Form Of Leasehold Mortgage

LOAN TRANCHE ____


This instrument was prepared by and, when recorded, should be returned to:


ATHERTON CAPITAL INCORPORATED 1001 Bayhill Drive, Suite 155 San Bruno, California 94066 Attention: David L. Elder


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LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING


dated as of _________________, 1997


from


SYBRA, INC.
a Michigan corporation,


as Mortgagor,


to


ATHERTON CAPITAL INCORPORATED
a Delaware corporation


as Mortgagee


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Property: [ ] County, __________________(Restaurant No. ____)


LOAN TRANCHE ___


LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING


THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING (herein called this "Leasehold Mortgage") dated as of ___________________, 1997, is executed by SYBRA, INC., a Michigan corporation, as the surviving entity of a merger with Newco, as the mortgagor (herein, together with its successors and assigns, called the "Mortgagor"), with a mailing address at [ ], Michigan _________, to ATHERTON CAPITAL INCORPORATED, a Delaware corporation, as the mortgagee (herein, together with its successors and assigns, called the "Mortgagee"), with a mailing address at 1001 Bayhill Drive, Suite 155, San Bruno, California 94066.


RECITALS:


A. Loan Agreement. Reference is hereby made to that certain Loan Agreement (the "Loan Agreement") dated as of the date hereof by and between Mortgagor, as borrower, and Mortgagee, as lender. Pursuant to the Loan Agreement, Mortgagee has agreed to loan certain funds to Mortgagor (the "Loan") and Mortgagor has executed and delivered to Mortgagee those certain promissory notes evidencing Mortgagor's obligation to repay the Loan (individually a "Note" and collectively as the "Note").


B. Secured Obligations. The obligations secured by this Leasehold Mortgage (the "Obligations") are comprised at any time of the following:


(i) the full and punctual payment by Mortgagor when due of (a) all principal of and interest on the Loan and the Note, the aggregate principal amount as of the date hereof is [ ] Dollars and No/100 ($[ ],000.00); and (b) all other amounts payable by Mortgagor pursuant to the Loan Agreement, the Note or any other Loan Document;


(ii) the full and punctual payment when due of all amounts payable by Mortgagor under this Leasehold Mortgage, including, without limitation, indemnification obligations and advances made to protect the Subject Property;


(iii) the performance and observance by Mortgagor of each other term, covenant, agreement, requirement, condition and other provision to be performed or observed by Mortgagor under any Loan Document; and


(iv) the performance and observance by Mortgagor of each other term, covenant, agreement, requirement, condition and other provision to be performed or observed by Mortgagor under all amendments, supplements, consolidations, replacements, renewals, extensions or other modifications of the foregoing, in each case whether now existing or hereafter arising.


The Obligations shall include, without limitation, any interest, Yield Maintenance Amount, costs, fees and expenses which accrue on or with respect to any of the foregoing, whether before or after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of Mortgagor.


GRANTING CLAUSES


NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for the purpose of securing the due and punctual payment, performance and observance of the Obligations and intending to be bound hereby, Mortgagor hereby grants, conveys, mortgages, transfers and assigns to Mortgagee as expressly set forth below, and for the purpose and upon the terms and conditions hereinafter set forth, with power of sale and right of entry and possession, subject to the provisions of Section 6.15, all of the property and rights described in the following Granting Clauses (all of which property and rights are herein collectively called the "Subject Property"), to wit:


GRANTING CLAUSE I.


Land. All estate, right, title and interest of Mortgagor, if any, in, to, under or derived from those certain lots, pieces, tracts or parcels of land located in certain cities and/or counties in the State of ____________________, more particularly described


in Exhibit A, Part I attached hereto and incorporated herein by this reference (the "Real Estate"; together with the Leasehold Estate, herein called the "Land").


Leasehold Estate. All estate, right, title and interest of Mortgagor in, to, under or derived from the lease described in Exhibit A, Part II (the "Site Lease") affecting the Real Estate (the "Leasehold Estate"); together with all amendments, supplements, consolidations, extensions, renewals and other modifications of the Site Lease now or hereafter entered into in accordance with the provisions thereof; together with all other, further, additional or greater estate, right, title or interest of Mortgagor in, to, under or derived from the Real Estate, the Leasehold Estate and the Improvements now or hereafter located thereon which may at any time be acquired by Mortgagor by the terms of the Site Lease by reason of the exercise of any option thereunder or otherwise.


