EXHIBIT 10.15
DEBTOR-IN-POSSESSION
LOAN AND SECURITY AGREEMENT
THIS DEBTOR-IN-POSSESSION LOAN AND SECURITY AGREEMENT (the "Agreement") is
hereby made and executed as of the 5th day of July, 2001, by and between R1
FRANCHISE SYSTEMS L.L.C. (SUCCESSOR IN INTEREST TO RANCH *1 ACQUISITION L.L.C.),
AN ARIZONA LIMITED LIABILITY COMPANY ("Lender") and RANCH *1, INC., A DELAWARE
CORPORATION, together with each affiliated entity identified on SCHEDULE 1.2,
attached (collectively referred to as "Borrower"). For present, fair
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to Bankruptcy Court approval in the Reorganization Case (as defined
below), the parties hereto hereby agree as follows:
RECITALS
A. Borrower is the debtor and debtor-in-possession in one or more Chapter
11 bankruptcy cases (collectively, the "Reorganization Case") pending
in the United States Bankruptcy Court for the Southern District of New
York, as shown on SCHEDULE 1.2.
B. Borrower desires to establish certain post-petition,
debtor-in-possession ("DIP") financing arrangements with and borrow
funds from Lender, and Lender is willing to establish such
arrangements for and make DIP loans and extensions of credit to
Borrower, on the terms and conditions set forth below (subject to the
approval of the Bankruptcy Court).
C. The ability of Borrower to obtain the DIP financing provided under
this Agreement is of material benefit to Borrower. Without access to
the DIP financing provided under this Agreement, it is not likely that
Borrower will be able to reorganize successfully in its Reorganization
Case.
NOW, THEREFORE, in consideration of the promises and covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Borrower and Lender agree as follows:
ARTICLE 1
DEFINITIONS
In addition to the capitalized terms defined above, whenever used in this
Agreement, unless another meaning is expressly indicated, the following defined
terms shall have the meanings ascribed to them below, all of which definitions
shall be substantive terms of this Agreement:
SECTION 1.1 ACCOUNT. "Account" means all of the following, whether now
existing or arising in the future: (a) accounts receivable, including Royalties
and related fees due from Franchisees of Borrower, and any and all instruments,
documents, contract rights, chattel paper, general intangibles relating to such
accounts receivable acquired by Borrower from third parties or created by
Borrower, including, without limitation, all accounts acquired by, created by,
or arising from all of the Borrower's sales of goods or rendition of services to
its respective customers, and all accounts acquired through or arising from
sales of goods or rendition of services made under any of the Borrower's
respective trade names or styles; (b) unpaid seller's rights (including
rescission, replevin, reclamation, and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any goods represented by any of
the foregoing, including rights to returned or repossessed goods; (d) reserves
and credit balances arising thereunder; (e) guarantees or collateral for any of
the foregoing; (f) insurance policies or rights relating to any of the
foregoing; and (g) cash and noncash proceeds of any and all of the foregoing.
SECTION 1.2 ACCOUNT DEBTOR. "Account Debtor" means any Person obligated on
any Account of Borrower.
SECTION 1.3 ADDITIONAL LEASE. "Additional Lease" has the meaning set forth
in Section 4.23.
SECTION 1.4 ADVANCE. "Advance" means any advance made under the Loan.
SECTION 1.5 AFFILIATE. "Affiliate" means, with respect to a specified
Person, any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, including without limitation its
stockholders and any Affiliates thereof. A Person will be deemed to control a
corporation or other entity if the Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and business of the
corporation or other entity, whether through the ownership of voting securities,
by contract, or otherwise.
SECTION 1.6 AGREEMENT. "Agreement" means this Debtor-In-Possession Loan and
Security Agreement, as it may be amended or supplemented from time to time.
SECTION 1.7 APPROVAL DATE. "Approval Date" means the date of the entry of
the Bankruptcy Court Order on the Bankruptcy Court's docket.
SECTION 1.8 BANKRUPTCY CODE. "Bankruptcy Code" means 11 U.S.C.ss.ss.101, ET
SEQ. as amended from time to time.
SECTION 1.9 BANKRUPTCY COURT. "Bankruptcy Court" or "Court" means the
United States Bankruptcy Court for the Southern District of New York.
SECTION 1.10 BANKRUPTCY COURT ORDER. "Bankruptcy Court Order" means the
following as applicable at any particular time: the First Interim Order, the
Second Interim Order and the Final Order entered by the Bankruptcy Court
approving this Agreement and the Loan hereunder. The Bankruptcy Court Order
shall expressly provide that (i) the Bankruptcy Court's approval of this
Agreement shall include approval of all fixed fees and costs payable to Lender
2
hereunder such that (a) no further court approval of such fixed fees and costs
shall be necessary, and (b) such fees and costs shall be paid by Borrower to
Lender in the time and manner provided herein; and (ii) neither the
professionals employed by Lender in connection with the Loan nor the fees and
costs charged by such professionals shall be subject to any of the provisions of
the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and/or local
bankruptcy rules or orders concerning or governing the employment or
compensation of professionals; PROVIDED, HOWEVER, THAT the amount of such
professional fees shall, if disputed by Borrower or the Committee, be subject to
the approval of the Bankruptcy Court as being reasonable, PROVIDED, FURTHER,
THAT pending resolution of any dispute, any undisputed fees shall be paid in the
time and manner provided herein.
SECTION 1.11 BASE RATE. "Base Rate" means a rate of interest equal to
twelve and one-half percent (12.5%) per annum.
SECTION 1.12 BORROWED MONEY. "Borrowed Money" means any obligation to repay
money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under generally
accepted accounting principles would be capitalized on the books of Borrower or
which is the substantial equivalent of the financing of the property so leased.
SECTION 1.13 BORROWER. "Borrower" has the meaning set forth in the
Preamble. Unless otherwise expressly stated and agreed, Borrower is acting
hereunder and pursuant to all orders approving or otherwise relating to this
Agreement, in all of its capacities, including acting on its own behalf, and as
the debtor-in-possession representative of its estate, in the Reorganization
Case.
SECTION 1.14 BUDGET. "Budget" has the meaning set forth in Section 2.6.
SECTION 1.15 BUSINESS DAY. "Business Day" means any day on which financial
institutions are open for business in the State of Arizona, excluding Saturdays
and Sundays.
SECTION 1.16 CARVE-OUT. "Carve-Out" has the meaning set forth in Section
9.1.
SECTION 1.17 CLOSING; CLOSING DATE. "Closing" and "Closing Date" have the
meanings set forth in Section 5.12.
SECTION 1.18 COLLATERAL. "Collateral" has the meaning set forth in Section
3.1.
SECTION 1.19 SECTION 1.19 COMMITTEE. "Committee" has the same meaning set
forth in the Final Order.
SECTION 1.20 DEFAULT RATE. "Default Rate" means a rate per annum equal to
five percent (5%) above the Base Rate.
SECTION 1.21 DIP. "DIP" has the meaning set forth in Recital B above.
SECTION 1.22 EARLY TERMINATION FEE. "Early Termination Fee" has the meaning
set forth in Section 2.4.
3
SECTION 1.23 EMERGENCY LOAN AMOUNT. "Emergency Loan Amount" has the meaning
set forth in Section 2.1.
SECTION 1.24 EVENT OF DEFAULT. "Event of Default" and "Events of Default"
have the meanings set forth in Article 8.
SECTION 1.25 EXAMINER. "Examiner" means the examiner appointed by the
Bankruptcy Court in the Reorganization Case while such appointment is effective
and such examiner is serving.
SECTION 1.26 FILING DATE. "Filing Date" means the date on which the
Reorganization Case was filed with the Bankruptcy Court.
SECTION 1.27 FIRST INTERIM ORDER. "First Interim Order" means the order
entered by the Bankruptcy Court, on an emergency basis and pending a second
interim hearing on approval of this Agreement and the Loan hereunder, which
order is in form and substance wholly satisfactory to Lender, which allows and
authorizes Borrower to borrow from Lender an amount up to $220,000.00 and which
shall provide to Lender, among other things, the liens, fees and administrative
claims contemplated by this Agreement.
SECTION 1.28 FINAL ORDER. "Final Order" means an order entered by the
Bankruptcy Court approving this Agreement and the Loan hereunder on a final
basis, which Final Order is in form and substance wholly acceptable to Lender.
SECTION 1.29 FRANCHISE AGREEMENTS. "Franchise Agreements" means all
franchise agreements, area development agreements and similar agreements by and
between Borrower as franchisor and one or more third parties as franchisee,
and/or area developer, including without limitation those shown on SCHEDULE
4.22, attached.
SECTION 1.30 FRANCHISEES. "Franchisees" shall mean the franchisees under
the Franchise Agreements and the area developers under the area development
agreements.
SECTION 1.31 HIGHEST LAWFUL RATE. "Highest Lawful Rate" means the maximum
lawful rate of interest referred to in Section 2.7 that may accrue pursuant to
this Agreement.
SECTION 1.32 INTERIM ORDERS. "Interim Orders" shall mean the First Interim
Order and the Second Interim Order.
SECTION 1.33 LEASES. "Leases" has the meaning set forth in Section 4.23.
SECTION 1.34 LENDER. "Lender" has the meaning set forth in the Preamble.
SECTION 1.35 LENDER INITIATED FRANCHISEES. "Lender Initiated Franchisees"
has the meaning set forth in the Bankruptcy Court Order.
SECTION 1.36 LOAN. "Loan" has the same meaning as Loan set forth in Section
2.1(a).
4
SECTION 1.37 LOAN DOCUMENTS. "Loan Documents" means and includes this
Agreement, the Note and each and every other document now or hereafter executed
and/or delivered in connection with this Agreement, as any of them may be
amended, modified, or supplemented from time to time.
SECTION 1.38 LOAN MANAGEMENT FEE. "Loan Management Fee" has the meaning set
forth in Section 2.4.
SECTION 1.39 LOAN ORIGINATION FEE. "Loan Origination Fee" has the meaning
set forth in Section 2.4.
SECTION 1.40 MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the meaning set
forth in Section 2.1(a).
SECTION 1.41 NOTE. "Note" has the meaning set forth in Section 2.1(c).
SECTION 1.42 OBLIGATIONS. "Obligations" has the meaning set forth in
Section 3.1.
SECTION 1.43 PERMITTED LIENS. "Permitted Liens" means: (a) liens for taxes
not delinquent, or which are being contested in good faith and by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Lender's sole discretion, involve any substantial danger of the sale, loss or
forfeiture of such property or assets or any interest therein); and (b) those
liens and encumbrances, if any, identified SCHEDULE 1.39, attached.
SECTION 1.44 PERSON. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, governmental authority, or
any other entity, and includes, without limitation, the Borrower, any affiliates
of the Borrower, any statutory committee, trustee, examiner or other estate
representative of any type appointed in or in connection with the Reorganization
Case, and any other party-in-interest in the Reorganization Case.
SECTION 1.45 PLAN EXPIRATION DATE. shall mean the seventy-fifth (75th) day
after the Closing Date.
SECTION 1.46 SALE MOTION. "Sale Motion" has the meaning set forth in
Section 2.8.
SECTION 1.47 PLAN OF REORGANIZATION. "Plan of Reorganization" means any
plan of reorganization filed pursuant to Chapter 11 of the Bankruptcy Code by
the Borrower, by any Affiliate of the Borrower, or by any other party in
interest in the Reorganization Case.
SECTION 1.48 REORGANIZATION CASE. "Reorganization Case" has the meaning set
forth in Recital A above.
SECTION 1.49 ROYALTIES. "Royalties" shall mean all royalties, marketing and
advertising fees, development fees, and all other amounts payable to Borrower
under its Franchise Agreements with Franchisees.
5
SECTION 1.50 SALES DOCUMENTS. "Sales Documents" has the meaning set forth
in Section 3.1.
SECTION 1.51 SECOND INTERIM ORDER. "Second Interim Order" means the order
entered by the Bankruptcy Court, on an emergency basis and pending a final
hearing on approval of this Agreement and the Loan hereunder, which order is in
form and substance wholly satisfactory to Lender, which allows and authorizes
Borrower to borrow from Lender an amount up to $500,000.00 (inclusive of the
amounts authorized pursuant to the First Interim Order) and which shall provide
to Lender, among other things, the liens, fees and administrative claims
contemplated by this Agreement.
SECTION 1.52 TERM. "Term" has the meaning set forth in Section 2.8.
ARTICLE 2
LOAN
SECTION 2.1 TERMS.
(a) All amounts of credit extended by Lender to Borrower hereunder are
collectively referred to herein as the "Loan". The maximum aggregate principal
amount of credit extended by Lender to Borrower hereunder that will be
outstanding at any time prior to entry of the Final Order is FIVE HUNDRED
THOUSAND and No/100 Dollars ($500,000.00) (the "Emergency Loan Amount").
Following the Closing, provided there exists no Event of Default and all terms
and conditions of this Agreement are met, Lender will advance funds to Borrower
according to the schedule attached as EXHIBIT B. The maximum aggregate principal
amount of credit extended by Lender to Borrower hereunder at any time after
entry of the Final Order (including the Emergency Loan Amount) is TWO MILLION
DOLLARS ($2,000,000.00) (the "Maximum Loan Amount").
(b) The Loan will include sums advanced and other credit extended by
Lender to or for the benefit of Borrower from time to time under this Article 2
up to (i) after entry of the Interim Orders and the satisfaction of all other
terms and conditions in this Agreement but prior to the entry of the Final
Order, the Emergency Loan Amount; and (ii) after the entry of the Final Order,
the Maximum Loan Amount. The outstanding principal balance of the Loan may be
increased by future advances and other extensions of credit to or for the
benefit of Borrower, and will be due and payable in full upon the expiration of
the Term. This Loan will not revolve. All payments made to Lender, whether
voluntary or required by the terms of this Agreement, will not be available for
subsequent Advances.
