iv) Each of the other documents, agreements and certificates listed on Schedule 3.01 which shall be delivered by Borrower to Lender on or prior to the Closing Date of the Loan. (b) Further Assurances. Borrower shall execute and deliver, or cause to be executed and delivered, to Lender such additional security agreements, pledge agreements and other instruments, agreements, certificates, opinions and documents (including, without limitation, Uniform Commercial Code financing statements and fixture filings and landlord waivers and estoppel) as Lender may reasonably request to establish, maintain, perfect, protect and evidence the rights provided to Lender pursuant to the Loan Documents. (c) Partial Release of Security Interest against Primary Collateral. Lender agrees to release from the lien of its Security Agreement and its Leasehold Mortgage a Restaurant which is Primary Collateral, upon satisfaction in full of all of the following conditions: 3 (i) Borrower requests such release in writing at least thirty (30) days in advance; (ii) Borrower has paid and satisfied all of its obligations under the Note corresponding to such Primary Collateral location in full; (iii) Borrower has paid the applicable Yield Maintenance Amount under Section 2.03 in connection with such Note (if no indebtedness has been allocated to such location then Borrower shall have paid to Lender a processing fee equal to $750 for each Primary Collateral location to be released); (iv) No Event of Default has occurred and is continuing under any of the Loan Documents; (v) The Pre Distribution Fixed Charge Ratio, as applied to the remaining Restaurants hereunder, for the 12 month period immediately preceding the Prepayment Date is equal to or greater than 1.30x and with such calculation, however, excluding payments in respect of the Note(s) being prepaid; (vi) In giving effect to the release of any such Primary Collateral (including any Indebtedness to be incurred by Borrower), the ratio of the remaining principal balance and interest balance of the Loan to the appraised value of the remaining Restaurants, as evidenced by an appraisal of Deloitte & Touche (or its successors or another accounting firm approved by Lender) delivered to Lender utilizing the valuation methodology used in connection with the origination of the Loan, does not exceed the percent indicated on Attachment 2; it being agreed, however, that Borrower may use the ------------ appraisal of Deloitte & Touche which was delivered to Lender in connection with the funding of the Loan under this Agreement for purposes of this Section 2.07(c)(vi) for any Primary Collateral location to be released by ------------------- Lender on a date during the period from the Closing Date through December 31, 1997, and thereafter, the Borrower shall deliver to Lender a new/updated appraisal in conformity with the requirements of this Section ------- 2.07(c)(vi) which in all cases shall be dated of a date no earlier than ----------- sixty (60) days prior to a Prepayment Date if a Note is required to be prepaid under this Section 2.07(c) or the date that Borrower requests a --------------- Primary Collateral location be released if no Note is required to be prepaid under this Section 2.07(c); --------------- (vii) Subject to Section 5.02(b), that no more than two (2) Primary Collateral --------------- locations have been or are requested by Borrower to be released in any given calendar year which release may be cumulated by Borrower from year to year; provided, that any request by Borrower for the release of more than two (2) such Primary Collateral locations would be subject to approval by Lender in its sole discretion; it being the understanding and agreement, however, that Borrower may prepay in full at any time the outstanding principal balance and interest balance of each Note (subject to the provisions of Section 2.03) and that upon the payment in full of ------------ such obligation(s) then the Primary Collateral attendant with each Note will be released by Lender; and (viii) In the event that any such prepayment and release of Primary Collateral would result in less than five (5) Primary Collateral locations remaining as security for the Notes, then Borrower shall prepay all obligations under any and all remaining Notes hereunder in full (subject to the provisions of Section 2.03), and Lender's liens against all such remaining Primary Collateral locations will be released; and (ix) Borrower has paid all of Lender's expenses and costs incident to any such release, including, without limitation, filing fees for UCC termination statements, filing fees in respect of the release (or partial release of any lien under a Leasehold Mortgage) and reasonable attorney's fees. (d) Release of Negative Pledge Agreement - Secondary Collateral. On or after a date which is two (2) years from the Closing Date the Lender shall upon the written request of Borrower release the Borrower from the terms and conditions of the Negative Pledge Agreement if: (i) No Event of Default has occurred and is continuing under any of the Loan Documents; and (ii) During any two (2) year period immediately prior to such written request (a) the Borrower has not failed to make any payment to Lender when due and payable, whether under or in connection with this Agreement or a Loan Document, or any other agreement, document or instrument between Lender and Borrower, and (b) 4 no Event of Default has occurred in respect of Sections 5.01(s) or (t) or Sections 5.02(h) or (k) of this Agreement. 2.08. Loan Assignment and Assumption. The obligations of Borrower under this Agreement and the other Loan Documents may not be assigned by Borrower or assumed by any third party. The receipt of loan payments, the cashing of such payment checks, or such similar acts by Lender shall not constitute a waiver of this prohibition. Notwithstanding the foregoing, however, Lender shall, one time only, consent to the assumption of the Loan by a new borrower provided that each of the following conditions are met: (a) Borrower shall provide Lender with thirty (30) Business Days advance written notice of the proposed assumption of the Loan. (b) The new borrower or Borrower and any new guarantor, if any, shall provide to Lender, at the expense of the new borrower or Borrower, as applicable, evidence satisfactory to Lender, in its reasonable discretion, that the new borrower and any new guarantor, if any, and the Loan upon assumption meet Lender's current underwriting standards at such time. Such obligation shall include providing to Lender appraisals, credit reports, environmental reports and such other documentation as Lender shall reasonably request. (c) The new borrower must purchase all of the Collateral and all of Borrower's interest in the Restaurants and be a franchisee in good standing of the Franchisor authorized to operate the Restaurant. (d) No Default or Event of Default shall exist under any Loan Document or occur as a result of any assumption. (e) The new borrower or Borrower shall pay to Lender a fixed administrative fee equal to $5,000. (f) Either (i) final U.S. Treasury Regulations in substantially the form of Section 1.1001-3 of the proposed U.S. Treasury Regulations, as published on the date hereof, shall have become effective and, under such final U.S. Treasury Regulations, effecting a substitution of liabilities upon the satisfaction of the conditions to assumption set forth in this Section 2.08 will not constitute a "modification" of the Loans or (ii) Borrower and Guarantor shall not be released from their respective obligations under the Loan Documents. (g) The new borrower shall assume all the obligations of Borrower under the Loan Documents pursuant to an agreement approved by Lender, which approval shall not be unreasonably withheld, and a new guarantor shall assume all the obligations of the Guarantor under the Guaranty Agreement pursuant to an agreement approved by Lender, which approval shall not be unreasonably withheld. (h) Borrower shall obtain the written consent of Lender to the assumption, which consent shall be granted in Lender's sole discretion but shall not be unreasonably withheld upon the satisfaction of each of the conditions set forth in this Section 2.08. (i) Borrower shall pay any and all costs incurred by Lender in connection with such assumption, whether or not such assumption is consummated, including, without limitation, title insurance fees, legal fees, appraisal fees, and environmental consulting fees. SECTION III. CONDITIONS PRECEDENT. 3.01. Documentary and Related Conditions Precedent. The obligation of Lender to make the Loan is subject to receipt by Lender, on or prior to the Closing Date, of an original of each item listed in Schedule 3.01, each duly authorized, executed and delivered by the parties thereto, as applicable (other than the Lender), and further subject to all of the other matters and transactions required to be performed on or prior to the Closing Date, and with all of the foregoing being in form and substance satisfactory to Lender in its sole discretion. SECTION IV. REPRESENTATIONS AND WARRANTIES. 4.01. Borrower's Representations and Warranties. To induce Lender to enter into this Agreement and to make the Loan hereunder, Borrower represents and warrants to Lender that the following matters are true and correct on the Closing Date: 5 (a) Legal Status. Borrower (i) is duly organized and existing and in good standing under the laws of the state in which it is organized, (ii) has the power and authority to own, lease and operate its properties and conduct its business as now conducted, and (iii) is duly qualified, licensed to do business and in good standing in all jurisdictions in which such qualification or licensing is required. (b) Authorization and Validity. All of the Loan Documents have been duly authorized, and upon their execution and delivery will constitute legal, valid and binding agreements and obligations of the Borrower and of the Guarantor which executes the same, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally. (c) Formation and Organizational Documents. Borrower has delivered to Lender all formation and organizational documents of Borrower and of the Guarantor, and all such formation and organizational documents remain in full force and effect and have not been amended or modified since they were delivered to Lender. Borrower shall promptly provide Lender with copies of any amendments or modifications to such formation or organizational documents. (d) No Violation. The execution, delivery and performance by Borrower and by Guarantor of each of the Loan Documents to which it is a party do not: (i) require any consent or approval not heretofore obtained under Borrower's or Guarantor's articles of incorporation or bylaws; (ii) to Borrower's knowledge, violate any governmental requirement applicable to a Restaurant or any other statute, law, regulation or ordinance or any order or ruling of any court or governmental entity; (iii) subject to Sections 5.01(u) and (v), conflict with, or constitute a breach or default or permit the acceleration of obligations under any material agreement, contract, lease, or other document by which Borrower, the Collateral or any Restaurant are bound or regulated; or (d) to Borrower's knowledge, violate any statute, law, regulation or ordinance, or any order of any court or governmental entity with jurisdiction over Borrower, the Collateral, or any Restaurant. (e) Permits and Licenses. Borrower has, and at all times shall have obtained, all material permits, licenses, exemptions and approvals necessary to construct, occupy and operate each Restaurant, and shall maintain compliance in all material respects with all governmental requirements applicable to the Restaurant and all other applicable statutes, laws, regulations and ordinances necessary for the transaction of its business. (f) Litigation. Except as set forth (with estimates of the dollar amounts involved) in Schedule 4.01(f), there are no actions (including, without limitation, derivative actions), suits, proceedings or investigations pending or, to the knowledge of Borrower, threatened against Borrower, at law or in equity in any court or before any other governmental authority. Except as set forth (with estimates of the dollar amounts involved) in Schedule 4.01(f), there are no actions (including, without limitation, derivative actions), suits, proceedings or investigations pending or, to the knowledge of Borrower, threatened against any Related Person, at law or in equity in any court or before any other governmental authority which (i) could (alone or in the aggregate) have a Material Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by Borrower of the Loan Documents or the transactions contemplated thereby. (g) Title. Borrower owns and has good and marketable title in fee simple absolute to, or a valid leasehold interest in, each Restaurant and all its other respective real properties and good title to its other assets and properties constituting Collateral hereunder as reflected in the most recent Financial Statements delivered to Lender (except those assets and properties disposed of in the ordinary course of business or otherwise in compliance with this Agreement since the date of such Financial Statements) and all assets and properties constituting Collateral hereunder acquired by Borrower since such date (except those disposed of in the ordinary course of business or otherwise in compliance with this Agreement). Such assets and properties are subject to no Lien, except for Permitted Liens. (h) Financial Statements. The audited annual Financial Statements of Sybra, Inc. and the Restaurants which have been delivered to Lender by Borrower dated December 28, 1996, are true, complete and correct and were prepared according to GAAP, and fairly and accurately present the financial condition and assets and liabilities (whether accrued, absolute or contingent as required to be disclosed by GAAP and if not required to be disclosed then as set forth on Schedule 5.02(g)) of Sybra, Inc. as of such date, and the results of operations of Sybra, Inc. for the period then ended. The audited balance sheet of Guarantor which was delivered to Lender by Borrower dated on or about February 19, 1997, is true, complete and correct and was prepared according to GAAP, and fairly and accurately presents the financial condition and assets and liabilities (whether accrued, absolute or contingent as required to be disclosed by GAAP and if not required to be disclosed then also as set forth on Schedule 5.02(g)) of Guarantor as of such date. All other interim Financial Statements of Borrower and Sybra, Inc. delivered to Lender by Borrower or its agents are true, complete and correct and have been prepared according to GAAP, without footnotes and disclosures which customarily accompany audited financial statements and subject to normal year-end adjustments not material in an aggregate amount, and the other financial information (excluding projections) 6 delivered to Lender by Borrower or its agents, fairly and accurately present the financial condition and assets and liabilities of Sybra, Inc. or the Borrower as of such date or for the proforma periods indicated, and the results of operations of Sybra, Inc. or anticipated results of operations for the Borrower for the period then ended or indicated. None of Sybra, Inc., the Borrower, or the Guarantor has any contingent obligations, liability for taxes or other outstanding obligations which are material in the aggregate, except as disclosed in the Financial Statements furnished by Borrower to Lender or as set forth on Schedule 5.02(g). There has been no material adverse change in the condition, financial or otherwise, of Sybra, Inc., the Borrower or of any Restaurant since the date of the last Financial Statements or the date of any other financial information submitted to Lender. Except as disclosed in such Financial Statements, there are no accruing franchise royalty payments or other obligations owed to Franchisor except for current and ordinary royalty payments and expenses, and all such royalty payments or other obligations owed to Franchisor as of the Closing Date are current in payment and not in arrears. (i) Solvency, Etc. None of the transactions contemplated by the Loan Documents will be or have been made with an actual intent to hinder, delay or defraud any present or future creditors of Borrower. Borrower acknowledges that it will have received fair and reasonably equivalent value in good faith for the grant of the lien or security interest effected by the Loan Documents. The fair saleable value of the assets of Borrower will, immediately following the consummation of all of the transactions contemplated under the Loan Documents (debt, liens and merger), exceed the amount of the existing debts and other liabilities (including contingent liabilities) of the Borrower. The Borrower does not and will not have, immediately following the consummation of all of the transactions contemplated under the Loan Documents (debt, liens and merger), unreasonably small capital to carry out its business as conducted or as proposed to be conducted. After giving effect to all of the transactions contemplated under the Loan Documents (debt, liens and merger) the Borrower is and will be able to pay its debts as they become due. (j) Franchise Agreement and Lease. Borrower is an authorized franchisee under the Franchise Agreement. All Arby's franchisees who are under common control with Borrower, control Borrower, are controlled by Borrower, or in which Borrower has an ownership interest of 25% or more, are listed on Schedule 4.01(j) attached hereto. Each Franchise Agreement and each Lease, a true, correct and complete copy of each of which were provided to Lender with Borrower's loan application, constitute the legal, valid and binding obligation of the parties thereto. Subject to Section 5.01(u), no party is in default under, and no circumstance exists which with the passage of time could give rise to a default under, any Franchise Agreement or under any Lease. There are no amendments, modifications or supplements to any Franchise Agreement or any Lease other than those already provided to Lender. Borrower has not received any notices under any Franchise Agreement or under any Lease with respect to Borrower's compliance with either, other than notices, copies of which have been furnished to Lender. Each Loan Maturity Date for each Note will occur prior to the expiration dates of each applicable and corresponding Franchise Agreement and each Lease, including any lessee option to extend such term. The information set forth in Exhibit E (Lease Summary) is true, complete and correct. Borrower acknowledges and agrees that no claim or defense which Borrower may at any time have against Franchisor or any affiliate of Franchisor shall relieve Borrower of its obligations under this Agreement or under the other Loan Documents. (k) Leasehold Mortgage. With respect to any portion of the Loan which is secured by a Leasehold Mortgage constituting a lien on an interest of Borrower as tenant under a Lease of the related property, but not by the related fee interest in such property, Borrower represents that: (i) Subject to Section 5.01(u), each Lease is valid, legal and binding and enforceable in accordance with its terms; such Lease or a memorandum thereof has been duly recorded to the extent required under Schedule 3.01(a)(5); and except as noted on Exhibit E as to each Lease, each such Lease does not prohibit the interest of the tenant thereunder to be encumbered by the related Leasehold Mortgage and does not restrict the use of the underlying property and related improvements thereon by such tenant, or its successors and assigns; and (ii) Such Lease has an original term (or an original term plus one or more optional renewal terms which under all circumstances may be exercised by Borrower and can be enforced by Lender on behalf of Borrower) which extends not less than two (2) months beyond the stated maturity of the related Note. (l) Taxes. The Borrower has filed all federal, state and local tax returns required to be filed and has paid or made provision for the payment of all taxes due and payable pursuant to such returns and pursuant to any assessments made against it or any of its property and all other taxes, fees and other charges imposed on it or any of its property by any governmental authority (other than taxes, fees or charges the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books 7 of the Borrower). No tax liens have been filed and no material claims are being asserted with respect to any such taxes, fees or charges. The charges, accruals and reserves on the books of the Borrower in respect of taxes and other governmental charges are adequate and the Borrower knows of no proposed material tax assessment against it or any basis therefor. (m) Compliance with Laws. The Borrower has complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of its business, its employees or the ownership of its properties, except where such non-compliance and failure would not have a Material Adverse Effect. (n) 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, except where such non- compliance and failure would not have a Material Adverse Effect. 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) of such Plan's projected benefit obligations did not exceed the fair market value of such Plan's assets. (o) Accuracy of Information Furnished. The information set forth in the Schedules and Exhibits to this Agreement, as well as such other information (excluding projections delivered to Lender prior to the Closing Date and which are not attached to an Exhibit or Schedule to this Agreement or any Loan Document) that was provided to Lender in connection with Borrower's loan request, is true, complete and correct, subject to the next sentence. None of the Loan Documents and none of the other certificates, statements or information (to the extent such certificates, statements or information was updated and delivered to Lender on or prior to the Closing Date) furnished to Lender by or on behalf of Borrower in connection with the Loan Documents or the transactions contemplated thereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION V. COVENANTS. 5.01. Affirmative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following affirmative covenants unless Lender shall otherwise consent in writing: (a) Compliance Certificates. Borrower shall provide to Lender by February 15 and August 15 of each year a compliance certificate executed by an authorized officer of Borrower for the twelve-month periods ended December 31 and June 30, respectively, or 45 days after Borrower's fiscal year end, in the form attached hereto as Exhibit C. Following any Event of Default , at Lender's option and upon Lender's request, Borrower agrees that it shall provide to Lender a compliance certificate in the form attached hereto as Exhibit C within fifteen (15) days of the end of each calendar quarter while any Event of Default is continuing and within fifteen (15) days after the end of the first calander quarter period following any cure of such Event of Default, along with an income statement and balance sheet for the 12-month period ending with such calendar quarter, until such time as Lender shall determine, in its sole discretion. (b) Communications with Franchisor. Borrower shall provide to Lender (i) copies of annual Restaurant reports (and such other reports as Lender may from time to time reasonably request) required under the Franchise Agreement at the same time it provides such reports to the Franchisor, and (ii) complete copies of any communications from Franchisor material to Borrower, the Restaurant or the Collateral (in the aggregate as to the Collateral), including, without limitation, any notices of an event of default or other event or condition which could have a Material Adverse Effect, promptly following receipt by Borrower, provided that such disclosure would not create a breach of the Franchise Agreement. If, and to the extent, that any disclosure required under clauses (i) or (ii) of the preceding sentence is not made because of the provision in the last clause of the preceding sentence, notice of such nondisclosure and the categories of information not disclosed shall be provided to Lender at the time such disclosure would have been required to be made. (c) Other Documents. Borrower shall provide copies of such other instruments, agreements, certificates, opinions, statements, documents and information relating to the operations or condition (financial or otherwise) of Borrower, and compliance by Borrower with the terms of this Agreement and the other Loan Documents as Lender may from time to time reasonably request. 8 (d) Books and Records. Borrower shall at all times keep proper books of record and account in which full, true and correct entries will be made of their dealings and transactions, in accordance with GAAP if required by Franchisor, and otherwise in accordance with good business practice and in a manner that will enable Borrower to provide Lender with Financial Statements which fairly present the financial positions of Borrower and each Restaurant as of Borrower's fiscal year end. (e) Inspections. Borrower shall permit any Person designated by Lender, upon reasonable notice and during normal business hours, to visit and inspect a Restaurant and the offices of Borrower, to examine and make abstracts from the record and books of account of Borrower and to discuss the affairs, finances and accounts of Borrower with, and to be advised as to the same by, their officers, auditors and accountants (and by this provision Borrower authorize said auditors and accountants to so discuss the affairs, finances, business, operations, properties and accounts of Borrower), all at such times and intervals as Lender may reasonably request. (f) Insurance. At Borrower's sole cost and expense, Borrower shall: (i) Subject to Schedule 3.01(c)(6), keep the Collateral and each Restaurant insured as may be required by the Franchisor or Lender, including, without limitation, fire, extended coverage, business interruption, , and peril, and against any other risks or hazards which, in the opinion of Lender should be insured against, in an amount not less than the full insurable value thereof on a full replacement cost basis, with an inflation guard endorsement, but in no event less than the minimum amount required to prevent the imposition of any coinsurance requirement on the insured. If the Restaurant is in an area identified in Federal Register by the Flood Emergency Management Agency as having special flood hazards (and such flood insurance has been made available), Borrower shall carry a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with an insurance carrier generally acceptable, in an amount representation coverage equal to the full insurable value of the Restaurant. Borrower shall also carry comprehensive general public liability insurance providing coverage not less than $1,000,000 per occurrence for bodily injury and $500,000 per occurrence for property damage, and business interruption insurance in an amount equal to twelve (12) months of operating income including financing costs; (ii) Cause all insurance policies insuring the Collateral and each Restaurant (1) to contain a standard lender's loss payable endorsement or mortgagee's endorsement providing for payment directly to Lender and/or its designees, (2) to provide for a minimum of thirty (30) day's notice to Lender prior to cancellation or modification or nonrenewal, (3) to provide that timely payment of the premium will otherwise cause the policy to remain in force, (4) to provide coverage on all restaurants, detached buildings, or other structures, by direct mention or allowance in the policy, (5) to contain loan number, property address and insured names, and (6) to be issued by companies authorized to issue such policies in the state in which the Restaurant is located having a General Policy Rating of "A-8" or better in Best's Key Rating Guide; (iii) Timely pay all premiums, fees and charges required in connection with all of its insurance policies and otherwise continue to maintain such policies (or conforming replacement policies) in full force and effect; and (iv) Promptly deliver copies of the insurance policies, certificates (and renewals) thereof or other evidence of compliance herewith to Lender. Borrower hereby (A) pledges and assigns to Lender and agrees to transfer and deliver to Lender all moneys which may become due and payable with respect to the Collateral and each Restaurant under any policy insuring the Collateral and a Restaurant, including return of unearned premium, provided that if no Loss or Event of Default has occurred and is continuing the Borrower may use any unearned premium in the operation of its business, subject, however, to the compliance with the terms and conditions of this Section 5.01(f), (B) directs any such insurance company to make payment directly to Lender and (C) authorizes Lender, in its sole discretion, to apply the same as set forth in Section 5.01(o) hereof. If Borrower fails to insure the Collateral and each Restaurant or to take any other action as required by this Section 5.01(f), Lender may, in addition to its other rights and remedies, and in its sole discretion (and without any obligation) obtain such insurance or take such other action. Borrower shall immediately reimburse Lender for all costs and expenses incurred by Lender in obtaining such insurance or taking such action. (g) Governmental Charges and Other Indebtedness. Subject to Borrower's right of contest set forth in Section 5.01(m), Borrower shall promptly pay and discharge when due (i) all taxes and other Governmental Charges prior to the date upon which penalties accrue thereon and (ii) all Indebtedness. (h) Use of Proceeds. Borrower shall use the proceeds of the Loan only for the purposes indicated in Schedule 5.01(h), which are not primarily for personal, family or household purposes. 9 (i) General Business Operations. Borrower shall (i) preserve and maintain its organizational existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities and maintain each Restaurant and the Collateral in substantially the same manner as it is being conducted and maintained at the date of this Agreement, except for any Released Restaurants, (iii) maintain and be in compliance with all Legal Requirements, except where non-compliance and failure would not have a Material Adverse Effect, and maintain and be in compliance with all Contractual Obligations applicable to each Restaurant or the Collateral, except for Contractual Obligations in respect of a Released Restaurant: (a) where the Borrower has been consensually released from its Contractual Obligations with respect to such Released Restaurant by the other Person who is party to such Contractual Obligations or (b) where non-compliance by the Borrower of such Contractual Obligation (other than non-compliance under a Lease or Franchise Agreement) would not (b1) have a Material Adverse Effect, (b2) cause an event of default or default under any Lease or any Franchise Agreement, (b3) create a Lien upon any Collateral, and (b4) in any manner effect or impair the operation of a Restaurant which is Primary Collateral, (iv) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except for property located at a Released Restaurant, (v) maintain its chief executive office and principal place of business in the state and county specified in Section 7.01, provided that Borrower may change the location of its chief executive office and principal place of business upon thirty (30) days advance written notice to Lender specifying the address for any such new location and upon Borrower's full compliance in executing any documents or instruments, at Borrower's expense, as may be reasonably requested by Lender, to maintain Lender's first priority security interest in the Collateral and to maintain Lender's interest in the Secondary Collateral, (vi) comply with all applicable laws, statutes, rules and regulations of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of its business, its employees or the ownership of its properties, except where non-compliance and failure would not have a Material Adverse Effect, and (vii) file all tax returns and reports which are required by law to be filed by Borrower. Borrower shall be and remain an Arby's franchisee in good standing under each Franchise Agreement, except for the consensual termination of a Franchise Agreement by Arby's and the Borrower in respect of a Released Restaurant. (j) Additional Debt. During the first two (2) years after the Closing Date the Borrower shall not incur any Additional Debt in excess of $1,000,000 per year without the Lender's prior written consent which consent shall not be unreasonably withheld, except that no limitation shall apply for the following Additional Debt if the Pre Distribution Fixed Charge Ratio of Borrower calculated on a Proforma Basis is not less than 1.30x: (i) Additional Debt arising as result of Capital Leases after the Closing Date, and (ii) Additional Debt secured solely by purchase money security interests against real and personal property purchased by Borrower (which property may include any real or personal property purchased by Borrower in connection with the acquisition of an Arby's restaurant) after the Closing Date. Borrower may incur Additional Debt on a date which is two (2) years after the Closing Date without the prior written consent of Lender if the Pre Distribution Fixed Charge Ratio of Borrower calculated on a Proforma Basis is not less than 1.30x. (k) Notices. Borrower shall give prompt written notice to Lender of (a) any claims, proceedings or disputes (whether or not purportedly on behalf of Borrower) against, or to Borrower's knowledge, threatened or affecting Borrower which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or which involve in the aggregate monetary amounts or claims in excess of $10,000 not fully covered by insurance; (b) any proposal by any public authority to acquire a Restaurant or any portion thereof; (c) the occurrence of any Default or Event of Default hereunder; and (d) any Permitted Contests under Section 5.01(m). (l) Loan Documents. Borrower shall comply with and observe all terms and conditions of the Loan Documents. (m) Permitted Contests. Subject to Section 5.01(u), Borrower may contest, by appropriate legal or other proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Imposition or lien therefor, any Legal Requirement, or any lien of any laborer, mechanic, materialman, supplier or vendor, provided that (a) the Collateral and any Restaurant, or any part thereof or estate or interest therein, shall not be in any danger of being sold, forfeited or lost by reason of such proceedings; (b) in the case of (i) liens of laborers, mechanics, materialmen, suppliers or vendors or (ii) the Impositions, or liens therefor, such proceedings shall suspend the foreclosure of any such lien or any other collection thereof from the Collateral or any Restaurant; (c) in the case of a Legal Requirement, Lender shall not be in any danger of any criminal liability or, unless Borrower shall have furnished a bond or other security therefor reasonably satisfactory to Lender, any additional civil liability for failure to comply therewith, and the Collateral and any Restaurant, or any part thereof or estate or interest therein, shall not be subject to the imposition of any lien as a result of such failure which is not properly contested pursuant to this Section 5.01(m); and (d) if reasonably required by Lender, Borrower shall have furnished to Lender a bond or other security reasonably satisfactory to Lender. (n) Performance by Lender. If Borrower shall fail to pay or perform any of its obligations herein contained or under any other Loan Documents, Lender upon five (5) business days prior written notice to Borrower (except as otherwise expressly permitted by any Loan Document in the event of an emergency when no notice need be given) may, but need not, make (or cause to be made) any 10 such payment or perform (or cause to be performed) any such obligation of Borrower hereunder or thereunder (provided Borrower is not contesting such payment or performance as permitted by Section 5.01(m) and the failure to so perform such obligation would have a Material Adverse Effect), in any form and manner deemed reasonably expedient by Lender as agent or attorney-in-fact of Borrower, and any amount so paid or expended (plus reasonable compensation to Lender for its out-of-pocket and other expenses (including reasonable legal expenses) for each matter for which it acts under this Agreement), with interest thereon at the Default Rate, shall be added to the Obligations and shall be repaid to Lender upon demand. No such action of Lender shall be considered as a waiver of any right accruing to it on account of the occurrence of any default on the part of Borrower under this Agreement, any Default, any Event of Default, or any default or event of default under any other Loan Document. (o) Casualty and Condemnation. (i) In the event of any casualty or Condemnation (a "Loss"), Borrower shall give prompt written notice thereof to Lender. Any Insurance Proceeds or awards with respect to such Loss in an amount greater than $10,000 (the "Loss Proceeds") shall be payable to Lender. Borrower shall have no right to settle or compromise, and shall not settle or compromise, any claim or proceeding relating to such Loss or Loss Proceeds without Lender's reasonable consent which shall not be unreasonably delayed. Borrower shall proceed promptly and diligently to prosecute in good faith the settlement or compromise of any and all claims or proceedings relating to such Loss or Loss Proceeds; provided, however, any such settlement or compromise shall be subject to Lender's reasonable consent which shall not be unreasonably delayed. Borrower hereby authorizes and directs any affected insurance company and any affected governmental body responsible for such Condemnation to make payment of the Loss Proceeds directly to Lender. If Borrower receives any Loss Proceeds, Borrower shall promptly pay over such Loss Proceeds to Lender. Borrower hereby covenants that until such Loss Proceeds are so paid over to Lender, Borrower shall hold such Loss Proceeds in trust for the benefit of Lender and shall not commingle such Loss Proceeds with any other funds or assets of Borrower or any other party. (ii) Borrower hereby irrevocably assigns to Lender all Loss Proceeds to which Borrower may become entitled by reason of its interests in each Restaurant which is Primary Collateral if a Loss occurs. All Loss Proceeds shall be paid to Lender and applied pursuant to this Section 5.01(o). Subject to the last sentence of this Section 5.01(o), Borrower shall take all appropriate action in connection with each such proceeding, settlement and adjustment and shall pay all expenses thereof, including, if Lender shall elect to participate therein, the cost of Lender's participation; provided, however, that any final settlement or adjustment shall be subject to the prior written reasonable consent of Lender which shall not be unreasonably delayed unless the Loss Proceeds are sufficient to prepay the Note in full, together with the Yield Maintenance Amount and all accrued and unpaid interest thereon. So long as an Event of Default shall have occurred and be continuing, Lender may, at its option and with respect to its interests as set forth herein, commence, appear in and prosecute, in its own name, any such action or proceeding or make any compromise or settlement in connection with such damage, destruction or taking and obtain directly all Loss Proceeds. (iii) So long as no Event of Default shall have occurred and be continuing, if any Collateral or a Restaurant which is Primary Collateral suffers a Loss, Borrower shall restore or replace items of Collateral and in all events restore such a Restaurant (or, in the case of a taking, the remaining Collateral and such a Restaurant) to the same condition, as nearly as possible, as existed immediately prior to such casualty or taking, whether or not the Loss Proceeds are sufficient therefor. If the cost of any restoration made by Borrower pursuant to this Section 5.01(o) shall exceed the amount of the Loss Proceeds, such deficiency shall be paid by Borrower. The Loss Proceeds shall be held by Lender or its agent and shall be disbursed to Borrower as hereinafter set forth, and Borrower shall be entitled to receive any accrued interest thereon. Lender or its agent shall release such Loss Proceeds to Borrower, subject to such reasonable procedural requirements as Lender or its agent may prescribe, from time to time and provided that such amounts shall be disbursed not more often than once monthly, as the restoration progresses, upon Borrower's written request, accompanied by a certificate of the architect or engineer in charge of the restoration or by an authorized officer or managing partner of Borrower, stating that the sum then requested either has been paid by Borrower or is justly due to the named persons (whose addresses shall also be stated) who have rendered services or furnished materials for certain portions of the restoration. The certificate shall give a brief description of such services and materials, shall list the amounts so paid or owing to each of such persons, shall state the estimated cost of the balance of the work yet to be performed, and shall state that no part of such expenditures has been or is being made the basis for any other request for payment. Upon compliance with the foregoing, Lender or its agent shall pay out of the Loss Proceeds to the extent available to the persons named in the certificate the respective amounts stated to be due to them or shall pay to Borrower the amount stated to have been paid by Borrower to such persons. So long as an Event of Default shall have occurred and be continuing, then such Loss Proceeds and any accrued interest thereon shall be applied at the option and direction of Lender either to the restoration and replacement of the Collateral and restoration of any such Restaurant which is Primary Collateral as set forth above or, on the next Payment Date, to the prepayment of the outstanding principal 11 amount of the Loan, at a price equal to 100% of the unpaid principal amount to be prepaid, plus accrued and unpaid interest thereon, and the Yield Maintenance Amount. (p) Extension and Renewal of Franchise Agreements and Lease Agreements. Borrower shall exercise any option or other extension or renewal right necessary to cause the term of each Franchise Agreement and of each Lease Agreement to extend to a date beyond the Loan Maturity Date for each Note. (q) Financial Statements and Reports. The Borrower will furnish to Lender: (i) Annual Financial Statements. As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of the Borrower, the audited consolidated financial statements of the Borrower (indicating consolidating entries) consisting of at least a balance sheet, and statements of income, cash flow, changes in financial position and stockholders' equity, as at the end of such year, prepared in accordance with GAAP, setting forth in each case in comparative form corresponding figures from the previous annual audit, certified without qualification by an independent certified public accountant of recognized national standing selected by the Borrower and reasonably acceptable to Lender, together with any management letters, management reports or other supplementary comments or reports to the Borrower or its board of directors furnished by such accountants. (ii) Monthly Financial Statements. As soon as available and in any event within thirty (30) days after the end of each fiscal month, unaudited statements of income for the Borrower for such month and for the period from the beginning of such fiscal year to the end of such month, and a balance sheet of the Borrower as at the end of such month, setting forth in comparative form figures for the corresponding period for the preceding fiscal year, accompanied by a certificate signed by the chief financial officer of the Borrower stating that such financial statements present fairly the financial condition of the Borrower and that the same have been prepared in accordance with GAAP (subject to normal year-end adjustments not material in an aggregate amount), except that notes and disclosures need not accompany such financial statements as is customary with audited financial statements, unless such a note or disclosure to Bank is