GRANTING CLAUSE II.


Improvements. All right, title and interest of Mortgagor, if any, in, to, under or derived from all buildings, structures, facilities and other improvements of every kind and description now or hereafter located on the Land or attached to the improvements which by the nature of their location thereon or attachment thereto are real property under applicable law (the foregoing being collectively the "Improvements"; and the Land with the Improvements thereon and Equipment therein and Appurtenant Rights thereto being collectively called the "Property").


GRANTING CLAUSE III.


Equipment. All estate, right, title and interest of Mortgagor in, to, under or derived from all machinery, equipment, fixtures and accessions thereof and renewals, replacements thereof and substitutions therefor, and all other customary franchise fast food restaurant equipment and other tangible property of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Land, or usable exclusively in connection with the present or future operation and occupancy of the Land or the Improvements (hereinafter collectively called the "Equipment").


GRANTING CLAUSE IV.


Appurtenant Rights. All estate, right, title and interest of Mortgagor, if any, in, to, under or derived from all tenements, hereditaments and appurtenances now or hereafter relating to the Property; all development, operating or similar rights appurtenant to the Land (including, without limitation, all rights arising from reciprocal access agreements, use or development agreements, and parking agreements); and all easements, licenses and rights of way now or hereafter appertaining to the Property (hereinafter collectively called "Appurtenant Rights").


GRANTING CLAUSE V.


General Intangibles, Payment Rights and Agreements. All estate, right, title and interest of Mortgagor in, to, under or derived from all contract rights, chattel paper, instruments, general intangibles, accounts, guaranties and warranties, letters of credit, and documents, in each case relating to the Property or to the present or future operation or occupancy of the Property, and all plans, specifications, maps, surveys, studies, records, insurance policies, guarantees and warranties, all relating to the Property or to the present or future operation or occupancy of the Property, all management contracts, all supply and service contracts for water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utilities relating to the Property (the foregoing being herein collectively called the "Agreements") and all other agreements affecting or relating to the use, enjoyment or occupancy of the Land or the Equipment.


GRANTING CLAUSE VI.


Leases. All estate, right, title and interest of Mortgagor in, to, under and derived from any lease, tenancy, subtenancy, license, concession or other occupancy agreement relating to the Property (together with all amendments, supplements, consolidations, replacements, restatements, extensions, renewals and other modifications of any thereof) (the "Leases"), other than the Site Lease assigned under Granting Clause I, now or hereafter in effect, whether or not of record; and the right to bring actions and proceedings under the Lease or for the enforcement thereof and to do anything which Mortgagor or any lessor is or may become entitled to do under the Lease.


GRANTING CLAUSE VII.


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Rents, Issues and Profits. All estate, right, title and interest of Mortgagor in, to, under or derived from all rents, royalties, issues, profits, receipts, revenue, income, earnings and other benefits now or hereafter accruing with respect to all or any portion of the Property, including all rents and other sums now or hereafter payable pursuant to the Leases; and all other claims, rights and remedies now or hereafter belonging or accruing with respect to the Property, including oil, gas and mineral royalties (herein collectively called the "Rents"), all of which Mortgagor hereby irrevocably directs be paid to Mortgagee, subject to the license granted to Mortgagor pursuant to Section 5.07, to be held, applied and disbursed as provided herein.


GRANTING CLAUSE VIII.


Permits. All estate, right, title and interest of Mortgagor in, to, under or derived from all licenses, certificates, variances, consents and other permits now or hereafter pertaining to the Property and all estate, right, title and interest of Mortgagor in, to, under or derived from all tradenames or business names relating to the Property or the present or future operation or occupancy of the Property (herein collectively called the "Permits"), excluding, however, from the grant under this Granting Clause (but not the definition of the term "Permits" for the other purposes hereof) any Permits which cannot be transferred or encumbered by Mortgagor without causing a default thereunder or a termination thereof.


GRANTING CLAUSE IX.


Proceeds and Awards. All estate, right, title and interest of Mortgagor in, to, under or derived from all proceeds of any sale, transfer, taking by Condemnation (or any proceeding or purchase in lieu thereof), whether voluntary or involuntary, of any of the Subject Property described above, including all Insurance Proceeds and awards and title insurance proceeds, now or hereafter relating to any of the Subject Property, all of which Mortgagor hereby irrevocably directs be paid to Mortgagee to the extent provided hereunder, to be held, applied and disbursed as provided in this Leasehold Mortgage.


