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Exhibit 10.2  

 
 

OFFICE LEASE AND
  MAIL SERVICE AGREEMENT    
  

        This Agreement, executed this 10th day of December, 2001, by and between LJMG, Inc. dba First Choice Executive Suites and Axtion Foods, Inc. hereinafter
referred to as "Client" for the following services rendered: 

        LJMG
agrees to lease one interior office of 150 square feet and receive and hold for pick up by Client, or Client's designated agent, for a monthly fee of
$250 all mail addressed to (Axtion Foods, Inc.) at 4025 Camino Del Rio South, Suite 300, San Diego, CA 92108, as well as any employees or agents of such.
If requests to do so, First Choice Executive Suites will forward Client's mail to designated address. Client will be billed charges according to First Choice Executive Suite's
price list. 

        THIS
AGREEMENT shall be effective December 10, 2001 for a minimum of 3 months. After the 3 month period you may sign up for an additional 3 months. 

        SET-UP FEE. There is a one time administrative fee of $100.00 required to set-up services and it's due and payable upon signing of this
Agreement.

        Client will have access to conference rooms, billed in 15 minute increments (with a minimum of 30 minutes) at the rate of $20.00 per hour. Client will inform
LJMG, INC. preferably 24 hours in advance of such usage. Cancellation is required at least 8 hours prior to appointment to avoid charges.

        SECURITY DEPOSIT. Upon execution of this Agreement, Client shall pay Company the amounts set forth in the Agreement  $60.00 as a Deposit. Such amount shall be held by
the company as security for the full, faithful and complete performance by Client of all terms,
covenants and agreements to be kept by Client under this Agreement. If Client fails to perform any of its obligation. Company may apply the Deposit to any amounts due including any amounts Company may
require to spend by reason of Client's breach of this Agreement. If at the end of the Term, Client has performed all of the provisions
of this Agreement, the Agreement Deposit, or any remaining balance, will be returned without interest, within sixty (60) days after end of term. 

        PAYMENT TERMS: Invoices are due and payable upon receipt and are considered delinquent after the 5th of the month.
A Notice Requiring Performance of Conditions will be served on the 6th of each month if account is not paid by 5:00 pm on the 5th. A fee of $50.00 will be charged to Client for each Notice Requiring
Performance of Conditions after the 1st initial Notice has been served. If payment has not been received by the 3rd business day after Notice has been served, services will be suspended. Tenant shall
pay a late charge of five percent (5%) of any amount that is due hereunder, provided late charge shall not be less then $5.00. LJMG and Client agree that such late charges are fair and reasonable
compensation for costs incurred by LJMG where default in payment under this Agreement. There is a $25.00 fee for any returned check, plus applicable bank charges. There is a $50.00 reinstatement fee
is service had to be discontinued due to non-payment or late payment of charges.  

	

 	
 	

JR
 INITIAL
	

LJMG, INC.	
 	

Client:
	

/s/ Amber Gentel

Amber Gentel

Administrative Assistant	
 	

/s/ Julia Reynolds
 (Signature)
	

 	
 	

/s/ Julia Reynolds/President
 (Print Name and Title)
	

Date: 12/11/01	
 	

Date: 12/11/01
	

 	
 	

Address: 3260 Meadow Grove Drive

San Diego, CA 92138
	

 	
 	

Office Phone: (760)436-3124
	

 	
 	

Driver's Lic.# NO124926

            (enclose a copy)

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OFFICE LEASE AND MAIL SERVICE AGREEMENTExhibit 10.4  

[SMART CHOICE LOGO]  

	 	 	Order          	 	 
	 	 	Purchase #:	 	00015179
	 	 	Date:	 	2/28/02
	 	 	Ship Via:	 	 
	 	 	Page:	 	1
	

 	
 	

 	
 	

 

	Attn: Julie	 	      Ship To:	 	 
	

Axtion Foods, Inc.

