EXHIBIT 10.15
FRANCHISE FINANCE [LOGO]
CORPORATION OF AMERICA
August 4, 1997
VIA AIRBORNE EXPRESS
Mr. Thomas Baldwin
Chief Financial Officer
Morton's Restaurant Group, Inc.
3333 New Hyde Park Road
New Hyde Park, New York 11042
Dear Tom:
Morton's Restaurant Group, Inc. ("MRG") has advised FFCA Acquisition
Corporation ("FFCA") that MRG or one or more wholly-owned subsidiaries of MRG
(individually or collectively, as appropriate, "Borrower") desires to obtain
mortgage financing for up to three (3) new Morton's of Chicago restaurants
during the next twenty-four (24) months. For each Property, Borrower desires to
obtain a construction/long term mortgage loan secured by a first lien mortgage
or deed of trust, as determined by FFCA (individually, the "Mortgage Loan" and
collectively the "Mortgage Loans"). Each of the Mortgage Loans shall be secured
by a first lien mortgage or deed of trust on the land, building and other
improvements (individually, a "Property" and collectively, the "Properties"). At
the time of the final construction draw of each Mortgage Loan, Borrower may also
elect to obtain an equipment loan from FFCA (individually an "Equipment Loan"
and collectively, the "Equipment Loans") secured by a first lien security
interest in the new furniture, equipment and other trade fixtures at the
Property (collectively, the "Equipment").
Upon the acceptance of this commitment letter (the "Commitment") by
Borrower, FFCA commits to make to borrower (i) up to three (3) Mortgage Loans,
and (ii) up to three (3) Equipment Loans, all on the terms set forth in this
Commitment (individually, a "Transaction" and collectively, the "Transactions").
A. Basic Commitment Terms.
Background: This Commitment outlines certain basic terms and
conditions of the Transactions; however, it is not
meant to define all of the terms and conditions of
the Transactions, which will be set forth more
fully in a separate term sheet (the "Term Sheet")
and the final documentation for each Transaction.
Each Transaction is subject to, among other things,
the approval by FFCA's in-house site review and
valuation department of the Property and the Loan
Amount (as defined below), Borrower's compliance
with all of the requirements set forth in this
Commitment and the receipt by FFCA of all documents
and other information requested by FFCA and its
counsel.
Acceptance: Borrower may accept this Commitment by signing and
returning a copy of this Commitment, together with
a check for the Fee (as defined below) to FFCA
within 10 days of the date hereof.
Fee: Borrower shall pay FFCA a $9,000.00 fee for this
Commitment.
Refundability of Fee: Although the Fee shall be nonrefundable and fully
earned when received by FFCA, all or part of the
Fee may be applied to the Property Commitment Fees
as described in the Property Commitment Fee Section
below. In the event FFCA does not approve any sites
prior to expiration of this Commitment, the Fee,
less FFCA's reasonable out-of-pocket expenses, will
be returned to Borrower.
Transaction
Processing: Borrower will notify FFCA as soon as Borrower has
identified a Property. Such notice shall include a
copy of the proposed purchase agreement, a
description of the Property, including the proposed
lmprovements, budget for the proposed Improvements,
a description and cost estimate for the Equipment
and any other documents and information available
regarding the Property (the "Property Notice").
Upon receipt of the Property Notice, FFCA's
in-house site review and insection department will
inspect the Property identified by Borrower. If the
identified Property is approved by FFCA, FFCA will
prepare a Term Sheet in the form attached hereto as
Exhibit A outlining the specific terms
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and conditions upon which FFCA would be willing to
enter into the Transaction. FFCA will not order a
title insurance commitment and phase I
environmental report or instruct its counsel to
begin preparing any of the documentation, until
Borrower has accepted the Term Sheet and returned
it to FFCA.
Commitment Term: The term of this Commitment shall commence on the
date this Commitment is accepted and automatically
expire and be of no further force or effect after
July 31 1999. Any Property Notice received by FFCA
after such date shall be ineffective.
Loan Amount Cap: Notwithstanding anything herein to the contrary, in
no event shall FFCA be obligated to fund a
Transaction where the sum of the Mortgage Loan
Amount and the Equipment Loan Amount for a Property
exceeds $3,500,000.00.
Property Locations: Each of the Properties shall be located in the
United States of America.
B. Basic Mortgage Loan Terms
Property Commitment
Fee: For each Transaction Borrower shall pay FFCA an
underwriting and processing fee equal to the sum of
one percent (1%) of the sum of the Loan Amount and
the Equipment Loan Amount. Borrower shall be
entitled to a $3,000.00 credit towards the Property
Commitment Fee owing under each Term Sheet.
