EXHIBIT 10.4
EXECUTION VERSION
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SUBORDINATED DEBT CREDIT AGREEMENT
between
XXXXXXXX CAPITAL PARTNERS, L.P.
and
FRANCHISE FINANCE CORP.
January 8, 1997
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TABLE OF CONTENTS
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Section Page
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SECTION I. INTERPRETATION
1.01. Definitions......................................................................... 1
1.02. Headings............................................................................ 1
1.03. Plural Terms........................................................................ 1
1.04. Time................................................................................ 1
1.05. Governing Law....................................................................... 2
1.06. Construction........................................................................ 2
1.07. Entire Agreement.................................................................... 2
1.08. Calculation of Interest and Fees.................................................... 2
SECTION II. CREDIT FACILITY
2.01. Revolving Credit Facility........................................................... 2
2.02. Proceeds of Revolving Loan.......................................................... 4
2.03. Interest Payment Dates and Delinquent Payments...................................... 4
2.04. Principal Prepayments............................................................... 5
2.05. Other Payment Terms................................................................. 5
2.06. Note................................................................................ 6
2.07. Use of Proceeds..................................................................... 6
SECTION III. SUBORDINATION
3.01. Subordination...................................................................... 6
3.02. Payments on Subordinated Indebtedness.............................................. 6
3.03. Insolvency, etc.................................................................... 7
3.04. Payments and Distributions Received................................................ 9
3.05. Subrogation........................................................................ 9
3.06. Amendment.......................................................................... 9
3.07. Reinstatement of Terms of Subordination............................................ 9
3.08. Limitation on the Exercise of Remedies in Respect of Obligations................... 9
3.09. Notice............................................................................. 10
SECTION IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to Initial Revolving Loan..................................... 10
4.02. Conditions Precedent to Each Revolving Loan........................................ 10
SECTION V. REPRESENTATIONS AND WARRANTIES
5.01. Borrower's General Representations and Warranties................................. 10
5.02. Reaffirmation..................................................................... 13
5.03. Survival.......................................................................... 13
SECTION VI. COVENANTS
6.01. Affirmative Covenants............................................................. 13
6.02. Negative Covenants................................................................ 15
SECTION VII. DEFAULT
7.01. Events of Default................................................................. 17
7.02. Remedies.......................................................................... 19
7.03. Defaults.......................................................................... 19
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Section Page
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SECTION VIII. MISCELLANEOUS
8.01. Notices........................................................................... 19
8.02. Expenses.......................................................................... 20
8.03. Indemnification................................................................... 20
8.04. Waivers; Amendments............................................................... 21
8.05. Successors and Assigns............................................................ 21
8.06. No Third Party Rights............................................................. 21
8.07. Partial Invalidity................................................................ 21
8.08. Jury Trial........................................................................ 22
8.09. Counterparts...................................................................... 22
SCHEDULE I - DEFINITIONS
SCHEDULE II - INITIAL CONDITIONS PRECEDENT
SCHEDULE III - APPROVED FRANCHISE CONCEPTS AND APPROVED REAL ESTATE
CONCEPTS
EXHIBIT A - NOTICE OF BORROWING
EXHIBIT B - NOTE
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SUBORDINATED DEBT CREDIT AGREEMENT
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THIS SUBORDINATED DEBT CREDIT AGREEMENT, dated as of January 8, 1997,
is entered into by and between:
(1) Xxxxxxxx Capital Partners, L.P., a California limited partnership
(the "Borrower"); and
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(2) FRANCHISE FINANCE CORP., a Delaware corporation ("FFC").
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RECITALS
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A. FFC is a partner of the Borrower.
B. FFC is willing to provide a subordinated debt credit facility
upon the terms and subject to the conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, and for other good and valuable consideration the
receipt and sufficiency of which are acknowledged by both parties hereto, the
parties hereto hereby agree as follows:
SECTION I. INTERPRETATION.
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1.01. DEFINITIONS. Each term set forth in Schedule I, when used in
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this Agreement or any other Credit Document, shall have the respective meaning
given to that term in Schedule I or in the provision of this Agreement or other
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Credit Document referenced in Schedule I.
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1.02. HEADINGS. Headings in this Agreement and each of the other
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Credit Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.03. PLURAL TERMS. All terms defined in this Agreement or any other
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Credit Document in the singular form shall have comparable meanings when used in
the plural form and vice versa.
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1.04. TIME. All references in this Agreement and each of the other
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Credit Documents to a time of day shall mean San Francisco, California time,
unless otherwise indicated.
1.05. GOVERNING LAW. This Agreement and each of the other Credit
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Documents shall be governed by and construed in accordance with the laws of the
State of Kansas without reference to conflicts of law rules.
1.06. CONSTRUCTION. Each of this Agreement and the other Credit
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Documents is the result of negotiations among, and has been reviewed by, the
Borrower, FFC and their respective counsel. Accordingly, this Agreement and the
other Credit Documents shall be deemed to be the product of all parties hereto,
and no ambiguity shall be construed in favor of or against the Borrower or FFC.
1.07. ENTIRE AGREEMENT. This Agreement and each of the other Credit
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Documents, taken together, constitute and contain the entire agreement of the
Borrower and FFC and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
1.08. CALCULATION OF INTEREST AND FEES. All calculations of interest
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and fees under this Agreement and the other Credit Documents for any period
shall include the first day of such period and exclude the last day of such
period.
SECTION II. CREDIT FACILITY.
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2.01. REVOLVING CREDIT FACILITY.
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(a) Revolving Credit Availability. Subject to the terms and
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conditions of this Agreement, FFC agrees to advance to the Borrower, from
time to time during the period beginning on the Closing Date and ending on
the earliest of (i) the Facility Termination Date, (ii) the occurrence of a
Termination Event and (iii) such other date as is specified in Section 7.02
or 7.03, such loans as the Borrower may request under this Section 2.01
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(including any Warehouse Revolving Loan and any Support Revolving Loan,
each a "Revolving Loan"); provided, however, that the aggregate outstanding
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principal balance of all Revolving Loans at any time shall not exceed the
Maximum Commitment Amount. Except as otherwise provided herein, the
Borrower may borrow, repay and reborrow Revolving Loans until the earliest
of (i) the Facility Termination Date, (ii) the occurrence of a Termination
Event and (iii) such other date as is specified in Section 7.02 or 7.03;
provided, however, that if FFC's obligation to make Revolving Loans
hereunder terminates as the result of the occurrence of a Termination
Event, FFC's right to terminate such obligation is conditioned by and
subject to the following:
(1) FFC shall give the Borrower not less than thirty (30) days'
prior written notice (the
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"Notice Period") of its intent to terminate its obligation to
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make Revolving Loans hereunder (the "Termination Notice").
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(2) The Borrower shall have the opportunity to cure the Termination
Event during the Notice Period and cure has not occurred at or
prior to the end of the Notice Period.
(3) During the Notice Period, FFC shall not be obligated to make
additional Revolving Loans other than Warehouse Revolving Loans
relating to Collateral Loans for which documented loan
commitments were outstanding at the time the Termination Notice
was given to the Borrower by FFC; provided, however, that the
principal amount of any such Warehouse Revolving Loan shall not
exceed five percent (5%) of the principal amount of any
Collateral Loans that are being originated or purchased with
the proceeds of such Revolving Warehouse Loan.