110 West C Street

San Diego, CA 92101	
 	

 	
 	

Bender Warehouse

205 Parr Blvd.

Reno, NV 89512	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 

	Description                                	 	 	 	Amount	 	Tx
	

86Cs Of Axtion Nutty Chocolate Bars To Indy	
 	

 	
 	

$3,529.44	
 	

 
	86Cs Of Axtion Nutty Chocolate Bars to Reno	 	 	 	$3,529.44	 	 
	172 Boxes with Labels @1.00 Per Box	 	 	 	$172.00	 	 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 

	Please confirm receipt of this Purchase Order by faxing us	 	Freight:	 	$0.00
	approximate ship date.	 	Sales Tax:	 	$0.00
	 	 	Total Amount:	 	$7,230.88
	Your invoice #:	 	Amount Applied:	 	$0.00
	Shipping Date:	 	Balance Due:	 	$7,230.88
	 	 	 	Terms:    Net	 	 	 	 
	 	

68555 Ramon Rd., Ste. D-204, Cathedral City, California 92234 • (760)328-7862 Fax (760)328-7864Exhibit 10.5  

	

	 	 	Big Water Ventures, LLC
 15149 Ventura Blvd.

Sherman Oaks, CA 91403

(818)461-8811 fax (818)461-8810	 	Purchase Order	 	101

	
	 	INVOICE
	

Name	
 	
Axtion Foods (attn. Julie Reynolds)	
 	

Date	
 	

2/27/02
	 	 	
	 	 	 	

	Address	 	4024 Camina Del Rio South Suite 300	 	Order No.	 	101
	 	 	
	 	 	 	

	City	 	San Diego                State CA                Zip
92108	 	Rep	 	 
	 	 	
	 	 	 	

	Phone	 	 	 	FOB	 	 
	 	 	
	 	 	 	

	

	 	 	 	 	 	 	Total
	 	 	 	 	 	 	

	 	 	10,000 nutty chocolate bars with wrappers	 	10,000 x 0.55	 	$5,500.00
	

 	
 	

point of purchase boxes 5,000 minimum	
 	

5,000 x 0.575	
 	

$2,875.00
	

 	
 	

master carton 250 minimum run	
 	

250 x 1.50	
 	

$375.00
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	 	 	One time charge	 	 	 	 
	 	 	Plates for wrapper	 	600 x 4	 	$2,400.00
	 	 	Plates for Point of Purchase boxes	 	500 x 4	 	$2,000.00
	

 	
 	

FOB charges	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 

	 	 	 	 	SubTotal	 	$13,150.00
	 	 	 	 	 	 	

	 	 	 	 	Shipping & Handling	 	$0.00
	 	 	Payment Details	 	 	 	

	/x/	 	Check 50% down—balance upon delivery	 	 	 	 
	/ /	 	 	 	 	 	 
	/ /	 	 	 	TOTAL	 	$13,150.00
	 	 	 	 	 	 	

	Name	 	 	 	 	 	 
	 	 	
	 	 	 	 
	CC#	 	 	 	 	 	 
	 	 	
	 	Office Use Only
	Expires	 	 	 	Delivery on or about 3/28/02
	 	 	
	 	COD CHECK
	

 	
 	

 	
 	

 	
 	

 
	Thank You and Keep Charging!EXHIBIT 4.4

 

REVOLVING LINE OF CREDIT NOTE

	
  $25,000,000.00

  	
  Los Angeles,
  California

  
	
   

  	
  June 28, 2001

  

 

FOR VALUE RECEIVED, the
undersigned, INTERNATIONAL HOUSE OF PANCAKES, INC., a Delaware corporation
(“Borrower”), promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”) at its office at Los Angeles RCBO, 333 South Grand Avenue,
Third Floor, Los Angeles, California 90071, or at such other place as the
holder hereof may designate, in lawful money of the United States of America
and in immediately available funds, the principal sum of
Twenty-Five Million and No/100 Dollars ($25,000,000.00), or so much
thereof as may be advanced and be outstanding, with interest thereon, to be
computed on each advance from the date of its disbursement as set forth herein.

DEFINITIONS:

As used herein, the
following terms shall have the meanings set forth after each, and any other
term defined in this Note shall have the meaning set forth at the place
defined:

(a)           “Business Day” means any day except a
Saturday, Sunday or any other day on which commercial banks in California are
authorized or required by law to close.

