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EXHIBIT 10.39
EXECUTION COPY
CONSENT AND AGREEMENT REGARDING SUBSTITUTION
This Consent And Agreement Regarding Substitution (this "Agreement"),
dated as of May 1, 1998, is by and among SFS SECURED RESTAURANTS, INC., SPARTAN
SECURED RESTAURANTS, INC. (each of SFS Secured Restaurants, Inc. and Spartan
Secured Restaurants, Inc. are referred to herein as an "Owner" and together as
the "Owners"), SECURED RESTAURANTS TRUST (the "Issuer"), THE BANK OF NEW YORK,
I. M. SPECIAL, INC., and FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"
and ADVANTICA RESTAURANT GROUP, INC. ("Advantica")).
Reference is made to:
(i) the Loan Agreement, dated as of November 1,
1990, as amended by a First Amendment to Loan Agreement, dated as
of November 1, 1991, and as further amended by a Second Amendment
to Loan Agreement, dated as of April 1, 1998, (collectively, the
"Quincy's Loan Agreement") between the Issuer and Quincy's
Realty, Inc. ("Quincy's Realty"),
(ii) the Loan Agreement, dated as of November 1,
1990, as amended by a First Amendment to Loan Agreement, dated as
of November 1, 1991, and as further amended by a Second Amendment
to Loan Agreement, dated as of April 1, 1998 (collectively, the
"Spardee's Loan Agreement"), between the Issuer and Spardee's
Realty, Inc. ("Spardee's Realty"),
(iii) the Collateral Assignment Agreement, dated as
of November l, 1990, as amended by a First Amendment to
Collateral Assignment Agreement, dated as of April 1, 1998
(collectively, the "Collateral Assignment Agreement") among the
Issuer, Financial Security and The Bank of New York, as successor
to The Citizens and Southern Bank of South Carolina, as indenture
trustee (the "Trustee") and as collateral agent (the "Collateral
Agent"), and
(iv) The Intercreditor Agreement, dated as of
November l, 1990 (the "Intercreditor Agreement"), among Financial
Security, the Trustee and the Collateral Agent.
All obligations and liabilities of Spardee's under the Spardee's
Loan Agreement were assigned to, and assumed by, Quincy's Realty pursuant to an
Assignment and Assumption Agreement, dated April 1, 1998 between Quincy's Realty
and Spardee's Realty. The Quincy's Loan Agreement, the Spardee's Loan Agreement,
the Collateral Assignment Agreement and the Intercreditor Agreement all relate
to the Issuer's 10 1/4 % Guaranteed Secured Bonds Due 2000 (the "Bonds") issued
pursuant to an indenture dated as of November 1, 1990 (the "Indenture") between
the Issuer and the Trustee. The Quincy's Loan Agreement and the Spardee's Loan
Agreement, and the Mortgage Notes thereunder (as defined in such agreements),
are referred to collectively herein as the "Loan Agreements."
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Financial Security is the Controlling Party (as defined in the
Intercreditor Agreement). On April 1, 1998, Quincy's Realty effected a
defeasance of the Mortgage Notes pursuant to Section 2.04(c) of each of the
Quincy's Loan Agreement and the Spardee's Loan Agreement (such transaction, the
"Defeasance").
Quincy's Realty has requested that Financial Security and the
other parties hereto consent to the substitution of I. M. Special, Inc. as
"Borrower" for Quincy's under (a) the Quincy's Loan Agreement, (b) the Spardee's
Loan Agreement and (c) in connection with the related Mortgage Notes. Such
substitution (the "Substitution") will occur pursuant to an Assignment and
Assumption Agreement dated May 1, 1998 (the "Assignment Agreement") by and
between Quincy's Realty and I. M. Special, Inc.
In consideration of the premises the parties hereto agree as
follows:
I. FINANCIAL SECURITY CONSENT TO SUBSTITUTION
Financial Security hereby consents to the Substitution subject to
the following:
(1) Receipt by Financial Security of executed originals (or
copies of executed originals, provided that Advantica shall deliver executed
originals to Financial Security by May 30, 1998) of:
(1) The Assignment Agreement;
(2) Certified copies of the certificate of
incorporation and bylaws of I. M. Special, Inc.;
(iii) Evidence that the Board of Directors of I.