required by the terms and conditions of this Agreement. (r) ERISA. The Borrower will maintain each Plan in compliance with all 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, except where non-compliance and failure would not have a Material Adverse Effect, and will not, and will not permit any of the ERISA Affiliates to, (a) engage in any transaction in connection with which the Borrower or any of the ERISA Affiliates 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 $10,000, (b) fail to make full payment when due of all amounts which, under the provisions of any Plan, the Borrower or any 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 an Section 412 of the Code), whether or not waived, with respect to any Plan in an aggregate amount exceeding $10,000 or (c) fail to make any payments in an aggregate amount exceeding $10,000 to any Multiemployer Plan that the Borrower or any of the ERISA Affiliates may be required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto. (s) Minimum Liquidity Level. Borrower shall maintain through September 30, 1998 one of the following minimum liquidity levels (the "Minimum Liquidity Level"): (a) the following cash on hand: at 9/30/97: $2,500,000; at 12/31/97: $2,500,000; at 3/31/98: $2,000,000; at 6/30/98: $1,500,000; at 9/30/98 and beyond: none; or (b) a Current Ratio of not less than 0.35:1 at any time, notwithstanding that such Current Ratio will be tested by Lender on quarterly basis during a calendar year. The failure of the Borrower to maintain compliance with the Minimum Liquidity Level shall not constitute an Event of Default under any Loan Document, provided, however, that if the Borrower is not in compliance with the Minimum Liquidity Level, then Borrower shall not and will not permit any Cash Payment to be made to, and will not make or permit to be made any Investment to or in, any Affiliate or Guarantor until such time that Borrower is in full compliance with the Minimum Liquidity Level. (t) Capital Expenditures. Borrower shall reinvest a minimum of (i) $1,135,000 in calendar year 1997 or $2,835,000 by the end of calendar year 1998, and (ii) $2,000,000 in calendar year 1999 or $3,875,000 for the two calendar years 1999 and 2000, and (iii) $1,875,000 in calendar year 2001, all in Capital Expenditures for the Arby's restaurants owned by Borrower or remodels, repairs and/or equipment replacement for such Arby's restaurants owned by Borrower. (u) Landlord Estoppel Agreements; Leasehold Mortgages. Borrower shall use its reasonable best efforts to obtain and deliver to Lender within twelve (12) months after the Closing Date any Estoppel(s) which were not delivered on the Closing Date. If the terms of a Lease are silent as to whether a Leasehold Mortgage may be granted against the tenants interest thereunder and Lender files a Leasehold Mortgage against such a Lease, then Lender agrees that no Default or Event of Default will occur under this Agreement 12 or any of the Loan Documents if the Landlord under such Lease asserts that an event of default has occurred solely by reason of any such Leasehold Mortgage being filed; provided, however, that the foregoing matters shall not be deemed or construed to release Borrower from its obligation to use reasonable best efforts to obtain each Estoppel which consents to the filing of a Leasehold Mortgage by Lender against any such Lease. (v) Mortgage Non-Disturbance Agreements. Borrower shall use its reasonable best efforts to obtain and deliver to Lender within six (6) months after the Closing Date the Mortgage Non-disturbance Agreements which were not delivered on the Closing Date. 5.02. Negative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower shall comply, and shall cause compliance, with the following negative covenants unless Lender shall otherwise consent in writing: (a) Liens. Borrower shall not directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to and of the following property of Borrower, whether now owned or hereafter acquired, except for Permitted Liens and a Liens incurred pursuant to and in compliance with Section 5.01(j): (i) any of the Collateral, (ii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Primary Collateral, (iii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Secondary Collateral until such time that Borrower is released from its covenants under the Negative Pledge Agreement as set forth under Section 2.07(d), (iv) any capital stock of Borrower owned by Guarantor, or (v) a Lien which is being contested by Borrower under Section 5.01(m). (b) Asset Dispositions. Borrower shall not sell, assign, convey, lease, transfer or otherwise dispose of or permit to be sold, assigned, conveyed, leased, transferred or otherwise disposed of (i) any of the Collateral, (ii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Primary Collateral, (iii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Secondary Collateral, or (iv) any capital stock of Borrower, whether any of the foregoing is now owned or hereafter acquired, except for inventory of Borrower in the ordinary course of Borrower's business or as expressly permitted by this Agreement or any other Loan Document; provided, however, that Borrower may replace a Restaurant's equipment or acquire new equipment and accessions to a Restaurant's equipment in the ordinary course of Borrower's business subject to the terms, conditions and provisions of this Agreement. Notwithstanding the foregoing provisions of this Section 5.02(b) to the contrary, Borrower may (i) sell a Restaurant which is Released Collateral or any item of property formerly serving as Collateral in respect of the operation of such Released Restaurant location, and (ii) sell all of its restaurants located in the State of Florida, provided that (a) each Note allocated to any Restaurant located in the State of Florida is prepaid in full and the applicable Yield Maintenance Amount (calculated in accordance with Section 2.03 is received by Lender upon such prepayment, and (b) Borrower has complied in full with the terms and conditions of Section 2.07(c) for the release of Primary Collateral as if the Borrower was requesting that such a Primary Collateral location be released, provided that Borrower shall not be required to comply with the provisions of Section 2.07(c)(vii). Any sale by Borrower of less than all of its restaurants located in the State of Florida shall be subject to all of the terms and conditions of Section 2.03 and Section 2.07(c) of this Agreement. (c) Franchise Agreements; Leases & Material Contracts. Subject to Section 5.01(u), Borrower shall not (i) violate any of the provisions of any Franchise Agreement, any Lease or other material contract to which Borrower is a party, or otherwise cause or permit any default under any Franchise Agreement, any Lease or other material contract; (ii) amend, modify or terminate, or permit termination, material amendment or material modification of any Franchise Agreement, any Lease or any other material contract to which it is a party; (iii) transfer, assign or waive any of its rights under any Franchise Agreement, any Lease or other material contract; or (iv) enter into any agreement with Franchisor by which franchise royalty payments under any Franchise Agreement are permitted to accrue. Notwithstanding the foregoing of this Section 5.02(c) to the contrary, Borrower may terminate, amend or otherwise modify a Lease, Franchise Agreement or other material contract, each only in respect of a Released Restaurant, where such termination, amendment or other modification is made on a consensual basis between each Person who is a party to such Lease, Franchise Agreement or other such contract. (d) Change in Control. Borrower will not permit any Person(s) (other than the Guarantor) to own, either directly or beneficially, capital stock or any other instrument in respect of Borrower which in the aggregate exceeds forty-nine percent (49%) of the total outstanding voting (or power to vote) or equity interest of Borrower, and Borrower will not permit, and at no time will, the voting capital stock of Borrower which is owned by Guarantor be less than fifty-one percent (51%). (e) Merger and Purchase Transactions. The Borrower will not merge, consolidate, purchase the assets of, or otherwise acquire any other business nor enter into any joint venture or enter into any transaction with any Person with respect thereto if the result 13 or effect of such transaction exceeds the permissible Investment limitation set forth in Section 5.01(i), or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution). (f) Transactions with Affiliates. The Borrower will not enter into or continue in effect any transactions with any Affiliate nor with an officer or employee thereof except transactions upon fair and reasonable terms no less favorable to the Borrower than would be obtainable in a comparable arm's length transaction with a Person not an Affiliate, subject in all cases, however, to the terms and conditions of Section 5.02(h) and Section 5.02(i) . (g) Contingent Liabilities. The Borrower will not be or become liable on any Contingent Obligations except Contingent Obligations existing on the date of this Agreement and described on Schedule 5.02(g). (h) Restrictions on Dividends & Distributions. The Borrower will not, without the Lender's prior written consent: (i) declare or pay any dividend or make any other distributions on any shares of the Borrower's capital stock (other than dividends payable in shares of the same class of capital stock), or make any other Cash Payment to Guarantor or any Affiliate; or (ii) redeem, purchase or otherwise acquire for value any shares of the Borrower's capital stock or any warrants, rights or other options to purchase such capital stock. Notwithstanding the foregoing of this Section 5.02(h) to the contrary, Borrower may make a Cash Payment to Guarantor or to an Affiliate in each fiscal year of Borrower (i) if no Default or Event of Default has occurred or is continuing under any Loan Document; and (ii) if after the payment of any Cash Payment to an Affiliate or the Guarantor or the amount of any Investment, the Post Distribution Fixed Charge Ratio of Borrower, tested on a consolidated basis as to all of the Borrower's Arby's restaurants, is equal to or greater than 1.30x at any time, to be measured quarterly based on a year to date performance and Cash Payments and Investments made year to date during the first twelve (12) months following the Closing Date, and thereafter based upon a trailing 12 months of performance and Cash Payments and Investments made during such twelve trailing month period. (i) Investment Limitation. The Borrower will not, without the Lender's prior written consent, acquire for value, make, have or hold, or permit to made, any Investment in or to any Person, other than (i) travel advances to management personnel and employees in the ordinary course of business; (ii) Investments in readily marketable direct obligations issued or guaranteed by the United States or any agency thereof and supported by the full faith and credit of the United States; (iii) certificates of deposit or bankers' acceptances issued by any commercial bank organized under the laws of the United States or any State thereof which has (a) combined capital and surplus of at least $100,000,000, and (b) a credit rating with respect to its unsecured indebtedness from a nationally recognized rating service that is satisfactory to the Bank; (iv) commercial paper given the highest rating by a nationally recognized rating service; (v) repurchase agreements relating to securities issued or guaranteed as to principal and interest by the United States of America; and (vi) other readily marketable Investments in debt securities which are reasonably acceptable to the Lender. Notwithstanding the foregoing of this Section 5.02(i) to the contrary, Borrower may make an Investment in or to a Person (i) if no Default or Event of Default has occurred or is continuing under any Loan Document, and (ii) if after the making of such Investment the Post Distribution Fixed Charge Ratio of Borrower, tested on a consolidated basis as to all of the Borrower's Arby's restaurants, is equal to or greater than 1.30x at any time, to be measured quarterly based on a year to date performance and Cash Payments and Investments made year to date during the first twelve (12) months following the Closing Date, and thereafter based upon a trailing 12 months of performance and Cash Payments and Investments made during such twelve trailing month period. (j) Change in Nature of Business. The Borrower will not make any material change in the nature of the business of the Borrower, as carried on at the date hereof. (k) Pre Distribution Fixed Charge Ratio. Borrower will not permit its Pre Distribution Fixed Charge Ratio, tested on a consolidated basis as to all of Borrower's Arby's restaurants to be less than 1.30x, with such ratio to be measured quarterly based on a year to date performance basis during the first twelve (12) months following the Closing Date, and thereafter based on the trailing 12 months of performance. Borrower or an Affiliate shall have the right to cure any breach by Borrower of such required consolidated Pre Distribution Fixed Charge Ratio within thirty (30) days of any such breach, by depositing into the Escrow Account (i) if the consolidated Pre Distribution Fixed Charge Ratio is less than 1.25x, then an amount in cash such that the interest income thereon is sufficient in amount to cause the future consolidated Pre Distribution Fixed Charge Ratio of Borrower to be equal to or greater than 1.30x, or (b) if the consolidated Pre Distribution Fixed Charge Ratio is equal to or greater than 1.25x, then an amount equal to the difference between the income of Borrower assuming a consolidated Pre Distribution Fixed Charge Ratio of 1.25x and the income of Borrower assuming a consolidated Pre Distribution Fixed Charge Ratio of 1.30x. The funds in such Escrow Account shall be 14 pledged as collateral to Lender (with such pledge being a first priority perfected lien in favor of Lender) to secure repayment of the Loan, pursuant to a pledge agreement or similar agreement in form and substance acceptable to Lender in its sole discretion, and with interest thereon being released to Borrower and included in future calculations of the Pre Distribution Fixed Charge Ratio. The funds in the Escrow Account shall be released by Lender to Borrower after Borrower has complied for a period of two consecutive calendar year quarters with the required consolidated Pre Distribution Fixed Charge Ratio. In no event shall Borrower be required to maintain funds in the Escrow Account in excess of the outstanding aggregate principal balance of the Loan. Lender will agree that there shall be no restriction upon Guarantor or any other Affiliate of Borrower to raise necessary funds to cure any violation by Borrower of the consolidated fixed charge ratio. SECTION VI. DEFAULT. 6.01. Events of Default. The occurrence, existence or violation of any one or more of the following shall constitute an "Event of Default" hereunder: (a) Monetary. Borrower's failure to pay within five (5) calendar days after the due date thereof any principal, interest, Yield Maintenance Amount or other payment required under the terms of this Agreement or any of the other Loan Documents; or Borrower shall fail to pay when due (but subject to any applicable grace period) any other Indebtedness or obligation of Borrower to Lender or any other Person; (b) Performance of Obligations. (i) Borrower's failure (or Guarantor's failure as to any Loan Document to which it is a party) to perform or observe any term, covenant, condition or obligation contained in this Agreement, any of the other Loan Documents other than those set forth in subsection (a) above or as otherwise provided in this Section 6.01 within ten (10) Business Days after receipt of written notice from Lender or such longer cure period as may be provided herein or in the Loan Documents; provided, however, if such default cannot be cured with such period, Borrower shall have such longer period of time to cure such default provided, in Lender's sole discretion, Borrower is proceeding with due diligence, but in no event shall such period of time exceed thirty (30) Business Days; or (ii) Borrower's failure to perform or observe any term, covenant, condition or obligation owed to Lender contained in any other loan or credit agreement or other agreement, document or instrument (other than this Agreement and the other Loan Documents), subject to applicable grace periods; (c) Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Borrower or the Guarantor to Lender in or in connection with the Loan or any of the Loan Documents, or as an inducement to Lender to make the Loan, shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; (d) Liens, Attachment; Condemnation. (i) The recording of any claim of lien against any Restaurant or the Collateral which is not expressly permitted under this Agreement or not being contested by Borrower as permitted under Section 5.01(m) of this Agreement, excluding any Released Restaurant location from the immediately preceding clause if such claim of lien does not have a Material Adverse Effect determined in the sole discretion of Lender; (ii) the Condemnation of, or occurrence of an uninsured casualty with respect to any material portion of a Restaurant which is Primary Collateral; or (iii) the sequestration or attachment of, or any levy or execution upon a Restaurant, the Collateral, or any other collateral provided by Borrower under any of the Loan Documents, which sequestration, attachment, levy or execution (iii-a) has a Material Adverse Effect and (iii-b) is not released, expunged or dismissed within thirty (30) days and before the sale of the assets affected thereby; (e) Death; Withdrawal. The death, retirement, incapacity, withdrawal or dissolution, as applicable, of: (i) Borrower; (ii) any Guarantor, or (iii) the President or Chairman of the Board of Directors of Borrower if Borrower fails to provide a substitute or replacement of any such individual with requisite industry experience within thirty (30) days after the occurrence of any such event; (f) Transfer of Property or Interest in Borrower. Except as otherwise permitted under this Agreement, Borrower shall not, without the prior written consent of Lender, sell, transfer, mortgage, pledge, hypothecate, assign, encumber or otherwise dispose of, whether voluntarily, involuntarily or by operation of law (i) any of the Collateral, (ii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Primary Collateral, or (iii) any real, tangible or intangible property involved in the operation of or related in any manner to a Restaurant which is Secondary Collateral, or sell, transfer, mortgage, pledge, hypothecate, assign, encumber or otherwise dispose of, whether voluntarily, involuntarily or by operation of law any capital stock of Borrower, except to the extent expressly permitted under this Agreement; (g) Adverse Financial Condition. Any change in the financial condition of the Borrower or of the Guarantor from the condition shown on the financial statement(s) submitted to Lender and relied upon by Lender in making the Loan, which change has a 15 Material Adverse Effect, or any other event or occurrence which has a Material Adverse Effect and notwithstanding the terms and conditions of the last clause of Section 6.01(i) and Section 6.01(j) to the contrary; (h) Termination or Revocation of Guaranty. The Guarantor or any guarantor shall terminate or revoke or attempt or purport to terminate or revoke its guaranty of Borrower's obligations to Lender; (i) Default under Franchise Agreements. Any failure by the Borrower to perform any obligation under a Franchise Agreement with Franchisor, and such failure shall not have been cured on or before the first date on which Franchisor may terminate such Franchise Agreement by reason of such failure; or any Franchise Agreement of Borrower is terminated or cancelled other than a consensual termination by each Person who is a party to a Franchise Agreement in respect of a Released Restaurant; (j) Default under Lease. Subject to Section 5.01(u), any failure by the Borrower to perform any obligation under a Lease, and such failure shall not have been cured on or before the first date on which the Landlord may terminate such Lease by reason of such failure; or any Lease of Borrower is terminated or cancelled other than a consensual termination by each Person who is a party to a Lease in respect of a Released Restaurant; (k) Default under Other Material Restaurant Agreements. Any failure of Borrower to perform its obligations under any other material contract relating to or involving a Restaurant (including, without limitation, such as a common area maintenance agreement or parking agreement), and such failure shall not have been cured within thirty (30) Business Days after receipt of written notice from Lender; (l) Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of a petition by Borrower or Guarantor for relief under the Bankruptcy Reform Act of 1978 (11 USC [section] 101-1330), or under any other present or future federal or state law regarding bankruptcy, reorganization or other debtor relief (the "Bankruptcy Code"); (ii) the filing of any pleading or an answer by Borrower or by Guarantor in any involuntary proceeding under the Bankruptcy Code or other debtor relief law which admits the jurisdiction of the court or the petition's material allegations regarding Borrower's insolvency; (iii) a general assignment by Borrower or by Guarantor for the benefit of creditors; (iv) Borrower or Guarantor applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Borrower or Guarantor or any of their respective property; or (v) the filing by or against Borrower or Guarantor of a petition seeking the liquidation or dissolution of Borrower or Guarantor or the commencement of any other procedure to liquidate or dissolve Borrower or Guarantor; provided, however, that Borrower or Guarantor, as the case may be, shall have a period of sixty (60) days to dismiss or vacate any action or matter commenced against it or them.; or (m) Involuntary Bankruptcy. The failure of Borrower or Guarantor to effect a full dismissal of any involuntary petition under the Bankruptcy Code or any other debtor relief law that is filed against Borrower or Guarantor or in any way restrains or limits Borrower, Guarantor or Lender regarding the Loan, a Restaurant, or the Collateral, prior to the earlier of the entry of any court order granting relief sought in such involuntary petition, or sixty (60) days after the date of filing of such involuntary petition. 6.02. Remedies. Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Section 6.01(l) or 6.01(m)) and at any time thereafter during the continuance of such Event of Default, Lender may, by written notice to Borrower, declare all outstanding Obligations (including the Yield Maintenance Amount) payable by Borrower hereunder, as well as all other obligations owed by Borrower to Lender under any other loan or credit agreement, to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Section 6.01(l) or 6.01(m), immediately and without notice, all outstanding Obligations (including the Yield Maintenance Amount) payable by Borrower hereunder, as well as all other obligations owed by Borrower to Lender under any other loan or credit agreement, shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Lender may exercise any other right, power or remedy granted to it by the Loan Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both. SECTION VII. MISCELLANEOUS. 7.01. Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Lender or Borrower under this Agreement or the other Loan Documents shall be in writing and telecopied, mailed or delivered to each party at its telecopier number or address set forth below (or to such other telecopier number or address for 16 any party as indicated in any notice given by that party to the other party). All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing, on the Business Day following the deposit with such service; (b) when mailed, certified, return receipt requested, postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of receipt. Lender: Atherton Capital Incorporated 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder Telephone: (415) 827-7800 Telecopier: (415) 827-7950 with a copy to Bankers Trust Company Loan Servicer: Corporate Trust and Agency Group Four Albany Street New York, New York 10006 Attention: Karla Leonffu Telephone: (212) 250-4984 Telecopier: (212) 250-6151 Borrower: Sybra, Inc. 8300 Dunwoody Place, Suite 300 Atlanta, Georgia 30350 Attention: Charles N. Hyslop Telephone: (770) 587-0290 Telecopier: (770) 594-7044 with copy to I.C.H. Corporation 9404 Genesse Avenue Suite 33 La Jolla, California 92037 Attention: James R. Arabia Telephone: (619) 587-8533 Telecopier: (619) 535-1634 with copy to Pryor, Cashman, Sherman & Flynn 410 Park Avenue New York, New York 10022 Attention: Selig D. Sacks Telephone: (212) 326-0879 Telecopier: (212) 326-0806 In any case where this Agreement authorizes notices, requests, demands or other communications by Borrower to Lender to be made by telephone or telecopy, Lender may conclusively presume that anyone purporting to be a person designated in any borrowing resolution, incumbency certificate or in any other such document delivered by Borrower to Lender, is such a person. 7.02. Expenses. Borrower shall pay on demand, (a) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in connection with the preparation, execution and delivery of, and the exercise of its duties under, this Agreement and the other Loan Documents, and the preparation, execution and delivery of amendments, consents and waivers hereunder and thereunder; and (b) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in the enforcement or attempted enforcement of any of the Obligations or in preserving any of Lender's rights and remedies. 7.03. Indemnification. To the fullest extent permitted by law, Borrower agrees to protect, indemnify, defend and hold harmless Lender and its respective shareholders, members, beneficial owners, directors, partners, managers, officers, employees, agents, 17 attorneys, successors, assigns and any affiliate thereof ("Indemnitees") from and against any and all liabilities, losses, damages (whether direct or consequential), obligations, claims, penalties, causes of action, fines, injunctions, costs or expenses of any kind or nature (including, without limitation, those arising out of, in respect of, as a consequence of or in connection with any violation or failure to comply with any Environmental Law) and from any and all suits, claims or demands (including, without limitation, in respect of or for reasonable attorney's fees and other expenses whether incurred within or outside the judicial process) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to Borrower, a Restaurant or the Loan Documents, whether prior to or after the date of this Agreement and whether prior to or after Borrower became the owner of the Restaurant including, without limitation, any use by Borrower of any proceeds of the Loans, except to the extent such liability arises from the willful misconduct or gross negligence of the Indemnitees. LENDER SHALL HAVE NO LIABILITY FOR ITS OWN NEGLIGENCE, EXCEPT FOR LIABILITY ARISING FROM ITS WILLFUL MISCONDUCT OR GROSS NEGLIGENCE. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Lender believes is covered by this indemnity, Lender shall give Borrower notice of the matter and an opportunity to defend it, at Borrower's sole cost and expense, with legal counsel satisfactory to Lender. Any failure or delay of Lender to notify Borrower of any such suit, claim or demand shall not relieve Borrower of its obligations under this Section 7.03. The obligations of Borrower under this Section 7.03 shall survive the payment and performance of the Obligations and the exercise of any rights or remedies by Lender. 7.04. Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement or any other Loan Document may be amended or waived if such amendment or waiver is in writing and is signed by Borrower and Lender provided, however, that if the Loan is sold to a trust, no such amendment or waiver may be made unless Borrower has provided to Lender an opinion of counsel satisfactory to Lender that such amendment or waiver will not affect the tax treatment of the trust. No failure or delay by Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. 7.05. Successors and Assigns. (a) Binding Effect; Conflict Between Loan Documents. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of Borrower, Lender, all future holders of the Notes and their respective successors and permitted assigns, except that Borrower may not assign or transfer any of its rights or obligations under any Loan Document without the prior written consent of Lender and the full compliance of the terms of Section 2.08. All references in this Agreement to any Person shall be deemed to include all successors and assigns of such Person. In the event that the terms, conditions and provisions of this Agreement are in conflict with the terms, conditions and provisions of any of the other Loan Documents, then the terms, conditions and provisions of this Agreement shall prevail. (b) Loan Sales and Participation; Disclosure of Information. Borrower agrees that Lender may elect, at any time, to sell, assign, securitize or grant a participation in all or any portion of Lender's rights and obligations under the Loan Documents, and that any such sale, assignment, securitization or participation may be to one or more financial institutions, private investors, public securities marketplace, trust and/or other entities, at Lender's sole discretion. Borrower further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s), trustee(s), participant(s) or such other party(s), including any servicer of the Loan or any governmental authority regulating any of the foregoing or as may be required by any governmental authority or any other authority having jurisdiction over Lender, all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property, the Collateral, and the Restaurant's operation; (b) any party connected with the Loan (including, without limitation, the Borrower, any partner of Borrower, any constituent partner or member of Borrower, any Related Person, and any guarantor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. In the event of any such sale, assignment, securitization or participation, Lender and the parties to such transaction shall share in the rights and obligations of Lender as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment, securitization or participation, Borrower further agrees that the Loan Documents shall be sufficient evidence of the obligations of Borrower to each purchaser, assignee, trustee, participant or such other party, and upon written request by Lender, Borrower shall, within fifteen (15) days after request by Lender, deliver an estoppel certificate verifying for the benefit of Lender and to any other party designated by Lender the status and the terms and provisions of the Loan in form and substance acceptable to Lender. The indemnity obligations of Borrower under the Loan Documents shall also apply with respect to any purchaser, assignee, trustee, participant or such other party. 7.06. Setoff. In addition to any rights and remedies of Lender provided by law, Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, upon the occurrence 18 and during the continuance of an Event of Default, to set-off and apply against any indebtedness, whether matured or unmatured, of Borrower to Lender (including, without limitation, the Obligations), any amount owing from Lender to Borrower. The aforesaid right of set-off may be exercised by Lender against Borrower or against any trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of Borrower or against anyone else claiming through or against Borrower or such trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by Lender prior to the occurrence of an Event of Default. Lender agrees promptly to notify Borrower after any such set-off and application made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 7.07. No Third Party Rights. Nothing expressed in or to be implied from this Agreement or any other Loan Document is intended to give, or shall be construed to give, any Person, other than the parties hereto and thereto and their permitted successors and assigns, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or any other Loan Document. 7.08. Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 7.09. JURY TRIAL. EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO ANY LOAN DOCUMENT IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT. 7.10. Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. 7.11. Recourse. Except as otherwise expressly set forth in this Section 7.11, Lender shall have no recourse against any shareholder, owner, partner, officer, director, agent or employee of or in Borrower or of or in any partner in or shareholder of Borrower (all such Persons, except to the extent any such Person is obligated under a Guaranty, referred to collectively as "Exculpated Persons") for the repayment of the Loan. Notwithstanding the provisions of this Section 7.11, nothing herein or in this Agreement, the Loan, or in any other Loan Document shall: (i) prevent Lender's recourse to Borrower, the Restaurant, the Collateral or the Property or against any Guarantor under a Guaranty; (ii) constitute a waiver, release or discharge of any Indebtedness or Obligation evidenced by the Loan or arising under or secured by this Agreement or any of the other Loan Documents, but the same shall continue until fully paid or discharged; (iii) affect or in any way limit the rights and remedies of Lender under this Agreement or under any other Loan Document; or (iv) limit the personal liability of any Exculpated Person for misappropriation or misallocation of any funds, fraud, misrepresentation or willful damage to a Restaurant, the Property or any portion thereof or for any environmental indemnity pursuant to Section 7.03. 7.12. Cumulative Rights. The rights, powers and remedies of Lender hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between Borrower and Lender relating hereto, at law, in equity or otherwise. 7.13. Survival. All representations, warranties, covenants and agreements herein contained on the part of Borrower shall be effective until the Loan is paid and performed in full, or longer as expressly provided herein. 7.14. Lender Discussions with the Franchisor. Borrower hereby authorizes Lender to discuss with the Franchisor Borrower's financial condition, operations and any other matters relating to Borrower, any Franchise Agreement, any Restaurant or any property. Borrower further (a) consents to the release to Lender by the Franchisor of any information relating to the foregoing matters and (b) instructs the Franchisor to release any information relating to the foregoing matters upon the request of Lender. IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be executed as of the day and year first above written. SYBRA, INC. (as the surviving entity of a merger with Newco), a Michigan corporation 19 By: ______________________________________ Name: Title: ATHERTON CAPITAL INCORPORATED, a Delaware corporation By: ______________________________________ Name: Title: 20 LOAN TRANCHE _____ SCHEDULE 1.01 DEFINITIONS "Additional Debt" means (i) any indebtedness or liability for borrowed money, whether or not subordinated to other Indebtedness of Borrower or the payment of the Obligations; (ii) obligations evidenced by bonds, debentures, notes, or other similar instruments; (iii) obligations for the deferred purchase price of property or services (excluding trade payables incurred in the ordinary course of business of Borrower); (iv) obligations as lessee under Capital Leases; (v) non-current liabilities in respect of unfunded vested benefits under any Plan; (vi) obligations under letters of credit; (vii) obligations under acceptance facilities; (viii) any Contingent Obligation (other than for collection or deposit in the ordinary course of business), including contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person; and (ix) obligations secured by any Liens, whether or not the obligations have been assumed. "Adjusted Free Cash Flow" means, for any specified period, the net income (loss) for the Arby's restaurant(s) specified, determined in accordance with GAAP: (a) plus, to the extent previously deducted in calculating net income (loss): (i) income taxes; (ii) interest expense; (iii) all non-cash charges including depreciation and amortization; (iv) the amount of expenses paid for regional and corporate overhead, including but not limited to automobiles, administrative fees, legal, accounting and other professional services, office supplies, travel and entertainment; and (v) non-recurring expenses, including those required by the Franchisor; (b) minus a standard management fee of 2.0% of gross sales for any 12-month period. "Affiliate" shall mean (a) any entity which Borrower or Guarantor, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, five (5%) percent or more of any class of stock or partnership interest of such entity, or (b) any Person that controls, is controlled by or is under common control with Borrower or Guarantor. For the purpose of this definition, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, partnership interest, by contract or otherwise. "Agreement" shall mean this Loan Agreement. "Asset Purchase Agreement" means that certain Asset Purchase Agreement dated as of December 23, 1996, by and among Sybra, Inc., Valcor, Inc. and USRP (as assigned to USRP by U. S. Restaurant Properties, MLP, a master limited partnership under the laws of the State of Delaware), as amended. "Borrower" shall have the meaning given to that term in clause (1) of the introductory paragraph, being the surviving entity of a merger between Sybra, Inc. and Newco, together with any other Person succeeding thereto by merger, consolidation or acquisition of Borrower's assets substantially as an entirety or any legal representative, heir, estate, successor or assignee thereof. "Business Day" shall mean any day other than a Saturday, Sunday or legal holiday or other day on which commercial banks in California are authorized or required by law to close. All references in this Agreement to a "day" or a "date" shall be to a calendar day unless specifically referenced as a Business Day. "Capital Expenditures" shall mean, for any specified period, the aggregate of all gross expenditures during such period for any assets, or for improvements, replacements, substitutions or additions therefor or thereto, which are required to be capitalized on the balance sheet of the Borrower, including the balance sheet amount of any capitalized lease obligations incurred during such period. "Capital Lease" means all leases which have been or should be capitalized on the books of the Borrower in accordance with GAAP. "Cash Payment" shall mean with respect to any Person identified, a payment or distribution by Borrower of or on account of (i) a cash dividend or distribution in respect of Borrower's capital stock, (ii) Indebtedness or any other loan or advance of 1.01-1 money, (iii) an operating or true lease, (iv) real, tangible or intangible property, or (v) cash for any reason of any kind or nature whatsoever, other than a payment by Borrower of cash in respect of (v-1) a reasonable salary, wage and bonus commensurate with employment experience which is paid by Borrower to its officers and employees, and reasonable director's fees which are paid by Borrower to its directors in the ordinary course of Borrower's business and consistent with the reasonable business plans of Borrower for the acquisition, development and operation of Arby's restaurants, subject, however, to the terms and conditions of Attachment 9 as to each Person/position noted thereon which employment relationship is acceptable to Lender, (v-2) reimbursing the directors, officers and employees of Borrower for travel, entertainment and miscellaneous expenses (miscellaneous expenses as construed under GAAP) incurred by such director, officer or employee on behalf of Borrower, (v-3) reimbursing Guarantor for the reasonable legal, accounting, tax and insurance expenses and fees incurred and paid by Guarantor on behalf of Borrower, along with reimbursement to the Guarantor for any payment made by Guarantor, for administrative convenience purposes, of any salary set forth on Attachment 9, and (v-4) reimbursing Guarantor on a one time basis for commitment fees, application deposit, Deloitte & Touche expenses and closing costs incurred and paid by Guarantor on behalf of Borrower in connection with this Agreement and the transactions contemplated hereby, but not to exceed in any event the aggregate sum of $500,000 as evidenced by a reasonably detailed accounting delivered by Guarantor to Lender; provided that upon reimbursement of such sums by Borrower to Guarantor, Borrower shall have as of the Closing Date a collected cash bank account balance equal to or greater than $3,000,000 after payment of such reimbursement as if such reimbursement was paid on the Closing Date. "Closing Date" shall mean April 30, 1997, or such other date as may be agreed to by Lender and Borrower, provided that such other date is not later than May 16, 1997. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" shall mean the meaning given to that term in the Security Agreement. "Condemnation" means any condemnation or other taking or temporary or permanent requisition of any Collateral or a Restaurant, any interest therein or right appurtenant thereto, or any change of grade affecting the Collateral or any Restaurant, or any part thereof, as the result of the exercise of any right of condemnation or eminent domain. A transfer in lieu or anticipation of Condemnation shall be deemed to be a Condemnation. "Contingent Obligation" means with respect to any Person at the time of any determination, without duplication, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or otherwise: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any direct or indirect security therefor, (b) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain working capital, equity capital or other financial statement condition of the primary obligor so as to enable the primary obligor to pay such Indebtedness or otherwise to protect the owner thereof against loss in respect thereof, or (d) entered into for the purpose of assuring in any manner the owner of such Indebtedness of the payment of such Indebtedness or to protect the owner against loss in respect thereof; provided, that the term "Contingent Obligation" shall not include endorsements for collection or deposit, in each case in the ordinary course of business. "Contractual Obligation" of any Person shall mean, any indenture, note, security, deed of trust, mortgage, security agreement, lease, guaranty, instrument, contract, agreement or other form of obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound, and shall include, in the case of Borrower, without limitation, each Franchise Agreement and each Lease. "Current Assets" means as of any date, the current assets of the Borrower determined in accordance with GAAP. "Current Liabilities" means as of any date, the current liabilities of the Borrower determined in accordance with GAAP. "Current Ratio" means as of any date (i) the sum total of Borrower's Current Assets less: (a) all accounts receivable other than those arising through credit card sales; (b) receivables from Guarantor or any Affiliate; and (c) cash in the Escrow Account, with such foregoing sum, divided by (ii) the sum total of Borrower's Current Liabilities less the current payment portion of Indebtedness, each as determined in accordance with GAAP. 1.01-2 "Default" shall mean any event or circumstance not yet constituting an Event of Default but which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default. "Default Rate" shall mean the higher of (i) the rate specified in Section 2.01(b) plus two percent (2%) or (ii) the reference rate publicly announced by Bank of America, NT&SA, San Francisco, California, as it may change from time to time, plus two percent (2%). "Determination Date" shall also mean the date of the Prepayment Date. "Environmental Indemnity Agreement" shall mean that certain Environmental Indemnity Agreement substantially in the form of Exhibit J and to be dated of even date herewith. "Environmental Laws" means all present and future Legal Requirements relating to the protection of human health and safety or the environment, including, without limitation, (a) all Legal Requirements, pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of hazardous materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the presence, generation, discharge, release, removal, manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, emissions, contaminants, or hazardous, radioactive or toxic substances, materials, or wastes, whether solid, liquid, or gaseous in nature; and (b) all Legal Requirements pertaining to the protection of the health and safety of employees or the public. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is a member of a group of which the Borrower is a member and which is treated as a single employer under Section 414 of the Code. "Escrow Account" shall mean an interest bearing deposit, savings or money market account in the name of Borrower which, is maintained at a financial institution and with the terms of such account each being acceptable to Lender in its sole discretion. "Estoppel" shall mean an estoppel agreement to be executed and delivered by a Landlord for each Lease in respect of a Restaurant which is Primary Collateral, in form and substance acceptable to Lender; provided that in no event shall the term Estoppel mean any Lease for any such Restaurant which is located in a "mall." "Event of Default" shall have the meaning given to that term in Paragraph 6.01. "Exculpated Person" shall the meaning indicated in Section 7.11. "Financial Statements" shall mean, with respect to any accounting period for any Person, statements of income and of changes in cash flow of such Person for such period, and balance sheets of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding annual financial review, all prepared in reasonable detail. "Franchise Agreement" shall mean each License, License Agreement, Franchise Agreement or similar agreement between Franchisor and Borrower with respect to the operation of a Restaurant. "Franchisor" shall mean Arby's, Inc., a __________________ corporation, or its successors or assigns under the Franchise Agreement. "GAAP" shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time, consistently followed. 1.01-3 "Governmental Charges" shall mean all levies, assessments, fees, claims or other charges imposed by any governmental authority upon or relating to (i) Borrower, (ii) the Loan, (iii) employees, payroll, income or gross receipts of Borrower, or (iv) the ownership or use of any of its assets by Borrower. "Guarantor" shall mean I.C.H. Corporation, a Delaware corporation. "Guaranty Agreement" shall mean that certain Guaranty Agreement substantially in the form of Exhibit K and to be dated of even date herewith. "Impositions" shall mean all taxes, assessments and other governmental charges, ground rents, or other rents, rates and charges, excises, levies, fees and other charges (public or private) which may be assessed, levied, confirmed or imposed on, or in respect of or be a lien upon the Collateral or the Restaurant or any part thereof or any interest therein. "Indebtedness" shall mean and include (i) with respect to any Person, (a) all items of indebtedness and liabilities which, in accordance with GAAP, would be included in determining liabilities that are shown on the liability side of the balance sheet of such Person, including, without limitation, Additional Debt and Capital Leases, (b) all indebtedness and liabilities of other Persons assumed or guaranteed by such Person or in respect to which such Person is secondarily or contingently liable whether by any agreement to acquire indebtedness and liabilities or to supply or advance funds or otherwise, and (c) all indebtedness and liabilities of other Persons secured by any Lien in any property of such Person; and, (ii) with respect to any Restaurant, (a) all items of indebtedness and liabilities which, in accordance with GAAP, would be included in determining liabilities that are shown on the liability side of the balance sheet of such Restaurant, (b), to the extent such indebtedness or liability specifically relates to the Restaurant or depends on Restaurant cash flow for repayment (as provided in an assumption of debt, guaranty or other agreement), all indebtedness and liabilities of other Persons assumed or guaranteed by any Person or in respect of which such Person is secondarily or contingently liable whether by any agreement to acquire indebtedness and liabilities or to supply or advance funds or otherwise and (c) all indebtedness and liabilities secured by any Lien on any property used in the operation of such Restaurant, to the extent not included pursuant to clauses (a) and (b). "Insurance Proceeds" means, at any time, all insurance proceeds or payments to which Borrower may be or become entitled by reason of any casualty under the insurance policies with respect to a Restaurant required to be maintained pursuant to this Agreement plus (i) if Borrower fails to maintain any of the insurance policies required under this Agreement, the amounts which would have been available with respect to such casualty had Borrower maintained such insurance policies; and (ii) all insurance proceeds and payments to which Borrower may be or become entitled, including, without limitation, pursuant to title insurance or by reason of any casualty under any other insurance policies coverage maintained by Borrower with respect to the Restaurant. "Intercreditor Agreement (USRP)" shall mean that certain Intercreditor Agreement by and among the USRP, the Borrower and the Lender. "Investment" shall mean (i) 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), (ii) any acquisitions of real or personal property (other than real and personal property acquired in the ordinary course of business for the operation of an Arby's restaurant), (iii) any purchase or commitment or option to purchase stock or other debt or equity securities or instrument of or any interest in another Person, or other form of infusion of capital into a Person, or any integral part of any business or the assets comprising such business or part thereof, and (iv) any loan, extension of credit or advance of money to a Person. The amount of any Investment shall be the original cost or amount of such Investment plus the cost or amount of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Landlord" shall mean each landlord, lessor or similar person in respect of a Lease. "Lease" shall mean each Lease Agreement, Ground Lease Agreement or similar agreement covering real property upon which a Restaurant is located. "Leasehold Mortgage" shall mean that certain Leasehold Mortgage (or Leasehold Deed of Trust or Deed to Secure Debt), Assignment of Leases and Rents and Fixture Filing, in respect of each Lease for a Restaurant which is Primary Collateral, substantially in the form of Exhibit F (or in such form as required by local law); provided that in no event shall the term Leasehold Mortgage apply to any Lease for any such Restaurant which is located in a "mall." 1.01-4 "Legal Requirements" shall mean all laws, rules, regulations, judgments, orders, permits, licenses, authorizations and other requirements of and agreements with all governments, department agencies, courts and officials, which now or hereafter shall be applicable to the Collateral or the Restaurant or any part thereof or any use or condition thereof including, without limitation, all Environmental Laws. "Lender" shall have the meaning given to that term in clause (2) of the introductory paragraph hereof. "Lien" shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction. "Loan" shall have the meaning given to that term in Section 2.01(a). "Loan Documents" shall mean and include this Agreement, each Note, the Security Agreement, each Leasehold Mortgage (or Leasehold Deed of Trust), each Estoppel, each Mortgage Non-Disturbance Agreement, the Negative Pledge Agreement, the Environmental Indemnity Agreement, the Guaranty Agreement, the Intercreditor Agreement (USRP), the Solvency Certificate and all other documents, instruments and agreements delivered to Lender in connection with this Agreement. "Loan Maturity Date" shall have the meaning given to that term in Section 2.01(c). "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of a Restaurant which is Primary Collateral; (b) the ability of Borrower to pay or perform the Obligations in accordance with the terms of this Agreement and the other Loan Documents; (c) the rights and remedies of Lender under this Agreement, the other Loan Documents or any related document, instrument or agreement; or (d) the value or use of the Collateral as to a Restaurant which is Primary Collateral, Lender's Liens in such Collateral or the perfection or priority of such Liens; or (e) any Franchise Agreement or any Lease, excluding a Franchise Agreement or a Lease which has been consensually terminated in respect of a Released Restaurant where such consensual termination does not create, cause or constitute a Material Adverse Effect under sub-paragraphs (a), (b), (c) or (d) set forth above in this Definition. "Merger" shall mean the merger of Newco with and into Sybra, Inc. "Memorandum of Lease" means a memorandum of lease which set forth the material terms of a Lease in respect of a Restaurant which is part of the Primary Collateral. "Minimum Liquidity Level" shall have the meaning given to that term in Section 5.01(s). "Mortgage Non-Disturbance Agreement" shall mean the Mortgage Non-Disturbance Agreement to be executed and delivered by any Person who holds a Lien against the real property upon which any Primary Collateral is located, substantially in the form of Exhibit I (or in such form as required by local law); provided that in no event shall the term Mortgage Non-Disturbance Agreement apply to any Lease for any such Primary Collateral which is located in a "mall." "Multiemployer Plan": means a multiemployer plan, as such term is defined in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date, within the five years preceding the Closing Date, or at any time after the Closing Date) for employees of the Borrower or any ERISA Affiliate. "Note" shall have the meaning given to that term in Section 2.05. "Negative Pledge Agreement" shall mean that certain Negative Pledge Agreement covering the property described therein in respect of the Secondary Collateral, substantially in the form of Exhibit H and to be dated of even date herewith. "Negative Rate Movement" shall mean with respect to any Note being prepaid and any Determination Date, an amount equal to the greater of (i) the difference of (x) the Treasury Rate on the Closing Date minus (y) the Treasury Rate on such Determination Date, and (ii) zero. 1.01-5 "Newco" shall mean SY Acquisition Corp., a Delaware corporation, which is the wholly owned subsidiary corporation of Guarantor. "Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by Borrower to Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of this Agreement or any of the other Loan Documents, including, without limitation, all interest, Yield Maintenance Amount, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to Borrower or payable by Borrower hereunder or thereunder. "Origination Fee" shall have the meaning given to that term in Paragraph 2.02. "Payment Date" shall mean with respect to any Note being prepaid, each date after the Determination Date on which the Borrower is required to make a payment of principal under such Note. "PBGC" means the Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof. "Permitted Liens" shall mean and include: (a) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith, as provided in Subparagraph 5.01(m); (b) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith, as provided in Subparagraph 5.01(m); (c) Deposits under workers' compensation, unemployment insurance and social security laws or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds or to secure indemnity, performance or other similar bonds in the ordinary course of business; (d) The Liens described in Schedule 2.01, but only to the extent that the amount of the Indebtedness secured by any such Lien does not at any time exceed the amount of such Indebtedness so secured by such Lien on the date of this Agreement or at any time after the date of this Agreement; and (e) Liens securing the Obligations. "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, an unincorporated association, a joint venture or other entity or a governmental authority. "Plan" means each employee benefit plan (whether in existence on the Closing Date or thereafter instituted), as such term is defined in Section 3 of ERISA, maintained for the benefit of employees, officers or directors of the Borrower or of any ERISA Affiliate. "Post Distribution Fixed Charge Ratio" shall mean the Pre Distribution Fixed Charge Ratio adjusted to take into account the amount of any Cash Payment(s) and the amount of any Investment, as illustrated on Attachment 7 hereto. "Pre Distribution Fixed Charge Ratio" shall mean (i) the sum of the Adjusted Free Cash Flow and all rent expense (defined as building and ground operating lease expense plus percent rent plus capitalized building lease expense for any Arby's restaurants specified (net of principal and interest), minus rent on regional and corporate offices and inactive units) during any period in determination, divided by (ii) the sum of all payments required to be made by Borrower during any period in determination (a) with respect to all of its Indebtedness including any payments pursuant to any lease(s) required to be capitalized in accordance with GAAP for, related in any manner to or in respect of the Arby's restaurants specified and (b) pursuant to any real property leases for the Arby's restaurants specified, as the foregoing calculation is illustrated for example purposes on Attachment 6 hereto; it being the purposes and 1.01-6 intent of Lender and Borrower in regard to the term "specified restaurants" that the Pre Distribution Fixed Charge Ratio at times may be applied to only the Restaurants as noted in Section 2.07(c) or all of the Arby's restaurants of Borrower on a consolidated basis. "Prepayment Date" shall have the meaning given to that term in Paragraph 2.03(a). "Primary Collateral" means each Restaurant described on Attachment 2. "Principal Amount(s)" shall mean, with respect to any Note being prepaid, the amount of principal due on a Payment Date "Proforma Basis" shall mean the calculation of the Pre Distribution Fixed Charge Ratio over the required prior monthly period and with giving full effect to any contemplated Indebtedness and payments thereon as if the same had been incurred by Borrower on the first calendar day on which such required prior monthly period began. "Property" shall mean the real property described in a Lease. "Related Persons" shall mean collectively, all Affiliates and Subsidiaries of Borrower. "Released Restaurant": shall mean (i) each Primary Collateral location were the liens against which are required to be released by Lender under Section 2.07(c) if Borrower has fully complied with the terms and conditions of Section 2.07(c), (ii) the Secondary Collateral on the date that Lender is required to release Borrower from the terms and conditions of the Negative Pledge Agreement in accordance with Section 2.07(d), (iii) each Restaurant set forth on Attachment 8 which is denoted as being a Resturant that may be closed, and (iv) a Restaurant of Borrower located in the State of Florida which was sold by Borrower if Borrower has fully complied with the terms and conditions of Section 2.07(c) to the extent required under Section 5.02(b) with respect to a such Restaurant located in the Sate of Florida. "Remaining Average Life" shall mean, with respect to any Note being prepaid and the Closing Date, the number of years (calculated to the nearest one-twelfth) obtained by dividing (i) the sum of the Remaining Principal Payments for such Note into (ii) the sum of the products obtained by multiplying (a) each Remaining Principal Payment by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between the first day of the month following the date of such Note (or the date of the Note, if such date is the first day of the month) and the Payment Date for such Remaining Principal Payment. "Remaining Principal Payment(s)" shall mean with respect to any Note being prepaid and any Determination Date, the Principal Amount(s) with respect to such Note that would be or become due on or after such Determination Date. "Restaurant" shall mean each Arby's restaurant listed on Attachment 1. "Secondary Collateral" means each Restaurant described on Attachment 3. "Security Agreement" shall mean the Security Agreement covering the property described therein in respect of the Primary Collateral, substantially in the form of Exhibit G (or in such form as required by local law) and to be dated of even date herewith. "Solvency Certificate" shall mean the Solvency Certificate in the form of Exhibit L and to be dated of even date herewith. "Stock Purchase Agreement" shall mean that certain Stock Purchase Agreement dated as of February 7, 1997, by and between Valcor, Inc., a Delaware corporation, and Newco (as the successor in interest through assignment by Guarantor to Newco), as amended. "Subsidiary" shall mean with respect to any Person (including Borrower) in determination (a) any corporation of which more than 50% of the issued and outstanding stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such a Person's other Subsidiaries, (b) any partnership, joint venture, or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such 1.01-7 partnership, joint venture or other association is at the time owned and controlled by such a Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other subsidiaries, and (c) any other entity included in the Financial Statements of such Person on a consolidated basis. "Taxes" shall have the meaning given to such term in Section 2.06. "Treasury Rate" shall mean, as of any Determination Date with respect to a Note being prepaid, the yield to maturity implied by the monthly equivalent of either (i) the yield reported as of 10:00 a.m. (New York City time) on the business day next preceding the Determination Date on the display designated at "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury Securities having a constant maturity equal to the Remaining Average Life of such Note, or (ii) if such yields have not been reported as of such time or yields reported at such time shall not be ascertainable, the Treasury Constant Maturity Series yield reported for the latest day for which such yields have been so reported as of the business day next preceding the Determination Date in the Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury Securities having a constant maturity equal to the Remaining Average Life of such Note. "USRP" means U. S. Restaurant Properties Operating L.P., a Delaware limited partnership or its Affiliates. "USRP Properties" means any real property and improvements thereon purchased by USRP from Borrower under the Asset Purchase Agreement. "USRP Lease Agreement" means each Master Lease Agreement, Lease Agreement or similar agreement, between Borrower and USRP under which USRP is leasing to Borrower any USRP Properties. "Yield Maintenance Amount" means, at any Determination Date with respect to any Note being prepaid, an amount equal to the sum of: (1) the greater of: (x) the sum of the amounts obtained by discounting to the Determination Date, in accordance with accepted financial practice and at a discount factor equal to the Treasury Rate, for each scheduled Payment Date an amount equal to the product of (i) the Remaining Principal Payments on such Payment Date and (ii) one-twelfth of the Negative Rate Movement; and (y) One percent (1%) of the unpaid principal balance of such Note; plus (2) the sum of the amounts obtained by discounting to the Determination Date, in accordance with accepted financial practice and at a discount factor equal to a rate of ten percent (10%) per annum, for each future scheduled Payment Date an amount equal to the product of (x) the Remaining Principal Payments on such Payment Date and (y) 0.133333% (13.3333 basis points). 1.01-8 EX-10.05 5 FORM OF NOTE LOAN TRANCHE ____ EXHIBIT A NOTE $[ ],000.00 ___________, 1997 FOR VALUE RECEIVED, SYBRA, INC., a Michigan corporation, as the surviving entity of a merger with Newco (together with its permitted successors and assigns, "Borrower"), hereby promises to pay to the order of ATHERTON CAPITAL INCORPORATED, a Delaware corporation, and its successors and assigns ("Lender"), the principal sum of [ ] DOLLARS AND NO/100 ($[ ],000.00) and all other amounts advanced by Lender to or on behalf of Borrower pursuant to the Loan Agreement (as hereinafter defined) or any other Loan Document, and interest thereon from the date hereof until the maturity hereof, at the rate of __________________________ percent ([_______.______]%) per annum, plus interest on any overdue principal, the Yield Maintenance Amount, if any, and interest at the lesser of the Default Rate, or the maximum rate allowed under applicable law. All computations of interest shall be based upon a 360-day year of twelve 30-day months, and, in the case of any partial month, on the actual number of days elapsed in such month. Borrower shall pay to Lender monthly principal and interest payments on this Note on the first day of the second calendar month subsequent to the date on which the loan proceeds are funded into escrow in connection with the closing of the loan (the "Disbursement Date") and shall continue on the first day of each calendar month thereafter (a "Loan Installment Date") for a period of ______ (____) months through ______________________________, _____ (the "Loan Maturity Date"). All subsequent monthly payments shall consist of a combined principal and interest installment of $_________________; provided , however, that the payment due on the Loan Maturity Date shall be in the amount necessary to pay all remaining unpaid accrued interest due on the Loan. Borrower shall make all payments hereunder in lawful money of the United States and in same day or immediately available funds. This Note is the Note referred to in the Loan Agreement, dated as of June __, 1996, between Borrower and Lender (together with all supplements and amendments thereto, the "Loan Agreement") which is incorporated herein by reference and is subject to the provisions of and entitled to the benefits of the Loan Agreement, including, without limitation, the provisions regarding the interest rate, Default Rate, Yield Maintenance Amount and principal payments; restrictions on and requirements for prepayment; and rights of acceleration. This Note also is subject to, secured by, and has the benefit of the other Loan Documents. Terms used herein have the meanings assigned to those terms in the Loan Agreement, unless otherwise defined herein. Should the indebtedness represented by this Note or any part hereof be collected at law or in equity or in bankruptcy, receivership or other court proceeding, or should this Note be placed in the hands of attorneys for collection after default, the Borrower agrees to pay, in addition to the principal, Yield Maintenance Amount, if any, interest due and payable hereon and any other sums due and payable hereon, all costs of collecting or attempting to collect this Note, including reasonable attorneys' fees and expenses (including those incurred in connection with any appeal). Borrower and all endorsers and guarantors of this Note hereby waive presentment, demand, notice, protest, stay of execution, and all other defenses to payment generally, assent to the terms hereof, and agree that any renewal, extension, or postponement of the time for payment or any other indulgence or any substitution, exchange, or release of collateral or the additional release of any person or entity primarily or secondarily liable, may be affected without notice to and without releasing Borrower, any endorser or any guarantor from any liability hereunder or under any related guaranty. Neither this Note, the Loan Agreement nor any other Loan Document shall require the payment or permit the collection of interest or any late payment charge in excess of the maximum rate permitted by law. If herein or in the Loan Agreement or any other Loan Document any excess of interest or late payment charge in such respect is provided for or shall be adjudicated to be so provided for, neither the Borrower, nor its successors or assigns shall be obligated to pay such interest or late payment charge in excess of the maximum amount permitted by law, and the right to demand the payment of any such excess shall be and hereby is waived, and this provision shall control any other provision of this Note or the Loan Agreement or any other Loan Document. This Note, the Loan Agreement and the other Loan Documents are not subject to any valid right of rescission, set-off, abatement, diminution, counterclaim or defense as against Lender, including the defense of usury, and the operation of any of the terms A-1 of the loan, or the exercise of any right thereunder, will not render the Loan unenforceable, in whole or in part, or subject to any right of rescission, set-off, abatement, diminution, counterclaim or defense, including the defense of usury, and Lender has not taken any action which would give rise to the assertion of any of the foregoing and no such right of rescission, set-off, abatement, diminution, counterclaim or defense, including the defense of usury, has been asserted with respect thereto. Borrower shall pay fees and expenses of Lender as provided in the Loan Agreement. This Note shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. IN WITNESS WHEREOF, the undersigned has executed and delivered this Note as of the date and year first above written. SYBRA, INC., a Michigan corporation By: ____________________________ Name: Title: A-2 EX-10.06 6 FORM OF LEASEHOLD MORTGAGE LOAN TRANCHE ____ This instrument was prepared by and, when recorded, should be returned to: ATHERTON CAPITAL INCORPORATED 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder ================================================================================ LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING dated as of _________________, 1997 from SYBRA, INC. a Michigan corporation, as Mortgagor, to ATHERTON CAPITAL INCORPORATED a Delaware corporation as Mortgagee ================================================================================ Property: [ ] County, __________________(Restaurant No. ____) LOAN TRANCHE ___ LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING (herein called this "Leasehold Mortgage") dated as of ___________________, 1997, is executed by SYBRA, INC., a Michigan corporation, as the surviving entity of a merger with Newco, as the mortgagor (herein, together with its successors and assigns, called the "Mortgagor"), with a mailing address at [ ], Michigan _________, to ATHERTON CAPITAL INCORPORATED, a Delaware corporation, as the mortgagee (herein, together with its successors and assigns, called the "Mortgagee"), with a mailing address at 1001 Bayhill Drive, Suite 155, San Bruno, California 94066. RECITALS: A. Loan Agreement. Reference is hereby made to that certain Loan Agreement (the "Loan Agreement") dated as of the date hereof by and between Mortgagor, as borrower, and Mortgagee, as lender. Pursuant to the Loan Agreement, Mortgagee has agreed to loan certain funds to Mortgagor (the "Loan") and Mortgagor has executed and delivered to Mortgagee those certain promissory notes evidencing Mortgagor's obligation to repay the Loan (individually a "Note" and collectively as the "Note"). B. Secured Obligations. The obligations secured by this Leasehold Mortgage (the "Obligations") are comprised at any time of the following: (i) the full and punctual payment by Mortgagor when due of (a) all principal of and interest on the Loan and the Note, the aggregate principal amount as of the date hereof is [ ] Dollars and No/100 ($[ ],000.00); and (b) all other amounts payable by Mortgagor pursuant to the Loan Agreement, the Note or any other Loan Document; (ii) the full and punctual payment when due of all amounts payable by Mortgagor under this Leasehold Mortgage, including, without limitation, indemnification obligations and advances made to protect the Subject Property; (iii) the performance and observance by Mortgagor of each other term, covenant, agreement, requirement, condition and other provision to be performed or observed by Mortgagor under any Loan Document; and (iv) the performance and observance by Mortgagor of each other term, covenant, agreement, requirement, condition and other provision to be performed or observed by Mortgagor under all amendments, supplements, consolidations, replacements, renewals, extensions or other modifications of the foregoing, in each case whether now existing or hereafter arising. The Obligations shall include, without limitation, any interest, Yield Maintenance Amount, costs, fees and expenses which accrue on or with respect to any of the foregoing, whether before or after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of Mortgagor. GRANTING CLAUSES NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for the purpose of securing the due and punctual payment, performance and observance of the Obligations and intending to be bound hereby, Mortgagor hereby grants, conveys, mortgages, transfers and assigns to Mortgagee as expressly set forth below, and for the purpose and upon the terms and conditions hereinafter set forth, with power of sale and right of entry and possession, subject to the provisions of Section 6.15, all of the property and rights described in the following Granting Clauses (all of which property and rights are herein collectively called the "Subject Property"), to wit: GRANTING CLAUSE I. Land. All estate, right, title and interest of Mortgagor, if any, in, to, under or derived from those certain lots, pieces, tracts or parcels of land located in certain cities and/or counties in the State of ____________________, more particularly described in Exhibit A, Part I attached hereto and incorporated herein by this reference (the "Real Estate"; together with the Leasehold Estate, herein called the "Land"). Leasehold Estate. All estate, right, title and interest of Mortgagor in, to, under or derived from the lease described in Exhibit A, Part II (the "Site Lease") affecting the Real Estate (the "Leasehold Estate"); together with all amendments, supplements, consolidations, extensions, renewals and other modifications of the Site Lease now or hereafter entered into in accordance with the provisions thereof; together with all other, further, additional or greater estate, right, title or interest of Mortgagor in, to, under or derived from the Real Estate, the Leasehold Estate and the Improvements now or hereafter located thereon which may at any time be acquired by Mortgagor by the terms of the Site Lease by reason of the exercise of any option thereunder or otherwise. GRANTING CLAUSE II. Improvements. All right, title and interest of Mortgagor, if any, in, to, under or derived from all buildings, structures, facilities and other improvements of every kind and description now or hereafter located on the Land or attached to the improvements which by the nature of their location thereon or attachment thereto are real property under applicable law (the foregoing being collectively the "Improvements"; and the Land with the Improvements thereon and Equipment therein and Appurtenant Rights thereto being collectively called the "Property"). GRANTING CLAUSE III. Equipment. All estate, right, title and interest of Mortgagor in, to, under or derived from all machinery, equipment, fixtures and accessions thereof and renewals, replacements thereof and substitutions therefor, and all other customary franchise fast food restaurant equipment and other tangible property of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Land, or usable exclusively in connection with the present or future operation and occupancy of the Land or the Improvements (hereinafter collectively called the "Equipment"). GRANTING CLAUSE IV. Appurtenant Rights. All estate, right, title and interest of Mortgagor, if any, in, to, under or derived from all tenements, hereditaments and appurtenances now or hereafter relating to the Property; all development, operating or similar rights appurtenant to the Land (including, without limitation, all rights arising from reciprocal access agreements, use or development agreements, and parking agreements); and all easements, licenses and rights of way now or hereafter appertaining to the Property (hereinafter collectively called "Appurtenant Rights"). GRANTING CLAUSE V. General Intangibles, Payment Rights and Agreements. All estate, right, title and interest of Mortgagor in, to, under or derived from all contract rights, chattel paper, instruments, general intangibles, accounts, guaranties and warranties, letters of credit, and documents, in each case relating to the Property or to the present or future operation or occupancy of the Property, and all plans, specifications, maps, surveys, studies, records, insurance policies, guarantees and warranties, all relating to the Property or to the present or future operation or occupancy of the Property, all management contracts, all supply and service contracts for water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utilities relating to the Property (the foregoing being herein collectively called the "Agreements") and all other agreements affecting or relating to the use, enjoyment or occupancy of the Land or the Equipment. GRANTING CLAUSE VI. Leases. All estate, right, title and interest of Mortgagor in, to, under and derived from any lease, tenancy, subtenancy, license, concession or other occupancy agreement relating to the Property (together with all amendments, supplements, consolidations, replacements, restatements, extensions, renewals and other modifications of any thereof) (the "Leases"), other than the Site Lease assigned under Granting Clause I, now or hereafter in effect, whether or not of record; and the right to bring actions and proceedings under the Lease or for the enforcement thereof and to do anything which Mortgagor or any lessor is or may become entitled to do under the Lease. GRANTING CLAUSE VII. 2 Rents, Issues and Profits. All estate, right, title and interest of Mortgagor in, to, under or derived from all rents, royalties, issues, profits, receipts, revenue, income, earnings and other benefits now or hereafter accruing with respect to all or any portion of the Property, including all rents and other sums now or hereafter payable pursuant to the Leases; and all other claims, rights and remedies now or hereafter belonging or accruing with respect to the Property, including oil, gas and mineral royalties (herein collectively called the "Rents"), all of which Mortgagor hereby irrevocably directs be paid to Mortgagee, subject to the license granted to Mortgagor pursuant to Section 5.07, to be held, applied and disbursed as provided herein. GRANTING CLAUSE VIII. Permits. All estate, right, title and interest of Mortgagor in, to, under or derived from all licenses, certificates, variances, consents and other permits now or hereafter pertaining to the Property and all estate, right, title and interest of Mortgagor in, to, under or derived from all tradenames or business names relating to the Property or the present or future operation or occupancy of the Property (herein collectively called the "Permits"), excluding, however, from the grant under this Granting Clause (but not the definition of the term "Permits" for the other purposes hereof) any Permits which cannot be transferred or encumbered by Mortgagor without causing a default thereunder or a termination thereof. GRANTING CLAUSE IX. Proceeds and Awards. All estate, right, title and interest of Mortgagor in, to, under or derived from all proceeds of any sale, transfer, taking by Condemnation (or any proceeding or purchase in lieu thereof), whether voluntary or involuntary, of any of the Subject Property described above, including all Insurance Proceeds and awards and title insurance proceeds, now or hereafter relating to any of the Subject Property, all of which Mortgagor hereby irrevocably directs be paid to Mortgagee to the extent provided hereunder, to be held, applied and disbursed as provided in this Leasehold Mortgage. TO HAVE AND TO HOLD the Subject Property unto Mortgagee, its successors and assigns, under and subject to the terms and conditions of this Leasehold Mortgage, including, but not limited to, Section 6.15, and for the security and enforcement of the prompt and complete payment and performance when due of all of the Obligations and the performance and observance by Mortgagor of all covenants, obligations and conditions to be performed or observed by Mortgagor pursuant to the Loan Agreement, the Note, and the other Loan Documents. PROVIDED, HOWEVER, that this Leasehold Mortgage is upon the condition that, if Mortgagor shall pay in full all of the Obligations and perform and observe all such covenants, obligations and conditions, this Leasehold Mortgage shall cease, terminate pursuant to and in accordance with Section 6.02 and, thereafter, be of no further force effect (except as provided in Sections 4.01, 4.02 and 5.06 hereof); otherwise this Leasehold Mortgage shall, subject to the provisions of Section 6.15, remain and be in full force and effect. FURTHER PROVIDED, that Mortgagee may from time to time release or reconvey all or a portion of the Subject Property, in accordance with the terms and conditions of the Loan Agreement and applicable law. MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Capitalized terms used, but not otherwise defined herein, are defined in, or by reference to the Loan Agreement and have the same meanings herein as therein. ARTICLE II CERTAIN WARRANTIES AND COVENANTS OF MORTGAGOR SECTION 2.01. Authority and Effectiveness. (a) Mortgagor represents, warrants and covenants that (i) Mortgagor is and shall be a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation or organization, and qualified to do business and in good standing in the state in which the Property is located and has and will have all 3 governmental licenses, authorizations, consents and other qualifications required to carry on its business as now conducted, and, subject to the provisions of Section 6.15, to execute, deliver and perform this Leasehold Mortgage; (ii) the execution, delivery and performance by Mortgagor of this Leasehold Mortgage are within Mortgagor's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not and, subject to the provisions of Section 6.15, will not contravene, or constitute a default under, any provision of the organizational documents of Mortgagor or of any agreement, judgment, injunction, order, decree or other instrument binding upon Mortgagor or relating to the Property; and (iii) subject to the provisions of Section 6.15, this Leasehold Mortgage constitutes a legal, valid, binding and enforceable agreement of Mortgagor. (b) Mortgagor shall cause the representations and warranties in subsection (a) of this Section to continue to be true in each and every respect at all times prior to the termination of this Leasehold Mortgage. SECTION 2.02. Title and Further Assurances. (a) Subject to the provisions of Section 6.15, Mortgagor hereby represents and warrants to Mortgagee that: (i) Mortgagor is the owner of a valid and subsisting leasehold interest in the Land and the Improvements and holds good and marketable title to the Improvements, the Equipment and the other Subject Property, free from all liens, security interests, Leases, charges or encumbrances whatsoever, except for such liens as are permitted under the Loan Agreement. Notwithstanding anything else herein to the contrary, Mortgagor makes no representation or warranty with respect to any interest in the fee to the real property upon which the Subject Property is located (the "Fee Interest") or to any rents or income arising therefrom; (ii) Mortgagor has good and lawful right to mortgage the Subject Property to Mortgagee without the consent of any Person other than those consents which have been obtained; (iii) the lien created by this Leasehold Mortgage constitutes a valid, binding and enforceable lien on the Subject Property; and (iv) the Site Lease creates and constitutes in the tenant thereunder a valid and subsisting leasehold interest in the Leasehold Estate; the Site Lease has not been modified or amended, except as disclosed to Mortgagee in writing; there is no default under the Site Lease, all rents due have been paid in full; no action has commenced and is pending to terminate the Site Lease; and Mortgagor is the owner of the leasehold interest under the Site Lease and Mortgagor is the owner of the Improvements, in each case subject to the provisions of the Site Lease. (b) Subject to the provisions of Section 6.15, Mortgagor shall (i) cause the representations and warranties in subsection (a) of this Section to continue to be true in each and every respect at all times prior to the termination of this Leasehold Mortgage; and (ii) preserve, protect, warrant and defend (A) the estate, right, title and interest of Mortgagor in and to its Subject Property (B) the validity, enforceability and priority of the lien this Leasehold Mortgage, and (C) the right, title and interest of Mortgagee and any purchaser at any sale of the Subject Property hereunder or relating hereto. (c) Upon the recording of this Leasehold Mortgage in the county recording office of the county in which the Land is located, the lien of this Leasehold Mortgage shall be a perfected mortgage lien and fixture filing on the Subject Property. (d) Subject to the provisions of Section 6.15, Mortgagor shall perform all acts that may be necessary to continue, maintain, preserve, protect and perfect the Subject Property, the lien granted to Mortgagee therein and the perfected priority of such lien. Upon request by Mortgagee, Mortgagor shall at its sole cost and expense (i) promptly correct any defect or error which may be discovered in this Leasehold Mortgage or any financing statement or other document relating hereto; and (ii) promptly execute, acknowledge, deliver, record, and re-record, register and re-register, and file and re-file this Leasehold Mortgage and any fixture filings, financing statements or other documents which Mortgagee may reasonably require from time to time (all in form and substance reasonably satisfactory to Mortgagee) in order (A) to effectuate, complete, perfect, continue or preserve the lien of this Leasehold Mortgage on the Subject Property, whether now owned or hereafter acquired, (B) to correct or change the name of Mortgagor following any change in its identity, sale of the Subject Property, or assumption of the Loan pursuant to Section 2.07(b), or (C) to effectuate, complete, perfect, continue or preserve any right, power or privilege granted or intended to be granted to Mortgagee hereunder. SECTION 2.03. Secured Obligations. Mortgagor shall duly and punctually pay, perform and observe the Obligations binding upon Mortgagor. 