(b)           “Fixed Rate Term” means a period
during which all or a portion of the outstanding principal balance of this Note
bears interest determined in relation to LIBOR or the SAF Rate, with each Fixed
Rate Term to commence on a Business Day and to continue:

(i)            for a period of one (1),
two (2) or three (3) months for a LIBOR interest selection; and

(ii)           for a period of not less than one (1)
Business Day nor more than twenty-eight (28) days for a SAF Rate interest
selection;

provided however, that no
Fixed Rate Term for a LIBOR interest option may be selected for a principal
amount less than One Hundred Thousand Dollars ($100,000.00) and no Fixed Rate
Term for a SAF Rate interest option may be selected for a principal amount less
than One Hundred Thousand Dollars ($100,000.00); and provided further, that no
Fixed Rate Term shall extend beyond the Line of Credit Maturity Date.  If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the
next succeeding Business Day.

(c)           “LIBOR” means the rate per annum
(rounded upward, if necessary, to the nearest whole 1/16 of 1%) and determined
pursuant to the following formula:

	
  LIBOR =

  	
  Base LIBOR

  	
   

  
	
   

  	
  100% — LIBOR Reserve Percentage

  	
   

  

 

 

1

 

(i)            “Base LIBOR” means the rate per
annum for United States dollar deposits quoted by Bank as the Inter-Bank Market
Offered Rate, with the understanding that such rate is quoted by Bank for the
purpose of calculating effective rates of interest for loans making reference
thereto, on the first day of a Fixed Rate Term for delivery of funds on said
date for a period of time approximately equal to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term applies. 
Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

(ii)           “LIBOR Reserve Percentage” means the
reserve percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for “Eurocurrency Liabilities” (as defined in
Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for
expected changes in such reserve percentage during the applicable Fixed Rate
Term.

(d)           “Line of Credit Maturity Date” shall
have the meaning specified for such term in the Credit Agreement described
below.

(e)           “Prime Rate” means at any time the
rate of interest most recently announced within Bank at its principal office as
its Prime Rate, with the understanding that the Prime Rate is one of Bank’s
base rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Bank may designate.

(f)            “SAF Rate” means the fixed rate per
annum determined solely for Borrower by Bank to be the Special Advance Facility
Rate applicable to all or a portion of the outstanding principal balance of
this Note, with the understanding that: 
(i) the SAF Rate shall be determined separately by Bank at the time
of each request therefor; (ii) Bank’s agreement to make the SAF Rate available
is subject to cancellation by Bank at any time at Bank’s sole discretion; and
(iii) upon any such cancellation, Bank shall have no further obligation to
provide any new SAF Rate for this Note.

INTEREST:

(a)           Interest.  The outstanding principal balance of this
Note shall bear interest (computed on the basis of a 360-day year, actual days
elapsed) either (i) at a fluctuating rate per annum one percent (1.000%)
below the Prime Rate in effect from time to time, (ii) at a fixed rate per
annum determined by Bank to be three-quarters percent (0.750%) above LIBOR in
effect on the first day of the applicable Fixed Rate Term for a LIBOR interest
selection, or (iii) at a fixed rate per annum determined by Bank to be
ninety-five one hundredths of one percent (0.950%) above the SAF Rate in effect
on the first day of any Fixed Rate Term for a SAF Rate interest selection.  When interest is determined in relation to
the Prime Rate, each change in the rate of interest hereunder shall become
effective on the date each Prime Rate 

 

2

 

change is announced
within Bank.  With respect to each LIBOR
or SAF Rate interest selection hereunder, Bank is hereby authorized to note the
date, principal amount, interest rate and Fixed Rate Term applicable thereto
and any payments made thereon on Bank’s books and records (either manually or
by electronic entry) and/or on any schedule attached to this Note, which
notations shall be prima facie evidence of the accuracy of the information noted.

