EXHIBIT 10.14
PROGRAM AGREEMENT
THIS PROGRAM AGREEMENT ("AGREEMENT") is dated as of November 11, 2004
("COMMENCEMENT DATE") and entered into by and between GE CAPITAL FRANCHISE
FINANCE CORPORATION, a Delaware corporation, with offices at 17207 N. Perimeter
Drive, Scottsdale, Arizona 85255 ("GE"), and O'CHARLEY'S INC., a Tennessee
corporation, with offices at 3038 Sidco Drive, Nashville, Tennessee 37204
("FRANCHISOR").
WITNESSETH:
WHEREAS, Franchisor will be engaging in the business of franchising the
right to operate restaurants under the O'Charley's operating system
(individually, a "RESTAURANT" and collectively, the "RESTAURANTS") to
franchisees located within the continental United States of America
("FRANCHISEES"); and
WHEREAS, GE and Franchisor desire to create a financing program for
qualified Franchisees to fund (i) the acquisition, construction and installation
of the land, building and equipment for new Restaurants and (ii) the acquisition
of existing Restaurants from Franchisor; and
WHEREAS, GE is engaged in the business of providing construction loans
combined with permanent loans, and permanent loans (without construction loans)
for newly constructed restaurants or existing restaurants.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, GE and Franchisor, intending to be
legally bound, hereby agree as follows:
1. The Program.
(a) Pursuant to the terms and conditions set forth in this Agreement, GE
shall provide a financing program ("PROGRAM") in a maximum aggregate amount to
be advanced of $75,000,000 to certain qualified Franchisees under which, among
other things, GE will finance (i) the acquisition, construction and installation
of the land, building and equipment for new Restaurants, or (ii) the acquisition
from Franchisor of the land, building and equipment for existing Restaurants
(collectively, "ELIGIBLE TRANSACTIONS"). GE may, in its sole judgment and
discretion, finance transactions with Franchisees which financings shall not be
a part of the Program and shall not be subject to the terms and provisions of
this Agreement.
(b) Subject to the terms and conditions set forth herein and on the
schedule attached hereto as Exhibit A and incorporated herein by this reference,
as such Exhibits may be amended from time to time by GE and Franchisor, GE shall
make available financing (each a "PROGRAM FINANCING") to qualified Franchisees
with respect to each Restaurant which is the subject of an Eligible Transaction
in an amount equal to the lesser of (i) eighty percent (80%) of the total
acquisition and construction costs relating to such Restaurant, or (ii)
$2,500,000. Each Program Financing may consist of real estate loans and/or
equipment loans and shall have the business terms described on Exhibit A
attached hereto.
2. Approval Process.
(a) GE will require the following with respect to applications for each
Program Financing (any of which may be waived by GE in its sole discretion):
(i) a fully completed Loan Application ("APPLICATION") in
substantially the same form and substance as set forth in Exhibit B
attached hereto, which Application shall set forth the location of the
Restaurant(s) for which the Program Financing relates, and an election for
the loan to accrue interest at either the fixed at closing rate or the
variable rate with option to fix;
(ii) with respect to any Eligible Transaction consisting of an
acquisition of a Restaurant or the real estate relating thereto, a copy of
the Purchase and Sale Agreement and Letter of Intent, together with a
detailed breakdown of the acquisition costs;
(iii) for each Restaurant, a three (3) year financial projection;
(iv) for new Franchisees, an owner's background summary or resume;
(v) for existing Franchisees, financial statements and tax returns
for the last two (2) fiscal years preceding the submission of the
Application for the Franchisee and for all affiliated restaurant and
franchise companies;
(vi) for each Restaurant for which a Program Financing is sought as
well as any and all other entities or franchises either partially or fully
owned by the applying Franchisee, (x) monthly financial statements for the
twelve (12) months preceding the submission of the Application and (y) a
summary of all of the Franchisee's debt and lease obligations;
(vii) personal financial statements and the last two (2) years tax
returns for each of the principals of the Franchisee who will be
guarantors of the corresponding Program Financing; and
(viii) such additional information as GE may reasonably request.
The foregoing items (i) through (viii) shall hereinafter be referred to
collectively as the "APPLICATION PACKAGE".
(b) Upon submission of a completed Application Package to GE by a
Franchisee, GE shall review the creditworthiness of each Franchisee and, if such
Franchisee satisfies GE's criteria for Program Financing, in GE's sole
discretion, GE shall forward the Application Package, GE's financial analysis
and a "Program Agreement Addendum," the form of which is attached hereto as
Exhibit C, to Franchisor for review by Franchisor. If Franchisor, in its sole
discretion, then approves the Franchisee for Program Financing, Franchisor
shall, within ten (10) business days after receipt by Franchisor of the
Application Package from GE, forward to GE an executed copy of the Program
Agreement Addendum. GE shall then provide Program Financing to such Franchisee
upon the terms, provisions and conditions contained herein and, to the extent
such terms, provisions and conditions are not set forth herein, as GE determines
in GE's ordinary course of business. If Franchisor disapproves of a proposed
Program Financing, GE shall be under no obligation to Franchisor or to the
prospective Franchisee or any related Franchisee to
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further consider the proposed Program Financing or any additional proposed
Program Financing by such Franchisee or any related Franchisee.
(c) GE will use its best efforts to complete its review of each
completed Application Package within ten (10) business days after receipt
thereof at GE's offices in Scottsdale, Arizona (Attn: Mike Record) or such other
processing locations as GE designates. If GE rejects an Application Package, GE
shall notify Franchisor within five (5) business days thereafter, and GE shall
review with the Franchisee the reason(s) it did not qualify for the Program
Financing. If GE rejects a proposed Program Financing, GE shall be under no
obligation to Franchisor or to the prospective Franchisee or any related
Franchisee to further consider the proposed Program Financing or any additional
proposed Program Financing by such Franchisee or any related Franchisee. GE, in
its sole discretion, may limit the maximum amount which may be advanced to a
particular Franchisee and to such Franchisee's affiliates to $7,500,000 in total
borrowings.
3. Program Financing Processing. GE will use reasonable efforts to fund the
Program Financing within ten (10) business days after receipt by GE of all
executed "FINANCING DOCUMENTS". The term "FINANCING DOCUMENTS" shall include the
following:
(a) a promissory note in the amount of the Program Financing executed by
the Franchisee;
(b) a loan agreement executed by the Franchisee with respect to any real
estate loan which is the subject of the Program Financing;
(c) a first priority deed of trust or mortgage executed by the
Franchisee in the fee simple or leasehold interest in any real
property being financed ("MORTGAGE");
(d) a loan and security agreement executed by the Franchisee covering
all furniture, fixtures, equipment and leasehold improvements which
are located at or used in connection with the Restaurant which is
the subject of the Program Financing and granting GE a first
priority security interest with respect thereto ("SECURITY
AGREEMENT");
(e) an environmental indemnity agreement executed by the Franchisee in
favor of GE with respect to any real property being financed;
(f) a disbursement agreement executed by the Franchisee and the
applicable title company with respect to the disbursement of the
proceeds the real estate loan to fund construction costs;
(g) Uniform Commercial Code financing statements and such other related
documents, executed by the Franchisee if applicable, as GE may deem
necessary or desirable to perfect its security interest in the
property which is the subject of the Security Agreement and
Mortgage, each in form and substance satisfactory to GE ("UCC
FINANCING STATEMENTS");
(h) personal guaranties executed by all individuals named as the
Franchisee, or all principals of any entities named as the
Franchisee (other than Franchisor), of all obligations owing to GE
under the Program Financing ("GUARANTIES"); provided, however, store
level managers owning less than 10% of the ownership interests in
the Franchisee shall not be required to personally guarantee a
Program
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Financing if GE determines that the Franchisee and/or any guarantors
of the Program Financing (other than Franchisor) have sufficient
restaurant operating experience;
(i) evidence reasonably acceptable to GE that GE has been named as an
additional insured on all insurance policies maintained by the
Franchisee or Franchisor, if applicable, on or covering any
Restaurant for which the Program Financing is made;
(j) a landlord's waiver or estoppel certificate if necessary, in form
and substance satisfactory to GE, executed by the landlord of each
Restaurant for which the Program Financing is made ("LANDLORD'S
WAIVER");
(k) satisfactory proof that title to the related land or property on
which the Restaurant is located is owned by the Franchisee, or, if
the property on which the Restaurant is to be located is leased, a
copy of the executed lease between the landlord and Franchisee
(which lease shall be in form and substance acceptable to GE and its
outside counsel, including having a lease term equal to or exceeding
the loan term);
(l) satisfactory proof that Franchisor has entered or will be entering
into a franchise agreement with Franchisee with respect to the
Restaurant, which franchise agreement will have a term of at least
15 years with at least one option to renew;
(m) a Program Agreement Addendum in the form attached hereto as Exhibit
C, executed by Franchisor acknowledging the Restaurant's inclusion
into the Program;
(n) search results of all applicable recording offices, and releases or
evidence acceptable to GE that appropriate releases will be
provided, indicating that upon completion of the applicable Program
Financing and filing of the UCC Financing Statements, GE will obtain
a first priority security interest in all collateral described in
the Security Agreement and Mortgage; and
(o) such additional information as GE shall reasonably request.