4 SECTION 2.04. Impositions. Subject to Section 2.06 and Section 2.09, Mortgagor shall (i) duly and punctually pay all Impositions before any fine, penalty, interest or cost may be added for nonpayment; and (ii) promptly notify Mortgagee of the receipt by Mortgagor of any notice of default in the payment of any Imposition. The term "Impositions" means all taxes, assessments and other governmental charges, ground rents, or other rents, charges, excises, levies, fees and other charges (public or private) which may be assessed, levied or imposed on, or in respect of or be a lien upon the Subject Property or any part thereof or any interest therein. SECTION 2.05. Compliance with Legal and Insurance Requirements. (a) Mortgagor represents and warrants that (i) as of the date hereof, the Property and the use and operation thereof comply with all Legal Requirements (as defined below), Insurance Requirements (as defined below) and Contractual Obligations except for any failure to comply therewith which could not have a Material Adverse Effect; (ii) there is no material default under any Legal Requirement, Insurance Requirement and Contractual Obligation; and (iii) subject to the provisions of Section 6.15, the execution, delivery and performance of this Leasehold Mortgage does not require any consent the failure of which to obtain would contravene any provision of and constitute a material default under, any Legal Requirement, Insurance Requirement or Contractual Obligation. Notwithstanding the limitations set forth in the preceding sentence, Mortgagor represents and warrants that as of the date hereof, the Property and the use thereof comply with all Environmental Laws and that Mortgagor has complied and shall comply with all Environmental Laws. (b) Subject to Section 2.06 and Section 2.09, Mortgagor shall promptly perform and observe, or cause to be performed and observed and cause the Property to comply with, if the failure to so perform and observe would have a Material Adverse Effect, (i) all laws, rules, regulations, judgments, orders, permits, licenses, authorizations and other requirements of and agreements with all governments, department agencies, courts and officials, which now or hereafter shall be applicable to the Subject Property or any part thereof or any use or condition thereof including, without limitation, all Environmental Laws (herein collectively called the "Legal Requirements"); (ii) all terms of any insurance policy covering or applicable to the Subject Property or any part thereof as required by the Loan Agreement, all requirements of the issuer of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to the Subject Property or any part thereof or any use or condition thereof (herein collectively called the "Insurance Requirements"); and (iii) all Permits required for any construction, reconstruction, repair, alteration, addition, improvement, maintenance, use and operation of the Property. (c) Mortgagor shall promptly notify Mortgagee of the receipt by Mortgagor of any notice of default under any Legal Requirement, Insurance Requirement, Contractual Obligation or Permit or of the receipt by Mortgagor of any notice of any threatened or actual termination of any Permit or Insurance Policy, Franchise Agreement or Site Lease and furnish to Mortgagee a copy of such notice of default or termination. SECTION 2.06. Impound and Security Account. At Mortgagee's option and upon its demand and except where and to the degree prohibited by law, Mortgagor shall, until all Obligations have been paid in full, pay to Mortgagee each month an amount estimated by Mortgagee to be equal to (i) the Impositions, (ii) all payments and premiums with respect to the Insurance Requirements, and (iii) all lease payments under the Site Lease next due. Estimated payments of Impositions, Insurance Requirements and Site Lease payments shall be calculated by dividing the amount next due by, in each instance, the number of months to lapse preceding the month in which the same, respectively, will become due. All sums so paid shall not bear interest, except to the extent and in the minimum amount required by law, and Mortgagee shall, unless Mortgagor is otherwise in default hereunder or under any obligation secured hereby, apply said funds to the payment of, or at the sole option of Mortgagee timely release said funds to Mortgagor for timely application to and payment of, such Impositions, Insurance Requirements and Site Lease payments. However, upon the occurrence of an Event of Default by Mortgagor hereunder or under any obligation secured hereby, Mortgagee may, at its sole option, apply all or any part of said sums to any Obligations or to advance sums to pay such Imposition, Insurance Requirement or Site Lease payment, which advance shall not cure Mortgagor's Default hereunder. SECTION 2.07. Sale; Liens. (a) Except as otherwise provided in the Loan Agreement, Mortgagor shall not sell, assign, transfer, convey, lease or permit to be sold, assigned, transferred, conveyed, leased or otherwise disposed of, the Subject Property (other than Inventory sold in the normal course of business) or any part thereof or interest therein (for the purposes of this Section, a "Transfer"), and shall not create, suffer or permit to be created or exist any lien attaching to the Subject Property or any part thereof or interest therein, except as permitted by the Loan Agreement. In the event of any Transfer or the creation, suffering, permitting to be created of any lien attaching to the Subject Property or any part thereof, that is not expressly permitted hereunder or under the terms of the Loan Agreement and is without the prior written consent of Mortgagee, Mortgagee shall have the absolute right at its option, without prior demand or notice, to declare all of the Obligations immediately due and payable and pursue its rights and remedies under Article 5. Consent to one such Transfer or lien shall not be deemed to be a waiver of the right to require the consent to future or successive Transfers or liens. Mortgagee shall have the right to grant or deny such consent in its absolute discretion. If 5 consent should be given to a Transfer and if this Leasehold Mortgage is not released to the extent of the Subject Property transferred or subjected to a lien by a writing signed by Mortgagee and recorded in the proper city, town, county or parish records, then any such Transfer or lien shall be subject to this Leasehold Mortgage and any such transferee shall assume all obligations hereunder and agree to be bound by all of the provisions contained hereunder. (b) The Loan may be assumed by a new borrower provided each of the conditions set forth in Section 2.08 of the Loan Agreement are met. SECTION 2.08. Status and Care of the Property. (a) Mortgagor represents and warrants that (i) the Property is served by all necessary water, sanitary and storm sewer, electric, gas, telephone and other utility facilities which facilities have capacities which are sufficient to serve the current and anticipated future use and occupancy of the Property as presently constructed; (ii) the Property has legal access to public streets or roads sufficient to serve the current and anticipated future use and operation of the Property as presently constructed; (iii) to the extent that the Property is located in an area identified by the Secretary of Housing and Urban Development or a successor thereto as an area having special flood hazards or as an area designated as "flood prone" or a "flood risk area" pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, and any amendments or supplements thereto or substitutions therefor, Mortgagor has purchased flood insurance to the extent available; and (iv) all activities and conditions on the Property are currently in compliance with all Legal Requirements. (b) Subject to the terms, conditions and provisions of the Loan Agreement, the Mortgagor (i) shall use and operate the Property, or cause the same to be used and operated, pursuant to the terms and provisions of a Franchise Agreement with Arby's, Inc., a true and correct copy of which has been previously delivered to Mortgagee, and Mortgagor shall continue to operate the Property as a Arby's restaurant and shall not permit or suffer any default to occur under said Franchise Agreement; (ii) agrees that all activities on the Property shall at all times comply with all Legal Requirements; (iii) shall operate and maintain the Property, or cause the same to be operated and maintained, in good order, repair and condition except (subject to the provisions of this Section) for reasonable wear and tear; (iv) subject to the provisions of Section 3.02, shall promptly make, or cause to be made, all repairs, replacements, alterations, additions and improvements of and to the Property necessary or appropriate to keep the Property in good order, repair and condition; (v) shall not initiate or affirmatively support any change in the applicable zoning adversely affecting the Property, seek any variance (or any change in any variance), under the zoning adversely affecting the Property; and (vi) shall, promptly after receiving notice or obtaining knowledge of any proposed or threatened change in the zoning affecting the Property which would result in the current use of the Property being a non-conforming use, notify Mortgagee thereof and diligently contest the same at Mortgagor's expense by any action or proceeding deemed appropriate by Mortgagor or requested by Mortgagee. SECTION 2.09. Permitted Contests. After prior notice to Mortgagee, Mortgagor may contest at Mortgagor's expense, by appropriate legal or other proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Imposition or lien therefor, any Legal Requirement, or any lien of any laborer, mechanic, materialman, supplier or vendor, provided that (a) the Subject Property, or any part thereof or estate or interest therein, shall not be in any danger of being sold, forfeited or lost by reason of such proceedings; (b) in the case of (i) liens of laborers, mechanics, materialmen, suppliers or vendors or (ii) the Impositions, or liens therefor, such proceedings shall suspend the foreclosure of any such lien or any other collection thereof from the Subject Property; (c) in the case of a Legal Requirement, Mortgagee shall not be in any danger of any criminal liability or, unless Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to Mortgagee, any additional civil liability for failure to comply therewith, and the Subject Property, or any part thereof or estate or interest therein, shall not be subject to the imposition of any lien as a result of such failure which is not properly contested pursuant to this Section 2.09; and (d) if reasonably required by Mortgagee, Mortgagor shall have furnished to Mortgagee a bond or other security reasonably satisfactory to Mortgagee. SECTION 2.10. Inspection. Mortgagee and its authorized agents and employees and any person designated by Mortgagee shall have the right to enter on and into the Property at all reasonable times and, except in the event of an emergency, after reasonable notice for the purpose of inspecting the same, provided such inspection shall not unreasonably disturb business activities at the Property. SECTION 2.11. Compliance with Instruments. Mortgagor shall promptly perform and observe, or cause to be performed and observed, all of the terms, covenants and conditions of all other instruments affecting the Property if the failure to so perform or observe would have a Material Adverse Effect and shall do or cause to be done all things necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of or constituting any portion of the Subject Property if the failure so to do would have a Material Adverse Effect. 6 SECTION 2.12. Improvements. All improvements on the Land lie wholly within the boundary and building restriction lines of the Land and no improvements on adjoining properties encroach upon the Land in any respect so as to have a Material Adverse Effect on the use, operation or value of the Property. SECTION 2.13. Casualty; Condemnation. The Subject Property is free of material damage and waste and, to Mortgagor's knowledge, there is no proceeding pending or threatened for the total or partial Condemnation thereof. SECTION 2.14. Zoning and Other Laws. The Property and the use thereof, separate and apart from any other properties, constitute a legal and conforming use in compliance with the zoning regulations for which the Property is located. The Property complies with all applicable subdivision laws, ordinances and regulations, such that failure to comply would not have a Material Adverse Effect. All inspections, licenses and certificates required, whether by law, ordinance, regulation or insurance standards, to be made or issued with respect to the Property have been made by or issued by appropriate authorities, such that a failure to obtain such inspections, licenses or certificates would not have a Material Adverse Effect. SECTION 2.15. Site Lease. (a) Mortgagor represents and warrants that (i) Exhibit A contains a description of the Site Lease; (ii) Mortgagor has furnished to Mortgagee a copy of the Site Lease certified as true and correct by Mortgagor; (iii) except as described in Exhibit A, the Site Lease has not been modified, assigned by Mortgagor or, to the knowledge of Mortgagor, assigned by the landlord thereunder; (iv) the Site Lease is in full force and effect and, to the knowledge of Mortgagor, there is no default, or existing condition which with the giving of notice or passage of time or both would cause a default under the Site Lease; and (v) subject to the provisions of Section 6.15, the execution, delivery and performance of this Leasehold Mortgage do not require any consent under, and will not contravene any provision of or cause a default under, the Site Lease. (b) Mortgagor (i) shall duly and punctually pay, perform and observe (unless being paid pursuant to Section 2.06 or being contested pursuant to Section 2.09) all of its obligations under the Site Lease; (ii) shall do all things reasonably necessary or appropriate to enforce, preserve and keep unimpaired the rights of Mortgagor; (iii) shall not enter into any amendment or other agreement or take any other action or fail to take any action that would modify or terminate any rights or obligations of Mortgagor or of the landlord under the Site Lease or subordinate any right of Mortgagor under the Site Lease to any lien; (iv) shall notify Mortgagee in writing not later than ninety (90) days prior to the last date on which Mortgagor can exercise (A) any right to extend the term of the Site Lease or (B) any option to purchase or otherwise acquire the interest of the landlord under the Site Lease, of the existence of such right or option; (v) to the extent the current term of the Site Lease does not extend beyond the maturity date of the Loan, shall exercise (not later than thirty (30) days prior to the last date on which Mortgagor may timely do so) each right or option of Mortgagor under the Site Lease to extend the term thereof; (vi) shall notify Mortgagee (promptly after receipt or contemporaneously when given, as the case may be) of the receipt or giving by Mortgagor of any notice of default under, or any notice of the possible or actual termination of, the Site Lease, accompanied by a copy of such notice (the failure of Mortgagor to comply with this subclause (vi) shall constitute an Event of Default hereunder); and (vii) shall promptly notify Mortgagee, upon Mortgagor's acquisition of knowledge thereof, of the occurrence of any event or condition which with the passage of time or giving of notice would constitute a default under the Site Lease. Mortgagee is hereby irrevocably appointed the true and lawful attorney of Mortgagor and any subsequent owner of the Property to exercise, in its own name and stead or in the name of Mortgagor, each right or option of Mortgagor under the Site Lease to extend the term thereof or to purchase or otherwise acquire the interest of the landlord under the Site Lease, and for that purpose Mortgagee may execute all necessary documents and instruments to exercise each option and may substitute Persons with like power, Mortgagor or any subsequent owner of the Property hereby ratifying and confirming all that their said attorney or such substitutes shall lawfully do by virtue hereof. Nevertheless, Mortgagor or any subsequent owner of the Property, if so requested in writing by Mortgagee shall ratify and confirm the exercise of any such option by executing and delivering to Mortgagee or to such purchasers any instrument which, in the judgment of Mortgagee, is suitable or appropriate therefor. Mortgagor acknowledges (i) that this power of attorney is given to Mortgagee in consideration for Mortgagee's (A) making of the Loan and (B) not requiring Mortgagor to exercise the option to extend the term of the Site Lease or exercise any purchase option before the Closing Date, (ii) that it is reasonable for Mortgagee to require the leasehold term to extend beyond the maturity of the Note; (iii) that if any option is exercised by Mortgagee, Mortgagor agrees it is and shall remain solely liable with respect thereto as tenant under the Site Lease and releases Mortgagee from any and all liability with respect thereto or claims relating thereto. (c) So long as any portion of the Obligations shall remain unpaid, unless Mortgagee shall otherwise consent, the fee title to the Land and the leasehold estate therein created pursuant to the provisions of the Site Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of such estates in Mortgagor, the owner, or in any other person by purchase, operation of law or otherwise. Mortgagee reserves the right, at any time, to release portions of the Subject Property, including, but not limited to, the leasehold estate created by the Site Lease, with or without consideration, at Mortgagee's election, without waiving or 7 affecting any of its rights hereunder or under the Loan Documents and any such release shall not affect Mortgagee's rights in connection with the portion of the Subject Property not so released. (d) So long as any portion of the Obligations remains unpaid, if Mortgagor shall become the owner and holder of the fee title to the Land, the lien of this Leasehold Mortgage shall be spread to cover Mortgagor's fee title to the Land and said fee title shall be deemed to be included in the Subject Property. Mortgagor agrees to execute any and all documents or instruments necessary to subject its fee title to the Land to the lien of this Leasehold Mortgage, in form and substance satisfactory to Mortgagee. (e) Mortgagor hereby unconditionally assigns, transfers and sets over to Mortgagee all of Mortgagor's claims and rights to the payment of damages arising from any rejection by the owner of the Site Lease under the Bankruptcy Code. Mortgagee shall have the right to proceed in its own name or in the name of Mortgagor in respect of any claim, suit, action or proceeding relating to the rejection of the Site Lease, including, without limitation, the right to file and prosecute, to the exclusion of Mortgagor, any proofs of claim, complaints, motions, applications, notices and other documents, in any case in respect of the owner under the Bankruptcy Code. Subject to the provisions of Section 6.15, this assignment constitutes a present, irrevocable and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until all of the Obligations shall have been satisfied and discharged in full. Any amounts received by Mortgagee as damages arising out of the rejection of the Site Lease as aforesaid shall be applied first to all reasonable costs and expenses of Mortgagee (including, without limitation, reasonable attorneys' fees and disbursements) incurred in connection with the exercise of any of its rights or remedies under this Section 2.15(e). (f) Mortgagor shall not, without Mortgagee's prior written consent, elect to treat the Site Lease as terminated under Section 365(h)(1) of the Bankruptcy Code. Any such election made without Mortgagee's prior written consent shall be void. (g) If pursuant to Section 365(h)(1) of the Bankruptcy Code, Mortgagor seeks to offset against the Rent reserved in the Site Lease the amount of any damages caused by the non-performance by the owner of any of the owner's obligations under the Site Lease after the rejection by the owner of the Site Lease under the Bankruptcy Code, Mortgagor shall, prior to effecting such offset, notify Mortgagee of its intention to do so, setting forth the amounts proposed to be so offset and the basis therefor. Mortgagee shall have the right, within (10) days after receipt of such notice from Mortgagor, to reasonably object to all or any part of such offset, and, in the event of such reasonable objection, Mortgagor shall not effect any offset of the amounts so objected to by Mortgagee for a period of thirty (30) days after Mortgagee has delivered its objection notice to Mortgagor during which time Mortgagee shall have the right to bring its objections to the attention of any court supervising the bankruptcy of the owner of the Site Lease and both Mortgagee and Mortgagor agree to abide by the decision of any such court. If (A) Mortgagee has failed to object as aforesaid within ten (10) days after notice from Mortgagor or (B) the court fails to render its decision within the above-mentioned thirty (30) day period, Mortgagor may proceed to effect such offset in the amounts set forth in Mortgagor's notice. Neither Mortgagee's failure to object as aforesaid nor any objection or other communication between Mortgagee and Mortgagor relating to such offset shall constitute an approval of any such offset by Mortgagee. (h) If any action, proceeding, motion or notice shall be commenced or filed in respect of Mortgagor or the Subject Property in connection with any case under the Bankruptcy Code (other than a case under the Bankruptcy Code commenced with respect to Mortgagor), Mortgagee shall have the option, to the exclusion of Mortgagor, exercisable upon notice from Mortgagee to Mortgagor, to conduct and control any such litigation with counsel of Mortgagee's choice. Mortgagee may proceed in its own name or in the name of Mortgagor in connection with any such litigation, and Mortgagor agrees to execute any and all powers, authorizations, consents and other documents required by Mortgagee in connection therewith. Mortgagor shall pay to Mortgagee all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) paid or incurred by Mortgagee in connection with the prosecution or conduct of any such proceedings within five (5) days after notice from Mortgagee setting forth such costs and expenses in reasonable detail. Any such costs or expenses not paid by Mortgagor as aforesaid shall be secured by the lien of this Leasehold Mortgage and shall be added to the principal amount of the indebtedness secured hereby. Mortgagor shall not commence any action, suit, proceeding or case, or file any application or make any motion, in respect of the Site Lease in any such case under the Bankruptcy Code (other than a case under the Bankruptcy Code commenced with respect to Mortgagor) without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. (i) Mortgagor shall promptly, after obtaining knowledge thereof, notify Mortgagee of any filing by or against the owner of the Land of a petition under the Bankruptcy Code, setting forth any information available to Mortgagor as to the date of such filing, the court in which such petition was filed, and the relief sought therein. Mortgagor shall promptly deliver to Mortgagee following receipt any and all notices, summonses, pleadings, applications and other documents received by Mortgagor in connection with any such petition and any proceedings relating thereto. 8 (j) If there shall be filed by or against Mortgagor a petition under the Bankruptcy Code, and Mortgagor, as the tenant under the Site Lease, shall determine to reject the Site Lease pursuant to Section 365(a) of the Bankruptcy Code, then Mortgagor shall give Mortgagee not less than ten (10) days' prior notice of the date on which Mortgagor shall apply to the bankruptcy court for authority to reject the Site Lease. Mortgagee shall have the right, but not the obligation, to serve upon Mortgagor within such 10-day period a notice stating that (i) Mortgagee demands that Mortgagor assume and assign the Site Lease to Mortgagee pursuant to Section 365 of the Bankruptcy Code and (ii) Mortgagee covenants to cure or provide adequate assurance of prompt cure of all defaults and provide adequate assurance of future performance of Mortgagor's obligations under the Site Lease. If Mortgagee serves upon Mortgagor the notice described in the preceding sentence, Mortgagor shall not seek to reject the Site Lease and shall seek court approval to comply with the demand provided for in clause (i) of the preceding sentence within thirty (30) days after the notice shall have been given, subject to the performance by Mortgagee of the covenant provided for in clause (ii) of the preceding sentence. (k) Effective upon the entry of an order for relief in respect of Mortgagor under the Bankruptcy Code, Mortgagor hereby assigns and transfers to Mortgagee a non-exclusive right to apply to the bankruptcy court under Section 365(d)(4) of the Bankruptcy Code for an order extending the period during which the Site Lease may be rejected or assumed. ARTICLE III INSURANCE, CASUALTY AND CONDEMNATION SECTION 3.01. Insurance. Mortgagor shall comply with all of the terms and provisions and shall maintain, or cause to be maintained, with respect to the Property the insurance required by the Loan Agreement. If Mortgagor fails to maintain the insurance policies required to be maintained under this Section, Mortgagee shall have the right (but not the obligation) to obtain such insurance policies and pay the premiums therefor. If Mortgagee obtains such insurance policies or pays the premiums therefor, upon demand, Mortgagor shall reimburse Mortgagee for its expenses in connection therewith, together with interest thereon, pursuant to Section 4.03. SECTION 3.02. Casualty and Condemnation. Mortgagor's right to collect or use any Insurance Proceeds or awards resulting from any casualty loss or Condemnation shall be subject to, and applied in accordance with, the terms and provisions of the Loan Agreement. Mortgagor hereby authorizes and directs any affected insurance company and any affected governmental body responsible for such Condemnation to make payment of the Insurance Proceeds or awards directly to Mortgagee. Mortgagor hereby irrevocably assigns to Mortgagee all Insurance Proceeds and awards to which Mortgagor may become entitled by reason of its interests in the Property if a loss occurs. ARTICLE IV EXPENSES AND INDEMNIFICATION SECTION 4.01. Expenses. Upon written demand, Mortgagor (a) shall reimburse Mortgagee for all reasonable out-of-pocket expenses, including reasonable attorneys' fees and expenses, paid or incurred by Mortgagee in connection with (i) any Default or alleged Default, (ii) the perfection, protection, exercise or enforcement of any right or remedy under or with respect to this Leasehold Mortgage or any other Loan Document, and (iii) the execution, delivery, administration or performance of this Leasehold Mortgage or any other Loan Document and any consent or waiver thereunder and any amendment thereof, or (b) if an Event of Default occurs, shall reimburse Mortgagee for all reasonable out-of-pocket expenses, including reasonable attorneys' fees and expenses, (i) paid or incurred by Mortgagee in connection with (A) such Event of Default and collection, bankruptcy, insolvency and enforcement proceedings resulting therefrom or (B) the exercise or enforcement of any right or remedy under or with respect to this Leasehold Mortgage or any other Loan Document or (ii) otherwise paid or incurred with respect to this Leasehold Mortgage or any other Loan Document, together, in each case, with interest thereon at the Default Rate from the date paid by Mortgagee through the date repaid to Mortgagee, as the case may be. All such funds advanced in the reasonable exercise of Mortgagee's judgment that the same are needed to protect the Subject Property, the lien of this Leasehold Mortgage, or the Obligations are to be deemed obligatory advances hereunder and shall constitute additional indebtedness secured by this Leasehold Mortgage. The obligations of Mortgagor under this Section shall be part of the Obligations and shall survive any foreclosure or transfer in lieu of foreclosure of this Leasehold Mortgage and the release of this Leasehold Mortgage. SECTION 4.02. Indemnification. To the fullest extent permitted by law, Mortgagor shall protect, defend, indemnify and save harmless Mortgagee, and its stockholders, directors, officers, employees, beneficial owners, attorneys, agents and other representatives or affiliates of, and partners in, Mortgagee (each an "Indemnified Person") from and against any and all liabilities, losses, 9 actions, fines, injunctions, obligations, claims, damages (whether direct or consequential), penalties, causes of action, costs and expenses of any kind or nature (including, without limitation, in respect of or for reasonable attorneys' fees and expenses whether incurred within or outside the judicial process), imposed upon or incurred by or asserted against any such Indemnified Person including, without limitation, by reason of (i) this Leasehold Mortgage or the Subject Property or any interest therein or receipt of any Rents; (ii) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Subject Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (iii) any failure on the part of Mortgagor to perform or comply with any of the terms of this Leasehold Mortgage; (iv) any violation or failure to comply with any Legal Requirement by Mortgagor or the Property in any way; and (v) performance of any labor or services or the furnishing of any materials or other property in respect of the Subject Property or any part thereof, provided that any claims arising out of the willful misconduct or gross negligence of any Indemnified Person or act of any Indemnified Person after taking title to the Property shall be excluded from the foregoing indemnification of such Indemnified Person. Any amounts payable to Mortgagee by reason of the application of this Section 4.02 shall be secured by this Leasehold Mortgage as an Obligation and shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Mortgagee until paid. The obligations and liabilities of Mortgagor under this Section 4.02 shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure or delivery of a deed in lieu of foreclosure of this Leasehold Mortgage and the exercise of any rights or remedies by Mortgagee. SECTION 4.03. Interest. If any Obligation arising hereunder (including, to the extent permitted under applicable law, any interest obligation) shall not be paid when due, such Obligation shall bear interest at the Default Rate commencing from the due date through the date paid. Such interest shall be part of the Obligations and shall be secured by this Leasehold Mortgage. SECTION 4.04. Increased Costs. In the event of the enactment after the date hereof of any applicable law deducting from the value of the Property for the purpose of taxation of any lien thereon or changing in any way the applicable taxation of mortgages, deeds of trust or other liens or obligations secured thereby, or the manner of collection of such taxes, so as to affect this Leasehold Mortgage, the Obligations or Mortgagee, upon demand by Mortgagee, to the extent permitted under applicable law, Mortgagor shall pay or reimburse Mortgagee for all taxes, assessments or other charges which Mortgagee is obligated to pay as a result thereof. Such taxes, assessments or other charges shall be part of the Obligations and shall be secured by this Leasehold Mortgage. ARTICLE V DEFAULTS, REMEDIES AND RIGHTS SECTION 5.01. Events of Default. The occurrence of any of the following events shall be deemed an event of default ("Event of Default") hereunder and shall, at the option of Mortgagee make all amounts then remaining unpaid on the Obligations immediately due and payable, all without further demand, presentment, notice or other requirements of any kind, all of which are expressly waived by Mortgagor, and the lien, encumbrance and security interest evidenced or created hereby shall be subject to foreclosure in any manner provided for herein or provided for by law and all other remedies available at law or in equity: (a) The occurrence of any Event of Default (as defined in the Loan Agreement) under the Loan Agreement; or (b) Mortgagor shall default in the performance or observance of any term, covenant or condition required to be observed by Mortgagor under this Leasehold Mortgage which remains uncured for a period of ten (10) business days after receipt of written notice from Mortgagee; provided, however, if such default cannot be cured with such period, Mortgagor shall have such longer period of time to cure such default provided, in Mortgagee's sole discretion, Mortgagor is proceeding with due diligence, but in no event shall such period of time exceed thirty (30) Business Days; provided, further, that the cure periods set forth in this Section 5.01(b) are subject in all cases to the terms, conditions and provisions of the Loan Agreement; SECTION 5.02. Fixtures. Upon the occurrence of any Event of Default, or at any time thereafter, Mortgagee may, to the extent permitted under applicable law, elect to treat the fixtures included in the Subject Property either as real property or personal property, or both, and proceed to exercise such rights as apply thereto. With respect to any sale of real property included in the Subject Property made under the power of sale herein granted and conferred, Mortgagee may, to the extent permitted by applicable law, include in such sale any personal property and fixtures included in the Subject Property relating to such real property. SECTION 5.03. Remedies Cumulative. All notice and cure periods provided in this Leasehold Mortgage, the Loan Agreement or any other Loan Document shall run concurrently with any notice or cure periods provided under applicable law. No remedy or right of Mortgagee hereunder, under the Loan Agreement and any other Loan Document or otherwise, or available under applicable law, shall be exclusive of any other right or remedy, but each such remedy or right shall be in addition to every other remedy 10 or right now or hereafter existing at law or in equity under any such document or under applicable law. No failure or delay by Mortgagee in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Every such remedy or right may be exercised concurrently or independently, and when and as often as may be deemed expedient by Mortgagee. All obligations of Mortgagor, and all rights, powers and remedies of Mortgagee expressed herein shall be in addition to, and not in limitation of, those provided by law, equity or in the Loan Agreement and any other Loan Document. SECTION 5.04. Possession of Property. Mortgagor hereby waives, while any Event of Default exists, all right to the possession, income, earnings, revenues, issues, profits and Rents of the Property. Mortgagee or a Receiver (as the case may be as the Person exercising the rights under this Section) is hereby expressly authorized and empowered to the extent permitted by applicable law, but not obligated, while any Event of Default exists, (i) to enter into and upon and take possession of, and operate all facilities on, the Property or any part thereof, personally, or by its agents or attorneys, and exclude Mortgagor therefrom without liability for trespass, damages or otherwise; (ii) to enter upon and take and maintain possession of all of the documents, books, records, papers and accounts of Mortgagor relating to the possession and operation of the Subject Property; (iii) to conduct, either personally or by its agents, the business of the Property; (iv) to exercise all rights of Mortgagor with respect to the Subject Property, including, without limitation, the right to sue for or otherwise collect the Rents, including those that are unpaid; (v) to complete any Alteration or Restoration in progress on the Property at the expense of Mortgagor at reasonable and customary cost or at such cost previously agreed to by Mortgagor, and (vi) to apply all income of the Property, to the extent Mortgagor has any right to such income, less the necessary or appropriate expenses of collection thereof, either for the operation, care and preservation of the Property, or, at the election of the Person exercising the rights under this Section in its sole discretion, as provided in Section 5.09 hereof. The Person exercising the rights under this Section is also hereby granted full and complete authority while any Default exists (vii) to employ watchmen to protect the Subject Property; (viii) to continue any and all outstanding contracts for the erection and completion of Improvements to the Property; (ix) to make all necessary and proper repairs, renewals, replacements, alterations, additions, betterments and improvements to the Property that, in its sole discretion, it may deem appropriate; (x) to insure and reinsure the Property for all risks incidental to Mortgagee's possession, operation and management thereof; (xi) to make and enter into any contracts obligations wherever necessary in its own name for the operation, care and preservation of the Subject Property, and (xii) to pay and discharge all debts, obligations and liabilities incurred thereby, all at the expense of Mortgagor. The Person exercising the rights under this Section shall not be liable to account for any action taken hereunder, and shall not be liable for any loss sustained by Mortgagor resulting from any act or omission of such Person, except to the extent such loss is caused by such Person's willful misconduct or gross negligence. All such expenditures by the Person exercising the rights under this Section shall be Obligations hereunder. SECTION 5.05. Foreclosure; Receiver. While any Event of Default exists, Mortgagee with or without entry, shall also have the following rights: (a) to institute a proceeding or proceedings, by advertisement, judicial process or otherwise, as provided under applicable law, for the complete or partial foreclosure of this Leasehold Mortgage or the complete or partial sale of the Subject Property under the power of sale hereunder or under any applicable provision of law; (b) to sell the Subject Property and all estate, right, title and interest of Mortgagor therein as a whole or in separate parcels, at one or more sales, at such time and place and upon such terms and conditions as may be required by applicable law; (c) to take such steps to protect and enforce rights, whether by action, suit or proceeding in equity or at law, for the specific performance of any provision in the Loan Documents, or in aid of the execution of any power herein granted, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy Mortgagee shall elect; (d) to apply for the appointment of a receiver, supervisor, trustee, liquidator, conservator or other custodian (a "Receiver") of the Subject Property or any part thereof and all earnings, revenues, Rents, issues, profits and income thereof, to the extent permitted by law without giving notice to any other party and without regard to the adequacy or inadequacy of the security of the Subject Property or the solvency of either Mortgagor or any other Person and Mortgagor agrees that it shall not oppose the appointment of a Receiver; and (e) to take all such other steps and to assert all such other rights and remedies as shall be permitted by applicable law. 11 (f) Mortgagee understands and acknowledges that, on the date hereof, Mortgagor has no present right, title or interest whatsoever in the Fee Interest or to any rents or income arising therefrom, and therefore, until such time as Mortgagor does own the Fee Interest, Mortgagee has no rights or power to sell or offer for sale, or to force the sale of the Fee Interest. The purchase money, proceeds or avails of any foreclosure or sale after default and any other sums which then may be held by Mortgagee under this Leasehold Mortgage shall be applied as provided in Section 5.09 hereof. SECTION 5.06. No Liability on Mortgagee. Notwithstanding anything contained herein, this Leasehold Mortgage is only intended as security for the Obligations and Mortgagee shall not be obligated to perform or discharge, and Mortgagee need not perform or discharge, any obligation, duty or liability of Mortgagor with respect to any of the Subject Property. Mortgagee shall not have responsibility for the control, care, management or repair of the Property nor shall Mortgagee be responsible or liable for any negligence in the management, operation, upkeep, repair or control of the Subject Property resulting in loss or injury or death to any licensee, employee, tenant or stranger, unless Mortgagee takes physical possession and occupancy of the Subject Property and such loss, injury or death is not a result of the direct action by Mortgagee. No liability shall be enforced or asserted against Mortgagee in its exercise of the powers herein granted to it, and Mortgagor expressly waives and releases any such liability. Should Mortgagee or any Person exercising rights on its behalf incur any such liability, loss or damage, under or by reason hereof, or in the defense of any claims or demands, Mortgagor agrees to reimburse Mortgagee and such Person, immediately upon demand (provided such demand is accompanied by an itemized statement) for the amount thereof, including costs, expenses and reasonable attorneys' fees, and any such obligations of Mortgagor shall be Obligations hereunder and shall survive any foreclosure or transfer in lieu of foreclosure of this Leasehold Mortgage and the release of this Leasehold Mortgage. SECTION 5.07. Assignment of Leases. (a) Subject to paragraph (d) below and the provisions of Section 6.15, the assignments of the Leases and the Rent under Granting Clauses VI and VII are and shall be present, absolute and irrevocable assignments by Mortgagor to Mortgagee and, subject to the license to Mortgagor under Section 5.07(b), Mortgagee or a Receiver appointed pursuant to Section 5.05(d) (as the case may be as the Person exercising the rights under this Section) shall have the absolute, immediate and continuing right to collect and receive all Rents now or hereafter, including during any period of redemption, accruing with respect to the Property. At the request of Mortgagee or such Receiver, Mortgagor shall promptly execute, acknowledge, deliver, record, register and file any additional general assignment of the Leases or specific assignment of any Lease which Mortgagee or such Receiver may require from time to time (all in form and substance reasonably satisfactory to Mortgagee of such Receiver) to effectuate, complete, perfect, continue or preserve the assignments of the Leases and the Rents under Granting Clauses VI and VII. (b) As long as no Event of Default exists, Mortgagor shall have the right under a license granted hereby, subject to Section 5.07(c), to collect all Rents upon, but not prior to fifteen (15) days before, the due date thereof. (c) If any Event of Default exists, Mortgagee or Receiver appointed pursuant to Section 5.05(d) (as the case may be as the Person exercising the rights under this Section) shall have the right to do any of the following: (i) terminate the license granted under Section 5.07(b) by notice to Mortgagor (ii) exercise the rights and remedies provided to Mortgagor under the Site Lease; (iii) exercise the rights and remedies provided under Section 5.04, Section 5.05 or under applicable law; (iv) as attorney in-fact or agent of Mortgagor, or in its own name as the Person exercising the rights under this Section and under the powers herein granted, hold, operate, manage and control the Property and all other Subject Property, either personally or by its agents, contractors or nominees, with full power to use such measures, legal or equitable, as in its discretion may be deemed proper and necessary to enforce the payment of any Rents, the Leases and other Subject Property relating thereto (including actions for the recovery of Rent, actions in forcible detainer and actions in distress of Rent); (v) cancel or terminate any Lease or sublease for any cause or on any ground which would entitle Mortgagor to cancel the same; (vi) elect to disaffirm any Lease or sublease made subsequent hereto or subordinated to the lien hereof; and (vii) perform such other acts in connection with the management and operation of the Subject Property as the Person exercising the rights under this Section in its discretion may deem proper, Mortgagor hereby granting full power and authority to exercise each and every one of the rights, privileges and powers contained herein at any and all times while an Event of Default exists without notice to Mortgagor. (d) Nothing in this Section 5.07 shall be construed to be an assumption by the Person exercising the rights under this Section, or to otherwise make such Person liable for the performance, of any of the obligations of Mortgagor under the Leases. SECTION 5.08. Sales. Except as otherwise provided herein, to the extent permitted under applicable law, at the election of Mortgagee, the following provisions shall apply to any sale of the Subject Property hereunder, whether made pursuant to the power of sale hereunder, any judicial proceeding, or any judgment or decree of foreclosure or sale or otherwise; 12 (a) Mortgagee or the court officer (as the case may be as the Person conducting any sale) may conduct any number of sales as Mortgagee may direct from time to time. The power of sale hereunder or with respect hereto shall not be exhausted by any sale as to any part or parcel of the Subject Property which is not sold, unless and until the Obligations shall have