(b) Maturity Date. The outstanding principal balance of, together
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with all accrued but unpaid interest on, the Revolving Loans shall be due
and payable (without demand, defense, set-off or counterclaim) in full upon
the Facility Termination Date.
(c) Notice of Borrowing. The Borrower shall request each Revolving
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Loan, which may be funded only on a Business Day, by delivering to FFC a
written notice in the form of Exhibit A hereto, appropriately completed (a
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"Notice of Borrowing"). The Borrower shall give each Notice of Borrowing
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to FFC by 1:00 p.m., Kansas time, on the Business Day immediately before
the funding date of the requested Revolving Loan. Each Notice of Borrowing
shall be delivered by telecopy to FFC at the telecopy number and during the
hours specified in Section 8.01 hereof.
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(d) Revolving Loan Interest Rate. The Borrower shall pay interest on
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the unpaid principal amount of each Revolving Loan from the funding date of
such Revolving Loan until the date such Revolving Loan (or portion thereof)
is actually repaid in full (the "Repayment Date") at a rate per annum equal
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to (i) the Applicable Treasury Rate plus 7.00% per annum for all Support
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Revolving Loans and (ii) the Applicable LIBOR Rate plus 7.50% per annum for
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all other Revolving Loans. If a Revolving Loan, other than a Support
Revolving Loan, is made on a day other than the first Business Day of a
calendar month, the Applicable LIBOR Rate for such Revolving Loan shall be
the Stub LIBOR Rate until the first Business Day of the next calendar
month, from and after which time the Applicable LIBOR Rate for such
Revolving Loan shall be at the Monthly LIBOR Rate. All
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computations of interest on Revolving Loans shall be based on a year of 360
days for actual days elapsed.
(e) Termination of Maximum Commitment Amount. On the Facility
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Termination Date, the obligation of FFC to make Revolving Loans pursuant to
this Agreement shall terminate automatically without any further action,
and the Maximum Commitment Amount shall be zero.
(f) Extension of Facility Termination Date. At least ninety (90) days
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prior to the Stated Termination Date, the Borrower may, by delivering a
written request to FFC, request that FFC extend for up to one year the
Stated Termination Date. Upon receipt of the request from the Borrower, FFC
may, in its sole discretion, agree to extend the Stated Termination Date
and shall, within thirty (30) days after receipt of such request, notify
the Borrower of its approval or rejection of such request. If FFC does not
respond to the Borrower's request within such thirty (30) day period, FFC
shall be deemed to have rejected the request. If FFC approves the request
for extension, the Stated Termination Date shall be extended for the
requested period, commencing on the Stated Termination Date.
2.02. PROCEEDS OF REVOLVING LOAN. Subject to the satisfaction of the
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conditions set forth in Section 4.02 hereof, on the day requested by the
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Borrower in the related Notice of Borrowing, FFC shall pay each Revolving Loan
to the account designated in the related Notice of Borrowing:
(a) to fund no more than fifteen percent (15%) of the principal
amount of the related Collateral Loans, in which case such Revolving Loan
shall be deemed to be a "Warehouse Revolving Loan";
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(b) to support pricing on securitizations or whole loan sales by the
Borrower through the financing of related subordinate tranches or
certificates or the funding of purchase price holdback amounts or loans, in
each case upon terms approved by FFC, which approval shall not be
unreasonably withheld, in which case any such Revolving Loan shall be
deemed to be a "Support Revolving Loan";
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(c) to pay for Borrower Expenses; provided, however, that the
aggregate amount of Revolving Loans used to pay for Borrower Expenses shall
not exceed one million dollars ($1,000,000); or
(d) to fund any other use approved in writing by FFC.
2.03. INTEREST PAYMENT DATES AND DELINQUENT PAYMENTS.
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On the twelfth (12th) day of each month (or if such day is not a
Business Day, the next succeeding Business Day) (each
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such day, an "Interest Payment Date"), the Borrower shall pay (a) interest at
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the applicable rate accrued during the preceding calendar month on the average
outstanding daily balance of all Revolving Loans, other than Support Revolving
Loans, outstanding on the first day of the preceding calendar month, (b)
interest accrued during the preceding calendar month at the applicable rate on
any Revolving Loan, other than any Support Revolving Loan, not outstanding on
the first day of the preceding calendar month, based on the outstanding
principal balance thereof and the number of days such Revolving Loan has been
outstanding during the preceding calendar month and (c) interest at the
applicable rate accrued during the preceding calendar month on the average
outstanding daily balance of all Support Revolving Loans.
Interest shall accrue on any payment that is not paid when due
hereunder at a rate equal to the sum of (i) the applicable rate, based on
whether such interest payment relates to a Support Revolving Loan or other
Revolving Loan, plus (ii) one percent (1.00%).
2.04. PRINCIPAL PREPAYMENTS.
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The outstanding principal balance of each Revolving Loan may be
prepaid, in whole or in part, on any Business Day. Such prepayment shall be
without premium or penalty.
2.05. OTHER PAYMENT TERMS.
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(a) Place and Manner. The Borrower shall make, without setoff,
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deduction or counterclaim, all payments due to FFC hereunder at FFC's
office, located at the address specified in Section 8.01(a), or such other
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office as FFC shall request in writing, in lawful money of the United
States and in same day or immediately available funds not later than 2:00
p.m., Kansas time, on the date due. Funds received after such time shall
be deemed to have been received by FFC on the next Business Day.
(b) Date. Whenever any payment due hereunder shall fall due on a day
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other than a Business Day, such payment shall be made on the next Business
Day.
(c) Application of Payments. All payments hereunder shall be applied
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first to unpaid costs and expenses then due and payable under this
Agreement or the other Credit Documents, second to accrued interest then
due and payable under this Agreement or the other Credit Documents and
finally to reduce the principal amount of outstanding Revolving Loans then
bearing the highest interest rate.
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2.06. NOTE.
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(a) Revolving Loan Note. The obligation of the Borrower to repay the
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Revolving Loans and to pay interest thereon at the rates provided herein
shall be evidenced by a subordinated promissory note in the form of Exhibit
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B, as amended from time to time (the "Note"), which note shall be (i) in
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the principal amount of twenty (20) million dollars ($20,000,000), (ii)
dated the Closing Date and (iii) otherwise appropriately completed. The
Borrower authorizes FFC to record on the schedule annexed to the Note the
date and amount of each Revolving Loan and of each payment of principal
thereon made by or on behalf of the Borrower, and agrees that all such
notations shall constitute prima facie evidence of the matters noted;
provided, however, that the failure of FFC to make any such notation shall
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not affect the Borrower's obligations. The Borrower further authorizes FFC
to attach to and make a part of the Note continuations of the schedule
attached thereto as necessary.
(b) Record of Interest. The Borrower authorizes FFC to record in its
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books (i) the Applicable Treasury Rate for all Support Revolving Loans and
the effective dates of all changes thereto, (ii) the Applicable LIBOR Rate
for all other Revolving Loans, (iii) the date and amount of each principal
and interest payment on each Revolving Loan, and (iv) such other
information as FFC may determine is necessary for the computation of
interest payable by the Borrower hereunder.