4. Limited Guaranty.
(a) Defined terms:
"DEBT SERVICE PAYMENTS" means all debt service payments due to GE
with respect to each Defaulted Program Financing prior to the payment by
Franchisor of the Ultimate Net Losses with respect to such Defaulted
Program Financing.
"DEFAULTED PROGRAM FINANCING" shall have the meaning given such term
in Section 5 below.
"NET REPURCHASE AMOUNT" shall mean, relative to a single Defaulted
Program Financing, the sum of (x) the outstanding principal sum owed to GE
under such Defaulted Program Financing ("Principal"), (y) the accrued and
unpaid interest owed to
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GE under the Defaulted Program Financing (including any interest accruing
at a default rate of interest), and (z) all reasonable third-party costs
and expenses incurred by GE as a result of such Defaulted Program
Financing, including without limitation management expenses and attorneys'
fees and expenses. To the extent that Franchisor makes Debt Service
Payments to GE with respect to a single Defaulted Program Financing as
contemplated and required by Sections 4(b) and 5(c), the "Net Repurchase
Amount" shall not include the principal and interest paid by Franchisor.
"ULTIMATE NET LOSS" shall mean, relative to a single Defaulted
Program Financing, the Net Repurchase Amount in connection with such
Defaulted Program Financing, minus any proceeds received by GE as a result
of collection actions with respect to the Defaulted Program Financing,
including any secured creditor sale and/or remarketing of the collateral
for the Defaulted Program Financing and any net proceeds received by GE
from any guarantor of the Defaulted Program Financing (other than
Franchisor), which proceeds reduce the total amount due to GE in
connection with such Defaulted Program Financing.
(b) As consideration to GE for making Program Financings available to
qualified Franchisees, but subject to the limitations set forth herein
(including, without limitation, those set forth in Section 5), Franchisor hereby
guaranties the payment to GE, within ten (10) business days after demand by GE,
of (i) all Net Repurchase Amounts if the then sum of the original funded
principal amount of all Program Financings funded by GE is less than
$10,000,000.00, (ii) all Ultimate Net Losses suffered by GE in connection with
all Program Financings for which Franchisor did not pay the applicable Net
Repurchase Amount, and (iii) all Debt Service Payments. Notwithstanding anything
to the contrary contained in this Agreement, in no event shall Franchisor be
responsible for paying any amounts due with respect to loans from GE (or its
affiliates) to a Franchisee (or its affiliates) which are not part of the
Program, notwithstanding that such loans may be cross-collateralized or
cross-defaulted with loans which are part of the Program.
(c) Notwithstanding anything to the contrary set forth herein,
Franchisor's aggregate liability under this Agreement for Ultimate Net Losses
and Debt Service Payments shall be limited to an amount equal to the lesser of
the product of twenty percent (20%) multiplied by the aggregate funded principal
amount of all Program Financings funded by GE and $15,000,000.00 ("MAXIMUM
LIABILITY"); provided however, the Maximum Liability shall be reduced by an
amount equal to the sum of (i) twenty percent (20%) of the funded principal
amount of any Program Financing for which Franchisor has paid the applicable Net
Repurchase Amount after the occurrence of a Default but before demand for
payment of Debt Service Payments by GE or establishment by GE of an Ultimate Net
Loss, (ii) the aggregate amount of Debt Service Payments paid by Franchisor
pursuant to Section 5 below, (iii) the aggregate amount of Ultimate Net Losses
on all Program Financings paid by Franchisor pursuant to Section 5 below, and
(iv) twenty percent (20%) of the funded principal amount of any Program
Financing for which Franchisor no longer has any liability under this Agreement
as contemplated by Section 4(d) below. The Maximum Liability shall not reduce
with the amortization of any Program Financing. Furthermore, Franchisor's
obligations under this Agreement to pay Net Repurchase Amounts shall not be
subject to the Maximum Liability cap.
(d) Notwithstanding anything to the contrary set forth herein, in the
event that all of the following conditions are satisfied with respect to a
particular Franchisee and provided no default by Franchisor shall have occurred
and be continuing under this Agreement as of the
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Burn-Off Date (as hereinafter defined) corresponding to such Franchisee,
Franchisor shall no longer have any liability under this Agreement with respect
to any Program Financing provided to such Franchisee if the Burn-Off Date
corresponding to such Franchisee shall have passed:
(i) Prior to the Burn-Off Date corresponding to such Franchisee,
such Franchisee shall not have been in default with respect to any of its
obligations to GE and no debt service payments shall have been made by
Franchisor to GE with respect to such Franchisee (provided that the
foregoing shall not include debt service payments made by such Franchisee
from the proceeds of any working capital loan from Franchisor permitted
under the Financing Documents); and
(ii) Prior to the Burn-Off Date corresponding to such Franchisee,
such Franchisee shall have been in full compliance with all fixed charge
coverage ratio and effective funded debt to EBITDAR covenants set forth in
its Financing Documents.
As used herein, the term "Burn-Off Date" shall mean:
(i) If the particular Franchisee has one Restaurant which is
subject to Program Financing, the third anniversary of the opening of such
Restaurant;
(ii) If the particular Franchisee has two Restaurants which are
subject to Program Financing, the later to occur of (x) the second
anniversary of the opening of such Franchisee's second Restaurant, and (y)
the third anniversary of the opening of such Franchisee's first
Restaurant; and
(iii) If the Franchisee has three Restaurants which are subject to
Program Financing, the later to occur of (x) the eighteen month
anniversary of the opening of such Franchisee's third Restaurant, and (y)
the third anniversary of the opening of such Franchisee's first
Restaurant.
(e) The provisions of this Section 4 shall survive the expiration or
earlier termination of this Agreement.
5. Procedure with Respect to Defaulted Program Financings.
(a) Defined terms:
"DEFAULT" shall mean the occurrence of a default by a Franchisee
under, or a failure by the Franchisee to comply with, any of the terms and
provisions of the Franchisee's Financing Documents; provided, however,
that a default by a Franchisee under such Franchisee's Financing Documents
which results solely because of a default with respect to documents or
agreements between such Franchisee (or its affiliates) and GE (or its
affiliates) relating to a loan which is not part of the Program, shall not
be a "Default" for purposes of this Agreement;
"DEFAULTED PROGRAM FINANCING" shall mean any Program Financing for
which a Default has occurred and either (x) such default remains uncured
beyond the expiration of any Standstill Period or (y) Franchisor has
waived its right to cure such default and have consented in writing to
acceleration of such Program Financing or the taking by GE of other
collection actions under such Program Financing; and
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"STANDSTILL PERIOD" shall mean, as to a particular Program
Financing, a thirty (30) day period commencing upon the giving of notice
to Franchisor by GE that a Default has occurred under the Financing
Documents for such Program Financing, provided that there shall be no
Standstill Period if a Default has occurred under such Program Financing
during the six (6) month period prior to the occurrence of such Default.
(b) Upon the occurrence of a Default, GE shall notify Franchisor of such
Default and a Standstill Period shall commence unless another Default by the
applicable Franchisee has occurred during the prior six (6) month period. GE
will not accelerate or take any other collection action against a defaulting
Franchisee as a result of a Default prior to the expiration of any applicable
Standstill Period unless Franchisor in writing consents to the taking of such
action. Franchisor shall have the right, but not the obligation, to cure the
Default on the Franchisee's behalf prior to the expiration of the Standstill
Period (without reduction of Franchisor's liability hereunder) or to repurchase
from GE the Program Financing for which the Default has occurred for an amount
which would be equal to the Net Repurchase Amount for such Program Financing.