(b)           Selection of Interest Rate Options.  At any time any portion of this Note bears
interest determined in relation to LIBOR or the SAF Rate, it may be continued
by Borrower at the end of the Fixed Rate Term applicable thereto so that all or
a portion thereof bears interest determined in relation to the Prime Rate or in
relation to LIBOR or the SAF Rate for a new Fixed Rate Term designated by
Borrower.  At any time any portion of
this Note bears interest determined in relation to the Prime Rate, Borrower may
convert all or a portion thereof so that it bears interest determined in
relation to LIBOR or the SAF Rate for a Fixed Rate Term designated by
Borrower.  At such time as Borrower
requests an advance hereunder or wishes to select a LIBOR or SAF Rate option
for all or a portion of the outstanding principal balance hereof, and at the
end of each Fixed Rate Term, Borrower shall give Bank notice specifying:  (i) the interest rate option selected
by Borrower; (ii) the principal amount subject thereto; and (iii) for
each LIBOR or SAF Rate selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR or SAF Rate selection,
(A) if requested by Bank, Borrower provides to Bank written confirmation
thereof not later than three (3) Business Days after such notice is given, and
(B) with respect to each LIBOR option requested hereunder, such notice is
given to Bank prior to 2:00 p.m. on the first day of the Fixed Rate Term,
or at a later time during any Business Day if Bank, at it’s sole option but
without obligation to do so, accepts Borrower’s notice and quotes a LIBOR-based
rate to Borrower.  If Borrower does not
immediately accept a LIBOR-based rate when quoted by Bank, the quoted rate
shall expire and any subsequent LIBOR request from Borrower shall be subject to
a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest
selection for such advance or the principal amount to which such Fixed Rate
Term applied.

(c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any
and all (i) withholdings, interest equalization taxes, stamp taxes or
other taxes (except income and franchise taxes) imposed by any domestic or
foreign governmental authority and related in any manner to LIBOR, and
(ii) future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or
foreign governmental authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are
attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.

 

3

 

(d)           Payment of Interest.  Interest accrued on this Note shall be
payable on the first day of each month, commencing August 1, 2001.

(e)           Default Interest.  From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder becomes due and
payable by acceleration or otherwise, the outstanding principal balance of this
Note shall bear interest until paid in full at an increased rate per annum (computed
on the basis of a 360-day year, actual days elapsed) equal to four percent (4%)
above the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

(a)           Borrowing and Repayment.  Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount set forth above or such lesser
amount as shall at any time be available hereunder.  The unpaid principal balance of this obligation at any time shall
be the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and
payable in full on the Line of Credit Maturity Date.

(b)           Advances.  Advances hereunder, to the total amount of
the principal sum stated above, may be made by the holder at the oral or
written request of Alan S. Unger, Katherine G. Mittelman, or Robert H. Dickson,
any one acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or
(ii) any person, with respect to advances deposited to the credit of any
deposit account of Borrower, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account.  The holder shall have no obligation to
determine whether any person requesting an advance is or has been authorized by
any Borrower.

(c)           Application of Payments.  Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.  All payments
credited to principal shall be applied first, to the outstanding principal balance
of this Note which bears interest determined in relation to the Prime Rate, if
any, second, to the outstanding principal balance of this Note which bears
interest determined in relation to LIBOR, with such payments applied to the
oldest Fixed Rate Term first, and third, subject to the restrictions set forth
below on voluntary prepayments of any principal amount bearing interest in
relation to the SAF Rate, to the outstanding principal balance of this Note
which bears interest determined in relation to the SAF Rate, with such payments
applied to the oldest Fixed Rate Term first.

 

4

 

PREPAYMENT:

(a)           Prime Rate.  Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to the Prime Rate at
any time, in any amount and without penalty.

(b)           LIBOR.  Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to LIBOR at any time
and in the minimum amount of One Hundred Thousand Dollars ($100,000.00);
provided however, that if the outstanding principal balance of such portion of
this Note is less than said amount, the minimum prepayment amount shall be the
entire outstanding principal balance thereof. 
In consideration of Bank providing this prepayment option to Borrower,
or if any such portion of this Note shall become due and payable at any time
prior to the last day of the Fixed Rate Term applicable thereto by acceleration
or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is
the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:

(i)            Determine the amount of
interest which would have accrued each month on the amount prepaid at the
interest rate applicable to such amount had it remained outstanding until the
last day of the Fixed Rate Term applicable thereto.

(ii)           Subtract from the amount
determined in (i) above the amount of interest which would have accrued for the
same month on the amount prepaid for the remaining term of such Fixed Rate Term
at LIBOR in effect on the date of prepayment for new loans made for such term
and in a principal amount equal to the amount prepaid.

(iii)          If the result obtained in (ii) for any
month is greater than zero, discount that difference by LIBOR used in (ii)
above.