2.07. USE OF PROCEEDS. The Borrower shall apply the proceeds of each
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Revolving Loan solely for the purposes specified in Section 2.02, as set forth
in the related Notice of Borrowing.
SECTION III. SUBORDINATION.
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3.01. SUBORDINATION. The Obligations shall be subordinated and junior
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in right of payment, to the extent and in the manner hereinafter set forth, to
all Senior Debt of the Borrower. The term "Senior Debt" shall mean all
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obligations of the Borrower under that certain Warehouse Credit Agreement dated
January 8, 1997 by and between FFC and Borrower, as amended from time to time,
and such other obligations as FFC and the Borrower shall specifically designate
as "Senior Debt" by an amendment to this Agreement.
3.02. PAYMENTS ON SUBORDINATED INDEBTEDNESS. The Borrower will not,
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directly or indirectly, make or agree to make, and neither the holder nor any
assignee or successor holder of any right to receive payment of the Obligations
(a "Noteholder") will demand, accept or receive, any payment (by set-off or
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otherwise), direct or indirect, of or on account of any principal
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or interest in respect of any Obligations, and no such payment shall be due, if,
at the time of making any such payment:
(a) a default (a "Payment Default") in the payment when due (whether
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at the stated maturity thereof, by acceleration or otherwise) of all or any
portion of any of the Senior Debt shall have occurred and be continuing; or
(b) all of the following four conditions shall be satisfied:
(i) an event of default other than a Payment Default
shall have occurred with respect to any Senior Debt (a "Covenant
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Default") which permits the requisite holder or holders thereof to
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accelerate the maturity thereof;
(ii) the Borrower shall have received written notice (each
a "Subordination Notice") of such Covenant Default from the holders of
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at least 51% of the outstanding principal amount of Senior Debt, or
their representative or representatives;
(iii) such Covenant Default shall not have been cured or
waived in writing by the requisite holder or holders of Senior Debt;
and
(iv) fewer than six months shall have elapsed after the
date of receipt by the Borrower of such Subordination Notice (the
period during which the restrictions imposed by this subdivision (b)
are in effect being hereinafter referred to as a "Blockage Period").
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Notwithstanding the foregoing, Blockage Periods shall not be in effect for
more than an aggregate of 180 days during any period of 360 consecutive days.
Following an acceleration of the maturity of any Senior Debt, and as long
as such acceleration shall continue unrescinded and unannulled, such Senior Debt
shall first be paid in full in cash before any payment is made on account of or
applied to the Obligations.
3.03. INSOLVENCY, ETC. In the event of (a) any insolvency, bankruptcy,
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receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Borrower or its property, (b) any proceeding
for the liquidation, dissolution or other winding-up of the Borrower, voluntary
or involuntary, and whether or not involving insolvency or bankruptcy
proceedings, (c) any assignment for the benefit of creditors, or (d) any
distribution, division, marshalling or application of any of the properties or
assets of the Borrower or the proceeds thereof to creditors,
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voluntary or involuntary, and whether or not involving legal proceedings, then
and in any such event:
(i) all Senior Debt shall first be paid in full
(including all principal, premium, if any, and interest, including
interest accruing after the commencement of any such proceeding)
before any payment or distribution of any character, whether in cash,
securities or other property shall be made in respect of any
Obligations;
(ii) all principal and interest on the Obligations shall
forthwith become due and payable, and any payment or distribution of
any character, whether in cash, securities or other property, which
would otherwise (but for the terms hereof) be payable or deliverable
in respect of any Obligations, shall be paid or delivered directly to
the holders of the Senior Debt, for application to the payment of the
Senior Debt, until all Senior Debt shall have been paid in full, and
the Noteholders at the time outstanding irrevocably authorize, empower
and direct all receivers, trustees, liquidators, conservators, fiscal
agents and others having authority in the premises to effect all such
payments and deliveries;
(iii) each Noteholder at the time outstanding irrevocably
authorizes and empowers each holder of the Senior Debt and such
holder's representatives (without imposing any obligation on any
holder of the Senior Debt or such holder's representative) to demand,
xxx for, collect and receive such holder's ratable share of all such
payments and distributions and to receipt therefor, and to file and
prove all claims therefor and take all such other action in the name
of such holder or otherwise, as such holder of the Senior Debt or such
holder's representative may determine to be necessary or appropriate
for the enforcement of this Section 3.03; and
(iv) the Noteholders shall execute and deliver to each
holder of the Senior Debt or such holder's representative all such
further instruments confirming the above authorization, and all such
powers of attorney, proofs of claim, assignments of claim and other
instruments, and shall take all such other action as may be reasonably
requested by such holder of the Senior Debt or such holder's
representative to enforce all claims upon or in respect of the
Obligations.
For all purposes of this instrument, Senior Debt shall not be deemed to have
been paid in full unless the holders thereof shall have received cash equal to
the amount of principal, premium, if any, and interest in respect of all Senior
Debt at the time
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outstanding, and in case there are two or more holders of the Senior Debt any
payment or distribution required to be paid or delivered to the holders of the
Senior Debt shall be paid or delivered to such holders ratably according to the
respective aggregate amounts remaining unpaid on the Senior Debt held by such
holders.
3.04. PAYMENTS AND DISTRIBUTIONS RECEIVED. If any payment or
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distribution of any character, whether in cash, securities or other property,
shall be received by any Noteholder, or such holder's representative, in
contravention of any of the terms of this instrument, such payment or
distribution or security shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the holders of the Senior Debt or
such holders' representative or representatives for application to the payment
of all Senior Debt remaining unpaid, to the extent necessary to pay all such
Senior Debt in full. In the event of the failure of any Noteholder to endorse
or assign any such payment or distribution, any holder of the Senior Debt or
such holder's representative is hereby irrevocably authorized to endorse or
assign the same.
3.05. SUBROGATION. In case cash, securities or other property
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otherwise payable or deliverable to the Noteholders shall have been applied
pursuant to Sections 3.02 or 3.03 hereof to the payment of Senior Debt in full,
then and in each such case, the Noteholders shall be subrogated to any rights of
any holders of Senior Debt to receive any further payments or distributions in
respect of or applicable to the Senior Debt.
3.06. AMENDMENT. The subordination provisions of this Article III have
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been entered into for the benefit of the holders of the Senior Debt, and may not
be supplemented, amended or otherwise modified without the written consent of
all such holders or, if the instruments pursuant to which the Senior Debt shall
have been issued provide for effective consent by less than all the holders
thereof, by the requisite number or percentage of such holders provided for in
such instruments.
3.07. REINSTATEMENT OF TERMS OF SUBORDINATION. The terms of this
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instrument shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any Senior Debt is rescinded, annulled or must
otherwise be returned by any holder of Senior Debt or such holder's
representative, upon the insolvency, bankruptcy or reorganization of the
Borrower or any of its Subsidiaries or otherwise, all as though such payment has
not been made.