(c) In the event that, prior to the expiration of the applicable
Standstill Period, Franchisor does not cure any Default or repurchase from GE
the Program Financing for which the Default has occurred, such Program Financing
shall automatically and without further action constitute a Defaulted Program
Financing, and GE shall have the right, in its sole discretion, to: (i) demand
payment by Franchisor to GE of the Net Repurchase Amount due with respect to
such Defaulted Program Financing if the then sum of the original funded
principal amount of all Program Financings funded by GE is less than
$10,000,000; (ii) demand payment by Franchisor to GE of the Debt Service
Payments due with respect to such Defaulted Program Financing (subject to
Franchisor's outstanding contingent liability under the Program); (iii) commence
collection actions against the defaulting Franchisee in order to establish an
Ultimate Net Loss; or (iv) enter into alternative arrangements with the
defaulting Franchisee, which may be in the form of interest only payments,
extension of payment dates, or other payment modifications determined by GE in
its sole discretion. No delay by GE in making an election under the preceding
sentence shall constitute a waiver of its rights hereunder. In the event that GE
has the right to demand payment of the Net Repurchase Amount due with respect to
a Defaulted Program Financing and does so demand such payment, Franchisor shall
pay such Net Repurchase Amount to GE, in immediately available funds, within ten
(10) business days after demand. In the event that GE demands payment of the
Debt Service Payments due with respect to a Defaulted Program Financing, (i)
Franchisor shall pay all such outstanding Debt Service Payments to GE, in
immediately available funds, within ten (10) business days after demand, and
(ii) thereafter on a going forward basis until Franchisor has paid the Ultimate
Net Loss with respect to such Defaulted Program Financing, Franchisor shall pay
such Debt Service Payments on a monthly basis (to the extent they have not been
paid by the applicable Franchisee) in immediately available funds, within ten
(10) business days after the date when due under the applicable Financing
Documents without GE being required to first make demand therefor (provided that
GE shall notify Franchisor to the extent such Debt Service Payments have been
made by the Franchisee and shall refund such Debt Service Payments to Franchisor
to the extent GE has received duplicate payments from Franchisee and
Franchisor). In the event that GE elects either to establish an Ultimate Net
Loss or to enter into alternative arrangements with the defaulting Franchisee,
Franchisor shall not be released from its obligations hereunder, and within ten
(10) business days after demand therefor by GE, Franchisor shall pay to GE the
Net Repurchase Amount (if otherwise required to do so under this Agreement), the
outstanding Debt Service Payments (and the going forward Debt Service Payments
as contemplated by the preceding sentence) or Ultimate Net Loss, as
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applicable, in connection with such Defaulted Program Financing. No Ultimate Net
Loss shall be established with respect to a Defaulted Program Financing for
which Franchisor has paid GE the Net Repurchase Amount.
(d) Upon establishment of an Ultimate Net Loss with respect to a
Defaulted Program Financing, GE shall notify Franchisor of the amount of such
Ultimate Net Loss, and Franchisor shall, within ten (10) business days after
such notice, pay such amount to GE in immediately available funds. In the event
that GE has been unable to establish an Ultimate Net Loss within eighteen (18)
months after the notice of Default with respect to a Defaulted Program Financing
and such inability is not the result of either a bankruptcy proceeding involving
the applicable Franchisor or an environmental condition affecting the
collateral, the Ultimate Net Loss for such Defaulted Program Financing shall be
equal to Zero Dollars ($0.00). To the extent that the Ultimate Net Loss
established with respect to a Defaulted Program Financing is less than the
amount of Debt Service Payments made by Franchisor with respect to such
Defaulted Program Financing (and not refunded to Franchisor as contemplated by
Section 5(c)), then GE shall refund the difference to Franchisor within ten (10)
business days after establishment of such Ultimate Net Loss.
(e) GE shall use its customary collection practices to collect amounts
due under Defaulted Program Financings, including any accelerated balance due
thereunder, to the same degree as if exercising remedies under defaulted loans
which are not part of the Program, including commencing legal proceedings,
accepting partial payments where appropriate, or extending or rewriting the
Program Financing, and, in each instant, consistent with good business judgment.
(f) Franchisor agrees to reasonably cooperate with GE in connection with
GE's collection efforts, including, without limitation (i) if Franchisor deems
it appropriate in its sole judgment, Franchisor shall have the right to assume
the operation of the Restaurant(s) of the defaulting Franchisee and the
defaulting Franchisee's obligations to GE, (ii) if Franchisor deems it
appropriate in its sole judgment, Franchisor may obtain a qualified replacement
franchisee acceptable to GE to assume the Defaulted Program Financing and pay
all arrears (notwithstanding any assumed Program Financing, Franchisor shall not
be relieved of its obligations to make any payments hereunder with respect to
such assumed Program Financing if a replacement Franchisee subsequently defaults
with respect to the Program Financing), and (iii) if any of the Restaurants are
acquired by GE from a defaulting Franchisee, whether by foreclosure or deed in
lieu of foreclosure, to assist GE in the remarketing of the Restaurants to the
next available Franchisee acceptable to GE and Franchisor.
(g) Upon the payment by Franchisor to GE of the full Net Repurchase
Amount under a Program Financing for which a Default has occurred, GE shall, if
requested by Franchisor, assign to Franchisor GE's interest in the Financing
Documents relating to such Program Financing. In addition to such assignment, GE
shall, with respect to any personalty involved in such assignment, deliver
assignments to Franchisor of any UCC financing statements in which GE is
identified as the secured party. If Franchisor elects to have a Defaulted
Program Financing for which it has paid the Net Repurchase Amount assigned to it
(whether at the time the Program Financing becomes a Defaulted Program Financing
or thereafter) and prior thereto, GE has commenced an action against the
Franchisee, so long as no claims have been asserted against GE in such action,
GE and Franchisor, as appropriate, shall amend the pleadings to substitute
Franchisor for GE and continue the action with counsel of Franchisor's choosing.
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Notwithstanding the change of counsel, if a claim has been made against GE in
such action, GE may continue to designate counsel to represent its interest in
such action at GE's sole expense.
6. Program Administration. GE and Franchisor shall each designate at its
principal executive offices a "PROGRAM ADMINISTRATOR" and a "PROGRAM
RELATIONSHIP MANAGER" to administer and implement the Program. The primary
responsibilities of the Program Administrators shall be to assist in the timely
processing of Application Packages and to communicate with each other in order
to facilitate the resolution of underwriting and closing issues as the same may
arise. The primary responsibilities of the Program Relationship Managers shall
be to (i) facilitate the implementation of the Program in coordination with the
Program Administrators, (ii) develop marketing strategies to solicit indentified
Franchisees who are eligible for the Program, and (iii) to facilitate
communications between the parties regarding Program issues and the resolutions
thereof. The parties shall each provide the other with the name and telephone
number of the Program Administrator and the Program Coordinator. The Program
Coordinators and Program Relationship Managers shall be available to assist with
the administration and implementation of the Program.
7. Independent Contractor Relationship. Neither Franchisor nor GE, nor any
officer, director, employee or other personnel of any of them, are agents of the
other. It is the intention of Franchisor and GE that the relationship of
Franchisor and GE to each other shall be that of an independent contractor.
Neither Franchisor nor GE nor any officer, director, employee or other person
associated with either of them shall use the name of the other party except in
connection with the Program or represent by his or her conduct or otherwise that
he or she is an agent or employee of the other party or authorized to speak for
or on behalf of the other party unless such action has previously been
authorized in writing by such party.
8. Representations, Warranties and Covenants.
(a) To induce GE to enter into this Agreement and provide financing to
Franchisees pursuant to the Program, Franchisor represents and warrants to, and
agrees and covenants with GE, knowing and intending that GE rely thereon, as
follows:
(i) Franchisor is a corporation duly authorized, validly existing
and in good standing under and pursuant to the laws of the State of Tennessee.
Franchisor is duly qualified and authorized to conduct business and is in good
standing as a foreign corporation in all jurisdictions where such qualification
is necessary. Franchisor has all requisite power and authority to own its
properties, carry on its business as now being or as proposed to be conducted,
execute and deliver this Agreement and perform all its obligations under this
Agreement and under each document and instrument executed and delivered by it
pursuant hereto.