been paid in full, and shall not be exhausted or impaired by any sale which is not completed or is defective. A sale may be as a whole or in part or parcels and Mortgagor hereby waives its right to direct the order in which the Subject Property or any part or parcel thereof is sold. (b) Any sale may be postponed or adjourned by public announcement at the time and place appointed for such sale or such postponed or adjourned sale without further notice. (c) Any statement of fact or other recital made in any instrument given by the Person conducting any sale as to the nonpayment of any Obligation, the existence of an Event of Default, the amount of the Obligations due and payable, the request to Mortgagee to sell, the notice of the time, place and terms of sale and of the Subject Property to be sold having been duly given, or any other act or thing having been duly done or not done by Mortgagor, Mortgagee, or any other Person, shall be taken as conclusive and binding against all other Persons as evidence of the truth of the facts so stated or recited. (d) Any sale shall operate to divest all of the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Mortgagor in and to the Subject Property sold, and (to the extent permitted under applicable law) shall be a perpetual bar both at law and in equity against Mortgagor and any and all Persons claiming such Subject Property or any interest therein by, through or under Mortgagor. Mortgagee understands and acknowledges that on the date hereof, Mortgagor has no present estate, right, title or interest whatsoever in the Fee Interest or to any rents or income arising therefrom. (e) At any sale, Mortgagee may bid for and acquire the Subject Property sold and, in lieu of paying cash therefor may make settlement for the purchase price by causing the Secured Parties to credit against the Obligations, including the expenses of the sale and the cost of any enforcement proceeding hereunder, the amount of the bid made therefor to the extent necessary to satisfy such bid. (f) In the event that Mortgagor or any Person claiming by, through or under Mortgagor shall transfer or fail to surrender possession of the Subject Property after any sale thereof, then Mortgagor or such Person shall be deemed tenant at sufferance of the purchaser at such sale, subject to eviction by means of forcible entry and unlawful detainer proceedings, or subject to any other right or remedy available, hereunder or under applicable law. (g) Upon any sale, it shall not be necessary for the Person conducting such sale to have any Subject Property being sold present or constructively in its possession. (h) To the extent permitted under applicable law, in the event that a foreclosure hereunder shall be commenced by Mortgagee, Mortgagee may at any time before the sale abandon the sale, and may institute suit for the collection of the Obligations or for the foreclosure of this Leasehold Mortgage; or in the event that Mortgagee should institute a suit for collection of the Obligations or the foreclosure of this Leasehold Mortgage, Mortgagee may at any time before the entry of final judgment in said suit dismiss the same and sell the Subject Property in accordance with the provisions of this Leasehold Mortgage. SECTION 5.09. Application of Proceeds. The proceeds of any sale of any of the Subject Property made pursuant to this Article V shall be applied as follows: (a) First, to the payment of all reasonable costs and expenses incident to the enforcement of this Leasehold Mortgage paid or incurred by Mortgagee or the agent for enforcement, protection or collection, including, without limitation, reasonable costs, attorneys' fees, stenographers' fees, costs of advertising, costs of documentary evidence of title (including title search and insurance), all other related charges and costs, and a reasonable compensation to the agents and attorneys of Mortgagee and of agent; (b) Second, to the payment or prepayment of the Obligations, in such order as Mortgagee shall elect; and (c) Third, the remainder, if any, shall be paid to Mortgagor or such other person or persons as may be entitled thereto by law; provided, however, if applicable law requires such proceeds to be paid or applied in a manner other than as set forth above in this Section 5.09, then such proceeds shall be paid or applied in accordance with such applicable law. 13 ARTICLE VI GENERAL SECTION 6.01. Fixture Filing. To the extent that the Subject Property includes items of personal property which are or are to become fixtures under applicable law, and to the extent permitted under applicable law, the filing of this Leasehold Mortgage in the real estate records of the county in which such Subject Property is located shall also operate from the time of filing as a fixture filing with respect to such Subject Property, and the following information is applicable for the purpose of such fixture filing, to wit: (a) Name and Address of the Debtor: Attention: (b) Name and Address of the Secured Party: Atherton Capital Incorporated 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder (c) This financing statement covers goods or items of personal property which are or are to become fixtures upon the Property. (d) Name and address of record owners: Attention: SECTION 6.02. Defeasance. If all of the Obligations shall have been paid in full, and if Mortgagor shall have performed and observed all the covenants, obligations and conditions to be performed by Mortgagor pursuant to the Loan Documents, and each of the Loan Documents shall have been terminated, then this Leasehold Mortgage shall cease, terminate and, thereafter, be of no further force or effect (except as provided in Sections 4.01, 4.02 and 5.06). Upon such termination and Mortgagor's request, appropriate release shall promptly be made by Mortgagee to the Person or Persons legally entitled thereto at Mortgagor's reasonable expense. SECTION 6.03. Notices. Each notice, demand or other communication given to Mortgagor or Mortgagee in connection with this Leasehold Mortgage shall be given in the manner set forth in the Loan Agreement and shall be sent to the addresses shown below or such other addresses which the parties may provide to one another in accordance with the Loan Agreement. To Mortgagee: Atherton Capital Incorporated 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder Telephone: (415) 827-7800 Telecopier: (415) 827-7950 with a copy to Bankers Trust Company 14 Loan Servicer: Corporate Trust and Agency Group Four Albany Street New York, New York 10006 Attention: Christopher Pohl Telephone: (212) 250-4984 Telecopier: (212) 250-6151 To Mortgagor: Attention: Telephone: Telecopier: SECTION 6.04. Amendments in Writing. No amendment, consent, waiver or supplement in any way affecting Mortgagor's obligations or Mortgagee's rights under this Leasehold Mortgage shall in any event be effective unless contained in a writing signed by Mortgagee. SECTION 6.05. Governing Law; Construction. This Leasehold Mortgage shall be governed by the law of the state in which the Land is situated. SECTION 6.06. Successors and Assigns. Subject to the provisions of Section 6.15, the covenants and agreements of Mortgagor hereunder, and the provisions hereof affecting Mortgagor, shall bind Mortgagor hereunder, its successors and assigns and all Persons claiming by, through or under Mortgagor and shall inure to the benefit of Mortgagor and its successors and permitted assigns. The rights and privileges of Mortgagee hereunder, and the provisions hereof affecting Mortgagee, shall inure to the benefit of Mortgagee hereunder and its successors and assigns. SECTION 6.07. Waiver. Mortgagor waives, on behalf of itself and all Persons now or hereafter interested in the Property or the other Subject Property, to the fullest extent permitted by applicable law, (i) all rights under all appraisement, homestead, moratorium, valuation, exemption, stay, extension, redemption, single action, election of remedies and marshalling statutes, laws or equities now or hereafter existing, (ii) any benefit of any law providing for the valuation or appraisal of the Property or the other Subject Property or any part thereof prior to any sale thereof; (iii) after any such sale, claim or exercise any right to redeem the property so sold or any part thereof; (iv) all benefit or advantage of any such law and covenants not to hinder, delay or impede the execution by Mortgagee of any power or remedy herein granted or available at law or in equity, but to suffer and permit the execution of every power and remedy as though no such law existed and (v) any and all requirements that at any time any action may be taken against any other Person. Mortgagor hereby acknowledges and agrees that no defense based on any of the foregoing will be asserted in any action enforcing this Leasehold Mortgage. SECTION 6.08. WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASEHOLD MORTGAGE, THE NOTE OR ANY OTHER LOAN DOCUMENT OR FOR ANY COUNTERCLAIM THEREIN. SECTION 6.09. No Redemption. Mortgagor hereby waives, to the fullest extent permitted by applicable law, any and all rights of redemption from sale under any order or decree of foreclosure of this Leasehold Mortgage or under any power contained herein on its own behalf and on behalf of each and every Person acquiring any interest in or title to the Property subsequent to the date of this Leasehold Mortgage. SECTION 6.10. Limitation by Law. All rights, remedies and powers provided in this Leasehold Mortgage may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Leasehold Mortgage are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Leasehold Mortgage illegal, invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered, or filed under the provisions of any applicable law. 15 SECTION 6.11. Mortgagee's Performance. If Mortgagor shall fail to pay or perform any of its obligations herein contained (including, without limitation, payment of expenses of foreclosure and court costs) or under the Loan Documents each with respect to the Subject Property, Mortgagee upon ten (10) business days prior written notice to Mortgagor (except as otherwise expressly permitted by any Loan Document in the event of an emergency when no notice need be given) may, but need not, make (or cause to be made) any such payment or perform (or cause to be performed) any such obligation of Mortgagor hereunder or thereunder (provided Mortgagor is not contesting such payment or performance in accordance with Section 2.09 and the failure to so perform such obligation would have a Material Adverse Effect), in any form and manner deemed reasonably expedient by Mortgagee as agent or attorney-in-fact of Mortgagor, and any amount so paid or expended (plus reasonable compensation to Mortgagee for its out-of-pocket and other expenses (including legal expenses) for each matter for which it acts under this Leasehold Mortgage), with interest thereon at the Default Rate, shall be added to the Obligations and shall be repaid to Mortgagee upon demand. No such action of Mortgagee shall be considered as a waiver of any right accruing to it on account of the occurrence of any default on the part of Mortgagor under this Leasehold Mortgage, any Default, any Event of Default, or any default or event of default under any other Loan Document. SECTION 6.12. Subrogation. To the extent that Mortgagee, after the date hereof, pays pursuant to the terms of this Leasehold Mortgage any sum due under any provision of law or any instrument or documents creating any lien prior or superior to the lien of this Leasehold Mortgage, Mortgagee shall have and be entitled to a lien on the Subject Property equal in priority to that discharged, and Mortgagee shall be subrogated to, and receive and enjoy all rights and liens possessed, held or enjoyed by, the holder of such lien, which shall remain in existence for the benefit of Mortgagee to secure the amount expended by Mortgagee on account of or in connection with such lien. SECTION 6.13. Conflicting Provisions. To the extent there exists any conflict or inconsistency between the terms of this Leasehold Mortgage and the terms of the Loan Agreement, the terms of the Loan Agreement shall govern. SECTION 6.14. Counterparts. This Leasehold Mortgage may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. SECTION 6.15. Effectiveness of Document. Notwithstanding any other provision of this Leasehold Mortgage to the contrary, in the event that this Leasehold Mortgage or the execution and delivery hereof would cause Mortgagor to be in default under any Site Lease by reason of the failure of Mortgagor to obtain the prior consent of the landlord under the Site Lease to this Leasehold Mortgage or the execution and delivery hereof, Mortgagee hereby agrees, solely for the purpose of avoiding any such default by Mortgagor, that this Leasehold Mortgage shall not be effective, and that Mortgagee will not record this Leasehold Mortgage or otherwise exercise any of its remedies hereunder, unless and until such required consent (if any) of the landlord under the Site Lease shall have been obtained. Mortgagor hereby agrees that if an Event of Default shall have occurred and be continuing, then, upon the request of Mortgagee, Mortgagor shall obtain the consent of the landlord under the Site Lease to this Leasehold Mortgage and the exercise of remedies hereunder and take whatever action shall be necessary to record the Site Lease or a memorandum thereof and this Leasehold Mortgage as a mortgage lien on the leasehold estate created by the Site Lease. Mortgagor irrevocably constitutes and appoints Mortgagee the true and lawful attorney-in-fact of Mortgagor, so long as any such Event of Default has occurred and is continuing, to execute, acknowledge, swear to and file any documents in the name of Mortgagor necessary to record the Site Lease or a memorandum thereof and this Leasehold Mortgage as a mortgage lien on the leasehold estate created by the Site Lease; it being expressly acknowledged that the foregoing power of attorney is coupled with an interest and shall survive the dissolution of Mortgagor or assignment by Mortgagor of its rights hereunder. SECTION 6.16. Recourse. Except as otherwise expressly set forth in this Section 6.16, Mortgagee shall have no recourse against any shareholder, owner, partner, officer, director, agent or employee of or in Mortgagor or of or in any partner in or shareholder of Mortgagor (all such Persons, except to the extent any such Person is obligated under a Guaranty, referred to collectively as "Exculpated Persons") for the repayment of the Loan. Notwithstanding the provisions of this Section 6.16, nothing herein or in any other Loan Document shall: (i) prevent Mortgagee's recourse to Mortgagor, the Restaurant, the Collateral or the Property or against any Guarantor under a Guaranty; (ii) constitute a waiver, release or discharge of any Indebtedness or Obligation evidenced by the Loan or arising under or secured by this Mortgage or any of the other Loan Documents, but the same shall continue until fully paid or discharged; (iii) affect or in any way limit the rights and remedies of Mortgagee under this Mortgage or under any other Loan Document; or (iv) limit the personal liability of any Exculpated Person for misappropriation or misallocation of any funds, fraud, misrepresentation or willful damage to the Restaurant, the Property or any portion thereof or for any environmental indemnity under the Loan Documents. [Signature Page Next] 16 IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this Leasehold Mortgage as of the date first written above. SYBRA, INC., a Michigan corporation By: _______________________ Name: Title: [Corporate Seal] Attest: By: __________________________ Name: By: __________________________ Name: This instrument was prepared by and when recorded should be returned to: ATHERTON CAPITAL INCORPORATED 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder 17 ACKNOWLEDGEMENT FOR MORTGAGOR STATE OF ________________________ COUNTY OF ________________________ The foregoing instrument was acknowledged before me this ____ day of ___________, 19__, by _______________________, the _______________________ of Sybra, Inc., a Michigan corporation. NOTARY PUBLIC: Name: Notary Public My commission expires on ___________ ___, 19__. [Notary Seal] EX-10.07 7 FORM OF SEC AGREEMENT LOAN TRANCHE ____ EXHIBIT G SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of ________________________, 19__, is executed by SYBRA, INC., a Michigan corporation, as the surviving entity of a merger with Newco ("Borrower"), in favor of ATHERTON CAPITAL INCORPORATED, a Delaware corporation (together with its successors and assigns, "Lender"). RECITALS A. Pursuant to a Loan Agreement, dated as of the date hereof (the "Loan Agreement"), between Borrower and Lender, Lender has agreed to extend a loan in the aggregate principal amount of $__________________________ (the "Loan") to Borrower upon the terms and subject to the conditions set forth therein. B. Lender's obligation to extend the loan to Borrower under the Loan Agreement is subject, among other conditions, to receipt by Lender of this Security Agreement duly executed and delivered by Borrower. C. Following the execution of this Security Agreement, Lender expects to eventually sell the Loan to one or more trusts or other entities. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower hereby agrees with Lender as follows: 1. Definitions and Interpretation. When used in this Security Agreement, the following terms shall have the following respective meanings: "Collateral" shall have the meaning given to that term in paragraph 2 hereof. "Equipment" shall have the meaning given to that term in Attachment 1 hereto. "Inventory" shall have the meaning given to that term in Attachment 1 hereto. "Loan Agreement" shall have the meaning given to that term in Recital A hereof. "Obligations" shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by Borrower to Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of the Loan Agreement or any of the other Loan Documents including, without limitation, all interest, Yield Maintenance Amount, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to and payable by Borrower hereunder or thereunder. "Receivables" shall have the meaning given to that term in Attachment 1 hereto. "Related Contracts" shall have the meaning given to that term in Attachment 1 hereto. "Restaurant" shall mean each of the Arby's restaurants described on Attachment 2. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time. Unless otherwise defined herein, all other capitalized terms used herein and defined in the Loan Agreement shall have the respective meanings given to those terms in the Loan Agreement, and all terms defined in the UCC shall have the respective meanings given to those terms in the UCC. The rules of construction set forth in Section I of the Loan Agreement shall, to the extent not inconsistent with the terms of this Security Agreement, apply to this Security Agreement and are hereby incorporated by reference. 2. Grant of Security Interest. As collateral security for the Obligations, Borrower hereby pledges and assigns to Lender and grants to Lender a security interest in all right, title and interest of Borrower in and to the property described in Attachment 1 hereto, whether now owned or hereafter acquired (collectively and severally, the "Collateral"), which Attachment 1 is incorporated herein by this reference. 3. Representations and Warranties. Borrower represents and warrants to Lender as follows: (a) Borrower is the legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Borrower acquires rights in the Collateral, will be the legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens pertaining to personal property. (b) Lender has (or in the case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) a first priority perfected security interest in the Collateral, other than Permitted Liens pertaining to personal property. (c) All Equipment and Inventory are located at the Restaurant. Borrower has exclusive possession and control of the Inventory and Equipment. (d) Borrower keeps all records concerning the Receivables and the originals of all Related Contracts at the Restaurant or at its chief executive office. 4. Covenants. Borrower hereby agrees as follows: (a) Upon the written request of Lender at any time and from time to time, Borrower shall perform all acts that may be reasonably deemed necessary or appropriate by Lender to maintain, continue, preserve, protect and perfect the Collateral (ordinary wear and tear excepted), the Lien granted to Lender therein and the first perfected priority of such Lien. (b) Borrower shall not use or permit any Collateral to be used in violation of any provision of the Loan Agreement, this Security Agreement or any other Loan Document. (c) Borrower shall pay promptly when due all taxes and other Governmental Charges, all Liens and all other charges now or hereafter imposed upon or affecting any Collateral (other than any such taxes, Governmental Charges, Liens or other charges which are being contested by Borrower in good faith and by appropriate proceedings and for which Borrower has established adequate reserves. (d) Without 30 days' prior written notice to Lender, Borrower shall not (i) change Borrower's name or place of business (or, if Borrower has more than one place of business, its chief executive office), or the office in which Borrower's records relating to Receivables or the originals of Related Contracts are kept, (ii) keep Collateral consisting of chattel paper at any location other than at the Restaurant or its chief executive office, or (iii) keep Collateral consisting of Equipment, Inventory or other goods at any location other than at the Restaurant. (e) Borrower shall procure, execute and deliver from time to time any endorsements, assignments, financing statements and other writings reasonably deemed necessary or appropriate by Lender to perfect, maintain and protect its Lien hereunder and the priority thereof and to assure compliance by Borrower with the terms of this Security Agreement and the other Loan Documents as Lender may from time to time reasonably request and shall deliver promptly to Lender all originals of Collateral consisting of instruments, documents and chattel paper. (f) Borrower shall appear in and defend any action or proceeding which may affect its title to or Lender's interest in the Collateral. (g) If Lender gives value to enable Borrower to acquire rights in or the use of any Collateral, Borrower shall use such value for such purpose. (h) Borrower shall keep separate, accurate and complete records of the Collateral and shall provide Lender with such records and such other reports and information relating to the Collateral as Lender may reasonably request from time to time. 2 (i) Borrower shall not surrender or lose possession of (other than to Lender), sell, encumber, lease, rent, or otherwise dispose of or transfer any Collateral or right or interest therein except as permitted in the Loan Agreement, and, notwithstanding any provision of the Loan Agreement, Borrower shall keep the Collateral free of all Liens except Permitted Liens pertaining to personal property. (j) Borrower shall comply with all material Legal Requirements applicable to Borrower which relate to the production, possession, operation, maintenance and control of the Collateral (including, without limitation, the Fair Labor Standards Act). 5. Authorized Action by Agent. Borrower hereby irrevocably appoints Lender as its attorney-in-fact and agrees that Lender may perform (but Lender shall not be obligated to and shall incur no liability to Borrower or any third party for failure so to do) any act which Borrower is obligated by this Security Agreement to perform, and to exercise such rights and powers as Borrower might exercise with respect to the Collateral, including, without limitation, the right to (a) collect by legal proceedings or otherwise and endorse and receive all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, protect, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any Indebtedness of Borrower relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder. Borrower agrees to reimburse Lender upon demand for any reasonable costs and expenses, including reasonable attorneys' fees, Lender may incur while acting as Borrower's attorney-in-fact hereunder, all of which costs and expenses are included in the Obligations. Borrower agrees that such care as Lender gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Lender's possession; provided, however, that Lender shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other Person in connection with the Obligations or with respect to the Collateral. 6. Performance by Lender. If Borrower shall fail to pay or perform any of its obligations herein contained or under any other Loan Documents, Lender upon five (5) days prior written notice to Borrower (except as otherwise expressly permitted by any Loan Document in the event of an emergency when no notice need be given) may, but need not, make (or cause to be made) any such payment or perform (or cause to be performed) any such obligation of Borrower hereunder or thereunder (provided Borrower is not contesting such payment or performance as permitted by the Loan Agreement and the failure to so perform such obligation would have a Material Adverse Effect), in any form and manner deemed commercially reasonable by Lender as agent or attorney-in-fact of Borrower, and any amount so paid or expended (plus reasonable compensation to Lender for its out-of-pocket and other expenses (including legal expenses) for each matter for which it acts under this Security Agreement), with interest thereon at the Default Rate, shall be added to the Obligations and shall be repaid to Lender upon demand. No such action of Lender shall be considered as a waiver of any right accruing to it on account of the occurrence of any default on the part of Borrower under this Security Agreement, any Default, any Event of Default, or any default or event of default under any other Loan Document. 7. Default and Remedies. Borrower shall be deemed in default under this Security Agreement upon the occurrence and during the continuance of an Event of Default, as that term is defined in the Loan Agreement. In addition to all other rights and remedies granted to Lender by this Security Agreement, the Loan Agreement, the other Loan Documents, the UCC and other applicable governmental regulations, Lender may, upon the occurrence and during the continuance of any such Event of Default, exercise any one or more of the following rights and remedies: (a) foreclose or otherwise enforce Lender's security interests in any or all Collateral in any manner permitted by applicable law or in this Security Agreement; (b) notify any or all account debtors to make payments on Receivables directly to Lender; (c) sell or otherwise dispose of any or all Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as Lender may determine; (d) require Borrower to assemble the Collateral and make it available to Lender at a place to be designated by Lender; (e) enter onto any property where any Collateral is located and take possession thereof with or without judicial process; and (f) prior to the disposition of the Collateral, store, process, repair or recondition any Collateral consisting of goods, perform any obligations and enforce any rights of Borrower under any Related Contracts or otherwise prepare and preserve Collateral for disposition in any manner and to the extent Lender deems reasonably appropriate. In furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an irrevocable, non-exclusive license (exercisable without royalty or other payment by Lender) to use, license or sublicense any patent, trademark, tradename, copyright or other intellectual property in which Borrower now or hereafter has any right, title or interest, together with the right of access to all media in which any of the foregoing may be recorded or stored. Borrower hereby agrees that ten (10) days notice of any intended sale or disposition of any Collateral is reasonable. 8. Miscellaneous. 3 (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Borrower or Lender under this Security Agreement shall be in writing and telecopied, mailed or delivered to each party at its telecopier number or address set forth below (or to such other telecopier number or address for any party as indicated in any notice given by that party to the other party). All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing, on the Business Day following the deposit with such service; (b) when mailed, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of receipt. Lender: Atherton Capital Incorporated 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attn: David L. Elder Telephone No.: (415) 827-7800 Telecopier No.: (415) 827-7950 with a copy to _____________________________________ Loan Servicer: _____________________________________ _____________________________________ Attention:___________________________ Telephone No.:_______________________ Telecopy No._________________________ Borrower: Sybra, Inc. 8300 Dunwoody Place, Suite 300 Atlanta, GA 30350 Attn: Charles N. Hyslop, President Telephone No.: (770) 587-0290 Telecopier No.: (770) 594-7044 (b) Expenses. Borrower shall pay on demand (i) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in connection with the preparation, execution and delivery of, and the exercise of its rights and duties under, this Security Agreement, and the preparation, execution and delivery of amendments, consents and waivers hereunder; and (ii) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in connection with the custody, preservation, preparation or sale of, or other realization on, any of the Collateral or the enforcement or attempted enforcement of any of the Obligations or in preserving any of Lender's rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Loan Documents or the Obligations or any bankruptcy or similar proceeding affecting Borrower or Guarantor). As used herein, the term "reasonable attorneys' fees and expenses" shall include, without limitation, allocable costs and expenses of Lender's in-house legal counsel and staff. (c) Waivers; Amendments. Any term, covenant, agreement or condition of this Security Agreement may be amended or waived if such amendment or waiver is in writing and is signed by Borrower and Lender. No failure or delay by Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in any such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (d) Successors and Assignments. This Security Agreement shall be binding upon and inure to the benefit of Lender and Borrower and their respective successors and assigns; provided, however, that Borrower and Lender may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Loan Agreement. Lender may disclose this Security Agreement, any other Loan Documents and any financial or other information relating to Borrower to any assignee or potential assignee. (e) Partial Invalidity. If at any time any provision of this Security Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Security Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 4 (f) Jury Trial. EACH OF BORROWER AND LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT. (g) Cumulative Rights, etc. The rights, powers and remedies of Lender under this Security Agreement shall be in addition to all rights, powers and remedies given to Lender by applicable law, the Loan Agreement, any other Loan Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Lender's rights hereunder. Borrower waives to the fullest extent permitted by applicable law any right to require Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Lender's power. (h) Payments Free of Taxes, Etc. All payments made by Borrower under this Security Agreement shall be made by Borrower free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, Borrower shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Security Agreement. Upon request by Lender, Borrower shall furnish evidence satisfactory to Lender that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. (i) Borrower's Continuing Liability. Notwithstanding any provision of this Security Agreement or any other Loan Document or any exercise by Lender of any of its rights hereunder or thereunder (including, without limitation, any right to collect or enforce any Collateral), (i) Borrower shall remain liable to perform its obligations and duties in connection with the Collateral (including, without limitation, the Related Contracts and all other agreements relating to the Collateral) and (ii) Lender shall not assume any liability to perform such obligations and duties or to enforce any of Borrower's rights in connection with the Collateral (including, without limitation, the Related Contracts and all other agreements relating to the Collateral). (j) Governing Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of California. (k) Release of Collateral and Termination. Upon the indefeasible payment in full of all of the Obligations, Lender shall release its security interest in the Collateral and this Security Agreement shall be terminated. 5 IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be executed as of the day and year first above written. SYBRA, INC., a Michigan corporation By: ________________________________ Name: ______________________________ Title: _____________________________ 6 ATTACHMENT 1 TO SECURITY AGREEMENT (a) All equipment and fixtures held or maintained at the Restaurant or otherwise used in the ownership or operation of the Restaurant (including, without limitation, food preparation equipment, decorations, seating, booths, awnings, refrigeration equipment not involving roof penetration, signage, menus, furniture, playground equipment, vehicles and other machinery and office equipment), together with all additions and accessions thereto and replacements therefor (collectively, the "Equipment"); (b) All inventory held or maintained at the Restaurant or otherwise used in the ownership or operation of the Restaurant (including, without limitation, (i) all food and paper inventory and all other raw materials, work in process and finished goods and (ii) all such goods which are returned to or repossessed by Borrower), together with all additions and accessions thereto, replacements therefor, products thereof and documents therefor (collectively, the "Inventory"); (c) All accounts, chattel paper, instruments, deposit accounts and other rights to the payment of money (including, without limitation, general intangibles and contract rights) arising as a result of any activities conducted by, through or at the Restaurant (including, without limitation, payments received with respect to termination, arbitration or litigation under the Franchise Agreement) (collectively, the "Receivables") and all contracts, security agreements, leases, guaranties and other agreements evidencing, securing or otherwise relating to the Receivables (collectively, the "Related Contracts"); (d) All other general intangibles and contract rights not otherwise described above acquired, held, used, sold or consumed in connection with the Restaurant or relating to or arising out of the Restaurant or the operation thereof (including, without limitation, (i) customer and supplier lists and contracts, books and records, computer programs and other intellectual property, insurance policies, tax refunds, contracts for the purchase and/or lease of real or personal property, subject to the terms of Section 5.01(u) of the Loan Agreement, (ii) all patents, copyrights, trademarks, tradenames and service marks, (iii) to the extent permitted by the terms thereof, all licenses to use, applications for, and other rights to, such patents, copyrights, trademarks, tradenames and service marks, (iv) all goodwill of Borrower (including the ongoing enterprise value of the Restaurants), (v) the Franchise Agreement(s) in respect of each Restaurant and all rights thereunder, including, without limitation, the right to operate each Restaurant, the right to receive any payment from the Franchisor, and the right to receive any payment from any other Person in connection with, or related to, or arising out of or from any such Franchise Agreement, all to the fullest extent permitted by Arby's, Inc. or applicable law, and (vi) to the extent permitted by the terms thereof, any other agreement between Borrower and Franchisor; (e) All other property not otherwise described above acquired, held, used, sold or consumed in connection with the Restaurant or relating to the Restaurant or the management thereof (including, without limitation, all money, certificated securities, uncertificated securities, documents and goods); and (f) All cash and non-cash proceeds and products of the foregoing (including, without limitation, whatever is receivable or received when Collateral or proceeds is sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and return premiums and insurance proceeds under insurance with respect to any Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Collateral). [1]-1 LOAN TRANCHE ___ ATTACHMENT 2 TO SECURITY AGREEMENT Restaurant No. Location [1]-2 EX-10.8 8 RESTAURANT LEASE RESTAURANT LEASE TRANCHE C U. S. RESTAURANT PROPERTIES OPERATING L. P. ("Landlord") and SYBRA, INC. ("Tenant") RESTAURANT LEASE SYBRA, INC. TRANCHE C THIS LEASE (the "Lease") is made and entered into this ________ day of ___, 1997, by and between U. S. RESTAURANT PROPERTIES OPERATING L. P., a Delaware limited partnership (hereinafter called "Landlord"), and SYBRA, INC., a Michigan corporation (hereinafter called "Tenant"). For and in consideration of the rental and of the covenants and agreements hereinafter set forth to be kept and performed by Tenant, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the Building or Buildings and the Premises as defined below, for the term and at the rental amount, and subject to and upon all of the terms, covenants, and agreements hereinafter set forth. 1.0 DEFINITIONS ----------- 1.1 Building and Buildings. The word "Building or "Buildings" as used in this Lease shall mean the forty (40) one-story restaurant buildings located on the sites more particularly described on Exhibit A. 1.2 Personal Property. The furniture, fixtures and equipment owned by Landlord and used by Tenant at the Premises, more particularly described on Exhibit B. 1.3 Premises. The word "Premises" as used in this Lease shall mean the fee or leasehold interest in the underlying ground and driveways and parking areas outside of each Building as shown on Exhibit A. 1.4 Leased Property. The word "Leased Property" as used in this Lease shall mean collectively, the Buildings, the Premises and the Personal Property with respect to each Building. 1.5 Equipment. The word "Equipment" as used in this Lease shall mean collectively, the furniture, fixtures and equipment owned by Tenant and located in any Building or on any Premises, including, but not limited to, kitchen equipment, signage, canopies, menus, seating, counter tops and refrigeration equipment. 1.6 Operations. Intentionally deleted. 1.7 Taxes. The real property taxes and personal property taxes applicable to the Leased Property and restaurant operations pursuant to Sections 5.2 and 5.3. 1.8 Franchise Agreement. The Franchise Agreement between Tenant and Arby's Inc. d/b/a Triarc Restaurant Group, a Delaware corporation, dated _____________________________, with respect to the restaurant operations at each Building. The Franchise Agreements are attached hereto as Exhibit G. 1.9 Purchase Price. The purchase price for the Buildings shall be $18,128,100.00. The Purchase Price shall be allocated to individual Buildings in accordance with Exhibit C hereto. 1.10 Rent Reduction Amount. The product of (i) total Base Rent payable hereunder prior to such reduction multiplied by (ii) the ratio of (A) the portion of the Purchase Price allocated to the Building pursuant to Exhibit C with respect to which the Rent Reduction Amount is calculated, divided by (B) the Purchase Price. 2.0 TERM ---- 2.1 The Term of this Lease shall be for a period of twenty (20) years, commencing on the 30th day of April, 1997 (the "Rent Commencement Date") and ending on the 30th day of April, 2017. A "Lease Year" shall commence on the Rent Commencement Date and end 12 months thereafter. 2.2 Option to Renew Lease. Tenant shall have the option to renew the Lease for three (3) renewal terms, with the first renewal term being for a ten (10) year period and the next two (2) renewal terms being for periods of five (5) years each, on the same terms and conditions as herein set forth. Tenant shall exercise each renewal option by delivery of written notice of exercise of such option to Landlord on or before the date six (6) months preceding the scheduled termination date of the Lease or the current renewal period as the case may be. If Tenant fails to exercise any renewal option, Tenant's right to exercise any further renewal options will expire. 2.3 Acknowledgment of Commencement Date. In the event the commencement date of the term of this Lease is other than provided for in Section 2.1, then the Landlord and Tenant shall execute a written acknowledgment of commencement and shall attach it hereto as Exhibit D. 3.0 RENT. ----- Tenant shall pay to Landlord as rent for the Leased Property the sums shown on Exhibit E, payable in advance, without deduction, offset, prior notice or demand, in lawful monies of the United States of America. 4.0 FINANCIAL COVENANTS AND STATEMENTS. ----------------------------------- 4.1 Liquidity. Tenant represents and warrants that, as of the Rent Commencement Date, it shall have Unencumbered Liquidity of at least $2,750,000.00. For purposes hereof, Unencumbered Liquidity shall mean, as of the Rent Commencement Date, the sum of (i) 75% of the cash and cash equivalents of Tenant, plus (ii) 100% of the cash and cash equivalents of ICH Corporation which, in either case, are not collaterally assigned in connection with any loan in which such cash or cash equivalent represents substantially all of the collateral for such loan. Tenant shall deliver a certificate to Landlord as of the Rent Commencement Date evidencing compliance with this Section, which certificate is a condition precedent to the effectiveness of this Lease. 4.2 Guaranty. ICH Corporation ("Guarantor") shall irrevocably and unconditionally guaranty all obligations of Tenant under this Lease, and shall execute a Guaranty Agreement in the form attached hereto as Exhibit F. If Guarantor sells fifty-one percent (51.0%) or more of its ownership interest in Tenant to a party ("Substitute Guarantor") which agrees to execute a guaranty agreement substantially in the form attached hereto as Exhibit F, Guarantor shall be released from any further liability with respect to the Guaranty Agreement provided that (i) there is at such time no default under the Lease beyond any applicable notice and cure period, and (ii) the Substitute Guarantor has financial strength and payment 2 ability as of the date of the request for such substitution reasonably acceptable to Landlord, based on the financial statements of the Substitute Guarantor in form reasonably acceptable to Landlord. 4.3 Dividend Restriction. Guarantor (or any Substitute Guarantor) shall not pay any dividends on its capital stock, redeem any capital stock, or engage in any recapitalization requiring Guarantor to pay dividends or redeem its capital stock (i) at any time prior to two (2) years after the Rent Commencement Date, and thereafter (ii) only if, immediately after any such transaction, the Unencumbered Liquidity is more than $2,750,000.00. 4.4 Financial Statements. During the term of this Lease, including any renewal terms, Tenant and Guarantor (including any Substitute Guarantor) shall deliver to Landlord annual financial statements of Tenant and Guarantor, prepared in accordance with generally accepted accounting principles, certified by the chief executive officer or chief financial officer of Tenant within ninety (90) days following the close of such year. If Tenant or Guarantor has audited financial statements available, it shall deliver such audited financial statements to Landlord. Additionally, Tenant shall prepare and deliver to Landlord monthly sales reports separately identifying the gross sales from each Building subject to this Lease. 