M. Special, Inc. has authorized I. M. Special, Inc. to enter into
the Substitution;
(iv) Stock Pledge Agreement, dated as of May 1,
1998, among Spartan Holdings Inc., Financial Security and the
Collateral Agent;
(v) One or more legal opinions from Xxxxxx Xxx
Xxxxx and Xxxxxxxxx L.L.P. addressed to, and in form and
substance acceptable to, Financial Security relating to the
Substitution and such other matters as may be contemplated
thereby or by this Agreement; and
(vi) Certificates from Advantica, Quincy's Realty,
I. M. Special, Inc. and/or their affiliates and such other
documents as Financial Security may reasonably request.
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(b) Payment to Xxxxx Xxxx, as set forth in a statement from Xxxxx
Xxxx, of fees and disbursements for legal services provided to Financial
Security in connection with the Substitution.
(c) Execution of this Agreement by Advantica
II. CONSENTS AND DIRECTIONS REGARDING DOCUMENTS.
(a) Financial Security hereby directs The Bank of
New York, as Trustee and as Collateral Agent, to execute, and
directs the Owners to cause Wilmington Trust Company (the "Issuer
Trustee"), on behalf of the Issuer, to execute, as applicable:
(i) the Quincy's Realty, Inc.
Release and Agreement, dated May 1, 1998 (the
"Quincy's Release"), by the Issuer, Financial
Security, the Trustee and the Collateral Agent;
(ii) the Termination of
Reimbursement Agreement, dated May 1, 1998, by
Financial Security and Advantica; and
(iii) the Termination of Stock
Pledge Agreement, dated May 1, 1998 (the
"Termination of Stock Pledge"), by Quincy's
Restaurants, Inc. and the Issuer.
(b) Financial Security hereby consents to the
Issuer Trustee's execution, on its own behalf, of this Agreement;
(c) Financial Security hereby directs the Owners to
direct the Issuer Trustee to execute this Agreement, the Quincy's
Release and the Termination of Stock Pledge and any other
certificates or instruments required to be executed by the Owners
in connection with the matters contemplated hereby;
(d) The Owners hereby direct the Issuer Trustee to
execute this Agreement, the Quincy's Release and the Termination
of Stock Pledge.
(e) Upon satisfaction of all conditions set forth
in this Agreement, Financial Security will cancel Irrevocable
Letter of Credit No. 360920 issued by The Chase Manhattan Bank
dated April 1, 1998.
III. DEFINED TERMS.
The parties hereby agree that for purposes of the Collateral
Assignment Agreement, the Loan Agreements, the Mortgage Notes and the Insurance
Agreement (as defined in the Collateral Assignment Agreement), the following
terms shall have the meanings set forth below:
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"Borrower" means I. M. Special, Inc., a Delaware corporation.
"Stock Pledge Agreement," "Stock Pledge" or "Quincy's Stock
Pledge" means the Stock Pledge Agreement, dated as of May 1, 1998, among Spartan
Holdings, Inc., Financial Security and the Collateral Agent.
IV. ADVANTICA AGREEMENTS.
Advantica hereby covenants and agrees as follows:
(a) Advantica and its affiliates have received adequate
consideration and fair value in connection with the Defeasance and the
Substitution and neither such action has been taken with the intent of
defrauding any creditors of Advantica or of any of its affiliates;
(b)(i) Following the substitution, neither Advantica nor any of
its affiliates, other than I. M. Special, Inc., has any right, title or interest
in, to or under the Defeasance Eligible Investments (as defined in the
Collateral Assignment Agreement) or any other part of the Borrower Collateral
(as defined in the Loan Agreements) or has made any representation to the Banks
(as defined in (v) below) that it has any such right, title or interest;
(ii) Prior to transfer of ownership of either Quincy's
Restaurants, Inc. or Quincy's Realty to any entity which is not an affiliate of
Advantica (a "Transferee"), Advantica will provide to Financial Security a
written confirmation, in form and substance satisfactory to Financial Security,
from the Transferee that neither such Transferee nor Quincy's Realty, Inc. has
any right, title or interest in, to or under the Defeasance Eligible Investments
or any other part of the Borrower Collateral;
(iii) Neither Advantica nor any of its affiliates will take any
action to obtain or recover any interest in the Defeasance Eligible Investments
or any other part of the Borrower Collateral until the Term of the Agreement (as
defined in the Insurance Agreement) has expired; and
(iv) Advantica confirms that the Banks have approved the
Substitution and the transfer of all right, title and interest of Quincy's
Realty in, to and under the Borrower Collateral to I. M. Special, Inc. in
connection therewith.