(ii) Franchisor has the full corporate power, authority and legal
right to enter into, and has taken all corporate action necessary to authorize
the execution, delivery and performance of this Agreement and all other
documents and instruments otherwise required or contemplated hereunder and
thereunder and for the consummation of all transactions herein contemplated. The
execution of this Agreement and all such other documents and instruments and the
performance by Franchisor of its obligations hereunder and thereunder have been
duly authorized by all requisite corporate action on the part of Franchisor and
do not and will not (i) violate or conflict with any provision of the charter or
by-laws of Franchisor, (ii) conflict with, result in a breach of, constitute a
default of accelerate any payment pursuant, to the provisions of any instrument,
document or agreement to which Franchisor is a party or by which any of its
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properties are bound, or (iii) violate any law, rule or regulation applicable to
Franchisor or any order, writ, injunction or decree of any court, governmental
authority or arbitrator applicable to Franchisor.
(iii) No authorization, approval or consent of, and no filing or
registration with, any court, governmental authority or third party is or will
be required in connection with the execution, delivery or performance of this
Agreement by Franchisor or the validity or enforceability hereof or any other
document or instrument required or contemplated hereby. There is no claim,
action, litigation, proceeding before any court, governmental body or agency
pending or, to the best of Franchisor's knowledge, threatened, against
Franchisor which would materially adversely affect Franchisor's obligations.
(iv) This Agreement constitutes the legal, valid and binding
obligation of Franchisor, fully enforceable against Franchisor in accordance
with its terms.
(v) Franchisor hereby covenants and agrees that, so long as there is
any outstanding Program Financing under this Agreement, Franchisor shall
immediately notify GE of the institution of any litigation that, if adversely
determined, could materially adversely affect Franchisor's obligations
hereunder.
(b) To induce Franchisor to enter into this Agreement and to encourage its
Franchisees to obtain financing pursuant to the Program, GE represents and
warrants to, and agrees and covenants with Franchisor, knowing and intending
that Franchisor rely thereon, as follows:
(i) GE is a corporation duly organized, validly existing and in good
standing under and pursuant to the laws of the State of Delaware. GE is duly
qualified and authorized to conduct business and is in good standing as a
foreign corporation in all jurisdictions where such qualification is necessary.
GE has all requisite power and authority to own its properties, carry on its
business as now being or as proposed to be conducted, execute and deliver this
Agreement and perform all its obligations under this Agreement and under each
document and instrument executed and delivered by it pursuant hereto.
(ii) GE has the full corporate power, authority and legal right to
enter into, and has taken all corporate action necessary to authorize the
execution, delivery and performance of this Agreement and all other documents
and instruments otherwise required and contemplated hereunder and thereunder and
for the consummation of all transactions herein contemplated. The execution of
this Agreement and all such other documents and instruments and the performance
by GE of its obligations hereunder and thereunder have been duly authorized by
all requisite corporate action of the part of GE and do not and will not (i)
violate or conflict with any provision or the charter or by-laws of GE, (ii)
conflict with, result in the breach of, constitute a default or accelerate any
payment pursuant to the provisions of any instrument, document or agreement to
which GE is a party or by which any of its properties are bound or (iii) violate
any law, rule or regulation applicable to GE or any order, writ, injunction or
decree of any court, governmental authority or arbitrator applicable to GE.
(iii) No authorization, approval or consent of, and no filing or
registration with, any court, governmental authority or third party is or will
be required in connection with the execution, delivery or performance of this
Agreement by GE or the validity or enforceability hereof or any other document
or instrument required or contemplated hereby. There is no claim, action,
litigation, proceeding before any court, governmental body or agency pending or,
to the
10
best of GE's knowledge, threatened, against GE which would materially adversely
affect GE's obligations.
(iv) This Agreement constitutes the legal, valid and binding
obligation of GE, fully enforceable against GE in accordance with its terms.
9. Notices of Franchisee Defaults. Franchisor hereby covenants and agrees
that Franchisor shall notify GE of a default under the franchise agreement
relating to any Restaurant in the Program within 30 days of such default;
provided that Franchisor shall not be obligated to notify GE of any defaults
that have been cured before such 30 day period expires or any non-monetary
defaults of which Franchisor does not have actual knowledge.
10. Damages Limitation. In no event shall GE or Franchisor be liable to the
other under this Agreement or any other documents executed in connection
herewith, or otherwise, for any lost profits or any special, indirect,
incidental, punitive, exemplary or consequential damages for any reason
whatsoever. Except as provided above, nothing contained herein is intended to
limit any party's right to recover damages from the other for breach of this
Agreement to any extent permitted by applicable law.
11. Term of Agreement; Termination. This Agreement shall terminate on May 31,
2006, unless GE and Franchisor mutually agree to extend such date (such date, as
may be extended, being hereinafter referred to as the "Outside Date").
Notwithstanding the foregoing, (a) each of the parties shall have the right to
terminate this Agreement prior to the Outside Date upon 90 days prior written
notice to the other, and (b) GE shall have the right to terminate this Agreement
prior to the Outside Date upon 30 days prior written notice to Franchisor if
there has been a material adverse change in the financial condition of
Franchisor from the financial condition of Franchisor on the Commencement Date.
Franchisor understands and acknowledges that any Application Packages received
by GE on or after the date of termination shall not be subject to this Agreement
and shall be subject to GE's standard underwriting guidelines and business terms
as GE determines in GE's sole discretion. Notwithstanding the termination of
this Agreement, the applicable provisions of this Agreement shall remain in full
force and effect with respect to (x) any outstanding Program Financing, (y)
Franchisor's obligation to make payments to, or purchases from, GE pursuant to
the terms of this Agreement, and (z) any obligations of GE or Franchisor with
respect any Program Financing entered into with a Franchisee prior to the
termination of this Agreement.
12. Notices.
Any notice required under this Agreement shall be deemed sufficient if
sent by (a) the United States mail, registered or certified mail, postage
prepaid, return receipt requested, addressed to the addresses set forth at the
beginning of this Agreement or to such other address as directed by the parties
during the term of this Agreement, or (b) personal delivery, or (c) nationally
recognized overnight courier. Any such notice shall be deemed to have been given
if sent by mail, on the third business day after the day duly deposited in the
mail, or in the case of personal delivery, on the day actually received or in
the case of overnight courier, on the day after duly delivered to the courier.
All notices shall be sent to the addresses and to the attention of the person
set forth below, or to such other address as either party may notify to the
other in writing from time to time:
11
As to GE: GE CAPITAL FRANCHISE FINANCE CORPORATION
17207 N. Perimeter Drive
Scottsdale, AZ 85255
Attention: Mike Record
As to Franchisor: O'CHARLEY'S INC.
3038 Sidco Drive
Nashville, TN 37204
Attention: Zeb Hastings
13. Assignment. Neither party may assign or transfer, or attempt to assign or
transfer, all or any part of this Agreement except in connection with the sale
of all or a substantial part of the assets of the assigning party, in which sale
the assignee agrees to assume all of the obligations of the assignor, provided
that, notwithstanding any such arrangement and assignment and assumption, the
party assigning shall continue to be liable to the same extent as if such
assignment had not occurred. Notwithstanding the foregoing, GE may assign its
rights under the Financing Documents and grant a security interest therein or in
the Restaurants and/or the improvements in connection with any Program
Financing. This Agreement is binding upon and shall inure to the benefit of the
parties and their respective successors and permitted assigns.
14. Entire Agreement. This Agreement, including the Exhibits hereto,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between the
parties with respect to such matter. Neither GE nor Franchisor shall be bound
by, nor shall they be deemed to have made, any representation, warranty or
covenant, except as contained herein. Any amendment or modification of this
Agreement must be in writing and signed by both parties hereto.
15. Governing Law and Waiver of Trial by Jury. This Agreement shall be deemed
fully executed and performed in the State of Arizona and shall be governed by
and construed and enforced in accordance with the laws of the State of Arizona,
without giving effect to the conflicts of law principles thereof. TO THE EXTENT
PERMITTED BY LAW, THE PARTIES WAIVE TRIAL BY JURY IN ANY ACTION HEREUNDER.
16. Broker or Finder. GE and Franchisor represent to each other that no person
or persons assisted in or brought about the negotiation and execution of this
Agreement in the capacity of broker, agent or finder and that no broker, agent
or finder has acted on its behalf in connection with the transactions
contemplated hereunder.