3.08. LIMITATION ON THE EXERCISE OF REMEDIES IN RESPECT OF OBLIGATIONS.
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In no event may any Noteholder exercise any right or remedy available to it on
account of any Default or Event of Default (a) at any time at which payments
with respect thereto may not be made by the Borrower on account of the terms of
Section 3.02 above, or (b) prior to the expiration of forty-
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five (45) days after the Noteholders shall have given notice to the Borrower and
to the holders of the Senior Debt of their intention to take such action.
3.09. NOTICE. Immediately upon receipt by the Borrower of any
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Subordination Notice pursuant to Section 3.02(b)(ii) hereof, the Borrower shall
deliver to the Noteholders a copy of such notice.
SECTION IV. CONDITIONS PRECEDENT.
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4.01. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN. The obligation
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of FFC to make the initial Revolving Loan is subject to receipt by FFC, on or
prior to the Closing Date, of each item listed in Schedule II, each in form and
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substance satisfactory to FFC.
4.02. CONDITIONS PRECEDENT TO EACH REVOLVING LOAN. The making of each
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Revolving Loan is subject to the further conditions that FFC shall have received
the Notice of Borrowing requesting such Revolving Loan in accordance with this
Agreement and that on the date such Revolving Loan is to be made and after
giving effect to such Revolving Loan, the following shall be true and correct:
(a) The representations and warranties set forth in Section 5.01 are
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true and correct in all material respects as if made on such date;
(b) No Default or Event of Default has occurred and is continuing
under any Credit Document; and
(c) Each of the Credit Documents remains in full force and effect.
The submission by the Borrower to FFC of each Notice of Borrowing shall be
deemed to be a representation and warranty by the Borrower as of the date
thereof as to the paragraphs set forth above.
SECTION V. REPRESENTATIONS AND WARRANTIES.
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5.01. BORROWER'S GENERAL REPRESENTATIONS AND WARRANTIES. To induce
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FFC to enter into this Agreement and to make Revolving Loans hereunder, the
Borrower represents and warrants to FFC that:
(a) Due Organization, Qualification, etc. The Borrower (i) is a
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limited partnership duly organized, validly existing and in good standing
under the laws of its state of organization; (ii) has the power and
authority to own, lease and operate its properties and carry on its
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business as now conducted; and (iii) is duly qualified and licensed to do
business and is in good standing as a foreign entity in each jurisdiction
where the failure to be so qualified or licensed might have a Material
Adverse Effect.
(b) Authority. The execution, delivery and performance by the
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Borrower of each Credit Document to be executed by the Borrower and the
consummation by the Borrower of the transactions contemplated thereby (i)
are within the power of the Borrower and (ii) have been duly authorized by
all necessary actions on the part of the Borrower.
(c) Enforceability. Each Credit Document executed, or to be executed,
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by the Borrower has been, or will be, duly executed and delivered by the
Borrower and constitutes, or will constitute, a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws
of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by the Borrower of
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the Credit Documents executed by the Borrower and the performance and
consummation of the transactions contemplated thereby do not (i) conflict
with or violate any Requirement of Law applicable to the Borrower; (ii)
conflict with or violate any provision of, or result in the breach or the
acceleration of, or entitle any other Person to accelerate (whether after
the giving of notice or lapse of time or both), any Contractual Obligation
of the Borrower; or (iii) result in the creation or imposition of any Lien
upon any property, asset or revenue of the Borrower.
(e) Approvals. No consent, approval, order or authorization of, or
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registration, declaration or filing with, any Governmental Authority or
other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Credit Documents by the Borrower and the performance and consummation by
the Borrower of the transactions contemplated hereby and thereby.
(f) No Violation or Default. The Borrower is not in violation of or
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in default with respect to (i) any Requirement of Law applicable to the
Borrower; (ii) any Contractual Obligation of the Borrower (nor is there any
waiver in effect which, if not in effect, would result in such a violation
or default), where, in each case, such violation or default could have a
Material Adverse Effect. No Default or Event of Default has occurred and
is continuing.
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(g) Litigation. No actions (including, without limitation, derivative
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actions), suits, proceedings or investigations are pending or, to the
knowledge of the Borrower, threatened against the Borrower at law or in
equity in any court or before any other Governmental Authority which (i)
could have a Material Adverse Effect or (ii) seek to enjoin, either
directly or indirectly, the execution, delivery or performance by the
Borrower of the Credit Documents or the transactions contemplated thereby.
(h) Other Regulations. The Borrower is not subject to regulation
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under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code or to any federal or state statute or
regulation limiting its ability to incur Indebtedness.
(i) Licenses and Other Rights. The Borrower owns, or has the full
-------------------------
right to license without the consent of any other Person, all licenses,
trademarks, trade names, trade secrets, service marks, copyrights and all
rights with respect thereto, which are required to conduct its businesses
as now conducted.
(j) Governmental Charges and Other Indebtedness. The Borrower has
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filed or caused to be filed all tax returns which are required to be filed
by it. The Borrower has paid, or made provision for the payment of, all
taxes and other Governmental Charges which have or may have become due
pursuant to said returns or otherwise and all other Indebtedness, except
such Governmental Charges or Indebtedness, if any, which are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which could not have a Material
Adverse Effect if unpaid.
(k) Margin Stock. The Borrower owns no Margin Stock which, in the
------------
aggregate, would constitute a substantial part of the assets of the
Borrower, and no proceeds of any Revolving Loan will be used to purchase or
carry, directly or indirectly, any Margin Stock or to extend credit,
directly or indirectly, to any Person for the purpose of purchasing or
carrying any Margin Stock.
(l) Solvency, etc. The Borrower is Solvent and, after the execution
-------------
and delivery of the Credit Documents and the consummation of the
transactions contemplated thereby, will be Solvent.
(m) Accuracy of Information. None of the Credit Documents and none of
-----------------------
the other certificates, statements or information furnished to FFC by the
Borrower in connection with the Credit Documents or the transactions
contemplated thereby contains or will contain any untrue statement of a
12
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.
(n) Intent. None of the transactions contemplated by this Agreement
------
have been or will be made with an actual intent to hinder, delay or defraud
any present or future creditors of the Borrower. The Borrower is able to
pay its debts as they become due.
5.02. REAFFIRMATION. The Borrower shall be deemed to have reaffirmed,
-------------
for the benefit of FFC, each representation and warranty contained in Section
-------
5.01 on and as of the funding date of each Revolving Loan.
----
5.03. SURVIVAL. The representations and warranties set forth in
--------
Section 5.01 shall remain in full force and effect until the expiration or
------------
earlier termination of this Agreement and the satisfaction in full by the
Borrower of all Obligations.
SECTION VI. COVENANTS.