Borrower acknowledges
that prepayment of such amount may result in Bank incurring additional costs,
expenses and/or liabilities, and that it is difficult to ascertain the full
extent of such costs, expenses and/or liabilities.  Borrower, therefore, agrees to pay the above–described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee
when due, the amount of such prepayment fee shall thereafter bear interest
until paid at a rate per annum two percent (2.000%) above the Prime Rate in
effect from time to time (computed on the basis of a 360–day year, actual
days elapsed).  Each change in the rate
of interest on any such past due prepayment fee shall become effective on the
date each Prime Rate change is announced within Bank.

(c)           SAF Rate.  Borrower may not voluntarily prepay
principal on any portion of this Note which bears interest determined in
relation to the SAF Rate. 
Notwithstanding the foregoing, in the event that any portion of this
Note which bears interest in relation to the SAF Rate shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall reimburse Bank immediately

 

5

 

on demand for the full
amount of any loss incurred by Bank as a result of the prepayment of such
portion, including any loss of income resulting from Bank’s reinvestment or
re-employment of the amount prepaid at a rate which is less than the SAF Rate
for such portion.

EVENTS OF DEFAULT:

This Note is made
pursuant to and is subject to the terms and conditions of that certain Credit
Agreement between Borrower and Bank dated as of June 28, 2001, as amended from
time to time (the “Credit Agreement”). 
Any default in the payment or performance of any obligation under this
Note, or any defined event of default under the Credit Agreement, shall
constitute an “Event of Default” under this Note.

MISCELLANEOUS:

(a)           Remedies.  Upon the occurrence of any Event of Default,
the holder of this Note, at the holder’s option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. 
Borrower shall pay to the holder immediately upon demand the full amount
of all payments, advances, charges, costs and expenses, including reasonable
attorneys’ fees (to include outside counsel fees and all allocated costs of the
holder’s in-house counsel), expended or incurred by the holder in connection
with the enforcement of the holder’s rights and/or the collection of any
amounts which become due to the holder under this Note, and the prosecution or
defense of any action in any way related to this Note, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any
of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to Borrower or any other
person or entity.

(b)           Governing Law.  This Note shall be governed by and construed
in accordance with the laws of the State of California.

IN WITNESS
WHEREOF, the undersigned has executed this Note as of the date first written
above.

INTERNATIONAL HOUSE OF
PANCAKES, INC.,

a Delaware corporation

	
  By

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    [Printed Name and Title]

  

 

 

6

CREDIT AGREEMENT

THIS CREDIT AGREEMENT is
entered into as of June 28, 2001, by and between INTERNATIONAL HOUSE OF
PANCAKES, INC., a Delaware corporation (“Borrower”), and WELLS FARGO
BANK, NATIONAL ASSOCIATION 

(“Bank”).

RECITALS

Borrower has requested
that Bank extend credit to Borrower as described below, and Bank has agreed to
provide such credit to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1         DEFINED TERMS.  The following terms as used herein shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

“Additional
Permitted Subsidiary Guarantees” means those Guarantees delivered by any
Guarantor (other than IHOP) which guarantee Debt of Borrower the beneficiaries
of which are or become a party to, and thereby agree to undertake and perform
the duties, rights and obligations of a party under, the Intercreditor
Agreement.

“Advance”
means an advance under the Line of Credit.

“Affiliate”
means any Person (other than a Subsidiary) (a) which directly or
indirectly controls, or is controlled by, or is under common control with,
IHOP, (b) which beneficially owns or holds 10% or more of any class of the
Voting Stock of IHOP, (c) 10% or more of the Voting Stock of which is
beneficially owned or held by IHOP or a Subsidiary of IHOP or (d) any
officer or director of IHOP or any of its Subsidiaries.  For purposes of this definition, “control”
of a Person shall mean the power, direct or indirect, (i) to vote or
direct the voting of a majority of the Voting Stock of such Person, or
(ii) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.

“Agreement”
means this Credit Agreement, either as originally executed or as it may from
time to time be supplemented, modified, amended, restated or extended.

“Appropriate
Officer” means, with respect to any corporation, such corporation’s
President, Vice President, Chief Executive Officer, Chief Financial Officer,
Treasurer or Controller.

“Bank” is
defined in the preamble.