17. Confidentiality. During the existence of this Agreement and for a period
of three years thereafter, GE and Franchisor shall treat as confidential the
terms, conditions and provisions of this Agreement, the name of each Franchisee
and the financial information of each Franchisee whether or not GE enters into a
Program Financing with such Franchisee, the financial terms of the Program
Financing, and such other information as designated by GE or Franchisor as
confidential, and GE and Franchisor shall not use such information except in
connection with the purposes of this Agreement.
18. No Third Party Beneficiaries. This Agreement is entered into solely for
the benefit of GE and Franchisor and their respective successors and permitted
assigns and no other person, firm,
12
entity or corporation (including, without limitation, any Franchisee) shall have
any right, benefit or interest under or because of the existence of this
Agreement.
19. Indemnification. Each of Franchisor and GE agrees to indemnify and hold
harmless the other and their respective affiliates, parent, subsidiaries,
employees, officers, directors, agents, representatives, attorneys and
consultants and their respective successors and assigns (each an "Idemnified
Party") from and against any and all claims, losses, liabilities, demands and
expenses whatsoever incurred by an Indemnified Party (including, without
limitation, reasonable attorney's fees and costs) arising out of, or as a result
of (a) the breach of any representation, warranty or covenant made by Franchisor
or GE, as the case may be, hereunder, (b) any material misrepresentation and/or
false or misleading statement made by Franchisor or GE, or their respective
agents or employees, as the case may be, to Franchisees with respect to the
Program or any Program Financing or in connection with obtaining and delivering
Application Packages or the execution of any Financing Document, or (c) the
violation by Franchisor or GE, as the case may be, of any federal or state law,
rule or regulation, including, in the case of Franchisor, any law, rule or
regulation regarding franchising which affects GE's ability to enforce the
Financing Documents. The indemnity obligations under this Agreement or any
document executed in connection herewith shall survive the termination of this
Agreement. In addition, payment of any loss under this Section shall not relieve
Franchisor of its other obligations under this Agreement, including, without
limitation, pursuant to Section 5 hereof.
20. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
WINTESS/ATTEST: GE CAPITAL FRANCHISE FINANCE
CORPORATION, a Delaware corporation
_____________________ By: /s/ Mike Record (SEAL)
--------------------------------
Name: Mike Record
--------------------------
Title: Sr. Vice President
-------------------------
O'CHARLEY'S INC., a Tennessee corporation
_____________________ By: /s/ Gregory L. Burns (SEAL)
--------------------------------
Name: Gregory L. Burns
--------------------------
Title: Chairman and Chief
Executive Officer
-------------------------
EXHIBIT A
GE CAPITAL RESTAURANT PROGRAM TERM SHEET
We are pleased to submit the following financing proposal. THIS PROPOSAL IS
SUBJECT TO REVIEW AND APPROVAL BY GE CAPITAL FRANCHISE FINANCE CORPORATION ("GE
CAPITAL"). FINAL TERMS AND CONDITIONS WILL BE SUBJECT TO MUTUALLY SATISFACTORY
DOCUMENTATION.
GE Capital may provide qualified franchisees of O'Charley's Inc. ("OCI") with a
Financing Program ("Program") on the following terms and conditions:
LOAN PURPOSE: To provide loans to eligible franchisees to fund (i) the
acquisition, construction and installation of the land,
building and equipment of new OCI restaurant facilities or
(ii) the acquisition from OCI of existing restaurant
facilities, for the following franchise brand:
- O'Charley's
Eligible Program loans will include construction loans
combined with permanent loans, and permanent loans (without
construction loans) for newly constructed restaurants or
existing restaurants acquired from OCI.
ELIGIBILITY: To qualify for the Program, franchisees must meet the
following criteria:
- Approved franchisee applicant or existing franchisee as
confirmed by OCI
- Franchisee in good standing with OCI as confirmed by OCI
- Current with all advertising/supplier co-ops
- No bankruptcies
- Satisfactory personal and corporate credit rating
- Financial requirements, as outlined in Program summary
sheet, are achieved.
- Franchise Agreement term equal to or exceeding loan term
- Lease term equal to or exceeding loan term
- OCI approved cost breakdown submitted for each request
- Proforma income statement provided for each new store.
COVENANTS: CORPORATE FIXED CHARGE COVERAGE RATIO
For the twelve month period immediately preceding the second
anniversary of a restaurant opening, a borrower and its
affiliates must meet a minimum of a 1.15X FCCR on a
consolidated basis. For the twelve month period immediately
preceding the third anniversary of a restaurant opening and
for each twelve month period thereafter, a borrower and its
affiliates must meet a
minimum of a 1.20X FCCR on a consolidated basis. If the
applicable FCCR is not met on or after the third year, the
borrower must pay down the loan balances to an amount that
would meet the FCCR requirement for the prior year. The FCCR
calculations will exclude any O'Charley's restaurant that has
been open for less than two years. All FCCR calculations will
be done on a post-compensation/distribution basis.
EFFECTIVE FUNDED DEBT TO EBITDAR RATIO
For the twelve month period ending on the second anniversary
of a restaurant opening, a borrower and its affiliates must
maintain, on a consolidated basis, an Effective Funded Debt to
EBITDAR ratio not to exceed 8:1. For the twelve month period
ending on the third anniversary of a restaurant opening, a
borrower and its affiliates must maintain, on a consolidated
basis, an Effective Funded Debt to EBITDAR ratio not to exceed
7:1. For the twelve month period ending on the fourth
anniversary of a restaurant opening, and for each twelve month
period thereafter, a borrower and its affiliates must
maintain, on a consolidated basis, an Effective Funded Debt to
EBITDAR ratio not to exceed 6.5:1.
"Effective Funded Debt" means (a) senior debt plus (b)
operating lease expense divided by .11.
PROGRAM SIZE: Not to exceed $75,000,000
LOAN ADVANCE: GE Capital will advance 80% of the total eligible Program
costs, up to $2,500,000 per location. Loans will be funded in
draws subsequent to OCI's approval of the eligible loan amount
and subject to satisfactory documentation.
INTEREST RATE: A borrower will have the option to choose a Variable Rate with
an Option to Fix or a Fixed Rate to be determined at the time
the loan closes. A borrower must make this choice at the time
the loan application is submitted to GE Capital. The rates
will be determined as follows:
REAL ESTATE LOANS:
Fixed At Closing: 335 basis points over the Ten (10) Year U.S.
Dollar Interest Rate Swap.
Variable with the Option to Fix: 350 basis points over the 30
Day LIBOR rate with the option to fix at 335 basis points over
the Ten (10) Year U.S. Dollar Interest Rate Swap.
EQUIPMENT LOANS:
Fixed At Closing: 335 basis points over the Five (5) Year U.S.
Dollar Interest Rate Swap.
2
Variable with the Option to Fix: 350 basis points over the 30
Day LIBOR rate with the option to fix at 335 basis points over
the Five (5) Year U.S. Dollar Interest Rate Swap.
TERM: REAL ESTATE LOANS: Fifteen (15) years, fully amortizing
EQUIPMENT LOANS: Seven (7) years, fully amortizing
REPAYMENT: Level monthly debt service payments of principal and interest
in arrears. Payments for Variable Rate loans will be adjusted
every twelve (12) months based on remaining outstanding
principal, remaining loan term, and the then current Variable
rate.
PREPAYMENT: Prepayment of the loans in full will be allowed with the
payment, if applicable, of fees and breakage costs as
described below. Except as set forth below, no partial
prepayments will be allowed. A borrower must provide GE
Capital thirty (30) days prior written notice of the date of
prepayment:
REAL ESTATE LOANS:
Number of Months Applicable Percentage
Remaining In Term Of Amount Prepaid
- ----------------- ---------------------
180-169 3.0%
168-157 2.0%
156-145 1.0%
Thereafter 0.0%
EQUIPMENT LOANS:
Number of Months Applicable Percentage
Remaining In Term Of Amount Prepaid
- ----------------- ---------------------
84 - 73 3.0%
72 - 61 2.0%
60 - 49 1.0%
Thereafter 0.0%
In addition to the above prepayment fees and in the event the
Fixed At Closing rate is in effect, or the Variable Rate is
converted to a Fixed rate, A borrower may be subject to a
breakage fee to offset any adverse impact to GE Capital of any
decline in interest rates.
A borrower may make a partial prepayment, and will not be
subject to any prepayment or breakage fees, if such prepayment
is made in order to bring the borrower into compliance with
the applicable FCCR requirement.