---------
6.01. AFFIRMATIVE COVENANTS. Until the termination of this Agreement
---------------------
and the satisfaction in full by the Borrower of all Obligations, the Borrower
shall comply, and shall cause compliance, with the following affirmative
covenants unless FFC shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. The Borrower shall furnish to
----------------------------------
FFC the following:
(i) not later than thirty (30) days after the end of each
calendar quarter, a quarterly report which shall include an unaudited
balance sheet, income statement and statement of cash flows for the
quarterly period then ended;
(ii) not later than one hundred twenty (120) days after
the close of the Borrower's fiscal year, a report containing (a) a
balance sheet of the Borrower as of the end of the fiscal year, (b) an
income statement for the fiscal year, (c) a statement of cash flows
for the fiscal year and (d) a statement of partners' capital as of the
end of the fiscal year, prepared in accordance with GAAP, consistently
applied, and accompanied by the report thereon of the nationally
recognized independent accountants engaged by the Borrower; and
(iii) such other instruments, agreements, certificates,
opinions, statements, documents and information relating to the
operations or condition (financial or otherwise) of the Borrower, and
13
compliance by the Borrower with the terms of this Agreement and the
other Credit Documents as FFC may from time to time reasonably
request.
(b) Books and Records. The Borrower shall at all times keep proper
-----------------
books of record and account in which full, true and correct entries will be
made of its transactions in accordance with GAAP. With respect to each
Collateral Loan, the record keeping practices used by the Borrower with
respect to each Collateral Loan shall be in all respects legal, proper and
prudent.
(c) General Inspections. The Borrower shall permit any Person
-------------------
designated by FFC, upon reasonable notice and during normal business hours,
to visit and inspect any of its properties and offices, to examine its
books of account, all relevant information in the possession of the
Borrower or its Affiliates and agents (including any bailee, custodian,
accountant or attorney) concerning the transactions contemplated by this
Agreement and each other Credit Document and to discuss the affairs,
finances and accounts of the Borrower with, and to be advised as to the
same by, their officers, auditors and accountants, all at such times and
intervals as FFC may reasonably request.
(d) Governmental Charges and Other Indebtedness. The 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
other Indebtedness which, if unpaid, could have a Material Adverse Effect,
except such Indebtedness as may in good faith be contested or disputed, or
for which arrangements for deferred payment have been made, provided that
in each such case appropriate reserves are maintained to the reasonable
satisfaction of FFC.
(e) General Business Operations. The Borrower shall (i) preserve and
----------------------------
maintain its partnership existence and all of its rights, privileges and
franchises reasonably necessary to the conduct of its business, (ii)
conduct its business activities in compliance with all Requirements of Law
and Contractual Obligations applicable to such Person, the violation of
which could have a Material Adverse Effect, and (iii) keep all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(f) Notices. The Borrower shall promptly notify FFC upon:
--------
(i) the commencement of any litigation against the Borrower
that may have a Material Adverse Effect;
14
(ii) the occurrence of any Default or Event of Default
under this Agreement;
(iii) the occurrence of any default with respect to any
Senior Debt;
(iv) a Collateral Loan becoming a Nonperforming Loan and
the unpaid principal balance thereof; and
(v) any material adverse change in the business,
operations or condition (financial or otherwise) of the Borrower.
6.02. NEGATIVE COVENANTS.
------------------
(a) No Merger. Until the termination of this Agreement and the
---------
satisfaction in full by Borrower of all Obligations, the Borrower shall not
consolidate with or merge into any other Person or permit any other Person
to merge or consolidate with or into, the Borrower; provided, however, that
--------- --------
(i) the Borrower may merge or consolidate with or into any other Person or
entity if immediately after giving effect to such proposed transaction, no
Default or Event of Default would exist, and (ii) the Borrower is either
the surviving entity or the surviving entity agrees to assume all of the
Borrower's obligations hereunder and each other Credit Document in an
agreement or instrument satisfactory in form and substance to FFC.
(b) Senior Debt. The Borrower shall not amend in any material
-----------
respect the terms, conditions or covenants of any Senior Debt without the
written consent of FFC.
(c) Underwriting Guidelines. The Borrower shall not amend in any
-----------------------
material respect the terms of its Underwriting Manual without the written
consent of FFC.
(d) Additional Indebtedness. The Borrower shall not incur
-----------------------
Indebtedness other than:
(i) the Senior Debt and Indebtedness under this Agreement;
(ii) Indebtedness relating to any lending program of the
Borrower in the ordinary course of its business that has been approved
by FFC, which approval shall not be unreasonably withheld;
(iii) Indebtedness to subcontractors and trade creditors
incurred in the ordinary course of business and not delinquent for
more than 45 days or being contested in good faith;
15
(iv) Indebtedness under capital leases and operating
leases incurred in the ordinary course of business; and
(v) Other Indebtedness incurred in the ordinary course of
business not exceeding $250,000 at any time.
(e) Additional Liens. The Borrower shall not create, incur, assume or
----------------
permit to exist any Lien on any of its assets or property except for:
(i) Liens for taxes or other governmental charges not at
the time delinquent or thereafter payable without penalty or being
contested in good faith;
(ii) 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;
(iii) 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 in the ordinary course of business, 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;
(iv) Liens arising out of a judgment or award with respect
to which an appeal is being prosecuted, a stay of execution pending
appeal having been secured;
(v) Liens relating to any lending program of the Borrower
in the ordinary course of its business that has been approved by FFC,
which approval shall not be unreasonably withheld; and
(vi) Liens in favor of the lender or lenders of any Senior
Debt.
(f) Distributions, Redemptions, Etc. The Borrower shall not (i) pay
--------------------------------
any dividends or make any distributions on its Equity Securities; (ii)
purchase, redeem, retire, defease or otherwise acquire for value any of its
Equity Securities; or (iii) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity
Securities; provided, however, that the Borrower may make distributions to
enable holders of its Equity Securities to pay tax obligations relating to
such holdings, as permitted by the Borrower's Partnership Agreement.
16
(g) Asset Dispositions. The Borrower shall not sell, transfer or
------------------
otherwise dispose of substantially all of its assets except in connection
with a whole loan sale or securitization in the ordinary course of its
business.
(h) Investments. The Borrower shall not make any loans or advances
-----------
of funds to any Person or acquire Equity Securities other than (i) Eligible
Investments (as defined in the Borrower's Restated Agreement of Limited
Partnership dated January 8, 1997, as it may be amended from time to time),
(ii) Collateral Loans, (iii) other loans originated or purchased in the
ordinary course of the Borrower's business pursuant to lending programs
that have been approved by FFC, which approval shall not be unreasonably
withheld, and (iv) up to $148,313 pursuant to loans existing on the date
hereof made to Affiliates of the Borrower.
SECTION VII. DEFAULT.
7.01. EVENTS OF DEFAULT. The occurrence or existence of any one or
-----------------
more of the following shall constitute an "Event of Default" hereunder:
----------------
(a) the Borrower shall fail to observe or perform any other covenant,
obligation, condition or agreement contained in this Agreement or the other
Credit Documents and such failure shall continue unremedied for ten (10)
Business Days; or
(b) any representation, warranty, certificate, or other statement
(financial or otherwise) made or furnished by the Borrower to FFC in this
Agreement or any of the other Credit Documents shall be false, incorrect,
incomplete or misleading in any respect when made or furnished, and
(i) the same was made in bad faith; or
(ii) the same may result in a Material Adverse Effect
described in clause (a) of the definition of Material Adverse Effect,
----------
and such Material Adverse Effect is not cured within 30 days after the
earlier of (A) discovery thereof by the Borrower, or (B) notice
thereof by FFC to the Borrower; or
(iii) the same results in any other Material Adverse
Effect; or
(c) the Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
17
assignment for the benefit of its or any of its creditors, (iv) be
dissolved or liquidated in full or in part, (v) become insolvent (as such
term may be defined or interpreted under any applicable statute), (vi)
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession
of its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of affecting
any of the foregoing; or
(d) proceedings for the appointment of a receiver, trustee, liquidator
or custodian of the Borrower or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to the Borrower or
the debts thereof under any bankruptcy, insolvency or other similar law now
or hereafter in effect shall be commenced and an order for relief entered
or such proceeding shall not be dismissed or discharged within ninety (90)
days of commencement; or
(e) any Credit Document or any material term thereof shall cease to
be, or be asserted by the Borrower not to be, a legal, valid and binding
obligation of the Borrower enforceable in accordance with its terms.