One-half of the balance of the Property Commitment
Fee shall be due upon Borrower's acceptance of a
Term Sheet; the balance of the Property Commitment
Fee shall be due at the Closing. If any Loan fails
to close as a result of Borrower's default, FFCA's
damages shall be limited to the Property Commitment
Fee and any actual out-of-pocket expenses incurred
by FFCA in excess of the Property Commitment Fee.
Documentation FFCA shall provide Borrower with FFCA's proposed
form of promissory note ("Note"), loan agreement
("Loan Agreement"), disbursement agreement
("Disbursement Agreement") mortgage or deed of
trust, as determined by FFCA, and security
agreement ("Deed of Trust"),
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assignment of leases and rents and UCC-1 financing
statements.
Loan Amount: The sum of (i) the fair market value of the land as
determined by FFCA's in-house site inspection and
valuation department, (ii) the actual and
reasonable cost to construct the Improvements, as
determined by FFCA's in-house site inspection and
review department (iii) the Property Commitment
Fee, and (iv) such soft costs and closing costs as
FFCA may approve in its sole discretion.
Loan Amount: Up to $3,000,000 for any property (inclusive of the
cost of the Land, the Development Price (as defined
below), and all financed soft costs and closing
costs).
Development Price: After Borrower purchases the Land, FFCA will fund
the sum of (i) the actual and reasonable hard costs
incurred to construct the improvements at the
Property, and (ii) such soft costs relating to the
construction of the Improvements as may be approved
as to category and amount by FFCA, in its sole
discretion.
Basic Construction
Funding Terms: The Disbursement Agreement shall provide that FFCA
will agree to fund the Development Price in
progress payments through Lawyer's Title Insurance
Company, and Borrower will agree to complete the
lmprovements as provided therein.
Note Terms: During the construction period, interest shall
accrue at a variable rate equal to the 30-day LIBO
Rate then in effect plus 2.75%; thereafter,
interest shall accrue at an annual rate equal to
the 10-year U.S. Treasury Note Rate in effect 10
days prior to final disbursement of the Development
Price plus 2.75%. Principal and interest shall be
paid in equal monthly installments due on the first
day of each month based on a twenty (20) year
amortization schedule.
Prepayment: Subject to the terms of the Fixed Charge Coverage
paragraph below, the Note may not be prepaid in
whole or in part during the first five years of the
term of the Note. Thereafter, Borrower may prepay
the Note, in whole but not in part, on any
regularly scheduled payment date; provided,
however, any prepayment during the sixth year of
the term of the Mortgage Loan shall include a
prepayment premium equal to 5% of the
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then outstanding amount of the loan; any prepayment
during the seventh year of the term of the Mortgage
Loan shall include a prepayment premium equal to 4%
of the then outstanding amount of the loan; any
prepayment during the eighth year of the term of
the Mortgage Loan shall include a prepayment
premium equal to 3% of the then outstanding amount
of the loan; any prepayment during the ninth year
of the term of the Mortgage Loan shall include a
prepayment premium equal to 2% of the then
outstanding amount of the loan; and any prepayment
during the tenth year of the term of the Mortgage
Loan shall include a prepayment premium equal to 1%
of the then outstanding amount of the loan.
Fixed Charge
Coverage: Borrower shall be required to achieve and maintain
an annual Fixed Charge Coverage Ratio (as defined
below) at each Property equal to or greater than
1.25:1. If Borrower does not achieve such annual
the fixed Charge Coverage Ratio for such Properties
within 30 days following notice from FFCA, Borrower
shall be required to perform one of the following
at its sole option: (i) substitute a similar
property in the place of the non-complying Property
provided such property has a fair market value (as
determined by FFCA) of not less than the original
principal amount of the related Mortgage Loan terms
as are reasonably required by FFCA, (ii) partially
prepay the Note by an amount sufficient to raise
the Fixed Charge Coverage Ratio at such Property to
1.25:1, and Borrower and FFCA shall amend such Note
to reamortize the payment schedule thereunder, or
(iii) prepay the Note in full or provide that such
Note is prepayable and any applicable prepayment
penalty is made thereon. For purposes hereof, the
term "Fixed Charge Coverage Ratio" shall mean the
ratio of (a) the sum of net income before
non-recurring items and after corporate overhead
allocation (equal to 2% of gross sales), interest
charges (in accordance with generally accepted
accounting principles), depreciation, amortization,
non cash charges and non cash inter-company
charges, income taxes, FICA income tax credits and
operating lease payments, to (b) the sum of any
cash principal and interest mortgage payments and
equipment loan payments which are associated with
the Property.