(c) At Closing and on the date of each Advance, Borrower will execute
and deliver to Lender one or more promissory notes evidencing Borrower's
unconditional obligation to repay Lender for the Loan and other extensions of
credit made under the Loan, in the form of EXHIBIT A to this Agreement (the
"Note"), dated the date hereof, payable to the order of Lender in accordance
with the terms thereof. The Note will bear interest from the date thereof until
repaid, with interest payable monthly in arrears, on any and all amounts
outstanding under, or as a result of the Loan, on the first Business Day of each
month, at a rate per annum (on the basis of the actual number of days elapsed
6
over a year of 360 days) equal to the Base Rate, provided that upon the
occurrence and during the continuance of an Event of Default such rate will be
equal to the Default Rate. Each Advance and other extension of credit will be
deemed evidenced by the Note, which is deemed incorporated by reference herein
and made a part hereof.
SECTION 2.2 LOAN ADMINISTRATION. Borrowings under the Loan will be as
follows:
(a) A request for an Advance under the Loan will be made, or will be
deemed to be made, in the following manner: Borrower may give Lender notice of
its intention to borrow, in which notice Borrower will specify the amount of the
proposed borrowing and the proposed borrowing date, not later than 2:00 p.m.
Phoenix, Arizona time three (3) Business Days prior to the proposed borrowing
date; PROVIDED, HOWEVER, THAT Lender will have no obligation to fund any such
request made at a time when an Event of Default has occurred and is continuing
or a condition precedent to the Advance has not been met, and, PROVIDED, further
Advances (after the Emergency Loan Amount) will not be made more frequently than
on 30 day intervals and will not be made in amounts greater than $250,000.00.
(b) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Advance requested, or deemed to be requested, by wire transfer
to an account specified by Borrower.
(c) All Advances and other extensions of credit to or for the benefit
of Borrower will constitute a single general Obligation of Borrower, and will be
secured by Lender's lien upon all of the Collateral.
(d) Lender will enter all Advances as debits to a loan account in the
name of Borrower and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower under this Agreement. Payments on the
Loan will be made as provided herein and/or in the Note. Unless applied
otherwise in Lender's sole discretion, payments made by Borrower to Lender in
respect of the Loan will be applied first to fees, costs, and expenses due and
owing under the Loan Documents, then to interest due and owing under the Loan
Documents, and then to principal outstanding with respect to the Loan.
(e) Lender will account to Borrower on a regular basis (but not more
frequently than monthly) with a statement of Advances, charges and payments made
pursuant to this Agreement, and such account rendered by Lender will be deemed
final, binding and conclusive upon Borrower unless Lender is notified by
Borrower in writing to the contrary within ten (10) days of the date each
accounting is transmitted by facsimile to Borrower. Such notice will be deemed
an objection only to those items specifically objected to therein.
SECTION 2.3 (INTENTIONALLY OMITTED).
SECTION 2.4 FEES.
(a) Borrower unconditionally agrees to pay to Lender a non-refundable
loan origination fee in the amount of $25,000.00, due and payable on the entry
of the Emergency Order.
7
(b) For so long as any portion of the Loan remains outstanding and/or
is available to Borrower, Borrower unconditionally will pay to Lender a monthly
loan management fee (the "Loan Management Fee") equal to $20,000.00 payable to
the Lender solely from the proceeds, if any, of the Borrower's share of initial
franchise fees paid by Lender Initiated Franchisees. The Loan Management Fees
due to the Lender shall begin to accrue from July 5, 2001. The payment of the
Loan Management Fee shall be in addition to the commissions and fees payable to
the Lender on account of the Lender Initiated Franchisees.
(c) Borrower unconditionally promises to pay to Lender a fee equal to
five percent (5%) of the Maximum Loan Amount if Lender terminates this Agreement
upon or after the occurrence of an Event of Default, if this Agreement
terminates as provided in Section 2.8(c), or if Borrower shall terminate this
Agreement effective prior to the end of the Term, which fee shall be due and
payable upon the termination of this Agreement (the "Early Termination Fee");
PROVIDED, HOWEVER, the Borrower shall not be obligated to pay the Early
Termination Fee in the event that, on or before the Plan Expiration Date, the
Borrower files a plan of reorganization which is not satisfactory to the Lender
(in the Lender's sole discretion), unless (i) such plan fails to pay the Lender
the full amount of the DIP Liabilities, or (ii) such plan is premised upon the
Borrower's obtaining funding from an alternative lender, funder or acquirer or
the sale of substantially all of the Borrower's assets to a third party not
affiliated with Lender.
(d) Borrower unconditionally promises to pay to Lender a commitment
fee in the amount of one fourth of one percent (.25%) per annum of the average
daily unused portion of the Maximum Loan Amount (the portion which has not been
Advanced), which fee shall be due and payable and non-refundable monthly in
arrears on the first Business Day of each successive calendar month.
SECTION 2.5 PAYMENTS. Principal and all other amounts payable on account of
the Loan will be payable by Borrower to Lender immediately upon the earliest of
(i) the occurrence of an Event of Default in consequence of which the Loan and
the maturity of the payment of the Obligations are accelerated, (ii) the
termination of this Agreement pursuant to Section 2.8(c) hereof, or (iii) the
end of the Term. Interest accrued on the Loan will be paid on the earliest of
(i) the first Business Day of each month (for the immediately preceding month),
with interest computed on the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which the Loan and the
maturity of the payment of the Obligations are accelerated, or (iii) the
termination of this Agreement pursuant to Section 2.8 hereof. Except to the
extent otherwise set forth in this Agreement, all payments of principal and of
interest on the Loan, all other charges and any other obligations of Borrower
hereunder will be made to Lender in immediately available funds.
SECTION 2.6 USE OF PROCEEDS. Except as otherwise expressly provided in this
Agreement and in the Bankruptcy Court Order, the proceeds of Lender's advances
under the Loan will be used solely for: working capital and payment of essential
post-petition operating and administrative expenses, all strictly in accordance
with the operating budget of Borrower (the "Budget") as set forth on SCHEDULE
2.6, attached, and as set forth on EXHIBIT B.
SECTION 2.7 INTEREST RATE LIMITATION. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would be
8
usurious under such laws, then notwithstanding any other provision hereof: (i)
the aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document will not exceed the maximum
amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess will be promptly credited to Borrower by Lender (or, to the extent
that such consideration will have been paid, such excess will be promptly
refunded to Borrower by Lender); (ii) neither Borrower nor any other Person now
or hereafter liable hereunder will be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and
(iii) the effective rate of interest will be reduced to the Highest Lawful Rate.
All sums paid, or agreed to be paid, to Lender for the use, forbearance, and
detention of the debt of Borrower to Lender will, to the extent permitted by
applicable law, be allocated throughout the full term of the Notes until payment
is made in full so that the actual rate of interest does not exceed the Highest
Lawful Rate in effect at any particular time during the full term thereof. If at
any time the rate of interest under the Notes exceeds the Highest Lawful Rate,
the rate of interest to accrue pursuant to this Agreement will be limited,
notwithstanding anything to the contrary herein, to the Highest Lawful Rate, but
any subsequent reductions in the Base Rate will not reduce the interest to
accrue pursuant to this Agreement below the Highest Lawful Rate until the total
amount of interest accrued equals the amount of interest that would have accrued
if a varying rate per annum equal to the interest rate under the Notes had at
all times been in effect. If the total amount of interest paid or accrued
pursuant to this Agreement under the foregoing provisions is less than the total
amount of interest that would have accrued if a varying rate per annum equal to
the interest rate under the Notes had been in effect, then Borrower agrees to
pay to Lender an amount equal to the difference between (i) the lesser of (x)
the amount of interest that would have accrued if the Highest Lawful Rate had at
all times been in effect, or (y) the amount of interest that would have accrued
if a varying rate per annum equal to the interest rate under the Note had at all
times been in effect, and (ii) the amount of interest accrued in accordance with
the other provisions of this Agreement.
SECTION 2.8 TERM.
(a) Subject to Lender's right to cease making Advances to Borrower
upon or after any Event of Default has occurred and is continuing, and subject
to earlier termination as provided below in this Section 2.8, this Agreement
will be in effect for a period equal to the EARLIER of one (1) year from the
Closing Date OR the effective date of a Plan of Reorganization (the "Term");
and, in the absence of any Event of Default, this Agreement may be renewed
thereafter upon the mutual written agreement of the parties.
(b) Notwithstanding anything herein to the contrary, subject to
Section 2.8(d) hereof, Lender may terminate this Agreement upon or after the
occurrence and during the continuance of an Event of Default, or if Borrower
fails to file a Plan of Reorganization within seventy five (75) days after the
Closing, which is approved by Lender (in Lender's sole discretion) and which,
once filed, is not amended or withdrawn without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion (the "Approved
Plan").
(c) This Agreement also will terminate immediately and automatically
upon the occurrence of any of the following:
9
(i) The appointment of a trustee in the Reorganization Case;
(ii) The dismissal of the Reorganization Case or the conversion
of the Reorganization Case from a Chapter 11 proceeding to a Chapter 7
proceeding;
(iii) Without the prior written consent of Lender, the granting,
by stipulation or otherwise, of relief from the automatic stay of Bankruptcy
Code Section 362(a), in favor of a party other than Lender which asserts a lien
or security interest in any of the Collateral;
(iv) The entry of an Order in the Reorganization Case which
authorizes (under Bankruptcy Code Sections 105 or 364, or otherwise) the
granting of a lien or security interest in any of the Collateral in favor of any
party other than Lender which is not approved expressly in writing by Lender,
which approval may be withheld in Lender's sole and absolute discretion;
(v) The modification, rescission, reversal, termination, stay or
other change in the form, substance or effectiveness of the Bankruptcy Court
Order which is not approved in writing by Lender, which approval may be withheld
in Lender's sole and absolute discretion, or the entry of any order that in
Lender's sole opinion adversely affects the rights, interests and/or protections
of Lender under the Loan or this Agreement; or
(vi) The modification, termination or subordination of any of
Lender's liens on the Collateral which is not approved in writing by Lender,
which approval may be withheld in Lender's sole and absolute discretion.
(d) All of the Obligations will be immediately due and payable upon
the termination of this Agreement; PROVIDED, HOWEVER, notwithstanding anything
to the contrary contained herein, including Section 8.6(l), (i) in the event the
Borrower fails to file a plan of reorganization which is satisfactory to the
Lender (in the Lender's sole discretion) on or before the Plan Expiration Date,
all of the Obligations will be due and payable upon the earlier of (1) the
forty-fifth (45th) day after the Plan Expiration Date and (2) the consummation
of a plan of reorganization, or such other time which is agreed to in writing by
the Lender, and (ii) in the event the Borrower files an application with the
Bankruptcy Court seeking authorization for the sale of substantially all of the
Borrower's assets pursuant to Section 363 of the Bankruptcy Code without the
Lender's consent (in the Lender's sole discretion) (the "Sale Motion"), all of
the Obligations will be due and payable upon the earlier of (1) the thirtieth
(30th) day of the date of the filing of the Sale Motion and (2) the consummation
of such a sale, or such other time which is agreed to in writing by the Lender.
All undertakings, agreements, covenants, warranties, and representations of
Borrower contained in the Loan Documents will survive any such termination and
Lender will retain its liens in the Collateral and all of its rights and
remedies under the Loan Documents and the Bankruptcy Court notwithstanding such
termination until all Obligations owing from Borrower to Lender have been
satisfied indefeasibly and in full.
SECTION 2.9 COSTS AND EXPENSES. Borrower shall pay to Lender on demand all
reasonable costs and expenses that Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the Loan Documents, the Bankruptcy Court
Order, including, without limitation: (a) attorneys' and paralegals' fees and
10
disbursements of counsel to Lender, (b) costs and expenses (including attorneys'
and paralegals' fees and disbursements) for any amendment, supplement, waiver,
consent, or subsequent closing in connection with this Agreement and related
documents, the Bankruptcy Court Order, and any transaction mentioned or
contemplated thereby; (c) costs and expenses of lien searches, environmental
surveys, recording and filing fees and any other recording taxes associated with
the perfection of interests in the Collateral; (d) taxes, fees and other charges
for recording any agreements or documents with any governmental authority, and
the filing of Financing Statements and continuations, and other actions to
perfect, protect, and continue the security interests and liens of Lender in the
Collateral; (e) sums paid or incurred to pay any amount or take any action
required of Borrower under this Agreement and related documents, or the
Bankruptcy Court Order that Borrower fails to pay or take; (f) costs of
appraisals, inspections and verifications of the Collateral and including
travel, lodging, and meals for inspections of the Collateral and the Borrower's
operations by Lender or its agents and to attend court hearings or otherwise in
connection with the Chapter 11 Case; (g) costs and expenses of preserving and
protecting the Collateral; (h) all out-of-pocket expenses and costs heretofore
and from time to time hereafter incurred by the Lender during the course of
periodic field examinations of the Collateral and Borrower's operations, plus a
per diem charge per person per day at Lender's then current rate (as of the
Closing Date, such rate is $750 per day, per man), for Lender's examiners in the
field and office; and (i) costs and expenses (including attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the security interests and liens of Lender, sell or
otherwise realize upon the Collateral, and otherwise enforce the provisions of
this Agreement and related documents, and the Bankruptcy Court Order, or to
defend any claims made or threatened against Lender arising out of the
transactions contemplated hereby (including, without limitation, preparations
for and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of this Agreement and related documents
regarding costs and expenses to be paid by Borrower. All sums provided for in
this Section 2.9 shall be part of the Obligations, shall be payable on demand,
and shall accrue interest after demand for payment thereof at the highest rate
of interest then payable under this Agreement and related documents. Lender is
hereby irrevocably authorized to charge any amounts payable hereunder directly
to any of the account(s) maintained by Lender with respect to Borrower.