 

1

 

“Board”
means the Board of Directors of any corporation or a committee of said
corporation having authority to exercise, when the Board of Directors is not in
session, the powers of the Board of Directors (subject to any designated
limitations) in the management of the business and affairs of said corporation.

“Book Value”
of an asset of any Person means the value of such asset as reported in the
books and records of such Person in accordance with GAAP.

“Borrower”
is defined in the preamble.

“Business Asset
Acquisition” is defined in Section 6.7 hereof.

“Business Day”
means any Monday, Tuesday, Wednesday, Thursday or Friday on which Bank is open
for business at its address for notices as designated herein.

“Capitalized
Lease” means a lease of Property which in accordance with GAAP should be
capitalized on the balance sheet of any Person.

“Capitalized
Lease Obligations” means the aggregate rentals due and to become due under
all Capitalized Leases which any Person, as a lessee, would be required to
reflect as a liability on the consolidated balance sheet of such Person in
accordance with GAAP.

“Closing Date”
means the date on which all conditions precedent set forth in Article 4
have been met.

“Compliance
Certificate” means a certificate in the form of Exhibit A,
properly completed and signed by an Appropriate Officer of IHOP and Borrower.

“Consolidated
Debt” means the Debt of IHOP, Borrower and their Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.

“Consolidated
Income Available for Fixed Charges” means the sum of (a) Consolidated
Net Income, (b) consolidated income tax expense of IHOP and its
Subsidiaries in accordance with GAAP and (c) Fixed Charges.

“Consolidated
Net Income or Loss” means the Net Income or Loss of IHOP, Borrower and
their Subsidiaries, as determined on a consolidated basis in accordance with
GAAP.

“Consolidated
Tangible Net Worth” means shareholders’ equity of IHOP and its Subsidiaries
less intangible assets booked after December 31, 1999, less
Restricted Investments in excess of 10% of shareholders’ equity of IHOP and its
Subsidiaries at any date of determination, all as determined for IHOP and its
Subsidiaries on a consolidated basis in accordance with GAAP.

 

2

 

“Debt” with
respect to any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, (b) the liability of such Person created
by granting a Lien to which the property or assets of such Person are subject
whether or not such Person has assumed or become legally liable for the payment
of any obligation (provided that, if such obligation has not been assumed or
become the legal liability of such Person, the amount of the liability shall be
deemed to be in an amount not to exceed the Fair Market Value of the property
to which the Lien relates, as determined in good faith by such Person),
(c) Capitalized Lease Obligations of such Person, to the extent such
obligations exceed 95% of the amount of accounts receivable by such Person as
lessor under direct financing leases with franchisees so long as such direct
financing leases are, at the time of determination to the best knowledge of the
lessor thereunder, valid and enforceable against their lessees and are current
as to payment and not otherwise in default to the extent that there is a
reasonable likelihood that any such lease would be terminated by the lessor
prior to its stated expiration and (d) the aggregate amount of all
Guarantees given by such Person with respect to any of the foregoing.

“Default”
means any Event of Default and/or any event that, with the passage of time or
the giving of notice or both, would constitute an Event of Default.

“Disposition”
means any sale, transfer, assignment, lease, conveyance or other disposition of
any asset except for sales, transfers, assignments, leases conveyances or other
dispositions solely between IHOP, Borrower and/or the other Guarantors.

“ERISA”
means the Employee Retirement Income Security Act of 1974, as from time to time
amended.

“Event of
Default” shall have the meaning specified in Section 7.1.

“Fair Market
Value” means what a willing buyer would pay to a willing seller in an
arm’s-length transaction.

“Fixed Charges”
means the sum of (a) Interest Expense and (b) rental expense under
operating leases, all as determined for IHOP and its Subsidiaries on a
consolidated basis in accordance with GAAP.

“Fixed Rate
Notes” means, collectively, (a) Borrower’s 7.79% senior notes due in 2002
in the original aggregate principal amount of $32,000,000 issued on
November 19, 1992 pursuant to the Note Purchase Agreements-1992 and (b)
Borrower’s 7.42% senior notes due in 2008 in the original aggregate principal
amount of $35,000,000 issued on November 1, 1996 pursuant to the Note Purchase
Agreements-1996.

“GAAP”
means generally accepted accounting principles in the United States in effect
from time to time.