5.0 TAXES. ------ 5.1 Payment of Taxes. Tenant shall pay, as additional rent hereunder, all real property taxes applicable to the Leased Property during the term of the Lease. Payment of taxes shall be made directly to the taxing authority prior to the due date for such taxes (provided Tenant receives a copy of the tax bill at least thirty (30) days prior to the due date), with a copy to Landlord of the remittance within five (5) days after payment by Tenant. In the event such real property taxes required to be paid by Tenant cover any period of time before or after expiration of the term of this Lease, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the fiscal tax year during which this Lease is in effect. Landlord shall forward copies of all tax bills within fifteen (15) days after Landlord's receipt thereof. 5.2 Definition of "Real Property Taxes". As used herein, the term "real property tax" shall include any form of assessment, license fee, rent tax, sales tax on rental receipts, levy, or tax imposed by any authority having the direct or indirect power to tax, including any city, county, state, or federal government, or any school, agricultural, lighting, drainage, or other improvement district thereof, as against any legal or equitable interest of Landlord in any Leased Property or in the real property of which any Premises is a part, as against Landlord's right to rent or other income therefrom. 5.3 Personal Property Tax. (a) Tenant shall pay prior to delinquency all taxes assessed against and levied upon leasehold improvements, fixtures, furnishings, Personal Property and Equipment. (b) If any Equipment shall be assessed with Landlord's real property, Tenant shall pay to Landlord the taxes attributable to such Equipment within ten (10) days after receipt of a written statement setting forth the taxes applicable to the Equipment. 5.4 If Tenant should fail to pay any taxes, assessments or governmental charges required to be paid by it hereunder, in addition to any other remedies provided herein, Landlord may, in its sole discretion, after ten (10) days' prior written notice to Tenant, pay such taxes, assessments and governmental charges. 3 Any sums so paid by Landlord shall be deemed to be additional rental owing by Tenant to Landlord and due and payable upon demand as additional rent with interest at the rate of twelve percent (12.00%) from the date of the payment by Landlord. 5.5 If at any time during the term of the Lease the present method of taxation shall be changed so that, in lieu of the whole or any part of any taxes, assessments, levies or charges levied, assessed or imposed on real estate and the improvements thereon there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received from Tenant and/or any assessment, levy or charge measured by or based in whole or in part, upon such rents, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be deemed to be included with the term taxes for the purposes hereof and shall be paid by Tenant. 5.6 Tenant may contest the amount, validity or application of any taxes by appropriate proceedings diligently conducted in good faith provided that (a) such proceedings shall suspend the collection thereof, (b) no part of the Leased Property or of any rent would be subject to loss, sale or forfeiture before determination of any contest, (c) Landlord would not be subject to any criminal liability for failure to pay, (d) such proceedings shall not affect the payment of rent hereunder or prevent Tenant from using any Leased Property for its intended purposes, and (e) Tenant shall notify Landlord of any such proceedings at which the amount of contest exceeds $10,000.00 within 20 days after the commencement thereof, and shall describe such proceedings in reasonable detail. Tenant will conduct all such contests in good faith and with due diligence and will, promptly after the determination of such contest, pay and discharge all amounts which shall be determined to be payable therein. In the event Tenant elects to dispute and contest any taxes, it shall provide Landlord with a surety bond in the amount of taxes in dispute. 5.7 Landlord covenants and agrees that if there shall be any refunds or rebates of the Taxes paid by Tenant, such refunds or rebates shall belong to Tenant. Any refunds received by Landlord shall be deemed trust funds and as such are to be received by Landlord in trust and paid to Tenant forthwith. Tenant will, upon the request of Landlord, sign any receipts which may be necessary to secure the payment of any such refunds or rebates. The obligations set forth in this Section 5.7 shall survive any termination of this Lease. Landlord will cooperate in the execution of any documents Tenant may reasonably request in connection with such proceedings. 6.0 USE --- 6.1 Use. The Leased Property shall be used and occupied by Tenant as an Arby's restaurant pursuant to the Franchise Agreement, and may be used for any other lawful purpose with Landlord's prior written consent, which shall not unreasonably be withheld or delayed (and which may be conditioned, for non-restaurant uses, on such use not causing any violation of a loan agreement or other contractual commitment to which Landlord is a party). Tenant will not do or permit any act or thing that is contrary to any legal requirement or insurance requirement, or that impairs the value of any Leased Property or any part thereof or that materially increases the dangers, or poses unreasonable risk of harm, to third parties (in, on or off any Leased Property) arising from activities thereon, or that constitutes a public or private nuisance or waste to any Leased Property or any part thereof. Tenant shall not conduct any activity on any Premises or use any Leased Property in any manner (i) which would cause any Leased Property to become a hazardous waste treatment, storage or disposal facility within the meaning of, or otherwise bring any Leased Property within the ambit of, the Resource Confirmation and Recovery Act of 1976, 42 U.S.C. ss. 4 6901, et seq., or any similar state law or local ordinance; (ii) so as to cause a release or threat of release of hazardous waste from any Leased Property within the meaning of, or otherwise bring any Leased Property within the ambit of, the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601-57, or any similar state law or local ordinance or any other environmental law; or (iii) so as to cause a discharge of pollutants or effluents into any water source or system, or the discharge into the air of any emissions, which would require a permit under the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251, et seq., or the Clean Air Act, 42 U.S.C. ss. 741, et seq., or any similar state or local ordinance. 6.2 Compliance with the Law. Tenant shall, at Tenant's expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, and requirements in effect during the term hereof, regulating the use by Tenant of any Leased Property. Tenant shall not use or permit the use of any Leased Property in any manner that will tend to create waste or a nuisance, or, otherwise expose Landlord or any Leased Property to any liability. 6.3 Condition of Leased Property. Tenant hereby accepts all of the Leased Property in their condition as of the date of the possession hereunder, subject to all applicable zoning, municipal, county, and state laws, ordinances, and regulations governing and regulating the use of any Leased Property, and accepts this Lease subject thereto and to all matters disclosed thereby, and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Landlord's agent has made any representation or warranty as to the suitability of any Leased Property for the conduct of the Tenant's business. 6.4 Tenant's Covenants and Indemnity. Tenant shall not dispose of or otherwise allow the release of any hazardous waste or materials in, on, or under the Premises, or any adjacent property or in any improvements placed on the Premises (other than in full compliance with all environmental laws). Tenant represents and warrants to Landlord that Tenant's intended use of any Leased Property does not involve the use, production, disposal or bringing onto any Premises of any hazardous waste or materials. Tenant shall promptly comply with all statutes, regulations and ordinances, and with all orders, decrees or judgments of governmental authorities or courts having jurisdiction, relating to the use, collection, treatment, disposal, storage, control, removal or clean up of hazardous waste or materials, in, on or under any Leased Property or any adjacent property, or incorporated in any improvements, at Tenant's expense. After notice to Tenant and reasonable opportunity for Tenant to effect such compliance, Landlord may, but is not obligated to, enter upon any Leased Property and take such actions and incur such costs and expenses to effect such compliance as it deems advisable to protect its interest in any Leased Property; provided, however, that Landlord shall not be obligated to give Tenant notice and an opportunity to effect such compliance if (i) such delay might result in material adverse harm to Landlord or any Leased Property, (ii) Tenant has already had actual knowledge of the situation and a reasonable opportunity to effect such compliance, or (iii) an emergency exists. Whether or not Tenant has actual knowledge of the release of hazardous waste or materials in, on or under any Leased Property or any adjacent property as the result of Tenant's use of any Leased Property, Tenant shall reimburse Landlord for the full amount of all costs and expenses reasonably incurred by Landlord in connection with such compliance activities, and such obligation shall continue even after the termination of this Lease. Tenant shall notify Landlord immediately after Tenant learns of any release of any hazardous waste or materials in, on or under any Leased Property. Tenant shall indemnify, defend and hold Landlord harmless from and against any and all 5 environmental claims, damages, demands, losses, liens, liabilities, obligations, fines, penalties, charges, judgments, clean up costs, remedial actions and other proceedings and costs and expenses (including, without limitation, attorneys' fees and disbursements) which may be imposed on, incurred or paid by, or asserted against Landlord or any Leased Property by reason of, or in connection with (i) any misrepresentation or breach of warranty by Tenant, or (ii) the acts or omissions of Tenant, or any sublessee or other person for whom Tenant would otherwise be liable, resulting in the release of any hazardous waste or materials, or (iii) arising directly or indirectly from or out of or in any way connected to Tenant's use, storage, ownership, possession, or control of hazardous substances in, on or under any Leased Property which directly or indirectly result in the Leased Property or any other property becoming contaminated with hazardous substances. Tenant hereby agrees upon notification to clean up from any Leased Property or any other property any contamination caused by its activity, including, without limitation, use, storage, ownership, possession or control of hazardous substances in, on or under any Leased Property, including, without limitations, any remedial action required by applicable governmental authorities. Tenant further acknowledges that it will be solely responsible for all costs and expenses relating to the clean up of hazardous substances from any Leased Property or any other properties which become contaminated with hazardous substances as a result of Tenant's activities in, on or under any Leased Property. The term "hazardous substances" and "hazardous waste or materials" shall mean: Any substance or material defined or designated as a hazardous or toxic waste, hazardous or toxic material, a dangerous, hazardous, toxic, or radioactive substance, or other similar term, by any federal, state, or local environmental statute, regulation, or ordinance presently in effect or that may be promulgated in the future, as such statutes, regulations, and ordinances may be amended from time to time including, but not limited to, the statutes listed below: Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq. Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 49 U.S.C. ss. 1801, et seq. Federal Clean Air Act, 42 U.S.C. ss. 7401-7626. Federal Water Pollution Control Act, Federal Clean Water Act of 1977, 33 U.S.C. ss. 1251, et seq. Federal Insecticide, Fungicide, and Rodenticide Act, Federal Pesticide Act of 1978, 7 U.S.C., Paragraph 13, et seq. Federal Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq. Federal Safe Drinking Water Act, 42 U.S.C. ss. 300 (f), et seq. 6.5 Insurance Cancellation. Notwithstanding the provisions of Section 6.1 above, no use shall be made or permitted to be made of any Leased Property nor acts done which will cause the cancellation of any insurance policy obtained by Tenant covering any Leased Property or any other property of which any Premises may be a part. 6 7.0 UTILITIES. ---------- Tenant shall pay prior to delinquency for all water, gas, heat, light, power, telephone, sewage and city assessments, air conditioning, ventilation, janitorial, landscaping, fire protection monitoring service, and all other materials and utilities supplied to any Leased Property. Landlord has no responsibility to maintain or pay for any utilities on any Leased Property. 8.0 MAINTENANCE AND REPAIRS; ALTERATIONS AND ADDITIONS -------------------------------------------------- 8.1 Tenant shall at its sole cost and expense keep and maintain all Leased Property, including sidewalks, landscaping and driveways located on the Premises, in good order and condition and repair, and shall suffer no waste with respect thereto. Tenant shall at all times comply with the image standard required under the Franchise Agreement. Tenant shall at its sole cost and expense make all needed repairs to and replacements of the Leased Property, interior and exterior, structural and nonstructural, ordinary and extraordinary, including but not limited to any roof, air conditioning and heating systems, replacements of cracked or broken grass, repair of parking areas and driveways, and shall keep the plumbing units, pipes and connections free from obstruction and protected against ice and freezing. Landlord has no responsibility to maintain or pay for any part of the maintenance or replacement of the Leased Property. 8.2 Surrender. On the last day of the term hereof, or on any sooner termination, Tenant shall surrender the Leased Property to Landlord in good condition, broom clean, ordinary wear and tear excepted. Tenant shall repair any damage to the Leased Property caused by the removal of Tenant's Equipment pursuant to Section 8.4 below, which repairs shall include the patching and filling of holes thereof, the repair of structural damage of any kind or type, the repair or replacement of all damaged mechanical equipment and all heating, air conditioning, and ventilating equipment. 8.3 Landlord's Rights. If Tenant fails to perform Tenant's obligations under any of the provisions of this Section 8, Landlord shall give Tenant written notice to do such acts as are reasonably required to maintain any Leased Property in good order and condition. If, within thirty (30) days of such notice, Tenant fails to commence to do the work and diligently prosecute it to completion, or, with respect to items which are not reasonably susceptible to being remedied within such thirty (30) day period, within the period during which the work may reasonably be completed, then Landlord shall have the right, (but not the obligation) to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work satisfactorily. Any amount so expended by Landlord shall be paid by Tenant within ten (10) days after billing for same, with interest at twelve percent (12.00%) per annum from the date of such work. Landlord shall have no liability to Tenant for any damage, inconvenience, or interference with the use of any Leased Property by Tenant as a result of performing any such work. 8.4 Alterations and Additions. (a) Tenant shall not make any alterations to any structural component of any Building (including, but not limited to exterior walls, foundations, roof and ceilings), or utility installations on or about any Premises without the express written consent of the Landlord; provided, however, that the Landlord will not unreasonably delay or withhold consent. As used in this section, the term "utility installations" shall include ducting, power plants, space heaters, conduit, and wiring. (b) Tenant shall provide Landlord with written notice of each contractor or 7 subcontractor performing work on any Leased Property. Landlord's consent to the selection of such contractors or subcontractors shall not be required for construction on the Leased Property not exceeding $100,000.00. Landlord shall have the right to approve any contractors or sub-contractors for work on any Leased Property which is reasonably expected to exceed $100,000.00, which approval shall not be unreasonably withheld or delayed. (c) All alterations, changes, additions, improvements, and utility installations (whether or not such utility installations constitute trade fixtures of Tenant) which may be made to any Leased Property, shall at the expiration or earlier termination of this Lease, become the property of the Landlord and remain upon and be surrendered with the Leased Property. The Equipment, inventory and any other personal property, to the extent owned by Tenant, other than that which is affixed to any Building or Premises so that it cannot be removed without material damage to such Building or Premises, shall remain the property of the Tenant, and may be removed by the Tenant subject to the provisions of Section 8.23, at any time during the term of this Lease when Tenant is not in default of any of the provisions of this Lease beyond any applicable notice and cure period. 9.0 ENTRY BY LANDLORD. ------------------ Landlord and Landlord's agents, shall have the right on reasonable prior notice during normal business hours to enter any Building or Premises to inspect the same or to maintain or repair the Leased Property or any portion thereof or to show any Leased Property to prospective purchasers or lenders, or during the last three (3) months of the term of the Lease to any prospective Tenant. Landlord shall have the right to use any and all means which Landlord may deem proper to open the door to any Building in an emergency of any type. 10.0 LIENS. ------ Tenant shall keep all Leased Property free from any and all liens arising out of work performed, materials furnished, or obligations incurred by Tenant and shall indemnify and hold harmless and defend the Landlord from any and all liens and/or encumbrances arising out of any work performed or materials furnished by or at the direction to the Tenant. In the event that any such lien is imposed, Tenant shall have thirty (30) days from the date it is notified of such imposition to cause the lien to be released of record or bonded around. Failure to do so by Tenant shall allow Landlord, in addition to all other remedies provided herein by law, the right, but by no means the obligation, to cause the lien to be released by such means as it shall deem proper, including payment of the claim giving rise to the lien. All such sums reasonably paid by Landlord and all expenses reasonably incurred by it in connection therewith, including attorney's fees and costs, shall be payable to Landlord by Tenant on demand with interest at twelve percent (12.00%) per annum. Landlord shall have the right at all times to post and keep posted on any Leased Property any notices permitted or required by law, or which the Landlord shall deem proper, for the protection of the Landlord and any Leased Property, and/or any other party having an interest therein, from mechanic's and materialman's liens. The Tenant shall give to Landlord at least ten (10) days written notice of the expected date of commencement of any work relating to alterations and/or additions to the Leased Property exceeding $100,000.00. 8 11.0 INDEMNITY --------- 11.1 Indemnity. Tenant shall defend, indemnify, and hold harmless Landlord from and against any and all claims arising from Tenant's use of any Leased Property or the conduct of its business or from any activity, work, or thing done, permitted, or suffered by Tenant in or about any Leased Property and shall further defend, indemnify, and hold harmless Landlord from and against any and all claims arising from any breach, or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease, or arising from any act or negligence of Tenant, or any of its agents, contractors, or employees, and from and against any and all costs, attorneys fees, expenses, and liabilities reasonably incurred in connection with such claim or any action or proceeding brought thereon. In case any action or proceeding be brought against Landlord by reason of any such claim whatsoever, Tenant, upon notice from Landlord, shall defend same at Tenant's expense by counsel reasonably satisfactory to Landlord. However, Tenant shall not be liable for any damage or injury occasioned by the negligence or intentional acts of Landlord or its designated agents, contractors or employees or for consequential damages. 11.2 Exemption of Landlord from Liability. Except for intentional acts or gross negligence of the Landlord, its agents, contractors and employees, Landlord shall not be held liable for injury or damage which may be sustained by the person, goods, wares, merchandise, or property of Tenant, or by any agent or other person claiming by or under Tenant which might be caused by or resulting from fire, steam, electricity, gas, water, or rain, which may leak or flow from or into any part of any Leased Property, or from breakage, leakage, obstruction, or other defects of the pipes, sprinklers, wires, appliances, plumbing, heating, air conditioning, ventilating, or lighting fixtures of the same, whether the said damage or injury results from conditions arising in, on, or under any Building or Premises or upon other portions of the Property of which the Premises are a part or from other sources. Landlord shall not be liable for any damages arising from any act or neglect of any other tenant (if any) of any Building or Premises, or property of which any Premises is a part. Tenant shall defend, indemnify and hold harmless Landlord from and against any and all claims by any person which may arise from the matters mentioned in this Section 11.2 except for intentional acts or negligence of the Landlord, its agents, contractors and employees. 9 12.0 INSURANCE --------- 12.1 Liability Insurance. Tenant shall, at Tenant's expense, procure and maintain at all times during the term of this Lease, a policy of comprehensive public liability insurance insuring Landlord and Tenant against any liability arising out of the ownership, use, occupancy, or maintenance of any Leased Property. Such insurance shall at all times be in an amount of not less than $3,000,000.00. The limits of such insurance shall not limit the liability of the Tenant. All insurance required under this Section 12 shall be with companies rated A or better in Best's Insurance Guide. Tenant shall deliver to Landlord certificates of insurance evidencing the existence and amounts of such insurance with loss payable clauses reasonably satisfactory to Landlord, provided that in the event Tenant fails to procure and maintain such insurance, Landlord may (but shall not be required to), procure same at Tenant's expense after ten (10) days prior written notice. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days prior written notice to Landlord by the insurer. All such policies shall be written as primary policies, not contributing with and not in excess of coverages which the Landlord may carry. Tenant shall, within twenty (20) days prior to the expiration of such policies, furnish Landlord with renewals or binders or Landlord, after ten (10) days' written notice, may order such insurance and charge the cost to the Tenant, which amounts shall be payable by Tenant on demand. Tenant shall have the right to provide such insurance coverage pursuant to blanket policies which the Tenant may have in force, provided such blanket policies expressly afford coverage of any Leased Property and to Landlord as is required by this Lease. 12.2 Property Insurance. Tenant shall, at Tenant's expense, procure and maintain at all times during the term of this Lease, the policy or policies of insurance covering loss or damage to any Leased Property in the amount of the full replacement value thereof, and providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, sprinkler leakage, flood and special extended peril (all risk). Tenant shall pay the entire amount of such annual insurance premiums and shall deliver to Landlord certificates of insurance evidencing such insurance with loss payable clauses reasonably satisfactory to Landlord, provided that in the event Tenant fails to provide and maintain such insurance, Landlord may (but shall not be required to) procure same at Tenant's expense after ten (10) days prior written notice. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days prior written notice to Landlord by the insurer. All such policies shall be written as primary policies, not contributing with and not in excess of coverages which the Landlord may carry. Tenant shall, within twenty (20) days prior to the expiration of such policies, furnish Landlord with renewals or binders or Landlord, after ten (10) days' written notice, may order such insurance and charge the cost to the Tenant, which amounts shall be payable by Tenant on demand. Such insurance shall provide for payment of losses thereunder to Landlord or the holder of a first mortgage or deed of trust on any of the Leased Property. Any loss proceeds shall be made available for the purposes of replacing or rebuilding the pertinent Leased Property if required under Section 13 and in which event, such funds shall be segregated from the general funds of Landlord and any mortgagee of Landlord's interest in the Leased Property. 12.3 Waiver of Subrogation. Landlord and Tenant shall waive any and all rights of recovery against the other or against the officers, employees, agents and representatives of the other, on account of loss or damage occasioned to such waiving party or its property or the property of others under its control caused by fire or any of the extended coverage risks described above to the extent that such loss or damage is insured. Landlord and/or Tenant shall give notice to the insurance carrier or carriers involved that the 10 foregoing mutual Waiver of Subrogation option is contained in this Lease. The waivers provided for in this Section 12.3 shall be applicable and effective only in the event such waivers are obtainable from the insurance carriers concerned. 13.0 DAMAGE TO PREMISES ------------------ 13.1 Partial or Total Damage-Insurance Available. In the event of damage causing a partial or total destruction of a Building during the term of this Lease and there is made available to the Landlord, or to any mortgagee of Landlord's interest in the Leased Property, pursuant to Section 12.0 above, insurance proceeds for such damage, Landlord shall repair or rebuild the damaged Building to the condition existing immediately prior to such damage, with this Lease to continue in full force and effect with respect to such damaged Building. Tenant shall deposit with Landlord or make available to Landlord the amount reasonably estimated by Landlord to be required in addition to any available insurance proceeds to complete the repairs or reconstruction ("Tenant Repair Deposit") within thirty (30) days after notice to Tenant by Landlord. The amount of the Tenant Repair Deposit shall not limit Tenant's liability if insufficient insurance is available to reconstruct the damaged Building, and Tenant shall pay any such deficiency to Landlord within thirty (30) days after written notice; conversely if after such reconstruction there is any balance in the Tenant Repair Deposit, such excess will promptly be refunded to Tenant within ten (10) days after reconstruction is completed. Provided, however, if Landlord has not begun reconstruction or repairs within thirty (30) days after the later of (i) receipt of available insurance proceeds or (ii) receipt of the Tenant Repair Deposit, if any, or it is not reasonably anticipated that such repair or reconstruction can be completed within a 180-day period after commencement of reconstruction, Tenant may, by written notice to Landlord, terminate this Lease as to such damaged Building, with a reduction in rent due hereunder as provided in Section 13.4, provided that Tenant has indemnified Landlord against any deficiency in insurance proceeds. 13.2 Repair Not Permitted. In the event that a Building may not be repaired as required herein under applicable laws and regulations notwithstanding the availability of insurance proceeds and any Tenant Repair Deposit, this Lease shall be terminated as to such Building effective with the date of the damage occurrence, with a reduction in rent due hereunder as provided in Section 13.4, and Landlord shall be entitled to retain the insurance proceeds and the Tenant Repair Deposit pertaining to the damaged Building. 13.3 Damage to Building or Personal Property During Last Twelve Months of Term. In the event of any total or partial destruction to a Building occurring during the last twelve (12) month period of the term of this Lease (or any extension thereof), and notwithstanding the provisions of Sections 13.1 above, Landlord or Tenant shall have the right for the longer of (i) a period of sixty (60) days following the event giving rise to the casualty or damage, or (ii) the period fifteen (15) days following the receipt of insurance proceeds and any Tenant Repair Deposit to elect to retain all insurance proceeds and any Tenant Repair Deposit and to terminate this Lease as to such Building, with a reduction in rent due hereunder as provided in Section 13.4. Provided, however, if Tenant has properly exercised any option that it may have to renew the Lease Term, this Section 13.3 shall be applicable to the option period. 13.4 Abatement of Rent. In the event that casualty to a Building results in Tenant ceasing business operations at the Building, and/or in the event of termination of this Lease with respect to a Building, the rent payable by Tenant under this Lease shall be reduced by the Rent Reduction Amount from 11 the date of the event giving rise to such damage or casualty. If only a portion of the Premises are affected by the casualty, but Tenant continues restaurant operations at such damaged Building, Tenant shall be entitled to an equitable reduction (not to exceed the Rent Reduction Amount) in rent in direct proportion to the area of the Building which is unusable bears to the area of improvements at such damaged Building. Tenant's obligation to resume the payment of rent and other charges with respect to a damaged Building shall recommence on the earlier of sixty (60) days after completion of any required construction of the Building or the date on which Tenant first reopens for business to the public. This right to a partial abatement of rent shall be Tenant's sole remedy as a result of any such damage or repair. Landlord shall not be required to make any repair or restoration of injury or damage to any Equipment or any improvement or property installed on the Premises by or at the expense of Tenant. Such items shall be replaced by Tenant at Tenant's sole cost and expense. 13.5 Continuation of Lease After Casualty or Condemnation. Notwithstanding any partial or complete termination of this Lease with respect to a damaged or condemned Building pursuant to Section 13 or 14 hereof, this Lease shall continue in full force and effect with respect to the remaining Leased Property, with such reduction in rent attributable to such damaged or condemned Building as provided in Section 13 or 14 hereof. 14.0 CONDEMNATION. ------------- 14.1 Total Taking. If all, or a substantial portion of any Building or the Premises of which such Building is located shall be taken or appropriated for public or quasi-public use by the right of eminent domain, (with or without litigation), or transferred by agreement in connection with such public or quasi-public use, either Landlord or Tenant shall have the right at its option (exercisable within thirty (30) day of the receipt of notice of such taking), to terminate this Lease as to such Building as of the date possession is taken by the condemning authority. A substantial portion of the Building shall be deemed to be taken or appropriated if such taking shall have a materially adverse effect upon the present use and operation of the affected Building or the economic feasibility of operation thereof, or shall result in the elimination of necessary ingress and/or egress from such Building to public roads ("Total Taking"). In the event of a Total Taking in which this Lease is terminated with respect to the condemned Building, the rent due under this Lease shall be reduced by the Rent Reduction Amount from the date of such taking. In the event of a taking which does not constitute a Total Taking ("Partial Taking"), Tenant shall be entitled to an equitable reduction in rent (not to exceed the Rent Reduction Amount) in direct proportion to the area of the Premises so taken bears to the total area of the Premises leased to Tenant. 14.2 Award. No award for any Total Taking or Partial Taking shall be apportioned, and except as provided in the next sentence, Tenant hereby assigns to Landlord any award which may be made in such taking appropriation, or condemnation, together with any and all rights of Tenant now or hereafter arising in such award. Landlord has no interest, however, in any award made to Tenant for the taking of Equipment belonging to Tenant or moving expenses; or for the interruption of or damage to Tenant's business, or to Tenant's unamortized cost of leasehold improvements. Any award to the Landlord by reason of a Partial Taking (or Total Taking, if the Lease is not terminated with respect to such condemned Building as set forth above) shall be made available for reconstruction, and shall be segregated from the Landlord's general funds. No temporary taking of any Building and/or of the Tenant's rights therein, or under this Lease, shall terminate this Lease as to such Building or give Tenant any right to any abatement of rent. Any award made for such temporary taking shall belong entirely to Tenant. 12 15.0 ASSIGNMENT AND SUBLETTING ------------------------- 15.1 Landlord's Consent Required. Tenant shall not assign, transfer, mortgage, pledge, hypothecate, or encumber this Lease or any interest therein, nor permit such assignment by operation of law, and shall not sublet any Leased Property or any part thereof, without the prior express written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. Landlord may condition such consent upon any assignee or subtenant providing Landlord with evidence of financial capability and restaurant operating experience reasonably satisfactory to Landlord. Any attempt to do so without such consent being in hand, shall be wholly void and shall constitute a breach of this Lease. Notwithstanding the foregoing to the contrary, Tenant shall have the right to assign this Lease with prior written notice to Landlord but without Landlord's consent, provided that there then exists no default under this Lease, beyond any applicable notice and cure period, to any person which is acquiring all or substantially all of the assets of Tenant, whether by merger, sale or otherwise. In connection with Tenant's assignment of its interest in this Lease with respect to less than all of the Buildings in a transaction satisfying the requirement of this Section 15.1, Landlord will cooperate with Tenant in executing an individual lease agreement with such assignee, provided that: (i) Tenant pays Landlord's reasonable legal fees in connection with the preparation of such individual lease; (ii) the individual lease has identical terms to the provisions of this Lease except for (A) the rental rate, which will be determined by Tenant in its reasonable discretion, and which will reduce the rental payments due hereunder by the same amount, (B) the assignee shall have no right to purchase a Building pursuant to Section 18.22 hereof, (C) the Assignee shall have no right to further assign or sublet the Leased Property without Landlord's prior written consent, which consent will not be unreasonably withheld or delayed, and (iii) Tenant shall guaranty, in form and content reasonably satisfactory to Landlord, the assignee's payment and performance obligation under such individual lease. Upon execution of such individual lease, the Leased Property which is the subject of such individual lease shall no longer be part of the Leased Property demised under this Lease or be governed by this Lease. Concurrently with the execution of such individual lease, the parties shall enter into an amendment to this Lease evidencing the removal of such Leased Property from the Leased Property demised hereunder and the corresponding reduction of the Base Rent payable hereunder, as provided above. 15.2 No Release of Tenant. No consent by Landlord to any assignment or subletting by Tenant shall relieve Tenant of any obligations to be performed by Tenant under this Lease, whether occurring before or after such assignment or subletting. The consent by Landlord to any assignment or subletting shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other assignment or subletting, which consent will not be unreasonably withheld or delayed. The acceptance of any rent by Landlord from any person shall not be deemed to be a waiver by Landlord of any provision of this Lease, or to be consent to any assignment, subletting, or other transfer. 15.3 By Landlord. This Lease shall be fully assignable by Landlord or its assigns. 15.4 Leasehold Mortgages. Tenant and its successors and assigns are hereby given the right by Landlord in addition to any other rights herein granted, without Landlord's prior written consent, to mortgage its interests in this Lease and any sublease(s) under one or more first leasehold mortgages, and assign this Lease, and any sublease(s) as collateral security for such Mortgage(s), upon the condition that all rights acquired under such Mortgage(s) shall be subject to each and all of the covenants, conditions and 13 restrictions set forth in this Lease, and to all rights and interests of Landlord herein, none of which covenants, conditions or restrictions is or shall be waived by Landlord by reason of the right given to mortgage such interest in this Lease, except as expressly provided herein. If Tenant or its successors and assigns shall mortgage this leasehold, and if the holder(s) of such Mortgage(s) shall send to Landlord a true copy thereof, together with written notice specifying the name and address of the Mortgagee and the pertinent recording date, if any, with respect to such Mortgage(s) (which notice provision may be satisfied by a letter from the leasehold Mortgagee to Landlord specifying each Building location subject to such mortgage, and that a true and correct form of such leasehold Mortgage is attached to such letter), Landlord agrees that so long as any such leasehold Mortgage(s) shall remain unsatisfied of record or until written notice of satisfaction is given by the holder(s) to Landlord, the following provisions shall apply: (a) There shall be no cancellation, surrender or modification of this Lease by joint action of Landlord and Tenant without the prior consent in writing of the leasehold Mortgagee(s). (b) Landlord shall, upon serving Tenant with any notice of default, simultaneously serve a copy of such notice upon the holder(s) of such leasehold Mortgage(s). The leasehold Mortgagee(s) shall thereupon have the same period (plus an additional fifteen (15) days), after service of such notice upon it, to remedy or cause to be remedied the default complained of, and Landlord shall accept such performance by or at the instigation of such leasehold Mortgagee(s) as if the same had been done by Tenant. (c) Anything herein contained notwithstanding, while such leasehold Mortgage(s) remains unsatisfied of record, or until written notice of satisfaction is given by the holder(s) to Landlord, if any default shall occur which, pursuant to any provision of this Lease, entitles Landlord to terminate this Lease, and if, before the expiration of thirty (30) days from the date of service of notice of termination upon such leasehold Mortgagee(s) such leasehold Mortgagee(s) shall have notified Landlord of its desire to nullify such notice and shall have paid to Landlord all rent and additional rent and other payments herein provided for which are then in default, and shall have complied or shall commence the work of complying with all of the other requirements of this Lease, which are then in default and which are capable of cure by such leasehold Mortgagee(s), and shall prosecute the same to completion with due diligence, then in such event Landlord shall not be entitled to terminate this Lease and any notice of termination theretofore given shall be void and of no effect. (d) Landlord agrees that the name of the leasehold Mortgagee(s) may be added to the "Loss Payable Endorsement" of any and all insurance policies required to be carried by Tenant hereunder on condition that the insurance proceeds are to be applied in the manner specified in this Lease. (e) Landlord agrees that, in the event of termination of this Lease by reason of any default by Tenant or rejection in bankruptcy, Landlord will enter into a new lease of the Leased Property with the leasehold Mortgagee(s) or its nominee(s), for the remainder of the term, effective as of the date of such termination, at the rent and additional rent and upon the terms, provisions, covenants and agreements as herein contained, and to the rights, if any, of any parties then in possession of any part of the Leased Property, provided: (i) Said Mortgagee(s) or its nominee shall make written request upon Landlord for such new lease within thirty (30) days after the date of such termination and such written request is accompanied by payment to Landlord of sums then due to Landlord under this Lease; 14 (ii) Said Mortgagee(s) or its nominee(s) shall thereafter pay to Landlord at the time of the execution and delivery of said new lease, any and all sums which would at the time of the execution and delivery thereof, be due pursuant to this Lease but for such termination, and in addition thereto, any expenses, including reasonable attorneys' fees, to which Landlord shall have been subjected by reason of such default (after Landlord has applied any security held hereunder); (iii) Said Mortgagee(s) or its nominee(s) shall thereafter perform and observe all covenants herein contained on Tenant's part to be performed and shall further remedy any other conditions which Tenant under the terminated lease was obligated to perform under the terms of this Lease; (iv) Such new lease shall be expressly made subject to the rights, if any, of Tenant under the terminated lease; (v) The tenant under such new lease shall have the same right, title and interest in and to the buildings and improvements on the Leased Property as Tenant had under the terminated lease. 16.0 SUBORDINATION ------------- 16.1 Subordination. At Landlord's option, this Lease shall be subject and subordinate to all ground or underlying leases hereinafter executed affecting any Leased Property, and to the lien of any mortgages or deeds of trust in any amount or amounts whatsoever now or hereafter placed on or against the land or improvements or either thereof, of which the Premises are a part, without the necessity of the execution and delivery of any further instruments, on the part of the Tenant, to effectuate such subordination. If any mortgagee, trustee, or ground lessor shall elect to have this Lease prior to the lien of its mortgage deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust or ground lease, on the date of the recording thereof. 16.2 Subordination Agreements. Tenant covenants and agrees to execute and deliver upon demand, without charge, such reasonable further instruments evidencing such subordination of this Lease to such ground or underlying leases and to the lien of any such mortgages or deeds of trust as may be required by Landlord. 16.3 Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon Tenant paying rent and other monetary sums due under this Lease, performing its covenants and conditions of the Lease and upon recognizing any subsequent lessor under a ground or underlying lease or any purchaser as Landlord, Tenant shall and may peaceably and quietly have, hold, and enjoy the Leased Property for the term of the Lease as against any adverse claim of Landlord or any party subject, however, to the terms of the Lease. 