SECTION 2.10 RIGHT TO CHARGE ACCOUNT At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement, or in any other agreement now or hereafter existing between Lender
and Borrower, shall be deemed Obligations secured by the Collateral and may be
charged to the loan account of Borrower maintained by Lender. By way of example,
Lender may withhold from an Advance fees which are due and payable and for
purposes of the Loan such fees shall be deemed to have been included in the
Advance for all intents and purposes as if they had been included in the Advance
and subsequently paid to Lender by Borrower. All interest, fees and charges
payable by Borrower to Lender based on a per annum rate shall be calculated on
the basis of actual days elapsed over a 360-day year.
11
ARTICLE 3
COLLATERAL
SECTION 3.1 GENERALLY. As security for the payment of all Obligations of
Borrower to Lender, including without limitation: (i) indebtedness evidenced
under the Note, repayment of the Loan, repayment of the Advances and other
extensions of credit, all fees and charges owing by Borrower, and all other
liabilities and obligations of every kind or nature whatsoever of Borrower to
Lender, whether now existing or hereafter incurred, joint or several,
contingent, matured or unmatured, direct or indirect, primary or secondary,
related or unrelated, due or to become due, including but not limited to any
extensions, modifications, substitutions, increases and renewals thereof, (ii)
the payment of all amounts advanced by Lender to preserve, protect, defend, and
enforce its rights hereunder and in the following property in accordance with
the terms of this Agreement, and (iii) the payment of all expenses provided for
herein incurred by Lender in connection therewith (collectively, the
"Obligations"), Borrower hereby assigns and grants to Lender a continuing first
priority lien on and security interest in, upon, and to the following property,
whether now-owned or hereafter acquired or arising (the "Collateral"): all
property and assets of Borrower and the proceeds and products thereof,
including, without limitation, the following:
(a) All Accounts; contract rights (including without limitation rights
under all Franchise Agreements, all Royalties and all Leases); chattel paper;
general intangibles (including, but not limited to, tax and duty refunds,
patents, patent applications, trademarks, trademark applications, trade names
and tradestyles, copyrights, copyright applications, trade rights (whether or
not registered), discoveries, improvements, processes, know-how, formulas, trade
secrets, service marks, other rights in intellectual property (whether
patentable or not), goodwill, customer and mailing lists, life insurance
policies, licenses (whether as licensor or licensee), and permits); payment
intangibles, commercial tort claims, supporting obligations; documents
(including, without limitation, all warehouse receipts); instruments; all
guaranties, letters of credit, steamship guaranties, airway releases or other
similar guaranties, security interests, or agreements (including, but not
limited to, purchase money security interests granted by Account Debtors in
connection with installment sales); all cash monies, investment properties,
deposits, securities, bank accounts, deposit accounts, and credit card receipts;
(b) All inventory;
(c) All equipment;
(d) All chattel paper;
(e) All claims, rights, interests, assets and properties recovered by
or on behalf of Borrower or any trustee of Borrower (whether in the Chapter 11
Case or any subsequent case to which the Chapter 11 Case is converted), but
excluding all rights and claims arising under Chapter 5 of the Bankruptcy Code;
(f) All leasehold interests of Borrower, together with all fixtures
and leasehold improvements;
(g) All rights of Borrower under the promissory notes and other
instruments listed on SCHEDULE 3.1(G), attached, together with all rights of
Borrower in all security agreements and other documents or instruments executed
in connection with such promissory notes or in connection with any collateral
12
given in connection therewith or as security therefor (collectively all of the
foregoing is referred to herein as the "Sales Documents").
(h) All present and future books and records relating to any of the
above including, without limitation, all present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to any of
the foregoing maintained with or by any other person); and
(i) Any and all products and proceeds of the foregoing in any form
including, without limitation, all insurance claims, warranty claims and
proceeds and claims against third parties for loss or destruction of or damage
to any or the foregoing.
In applying the law of any jurisdiction that at any time enacts all or
substantially all of the uniform provisions of Revised Article 9 of the Uniform
Commercial Code, the foregoing collateral description consists of all assets of
Borrower, whether now owned or hereafter acquired, but excluding all rights and
claims arising under Chapter 5 of the Bankruptcy Code.
SECTION 3.2 LIEN DOCUMENTS. At Closing or as soon thereafter as is
reasonably practicable, and thereafter as Lender deems necessary in its sole
discretion, Borrower will execute and deliver to Lender, or have executed and
delivered (all in form and substance satisfactory to Lender in its sole
discretion):
(a) UCC-1 Financing Statements pursuant to the Uniform Commercial Code
in effect in the jurisdiction(s) in which Borrower operates, which Lender may
file in any jurisdiction where any Collateral is or may be located and in any
other jurisdiction that Lender deems appropriate; PROVIDED that a carbon,
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement;
(b) Such consents, agreements, estoppel certificates and
acknowledgements from third parties to any Franchise Agreements, leases,
contracts, or other items of Collateral as Lender deems reasonably necessary,
together with such landlord consents and lien waivers as Lender deems reasonably
necessary; and
(c) Any other agreements, documents, instruments, and writings deemed
reasonably necessary by Lender or as Lender may otherwise request from time to
time to evidence, perfect, or protect Lender's liens and security interests in
the Collateral required hereunder, and to allow Lender to enter upon all
premises where any item of Collateral may be located and remove such Collateral
upon an Event of Default.
(d) The original promissory notes referenced in SCHEDULE 3.1(G),
endorsed.
Borrower specifically hereby gives Lender permission to file UCC-1
financing statements in such jurisdictions as Lender may determine, including
without limitation in the states of New York and Delaware, to evidence and/or
perfect the security interests and other rights granted herein.
13
SECTION 3.3 COLLATERAL ADMINISTRATION.
(a) Borrower will keep accurate and complete records of its Accounts
and Franchise Agreements and all payments and collections thereon, and all of
the other Collateral, and Borrower will submit to Lender on such periodic basis
as Lender will request a sales and collections report for the preceding period,
in form satisfactory to Lender. If requested by Lender, Borrower will execute
and deliver to Lender formal written collateral assignments of all of its
Accounts, Franchise Agreements and leases weekly or daily, which will include
all Accounts, Franchise Agreements and leases that have been created since the
date of the last assignment, together with copies of claims, invoices or other
information related thereto.
(b) Whether or not an Event of Default has occurred, any of Lender's
officers, employees or agents will have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
with any Account Debtor or the obligor under any Franchise Agreements the
validity, amount, or any other matter relating to any Accounts or Franchise
Agreement by mail, telephone, telegraph or otherwise. Borrower will cooperate
fully with Lender in an effort to facilitate and promptly conclude such
verification process.
(c) To expedite collection, Borrower will endeavor in the first
instance to make collection of its Accounts and Royalties for Lender. Lender
retains the right at all times after the occurrence and during the continuance
of an Event of Default to notify Account Debtors and Franchisees that Accounts
and Royalties have been pledged and assigned to Lender and to collect Accounts
and Royalties directly in its own name and to charge the collection costs and
expenses, including reasonable attorneys' fees, to Borrower.
SECTION 3.4 POWER OF ATTORNEY.Subject to any applicable law or regulation,
each of the officers of Lender is hereby irrevocably made, constituted and
appointed the true and lawful attorney for Borrower (without requiring any of
them to act as such) with full power of substitution to do the following: (i)
upon the occurance of an Event of Default, endorse the name of Borrower upon any
and all checks, drafts, money orders, and other instruments for the payment of
money that are payable to Borrower and constitute collections on Borrower's
Accounts; (ii) execute in the name of Borrower any financing statements,
schedules, assignments, instruments, documents, and statements that Borrower is
obligated to give Lender hereunder or perfect Lender's security interest or lien
in any Collateral; (iii) upon the occurance of an Event of Default, direct any
Account Debtors, to remit payments in relation to Borrower's Accounts directly
to the Lender; and (iv) upon the occurance of an Event of Default, do such other
and further acts and deeds in the name of Borrower that Lender may deem
reasonably necessary or desirable to enforce any Account or Royalty or other
Collateral.
14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender, knowing and intending
that Lender shall rely thereon in making the Loan contemplated hereby (each of
which representations and warranties shall be continuing unless expressly made
in relation only to a specific date), that:
SECTION 4.1 FINANCING ORDER. The Bankruptcy Court Order has been duly
entered, is valid, subsisting and continuing and has not been vacated, modified,
reversed on appeal, or vacated or modified by any order of the Bankruptcy Court
(other than as consented to by Lender) and is not subject to any pending appeal
or stay; and Borrower will not seek to have such Order vacated or modified
without Lender's prior written permission, which permission may be withheld in
Lender's sole discretion.
SECTION 4.2 EXISTENCE: GOOD STANDING.
(a) Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, (ii) is in
good standing in all other states in which it is required to be qualified to do
business as a foreign corporation, and (iii) has all requisite power and
authority and full legal right to own or to hold under lease its properties and
to carry on the business as presently engaged.
(b) Borrower has adequate power and authority and has full legal
rights to enter into each of the Loan Documents to which it is a party, to
perform, observe and comply with all of its agreements and obligations under
each of such documents, and to obtain all of the Loans contemplated by this
Agreement.
SECTION 4.3 AUTHORITY. The execution and delivery by Borrower of the Loan
Documents to which it is a party, the performance by Borrower of all of its
agreements and obligations under each of such documents, and the incurring by
Borrower of all of the Obligations contemplated by this Agreement, have been
duly authorized by all necessary actions on the part of Borrower and the
officers and directors of each, does not (a) contravene any provision of
Borrower's charter or bylaws or this Agreement (each as from time to time in
effect), (b) conflict with, or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, or result in the creation of any
mortgage, lien, pledge, charge, security interest or other encumbrance upon any
of the property of Borrower under any material agreement, mortgage or other
instrument to which Borrower is or may become a party, (c) violate or contravene
any provision of any law, regulation, order, ruling or interpretation thereunder
or any decree, order or judgment or any court or governmental or regulatory
authority, bureau, agency or official (all as from time to time in effect and
applicable to such entity), (d) require any waivers, consents or approvals by
any of the creditors or trustees for creditors of Borrower, or (e) require any
approval, consent, order, authorization, or license by, or giving notice to, or
taking any other action with respect to, any governmental authority.
SECTION 4.4 BINDING EFFECT OF DOCUMENTS. Borrower has duly executed and
delivered each of the Loan Documents to which it is a party, and each of the
Loan Documents is valid, binding and in full force and effect. The agreements
and obligations of Borrower as contained in each of the Loan Documents
constitutes, or upon execution and delivery thereof will constitute, legal,
valid and binding obligations of Borrower enforceable against each in accordance
with their respective terms, subject, as to the enforcement of remedies only, to
limitations imposed by federal and state laws regarding bankruptcy, insolvency,
15
reorganization, moratorium and other laws affecting creditors' rights and
remedies generally, and by general principles of law and equity.
SECTION 4.5 NO EVENTS OF DEFAULT. No Event of Default has occurred and is
continuing and no event has occurred and is continuing and no condition exists
that would, with notice or the lapse of time, or both, constitute an Event of
Default.
SECTION 4.6 NO GOVERNMENTAL CONSENT NECESSARY. No consent or approval of,
giving of notice to, registration with or taking of any other action in respect
of, any governmental authority is required with respect to the execution,
delivery and performance by Borrower of this Agreement and the other Loan
Documents to which it is a party other than the filing of UCC-1 Financing
Statements, and the recording of applicable leasehold mortgages.
SECTION 4.7 NO PROCEEDINGS. There are no actions, suits, or proceedings
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower in any court or before any governmental authority which, if adversely
determined, would have an adverse effect on the ability of Borrower to perform
its obligations under this Agreement or the other Loan Documents to which it is
a party.
SECTION 4.8 NO VIOLATIONS OF LAWS. Borrower has conducted, and is
conducting, its business, so as to comply in all material respects with all
applicable federal, state, county and municipal statutes and regulations.
Borrower or any officer, director or shareholder (except as previously disclosed
to Lender by Borrower) of Borrower is not charged with, or so far as is known by
Borrower, is not under investigation with respect to, any violation of any such
statutes, regulations or orders, which could have a material or adverse effect
on the financial condition, business or operations of Borrower;
SECTION 4.9 USE OF PROCEEDS OF THE LOAN.
(a) The proceeds of the Loan shall be used by Borrower for general
operating and working capital purposes in the ordinary course of business of
Borrower, pursuant to the Budget. Unless authorized by the Bankruptcy Court and
approved by Lender in writing, no portion of any administrative expense claim or
other claim relating to the Reorganization Case shall be paid with the proceeds
of such Loans provided by Lender to Borrower, other than those administrative
expense claims and other claims relating to the Reorganization Case directly
attributable to the operation of the business of Borrower in the ordinary course
of business.
(b) Proceeds from the Loan shall be used only for those purposes set
forth in this Agreement. No part of the proceeds of the Loan shall be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock, or for the purpose of purchasing or carrying or trading in any stock
under such circumstances as to involve Borrower in a violation of applicable
law. In particular, without limitation of the foregoing, no part of the proceeds
from the Loans are intended to be used to acquire any publicly-held stock of any
kind.