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Closing Costs: Borrower shall pay its attorneys' fees, FFCA's
reasonable attorneys' fees, the cost of the phase I
environmental report, FFCA's in-house site
inspection expenses and all other reasonable and
customary Mortgage Loan closing costs, including,
without limitation, all mortgage and stamp taxes,
construction consultant fees, soil report expenses,
disbursement agent costs, survey expenses, and
title insurance premiums, and escrow, filing and
recording fees.
Guaranty: To the extent Borrower is an entity other than MRG,
all of Borrower's obligations under the Loan
Documents shall be unconditionally guaranteed by
MRG.
Basic Construction
Funding Terms: The Loan Agreement shall provide that FFCA will
agree to fund the Loan Amount in progress payments
through the title company and Borrower will agree
to complete the Improvements as provided therein.
C. Basic Equipment Loan Terms:
Documentation: In the event Borrower elects to obtain financing
for its equipment package from FFCA, FFCA's counsel
will prepare and submit to Borrower the form of
equipment note (the "Equipment Note"), equipment
loan agreement (the "Equipment Loan Agreement"),
security agreement (the "Security Agreement") and
UCC-1 Financing Statements previously agreed upon
by FFCA and Borrower. The Security Agreement shall
grant FFCA a first priority purchase money security
interest in the Equipment, and the Equipment Loan
Agreement shall (i) contain such representations,
warranties, covenants and agreements as are
customary in loan transactions of this type, and
(ii) provide that Borrower will indemnify FFCA
against all claims, suits and costs whatsoever
relating to any breach of Borrower's
representations and warranties. At the Equipment
Loan closing, Borrower shall (i) provide FFCA with
proof of insurance and copies of all bills of sale,
invoices and purchase agreements relating to the
Equipment, and (ii) execute the Equipment Note, the
Equipment Loan Agreement, the Security Agreement,
the UCC-1 financing statements and such other
documents as may be reasonably required by FFCA or
the title company (collectively, the "Equipment
Loan Documents"). In the event Borrower seeks
purchase-
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money equipment financing from a third party
lender, the Loan Documents shall provide the FFCA
will subordinate its lien in such equipment to the
lien of the third-party lender.
Equipment
Loan Amount: The actual and reasonable cost of the Equipment at
each Property, but in no event shall the cost
exceed the sum of $500,000.00 per Property.
Note Terms: Interest shall accrue at the rate per annum equal
to the 10-year U.S. Treasury Note Rate in effect 10
days prior to closing plus 2.75%. Principal and
interest shall be paid in equal monthly
installments due on the first day of each month
based on a seven (7) year amortization schedule.
Prepayment: Borrower may not prepay any Note in whole or in
part during the first four (4) years thereof;
thereafter Borrower may prepay the Note in whole
only on any regularly scheduled payment date;
provided, however any prepayment during the fifth
year of the term of the Equipment Loan shall
include a prepayment premium equal to 3% of the
then outstanding amount of the Equipment Loan;
any prepayment during the sixth year of the term
of the Equipment Loan shall include a prepayment
premium equal to 2% of the then outstanding amount
of the Equipment Loan; and any prepayment during
the seventh year of the term of the Equipment Loan
shall include a prepayment premium equal to 1% of
the then outstanding amount of the Equipment Loan.
Equipment Loan
Closing Date: The date of the final funding of the Loan Amount.
Guaranty: To the extent Borrower is an entity other than MRG,
all of Borrower's obligations under the Loan
Documents shall be unconditionally guaranteed by
MRG.
D. Other Material Transaction Terms.
Financial Statements: Within forty-five days following the end of each
quarter during the Commitment Term, Borrower shall
provide FFCA with Borrower's financial statements
for the preceding quarter.
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Securitization: The Loan Documents shall provide that FFCA may, at
any time, sell, transfer or assign any Note, Deed
of Trust and any of the other Loan Documents and
Equipment Loan Documents, and any or all servicing
rights with respect thereto (each, a "Transfer"),
or grant participations therein (each, a
"Participation"), or complete an asset
securitization vehicle selected by FFCA, in
accordance with all requirements which may be
imposed by the investors or the rating agencies
involved in such securitized financing transaction,
as selected by FFCA, or which may be imposed by
applicable securities, tax or other laws or
regulations, including, without limitation, laws
relating to FFCA's status as a real estate
investment trust (each, a "Securitization").