16.4 Attornment. In the event any proceedings are brought for default under any ground or underlying lease, or in the event of foreclosure or the exercise of a power of sale under any mortgage or deed or trust made by Landlord covering any Leased Property, the Tenant shall attorn to the lessor under the ground or underlying lease or the purchaser upon any such foreclosure, or sale, and recognize such lessor or purchaser as the Landlord under this Lease, provided said lessor or purchaser expressly agrees in writing to be bound by the terms of this Lease. 15 16.5 Non-Disturbance. Tenant's agreement to subordinate or attorn pursuant to Section 16.1, 16.2, and 16.4 is expressly contingent upon Tenant receiving from such ground lessor or holder of such mortgage or deed of trust a commercially reasonable and acceptable non-disturbance agreement at no cost to Tenant which nondisturbance agreement shall provide, among other things, that (i) Tenant shall get the same notice, if any, given to Landlord of any default or acceleration of any obligation or any sale in foreclosure, (ii) Tenant shall be permitted to cure any such default on Landlord's behalf within any applicable cure period, and Tenant shall be reimbursed by Landlord for any and all costs incurred in effecting such cure, including without limitation out-of-pocket costs incurred to effect any such cure (including reasonable attorneys' fees) and (iii) so long as Tenant is not in default hereunder, Tenant shall not be named in any foreclosure action or sale and this Lease shall not be terminated and Tenant shall be recognized as the tenant under all of the terms of this Lease. Landlord shall obtain from the holder of the mortgage or deed of trust encumbering the Leased Property on the Rent Commencement Date a non-disturbance agreement satisfying the requirements of this Section. 17.0 DEFAULT, REMEDIES ----------------- 17.1 Default. The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (a) Any failure by Tenant to pay the rent or any other monetary sums required to be paid hereunder (where such failure continues for ten (10) days after written notice by Landlord to Tenant); (b) The abandonment or vacation of more than five (5) Buildings at any one time by the Tenant or the sale by Tenant of all or a part of the restaurant operations, unless pursuant to a permitted assignment or sublease pursuant to Section 15; (c) A failure by Tenant to observe and perform any other provision of this Lease to be observed or performed by Tenant, where such failure continues for thirty (30) days after written notice thereof by the Landlord to the Tenant. However, if the nature of the default is such that the default cannot be reasonably cured within the thirty (30) day period, Tenant shall not be deemed to be in default if Tenant shall within such period of time commence such cure and thereafter diligently prosecute the same to completion; (d) The making by Tenant of any general assignment or general arrangement for the benefit of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt, or of a petition for reorganization or arrangement under any law relating to bankruptcy, which is not dismissed within ninety (90) days; the appointment of a trustee or receiver to take possession of substantially all of the Tenant's assets located at any Premises or of Tenant's interest in this Lease where possession is not restored to Tenant within ninety (90) days; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at any Premises or of Tenant's interest in this Lease, where such seizure is not discharged within ninety (90) days; (e) The default by Tenant under any Franchise Agreement beyond any applicable notice and cure period; (f) The default by Tenant under any leasehold Mortgage beyond any applicable notice and cure period; and 16 (g) The default by Guarantor or any Substitute Guarantor under Section 4.0 hereof. 17.2 Remedies. In the event of any such material default or breach by Tenant, Landlord may, at any time thereafter, without limiting Landlord in the exercise of any right or remedy at law or in equity which Landlord may have by reason of such default or breach: (a) Maintain this Lease in full force and effect and recover the rent and other monetary charges as they become due, without terminating Tenant's right to possession irrespective of whether Tenant shall have abandoned any Leased Property. In the event Landlord elects not to terminate the Lease, Landlord shall have the right to attempt to relet all or any portion of any Leased Property at such rent and upon such conditions and for such a term, and to do all acts necessary to maintain or preserve any Leased Property as Landlord deems reasonable and necessary without electing to terminate the Lease, including removal of all persons and property from each Leased Property; (b) Terminate Tenant's right to possession of one or more (including all) of all Leased Property by any lawful means, in which case this Lease shall terminate with respect to such Leased Property (collectively the "Terminated Leased Property") and Tenant shall immediately surrender possession of the Terminated Leased Property to the Landlord. In such event Landlord shall be entitled to recover possession of the Terminated Leased Property from Tenant and those claiming through or under Tenant, and Landlord may continue the restaurant operations itself or through an affiliate, and Tenant hereby assigns to Landlord its right, title and interest in the following properties as security for Landlord's remedies under this Section 17.2: (i) The Franchise Agreement and (ii) the Equipment. In the event that Landlord or its affiliates continue the restaurant operations with respect to any Building after a default by Tenant hereunder, the rent due under this Lease shall be reduced by the Rent Reduction Amount with respect to the Building or Buildings in which Landlord or its affiliate is conducting such restaurant operations; provided, however, that Landlord may at any time abandon such restaurant operations with respect to any Building by delivery of thirty (30) days' written notice to Tenant, in which event Tenant's rental obligation with respect to such Building shall be restored in full. Any termination of this Lease and repossession of the Terminated Leased Property shall be without prejudice to any remedies which Landlord might otherwise have for arrears of rent or for a prior breach of the provisions of this Lease. In case of such termination, Tenant shall indemnify Landlord against all costs and expenses and loss of rent (loss of rent for the Terminated Leased Property shall be determined in accordance with Exhibit E). Items of expense for which Tenant shall indemnify Landlord shall include the costs and expenses reasonably incurred in collecting amounts due from Tenant under this Lease (including attorneys' fees, litigation expenses and the like); the damages incurred by Landlord by reason of Tenant's default, including, the cost of recovering possession of the Terminated Leased Property, expenses of reletting including necessary repairs of the Leased Property, excluding consequential damages. All sums due in respect of the foregoing shall be due and payable immediately upon notice from Landlord that a cost or expense has been incurred without regard to whether the cost or expense was incurred before or after the termination of this Lease. In the event proceedings are brought under the Bankruptcy Code, including proceedings brought by Landlord which relate in any way to this Lease including, without limitation, proceedings for the termination, assumption or assignment thereof, or proceedings to secure adequate protection for Landlord or proceedings involving objections to the allowance of Landlord's claim, then Landlord shall be paid, in addition to any and all amounts due Landlord pursuant to the terms of this Lease, such further amount as shall be sufficient to cover all costs and expenses actually incurred by Landlord 17 with respect to the proceeding, which costs and expenses shall include the reasonable compensation, costs, expenses, disbursements and advances of Landlord, its agents and attorneys. Landlord may elect by written notice to Tenant within 60 days following such termination to be indemnified for loss of rent by a lump sum payment representing the difference between the amount of rent which would have been paid in accordance with this Lease for the Terminated Leased Property for the remainder of the Lease term (loss of rent for the Terminated Leased Property shall be based on the Rent Reduction Amount for the Terminated Leased Property, including all escalations of Base Rent pursuant to Exhibit E, and all taxes and other amounts required to be paid by Tenant hereunder) and the aggregate fair market rent of the Terminated Leased Property for the remainder of the Lease term, estimated as of the date of the termination, both of which amounts shall be discounted using a discount rate equal to Treasury Securities with maturity date approximately equal to the remaining term of the Lease. Should Landlord fail to make the election provided for above, Tenant shall indemnify Landlord for the loss of rent by a payment at the end of each month during the remaining Lease term representing the difference between the rent which would have been paid in accordance with this Lease and the rent actually received by Landlord with respect to the Premises (loss of rent for the Terminated Leased Property shall be based on the Rent Reduction Amount for the Terminated Leased Property, including all escalations of Base Rent pursuant to Exhibit E, and all taxes and other amounts required to be paid by Tenant hereunder). Without any previous notice or demand separate actions may be maintained by Landlord against Tenant from time to time to recover any damages which, at the commencement of any action, have then or theretofore become due and payable to Landlord under this Article without waiting until the end of the original term of this Lease. In the event that this Lease shall be terminated as hereinabove provided or by summary proceedings or otherwise, Landlord may at any time and from time to time relet the Terminated Leased Property in whole or in part either in its own name or as agent of Tenant for any period equal to or greater or less than the remainder of the then current term of this Lease for any rental which it may deem reasonable to any tenant it may deem suitable and satisfactory and for any use and purpose which it may deem appropriate. Landlord shall use reasonable commercial efforts to mitigate Tenant's damages hereunder on any breach of this Lease. Upon each reletting all rentals received by Landlord from such reletting shall be applied first to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any reasonable costs and expenses of such reletting and of such alterations and repairs as are reasonably necessary for the reletting; third to the payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Upon a reletting of the Terminated Leased Property, Landlord shall not in any event be required to pay Tenant any surplus of any sums received by the Landlord in excess of the rent payable in accordance with this Lease. Unpaid installments of rent or other monies due shall bear interest from the date due at the rate of twelve percent (12.00%) per annum. 17.3 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or deed of trust covering any Leased Property. Accordingly, if any installment of rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after such amount shall be due, Tenant shall pay to Landlord a late charge equal to three percent (3.00%) of such 18 overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the cost Landlord will incur by reason of late payment by Tenant. 17.4 Default by Landlord. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than ten (10) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises, whose name and address shall have been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligation, provided, however, that if the nature of Landlord's obligation is such that more than ten (10) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such ten (10) day period and thereafter diligently prosecutes same to completion. Tenant agrees that any such mortgagee or deed of trust holder shall have the right to cure such default on behalf of Landlord within ten (10) calendar days after receipt of such notice. Tenant further agrees not to invoke any of its remedies under this Lease until said ten (10) days have elapsed. 18.0 MISCELLANEOUS ------------- 18.1 Estoppel Certificate. (a) Tenant shall at any time upon not less than twenty (20) days prior written notice from Landlord, execute, and deliver to Landlord a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect), and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of any Leased Property. (b) Landlord shall at any time upon not less than twenty (20) days prior written notice from Tenant, execute, and deliver to Tenant a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect), and the date to which the rent and other charges are paid in advance, if any, (ii) acknowledging that there are not, to Landlord's knowledge, any uncured defaults on the part of Tenant hereunder, or specifying such defaults if any are claimed, and (iii) containing such additional information as is set forth in Exhibit H hereto. Any such statement may be conclusively relied upon by any prospective leasehold Mortgagee or prospective purchaser or assignee. (c) Either party's failure to deliver the statement referenced in Section 18.1 within such time shall be conclusive upon such party (i) that this Lease is in full force and effect, without modification, (ii) that it has no knowledge of any uncured defaults in the other party's performance, and (iii) that not more than one month's rent has been paid in advance. 18.2 Transfer of Landlord's Interest. In the event of a bona fide sale or conveyance by Landlord of Landlord's interest in any Leased Property or in any other property in which any Premises may be a part, other than a transfer for security purposes only, if Landlord is not in default under any provision of this Lease, Landlord shall be relieved from and after the date specified in any such notice of transfer of all obligations and liabilities accruing thereafter on the part of the Landlord with respect to the transferred 19 Leased Property, provided that any funds in the hands of Landlord at the time of transfer in which Tenant has an interest, shall be delivered to the successor of the Landlord and provided Landlord's assignee assumes all such obligations. This Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee provided all Landlord's obligations hereunder are assumed in writing by the transferee. In the event that less than all of the Leased Properties are sold to a single purchaser, as a condition to such sale, the purchaser and Tenant shall concurrently with each sale, execute and deliver to each other a new lease for such Leased Property, which new lease shall be for the remaining term of this Lease and shall be in the form of this Lease (each, an "Individual Lease"). The Base Rent payable by Tenant under each Individual Lease shall be an allocable portion of the Base Rent payable by Tenant under this Lease, as determined by Landlord in its reasonable discretion. Landlord shall provide Tenant with no less than thirty (30) days prior written notice of the anticipated closing date of the sale of a Leased Property, which notice shall be accompanied by a draft of the Individual Lease. Subject to and effective immediately upon the transfer of title to any Leased Property to a purchaser and the execution and delivery by such purchaser and Tenant of the Individual Lease, such Leased Property shall thereafter no longer be part of the Leased Property demised under this Lease or be governed by this Lease and the Base Rent payable under this Lease shall be reduced by an amount equal to the Base Rent payable by Tenant under the Individual Lease for such Leased Property. Concurrently with the sale of each Leased Property and the execution of an Individual Lease, the parties shall enter into an amendment to this Lease evidencing the removal of such Leased Property from the Leased Property demised hereunder and the corresponding reduction of the Base Rent payable hereunder, as provided above. 18.3 Captions; Attachment; Defined Terms. (a) Captions of the paragraphs of this Lease are for convenience only and shall not be deemed to be relevant in resolving any question of interpretation or construction of any section of this Lease. (b) Exhibits attached hereto, and addendums and schedules initialed by the parties, are deemed by attachment to constitute part of this Lease and are incorporated herein. 18.4 Entire Agreement. This instrument along with any exhibits and attachments hereto constitutes the entire agreement between Landlord and Tenant relative to the Leased Property. This agreement and the exhibits and attachments may be altered, amended, or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant hereby agree that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relating to the leasing of any Leased Property are merged into or revoked by this agreement. 18.5 Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 18.6 Time; Joint and Several Liability. Time is of the essence of this Lease in each and every provision hereof. All the terms, covenants, and conditions contained in this Lease to be performed by 20 either party, if such party shall consist of more than one person or organization, shall be deemed to be joint and several, and all rights and remedies of the parties shall be cumulative and non-exclusive of any other remedy at law or in equity. 18.7 Waiver. No waiver by Landlord or Tenant of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Tenant or Landlord of the same or any other provision. Landlord's or Tenant's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Landlord's or Tenant's express written consent to or approval of any subsequent act by the Tenant or Landlord. The acceptance of rent hereunder by Landlord shall not be a waiver of any succeeding breach by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such succeeding breach at the time of acceptance of such rent. 18.8 Surrender of Premises. The voluntary or other surrender of this Lease by the Tenant, or mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it or any or all such subleases or subtenancies. 18.9 Holding Over. If Tenant remains in possession of all or any part of any Leased Property after the expiration of the term of this Lease, with or without the express or implied consent of the Landlord, such tenancy shall be from month to month only, and not a renewal of this Lease or an extension for any further term. In such case, rent and other monetary sums due hereunder shall be payable in the amount and at the time specified in this Lease and such month-to-month tenancy shall be subject to every other term, covenant, and agreement contained herein. 18.10 Signs. (a) Tenant shall have the right to erect such signs as it shall elect, all in accordance with legal requirements. (b) Any such signs described above shall be removed at the expiration or earlier termination of the Lease at Tenant's expense and Tenant shall repair any damage to any Leased Property resulting from such removal. If Tenant fails to do so, Landlord may cause such removal and repair on Tenant's behalf at Tenant's reasonable expense. 18.11 Reasonable Consent. Except as specifically limited elsewhere in this Lease, wherever in this Lease Landlord and/or Tenant is required to give its consent or approval to any action on the part of the other, such consent or approval shall not be unreasonably withheld, delayed, conditioned or charged for. In the event of failure to give any such consent, the other party shall be entitled to specific performance of law and shall have such other remedies as are reserved to it under this Lease, but in no event shall Landlord or Tenant be responsible in monetary damages for failure to give consent unless consent is withheld maliciously or in bad faith. 18.12 Interest on Past-Due Obligations. Except as expressly herein provided, any amount due to Landlord not paid when due shall bear interest at twelve percent (12.00%) per annum from the due date. Payment of such interest shall not excuse or cure any default by Tenant under this Lease. Payment of such interest is in addition to the late charge specified in section 17.3 of this Lease. 21 18.13 Recording. Tenant shall not record this Lease without Landlord's prior express written consent. Landlord and Tenant shall, at Tenant's expense, execute and record a short form or memo of Lease promptly following the Rent Commencement Date. 18.14 Costs of Suit. (a) If Tenant or Landlord shall bring any action for any relief against the other, declaratory or otherwise, arising out of this Lease, including any suit by Landlord for the recovery of rent or possession of any Leased Property, the prevailing party shall be entitled to an award of its reasonable attorneys' fees and costs. Such fees and costs shall include those fees and costs incurred at trial, on appeal, or in any bankruptcy proceeding. (b) Should Landlord, without fault on Landlord's part, be made a party to any litigation instituted by Tenant or by any third party against Tenant, or by or against any person holding under or using any Leased Property by license of Tenant, or for the foreclosure of any lien for labor, material furnished to or for Tenant or any such other person or otherwise arising out of or resulting from any act or transaction of Tenant, or of any such person, Tenant covenants to defend, indemnify, and hold Landlord harmless from any judgement rendered against Landlord or any Leased Property, or any part thereof, and all costs and expenses, including reasonable attorney fees, incurred by Landlord in or in connection with such litigation. 18.15 Binding Effect; Choice of Law. The parties hereto agree that all provisions hereof are to be construed as both covenants, and conditions as though the words importing such covenants and conditions were used in each separate paragraph hereof. Subject to any provisions hereof restricting assignment or subletting by the Tenant, all of the provisions hereof shall bind and inure to the benefit of the parties hereto, their respective heirs, legal representative, assigns, and successors. This Lease shall be governed by the laws of the State of Texas. 18.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS LEASE OR ANY EXHIBIT HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) MADE BY THE PARTIES HEREIN. 18.17 Corporate Authority. If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. 18.18 Representation of Landlord. Landlord represents and warrants that (i) it holds fee or leasehold title to the Leased Property subject to the Lease and has full power and authority to enter into this Lease; and (ii) each individual executing this Lease on behalf of Landlord represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of the corporate general partner of Landlord in accordance with a duly adopted resolution of the Board of Directors of said corporation, and that this Lease is binding upon Landlord in accordance with its terms. 22 18.19 Triple Net Lease. It is the intent of Landlord and Tenant that this Lease shall be an absolute triple-net lease, and that all costs, expenses or charges (including all ground lease rental payments with respect to Leased Properties) with respect to the Leased Property are the responsibility of Tenant. 18.20 Notices. Any notice provided or permitted to be given under this Lease must be in writing and may be served by depositing same in the United States mail, addressed to the party to be notified, postage prepaid and certified, with return receipt requested, by delivering the same in person to such party, by overnight delivery or by delivering the same by confirmed facsimile. Notice given in accordance herewith shall be effective upon the earlier of receipt at the address of the addressee or on the third (3rd) day following deposit of same in the United States mail as provided for herein, regardless of whether same is actually received. For purposes of notice, the addresses of the parties shall be as follows: If to Tenant: Sybra, Inc. 8300 Dunwoody Place, Suite 300 Atlanta, Georgia 30350 Telephone No. 770-587-0290 Facsimile No. 770-594-7044 Attn: Charles N. Hyslop Copies To: James R. Arabia 9404 Genesee Avenue, Suite 330 La Jolla, California 92037 Telephone No. 619-587-8533 Facsimile No. 619-535-1634 Pryor, Cashman, Sherman & Flynn 410 Park Avenue New York, New York 10022 Attn: Robert H. Dreschler, Esq. Telephone No. 212-326-0156 Facsimile No. 212-326-0806 If to Landlord: U. S. Restaurant Properties Operating L. P. 5310 Harvest Hill Road, Suite 270, Lock Box 168 Dallas, Texas 73230 Telephone No. 972-387-1487 Facsimile No. 972-490-9119 Either party may change its address for notice by giving ten (10) days prior written notice thereof to the other party. 18.21 Primary Leases for Subleased Properties Controlling. Notwithstanding anything contained herein to the contrary, with respect to Buildings 785, 995, 899, 984, 1172, 1253, 1254, 1313, 1330, and 1434, as designated on Exhibit C, Landlord's and Tenant's rights and obligations with respect to such Building shall be governed by the primary lease ("Primary Lease") of such Building between the fee owner thereof and Landlord or its designated affiliate (as lessee), and such Primary Lease shall control over any inconsistent provision in this Lease (other than, in case of default by Tenant hereunder, Section 17 of this 23 Lease). Tenant shall pay to Landlord, or its designated affiliate, as additional rent thereunder (and in addition to any amounts required to be paid pursuant to Exhibit E) the rent required to be paid by Landlord under such Primary Lease, plus, with respect to each such Primary Lease, $1.00 per month. Landlord shall remit to the lessor under such Primary Lease the rental and additional rental required thereunder, to the extent received from Tenant, but shall have no other obligation thereunder, provided, however, Landlord shall, upon written request of Tenant, use its best efforts (provided Tenant has indemnified Landlord against all costs and expenses incurred in connection therewith) to cause the landlord under such Primary Lease to comply with all covenants and responsibilities of such landlord under the Primary Lease. Landlord agrees to subordinate its lease with respect to Building 785 to a leasehold mortgagee, and further agrees that if Tenant desires to engage in a sale-leaseback financing of Building 785, it will amend the provisions of this lease as it affects Building 785 only to reasonably accommodate the requirements of such sale-leaseback financing; provided, however, Tenant shall give Landlord thirty (30) days' written notice of the terms of such sale-leaseback financing, and Landlord shall have the right of first refusal to provide such sale-leaseback financing. 18.22 Purchase Option. During the initial two (2) years of this Lease, Tenant shall have the option, by delivery of thirty (30) days written notice to Landlord, to purchase the following Buildings: 1707, 5906, 5943, 6285, 6055, 6056, 6253, 6185, 6309, 6420 (the "Option Buildings"). The purchase option is available only if Tenant agrees to acquire each of the Buildings subject to such option. The purchase price shall be payable in cash in an amount equal to 102% of the Purchase Price allocated to such Buildings on Exhibit C, with Tenant paying all closing costs (i.e., title insurance premiums, transfer taxes, recording costs, etc.) of acquiring the Buildings. Landlord shall convey the Buildings by special warranty deed, subject only to such title exceptions substantially similar to those existing upon Landlord's acquisition of the Buildings. At closing, the Base Rent due hereunder shall be reduced by the Rent Reduction Amount attributable to the Buildings purchased by Tenant. In the event that Tenant does not exercise its option and Landlord receives an offer to purchase the Option Buildings (or any one or more of such Option Buildings) that is acceptable to Landlord, Landlord shall provide Tenant with written notice ("Notice") of all of the material terms and conditions of such offer, and shall provide Tenant with a fifteen (15) day period from receipt of the Notice to agree to purchase the Option Building(s) pursuant to the terms set forth in the Notice. If Tenant does not accept such offer in the fifteen (15) day period from receipt of the Notice, Landlord shall be entitled to sell the Option Buildings pursuant to the terms set forth in the Notice at any time prior to the closing date as set forth in the Notice, or as may be extended by the parties for a period not exceeding ninety (90) days. This right of first refusal shall not apply, however, to (i) sales of the Option Buildings to affiliates of Landlord, (ii) consideration not payable in substantial part (i.e., more than 40%) in cash, or (iii) sales where the Option Buildings are part of a portfolio of properties where the Option Buildings constitute seventy-five percent (75%) or less (in value) of the total assets transferred. 18.23 Landlord's Lien. As security for the performance of Tenant's obligations under this Lease, Tenant grants to Landlord a lien upon and security interest in Tenant's existing or hereafter acquired Equipment; provided, however, that Landlord hereby does and shall continue to subordinate such lien and security interest to any existing or future lien or security interest granted by Tenant in or to any of the Equipment as security for indebtedness provided by an institutional lender if (i) all or a part of such indebtedness is used for the benefit of the business conducted by Tenant at the Leased Property or to refinance such indebtedness existing, and (ii) such lender enters into an Inter-Creditor Agreement with Landlord in form attached hereto as Exhibit I. Landlord shall be entitled to exercise any and all rights and remedies at law and in equity in connection with any rights of Landlord under this Section. Subject to the rights of any lender described above, Tenant shall not, except in the ordinary course of business, sell, 24 transfer or remove from the Leased Property the Equipment, unless the restaurant location is closed, abandoned, assigned or sublet in compliance with the terms of this Lease. Landlord shall prepare and Tenant shall execute a financing statement to perfect the Landlord's lien and security interest. LANDLORD: U. S. RESTAURANT PROPERTIES OPERATING L. P. By: U. S. RESTAURANT PROPERTIES, INC. By: ___________________________________________ Name/Title: ___________________________________ TENANT: SYBRA, INC. By: ___________________________________________ Name/Title: ___________________________________ STATE OF TEXAS ss. ss. COUNTY OF DALLAS ss. BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared _______________________________________, ______________________ of U. S. RESTAURANT PROPERTIES, INC., general partner of U. S. RESTAURANT PROPERTIES OPERATING L. P., a Delaware limited partnership, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said limited partnership. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of _____________, 1997. ___________________________________ [SEAL] Notary Public, State of Texas 25 STATE OF ss. ss. COUNTY OF ss. BEFORE ME, the undersigned, a Notary Public in and for said County and State, on this day personally appeared _______________________________________, ______________________ of SYBRA, INC., a Michigan corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of _____________, 1997. ___________________________________ [SEAL] Notary Public, State of 26 EX-10.9 9 EMPLOYEMENT AGREEMENT CHARLES N. HYSLOP EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made as of the ___ day of _________, 1997 between Sybra, Inc. (the "Company"), a Michigan corporation, with offices at 8300 Dunwoody Place, Suite 300, Atlanta, Georgia 30350-1296 and Charles N. Hyslop, an individual residing at 4385 Bancroft Valley Court, Alpharetta, Georgia 30202 (the "Executive"). RECITALS WHEREAS, I.C.H. Corporation ("ICH") is purchasing all of the outstanding capital stock of the Company from Valcor, Inc. pursuant to the Stock Purchase Agreement dated February 7, 1997 (the "Stock Purchase Agreement") effective on the date of the closing of the transactions contemplated by the Stock Purchase Agreement (the "Closing Date"); and WHEREAS, the Executive has served as a key executive of the Company and, through such service, has acquired special and unique knowledge, abilities and expertise; and WHEREAS, the Company desires to continue to employ the Executive as its Chief Executive Officer after the Closing Date, and the Executive desires to be employed by the Company, pursuant to the terms set forth herein. W I T N E S S E T H: NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Employment. The Company hereby agrees to employ the Executive as Chief Executive Officer of the Company, and the Executive accepts such employment for the term of employment specified in Section 3 below (the "Employment Term"). During the Employment Term, the Executive shall, subject to the direction of the Board of Directors of the Company and the Board of Directors of ICH, render such services to the Company as are customarily rendered by the Chief Executive Officer and perform such other duties befitting the office of Chief Executive Officer of the Company. On the Closing Date, the Executive shall be named a Director on the Board of Directors of ICH. 2. Performance. The Executive agrees to devote his best efforts and substantially all of his business time to the performance of his duties hereunder during the Employment Term, except for: (a) time spent in managing his personal, financial, and legal affairs and serving on corporate (subject to the written consent of the Company which shall not be unreasonably withheld), civic or charitable boards or committees, in each case only if and to the extent such activities do not interfere with the performance of Executive's responsibilities, and (b) periods of vacation to which he is entitled. Executive's service on the corporate boards or committees set forth in Exhibit A, attached hereto, is hereby deemed to be consented to by the Company. 3. Employment Term. The Employment Term shall begin on the date of this Agreement, _____________ __, 1997 and continue until the second anniversary of the date of this Agreement, _____________ __, 1999 unless terminated sooner pursuant to the provisions of this Agreement. On the first anniversary of the date of this Agreement (the "Renewal Date"), the term of this Agreement shall be extended for a period of one (1) year unless either the Executive or the Company elects not to renew this Agreement by providing written notice to the other party on or within five (5) business days prior to the Renewal Date with such notice deemed to be given on the Renewal Date. In the event the Company elects not to renew this Agreement, the Executive shall be deemed to be terminated without Cause (as defined in Section 8(c)) as of the applicable Renewal Date and in the event the Executive elects not to renew this Agreement, the Executive shall be deemed to have Voluntarily Quit (as defined in Section 8(d)) as of the Renewal Date. In the event this Agreement is extended as of the Renewal Date, commencing with the day immediately following the Renewal Date and thereafter, this Agreement shall be extended for one day each day until a termination occurs pursuant to the provisions of Section 8 hereof, whereupon all extensions shall end. 4. Compensation. (a) Salary. During the Employment Term, the Company shall pay the Executive an annual base salary of two hundred thousand dollars ($200,000), payable in accordance with the normal payroll practices of the Company which amount may be increased, but not decreased, as the Board of Directors of the Company may determine. (b) Bonus. Executive shall be entitled to an annual bonus in the event certain performance targets are met. The bonus shall be determined based on Actual EBITDA (as defined below) as a percentage of Target EBITDA (as defined below). If Actual EBITDA is equal to one hundred percent (100%) of Target EBITDA, Executive shall receive a bonus of forty thousand dollars ($40,000). If Actual EBITDA is 105% of Target EBITDA or greater, Executive shall be entitled to receive a bonus of eighty thousand dollars ($80,000). If Actual EBITDA is more than one hundred percent (100%) but less than one hundred and five percent (105%) of Target EBITDA, Executive shall receive a bonus equal to an interpolated amount between $40,000 and $80,000. "Target EBITDA" for the 1997 fiscal year shall be the amount set forth on Exhibit B attached hereto. "Target EBITDA" for the 1998 fiscal year shall be determined by the Board of Directors of ICH and agreed to by Executive prior to the commencement of such fiscal year to be a reasonable target for EBITDA performance of the Company for such fiscal year and shall be calculated in a manner similar to the that used to calculate Target EBITDA for the 1997 fiscal year as set forth in Exhibit C 2 attached hereto. "Actual EBITDA" shall be calculated in the same manner as Target EBITDA except that the calculation shall be made using actual dollars as determined by the Company's independent certified public accounting firm for purposes of financial reporting, provided, however, that in calculating Actual EBITDA, management fees and overhead allocations paid or accrued with respect to ICH or its affiliates and administrative overhead associated with individuals who were not employed by the Company prior to its acquisition by ICH, but are now employed by the Company and ICH, or sit on the Board of Directors of ICH shall be capped at $240,000. All of the aforementioned calculations shall be determined in accordance with generally accepted accounting principles, applied in a consistent manner with prior periods. (c) Bonus Calculation and Payment. The bonus shall be paid to the Executive no later than ninety (90) days following the end of the period for which the bonus is being paid. (d) Additional Benefits. In addition to the other compensation payable to the Executive hereunder, during the Employment Term the Executive shall be entitled to the following benefits: (i) participation in the ICH Corporation 1997 Employee Stock Option Plan (the "Stock Option Plan") and other benefit plans made generally available to executives of the Company with such participation to be consistent with reasonable Company guidelines; (ii) participation in any health insurance, disability insurance, group life insurance or other welfare benefit program made generally available to all executives of the Company; (iii) vacation and other benefits as applicable to executives of the Company and in accordance with Company policies; and (iv) reimbursement for reasonable business expenses incurred by the Executive in furtherance of the interests of the Company. In the event that ICH adopts an employee benefit plan in which the Executive is eligible to participate, the Executive shall receive credit for any service performed for the Company prior to its acquisition by ICH as if such service were performed for ICH for vesting and eligibility purposes only. This paragraph shall not be construed to confer any right upon the Executive to participate in any of ICH's employee benefit plans. (e) Withholding. The Company shall deduct from all compensation paid to the Executive under this Agreement, any Federal, state or city withholding taxes, social security contributions and any other amounts which may be required to be deducted or withheld by the Company pursuant to any Federal, state or city laws, rules or regulations. 5. Option Grant. Upon execution of this Agreement, or as soon as administratively possible thereafter, Executive shall receive options (the "Options") issued pursuant to the Stock Option Plan to purchase shares of common stock of ICH, par value $0.01 ("Common Stock") in an amount equal to five percent (5%) of the Common Stock which is then outstanding on the Closing Date at an exercise price equal to its "Fair Market Value" (as defined in the Stock Option Plan) as of the Closing Date which shall be the date of grant of the Options. The Options are granted pursuant 3 to the terms and conditions of the Stock Option Plan and shall expire ten (10) years from the date of the grant. Subject to Section 9 below, the Options shall vest and become immediately exercisable during the Employment Term as follows: one-third on date of this Agreement, one-third on the first anniversary of the date of this Agreement, one-third on the second anniversary of the date of this Agreement; provided, however, that in the event of a Change in Control, as defined below, all outstanding Options which have not vested as of the date of the Change in Control shall upon the date of the Change in Control fully vest and become immediately exercisable in accordance with the terms and conditions of the Option Grant Agreement. The terms and conditions of the Options are memorialized in the written option grant agreement between the Company and the Executive ("Option Grant Agreement"), attached hereto as Exhibit D, which shall be executed by the Company and the Executive at the same time this Agreement is executed. The Options granted to the Executive are intended to qualify as incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that to the extent that any of such Options do not satisfy the requirements of Section 422(b) of the Code, then they shall be treated as non-qualified stock options. In the event that Executive's employment with the Company is terminated for any reason prior to the expiration of this Agreement, vested Options may be exercised through a minimum period of thirty-nine (39) months following the date of this Agreement. The Executive understands that the effect of exercising any incentive stock options on a day that is more than ninety (90) days after the date of termination of employment (or, in the case of termination of employment on account of death or disability, on a day that is more than one (1) year after the date of such termination) will be to cause such incentive stock options to be treated as non-qualified stock options. For purposes of this Section, Change in Control shall mean that any of the following events has occurred: (a) any "person" or "group" of persons, as such terms are used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than any employee benefit plan sponsored by ICH, becomes the "beneficial owner", as such term is used in Section 13 of the Exchange Act, of equity securities of ICH representing at least thirty percent (30%) of the voting power of all equity securities of ICH issued and outstanding immediately prior to such acquisition; (b) the dissolution or liquidation of ICH, the consummation of any merger or consolidation of ICH or any sale or other disposition of all or substantially all of its assets, if the shareholders of ICH immediately before such transaction own, immediately after consummation of such transaction, equity securities (other than options and other rights to acquire equity securities) possessing less than thirty percent (30%) of the voting power of the surviving or acquiring company; (c) ICH and its wholly owned subsidiaries fail to own equity securities representing more than fifty percent (50%) of the voting power of the Company or any subsidiary of ICH into which the business of the Company has been merged or transferred; or (d) substantially all of the assets of the Company, or any other subsidiary of ICH into which the business of the Company has been merged or transferred, are sold or transferred to any entity in which 4 ICH, directly or indirectly, does not own equity securities representing at least fifty percent (50%) of the voting power. 