TO HAVE AND TO HOLD the Subject Property unto Mortgagee, its successors and assigns, under and subject to the terms and conditions of this Leasehold Mortgage, including, but not limited to, Section 6.15, and for the security and enforcement of the prompt and complete payment and performance when due of all of the Obligations and the performance and observance by Mortgagor of all covenants, obligations and conditions to be performed or observed by Mortgagor pursuant to the Loan Agreement, the Note, and the other Loan Documents.


PROVIDED, HOWEVER, that this Leasehold Mortgage is upon the condition that, if Mortgagor shall pay in full all of the Obligations and perform and observe all such covenants, obligations and conditions, this Leasehold Mortgage shall cease, terminate pursuant to and in accordance with Section 6.02 and, thereafter, be of no further force effect (except as provided in Sections 4.01, 4.02 and 5.06 hereof); otherwise this Leasehold Mortgage shall, subject to the provisions of Section 6.15, remain and be in full force and effect.


FURTHER PROVIDED, that Mortgagee may from time to time release or reconvey all or a portion of the Subject Property, in accordance with the terms and conditions of the Loan Agreement and applicable law.


MORTGAGOR ADDITIONALLY COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:


ARTICLE I


DEFINITIONS


SECTION 1.01. Definitions. Capitalized terms used, but not otherwise defined herein, are defined in, or by reference to the Loan Agreement and have the same meanings herein as therein.


ARTICLE II


CERTAIN WARRANTIES AND COVENANTS
OF MORTGAGOR


SECTION 2.01. Authority and Effectiveness. (a) Mortgagor represents, warrants and covenants that (i) Mortgagor is and shall be a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation or organization, and qualified to do business and in good standing in the state in which the Property is located and has and will have all


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governmental licenses, authorizations, consents and other qualifications required to carry on its business as now conducted, and, subject to the provisions of Section 6.15, to execute, deliver and perform this Leasehold Mortgage; (ii) the execution, delivery and performance by Mortgagor of this Leasehold Mortgage are within Mortgagor's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not and, subject to the provisions of Section 6.15, will not contravene, or constitute a default under, any provision of the organizational documents of Mortgagor or of any agreement, judgment, injunction, order, decree or other instrument binding upon Mortgagor or relating to the Property; and (iii) subject to the provisions of Section 6.15, this Leasehold Mortgage constitutes a legal, valid, binding and enforceable agreement of Mortgagor.


(b) Mortgagor shall cause the representations and warranties in subsection (a) of this Section to continue to be true in each and every respect at all times prior to the termination of this Leasehold Mortgage.


SECTION 2.02. Title and Further Assurances. (a) Subject to the provisions of Section 6.15, Mortgagor hereby represents and warrants to Mortgagee that:


(i) Mortgagor is the owner of a valid and subsisting leasehold
interest in the Land and the Improvements and holds good and
marketable title to the Improvements, the Equipment and the other
Subject Property, free from all liens, security interests, Leases,
charges or encumbrances whatsoever, except for such liens as are
permitted under the Loan Agreement. Notwithstanding anything else
herein to the contrary, Mortgagor makes no representation or warranty
with respect to any interest in the fee to the real property upon
which the Subject Property is located (the "Fee Interest") or to any
rents or income arising therefrom;


(ii) Mortgagor has good and lawful right to mortgage the Subject
Property to Mortgagee without the consent of any Person other than
those consents which have been obtained;


(iii) the lien created by this Leasehold Mortgage constitutes a
valid, binding and enforceable lien on the Subject Property; and


(iv) the Site Lease creates and constitutes in the tenant
thereunder a valid and subsisting leasehold interest in the Leasehold
Estate; the Site Lease has not been modified or amended, except as
disclosed to Mortgagee in writing; there is no default under the Site
Lease, all rents due have been paid in full; no action has commenced
and is pending to terminate the Site Lease; and Mortgagor is the owner
of the leasehold interest under the Site Lease and Mortgagor is the
owner of the Improvements, in each case subject to the provisions of
the Site Lease.


(b) Subject to the provisions of Section 6.15, Mortgagor shall (i) cause the representations and warranties in subsection (a) of this Section to continue to be true in each and every respect at all times prior to the termination of this Leasehold Mortgage; and (ii) preserve, protect, warrant and defend (A) the estate, right, title and interest of Mortgagor in and to its Subject Property (B) the validity, enforceability and priority of the lien this Leasehold Mortgage, and (C) the right, title and interest of Mortgagee and any purchaser at any sale of the Subject Property hereunder or relating hereto.