“Governmental
Agency” means (a) any international, foreign, federal, state, county
or municipal government, or political subdivision thereof, (b) any
governmental or quasi–governmental agency, authority, board, bureau,
commission, department, instrumentality or public body, or (c) any court,
administrative tribunal or public utility.

 

3

 

“Gross Assets”
means the total assets and Properties of IHOP and its Subsidiaries less
accumulated depreciation, as indicated on the audited balance sheets of IHOP
and its Subsidiaries for the fiscal year end immediately prior to the date of
any determination.

“Guarantee”
means any guarantee or other contingent liability (other than any endorsement
for collection or deposit in the ordinary course of business), direct or
indirect, with respect to any obligations of another Person, through an
agreement or otherwise, including, without limitation, (a) any other
endorsement or discount with recourse or undertaking substantially equivalent
to or having economic effect similar to a guarantee in respect of any such
obligations and (b) any agreement (i) to purchase, or to advance or
supply funds for the payment or purchase of, any such obligations, (ii) to
purchase, sell or lease Property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the Property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of any liability for a dividend, stock liquidation
payment or expense) or to assure a minimum equity, working capital or other
balance sheet condition in respect of any such obligation.  The amount of liability of any Person
attributable to any Guarantee shall be equal to the maximum amount for which
such Person could be liable under such Guarantee.

“Guarantors”
means, collectively, IHOP, IHOP Properties, IHOP Realty and IHOP Restaurants,
together with any and all other Persons that may now or hereafter guaranty the
obligations of Borrower to Bank with respect to the Line of Credit or any part
thereof.

“IHOP”
means IHOP Corp., a Delaware corporation, or any successor thereto.

“IHOP
Guaranties” is defined in Section 2.4.

“IHOP
Properties” means IHOP Properties, Inc., a Delaware corporation which is an
indirect wholly-owned Subsidiary of Borrower.

“IHOP Realty”
means IHOP Realty Corp., a Delaware corporation which is a wholly–owned
Subsidiary of Borrower.

“IHOP
Restaurants” means IHOP Restaurants, Inc., a California corporation which
is a wholly-owned Subsidiary of Borrower.

“Intercreditor
Agreement” means the Intercreditor Agreement dated as of June 28, 2001
among the 1992 Noteholders (as defined therein), the 1996 Noteholders (as
defined therein), Bank and additional creditors which may become a party thereto
from time to time, substantially in the form attached hereto as Exhibit B,
either as originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.

 

4

 

“Interest
Expense” means interest expense, determined for IHOP and its Subsidiaries
on a consolidated basis in accordance with GAAP.

“Investment”
when used with reference to any investment of IHOP, Borrower or any of their
Subsidiaries, means any investment so classified under GAAP (and, specifically,
shall not include trade receivables which are classified as current assets
under GAAP), and, whether or not so classified, includes (a) any loan or
advance made by IHOP, Borrower or any of their Subsidiaries to any other
Person, and (b) any ownership or similar interest in any other Person; and
the amount of any Investment shall be the original principal or capital amount
thereof less all cash returns of principal or equity thereof (and without
adjustment by reason of the financial condition of such other Person).

“Laws”
means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, regulations, ordinances, codes and administrative or
judicial precedents.

“Lien”
means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, conditional sale or title retention agreement, lessor’s interest
under a Capitalized Lease or analogous instrument, in, of or on any of a
Person’s Property (whether held on the date hereof or hereafter acquired), or
any signed or filed financing statement which names such Person as the debtor,
or the execution of any security agreement or the like authorizing any other
Person as the secured party thereunder to file such a financing statement; provided
that neither (a) the interest of a lessee or a sublessee in its capacity
as lessee or sublessee under a lease or sublease entered into by IHOP, Borrower
or any of their Subsidiaries in the ordinary course of business nor
(b) the rights of franchisees in their capacities as franchisees to use
and possession of certain properties and rights pursuant to franchise
documentation entered into by IHOP, Borrower or any of their Subsidiaries in
the ordinary course of business shall be deemed to constitute a Lien for
purposes hereof.

“Line of Credit”
shall have the meaning specified in Section 2.1(a).