(f) any default or event of default under any other Credit Document
has occurred and is continuing after any applicable cure period;
(g) the Borrower shall be in default in the payment to FFC of any
interest on or principal of any Revolving Loan when it becomes due and
payable and continuance of such default for a period of TEN (10) days;
(h) the Borrower shall fail to make any payment when due under the
terms of any Senior Debt and the holder of any Senior Debt has caused such
Senior Debt to become due and payable prior to its stated date of maturity;
(i) a final judgment or order for the payment of money shall be
rendered against the Borrower, the same shall remain undischarged for a
period of sixty (60) days during which execution shall not be effectively
stayed, and such judgment or order has a Material Adverse Effect;
(j) a final, nonappealable judgment or order that prevents the
Borrower from conducting its business substantially in the manner conducted
on the date of such judgment or order shall be entered against the
Borrower; or
18
(k) both Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx, Xx. cease to be
associated with the Borrower as an officer, director, employee, or
consultant actively involved in the management of the business and affairs
of the Borrower.
7.02. REMEDIES. Upon the occurrence or existence of any Event of
--------
Default (other than an Event of Default referred to in Section 7.01(c) or
---------------
7.01(d)) and at any time thereafter during the continuance of such Event of
-------
Default, FFC may, by written notice to Borrower, (a) terminate its obligation to
make Revolving Loans hereunder and/or (b) declare all outstanding Obligations
payable by the Borrower hereunder 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 7.01(c) or 7.01(d), immediately and without notice,
--------------- -------
(1) the obligations of FFC to make Revolving Loans shall automatically terminate
and (2) all outstanding Obligations payable by the Borrower hereunder 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, FFC may exercise any other right, power or
remedy granted to it by the Credit Documents or otherwise permitted to it by
law, either by suit in equity or by action at law, or both.
7.03. DEFAULTS. Upon the occurrence of any Default, the obligation of
--------
FFC to make Revolving Loans shall be terminated unless such event is either
waived by FFC or, to the extent allowed hereunder, cured by the Borrower within
the applicable cure period.
SECTION VIII. MISCELLANEOUS.
-------------
8.01. NOTICES. Except as otherwise provided herein, all notices,
-------
requests, demands, consents, instructions or other communications to or upon FFC
or the Borrower under this Agreement or the other Credit 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 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.
19
FFC: For Notices of Borrowing:
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Attn: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
FFC: For all other notices:
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Borrower: Xxxxxxxx Capital Partners, L.P.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Each Notice of Borrowing shall be given by the Borrower to FFC's office located
at the address referred to above during FFC's normal business hours; provided,
--------
however, that any such notice received by FFC after 1:00 p.m., Kansas time on
-------
any Business Day shall be deemed received by FFC on the next Business Day.
8.02. EXPENSES. Upon the occurrence of any Event of Default hereunder,
--------
the Borrower shall pay on demand all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by FFC in the enforcement or
attempted enforcement of any of the Obligations or in preserving any of FFC's
rights and remedies (including, without limitation, all such fees and expenses
incurred in connection with any "workout" or restructuring affecting the Credit
Documents or the Obligations or any bankruptcy or similar proceeding). As used
herein, the term "reasonable attorneys' fees and expenses" shall include,
without limitation, allocable costs and expenses of Borrower's or FFC's in-house
legal counsel and staff.
8.03. INDEMNIFICATION. To the fullest extent permitted by law, the
---------------
Borrower agrees to protect, indemnify, defend and hold harmless FFC and its
respective directors, officers, employees, agents and any Affiliate thereof
("Indemnitees") from and against any and all liabilities, losses, damages or
-----------
expenses of any kind or nature and from any and all suits, claims or demands
(including, without limitation, in respect of or for reasonable attorney's fees
and other expenses) arising on account of or in connection with any action or
failure to act by the Borrower arising out of or relating to the Revolving
Loans, including without limitation any use by the Borrower of any proceeds of
the Revolving Loans, except to the extent such
20
liability arises from the willful misconduct or gross negligence of the
Indemnitees. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that FFC believes is covered by this indemnity, FFC shall give the
Borrower notice of the matter and an opportunity to defend it, at the Borrower's
sole cost and expense, with legal counsel satisfactory to FFC. Any failure or
delay of FFC to notify the Borrower of any such suit, claim or demand shall not
relieve the Borrower of its obligations under this Section 8.03 but shall reduce
------------
such obligations to the extent of any increase in those obligations caused
solely by an unreasonable failure or delay. The obligations of the Borrower
under this Section 8.03 shall survive the payment and performance of the
------------
Obligations and the termination of this Agreement.
8.04. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
-------------------
of this Agreement or any other Credit Document may be amended or waived if such
amendment or waiver is in writing and is signed by the Borrower and FFC. No
failure or delay by FFC 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.
8.05. SUCCESSORS AND ASSIGNS. This Agreement and the other Credit
----------------------
Documents shall be binding upon and inure to the benefit of the Borrower, FFC
and their respective successors and permitted assigns, except that (a) the
Borrower may not assign or transfer any of its rights or obligations under any
Credit Document without the prior written consent of FFC and (b) FFC may assign
its rights and benefits, but not is obligations, under any Credit Document
without the consent of the Borrower. All references in this Agreement to any
Person shall be deemed to include all successors and assigns of such Person.
8.06. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied
---------------------
from this Agreement or any other Credit 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 Credit
Document.
8.07. 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.
21
8.08. JURY TRIAL. EACH OF THE BORROWER AND FFC, TO THE FULLEST EXTENT
----------
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AS TO ANY ISSUE RELATING TO ANY CREDIT DOCUMENT IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.09. 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.
22
IN WITNESS WHEREOF, the Borrower and FFC have caused this Agreement to
be executed as of the day and year first above written.
XXXXXXXX CAPITAL PARTNERS, L.P.
By: The Xxxxxxxx Group Incorporated,
General Partner
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: XXXXX X. XXXXX
---------------------------
Title: PRESIDENT
--------------------------
FRANCHISE FINANCE CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
23
SCHEDULE I
----------
DEFINITIONS
-----------
"Affiliate" shall mean, with respect to any Person, (a) each Person
---------
that, directly or indirectly, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, fifty percent (50%) or more of any class
of Equity Securities of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person or any Affiliate of
such Person or (c) each of such Person's officers, directors, joint venturers
and partners; provided, however, that in no case shall FFC be deemed to be an
-------- -------
Affiliate of the Borrower, or any of its Subsidiaries for purposes of this
Agreement. For the purpose of this definition, "control" of a Person 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, by contract or otherwise.