(c) Upon the recording of this Leasehold Mortgage in the county recording office of the county in which the Land is located, the lien of this Leasehold Mortgage shall be a perfected mortgage lien and fixture filing on the Subject Property.


(d) Subject to the provisions of Section 6.15, Mortgagor shall perform all acts that may be necessary to continue, maintain, preserve, protect and perfect the Subject Property, the lien granted to Mortgagee therein and the perfected priority of such lien. Upon request by Mortgagee, Mortgagor shall at its sole cost and expense (i) promptly correct any defect or error which may be discovered in this Leasehold Mortgage or any financing statement or other document relating hereto; and (ii) promptly execute, acknowledge, deliver, record, and re-record, register and re-register, and file and re-file this Leasehold Mortgage and any fixture filings, financing statements or other documents which Mortgagee may reasonably require from time to time (all in form and substance reasonably satisfactory to Mortgagee) in order (A) to effectuate, complete, perfect, continue or preserve the lien of this Leasehold Mortgage on the Subject Property, whether now owned or hereafter acquired, (B) to correct or change the name of Mortgagor following any change in its identity, sale of the Subject Property, or assumption of the Loan pursuant to Section 2.07(b), or (C) to effectuate, complete, perfect, continue or preserve any right, power or privilege granted or intended to be granted to Mortgagee hereunder.


SECTION 2.03. Secured Obligations. Mortgagor shall duly and punctually pay, perform and observe the Obligations binding upon Mortgagor.


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SECTION 2.04. Impositions. Subject to Section 2.06 and Section 2.09, Mortgagor shall (i) duly and punctually pay all Impositions before any fine, penalty, interest or cost may be added for nonpayment; and (ii) promptly notify Mortgagee of the receipt by Mortgagor of any notice of default in the payment of any Imposition. The term "Impositions" means all taxes, assessments and other governmental charges, ground rents, or other rents, charges, excises, levies, fees and other charges (public or private) which may be assessed, levied or imposed on, or in respect of or be a lien upon the Subject Property or any part thereof or any interest therein.


SECTION 2.05. Compliance with Legal and Insurance Requirements. (a) Mortgagor represents and warrants that (i) as of the date hereof, the Property and the use and operation thereof comply with all Legal Requirements (as defined below), Insurance Requirements (as defined below) and Contractual Obligations except for any failure to comply therewith which could not have a Material Adverse Effect; (ii) there is no material default under any Legal Requirement, Insurance Requirement and Contractual Obligation; and (iii) subject to the provisions of Section 6.15, the execution, delivery and performance of this Leasehold Mortgage does not require any consent the failure of which to obtain would contravene any provision of and constitute a material default under, any Legal Requirement, Insurance Requirement or Contractual Obligation. Notwithstanding the limitations set forth in the preceding sentence, Mortgagor represents and warrants that as of the date hereof, the Property and the use thereof comply with all Environmental Laws and that Mortgagor has complied and shall comply with all Environmental Laws.


(b) Subject to Section 2.06 and Section 2.09, Mortgagor shall promptly perform and observe, or cause to be performed and observed and cause the Property to comply with, if the failure to so perform and observe would have a Material Adverse Effect, (i) all laws, rules, regulations, judgments, orders, permits, licenses, authorizations and other requirements of and agreements with all governments, department agencies, courts and officials, which now or hereafter shall be applicable to the Subject Property or any part thereof or any use or condition thereof including, without limitation, all Environmental Laws (herein collectively called the "Legal Requirements"); (ii) all terms of any insurance policy covering or applicable to the Subject Property or any part thereof as required by the Loan Agreement, all requirements of the issuer of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to the Subject Property or any part thereof or any use or condition thereof (herein collectively called the "Insurance Requirements"); and (iii) all Permits required for any construction, reconstruction, repair, alteration, addition, improvement, maintenance, use and operation of the Property.


(c) Mortgagor shall promptly notify Mortgagee of the receipt by Mortgagor of any notice of default under any Legal Requirement, Insurance Requirement, Contractual Obligation or Permit or of the receipt by Mortgagor of any notice of any threatened or actual termination of any Permit or Insurance Policy, Franchise Agreement or Site Lease and furnish to Mortgagee a copy of such notice of default or termination.