3
FEES: REAL ESTATE LOANS: 1.0% of the loan balance for each
transaction
EQUIPMENT LOANS: 1.0% of the loan balance for each
transaction
DOCUMENTATION: OCI and GE Capital will mutually agree on documentation to be
used for the Program. OCI will execute a Program Agreement
Addendum for each Program loan for the purpose of approving
the subject loan's inclusion in the Program.
SECURITY: A first deed of trust or mortgage in the fee simple or
leasehold interest in any real property being financed and a
first security interest in the equipment being financed. A
borrower will be required to sign the following documents:
Deed of Trust/Mortgage, Assignment of Rents and Leases,
promissory notes, security agreements, personal guarantees and
UCC-1 financing statements.
PERSONAL
GUARANTEE: All principals of a borrower will personally guarantee each
loan to such borrower; provided, however, store level managers
owning less than 10% of the ownership interests in the
borrower shall not be required to personally guarantee a loan
if GE Capital determines that the borrower and/or any
guarantors of the loan (other than OCI) have sufficient
restaurant operating experience.
RECOURSE: In consideration for GE Capital providing the Program, (i) OCI
shall provide an Ultimate Net Loss guarantee to GE Capital in
an amount equal to the lesser of twenty percent (20%) of the
sum of the original funded principal balances of all Program
loans and fifteen million dollars ($15,000,000), and (ii) OCI
shall purchase defaulted Program loans from GE Capital, as
contemplated below, if the then sum of the original funded
principal balances of all Program loans is less than
$10,000,000. For each defaulted loan, "Ultimate Net Loss" is
defined as the sum of the outstanding loan principal, accrued
interest at the default rate and any third party expenses
associated with GE Capital's handling of the subject defaulted
loan, less all net proceeds received from the remarketing of
the collateral and all net proceeds received from any
guarantor other than OCI. To the extent that OCI makes any
debt service payments with respect to a defaulted loan as
contemplated by the next paragraph, the outstanding loan
principal and accrued interest shall not include the principal
and interest paid by OCI. OCI's liability under the Program
will not reduce with the amortization of loans under the
Program.
GE Capital shall give OCI written notice of default by any
franchisee covered by a Program Agreement Addendum. In the
event that a Program loan shall have continued in default for
thirty (30) days after notice to OCI, GE Capital shall have
the
4
right, but not the obligation, to demand: (i) if the then sum
of the original funded principal balances of all Program loans
is less than $10,000,000, that OCI purchase such defaulted
loan from GE Capital by paying GE Capital an amount equal to
the sum of the outstanding loan principal and accrued interest
at the default rate on such defaulted loan; or (ii) that OCI
pay GE Capital all outstanding debt service payments due with
respect to such defaulted loan and all future debt service
payments as and when due under the loan documents until such
time as the Ultimate Net Loss has been established, up to an
amount equal to OCI's then outstanding contingent liability
under its Ultimate Net Loss guarantee. In lieu of accelerating
a defaulted loan and requesting OCI to purchase such loan (if
the then sum of the original funded principal balances of all
Program loans is less than $10,000,000) or make such debt
service payments, GE Capital may elect to extend alternative
arrangements (e.g. interest only payments or extended terms)
to the defaulted franchisee. Provided, however, by extending
an alternative arrangement, GE Capital will not release OCI
from its obligations under the Program. If the subject loan
remains in default GE Capital will retain its right to request
OCI to: (i) purchase the subject loan if the then sum of the
original funded principal balances of all Program loans is
less than $10,000,000; or (ii) pay such debt service payments
to the extent OCI still has outstanding contingent liability
under its Ultimate Net Loss guarantee. OCI shall have the
right to purchase from GE any Program loan that goes into
default by paying GE an amount equal to the sum of the
outstanding loan principal and accrued interest at the default
rate on such defaulted loan.
GE Capital will be responsible for the establishment of the
Ultimate Net Loss on a defaulted Program loan, provided that
no Ultimate Net Loss will be established with respect to a
defaulted Program loan which is purchased by OCI from GE
Capital. GE Capital will notify OCI when the Ultimate Net Loss
is established. To the extent that OCI still has outstanding
contingent liability under its Ultimate Net Loss guarantee,
OCI will pay GE Capital the Ultimate Net Loss. If the amount
previously paid by OCI to GE Capital on the defaulted account
exceeds the Ultimate Net Loss or exceeds the remaining amount
of OCI's contingent liability under its Ultimate Net Loss
guarantee, GE Capital will reimburse such difference to OCI.
If GE Capital has been unable to establish an Ultimate Net
Loss on a defaulted Program loan within 18 months of notice of
default and such inability is not the result of either a
bankruptcy proceeding involving the applicable borrower or an
environmental condition affecting the collateral, the Ultimate
Net Loss will be deemed to be $0 and GE Capital will return to
OCI any funds which it had previously paid to GE Capital
5
because of the default of the subject loan (provided that this
sentence shall not apply with respect to a defaulted Program
loan which is purchased by OCI from GE Capital).
OCI's contingent liability under its Ultimate Net Loss
guarantee will be reduced by (i) the aggregate amount of debt
service payments and Ultimate Net Losses paid by OCI to GE
Capital, (ii) 20% of the funded principal amount of any
defaulted Program loan for which OCI has paid GE an amount
equal to the sum of the outstanding loan principal and accrued
interest at the default rate on such defaulted loan, and (iii)
20% of the funded principal amount of any Program loan which
has been removed from the pool as contemplated by the next
paragraph. OCI's requirement to pay GE Capital debt service
payments on defaulted Program loans and to pay GE Capital the
Ultimate Net Loss on defaulted Program loans will be limited
to the amount of OCI's contingent liability outstanding under
its Ultimate Net Loss guarantee at the time of GE Capital's
request for such payments. OCI's requirement to purchase
defaulted Program loans from GE Capital (if the then sum of
the original funded principal balances of all Program loans is
less than $10,000,000) shall not be subject to the contingent
liability cap for the Ultimate Net Loss guarantee.
If a borrower has one store in the Program, the corresponding
Program loan will be removed from the pool and OCI will not
have any liability with respect to such loan when the third
anniversary of the store opening occurs. If a borrower has two
stores in the Program, the corresponding Program loans will be
removed from the pool and OCI will not have any liability with
respect to such loans as of the later to occur of (i) the
second anniversary of the opening of the second store or (ii)
the third anniversary of the opening of the first store. If a
borrower has three stores in the Program, the corresponding
Program loans will be removed from the pool and OCI will not
have any liability with respect to such loans as of the later
to occur of (i) the 18 month anniversary of the opening of the
third store or (ii) the third anniversary of the opening of
the first store. In each case, removal of a Program loan from
the pool and OCI's release of liability with respect to such
Program loan shall be subject to satisfaction of the following
conditions:
- During the time that the particular borrower has
had loans the pool, such borrower shall not have
been in default with respect to any of its
obligations to GE Capital and no debt service
payments shall have been made by OCI to GE Capital
with respect to such borrower's loans (provided
that the foregoing shall not include debt service
payments made by such
6
borrower from the proceeds of any working capital
loan from OCI permitted under the Program).
- During the time that the particular borrower has
had loans the pool, such borrower shall have been
in compliance with the FCCR and Effective Funded
Debt to EBITDAR covenants.
MAXIMUM
BORROWINGS: GE Capital will have the option of limiting a borrower's or
borrowing group's exposure under the Program to (i) $2,500,000
per location and (ii) $7,500,000 in total borrowings.
FRANCHISEE
DEFAULTS: OCI will notify GE Capital of a default under the franchise
agreement relating to any restaurant in the Program within 30
days of the default; provided that OCI shall not be obligated
to notify GE Capital of any defaults that have been cured
before such 30 day period expires or any non-monetary defaults
of which OCI does not have actual knowledge. The borrower will
consent to such notification and any default under the
franchise agreement which is not cured within the applicable
grace period (if any) will be an event of default under the
corresponding Program loan.