SECTION 4.10 BUDGET. The Budget has been prepared by Borrower and presented
to Lender and has been agreed to and accepted by Lender. The Budget has been
thoroughly reviewed by Borrower and its management and sets forth projected
16
operating cash disbursements, and receiptscommencing as of Closing, through and
including thirty (30) days after Closing. Borrower represents and warrants it
has made diligent and good faith estimates to accurately project in the Budget
all income and expenses. Borrower will prepare proposed Budgets for each
successive thirty (30) day periods, which must be approved by Lender. Borrower
represents and warrants it will make diligent and good faith estimates to
accurately project in the successive Budgets all income and expenses. Borrower
will act strictly in accordance with the Budget and Lender has relied upon the
Budget and will rely upon subsequent Budgets in determining to enter into the
post-petition financing arrangements provided for herein. Except as specifically
set forth in the Budget which has been approved by Lender, Borrower will make no
expenditures without the prior consent of Lender, unless individually each is
less than $2,500.00, and cumulatively the same do not exceed the sum of
$20,000.00 in any thirty (30) day period.
SECTION 4.11 FINANCIAL STATEMENTS.
(a) Subject to any limitation stated therein, all balance sheets,
income statements and other financial data which have been or shall hereafter be
furnished to Lender to induce it to enter into this Agreement, and to continue
to provide financing under this Agreement or otherwise in connection herewith,
do and will fairly present the financial condition of Borrower as at the periods
for which the same are furnished to Lender. All other information, reports and
other papers and data furnished to Lender are, or will be at the time the same
are so furnished, true, accurate and complete in all material respects.
(b) Except as shown on the most recent financial statements which have
been delivered to Lender, Borrower has no other indebtedness as of the date
hereof which would materially or adversely affect the financial condition of
Borrower or the Collateral.
SECTION 4.12 CHANGES IN FINANCIAL CONDITION. There has been no material
change in Borrower's financial condition since the date of its last financial
statements which have been delivered to Lender.
SECTION 4.13 EQUIPMENT. Borrower shall keep its equipment and all other
items of Collateral in good order and repair marketable condition, ordinary wear
and tear excepted.
SECTION 4.14 TAXES AND ASSESSMENTS. Except as specifically set forth in
SCHEDULE 4.14, attached, Borrower has paid and discharged when due all taxes,
assessments and other governmental charges which may lawfully be levied or
assessed upon its income and profits, or upon all or any portion of any property
belonging to it, whether real, personal or mixed, to the extent that such taxes,
assessment and other charges have become due, and Borrower has filed all tax
returns, federal, state and local, and all related information, required to be
filed by it.
SECTION 4.15 ERISA. Borrower is in compliance in all respects with the
applicable provisions of ERISA and all regulations issued thereunder by the
United States Treasury Department, the Department of Labor and the Pension
Benefit Guaranty Corporation.
17
SECTION 4.16 ENVIRONMENTAL MATTERS. Borrower has been issued all required
federal, state and local licenses, certificates or permits relating to the
operation of its business; and Borrower and its facilities, business, assets,
property and equipment (and, to the best of Borrower's knowledge, information
and belief, all of the properties which Borrower leases and the properties upon
which the Franchisees operate their franchises) are in compliance in all
material respects with, all applicable federal, state and local laws, rules and
regulations relating to air emissions, water discharge, noise emissions, solid
or liquid waste disposal, hazardous waste or materials, or other environmental,
health or safety matters.
SECTION 4.17 LOCATION OF COLLATERAL. As of the date hereof, none of the
Collateral is or will be located in or on any property other than those set
forth in SCHEDULE 4.17 of this Agreement.
SECTION 4.18 OTHER LIENS. Borrower has good and marketable title to and
owns all of the Collateral free and clear of any and all liens, encumbrances or
security interests whatsoever, except the Permitted Liens. None of the
Collateral is subject to any prohibition against encumbering, pledging,
hypothecating or assigning the same or requires notice or consent to Borrower's
doing of the same.
SECTION 4.19 BOOKS AND RECORDS. Borrower maintains its chief executive
office and its books and records related to its Accounts, Inventory and all
other Collateral at its address set forth in SCHEDULE 4.17 of this Agreement.
SECTION 4.20 REPRESENTATIONS AND WARRANTIES: TRUE, ACCURATE AND COMPLETE.
(a) None of the representations, certificates, reports, warranties or
statements now or hereafter made or delivered to Lender pursuant hereto or in
connection with this Agreement or the transactions contemplated hereby contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances in which they are made, not
misleading.
(b) All warranties and representations made herein or in any the Loan
Documents by Borrower will be true and accurate in all material respects at each
time Borrower requests Lender to make an Advance hereunder.
SECTION 4.21 LOCATION OF OFFICES. SCHEDULE 4.17 hereto sets forth
Borrower's chief executive office, and further sets forth a complete and
accurate list of all offices and locations at or out of which Borrower conducts
any of its business or operations.
SECTION 4.22 FRANCHISE AGREEMENTS.
(a) The Franchise Agreements in effect as of the date hereof are as
set forth on SCHEDULE 4.22 annexed hereto and made a part hereof, and all such
Franchise Agreements are in full force and effect and constitute the legal,
valid and binding obligation of Borrower and each Franchisee party thereto. No
material events of default exist thereunder and there exist no events or
conditions which with the giving of notice or the lapse of time or both would
result in a material event of default. Borrower shall not amend, modify,
supplement or terminate any Franchise Agreements or any exhibits thereto or any
18
related agreement now or hereafter entered into between a Franchisee and
Borrower, without the prior written consent of Lender.
(b) Borrower shall advise each Franchisee, in writing, that payment of
all amounts under any Franchise Agreement or any promissory note executed by
such Franchisee in favor of Borrower has been assigned as collateral to Lender.
(c) Borrower agrees to provide Lender with written notice within three
(3) Business Days after Borrower enters into any Franchise Agreement not set
forth on SCHEDULE 4.22 hereto (the "Additional Franchise Agreements"). In each
instance, Borrower shall deliver to Lender true and accurate copies of each such
Additional Franchise Agreement. Such Additional Franchise Agreements and all
payments arising thereunder shall be subject to the provisions of this
Agreement.
(d) Borrower shall not make any loans or advance, to or for the
account of any Franchisee. Borrower has not made any agreement with any
Franchisee for any extension of time for the payment of any amounts payable to
Borrower under any Franchise Agreement, except as disclosed on SCHEDULE 4.22,
any compromise or settlement for less than the full amount thereof, any release
of any Franchisee from liability therefor, or any deduction therefrom. Borrower
will not make any agreement with any Franchisee for any extension of time for
the payment of any amounts payable to Borrower under any Franchise Agreement,
other than in the ordinary course of business and in accordance with past
practices of Borrower and practices not uncommon to the industry, and in no
event where any amount would be deferred for any period of time longer than six
months. Borrower further acknowledges, confirms and agrees that no payments have
been or shall be made in respect of the foregoing except payments immediately
delivered to the Lender as required hereunder. In the event that any obligation
due and owing Borrower by any Franchisee is evidenced by an instrument, note or
chattel paper, Borrower shall deliver such original instrument, note or chattel
paper to Lender, duly endorsed in favor of Lender.
(c) Borrower represents that the franchise agreements are valid and
not cancellable as a result of insolvency, Chapter 11 or Chapter 7 bankruptcy in
which the DIP survives operationally as a successor company and continues to
meet its obligations to the Franchisees.
(d) Borrower will perform when due all of its obligations under the
Franchise Agreements, and will promptly notify Lender of any default thereunder
by any party or the existence of any event or condition which with the giving of
notice or the lapse of time or both would result in a default thereunder by any
party.
SECTION 4.23 LEASES.
(a) The real property leases (the "Leases") in effect as of the date
hereof are as set forth on SCHEDULE 4.23 annexed hereto and made a part hereof,
and all such Leases are in full force and effect and constitute the legal, valid
and binding obligations of the Borrower and each lessor thereto. No events of
default (other than any default which by the terms of the Leases would occur
solely as a result of the filing of the Reorganization Case) exist thereunder
and there exist no events or conditions which with the giving of notice or the
lapse of time or both would result in an event of default. Borrower shall not
amend, modify, supplement or terminate any Leases or any exhibits thereto or any
19
related agreement now or hereafter entered into between a lessor and Borrower,
without the prior written consent of Lender.
(b) Borrower shall advise each lessor, in writing, that the applicable
Lease has been assigned as collateral to Lender.
(c) Borrower agrees to provide Lender with written notice within three
(3) Business Days before Borrower enters into any real property lease not set
forth on SCHEDULE 4.23 hereto (the "Additional Lease"). In each instance,
Borrower shall deliver to Lender true and accurate copies of each such proposed
Additional Lease and Lender's written consent shall be required prior to
Borrower executing such Additional Lease. If approved, such Additional Lease
shall be subject to the provisions of this Agreement and shall be assigned by
Borrower to Lender as additional Collateral. Borrower represents that the Leases
are valid and in full force and effect and there exists no default by any party
thereunder and no event or condition which with the lapse of time or the giving
of notice or both would result in a default thereunder by any party thereto.
(d) Borrower will perform when due all of its obligations under the
Leases, and will promptly notify Lender of any default thereunder by any party
or the existence of any event or condition which with the giving of notice or
the lapse of time or both would result in a default thereunder by any party.
SECTION 4.24 SALES DOCUMENTS.
(a) The Sales Documents are in full force and effect and constitute
the legal, valid and binding obligations of Borrower and each and every other
party thereto. No events of default exist thereunder and there exist no events
or conditions which with the giving of notice or the lapse of time or both would
result in an event of default. Borrower shall not amend, modify, supplement or
terminate any Sales Documents or any exhibits thereto or any related agreement
now or hereafter entered into in connection therewith without the prior written
consent of Lender.
(b) Borrower shall advise each obligor under the Sales Documents, in
writing, that the Sales Documents have been assigned as collateral to Lender.
(c) Borrower will perform when due all of its obligations under the
Sales Documents, and will promptly notify Lender of any default thereunder by
any party or the existence of any event or condition which with the giving of
notice or the lapse of time or both would result in a default thereunder by any
party.
(d) Borrower has not made, and will not make, any agreement with any
obligor under any Sales Document for any extension of time for the payment of
any amounts payable to Borrower under any Sales Document, any compromise or
settlement for less than the full amount thereof, any release of any obligor
from liability therefor, or any deduction therefrom without the prior written
consent of Lender. Borrower further acknowledges, confirms and agrees that no
payments have been or shall be made in respect of the foregoing except payments
immediately delivered to the Lender as required hereunder. In the event that any
obligation due and owing Borrower by any obligor is evidenced by an instrument,
note or chattel paper, Borrower shall deliver such original instrument, note or
chattel paper to Lender, duly endorsed in favor of Lender
20
SECTION 4.25 COLLATERAL. Borrower owns all of the Collateral, free and
clear of all claims, liens and encumbrances, other than the Permitted Liens.
Each representation and warranty by Borrower contained in this Article 4,
and those contained elsewhere in this Agreement, shall be deemed to have been
made by each entity comprising Borrower and made about such entity as well as
about each and every other entity comprising Borrower.
ARTICLE 5
CLOSING AND CONDITIONS OF LENDING
The obligation of Lender to make each Advance under this Agreement shall be
subject to the satisfaction or waiver by Lender, prior thereto or concurrently
therewith, of each of the following conditions precedent:
SECTION 5.1 LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
and properly authorized, executed and delivered by the parties hereto and shall
be in full force and effect on and as of the date hereof and shall have been
duly and properly authorized, executed and delivered by Borrower and the other
parties thereto and shall be in full force and effect on and as of the date
hereof.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by or on behalf of Borrower to Lender in this Agreement or in
any other Loan Documents shall be true and correct in all material respects on
the date hereof.
SECTION 5.3 CERTIFIED COPIES OF DOCUMENTS. Lender shall have received from
Borrower, (a) for Ranch *1, Inc., Ranch *1 Group, Inc., and Ranch *1 Metro, Inc.
(and Borrower shall use its best efforts to provide in connection with the other
entities comprising Borrower) certified by a duly authorized officer to be true
and complete on and as of a date which is not more than ten (10) Business Days
prior to the date hereof, a copy of each of the certificate of incorporation or
such other incorporation documents of Borrower in effect on such date of
certification, the articles of incorporation and by-laws of Borrower in effect
on such date, and a certificate of good standing from the state of its
formation, and (b) each Franchise Agreement, each Lease and all Sales Documents
(including the original promissory notes).
SECTION 5.4 PROOF OF ACTION. Lender shall have received from Borrower a
copy, certified by a duly authorized officer to be true and complete on and as
of the date which is not more than ten (10) Business Days prior to the date
hereof, of the records of all action taken by Borrower to authorize: (a) its
execution and delivery of each of the Loan Documents to which it is or is to
become a party as contemplated or required by this Agreement, (b) its
performance of all of its agreements and obligations under each of such
documents, and (c) the incurring of the Obligations contemplated by this
Agreement.
21
SECTION 5.5 SEARCHES. Such Uniform Commercial Code and other searches as
Lender shall reasonably require to evidence the Collateral is free and clear of
all claims, liens and encumbrances other than the Permitted Liens.
SECTION 5.6 COLLATERAL.
(a) All of the Obligations of Borrower to Lender under or in respect
of this Agreement shall be entitled to all of the benefits of and be secured by
this Agreement and the Loan Documents, and Lender shall have obtained a
first-priority, perfected security interest in the Collateral of Borrower,
subject only to the Permitted Liens.
(b) The Loan Documents and all other documents in respect thereto,
which shall create and maintain a first perfected security interest in favor of
Lender and the appropriate financing statements in respect thereto and necessary
to enable Lender to perfect its security interests thereunder, shall have been
duly executed and delivered by Borrower to Lender.