SECTION 2.06. Impound and Security Account. At Mortgagee's option and upon its demand and except where and to the degree prohibited by law, Mortgagor shall, until all Obligations have been paid in full, pay to Mortgagee each month an amount estimated by Mortgagee to be equal to (i) the Impositions, (ii) all payments and premiums with respect to the Insurance Requirements, and (iii) all lease payments under the Site Lease next due. Estimated payments of Impositions, Insurance Requirements and Site Lease payments shall be calculated by dividing the amount next due by, in each instance, the number of months to lapse preceding the month in which the same, respectively, will become due. All sums so paid shall not bear interest, except to the extent and in the minimum amount required by law, and Mortgagee shall, unless Mortgagor is otherwise in default hereunder or under any obligation secured hereby, apply said funds to the payment of, or at the sole option of Mortgagee timely release said funds to Mortgagor for timely application to and payment of, such Impositions, Insurance Requirements and Site Lease payments. However, upon the occurrence of an Event of Default by Mortgagor hereunder or under any obligation secured hereby, Mortgagee may, at its sole option, apply all or any part of said sums to any Obligations or to advance sums to pay such Imposition, Insurance Requirement or Site Lease payment, which advance shall not cure Mortgagor's Default hereunder.


SECTION 2.07. Sale; Liens. (a) Except as otherwise provided in the Loan Agreement, Mortgagor shall not sell, assign, transfer, convey, lease or permit to be sold, assigned, transferred, conveyed, leased or otherwise disposed of, the Subject Property (other than Inventory sold in the normal course of business) or any part thereof or interest therein (for the purposes of this Section, a "Transfer"), and shall not create, suffer or permit to be created or exist any lien attaching to the Subject Property or any part thereof or interest therein, except as permitted by the Loan Agreement. In the event of any Transfer or the creation, suffering, permitting to be created of any lien attaching to the Subject Property or any part thereof, that is not expressly permitted hereunder or under the terms of the Loan Agreement and is without the prior written consent of Mortgagee, Mortgagee shall have the absolute right at its option, without prior demand or notice, to declare all of the Obligations immediately due and payable and pursue its rights and remedies under Article 5. Consent to one such Transfer or lien shall not be deemed to be a waiver of the right to require the consent to future or successive Transfers or liens. Mortgagee shall have the right to grant or deny such consent in its absolute discretion. If


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consent should be given to a Transfer and if this Leasehold Mortgage is not released to the extent of the Subject Property transferred or subjected to a lien by a writing signed by Mortgagee and recorded in the proper city, town, county or parish records, then any such Transfer or lien shall be subject to this Leasehold Mortgage and any such transferee shall assume all obligations hereunder and agree to be bound by all of the provisions contained hereunder.


(b) The Loan may be assumed by a new borrower provided each of the conditions set forth in Section 2.08 of the Loan Agreement are met.


SECTION 2.08. Status and Care of the Property.


(a) Mortgagor represents and warrants that (i) the Property is served by all necessary water, sanitary and storm sewer, electric, gas, telephone and other utility facilities which facilities have capacities which are sufficient to serve the current and anticipated future use and occupancy of the Property as presently constructed; (ii) the Property has legal access to public streets or roads sufficient to serve the current and anticipated future use and operation of the Property as presently constructed; (iii) to the extent that the Property is located in an area identified by the Secretary of Housing and Urban Development or a successor thereto as an area having special flood hazards or as an area designated as "flood prone" or a "flood risk area" pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, and any amendments or supplements thereto or substitutions therefor, Mortgagor has purchased flood insurance to the extent available; and (iv) all activities and conditions on the Property are currently in compliance with all Legal Requirements.


(b) Subject to the terms, conditions and provisions of the Loan Agreement, the Mortgagor (i) shall use and operate the Property, or cause the same to be used and operated, pursuant to the terms and provisions of a Franchise Agreement with Arby's, Inc., a true and correct copy of which has been previously delivered to Mortgagee, and Mortgagor shall continue to operate the Property as a Arby's restaurant and shall not permit or suffer any default to occur under said Franchise Agreement; (ii) agrees that all activities on the Property shall at all times comply with all Legal Requirements; (iii) shall operate and maintain the Property, or cause the same to be operated and maintained, in good order, repair and condition except (subject to the provisions of this Section) for reasonable wear and tear; (iv) subject to the provisions of Section 3.02, shall promptly make, or cause to be made, all repairs, replac ...