(v) Advantica will enforce the agreement pursuant to the Credit
Agreement, dated as of January 7, 1998, as amended or waived by Amendment No. l
and Waiver (the "Amendment"), dated as of March 16, 1998, each among Quincy's
Restaurants, Inc., Flagstar Enterprises Inc., Advantica Restaurant Group, Inc.,
the Lenders (as defined in the Credit Agreement), The Chase Manhattan Bank and
the other parties thereto, set forth in Section l(a) of the Amendment, which
provides that I. M. Special, Inc., as the SPC referred to in such amendment,
shall not be required to execute a
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Subsidiary Guarantee Agreement, an Indemnity and Contribution Agreement or any
Security Document until] such time when I. M. Special], Inc. is no longer
subject to a contractual prohibition on doing so. The Lenders and The Chase
Manhattan Bank are collectively referred to herein as the "Banks".
V. MISCELLANEOUS.
(a) NOTICES. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by overnight delivery or personally delivered or
facsimile to the recipient as follows:
(i) To Financial Security: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Surveillance Department
Telephone: (000) 000-0000
Facsimile Nos.: (000) 000-0000
(000) 000-0000
(in each case in which notice or other communication to
Financial Security refers to a Security Event, Event of
Default, a claim on the Policy or with respect to which
failure on the part of Financial Security to respond shall be
deemed to constitute consent or acceptance, then a copy of
such notice or other communication should also be sent to the
attention of each of the General Counsel and the Head
Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED.")
(ii) To the Issuer: Secured Restaurants Trust
c/o Wilmington Trust Company
Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Corporate Trust Administration
Telephone No.: (000) 000-0000
Telex No.: 835437
Answer Back: WILM-TR
Facsimile No.: (000) 000-0000
with a copy to
the Manager: Advantica Restaurant Group, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Legal Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(iii) To the Trustee: The Bank of New York
Towermarc Plaza
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Corporate Trust Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(iv) To the Collateral
Agent: The Bank of New York
Towermarc Plaza
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Corporate Trust Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(v) To the Borrower: I. M. Special, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Legal Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(vi) To Advantica: Advantica Restaurant Group, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Legal Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
A party may specify an additional or different
address or addresses by writing mailed or delivered to the other
parties as aforesaid. Except as may be otherwise specified
herein, all such notices and other communications shall be
effective two Business Days after being sent. Any notice required
to be given to any Non-Controlling Party shall also be given to
the Controlling Party.
(b) COUNTERPARTS. This Agreement may be executed in counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
(c) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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(d) BINDING AGREEMENT. This Agreement shall be binding upon, shall
inure to the benefit of, and shall be enforceable by, the parties hereto and
their respective successors and permitted assigns.
IN WITNESS WHEREOF, each party has hereby executed this Consent
and Agreement Regarding Substitution as of the date first above written.
SFS SECURED RESTAURANTS, INC.
By /s/ Xxxxxx X. Xxxxxx
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Name Xxxxxx X. Xxxxxx
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Title President
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SPARTAN SECURED RESTAURANTS, INC.
By /s/ Xxxxxx X. Xxxxxx
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Name Xxxxxx X. Xxxxxx
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Title President
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SECURED RESTAURANTS TRUST
By Wilmington Trust Company, not in
its individual capacity but solely as
Issuer Trustee
By /s/ Xxxx St. Xxxxx
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Xxxx St. Amand
Assistant Vice President
THE BANK OF NEW YORK, as Collateral
Agent and as Trustee
By /s/ Xxxxx Xxx Xxxx-Bash
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Name Xxxxx Xxx Xxxx-Bash
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Title Agent
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FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx, Managing Director
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I. M. SPECIAL, INC.
By /s/ Xxxxxxx X. Xxxxx
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Name Xxxxxxx X. Xxxxx
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Title President and Treasurer
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ADVANTICA RESTAURANT GROUP, INC.
By /s/ Xxxxxxx X. Xxxxx
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Name Xxxxxxx X. Xxxxx
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Title Vice President and Treasurer
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