"Agreement" shall mean this Subordinated Debt Credit Agreement, as
---------
amended from time to time.
"Applicable LIBOR Rate" shall mean, for each Revolving Loan made on
---------------------
the first Business Day of a calendar month, the Monthly LIBOR Rate and, for each
Revolving Loan made on a date other than the first Business Day of a calendar
month, the Stub LIBOR Rate for that period of time beginning on (and including)
the date on which a Revolving Loan is made and ending on (but excluding) the
first Business Day of the next calendar month, and the Monthly LIBOR Rate from
and after such date.
"Applicable Treasury Rate" shall mean, with respect to any funding
------------------------
date for a Revolving Loan (the "Funding Date"), the yield to maturity implied by
------------
the monthly equivalent of either (a) the yield reported as of 10:00 a.m. (New
York City time) on the Business Day preceding the Funding Date on the display
designated PX6 or PX7 on the Bloomberg service (or such other display as may
replace such displays on the Bloomberg service or specify the applicable data on
any other generally available service) for actively traded U.S. Treasury
Securities maturing on or as close as possible to December 31, 1999, or (b) if
such yields shall not be reported as of such time or the yields reported as of
such time shall not be ascertainable, the Treasury Constant Maturity Series
yields reported for the latest day for which such yields shall have been so
reported as of the Business Day next preceding the Funding Date in Federal
Reserve Statistical Release H-15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury Securities maturing on or as close as possible
to December 31, 1999. Such implied yield shall be determined, if necessary, by
(i) converting U.S. Treasury xxxx quotations to bond-equivalent
I-1
yields in accordance with accepted financial practice, and (ii) interpolating
linearly between reported yields.
"Approved Franchise Concept" shall mean those franchise concepts
--------------------------
specified on Section A of Schedule III hereto and such additional franchise
concepts as are approved in writing by the Borrower and FFC from time to time.
"Approved Real Estate Concept" shall mean those concepts specified on
----------------------------
Section B of Schedule III hereto and such additional concepts as are approved in
writing by the Borrower and FFC from time to time.
"Blockage Period" shall have the meaning given to such term in Section
---------------
3.02(b) hereof.
"Borrower" shall have the meaning given that term in clause (1) of the
-------- -----------------
introductory paragraph hereof.
-----------------------------
"Borrower Expenses" shall mean the expenses incurred by the Borrower
-----------------
in connection with the origination, purchase and aggregation of Collateral Loans
(the "Aggregation Period Expenses"), including (i) outside and inside legal
counsel, (ii) accounting fees for loan file review prior to origination or
purchase of such Collateral Loans by the Borrower, if any, (iii) revisions to
loan documents by legal counsel, (iv) revisions to the Borrower's Underwriting
Manual and Processing Manual by legal counsel, (v) servicing fees and expenses,
(vi) other necessary and reasonable expenses relating to the aggregation and
servicing of the Collateral Loans prior to securitization or sale and (vii) the
expenses incurred by the Borrower in connection with the securitization or sale
of the Collateral Loans, including (a) legal counsel and other professional
fees, (b) credit rating agency fees and expenses, (c) trustee, custodian and/or
servicer acceptance fees and out-of-pocket expenses, (d) fees, costs and
expenses related to a loan pool audit by accountants, (e) costs and expenses of
printing offering documents and certificates, (f) fees, costs and expenses of
the underwriter or placement agent and (g) other necessary and reasonable
expenses relating to the securitization or sale of the Collateral Loans.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
------------
holiday or other day on which commercial banks are authorized or required by law
to close in San Francisco, California, or Wichita, Kansas.
"Closing Date" shall mean January 8, 1997.
------------
"Collateral Loan" shall mean each Non-Standard Loan which has been
---------------
approved by FFC and the Borrower and each Standard Loan, in each case purchased,
originated or financed, in whole or in part, using the proceeds of a Revolving
Loan, including without limitation, all related security interests and, in each
I-2
case, all rights to receive payments which are collected with respect thereto
from and after the related date of origination, purchase or financing.
"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.
"Covenant Default" shall have the meaning given to such term in
----------------
Section 3.02(b) hereof.
"Credit Documents" shall mean and include this Agreement, the Note and
----------------
all other documents, instruments and agreements delivered to FFC in connection
with this Agreement, as the same may be amended from time to time.
"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.
"Dollars" and "$" shall mean the lawful currency of the United States
------- -
of America and, in relation to any payment under this Agreement, same day or
immediately available funds.
"Equity Securities" of any Person shall mean (a) all common stock,
-----------------
preferred stock, shares, partnership interests or other equity interests in and
of such Person (regardless of how designated and whether or not voting or non-
voting) and (b) all warrants, options and other rights to acquire any of the
foregoing.
"Event of Default" shall have the meaning given to that term in
----------------
Section 7.01 hereof.
------------
"Facility Termination Date" shall mean the earliest of (a) the Stated
-------------------------
Termination Date, (b) the occurrence of an Event of Default described in Section
7.01(c) or Section 7.01(d) and the expiration of any related cure period, (c)
the occurrence and continuance of any other Event of Default and the declaration
of the Revolving Loans to become due and payable pursuant to Section 7.02 and
(d) the expiration of the Notice Period, if any, following the occurrence of a
Termination Event.
"FFC" shall mean Franchise Finance Corp., a Delaware corporation.
---
"Franchisee Loan" shall mean each loan to a franchisee of an Approved
---------------
Franchise Concept.
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"GAAP" shall mean generally accepted accounting principles and
----
practices as in effect in the United States of America from time to time,
consistently applied.
"Governmental Authority" shall mean any domestic or foreign national,
----------------------
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"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 Revolving Loans, (iii) employees, payroll, income or
gross receipts of the Borrower, (iv) the ownership or use of any of its assets
by the Borrower or (v) any other aspect of the business of the Borrower.
"Governmental Rule" shall mean any law, rule, regulation, ordinance,
-----------------
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Indebtedness" of any Person shall mean and include (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, (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 (including without limitation capital leases).
"Interest Payment Date" shall have the meaning given to that term in
---------------------
Section 2.03 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, 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.
"Liquidated Loan" shall mean any Collateral Loan as to which the
---------------
Borrower has determined in accordance with customary servicing practices that
all amounts expected by the Borrower to be recovered from or on account of such
Collateral Loan, whether
I-4
from scheduled loan payments, condemnation proceeds, insurance proceeds,
liquidation proceeds or otherwise, following final liquidation of such
Collateral Loan and the disposition of the related collateral, have been
recovered.
"Loan Documents" shall mean the form of loan agreement, note, security
--------------
agreement, mortgage, leasehold mortgage, deed of trust, leasehold deed of trust,
guaranty, landlord estoppel, intercreditor agreement, subordination of lessor's
lien, environmental indemnity and other related documents prepared by the
Borrower, dated December 29, 1995, as such documents may be amended from time to
time with the prior written approval of FFC for material amendments.