Borrower agrees to cooperate in good faith with
FFCA in connection with any Transfer Participation
and/or Securitization, including, without
limitation, (i) providing such documents, financial
and other data, and other information and materials
(the "Disclosures") which would typically be
required with respect to Borrower by a purchaser,
transferee, assignee, servicer, participant,
investor or rating agency involved with respect to
such Transfer, Participation and/or the
Securitization, as applicable; provided, however,
Borrower shall not be required to make Disclosures
of any confidential information or any information
which has not previously been made public unless
required by applicable federal or state securities
laws; and (ii) amending the terms of the
transactions evidenced by the Loan Documents to the
extent necessary so as to satisfy the requirements
of purchasers, transferees, assignees, servicers,
participants, investors or selected rating agencies
involved in any such Transfers, Participations or
Securitization, so long as such amendments would
not have a material adverse effect upon Borrower or
the transactions contemplated by this Commitment.
Borrower consents to FFCA providing the
Disclosures, as well as any other information which
FFCA may now have or hereafter acquire with respect
to the Property or the financial condition of
Borrower, to each purchaser, transferee, assignee,
servicer, participant, investor or rating agency
involved with respect to each Transfer,
Participation and/or Securitization, as applicable.
FFCA shall pay its own attorneys' fees and other
out-of-pocket expenses incurred in connection with
any Transfer, Participation, and/or Securitization;
and FFCA shall pay reasonable attorneys' fees
incurred by Borrower in
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reviewing, negotiating and/or preparing any
documentation requested of Borrower in connection
therewith.
Contingencies: Prior to the first Closing, FFCA shall have
received and approved the financial statements of
Bertolini's and Mick's for the most recent fiscal
year. The structure and legal documentation of
these Transactions are subject to the approval of
FFCA's legal department.
E. Other Matters.
THE FOREGOING SUMMARY OF BASIC TERMS AND CONDITIONS IS NOT MEANT TO BE:
NOR SHOULD IT BE CONSTRUED AS AN ATTEMPT TO DEFINE ALL OF THE TERMS AND
CONDITIONS REGARDING THE TRANSACTIONS AND THE EQUIPMENT LOANS. INSTEAD, IT IS
INTENDED ONLY TO OUTLINE CERTAIN BASIC POINTS OF THE BUSINESS UNDERSTANDING
AROUND WHICH LEGAL DOCUMENTATION WILL BE STRUCTURED. THE OUTLINED TERMS AND
CONDITIONS ARE SUBJECT TO FINAL DOCUMENTATION SATISFACTORY TO ALL PARTIES AND
COMPLETE LEGAL REVIEW AND APPROVAL OF ALL PERTINENT MATTERS.
This Commitment and the Transactions and the Equipment Loans contemplated
hereby (i) shall be subject to, in FFCA's judgment, there being no adverse
materiel change in Borrower's financial condition, (ii) shall not be assignable
by Borrower or relied upon by any third party without the prior written consent
of FFCA, and (iii) shall be governed by the internal laws of the State of
Arizona, without giving effect to conflict of law principles. This Commitment
may be assigned by FFCA without the consent of Borrower. This Commitment (i)
supersedes any previous discussions, agreements and/or proposal/commitment
letters relating to the Transactions, and the Equipment Loans, (including, but
not limited to, those certain Commitment Letters dated April 29, 1997 and July
23, 1997) and (ii) may only be amended by a written agreement executed by FFCA
and Borrower. FFCA reserves the right to cancel this Commitment in the event
Borrower has made any misrepresentations or has withheld any information with
regard to the Transactions.
ANY ACTION ARISING OUT OF THIS COMMITMENT SHALL BE PROSECUTED ONLY IN THE
STATE OR FEDERAL COURTS LOCATED IN THE STATE OF ARIZONA. FFCA AND BORROWER
WAIVES ANY RIGHT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION ARISING
OUT OF THIS COMMITMENT. BORROWER WAIVES ANY RIGHT BORROWER HAS OR MAY HAVE TO
SEEK OR RECOVER FROM FFCA OR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS AND
EMPLOYEES ANY AWARD OF SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH ANY DEFAULT BY FFCA UNDER THIS COMMITMENT.
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Please indicate your acceptance of this Commitment by having a copy of
this Commitment signed and returned to FFCA to the attention of Ms. Michelle D.
Stewart, FFCA Acquisition Corporation, 17207 North Perimeter Drive, Scottsdale,
Arizona 85255, together with a check in the sum of $9,000.00 payable to "FFCA
Acquisition Corporation", within ten (10) days from the date hereof or this
Commitment will automatically expire.
FFCA Acquisition Corporation,
a Delaware corporation
/s/ Mark E. Wood
---------------------------------
Mark E. Wood
Vice President, Corporate Finance
ACCEPTED AND AGREED TO on this 11th day of August, 1997.
Morton's Restaurant Group, Inc.
By: /s/ Thomas J. Baldwin
------------------------------------
Thomas J. Baldwin
Executive Vice President and Chief Financial Officer
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