SECTION 5.7 INSURANCE. Lender shall have received evidence of insurance and
loss payee endorsements required hereunder and under the other Loan Documents,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee as required hereunder.
SECTION 5.8 INTENTIONALLY OMITTED.
SECTION 5.9 ASSIGNMENTS. All existing Franchise Agreements, notes, Leases
and royalty agreements between Borrower and third parties shall be assigned by
Borrower to Lender as Collateral for the Obligations, and Lender shall have
received from all other parties thereto such acknowledgments, consents,
agreements and estoppel certificates as Lender shall in its sole discretion
require.
SECTION 5.10 FINANCIAL PROJECTIONS. Borrowers shall provide Lender with
financial projections in form and substance satisfactory to Lender.
SECTION 5.11 MATTERS RELATING TO THE REORGANIZATION CASE.
(a) No trustee, examiner or receiver or the like shall have been
appointed or designated with respect to Borrower, as debtor and
debtor-in-possession, or its business, properties and assets and no motion or
proceeding shall be pending seeking such relief;
(b) Satisfactory review by counsel for Lender of legal issues
attendant to the post-petition financing transactions contemplated hereunder;
(c) Borrower shall comply in full with the notice and other
requirements of the Bankruptcy Code and the applicable Federal Rules of
Bankruptcy Procedure with respect to any relevant Bankruptcy Court Order in a
manner acceptable to Lender and its counsel, and such Order shall have been
entered by the Bankruptcy Court authorizing the secured financing under the Loan
Documents on the terms and conditions set forth in this Loan Agreement and,
INTER ALIA, modifying the automatic stay, authorizing and granting the senior
security interest in liens in favor of Lender described in this Loan Agreement
22
and in the Bankruptcy Court Order, and granting super-priority expense claims to
Lender with respect to all obligations due Lender. The Bankruptcy Court Order
shall authorize post-petition financing under the terms set forth in this Loan
Agreement in an amount acceptable to Lender, and it shall contain such other
terms or provisions as Lender and its counsel shall require;
(d) With respect to further credit after expiration of the Interim
Orders, on or before the expiration of the Interim Orders, the Bankruptcy Court
shall have entered the Final Order authorizing the secured financing on the
terms and conditions set forth in this Loan Agreement, granting to Lender the
senior security interest and liens described above and super-priority
administrative expense claims described above, modifying the automatic stay and
other provisions required by Lender and its counsel and Lender shall not provide
any Advances (or other financial accommodations) other than those authorized
under the Interim Orders unless, on or before the ninetieth (90th) day following
the Petition Date, the Final Order shall have been entered, and there shall be
no appeal or other contest with respect to either the Interim Orders or the
Final Order and the time to appeal to contest such order shall have expired;
(e) Other than the commencement of the Chapter 11 Case, no material
impairment of the priority of Lender's security interests in the Collateral
shall have occurred from the date of the latest field examinations of Lender to
the Petition Date; and
(f) As a condition precedent to any Advances later than seventy-five
(75) days after the Closing, Borrower shall have filed an Approved Plan.
SECTION 5.12 CLOSING. Closing shall occur on July 5, 2001 and the Closing
Date shall be July 5, 2001 (the "Closing" and "Closing Date").
SECTION 5.13 LANDLORD CONSENTS. Lender shall receive such landlord consents
and lien waivers as Lender shall require.
SECTION 5.14 WAIVERS. Lender may in its sole discretion waive one or more
conditions precedent for one or more Advances, PROVIDED, HOWEVER, such waiver(s)
shall not be deemed to apply to future Advances, and as to such future Advances
Lender may as a condition precedent to such funding insist on strict compliance
with all conditions precedent and other terms and conditions of this Agreement.
ARTICLE 6
AFFIRMATIVE COVENANTS
Until payment and satisfaction in full of all Obligations and the
termination of this Agreement, Borrower hereby covenants and agrees as follows:
SECTION 6.1 NOTIFY LENDER. Borrower shall promptly inform Lender if any one
or more of the representations and warranties made by Borrower in this Agreement
or in any document related hereto shall no longer be entirely true, accurate and
complete in any material respect, provided, the foregoing shall not be deemed
consent to any error or falsity in the same.
23
SECTION 6.2 PAY TAXES AND LIABILITIES; COMPLY WITH AGREEMENT. Borrower
shall promptly pay, when due, all indebtedness, sums and liabilities of any kind
now or hereafter owing by Borrower to any party however created, incurred,
evidenced, acquired, arising or payable, including without limitation the
Obligations, income taxes, excise taxes, sales and use taxes, license fees, and
all other taxes with respect to any of the Collateral, or any wages or salaries
paid by Borrower or otherwise, unless the validity of which are being contested
in good faith by Borrower by appropriate proceedings, provided that Borrower
shall have maintained reasonably adequate reserves and accrued the estimated
liability on Borrower's balance sheet for the payment of same.
SECTION 6.3 OBSERVE COVENANTS. Borrower shall timely observe, perform and
comply with the covenants, terms and conditions of this Agreement, the Loan
Documents and any other agreement or document entered into between Borrower and
Lender.
SECTION 6.4 MAINTAIN EXISTENCE AND QUALIFICATIONS. Borrower shall maintain
and preserve in full force and effect, its existence and rights, franchises,
licenses and qualifications necessary to continue its business, and comply with
all applicable statutes, rules and regulations pertaining to the operation,
conduct and maintenance of its existence and business including, without
limitation, all federal, state and local laws relating to benefit plans,
environmental safety, or health matters, and hazardous or liquid waste or
chemicals or other liquids (including use, sale, transport and disposal
thereof), if such failure would have a material adverse effect on the Borrower.
SECTION 6.5 INFORMATION AND DOCUMENTS TO BE FURNISHED TO LENDER. Borrower
shall deliver or cause to be delivered to Lender in form acceptable to Lender:
(a) annual financial statements within 60 days of the fiscal year end; (b)
interim financial statements consisting of compiled quarterly financial
statements to be provided within 30 days of each end of quarter, and monthly
internal statements to be provided within 20 days of month end; (c) weekly
Royalties and note collection reports, due no later than Wednesday of each week
for the preceding week; (d) notice of judgments, environmental, health or safety
complaints within 5 days of receipt; (e) within ten (10) days thereafter,
written notice to Lender of the entry of any judgment or the institution of any
lawsuit or of other legal or equitable proceedings or the assertion of any
crossclaim or counterclaim seeking monetary damages from Borrower in an amount
exceeding $5,000; (f) within ten (10) days thereafter, notice or copies if
written of all claims, complaints, orders, citations or notices, whether formal
or informal, written or oral, from a governmental body or private person or
entity, relating to air emissions, water discharge, noise emission, solid or
liquid waste disposal, hazardous waste or materials, or any other environmental,
health or safety matter, which materially and adversely effect Borrower; and (g)
upon demand, such other information as Lender may reasonably request from time
to time, including financial projections and cash flow analysis.
SECTION 6.6 COMPLY WITH LAWS. Borrower shall comply with the requirements
of all applicable laws, rules, regulations and orders of any governmental
authority, compliance with which is necessary to maintain its corporate
existence or the conduct of its business or non-compliance with which would
adversely affect in any material respect its ability to perform its obligations
or any security given to secure its obligations.
24
SECTION 6.7 INSURANCE REQUIRED.
(a) Borrower shall cause to be maintained, in full force and effect on
all property of Borrower insurance in such amounts against such risks as is
reasonably satisfactory to Lender, including, but without limitation, fire,
boiler, theft, burglary, pilferage, vandalism, malicious mischief, loss in
transit, and hazard insurance and, if as of the date hereof, any of the real
property of Borrower is in an area that has been identified by the Secretary of
Housing and Urban Development as having special flood or mudslide hazards, and
on which the sale of flood insurance has been made available under the National
Flood Insurance Act of 1968, then Borrower shall maintain flood insurance. Said
policy or policies shall:
(i) be in a form and with insurers which are satisfactory to
Lender;
(ii) be for such risks and for such insured values as Lender or
its assigns may require in order to replace the property in the event of actual
or constructive total loss;
(iii) designate Lender and its assignees, as additional insured
and loss payees as their interests may from time to time appear;
(iv) contain a "breach of warranty clause" whereby the insurer
agrees that a breach of the insuring conditions or any negligence by Borrower or
any other person shall not invalidate the insurance as to Lender and its
assignee;
(v) provide that they may not be canceled or materially altered
without ten (10) days prior notice to Lender and its assigns; and
(vi) upon demand, be delivered to Lender;
(b) Borrower shall obtain, maintain and provide to Lender evidence of
personal liability coverages in minimum amounts not less than $5,000,000 for
each occurrence, $5,000,000 for injury or death of any person and $5,000,000 for
property damage (provided, the foregoing required minimum amounts may be
satisfied through appropriate umbrella policies), containing such endorsements
as are common with like businesses, naming Lender and its assignees as
additional insured and loss payees as their interests may from time to time
appear, and providing it may not be canceled or materially altered without ten
(10) days prior notice to Lender and its assigns;
(c) Borrower shall obtain, maintain and provide to Lender evidence of
worker's compensation insurance coverage satisfactory to Lender.
(d) Borrower shall obtain such additional insurance as Lender may
reasonably require, which may include, without limitation, insurance covering
vandalism and malicious mischief, sprinkler leakage, rent abatement and/or
business loss.
(e) Borrower shall, in the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer; and
25
(f) Borrower shall forthwith upon receipt of insurance proceeds
endorse and deliver the same to Lender.
SECTION 6.8 CONDITION OF COLLATERAL; NO LIENS. Borrower shall maintain all
Collateral in good condition and repair at all times, normal wear and tear
excepted, and preserve it against any loss, damage, or destruction of any nature
whatsoever relating to said Collateral or its use, and keep said Collateral free
and clear of any Liens, except the Permitted Liens permitted hereunder.
SECTION 6.9 PAYMENT OF PROCEEDS. Prior to an Event of Default, all proceeds
of Collateral received in other than the ordinary course of business, such as
proceeds from the sale of a store, will be immediately paid to Lender to be
applied to the amounts owing Lender under this Agreement, whether or not then
due and payable. Subsequent to an Event of Default, Borrower shall forthwith
upon receipt of all proceeds of Collateral, pay such proceeds over to Lender to
be applied to the amounts owing Lender under this Agreement, whether or not then
due and payable.
SECTION 6.10 RECORDS. Borrower shall at all times keep accurate and
complete records of its operations and of the Collateral, and shall make the
same available for inspection, review and copying from time to time as Lender
shall reasonably request.
SECTION 6.11 DELIVERY OF DOCUMENTS. If any Collateral shall include, or any
of the Collateral shall be evidenced by, notes, trade acceptances or instruments
or documents, or if any inventory is covered by documents of title or chattel
paper, whether or not negotiable, then Borrower waives protest regardless of the
form of the endorsement. If Borrower fails to endorse any instrument or
document, Lender is authorized to endorse it on Borrower's behalf.
XXXXXXX 0.00 XXXXXX XXXXXX CONTRACTS. If any Collateral arises out of
contracts with the United States or any of its departments, agencies or
instrumentalities, Borrower will notify Lender, and, if requested by Lender,
execute any necessary instruments in order that all monies due or to become due
under such contract shall be assigned as collateral to Lender and proper notice
of the assignment given under the Federal Assignment of Claims Act.
SECTION 6.13 NAME CHANGES; LOCATION CHANGES.
(a) Borrower shall promptly notify Lender if Borrower is known by or
conducting business under any names other than those set forth in this
Agreement; and
(b) Borrower shall deliver not less than thirty (30) days prior
written notice to Lender if Borrower intends to conduct any of its business or
operations at or out of offices or locations other than those set forth in this
Agreement, or if it changes the location of its chief executive office or the
address at which it maintains its books and records or the location of any of
the Collateral.
SECTION 6.14 FURTHER ASSURANCES. Borrower shall at any time or from time to
time upon request of Lender take such steps and execute and deliver such other
and further documents and instruments as Lender may reasonably request from time
to time to evidence or carry out the intent of the parties as set forth in this
Agreement and to preserve, maintain, clarify or give effect to the rights and
remedies intended by this Agreement to be given to Lender, including without
limitation, the execution of such financing statements and other documents all
26
in the form of substance satisfactory to Lender relating to the creation,
validity or perfection of the security interests provided for herein, under the
UCC or other laws of the State of New York or of another state or states in
which the Collateral is located or which are reasonably necessary to effectuate
the purposes and provisions of this Agreement.