PROGRAM
TERMINATION: Either OCI or GE Capital, subject to 90 days prior written
notice, can terminate the Program with respect to loans not
yet committed to by GE Capital. Also, if there has been a
material adverse change in the financial condition of OCI from
the financial condition of OCI on the commencement date of the
Program, GE Capital can terminate the Program with respect to
loans not yet committed to by GE Capital on 30 days prior
written notice. Regardless of any termination, OCI's guarantee
will remain in place as to all committed or originated loans
until such time as those loans are paid in full. If the
Program is not otherwise terminated, the Program shall
terminate on May 31, 2006 at which time the Program may be
extended or a new Program may be established upon the consent
of OCI and GE Capital. All loans will be subject to approval
at GE Capital's sole discretion.
7
PROGRAM SUMMARY SHEET
Financed amount: Maximum of 80% of acceptable costs
Personal Guarantee Personal Guarantee of all principals of a
borrower; provided, however, store level managers
owning less than 10% of the ownership interests in
the borrower shall not be required to personally
guarantee a loan if GE Capital determines that the
borrower and/or any guarantors of the loan (other
than OCI) have sufficient restaurant operating
experience.
O'Charley's UNL Guarantee: The lesser of 20% of the original balance of the
sum of all Program loans and $15,000,000.
Real Estate Loan: Fully amortizing over 15 years
Equipment Loan: Fully amortizing over 7 years.
Franchise Agreement: 15 years with at least one option to renew
O'Charley's (or 3rd GE will take a leasehold mortgage, subject to
party) owns land: acceptable review of the Lease Agreement by GE
Capital outside counsel, and if applicable,
receipt of a satisfactory estoppel certificate
from the 3rd party.
Franchisee Leases GE will require a satisfactory landlord's waiver
the premises: from the landlord.
FCCR: 1.15X 2nd year and 1.20X ongoing from and after
3rd year. Tested on a trailing twelve month basis.
Additional Covenant: Effective Funded Debt to EBIDTAR ratio of less
than 8:1 2nd year, 7:1 3rd year and 6.5:1 ongoing
from and after 4th year. Tested on a trailing
twelve month basis.
Other Debt & Payments: Shareholder, Mezzanine and OCI debt to be deeply
subordinated to GE Capital. OCI debt can be
secured by lien which is deeply subordinated to GE
Capital.
Management Fees: Deeply subordinated to GE Capital.
Credit Enhancement Fees: Deeply subordinated to GE Capital.
8
EXHIBIT B
LOAN APPLICATION
[see attached]
LOAN
APPLICATION
PROCESS
GE COMMERICAL FINANCE
FRANCHISE FINANCE
IMAGINATION AT WORK [GE LOGO]
[GE LOGO] GE FRANCHISE FINANCE LOAN PROCESS
Welcome to GE Franchise Finance. All of us at GE thank you for choosing us as
your lending partner.
We want you to know that we will process and service your loan with the same
level and enthusiasm with which we won your business. Our objective is to
approve and fund your loan as quickly as possible. To do this, we need your help
and cooperation.
PROCESS OVERVIEW
Approx 15 - 20 business Approx 15 - 45 business
days after receipt of days after approval
complete package (depending on the type of
transaction)
PRE-APPLICATION APPLICATION DEAL REVIEW CLOSING/FUNDING
- - Identify Site - Application Materials - GEFF Review application to - Loan Documents Issued
(See Loan Application Checklist determine if complete
- - Gather Information on the next page and/or proposal - Promissory Note
(See Loan Application for a complete list of items - Customer contact: - Security Agreement
Checklist) required) introduction/questions - Landlord Waiver/
and answers regarding deal. Estoppel (if applicable)
- - Contact GE Account Rep - Complete Application May request additional - Title/Survey (RE only)
for a Financing Proposal information at this time - Mortgage doc's (RE only)
- Submit required items/documents if necessary - Environmental (RE only)
with signed Financing Proposal - Signed Lease Agreement
to GEFF - Transaction reviewed by - UCC Searches
GEFF Risk Department
- Loan Documents Executed
- Credit decision
- Initial Funding
[GE LOGO] GE FRANCHISE FINANCE LOAN APPLICATION CHECKLIST
To ensure GE Franchise Finance provides a credit decision in a timely fashion
please carefully follow all instructions throughout the application package and
Financing Proposal letter. Completed application packages must include the
following items listed under the Application Materials section. If any of the
following items are missing, the application will be deemed incomplete and will
not be processed until all the required items are submitted to GE Franchise
Finance.
Included with Previously
Application Materials: Package Submitted Comments
- ---------------------- ------------- ---------- --------
Signed Financing Proposal with Deposit Check
Completed Business Loan Application Form
Business Financial Statements for existing operations:
- Last 2 years fiscal year end financial statements
(units & corporate)
- Year-to-date financial statements w/comparable prior year
(units & corp.)
- Last 2 years financial statements for all affiliated
companies & properties (if your ownership exceeds 50%
in those entities)
Authorization to Release Information, signed by each guarantor
(included in application)
Personal Financial Statement for each guarantor (included in
application)
Pro-forma Income Statement for 1st year [illegible]
Information Required for Acquisitions
- -------------------------------------
Letter of Intent or Purchase and Sale Agreement
Business Financial Statements for operations being refinance
or acquired
- Last 2 years fiscal year end financial statements
(unit level) as available
- Year-to-date financial statements w/comparable prior
year (unit level) as available
Information Not Required to Begin Underwriting but Prior to Approval
- --------------------------------------------------------------------
Last 2 years Personnel Tax Returns for the guarantors (including
schedules, attachments and K1's) Must be a signed copy
Copy of leases on the locations being financed as available
Owner's background/resume/biography (for new customers)
Site Information and Demographics (for new locations only)
Other Items as requested in the Financing Proposal
Include income statements and balance sheets. If financial
statements are not audited or reviewed please provide last two
years tax returns, must be signed.
* Include income statements and balance sheets. If financial statements are not
audited or reviewed, please provide last two years tax returns, must be
signed.
[GE LOGO]
GE FRANCHISE FINANCE
BUSINESS LOAN APPLICATION
CREDIT APPLICATION
Note: Please print or type all information. Use additional sheets if necessary.
Borrower's Name (Exact Legal Business Name) ____________________________________
Mailing Address ________________________________________________________________
City _____________________ State _____________________ Zip _____________________
Telephone ( ) _____________ Mobile Phone ( ) _____________ Fax ( ) _____________
E-Mail Address _________________ Number of stores operated _____________________
Entity Type (circle one): Sub-S C-Corp LLC Partnership Sole Proprietor
Other____
OWNERSHIP STRUCTURE
Guarantor
Ownership % [Y/N]
1. Name ___________________ _________ ( ) Y ( ) N Telephone ( ) _____________
Address _____________________________ Social Security # _________
2. Name ___________________ _________ ( ) Y ( ) N Telephone ( ) _____________
Address _____________________________ Social Security # _________
3. Name ___________________ _________ ( ) Y ( ) N Telephone ( ) _____________
Address _____________________________ Social Security # _________
4. Name ___________________ _________ ( ) Y ( ) N Telephone ( ) _____________
Address _____________________________ Social Security # _________
Do any of the aforementioned owners have an ownership interest in other
companies?*
(If yes, please provide name(s) of those companies.)
Owner #: Name(s) of companies:
1. [ ] Yes [ ] No ___________________________________________________________
2. [ ] Yes [ ] No ___________________________________________________________
3. [ ] Yes [ ] No ___________________________________________________________
4. [ ] Yes [ ] No ___________________________________________________________
*The Patriot Act of 2001, requires lenders such as GE Franchise Finance to
understand completely the people and entities to which they lend money. As part
of this, GE must exercise adequate due diligence on the borrowing entity,
guarantors and any companies affiliated with the borrowing entity or guarantors.
OUTLINE OF LOAN REQUEST - FOR ACQUISITION/REFINANCING
* If this information has previously been provided please proceed to the
Authorization to Release.
For new store development, please proceed to the next page.