6. Covenant Not to Compete. (a) That Executive agrees that during the Non-Competition Period (as such term is defined below) he will not in any capacity, either separately, jointly, or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise engage or have a financial interest in any business which is or becomes a Material Competitor (as such term is defined below) of the Company or any subsidiary of the Company in the continental United States (excepting only the ownership of not more than one (1%) percent of the outstanding securities of any class listed on an exchange or regularly traded in the over-the-counter market). The "Non-Competition Period" the longer of (i) the period during which the Executive is employed hereunder, or is receiving compensation following a termination of employment during the Employment Term, as applicable, or (ii) the period during which the Executive is employed hereunder through the last day of the six (6) month period following the Date of Termination. "Material Competitor" during the first six (6) months following the Executive's applicable Date of Termination shall mean any fast food franchisor or franchisee in the continental United States, thereafter "Material Competitor" shall mean any Arby's franchisee within 20 miles of any Company locations. (b) That Executive agrees that during the Employment Period and for a eighteen (18) month period following the applicable Date of Termination where the Executive terminates employment with the Company for any reason he will not in any capacity, either separately, jointly, or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise solicit or employ any person, who was employed by the Company, or any subsidiary of the Company within six (6) months prior to the termination of the Executive' s employment with the Company, in any business in which the Executive has an interest either separately, jointly or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise. (c) If a court determines that the restrictions set forth in Sections 6(a) and 6(b) above are too broad or otherwise unreasonable under applicable law, including with respect to time or space, the court is hereby requested and authorized by the parties hereto to revise the restrictions in Section 6(a) and 6(b) to include the maximum restrictions allowed under the applicable law. The Executive expressly agrees that breach of either this Section 6 or Section 7 below would result in irreparable injuries to the Company, that the remedy at law for any such breach will be inadequate and that upon (i) breach of the provisions of Section 7, (ii) breach of the provisions of Section 6(a) during the first six (6) months following the Executive's applicable Date of Termination with the Company, or (iii) breach of the provisions of Section 6(b) during the eighteen (18) month period following 5 the Executive's applicable Date of Termination, the Company, in addition to all other available remedies, shall be entitled as a matter of right to injunctive relief in any court of competent jurisdiction without the necessity of proving the actual damages to the Company and such violation shall result in the forfeiture of any other entitlements Executive may have had under this Agreement as if the Executive had been terminated for Cause (as defined below). In the event that a breach of the provisions of Section 6(a) occurs after the six (6) month period following the Executive's applicable Date of Termination , the Company's sole and exclusive remedy for such breach shall be to cease any payments the Company is obligated to make pursuant to Section 9 hereof with such payments being automatically discontinued, and the Company shall not be entitled to further injunctive relief. The Executive hereby affirmatively represents that he has the skill and ability to earn a living without competing with the Company or ICH during the non-competition period. 7. Confidential Information. For the Employment Term and thereafter, (i) the Executive will not divulge, directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operation or finances of ICH, the Company, and any subsidiaries of ICH or the Company and (ii) the Executive will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company or ICH; provided, however, that the Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Executive. 8. Termination. (a) Termination by the Company With Cause. The Company shall have the right at any time to terminate the Executive's employment hereunder without prior notice upon the occurrence of any of the following (any such termination being referred to as a termination for "Cause"): (i) the commission by the Executive of any deliberate and premeditated act against the interest of the Company or ICH in contravention of the directives of the Board of Directors of the Company as communicated to the Executive; (ii) the habitual drug addiction or intoxication of the Executive; (iii) the conviction by the Executive of a felony; 6 (iv) the willful failure or refusal of the Executive to perform his duties hereunder if such failure or refusal is not cured within ten (10) days subsequent to notice from the Company of the failure or refusal; or (v) the material breach by the Executive of any terms of this Agreement not cured within thirty (30) days subsequent to notice from the Company to the Executive of the breach. (b) Termination for Death or by Company for Disability. The Company shall have the right at any time to terminate the Executive's employment hereunder without prior notice upon the Executive's inability to perform his duties hereunder by reason of any mental, physical or other disability for a period of at least six (6) successive months, or an aggregate period of at least six (6) months during any twelve (12) month period. For purposes of this Agreement, the term "disability" is defined to mean any physical or mental disability suffered by the Executive which renders the Executive unable to perform his duties. Any determination of disability shall be made by the Company in consultation with a qualified physician or physicians selected by the Company and reasonably acceptable to the Executive. The Executive's employment hereunder shall also terminate upon the death of the Executive. (c) Termination by Company Without Cause. The Company shall have the right at any time to terminate the Executive's employment without prior notice for any other reason without Cause. (d) Voluntary Quit. The Executive shall have the right at any time to terminate his employment without prior notice for any reason (any such termination being referred to as a "Voluntary Quit " by Executive). (e) Termination for Good Reason. The Executive shall have the right at any time to terminate his employment hereunder, subject to the notice provisions of Section 8(g), within one hundred and eighty (180) days after the Executive has notice of the occurrence of any of the following, provided that the Company does not cure such event to the extent possible on a retroactive basis within ten (10) days following receipt of the Executive's Notice of Termination (as defined in Section 8(f) below) (any such termination being referred to as a termination for "Good Reason"): (i) The Executive's title, position, authority or responsibilities (including reporting responsibilities and authority) are changed in materially adverse manner. (ii) The Executive's base salary is reduced for any reason other than in connection with the termination of his employment hereunder. (iii) For any reason other than in connection with the termination of the Executive's employment, the Company materially reduces any benefit provided under a welfare benefit plan to the Executive below the 7 level of such benefit provided generally to other actively employed and similarly situated executives of the Company. (iv) A change of over fifty (50) miles in either the Executive's principal place of employment or the headquarters of the Company (other than a change to the Metropolitan Atlanta, Georgia area) pursuant to which the Executive is required to relocate. (v) The Company refuses or is unable to perform its obligations under this Agreement (vi) Executive is not elected or reelected to the Board of Directors of the Company, or once elected, is removed from the Board of Directors of the Company for reasons other than Cause. (f) Notice of Termination. Any termination of the Executive's employment by the Company hereunder, or by the Executive other than termination upon the Executive's death, shall be communicated by written notice to the other party ("Notice of Termination"). (g) Date of Termination. "Date of Termination" shall mean any of the following: (i) If the Executive's employment is terminated by his death, the date of his death. (ii) If the Executive's employment is terminated by the Company as a result of Disability pursuant to Section 8(b), the date that is thirty (30) days after the Notice of Termination is given; provided that Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) days period. (iii) If the Executive terminates employment for Good Reason pursuant to Section 8(e), the date that is ten (10) days after Notice of Termination is given, provided, that the Company does not cure such event during the ten (10) day period. (iv) If the Executive Voluntarily Quits pursuant to Section 8(d), the date that is fourteen (14) days after Notice of Termination is given, provided, that in the sole discretion of the Company, such date may be any earlier date after Notice of Termination is given. (v) If the Executive's employment is terminated by the Company with or without Cause pursuant to Sections 8(a) and 8(c), the date on which the Notice of Termination is given. 9. Effect of Termination of Employment Prior to End of Employment Period. 8 (a) With Cause / Voluntary Quit. If the Executive's employment is terminated with Cause (pursuant to Section 8(a)) or Executive Voluntary Quits (pursuant to Section 8(d)), the Executive's salary and other benefits specified in Section 4(a) and 4(d) shall cease on the Date of Termination, and the Executive shall not be entitled to any bonuses specified in Section 4(b) which have not been paid prior to such termination; provided, however, that in the event the Executive Voluntarily Quits on the Renewal Date, the Executive shall continue to receive his salary for a period of twenty-four (24) months following his Date of Termination; further, provided, that the Executive shall be entitled to continue to participate in the Company's medical benefit plans but only to the extent required by law, and on the same basis applicable to other employees. Additionally, all outstanding Options not vested as of the Date of Termination shall be forfeited, provided, however, that in the event the Executive Voluntarily Quits on the Renewal Date, the Executive shall be vested in two-thirds (2/3) of the Options granted to him on the date of this Agreement pursuant to Section 5 hereof. (b) Without Cause or Good Reason. If the Executive's employment is terminated by the Company without Cause (pursuant to Section (c)) or by the Executive for Good Reason (pursuant to Section 8(e)), the Executive's annual base salary then in effect pursuant to Section 4(a) shall continue to be paid to the Executive for a period of twenty-four (24) months after the Date of Termination. The Executive shall be entitled to any bonuses specified in Section 4(b) which are applicable to the most recently completed fiscal year of the Company and which have been earned but not been paid prior to such termination and the Executive shall not be entitled to any additional bonuses. The Executive's additional benefits specified in Section 4(d) shall terminate at the time of such termination; provided, however, that the Executive shall be entitled to continue to participate in the Company's medical benefit plans but only to the extent required by law, and on the same basis applicable to other employees. Additionally, all outstanding Options not vested as of the Date of Termination shall be forfeited. (c) Death or Disability. If the Executive's employment is terminated due to the Executive's death or Disability (pursuant to Section 8(b)), the Executive's salary set forth in Section 4(a) shall cease on the Date of Termination. The Executive shall be entitled to any bonuses specified in Section 4(b) which are applicable to the most recently completed fiscal year of the Company and which have been earned but not been paid prior to such termination and the Executive shall not be entitled to any additional bonuses. The Executive's additional benefits specified in Section 4(d) shall terminate at the time of such termination; provided, however, that the Executive shall be entitled to continue to participate in the Company's medical benefit plans but only to the extent required by law, and on the same basis applicable to other employees. Additionally, all outstanding Options not vested as of the Date of Termination shall be forfeited. (d) No Duty to Mitigate. After any Date of Termination, the Executive shall have no obligation to seek other employment, but shall, subject to the provisions of Section 6, have the right to be otherwise employed, and any compensation of any 9 type whatsoever received by the Executive in connection with such employment shall not be offset by the Company against any of the obligations of the Company under this Agreement. 10. Notice. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered, or when mailed, certified or registered mail, postage prepaid, to the following addresses: If to the Executive: Charles N. Hyslop 4385 Bancroft Valley Court Alpharetta, Georgia 30202 With a copy to: Powell, Goldstein, Frazer & Murphy LLP 16th Floor 191 Peachtree Street, N.W. Atlanta, Georgia 30303 Attention: Steven G. Schaffer, Esq. If to the Company: Sybra, Inc. 8300 Dunwoody Place Suite 300 Atlanta, Georgia 30350-1296 Attention: James Arabia With a copy to: Pryor, Cashman, Sherman & Flynn 410 Park Avenue New York, New York 10022 Attention: Selig D. Sacks, Esq. Either party hereto may change its or his address specified for notices herein by designating a new address by notice in accordance with this Section 10. 11. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing future participation in any incentive, fringe benefit, deferred compensation, or other plan or program provided by the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan or program of the Company at or after the Date of Termination, shall be payable in accordance with such plan or program. 10 12. Indemnification. The Executive shall be indemnified in the same manner as actively employed and similarly situated executives of the Company and to the maximum extent as permitted for such executives under the by-laws of the Company for any acts or omission taken or omitted to be taken by the Executive in good faith and such indemnification shall survive the termination or expiration of this Agreement and the termination of the Executive's employment with the Company. 13. Arbitration. Any claim for damages arising out of or related to this Agreement except for any claims arising out of or related to Sections 6 and 7 hereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, provided, however, that the arbitration shall take place in Delaware and the arbitrators shall apply Delaware law. Each party to the Agreement may select one arbitrator. The selected arbitrators shall in turn appoint a third arbitrator, and the three so chosen shall comprise the arbitration panel. All arbitrators shall be independent third parties. The decision of the arbitration panel shall be final and binding on the parties, and judgment upon the award rendered by the arbitration panel may be entered by any court having jurisdiction thereof. This Section shall not be construed to prevent the Company from seeking injunctive relief as provided in Section 6 hereof and any and all disputes arising out of or related to Sections 6 and 7 shall be adjudicated by a court of competent jurisdiction. 14. General. (a) Governing Law. The terms of this Agreement shall be governed by the laws of the State of Delaware. (b) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. Executive agrees that this Agreement is personal to him and may not be assigned by him other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representative. (c) Entire Agreement; Modification. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, supersedes in its entirety any prior agreement between the Company and the Executive, and may not be modified or amended in any way except in writing by the parties hereto. (d) Provisions Severable. In case any one or more of the provisions of this Employment Agreement shall be invalid, illegal or unenforceable in any respect, or to any extent, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 11 (e) Duration. Notwithstanding the term of employment hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. 12 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement the day and year first written above. SYBRA, INC. Attest: _____________________________ By: _______________________________ Secretary Name: Title: Witness: EXECUTIVE _____________________________ ___________________________________ Charles N. Hyslop 13 EX-10.10 10 EMPLOYMENT AGREEMENT DONALD P. ZIMA EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made as of the ___ day of _________, 1997 between Sybra, Inc. (the "Company"), a Michigan corporation, with offices at 8300 Dunwoody Place, Suite 300, Atlanta, Georgia 30350-1296 and Donald P. Zima, an individual residing at 6851 Roswell Road, Unit G-11, Atlanta, Georgia 30328 (the "Executive"). RECITALS WHEREAS, I.C.H. Corporation ("ICH") is purchasing all of the outstanding capital stock of the Company from Valcor, Inc. pursuant to the Stock Purchase Agreement dated February 7, 1997 (the "Stock Purchase Agreement") effective on the date of the closing of the transactions contemplated by the Stock Purchase Agreement (the "Closing Date"); and WHEREAS, the Executive has served as a key executive of the Company and, through such service, has acquired special and unique knowledge, abilities and expertise; and WHEREAS, the Company desires to continue to employ the Executive as its Chief Financial Officer after the Closing Date, and the Executive desires to be employed by the Company, pursuant to the terms set forth herein. W I T N E S S E T H: NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Employment. The Company hereby agrees to employ the Executive as Chief Financial Officer of the Company, and the Executive accepts such employment for the term of employment specified in Section 3 below (the "Employment Term"). During the Employment Term, the Executive shall, subject to the direction of the Chief Executive Officer, and the Board of Directors of the Company render such services to the Company as are customarily rendered by the Chief Financial Officer and perform such other duties befitting the office of Chief Financial Officer of the Company. 2. Performance. The Executive agrees to devote his best efforts and substantially all of his business time to the performance of his duties hereunder during the Employment Term, except for: (a) time spent in managing his personal, financial, and legal affairs and serving on corporate (subject to the written consent of the Company which shall not be unreasonably withheld), civic or charitable boards or committees, in each case only if and to the extent such activities do not interfere with the performance of Executive's responsibilities, and (b) periods of vacation to which he is entitled. Executive's service on the corporate boards or committees set forth in Exhibit A, attached hereto, is hereby deemed to be consented to by the Company. 3. Employment Term. The Employment Term shall begin on the date of this Agreement, ____________________ __, 1997 and continue until the second anniversary of the date of this Agreement, ____________________ __, 1999 unless terminated sooner pursuant to the provisions of this Agreement. 4. Compensation. (a) Salary. During the Employment Term, the Company shall pay the Executive an annual base salary of one hundred thousand dollars ($100,000), payable in accordance with the normal payroll practices of the Company which amount may be increased, but not decreased, as the Board of Directors of the Company may determine. (b) Bonus. Executive shall be entitled to an annual bonus in the event certain performance targets are met. The bonus shall be determined based on Actual EBITDA (as defined below) as a percentage of Target EBITDA (as defined below). If Actual EBITDA is equal to one hundred percent (100%) of Target EBITDA, Executive shall receive a bonus of seventeen thousand ($17,000) dollars. If Actual EBITDA is 105% of Target EBITDA or greater, Executive shall be entitled to receive a bonus equal to forty percent (40%) of the Executive's annual base salary. If Actual EBITDA is more than one hundred percent (100%) but less than one hundred and five percent (105%) of Target EBITDA, Executive shall receive a bonus equal to an interpolated amount between $17,000 and forty percent (40%) of his annual base salary. "Target EBITDA" for the 1997 fiscal year shall be the amount set forth on Exhibit B attached hereto. "Target EBITDA" for the 1998 fiscal year shall be determined by the Board of Directors of ICH and agreed to by Executive prior to the commencement of such fiscal year to be a reasonable target for EBITDA performance of the Company for such fiscal year and shall be calculated in a manner similar to the that used to calculate Target EBITDA for the 1997 fiscal year as set forth in Exhibit C attached hereto. "Actual EBITDA" shall be calculated in the same manner as Target EBITDA except that the calculation shall be made using actual dollars as determined by the Company's independent certified public accounting firm for purposes of financial reporting, provided, however, that in calculating Actual EBITDA, management fees and overhead allocations paid or accrued with respect to ICH or its affiliates and administrative overhead associated with individuals who were not employed by the Company prior to its acquisition by ICH, but are now employed by the Company and ICH, or sit on the Board of Directors of ICH shall be capped at $240,000. All of the aforementioned calculations shall be determined in accordance with generally accepted accounting principles, applied in a consistent manner with prior periods. (c) Bonus Calculation and Payment. The bonus shall be paid to the Executive no later than ninety (90) days following the end of the period for which the bonus is being paid. 2 (d) Additional Benefits. In addition to the other compensation payable to the Executive hereunder, during the Employment Term the Executive shall be entitled to the following benefits: (i) participation in the ICH Corporation 1997 Employee Stock Option Plan (the "Stock Option Plan") and other benefit plans made generally available to executives of the Company with such participation to be consistent with reasonable Company guidelines; (ii) participation in any health insurance, disability insurance, group life insurance or other welfare benefit program made generally available to all executives of the Company; (iii) vacation and other benefits as applicable to executives of the Company and in accordance with Company policies; and (iv) reimbursement for reasonable business expenses incurred by the Executive in furtherance of the interests of the Company. In the event that ICH adopts an employee benefit plan in which the Executive is eligible to participate, the Executive shall receive credit for any service performed for the Company prior to its acquisition by ICH as if such service were performed for ICH for vesting and eligibility purposes only. This paragraph shall not be construed to confer any right upon the Executive to participate in any of ICH's employee benefit plans. (e) Withholding. The Company shall deduct from all compensation paid to the Executive under this Agreement, any Federal, state or city withholding taxes, social security contributions and any other amounts which may be required to be deducted or withheld by the Company pursuant to any Federal, state or city laws, rules or regulations. 5. Option Grant. Upon execution of this Agreement, or as soon as administratively possible thereafter, Executive shall receive options (the "Options") issued pursuant to the Stock Option Plan to purchase shares of common stock of ICH, par value $0.01 ("Common Stock") in an amount equal to one and one quarter percent (1.25%) of the Common Stock which is then outstanding on the Closing Date at an exercise price equal to its "Fair Market Value" (as defined in the Stock Option Plan) as of the Closing Date which shall be the date of grant of the Options. The Options are granted pursuant to the terms and conditions of the Stock Option Plan and shall expire ten (10) years from the date of the grant. Subject to Section 9 below, the Options shall vest and become immediately exercisable during the Employment Term as follows: one-fourth on the first anniversary of the date of this Agreement, one-fourth on the second anniversary of the date of this Agreement, one-fourth on the third anniversary of the date of this Agreement and one-fourth on the fourth anniversary of the date of this Agreement; provided, however, that in the event of a Change in Control, as defined below, of the then outstanding Options which have not vested prior to the date of the Change in Control, an amount of such Options equal to one-half (1/2) of the original amount of Options granted less the amount of Options vested prior to the date of the Change in Control shall upon the date of the Change in Control fully vest and become immediately exercisable in accordance with the terms and conditions of the Option Grant Agreement. 3 The terms and conditions of the Options are memorialized in the written option grant agreement between the Company and the Executive ("Option Grant Agreement"), attached hereto as Exhibit D, which shall be executed by the Company and the Executive at the same time this Agreement is executed. The Options granted to the Executive are intended to qualify as incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that to the extent that any of such Options do not satisfy the requirements of Section 422(b) of the Code, then they shall be treated as non-qualified stock options. In the event that Executive's employment with the Company is terminated for any reason prior to the expiration of this Agreement, vested Options may be exercised through a minimum period of twenty-seven (27) months following the date of this Agreement. The Executive understands that the effect of exercising any incentive stock options on a day that is more than ninety (90) days after the date of termination of employment (or, in the case of termination of employment on account of death or disability, on a day that is more than one (1) year after the date of such termination) will be to cause such incentive stock options to be treated as non-qualified stock options. For purposes of this Section, Change in Control shall mean that any of the following events has occurred: (a) any "person" or "group" of persons, as such terms are used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than any employee benefit plan sponsored by ICH, becomes the "beneficial owner", as such term is used in Section 13 of the Exchange Act, of equity securities of ICH representing at least thirty percent (30%) of the voting power of all equity securities of ICH issued and outstanding immediately prior to such acquisition; (b) the dissolution or liquidation of ICH, the consummation of any merger or consolidation of ICH or any sale or other disposition of all or substantially all of its assets, if the shareholders of ICH immediately before such transaction own, immediately after consummation of such transaction, equity securities (other than options and other rights to acquire equity securities) possessing less than thirty percent (30%) of the voting power of the surviving or acquiring company; (c) ICH and its wholly owned subsidiaries fail to own equity securities representing more than fifty percent (50%) of the voting power of the Company or any subsidiary of ICH into which the business of the Company has been merged or transferred; or (d) substantially all of the assets of the Company, or any other subsidiary of ICH into which the business of the Company has been merged or transferred, are sold or transferred to any entity in which ICH, directly or indirectly, does not own equity securities representing at least fifty percent (50%) of the voting power. 6. Covenant Not to Compete. (a) That Executive agrees that during the Non-Competition Period (as such term is defined below) he will not in any capacity, either separately, jointly, or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise engage or have a financial interest in any business which competes in a material way with or becomes a 4 material competitor of the Company or any subsidiary of the Company in the continental United States (excepting only the ownership of not more than one (1%) percent of the outstanding securities of any class listed on an exchange or regularly traded in the over-the-counter market). The "Non-Competition Period" the longer of (i) the period during which the Executive is employed hereunder, or is receiving compensation following a termination of employment during the Employment Term, as applicable, or (ii) the period during which the Executive is employed hereunder through the last day of the six (6) month period following the applicable Date of Termination. (b) That Executive agrees that during the Employment Period and for a one (1) year period following the applicable Date of Termination where the Executive terminates employment with the Company for any reason he will not in any capacity, either separately, jointly, or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise solicit or employ any person, who was employed by the Company, or any subsidiary of the Company within six (6) months prior to the termination of the Executive' s employment with the Company, in any business in which the Executive has an interest either separately, jointly or in association with others, directly or indirectly, as an officer, director, consultant, agent, employee, owner, partner, shareholder, beneficial owner or otherwise. (c) If a court determines that the restrictions set forth in Sections 6(a) and 6(b) above are too broad or otherwise unreasonable under applicable law, including with respect to time or space, the court is hereby requested and authorized by the parties hereto to revise the restrictions in Section 6(a) and 6(b) to include the maximum restrictions allowed under the applicable law. The Executive expressly agrees that breach of either this Section 6 or Section 7 below would result in irreparable injuries to the Company, that the remedy at law for any such breach will be inadequate and that upon (i) breach of the provisions of Section 7, (ii) breach of the provisions of Section 6(a) during the first six (6) months following the Executive's applicable Date of Termination with the Company, or (iii) breach of the provisions of Section 6(b) during the one (1) year period following the Executive's applicable Date of Termination, the Company, in addition to all other available remedies, shall be entitled as a matter of right to injunctive relief in any court of competent jurisdiction without the necessity of proving the actual damages to the Company and such violation shall result in the forfeiture of any other entitlements Executive may have had under this Agreement as if the Executive had been terminated for Cause (as defined below). In the event that a breach of the provisions of Section 6(a) occurs after the six (6) month period following the Executive's applicable Date of Termination , the Company's sole and exclusive remedy for such breach shall be to cease any payments the Company is obligated to make pursuant to Section 9 hereof with such payments being automatically discontinued, and the Company shall not be entitled to further injunctive relief. 5 The Executive hereby affirmatively represents that he has the skill and ability to earn a living without competing with the Company or ICH during the non-competition period. 7. Confidential Information. For the Employment Term and thereafter, (i) the Executive will not divulge, directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operation or finances of ICH, the Company, and any subsidiaries of ICH or the Company and (ii) the Executive will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company or ICH; provided, however, that the Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Executive. 8. Termination. (a) Termination at End of Employment Term. This Agreement shall terminate at the end of the Employment Term. The Executive and the Company may mutually agree to extend the Executive's employment beyond the Employment Term on terms and conditions mutually satisfactory to both parties. (b) Termination by the Company With Cause. The Company shall have the right at any time to terminate the Executive's employment hereunder without prior notice upon the occurrence of any of the following (any such termination being referred to as a termination for "Cause"): (i) the commission by the Executive of any deliberate and premeditated act against the interest of the Company or ICH in contravention of the directives of the Chief Executive Officer of the Company or the Board of Directors of the Company as communicated to the Executive; (ii) the habitual drug addiction or intoxication of the Executive; (iii) the conviction by the Executive of a felony; (iv) the willful failure or refusal of the Executive to perform his duties hereunder if such failure or refusal is not cured within ten (10) days subsequent to notice from the Company of the failure or refusal; or (v) the material breach by the Executive of any terms of this Agreement not cured within thirty (30) days subsequent to notice from the Company to the Executive of the breach. (c) Termination for Death or by Company for Disability. The Company shall have the right at any time to terminate the Executive's employment hereunder without prior notice upon the Executive's inability to perform his duties hereunder by 6 reason of any mental, physical or other disability for a period of at least six (6) successive months, or an aggregate period of at least six (6) months during any twelve (12) month period. For purposes of this Agreement, the term "disability" is defined to mean any physical or mental disability suffered by the Executive which renders the Executive unable to perform his duties. Any determination of disability shall be made by the Company in consultation with a qualified physician or physicians selected by the Company and reasonably acceptable to the Executive. The Executive's employment hereunder shall also terminate upon the death of the Executive. (d) Termination by Company Without Cause. The Company shall have the right at any time to terminate the Executive's employment without prior notice for any other reason without Cause. (e) Voluntary Quit. The Executive shall have the right at any time to terminate his employment without prior notice for any reason (any such termination being referred to as a "Voluntary Quit " by Executive). (f) Termination for Good Reason. The Executive shall have the right at any time to terminate his employment hereunder, subject to the notice provisions of Section 8(h), within one hundred and eighty (180) days after the Executive has notice of the occurrence of any of the following, provided that the Company does not cure such event to the extent possible on a retroactive basis within ten (10) days following receipt of the Executive's Notice of Termination (as defined in Section 8(g) below) (any such termination being referred to as a termination for "Good Reason"): (i) The Executive's title, position, authority or responsibilities (including reporting responsibilities and authority) are changed in materially adverse manner. (ii) The Executive's base salary is reduced for any reason other than in connection with the termination of his employment hereunder. (iii) For any reason other than in connection with the termination of the Executive's employment, the Company materially reduces any benefit provided under a welfare benefit plan to the Executive below the level of such benefit provided generally to other actively employed and similarly situated executives of the Company. (iv) A change of over fifty (50) miles in either the Executive's principal place of employment or the headquarters of the Company (other than a change to the Metropolitan Atlanta, Georgia area) pursuant to which the Executive is required to relocate. (v) The Company refuses or is unable to perform its obligations under this Agreement. 7 (g) Notice of Termination. Any termination of the Executive's employment by the Company hereunder, or by the Executive other than termination upon the Executive's death, shall be communicated by written notice to the other party ("Notice of Termination"). (h) Date of Termination. "Date of Termination" shall mean any of the following: (i) If the Executive's employment is terminated by his death, the date of his death. (ii) If the Executive's employment is terminated by the Company as a result of Disability pursuant to Section 8(c), the date that is thirty (30) days after the Notice of Termination is given; provided that Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) days period. (iii) If the Executive terminates employment for Good Reason pursuant to Section 8(f), the date that is ten (10) days after Notice of Termination is given, provided, that the Company does not cure such event during the ten (10) day period. (iv) If the Executive Voluntarily Quits pursuant to Section 8(e), the date that is fourteen (14) days after Notice of Termination is given, provided, that in the sole discretion of the Company, such date may be any earlier date after Notice of Termination is given. (v) If the Executive's employment is terminated by the Company with or without Cause pursuant to Sections 8(b) and 8(d), the date on which the Notice of Termination is given. 9. Effect of Termination of Employment Prior to End of Employment Period. (a) With Cause / Voluntary Quit. If the Executive's employment is terminated with Cause (pursuant to Section 8(b)) or Executive Voluntary Quits (pursuant to Section 8(e)), the Executive's salary and other benefits specified in Section 4(a) and 4(d) shall cease on the Date of Termination, and the Executive shall not be entitled to any bonuses specified in Section 4(b) which have not been paid prior to such termination; provided, however, that the Executive shall be entitled to continue to participate in the Company's medical benefit plans but only to the extent required by law, and on the same basis applicable to other employees. Additionally, all outstanding Options not vested as of the Date of Termination shall be forfeited. (b) Death, Disability, Without Cause or Good Reason. If the Executive's employment is terminated by the death or disability of the Executive 8 (pursuant to Section 8(c)), by the Company without Cause (pursuant to Section (d)) or by the Executive for Good Reason (pursuant to Section 8(f)), the Executive's annual base salary then in effect pursuant to Section 4(a) shall continue to be paid to the Executive or, in the event of the death of the Executive, the Executive's estate, through the end of the Employment Term as if no such termination had occurred. The Executive shall be entitled to any bonuses specified in Section 4(b) which are applicable to the most recently completed fiscal year of the Company and which have been earned but not been paid prior to such termination and the Executive shall not be entitled to any additional bonuses. The Executive's additional benefits specified in Section 4(d) shall terminate at the time of such termination; provided, however, that the Executive shall be entitled to continue to participate in the Company's medical benefit plans but only to the extent required by law, and on the same basis applicable to other employees. Additionally, of the then outstanding Options which have not vested prior to the date of termination, an amount of such Options equal to one-half (1/2) of the original amount of Options granted less the amount of Options vested prior to the date of termination shall upon the date of termination fully vest and become immediately exercisable in accordance with the terms and conditions of the Option Grant Agreement. (c) No Duty to Mitigate. After any Date of Termination, the Executive shall have no obligation to seek other employment, but shall, subject to the provisions of Section 6, have the right to be otherwise employed, and any compensation of any type whatsoever received by the Executive in connection with such employment shall not be offset by the Company against any of the obligations of the Company under this Agreement. 10. Notice. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered, or when mailed, certified or registered mail, postage prepaid, to the following addresses: If to the Executive: Donald P. Zima 6851 Roswell Road Unit G-11 Atlanta, Georgia 30328 With a copy to: Powell, Goldstein, Frazer & Murphy LLP 16th Floor 191 Peachtree Street, N.W. Atlanta, Georgia 30303 Attention: Steven G. Schaffer, Esq. 9 If to the Company: Sybra, Inc. 8300 Dunwoody Place Suite 300 Atlanta, Georgia 30350-1296 Attention: James Arabia With a copy to: Pryor, Cashman, Sherman & Flynn 410 Park Avenue New York, New York 10022 Attention: Selig D. Sacks, Esq. Either party hereto may change its or his address specified for notices herein by designating a new address by notice in accordance with this Section 10. 11. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing future participation in any incentive, fringe benefit, deferred compensation, or other plan or program provided by the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan or program of the Company at or after the Date of Termination, shall be payable in accordance with such plan or program. 12. Indemnification. The Executive shall be indemnified in the same manner as actively employed and similarly situated executives of the Company and to the maximum extent as permitted for such executives under the by-laws of the Company for any acts or omission taken or omitted to be taken by the Executive in good faith and such indemnification shall survive the termination or expiration of this Agreement and the termination of the Executive's employment with the Company. 13. Arbitration. Any claim for damages arising out of or related to this Agreement except for any claims arising out of or related to Sections 6 and 7 hereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, provided, however, that the arbitration shall take place in Delaware and the arbitrators shall apply Delaware law. Each party to the Agreement may select one arbitrator. The selected arbitrators shall in turn appoint a third arbitrator, and the three so chosen shall comprise the arbitration panel. All arbitrators shall be independent third parties. The decision of the arbitration panel shall be final and binding on the parties, and judgment upon the award rendered by the arbitration panel may be entered by any court having jurisdiction thereof. This Section shall not be construed to prevent the Company from seeking injunctive relief as provided in Section 6 hereof and any and all disputes arising out of or related to Sections 6 and 7 shall be adjudicated by a court of competent jurisdiction. 10 14. General. (a) Governing Law. The terms of this Agreement shall be governed by the laws of the State of Delaware. (b) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. Executive agrees that this Agreement is personal to him and may not be assigned by him other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representative. (c) Entire Agreement; Modification. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, supersedes in its entirety any prior agreement between the Company and the Executive, and may not be modified or amended in any way except in writing by the parties hereto. (d) Provisions Severable. In case any one or more of the provisions of this Employment Agreement shall be invalid, illegal or unenforceable in any respect, or to any extent, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (e) Duration. Notwithstanding the term of employment hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement the day and year first written above. SYBRA, INC. Attest: _____________________________ By: __________________________ Secretary Name: Title: Witness: EXECUTIVE ______________________________ ________________________________ Donald P. Zima 12 EX-27 11 I.C.H. CORPORATION FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 0000049588 I.C.H. Corporation Financial Data Schedule 3-MOS DEC-31-1997 MAR-31-1997 881,455 0 45,385 0 0 8,980,917 3,766,242 0 12,747,159 659,184 0 12,190,203 0 0 (102,228) 12,747,159 40,706 40,706 100,144 196,934 0 0 0 (156,228) (54,000) (156,228) 0 0 0 (102,228) (.04) (.04)
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