SECTION 6.15 INDEMNIFICATION. Borrower shall and hereby does indemnify,
protect, defend and save harmless Lender, as well as Lender's members and
managers, parents, subsidiaries, directors, officers, trustees, employees,
agents, and shareholders (hereinafter referred to collectively as the
"Indemnified Parties" and individually as an "Indemnified Party") from and
against (a) any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, by third parties including
reasonable counsel fees incurred in investigating or defending such claim,
suffered by any of them and caused by, relating to, arising out of, resulting
from, or in any way connected with the Loan and the transactions contemplated
herein, (b) any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, by third parties including
reasonable counsel fees incurred in investigating or defending such claim,
suffered by any of them and caused by, relating to, arising out of, resulting
from, or in any way connected with the breach of any representation or warranty
or obligation of Borrower contained herein, and (c) any and all losses, damages,
expenses or liabilities sustained by Lender in connection with any environmental
liabilities and costs, provided, however, Borrower shall not be obligated to
indemnify, protect, defend and save harmless an Indemnified Party, if the loss,
damage, expense or liability was caused by or resulted solely from the willful
misconduct of that Indemnified Party as determined by a final non-appealable
order of a court or Governmental Authority of competent jurisdiction. In case
any action shall be brought against an Indemnified Party based upon any of the
above and in respect to which indemnity may be sought against Borrower, the
Indemnified Party against whom such action was brought, shall promptly notify
Borrower in writing, and Borrower shall assume the defense thereof, including
the employment of counsel selected by Borrower and reasonably satisfactory to
the Indemnified Party, the payment of all costs and expenses and the right to
negotiate and consent to settlement. Upon reasonable determination made by the
Indemnified Party, the Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof; provided,
however that the Indemnified Party shall pay the costs and expenses incurred in
connection with the employment of separate counsel. Borrower shall not be liable
for any settlement of any such action effected without its consent, which
consent shall not be unreasonably withheld, but if settled with Borrower's
consent, or if there be a final judgment for the claimant in any such action,
Borrower agrees to indemnify and save harmless said Indemnified Party against
whom such action was brought from and against any loss or liability by reason of
such settlement or judgment, except as otherwise provided above. The provisions
of this Section shall survive the termination of this Agreement and the final
repayment of the Obligations. All costs and expenses which are indemnified under
this Section shall be reimbursed to the Indemnified Parties as incurred.
SECTION 6.16 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
Borrower promptly will notify Lender upon the occurrence of: (i) any Event of
Default; (ii) any event which, with the giving of notice or lapse of time, or
both, could constitute an Event of Default; (iii) any judicial, administrative
or arbitration proceeding pending against Borrower, and any judicial or
administrative proceeding known by Borrower to be threatened against it which,
if adversely decided, could adversely affect its condition (financial or
27
otherwise) or operations (present or prospective); (iv) any post-petition
default claimed by any other creditor for Borrowed Money of Borrower other than
Lender; and (v) any other development in the business or affairs of Borrower
which may be materially adverse; in each case describing the nature thereof and
(in the case of notification under clauses (i) and (ii)) the action Borrower
propose to take with respect thereto.
SECTION 6.17 APPROVED PLAN. Borrower will file an Approved Plan no later
than seventy-five (75) days after Closing, and thereafter will not amend,
withdraw or modify the Approved Plan without the prior written consent of
Lender.
ARTICLE 7
NEGATIVE COVENANTS
Without limiting its other Obligations under this Agreement, Borrower
covenants and agrees that so long as Borrower may borrow hereunder and until
payment in full of the Note and performance of all other Obligations of Borrower
under the Loan Documents:
SECTION 7.1 LIENS AND ENCUMBRANCES. Unless otherwise agreed to in writing
by Lender, Borrower will not create, incur, assume or suffer to exist any
mortgage, pledge, lien or other encumbrance of any kind (including the charge
upon property purchased under a conditional sale or other title retention
agreement) upon, or any security interest in, any of the Collateral, whether now
owned or hereafter acquired, except for Permitted Liens.
SECTION 7.2 MERGER, ACQUISITION, OR SALE OF ASSETS. Borrower will not enter
into any merger or consolidation with or acquire all or substantially all of the
assets of any Person, and, without the prior written consent of Lender (which
consent may be withheld in Lender's sole discretion), will not sell, lease, or
otherwise dispose of any of its assets except in the ordinary course of its
business, unless the same is ordered by the Bankruptcy Court, in which event all
proceeds resulting from the same will be paid to Lender and applied to all
amounts owing under this Agreement, whether or not then due and payable.
SECTION 7.3 LOANS. Borrower will not make loans or advances to any Person.
SECTION 7.4 CONTINGENT LIABILITIES. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business and in connection with borrowings permitted by this Agreement.
SECTION 7.5 SUBSIDIARIES. Without prior written consent from Lender,
Borrower will not form any subsidiary, or make any investment in or any loan in
the nature of an investment to, any other Person.
SECTION 7.6 TRANSACTIONS WITH AFFILIATES. Borrower will not enter into any
transaction, including without limitation the purchase, sale, or exchange of
property, or the loaning or giving of funds to any Affiliate or subsidiary,
except in the ordinary course of business and pursuant to the reasonable
requirements of Borrower's businesses and upon terms substantially the same and
no less favorable to Borrower as they would obtain in a comparable arm's length
28
transaction with any Person not an Affiliate or subsidiary, and so long as the
transaction is not otherwise prohibited hereunder.
SECTION 7.7 USE OF LENDER'S NAME. Borrower will not use Lender's name (or
the name of any of Lender's affiliates) in connection with any of its business
operations unless consented to by Lender. Borrower may disclose to third parties
that Borrower have a borrowing relationship with Lender. Nothing herein
contained is intended to permit or authorize Borrower to make any contract on
behalf of Lender.
SECTION 7.8 CONTRACTS AND AGREEMENTS. Borrower will not become or be a
party to any material contract or agreement which would breach this Agreement,
or breaches any other material instrument, agreement, or document to which
Borrower are a party or by which Borrower are or may be bound unless Borrower
believes in good faith that Borrower has a valid legal basis for such breach.
SECTION 7.9 TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not furnish
to Lender any certificate or other document that contains any untrue statement
of a material fact or that omits to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished.
SECTION 7.10 PROHIBITION ON AMENDMENTS TO ORGANIZATIONAL DOCUMENTS.
Borrower will not amend, modify, restate, supplement, or terminate its
respective certificate of incorporation or bylaws (or other organizational
documents) in any manner that would materially affect the validity and
enforceability of the Obligations or such Borrower's ability to borrow
hereunder, or that would materially impair any security for the Obligations.
SECTION 7.11 OTHER OBLIGATIONS. Borrower will not without the prior written
consent of Lender, enter into any new obligations with any Person, other than in
the ordinary course of business.
ARTICLE 8
EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an event of default
(hereinafter referred to as an "Event of Default"):
SECTION 8.1 FAILURE TO PAY. The failure by Borrower to pay, when due, any
payment of principal, interest or other charges due and owing to Lender pursuant
to any obligations of Borrower to Lender including, without limitation, those
Obligations arising pursuant to this Agreement or any Loan Document, or under
any other agreement for the payment of monies then due and payable to Lender, if
the same continues for a period of five (5) days after notice to Borrower.
SECTION 8.2 FAILURE OF INSURANCE. Failure on the part of Borrower to pay or
cause to be paid all premiums when due, or within any applicable grace period,
on the insurance policies pursuant to this Agreement; failure to take such other
action as may be reasonably requested by Lender in order to keep said policies
of insurance in full force and effect until the entire indebtedness represented
by the Loan Documents, and interest thereon, has been paid in full.
29
SECTION 8.3 FAILURE TO PERFORM. Except as otherwise provided herein,
Borrower's failure to perform or observe any covenant, term or condition of this
Agreement or any other Loan Document to be performed or observed by Borrower,
PROVIDED, HOWEVER, if the same can reasonably be cured within five (5) days
without material harm to Lender, and if the same failure has not occurred
previously, Borrower shall have five (5) days following receipt of notice within
which to cure the same and if cured no Event of Default shall exist.
SECTION 8.4 CROSS DEFAULT.
(a) The occurrence of any Event of Default on any of the Obligations,
an Event of Default under any Loan Document so that the holder of such
obligation or indebtedness has accelerated or has a right to accelerate such
obligation or indebtedness, if the same is not cured within any applicable grace
or cure period contained in such document.
(b) INTENTIONALLY OMITTED.
(c) The failure of Borrower to perform as required any obligation of
Borrower under any court order by which Borrower is bound.
SECTION 8.5 FALSE REPRESENTATION OR WARRANTY. Borrower shall have made any
statement, representation or warranty in this Agreement or in any of the other
Loan Documents to which it is a party or in a certificate executed by Borrower
incident to this Agreement, which is at any time found to have been false in any
material respect at the time such representation or warranty was made.
SECTION 8.6 MATTERS RELATING TO BORROWER'S REORGANIZATION CASE. The
occurrence of any of the following in the Reorganization Case shall constitute
an Event of Default hereunder, during the continuance of which Event of Default,
Lender shall not be required to make any Advances or to extend any other
financial accommodations to or for the benefit of the Borrower:
(a) The failure of Borrower to comply with any order of the Bankruptcy
Court which order provides a remedy to Lender in the event of Borrower's failure
to comply; or
(b) The termination or non-renewal of the Loan Documents as provided
for in the Interim Orders or the Final Order; or
(c) Borrower suspends or discontinues or is enjoined by any court or
governmental agency from continuing to conduct all or any material part of its
business or if a trustee, receiver or custodian is appointed for Borrower or any
of its properties; or
(d) Any act, condition or event occurring after the date of the
commencement of the Reorganization Case that has a material adverse effect upon
the assets of Borrower when taken as a whole or the Collateral or the value of
the rights and remedies of Lender under this Loan Agreement or any other Loan
Documents; or
(e) Conversion of Borrower's Reorganization Case to a Chapter 7 case
under the Bankruptcy Code; or
30
(f) Dismissal of Borrower's Reorganization Case or any subsequent
Chapter 7 case either voluntarily or involuntarily; or
(g) The grant of a lien on or other interest in any property of
Borrower (other than a lien or encumbrance permitted by this Loan Agreement or
by the Interim Orders or Final Order) or the grant or allowance of an
administrative expense claim (other than such administrative expense claims
permitted by the Interim Orders or Final Order or this Loan Agreement) by the
Bankruptcy Court, in each case, which is superior to or ranks in parity with
Lender's security interests in or liens upon the Collateral or the
super-priority administrative claim of Lender against Borrower; or
(h) INTENTIONALLY OMITTED.
(i) The Interim Orders or Final Order shall be modified, reversed,
revoked, remanded, stayed, rescinded, vacated or amended on appeal or by the
Bankruptcy Court without the prior written consent of Lender (and no such
consent shall be implied from any other authorization or acquiescence by
Lender); or
(j) The appointment of a trustee pursuant to Sections 1104(a)(1) or
1104(a)(2) of the Bankruptcy Code in the Reorganization Case; or
(k) The appointment of an examiner with special powers pursuant to
Section 1104(a) of the Bankruptcy Code in the Reorganization Case; or
(l) The filing of a plan of reorganization by Borrower or on its
behalf which does not provide for payment in full of the Obligations on the
effective date thereof or which does not constitute an Approved Plan; or
(m) Prior to the indefeasible payment and satisfaction in full of
Obligations due Lender any party other than the Lender shall foreclose upon or
otherwise seek to enforce any junior lien or other rights such other party may
have in and to any of a Borrower's property upon which Lender holds or asserts a
lien or security interest.
(n) Any loss of any priority by Lender in the Collateral.
SECTION 8.7 INTENTIONALLY OMITTED.
SECTION 8.8 CHANGE IN CONDITION. There occurs any event or a change in the
condition or affairs, financial or otherwise, of Borrower which, in the
reasonable opinion of Lender, impairs Lender's security or ability of Borrower
to discharge its obligations hereunder or which impairs the rights of Lender in
such Collateral, PROVIDED, HOWEVER, if the same can reasonably be cured within
five (5) days without material harm to Lender, Borrower shall have the right to
cure the same within five (5) days after notice from Lender and if cured the
same shall not constitute an Event of Default. Without in any way limiting the
foregoing, a "Change in Condition" shall be deemed to have occurred upon the
occurrence of any of the following: a reduction during any consecutive six month
period following the date of this Agreement by more than ten (10%) percent of
the amount of Royalties received by Borrower during the six month period prior
to the date of this Agreement, or termination of greater than ten (10%) percent
of the Franchise Agreements.
31
SECTION 8.9 ENVIRONMENTAL CLAIMS. At any time Lender determines that any
environmental liabilities and costs or environmental lien with respect to
Borrower will have a material or adverse effect on the financial condition of
Borrower or on the Collateral.
SECTION 8.10 FAILURE TO NOTIFY. If at any time Borrower fails to provide
Lender with notice or copies, if written, of all complaints, orders, citations
or notices with respect to environmental, health or safety complaints, within
ten (10) days after receipt of any such notices, complaints, orders or
citations.
SECTION 8.11 CHANGE IN MANAGEMENT. Any change in the chief executive
officer, the chief financial officer or controlling ownership of Borrower.
SECTION 8.12 NON-PAYMENT OF DEBTS. Any default after the date of this
Agreement by Borrower under any agreement, document or instrument relating to
any indebtedness for borrowed money owing to any person other than Lender, or
any capitalized lease obligations, contingent indebtedness in connection with
any guarantee, letter of credit, indemnity or similar type of instrument in
favor of any person other than Lender, in any case in an amount in excess of
$10,000, which default continues for more than the applicable cure period, if
any, with respect thereto, or any default by Borrower under any material
contract, lease, license or other obligation to any Person other than Lender,
which default materially and adversely affects its business or the Collateral or
other property which is security for the Obligations and which default continues
for more than the applicable cure period, if any, with respect thereto.
SECTION 8.13 DISSOLUTION; MAINTENANCE OF EXISTENCE. Borrower is dissolved,
or the usual business of Borrower ceases or is suspended in any material
respect.
SECTION 8.14 INDICTMENT. The indictment of Borrower under any criminal
statute, or commencement of criminal or civil proceedings against Borrower,
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of any material portion of the property of
Borrower.
SECTION 8.15 ACCELERATION. Upon the occurrence of any of the foregoing
Events of Default, the Note will become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower.
SECTION 8.16 REMEDIES.