"Margin Stock" shall have the meaning given to that term in Regulation
------------
U issued by the Federal Reserve Board, as amended from time to time, and any
successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, assets, operations, prospects or financial or other condition of
the Borrower; (b) the ability of the Borrower to pay or perform the Obligations
in accordance with the terms of this Agreement and the other Credit Documents;
or (c) the rights and remedies of FFC under this Agreement, the other Credit
Documents or any related document, instrument or agreement.
"Maximum Commitment Amount" shall mean twenty million dollars
-------------------------
($20,000,000) minus the aggregate amount of reserves for losses of the Borrower
with respect to Nonperforming Loans, as agreed to in good faith by the Borrower
and FFC; provided, however, that when any such Nonperforming Loan is no longer a
Nonperforming Loan or when such Nonperforming Loan has become a Liquidated Loan,
the Maximum Commitment Amount shall no longer be reduced by the reserve for
losses relating to such Nonperforming Loan.
"Monthly LIBOR Rate" shall mean, with respect to a Revolving Loan and
------------------
a calendar month period, a rate per annum (rounded upwards, if necessary, to the
nearest whole multiple of 0.0625% per annum) equal to the average of the rates
per annum, for deposits for a period of one month, that are posted by each of
the principal London offices of the banks posting rates as displayed on the
Reuters Screen LIBOR Page as of 11:00 a.m. (London time) on the first Business
Day of each calendar month. In the event that no such rates are posted, the
Monthly LIBOR Rate shall be the rate per annum shown on page 3750 of Dow Xxxxx
Company Telerate screen or any successor page as the composite offered rate for
London interbank deposits with a period of one month, as shown under the heading
"USD" as of 11:00 a.m. (London time) on the first Business Day of each calendar
month. The Monthly LIBOR Rate shall be determined and reset monthly on the
first Business Day of each calendar month.
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"Nonperforming Loan" shall mean any Collateral Loan with respect to
------------------
which no payment of principal or interest has been made for at least ninety (90)
days.
"Non-Standard Loan" shall mean any loan that does not conform to the
-----------------
underwriting guidelines contained in the Underwriting Manual but which has been
approved by FFC and the Borrower.
"Note" shall have the meaning given to such term in Section 2.06
---- ------------
hereof.
"Noteholder" shall have the meaning given to such term in Section 3.02
----------
hereof.
"Notice of Borrowing" shall have the meaning given to that term in
-------------------
Section 2.01(c) hereof.
---------------
"Notice Period" shall have the meaning given to such term in Section
-------------
2.01(a)(1) hereof.
"Obligations" shall mean and include all loans, advances, debts,
-----------
liabilities, and obligations, howsoever arising, owed by the Borrower to FFC 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 Credit Documents, including
without limitation all interest, fees, charges, expenses, attorneys' fees and
accountants' fees chargeable to the Borrower or payable by the Borrower
hereunder or thereunder.
"Payment Default" shall have the meaning given to such term in Section
---------------
3.02(a) hereof.
"Person" shall mean and include an individual, a partnership, a
------
corporation (including a business trust), a joint stock company, limited
liability company, an unincorporated association, a joint venture, a trust or
other entity or a Governmental Authority.
"Processing Manual" shall mean the Processing Manual prepared by the
-----------------
Borrower, dated as of December 13, 1995, with respect to the processing
guidelines and procedures for Collateral Loans, as such manual may be amended
from time to time with the prior written approval of FFC and the Borrower for
material amendments.
"Real Estate Loan" shall mean a loan underwritten primarily on the
----------------
basis of the value of the fee or leasehold interest in real property securing
such loan and occupied by a franchisee or franchisor of an Approved Real Estate
Concept,
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rather than primarily on the basis of the value of the business operated on such
real property.
"Requirement of Law" applicable to any Person shall mean (a) the
------------------
Articles or Certificate of Incorporation and By-laws, Partnership Agreement or
other organizational or governing documents of such Person, (b) any Governmental
Rule applicable to such Person, (c) any license, permit, approval or other
authorization granted by any Governmental Authority to or for the benefit of
such Person and (d) any judgment, decision or determination of any Governmental
Authority or arbitrator, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Repayment Date" shall have the meaning given to that term in Section
-------------- -------
2.01(d) hereof.
-------
"Revolving Loan" shall have the meaning given to such term in Section
-------------- -------
2.01(a) hereof.
-------
"Senior Debt" shall have the meaning given to such term in Section
----------- -------
3.01 hereof.
----
"Solvent" shall mean, with respect to any Person on any date, that on
-------
such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small capital.
"Standard Loan" shall mean a Franchisee Loan in an Approved Franchise
-------------
Concept or a Real Estate Loan in an Approved Real Estate Concept (i) conforming
in all material respects to the underwriting guidelines contained in the
Underwriting Manual, (ii) processed in accordance with the Processing Manual and
(iii) documented using the Loan Documents.
"Stated Termination Date" shall mean December 31, 1999, unless
-----------------------
otherwise extended pursuant to Section 2.01(f) hereof.
---------------
"Stub LIBOR Rate" shall mean, with respect to a Revolving Loan, a rate
---------------
per annum (rounded upwards, if necessary, to the nearest whole multiple of
0.0625% per annum) equal to the average of the rates per annum, for deposits for
a period of one month, that are posted by each of the principal London offices
of
I-7
the banks posting rates as displayed on the Reuters Screen LIBOR Page as of
11:00 a.m. (London time) on the date such Revolving Loan is made. In the event
that no such rates are posted, the Stub LIBOR Rate shall be the rate per annum
shown on page 3750 of Dow Xxxxx Company Telerate screen or any successor page as
the composite offered rate for London interbank deposits with a period of one
month, as shown under the heading "USD" as of 11:00 a.m. (London time) on the
date a Revolving Loan is made.
"Subordination Notice" shall have the meaning given to such term in
--------------------
Section 3.02(b) hereof.
"Subsidiary" of any Person shall mean (a) any corporation of which
----------
more than 50% of the issued and outstanding Equity Securities 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 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 partnership, joint venture or
other association is at the time owned and controlled by such Person, by such
Person and one or more of the other Subsidiaries or by one or more of such
Person's other subsidiaries and (c) any other Person included in the financial
statements of such Person on a consolidated basis.
"Support Revolving Loan" shall have the meaning given to such term in
----------------------
Section 2.02(b) hereof.
---------------
"Termination Event" shall mean the inability of the Borrower, for a
-----------------
period of at least sixty (60) continuous days, (a) to obtain additional advances
under the Senior Debt to finance Collateral Loans as a result of a default under
such credit agreement and (b) to obtain a replacement credit agreement for the
Senior Debt.
"Termination Notice" shall have the meaning given to such term in
------------------
Section 2.01(a)(1) hereof.
"Underwriting Manual" shall mean the Underwriting Manual prepared by
-------------------
the Borrower, dated as of February 12, 1996, with respect to the underwriting
procedures and guidelines for Collateral Loans, as such manual may be amended
from time to time with the prior written approval of FFC and the Borrower for
material amendments.
"Warehouse Revolving Loan" shall have the meaning given to such term
------------------------
in Section 2.02(a) hereof.
---------------
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