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 1,
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 1, 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."
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:
(a) 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:
(i) The Assignment Agreement;
(ii) 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 Parker Poe Adams and Bernstein
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.
(b) Payment to Kutak Rock, as set forth in a statement from Kutak Rock, of
fees and disbursements for legal services provided to Financial Security in
connection with the Substitution.
(c) Execution of this Agreement by Advantica.
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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:
"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:
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(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. 1 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
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:
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(i) To Financial Security: Financial Security Assurance
Inc. 350 Park Avenue New
York, NY 10022 Attention:
Surveillance Department
Telephone: (212) 826-0100
Facsimile Nos.: (212)
339-3518 (212) 339-3527
(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
Rodney Square North
Wilmington, DE 19890
Attention: Corporate Trust
Administration Telephone
No.: (302) 651-1428 Telex
No.: 835437 Answer Back:
WILM-TR Facsimile No.: (302)
651-1576
with a copy to Advantica Restaurant Group,
the Manager: Inc. 203 East Main Street
Spartanburg, SC 29301
Attention: Legal Department
Telephone No.: (803)
596-8000 Facsimile No.:
(803) 596-8327
(iii) To the Trustee: The Bank of New York
Towermarc Plaza 10161
Centurion Parkway
Jacksonville, FL 32256
Attention: Corporate Trust
Department Telephone No.:
(904) 998-4700 Facsimile
No.: (904) 645-1932
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(iv) To the Collateral Agent: The Bank of New York
Towermarc Plaza 10161
Centurion Parkway
Jacksonville, FL 32256
Attention: Corporate Trust
Department Telephone No.:
(904) 998-4700 Facsimile
No.: (904) 645-1932
(v) To the Borrower: I. M. Special, Inc. 201 East
Main Street Spartanburg, SC
29301 Attention: Legal
Department Telephone No.:
(864) 596-8000 Facsimile
No.: (864) 596-8327
(vi) To Advantica: Advantica Restaurant Group,
Inc. 201 East Main Street
Spartanburg, SC 29301
Attention: Legal Department
Telephone No.: (864)
596-8000 Facsimile No.:
(864) 596-8327
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.
(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.
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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:_______________________
Name:_____________________
Title:____________________
SPARTAN SECURED RESTAURANTS, INC.
By:________________________
Name:______________________
Title:_____________________
SECURED RESTAURANTS TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as
Issuer Trustee
By:___________________________
Mary St. Armand
Assistant Vice President
THE BANK OF NEW YORK, as Collateral Agent
and as Trustee
By:__________________________
Name:________________________
Title:_______________________
FINANCIAL SECURITY ASSURANCE INC.
By:____________________________________
Alex G. Makowski, Managing Director
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I. M. SPECIAL, INC.
By:__________________________
Name:________________________
Title:_______________________
ADVANTICA RESTAURANT GROUP, INC.
By:___________________________
Name:_________________________
Title:________________________
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