Upon the occurrence of an Event of Default and so long as same is
continuing:
(a) Lender shall have all rights and remedies provided in this
Agreement, any of the other Loan Documents, the UCC or other applicable law, all
of which rights and remedies may be exercised without notice to Borrower, all
such notices being hereby waived, except such notice as is expressly provided
for hereunder or is not waivable under applicable law. All rights and remedies
of Lender are cumulative and not exclusive and are enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the foregoing,
Lender may (a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender, (b) with or without judicial process or the aid or
32
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all Accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
Lender having the right to purchase the whole or any part of the Collateral at
any such public sale, all of the foregoing being free from any right or equity
of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral or other
security for the Obligations is sold or leased by Lender upon credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Lender. If notice of disposition
of Collateral is required by law, ten (10) days prior notice by Lender to
Borrower designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
(b) Lender may apply the cash proceeds of Collateral or other security
for the Obligations actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of any of the
Obligations, in whole or in part (including reasonable attorneys' fees and legal
expenses incurred by Lender with respect thereto or otherwise chargeable to
Borrower) and in such order as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment on demand of any
deficiency together with interest at the highest rate provided for herein and
all costs and expenses of collection or enforcement, including reasonable
attorneys' fees and legal expenses.
(c) If Borrower shall default in the performance of any of the
provisions of this Agreement or any other Loan Document to which it is a party,
Lender may (but without any obligation to do so) perform same for Borrower's
account and any monies expended in doing so shall be chargeable with interest to
Borrower, repayable by Borrower on demand and added to the Obligations.
(d) Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and pay any amount, incur any expense or perform any act which, in Lender's sole
judgment, is necessary or appropriate to preserve, protect, insure, maintain, or
realize upon the Collateral. Lender may charge Borrower's loan account for any
amounts so expended, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment, bonding or discharge,
33
and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower.
SECTION 8.17 SET-OFF. Upon the occurrence and during the continuance of an
Event of Default, Lender shall have the right to set-off against any of
Borrower's liabilities to Lender any money or other liability owed by Lender or
any Affiliate of Lender (and such Affiliate of Lender is hereby authorized to
effect such set-off) in any capacity to Borrower, whether or not due, and Lender
or such Affiliate shall be deemed to have exercised such right of set-off and to
have made a charge against any such money or other liability immediately upon
the occurrence of such Event of Default even though the actual book entries may
be made at a time subsequent thereto. The right of set-off granted hereunder
shall be effective irrespective of whether Lender shall have made demand under
or in connection with the Loan. Lender is hereby granted a security interest in
all money and property of Borrower being held by it or any Affiliate of Lender,
which security interest shall be a first priority perfected security interest in
favor of Lender as a result of Lender's or Affiliates of Lender's possession
thereof. None of the rights of Lender described in this SECTION 8.17 are
intended to diminish or limit in any way Lender's or Affiliates of Lender's
common-law set-off rights.
SECTION 8.18 CUMULATIVE REMEDIES; WAIVERS. No remedy referred to in this
Agreement or the other Loan Documents is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lender at law or in equity. No express or implied waiver
by Lender of any default or Event of Default hereunder shall be effective unless
in a writing signed by an officer of Lender and shall not in any way be, or be
construed to be, a waiver of any future or subsequent default or Event of
Default, whether similar in kind or otherwise. The failure, delay or waiver of
Lender in exercising any rights granted it hereunder or under the other Loan
Documents upon the occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such contingency or similar contingency and any single or partial exercise
of any particular right by Lender shall not exhaust the same or constitute a
waiver of any other right provided herein. The Events of Default and remedies
set forth herein are not restrictive of and shall be in addition to any and all
other rights and remedies of Lender provided for by this Agreement and
applicable law.
SECTION 8.19 COSTS AND EXPENSES. Borrower shall be liable for all costs,
charges and expenses, including reasonable attorney's fees and disbursements,
incurred by Lender by reason of the occurrence of any Event of Default or the
exercise of Lender's remedies with respect thereto, each of which shall be
repayable by Borrower on demand with interest, and added to the Obligations.
SECTION 8.20 NO MARSHALLING. Lender shall be under no obligation whatsoever
to proceed first against any of the Collateral or other property which is
security for the Obligations before proceeding against any other of the
Collateral. It is expressly understood and agreed that all of the Collateral or
other property which is security for the Obligations stands as equal security
for all Obligations, and that Lender shall have the right to proceed against any
or all of the Collateral or other property which is security for the Obligations
in any order, or simultaneously, as in its sole and absolute discretion it shall
determine. It is further understood and agreed that Lender shall have the right,
as it in its sole and absolute discretion shall determine, to sell any or all of
the Collateral or other property which is security for the Obligations in any
order or simultaneously, as Lender shall determine in its sole and absolute
discretion.
34
SECTION 8.21 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No delay on the part of
Lender in exercising any right, remedy, power or privilege hereunder or under
any of the Loan Documents or provided by statute or at law or in equity or
otherwise shall impair, prejudice or constitute a waiver of any such right,
remedy, power or privilege or be construed as a waiver of any Event of Default
or as an acquiescence therein. No right, remedy, power or privilege conferred on
or reserved to Lender hereunder or under any of the Loan Documents or otherwise
is intended to be exclusive of any other right, remedy, power or privilege. Each
and every right, remedy, power or privilege conferred on or reserved to Lender
under this Agreement or under any of the other Loan Documents or otherwise shall
be cumulative and in addition to each and every other right, remedy, power or
privilege so conferred on or reserved to Lender and may be exercised by Lender
at such time or times and in such order and manner as Lender shall (in its sole
and complete discretion) deem expedient.
SECTION 8.22 COLLECTIONS. Borrower is authorized to collect any monetary
obligations included in, or proceeds of, the Collateral on behalf of and in
trust for Lender, at Borrower's expense, but such authority shall, at Lender's
option, automatically terminate upon the occurrence and continuance of an Event
of Default. Lender may upon the occurrence of an Event of Default modify or
terminate such authority at any time and directly collect the monetary
obligations included in the Collateral. Borrower shall, at Borrower's expense
and in the manner requested by Lender from time to time, direct that remittances
and all other proceeds of Collateral shall be (a) remitted in kind to Lender,
(b) sent to a post office box designated by and/or in the name of Lender, or in
the name of Borrower, but as to which access is limited to Lender and/or (c)
deposited into a bank account maintained in the name of Lender and/or a blocked
bank account under arrangements with the depository bank under which all funds
deposited to such blocked bank account are required to be transferred solely to
Lender.
SECTION 8.23 REPAYMENT OF OBLIGATIONS. All Obligations shall be payable at
Lender's office set forth below or at a bank or such other place as Lender may
expressly designate from time to time for purposes of this Section. Upon the
occurrence of an Event of Default, Lender shall apply all proceeds of Collateral
received by Lender and all other payments in respect of the Obligations to the
Loans whether or not then due or to any other Obligations then due, in whatever
order or manner Lender shall determine. For purposes of determining remittances
and other payments with respect to the Collateral and Obligations will be
treated as credited to the loan account of Borrower maintained by Lender and
Collateral balances to which they relate, upon the date that such remittances or
other payments have been credited to Lender's account at Lender's bank or in the
case of remittances or other payments received directly in kind by Lender, upon
the date of Lender's deposit thereof at Lender's bank, subject to final payment
and collection. In computing interest charges, the Loan Account of Borrower
maintained by Lender will be credited with remittances and other payments on the
Business Day that such remittances have been deposited in Lender's account at
Lender's Bank.
SECTION 8.24 NOTIFICATION OF ACCOUNT DEBTORS AND BAILEES OF INVENTORY.
Immediately following an Event of Default, Lender may at any time, without
notice to or assent of Borrower, notify any party, including any Franchisee,
that the Collateral which includes a monetary obligation has been assigned to
Lender by Borrower and that payment thereof is to be made to the order of and
directly to Lender, and Lender may demand, collect or enforce payment of the
Collateral, but without any duty to do so, and Lender shall not be liable for
any failure to collect or enforce payment thereof. At any time, Lender may send,
or cause to be sent by its designee, requests for verification of Collateral
directly to any obligor or any bailee with respect thereto.
35
SECTION 8.25 LENDER APPOINTED ATTORNEY-IN-FACT. Borrower hereby irrevocably
constitutes and appoints Lender, with full power of substitution, as its true
and lawful attorney-in-fact, with full irrevocable power and authority in its
place and stead and in its name or otherwise, from time to time in Lender's
discretion, at Borrower's sole cost and expense, take any and all appropriate
action and to execute and deliver any and all documents and instruments which
Lender may deem reasonably necessary or advisable to accomplish the purposes of
this Agreement, including, without limiting the generality of the foregoing, (a)
upon the occurance of an Event of Default, to receive, take, endorse, assign,
deliver, accept and deposit, in the name of Lender or Borrower, any and all
cash, checks, commercial paper, drafts, remittances and other instruments and
documents relating to the Collateral or the proceeds thereof; (b) to execute in
the name of Borrower and file against Borrower in favor of Lender, Financing
Statements or amendments with respect to the Collateral, or record a copy or an
excerpt hereof in the United States Copyright Office or the United States Patent
and Trademark Office and (c) to take all other steps as are necessary in the
reasonable opinion of Lender under applicable law to perfect the security
interests granted herein. In addition to the foregoing, Lender may (d) transmit
to account debtors, other obligors or any bailees notice of the interest of
Lender in the Collateral or request from account debtors or such other obligors
or bailees at any time, in the name of Borrower or Lender or any designee of
Lender, information concerning the Collateral and any amounts owing with respect
thereto, (e) upon the occurance of an Event of Default, notify account debtors
or other obligors to make payment directly to Lender, or notify bailees as to
the disposition of Collateral, (f) upon the occurance of an Event of Default,
take or bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (g) upon the occurance
of an Event of Default, change the address for delivery of mail to Borrower and
to receive and open mail addressed to Borrower, (h) upon the occurance of an
Event of Default, extend the time of payment of, compromise or settle for cash,
credit, return of merchandise, and upon any terms or conditions, any and all
accounts or other Collateral which includes a monetary obligation and discharge
or release the account debtor or other obligor, without affecting any of the
Obligations, (i) upon the occurance of an Event of Default, obtain and adjust
insurance required pursuant to this Agreement and to pay all or any part of the
premiums therefor and the costs thereof, and (j) upon the occurance of an Event
of Default, pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral.
SECTION 8.26 RELEASE OF LENDER. Borrower hereby releases and exculpates
Lender, its officers, directors, employees, agents and designees, from any
liability arising from any acts under this Agreement or in furtherance thereof,
whether as attorney-in-fact or otherwise, whether of omission or commission, and
whether based upon any error of judgment or mistake of law or fact, except for
gross negligence or willful misconduct as determined by a final and
non-appealable order from a court of competent jurisdiction. In no event will
Lender have any liability to Borrower for lost profits or other special or
consequential damages.
36
SECTION 8.27 UNIFORM COMMERCIAL CODE. At all times prior and subsequent to
an Event of Default hereinafter, Lender shall be entitled to all the rights and
remedies of a secured party under the UCC with respect to all Collateral.
SECTION 8.28 PRESERVATION OF COLLATERAL. At all times prior and subsequent
to an Event of Default hereinafter, and after reasonable notice to Borrower,
Lender may take any and all action which in its sole and absolute discretion is
necessary and proper to preserve its interest in the Collateral, including
without limitation the payment of debts of Borrower which might, in Lender's
sole and absolute discretion, impair the Collateral or Lender's security
interest therein, purchasing insurance on the Collateral, repairing the
Collateral, or paying taxes or assessments thereon, and the sums so expended by
Lender shall be secured by the Collateral, shall be added to the amount of the
Obligations due Lender and shall be payable on demand with interest at the rate
set forth in SECTION 1.10 hereof from the date expended by Lender until repaid
by Borrower.
SECTION 8.29 LENDER'S RIGHT TO CURE. In the event Borrower shall fail to
perform any of its Obligations hereunder or under any of the Loan Documents, and
after the occurrence and continuance of an Event of Default, Lender, in addition
to all of its rights and remedies hereunder, may perform the same, but shall not
be obligated to do so, at the cost and expense of Borrower. In any such event,
Borrower shall promptly reimburse Lender together with interest at the rate set
forth in Section 3.1 hereof from the date such sums are expended until repaid by
Borrower.
SECTION 8.30 INSPECTION OF COLLATERAL. From time to time as reasonably
requested by Lender, at the sole expense of Borrower, Lender or its designee
shall have access, prior to an Event of Default during normal business hours and
on or after an Event of Default at any time, to all of the premises where
Collateral is located for the purposes of inspecting, disposing and realizing
upon the Collateral, and all Borrower's books and records, and Borrower shall
permit Lender or its designee to make such copies of such books and records or
extracts therefrom as Lender may request. Without expense to Lender, upon the
occurance of an Event of Default, Lender may use such of Borrower's personnel,
equipment, including computer equipment, programs, printed output and computer
readable media, supplies and premises for the collection of Accounts and
realization on other Collateral as Lender, in its sole discretion, deems
appropriate. Borrower hereby irrevocably authorizes all accountants and third
parties to disclose and deliver to Lender at Borrower's expense all financial
information, books and records, work papers, management reports and other
information in their possession regarding Borrower.
ARTICLE 9
SPECIAL BANKRUPTCY PROVISIONS
SECTION 9.1 POST-PETITION SECURITY. From and after the Filing Date, the
liens granted to and held by Lender with respect to the Collateral will be and
are post-petition liens, entitled to first priority as set forth in the
Bankruptcy Court Order, subject only to the Permitted Liens and the Carve-Out.