OTHER (NON-FINANCABLE COSTS,
REAL ESTATE UNLESS OTHERWISE NOTED)
Number of Fee* Sites being purchased/refinanced ________________ Working Capital ___________
Number of Ground Lease** Sites being purchased/refinanced ________________ Training Expenses ___________
Purchase amount of Real Estate (Fee Sites + Ground Lease Sites) ________________ Deposits ___________
FURNITURE, FIXTURES & EQUIPMENT Legal Expenses ___________
Total number of Sites being purchased/refinanced ________________ Closing Costs ___________
Franchise Fees/Transfer Fees ________________ Total Acquisition/
Refinance Amount: ___________
Purchase amount of FF&E and Business Value ________________
Total (Franchise Fee's + Purchase amount of FF&E and
Business Value) ________________
* The company will own land, building and equipment at these locations
** The company will own building and equipment at these locations
LOAN/EQUITY INFORMATION
Equity Source Amount
------------- ------
Loan Amount - Real Estate _______________ Name: _______________ _______________
Loan Amount - Equipment _______________ Name: _______________ _______________
Equity _______________ Name: _______________ _______________
Soft Costs/Non-Financable Costs _______________ Name: _______________ _______________
SITE INFORMATION
PLEASE PROVIDE ADDRESSES AND STORE OPENING DATES OF ALL RESTAURANTS BEING
ACQUIRED/REFINANCED: IF YOU HAVE MORE THAN 9 LOCATIONS, PLEASE ATTACH A FULL
LIST OF THE ADDRESSES, PROPERTY TYPES AND STORE OPENING DATES ON A SEPARATE
PIECE OF PAPER.
Property Type
(Fee, Ground
Address of location(s): Lease, FF&E only) Store opening date
------------------------ ----------------- ------------------
1.____________________________ __________________ ________________________
2.____________________________ __________________ ________________________
3.____________________________ __________________ ________________________
4.____________________________ __________________ ________________________
5.____________________________ __________________ ________________________
6.____________________________ __________________ ________________________
7.____________________________ __________________ ________________________
8.____________________________ __________________ ________________________
9.____________________________ __________________ ________________________
OUTLINE OF LOAN REQUEST - FOR NEW STORE DEVELOPMENT
CAPITAL EXPENDITURE BUDGET
OTHER: (NON-FINANCABLE COSTS,
REAL ESTATE BUDGETED AMOUNT UNLESS OTHERWISE NOTED) BUDGETED AMOUNT
- ----------- --------------- ----------------------------- ---------------
Land ________________ Working Capital ________________
Building ________________ Training Expenses ________________
Site Work ________________ Deposits ________________
Architectural/Engineering/Permitting ________________ Legal Expenses ________________
Other: ______________________________ ________________ Closing Costs ________________
Total ________________ Other: ______________________ ________________
Total Project Cost: ________________
FURNITURE, FIXTURES & EQUIPMENT
- -------------------------------
Franchise Fee ________________
POS ________________
Signage ________________
Equipment ________________
Smallwares ________________
Business License ________________
Other: ____________ ________________
Total ________________
LOAN/EQUITY INFORMATION
Loan Information Equity Source Amount
---------------- ------------- ------
Loan Amount - Real Estate _____________ Name: __________________ ________________
Loan Amount - Equipment _____________ Name: __________________ ________________
Equity _____________ Name: __________________ ________________
Soft Costs/Non-Financable Costs _____________ Name: __________________ ________________
SITE INFORMATION
If you have information from third party sources, i.e. realtor, etc. please
include with the application and skip this section.
Address of location(s):
GENERATORS
How does the location generate sales?
For example: lunchtime office workers, drive home from work, schools, catering,
shopping center/strip mall.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[GE LOGO]
GE FRANCHISE FINANCE
AUTHORIZATION TO RELEASE INFORMATION
______________________ ("Applicant") has applied to GE Capital Franchise
Finance Corporation ("GE") for equipment and/or real estate financing.
As such, each of the undersigned (each, a "Principal" and collectively,
the "Principals") hereby authorizes its bank(s), creditor(s) and
supplier(s) to release to GE all information requested by GE regarding any
depository, loan and/or other credit account of the Principals, the
Applicant and/or its affiliates including, without limitation, financial
information. This Authorization to Release Information shall also serve as
an authorization for GE to obtain a personal credit report on each
Principal and business credit reports on the Applicant and its affiliates.
The following is a listing of all of applicable affiliates of the
Applicant (please print legal name and any dba):
________________________________ ________________________________
________________________________ ________________________________
Additionally, during the term of any loan from GE to Applicant, including
any extensions or renewals thereof, the undersigned hereby authorizes GE
to obtain from the Applicant's franchisor any information, including
without limitation, financial information and information regarding the
status of the franchise agreement(s) between Applicant and its franchisor.
Each Principal releases its bank(s), creditor(s), supplier(s) and
franchisor from any and all liability with respect to the release of any
such information requested hereunder.
A facsimile signature of this Authorization to Release Information shall
be deemed an original signature.
By: _______________________________ Date: ___________________________
Printed Name: _____________________
By: _______________________________ Date: ___________________________
Printed Name: _____________________
[GE LOGO]
GE FRANCHISE FINANCE
CONFIDENTIAL
FINANCIAL STATEMENT
AS OF: _______________
DATE
If you have a personal financial statement already prepared, please sign
this form and attach your existing statement.
[ILLEGIBLE]
[SCHEDULES ON REVERSE SIDE]
SCHEDULES
[ILLEGIBLE]
For Existing Operations and/or stores being purchased
Lease Schedule Summary [Please list all capital lease amounts below]
Type (Ground Lease Lease Inception Original Renewal If Yes, when does Monthly Lease Purchase
Collateral Store or Leasehold) Date Lease Term Option final option expires Payment Option (Y/N)
- ---------------- ------------------ --------------- ---------- ------- -------------------- ------------- ------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
- --------------------------------------------------------------------------------------------------------------------------------
Yes No
Debt Schedule Summary (Please include any subordinated debt,
shareholder loans, intercompany notes and operating leases)
Type Original
Collateral Store [ILLEGIBLE] Lender Original Amount Original Term Amortization Commencement Date Payment Interest Rate
- ---------------- ----------- ------ --------------- ------------- ------------- ----------------- ------- ---------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SOLUTIONS
FOR YOUR BUSINESS NEEDS.
- REFINANCE [PICTURE] UNRIVALED ACCESS TO CAPITAL
- ACQUISITION [PICTURE] EASE OF USE
- NEW CONSTRUCTION [PICTURE] FLEXIBILITY
- REIMAGE
[GE LOGO] GE FRANCHISE FINANCE
GE FRANCHISE FINANCE DECISION DATE
Thank you for giving GE Franchise Franchise the opportunity to earn your
business. Please sign this page to complete your application.
In the Loan Application Package, please review the checklist of items required
from you, which will enable us to underwrite your transaction. With that in
mind, please provide us with the date that you need a final credit decision from
GE in the space below.
PLEASE NOTE THAT THE PROCESSING AND DECISION ON YOUR LOAN PACKAGE COULD BE
DELAYED UNLESS ALL OF THE ITEMS DETAILED IN THE LOAN APPLICATION CHECKLIST ARE
PROVIDED TO GE.
With your cooperation, we will work hard to fulfill your expectations!
/ /2004 / /2004
- ------------------------------------- ---------------------------------------
Your Desired Decision Date Your Signature & Date
We will notify you by phone of the credit decision as soon as it is reached. If
you would like someone else to receive the credit decision, please indicate that
individual's name & contact number here.
Name: ____________________________ Tel: _____________________________
EXHIBIT C
PROGRAM AGREEMENT ADDENDUM
"STORE FINANCING PROGRAM" - US
ADDENDUM to that certain Program Support Agreement ("Agreement") between
O'Charley's Inc. (O'Charley's), and GE Capital Franchise Finance
Corporation (GE Capital) dated _______________________, 2004.
O'Charley's and GE Capital agree that the following loan shall be covered
by the provisions of the Agreement:
Primary Contact: _______________________________________________________________
Borrower Name: _________________________________________________________________
Borrower Address: ______________________________________________________________
______________________________________________________________
Telephone Number: ______________________________________________________________
Fax: ___________________________________________________________________________
Email: _________________________________________________________________________
Federal Tax ID Number: _________________________________________________________
Guarantors: ____________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Guarantors: ____________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Guarantors: ____________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Guarantors: ____________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Location (O'Charley's store number(s)): ________________________________
Address of collateral unit:
Street: _____________________________________________
City: _______________________________________________
State: ______________________________________________
Zip Code: ___________________________________________
_____ Store to be constructed _____ Existing store
Mortgage Loan Amount: $________________________________________
Mortgage Loan Term: ___ months
Equipment Loan Amount: $_______________________________________
Equipment Loan Term: ___ months
O'CHARLEY'S INC. GE CAPITAL FRANCHISE
FINANCE CORPORATION
By: ____________________________ By: _______________________________
Name: __________________________ Name: _____________________________
Title: _________________________ Title: ____________________________
2