Lender will be entitled to the protections and priorities provided under Section
507(b) of the Bankruptcy Code if its interests in the Collateral are not
adequately protected from and after the commencement of the Bankruptcy Case. The
post-petition liens granted under Section 364 of the Bankruptcy Code and the
protections and priorities provided to Lender under Bankruptcy Code Section
37
507(b) are subject to the payment of allowed professional fees and disbursements
incurred by Borrower, including, without limitation, attorneys' fees and costs,
and by any statutory committee, trustee, examiner or other representative
appointed in the Bankruptcy Case in an aggregate amount not to exceed
$150,000.00 prior to the filing of the Approved Plan and an additional $150,000
subsequent to the filing of the Approved Plan, provided, an additional aggregate
amount not to exceed $20,000 may be paid for a Creditor's Committee (the
"Carve-Out"). Lender hereby consents to entry of an order providing for
professional fees to be paid on a monthly basis.
SECTION 9.2 LIENS PERFECTED WITHOUT FILING OR RECORDING. Upon entry of the
Bankruptcy Court Order, the post-petition liens and encumbrances granted to
Lender on the Collateral by virtue of the Bankruptcy Court Order and this
Agreement will be first and prior, and valid and perfected as against all third
parties (except for Permitted Liens), without regard to applicable federal,
state or local filing or recording statutes, NUNC PRO TUNC as of the Approval
Date, and without further action of any party, including Lender; PROVIDED, that
Lender may, but need not, take such steps as it deems desirable and applicable
to comply with such statutes, and all financing statements which are filed
listing Borrower as debtor and Lender as secured party, all mortgages or similar
instruments which are filed granting to Lender liens upon and security interests
in Collateral will be deemed to have been filed and the security interest and
liens evidenced thereby will be deemed perfected NUNC PRO TUNC as of the
Approval Date.
SECTION 9.3 EXTENSION OF POST-PETITION CREDIT AND OTHER REMEDIES OF LENDER.
The agreement of Lender to provide post-petition financing to Borrower will be
subject to the following exceptions:
(a) The agreement to provide post-petition financing will not prohibit
Lender from moving in the Bankruptcy Court for any other and further relief
which: (i) Lender believes in good faith to be reasonably and immediately
necessary to protect its rights with respect to the Collateral (including,
without limitation, a request for the Debtor to abandon any part of the
Collateral); and as to which (ii) Lender also believes reasonably and in good
faith that the Bankruptcy Court Order is not sufficient to protect the rights of
Lender with respect to the Collateral under the circumstances existing when
Lender requests such other and further relief; and
(b) From and after the termination of this Agreement, Lender will have
no obligation to provide financing to or on behalf of Borrower or its bankruptcy
estate; and there will be no restriction of any kind against the exercise by
Lender of its rights and remedies under the Loan Documents, including but not
limited to, the right of Lender to exercise all of its remedies with respect to
the Collateral so long as such exercise is consistent with the terms of this
Agreement.
SECTION 9.4 PLAN OF REORGANIZATION. Borrower will not file or propose, and
will object to (and will not thereafter withdraw or modify such objection to),
any Plan of Reorganization (including, but not limited to, any amendment or
modification of a Plan of Reorganization, whether before or after confirmation)
(i) which does not incorporate all of the terms of the Bankruptcy Court Order
and this Agreement that pertain to the treatment of the secured claim of Lender
and the preservation of Lender's rights in the Collateral, (ii) which does not
provide for payment and performance in full of all of the Obligations upon
confirmation of the Plan of Reorganization, (iii) that would allow any Person to
improve its lien priority VIS A VIS Lender with respect to the Collateral, (iv)
38
which does not provide for Lender (if Lender so elects) to purchase the assets
of Borrower upon terms and conditions reasonably satisfactory to Lender, or (v)
which does not otherwise meet all of the requirements of an Approved Plan.
Nothing in this Agreement will be construed as a consent by Lender, or an
approval by Lender of, the terms of any Plan of Reorganization or any amendment
or modification thereto.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof will be made except in writing executed by
the party against whom enforcement is sought.
SECTION 10.2 NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party hereto of
any one or more defaults by the other party in the performance of any of the
provisions of this Agreement will operate or be construed as a waiver of any
future default or defaults, whether of a like or different nature. No failure or
delay on the part of any party in exercising any right, power or remedy
hereunder will operate as a waiver thereof, nor will any single or partial
exercise of any such right, power or remedy preclude or require any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
SECTION 10.3 NOTICES. Any notice or other communication required or
permitted hereunder will be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:
39
(a) If to Lender, at:
R1 Franchise Systems L.L.C.
Attn: Xxxxxxx X. Xxxxxx, Esq.
0000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
With Copy to:
XXXX XXXXXXX LLP
Attn: Xxxxxx Xxxxxxx, Esq. and
Xxxxxxxx Xxxxx, Esq.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) If to Borrower, at:
Ranch * 1, Inc.
Attn: Xxxxxxx XxxXxxxxx
000 0xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxxxx Xxxxxxxxx
Attn: Xxxxx XxXxxxx, Esq.
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If mailed, notice will be deemed to be given five (5) days after being
sent, if sent by personal delivery or telecopier, notice will be deemed to be
given when delivered, and if sent by prepaid courier, notice will be deemed to
be given on the next Business Day following deposit with the courier.
SECTION 10.4 SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance will be found by a court of competent jurisdiction to be, to any
extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, will not be
affected thereby, and each term, covenant or condition will be valid and
enforced to the fullest extent permitted by law, or, at Lender's sole option,
this Agreement shall be deemed terminated. Upon determination that any such term
is invalid, illegal or unenforceable, and if Lender does not chose to treat the
Agreement as terminated, the parties hereto will amend this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner.
40
SECTION 10.5 SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the
other Loan Documents will be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
Obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder without notice to
or consent of Borrower.
SECTION 10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute but one instrument. Signatures transmitted by facsimile
shall bind the parties signing.
SECTION 10.7 INTERPRETATION. No provision of this Agreement or any other
Loan Document will be interpreted or construed against any party because that
party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement will be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" will be deemed to refer to this entire Agreement, except as the
context otherwise requires.
SECTION 10.8 SURVIVAL OF TERMS. All covenants, agreements, representations
and warranties made in this Agreement, any other Loan Document, and in any
certificates and other instruments delivered in connection therewith will be
considered to have been relied upon by Lender and will survive the making by
Lender of the Loan herein contemplated and the execution and delivery to Lender
of the Notes, and will continue in full force and effect until all liabilities
and Obligations of Borrower to Lender are satisfied in full.
SECTION 10.9 RELEASE OF LENDER. Borrower release Lender, its parents,
subsidiaries, officers, employees, and agents, of and from any claims for loss
or damage resulting from acts or conduct of any or all of them, unless caused by
Lender's gross negligence or willful misconduct.
SECTION 10.10 TIME. Whenever Borrower are required to make any payment or
perform any act on a Saturday, Sunday, or a legal holiday under the laws of the
State of Arizona (or other jurisdiction where Borrower are required to make the
payment or perform the act), the payment may be made or the act performed on the
next Business Day. Time is of the essence in Borrower's performance under this
Agreement and all other Loan Documents.
SECTION 10.11 COMMISSIONS. The transaction contemplated by this Agreement
was brought about by Lender and Borrower acting as principals and without any
brokers, agents, or finders being the effective procuring cause. Borrower
represent that they have not committed Lender to the payment of any brokerage
fee, commission, or charge in connection with this transaction. If any such
claim is made on Lender by any broker, finder, or agent or other person,
Borrower will indemnify, defend, and hold Lender harmless from and against the
claim and will defend any action to recover on that claim, at Borrower's cost
and expense, including Lender's counsel fees. Borrower further agrees that until
any such claim or demand is adjudicated in Lender's favor, the amount demanded
will be deemed a liability of Borrower under this Agreement, secured by the
Collateral.
41
SECTION 10.12 THIRD PARTIES. No rights are intended to be created hereunder
or under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of Borrower. Nothing contained in this
Agreement will be construed as a delegation to Lender of Borrower's duty of
performance, including without limitation Borrower's duties under any account or
contract in which Lender has a security interest.
SECTION 10.13 DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its sole
discretion, will have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (i) obtain insurance
covering any of the Collateral as required hereunder; (ii) pay for the
performance of any of Borrower's obligations hereunder; (iii) discharge taxes,
liens, security interests, or other encumbrances at any time levied or placed on
any of the Collateral in violation of this Agreement unless Borrower are in good
faith with due diligence by appropriate proceedings contesting those items; and
(iv) pay for the maintenance and preservation of any of the Collateral. Expenses
and advances will be added to the Loan, until reimbursed to Lender and will be
secured by the Collateral. Any such payments and advances by Lender will not be
construed as a waiver by Lender of an Event of Default.
SECTION 10.14 INFORMATION TO PARTICIPANTS. Lender may divulge to any
participant it may obtain in the Loan, or any portion thereof, all information,
and furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement or
any other Loan Document.
SECTION 10.15 CHOICE OF LAW. THE VALIDITY OF THIS AGREEMENT AND ALL OTHER
DOCUMENTS EXECUTED AND DELIVERED HEREWITH, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE UNITED STATES OF AMERICA (INCLUDING THE BANKRUPTCY CODE), IT
BEING THE INTENT OF THE PARTIES THAT FEDERAL LAW SHALL GOVERN THE RIGHTS AND
DUTIES OF THE PARTIES HERETO WITHOUT REGARD TO THE APPLICATION OF ANY PROVISION
OF STATE LAW. TO THE EXTENT THAT FEDERAL LAW WOULD APPLY THE LAW OF ANY STATE AS
THE FEDERAL RULE FOR THE PURPOSES OF THIS AGREEMENT, THE PARTIES AGREE THAT THE
LAWS OF THE STATE OF ARIZONA SHALL BE USED TO SUPPLEMENT APPLICABLE FEDERAL LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT.
BORROWER AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
10.15.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT
42
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
SECTION 10.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the
Bankruptcy Court and each party agrees that any action, suit or proceeding shall
be brought only in the Bankruptcy Court which shall be the exclusive and only
proper forum for adjudicating any action, suit or proceeding.
SECTION 10.17 INTENTIONALLY OMITTED.
SECTION 10.18 LOCK BOX. If requested by Lender at any time, Borrower will
consent to setting up a lock box into which all money thereafter paid to
Borrower (from Account Debtors, Franchisees, obligors under the Sales Documents,
or otherwise), will be deposited; and, in such event, Borrower will immediately
instruct all applicable obligors to thereafter send their payments directly to
the lock box.
SECTION 10.19 WAIVER.
(a) Borrower waives presentment, demand, protest and notices of
protest, nonpayment, partial payment and all other notices and formalities
except as expressly called for in this Agreement. Borrower consents to and
waives notice of: (i) the granting of indulgences or extensions of time of
payment, (ii) the taking or releasing of security, and (iii) the addition or
release of persons who may be or become primarily or secondarily liable for the
Loan or any other indebtedness arising in connection with the Loan, or any part
thereof, and all in such manner and at such time as Lender may deem advisable.
(b) No delay or omission by Lender in exercising any right, power or
remedy hereunder, and no indulgence given to Borrower, with respect to any term,
condition or provision set forth herein, shall impair any right, power or remedy
of Lender under this Agreement, or be construed as a waiver by Lender of, or
acquiescence in, any Event of Default. Likewise, no such delay, omission or
indulgence by Lender shall be construed as a variation or waiver of any of the
terms, conditions or provisions of this Agreement. Any actual waiver by Lender
of any Event of Default shall not be a waiver of any other prior or subsequent
Event of Default or of the same Event of Default after notice to Borrower
demanding strict performance.
43
SECTION 10.20 JOINT AND SEVERAL LIABILITY. The liability of each entity
signing this Agreement and all other Loan Documents as Borrower shall be joint
and several, and each entity shall be fully liable to Lender for the performance
of all obligations of Borrower hereunder and under the other Loan Documents.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
LENDER:
R1 FRANCHISE SYSTEMS L.L.C.,
an Arizona limited liability company
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
Title: VP-CFO of its Sole Member
BORROWER:
RANCH* 1, INC., a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1, GROUP, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 METRO, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
44
RANCH* 1 PEARL, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 OF AMERICA, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 DOWNTOWN, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 0 XXXXXX XXXXXX, XXX.,
x Xxx Xxxx corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 OF BROADWAY, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 ON 34TH STREET, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 FASHION, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
45
RANCH* 1 METRO TECH, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 52ND, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 PALISADES, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0135, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0202, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0117, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0125, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
46
RANCH* 1 NUMBER 0112, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0113, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0128, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0150, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 1701, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0207, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 0118, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
47
RANCH* 1 NUMBER 0137, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
RANCH* 1 NUMBER 1904, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
OME, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
DOME ENTERPRISES, INC.,
a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
MORGRHO, INC., a New York corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
FRANCHISE CONCEPTS GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxxxx XxxXxxxxx
-----------------------------------------
Name: Xxxxxxx XxxXxxxxx
Title: President and CFO
48
EXHIBIT A
NOTE
EXHIBIT B
DIP LOAN FUNDING SCHEDULE
SCHEDULE 4.22
LIST OF FRANCHISE AGREEMENTS AND AREA DEVELOPMENT AGREEMENTS
SCHEDULE 4.23
LIST OF LEASES
SCHEDULE 4.17
LOCATIONS OF OPERATIONS OF BORROWER
SCHEDULE 1.39
PERMITTED LIENS
SCHEDULE 1.2
LIST OF BORROWER AND BANKRUPTCY FILINGS AND CASE NUMBERS
SCHEDULE 3.1 (G)
PROMISSORY NOTES, SECURITY AGREEMENTS AND RELATED DOCUMENTS
EXECUTED IN FAVOR OF BORROWER
SCHEDULE 4.14
TAXES NOT PAID AND TAX RETURNS NOT FILED (TOGETHER WITH AN
ESTIMATE OF THE AMOUNT DUE)