“Line of Credit
Maturity Date” means May 31, 2004, or such later date as may then be in
effect pursuant to Section 2.1(d).

“Line of Credit
Note” shall have the meaning specified in Section 2.1(a).

“Loan Documents”
means, collectively, this Agreement, the Line of Credit Note, the IHOP
Guaranties and any other certificates, documents or agreements of any type or
nature heretofore or hereafter executed or delivered by Borrower and/or any
other Person (or any Affiliate) to Bank in any way relating to or in
furtherance of the Agreement, in each case either as originally executed or as
the same may from time to time be supplemented, modified, amended, restated or
extended.

 

5

 

“Material
Adverse Effect” means any change or changes or effect or effects that
individually or in the aggregate are or are likely to be materially adverse to
(a) the assets, business, operations, income, prospects or condition
(financial or otherwise) of IHOP and its Subsidiaries taken as a whole or
Borrower and its Subsidiaries taken as a whole, (b) the transactions
contemplated by this Agreement, or (c) taken as a whole, the ability of
Borrower and IHOP to fulfill their respective obligations under this Agreement
and the Line of Credit Note.

“Net Income or
Loss” of any Person, with respect to any period, shall mean the net income
or net loss of such Person after excluding the sum of (a) any net loss or
any undistributed net income of any Person other than a Subsidiary of such
Person, (b) the net income or net loss of any Subsidiary of such Person
earned or incurred prior to the date on which it became a Subsidiary of such  Person, (c) the gain or loss (net of
any tax effect) resulting from the sale of any capital assets other than in the
ordinary course of business, and (d) extraordinary or nonrecurring gains
or losses (net of any tax effect), all as determined for the relevant period in
accordance with GAAP.

“Note Purchase
Agreements” means, collectively, the Note Purchase Agreements-1992 and the
Note Purchase Agreements-1996.

“Note Purchase
Agreements-1992” means the several Senior Note Purchase Agreements dated as
of November 19, 1992 among Borrower, IHOP and the purchasers identified in
Schedule I thereto.

“Note Purchase
Agreements-1996” means the several Senior Note Purchase Agreements dated as
of November 1, 1996 among Borrower, IHOP and the purchasers identified in
Schedule I thereto.

“Opinion of Counsel”
means the favorable written legal opinion of Mark Weisberger, as internal
counsel to Borrower and the Guarantors, together with copies of all factual
certificates and legal opinions upon which such counsel has relied.

“Person”
means any entity, whether an individual, trustee, corporation, general
partnership, limited partnership, joint stock company, trust, unincorporated
organization, bank, business association, firm, joint venture, government
agency or authority, or otherwise.

“Permitted Lien”
is defined in Section 6.2.

“Prime Rate”
means the rate of interest most recently announced by Bank at its principal
office in San Francisco as its “Prime Rate.” 
The Prime Rate is one of Bank’s base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto and is evidenced by the recording thereof after its
announcements in such internal publication or publications as Bank may
designate.  Any change in the interest
rate resulting from a change in such Prime Rate shall become effective on the
Business Day on which each change in the Prime Rate is announced by Bank.  The Prime Rate may not necessarily be the
lowest interest rate at which Bank is willing to extend credit facilities.

 

6

 

“Property”
with respect to any Person, means any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible, of such Person.

“Request for
Extension” means a request for an extension of the Line of Credit Maturity
Date substantially in the form of Exhibit C, signed by an
Appropriate Officer of IHOP and Borrower and properly completed to provide all
information required to be included therein.

“Responsible
Official” means (a) when used with reference to a Person other than
an individual, any corporate officer of such Person, general partner of such
Person, corporate officer of a corporate general partner of such Person, or
corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official thereof duly
acting on behalf thereof, and (b) when used with reference to a Person who
is an individual, such Person.  Any
document or certificate hereunder that is signed or executed by a Responsible
Official of a Person shall be conclusively presumed to have been authorized by
all necessary corporate, partnership and/or other action on the part of that
Person.

“Restricted
Investments” shall mean all Investments made by IHOP, Borrower or their
Subsidiaries in or to any Person except (a) Investments in notes of
franchisees and receivables of franchisees in the ordinary course of business
other than notes and receivables held in settlement of franchise obligations,
and in Property of IHOP or its Subsidiaries to be used in the ordinary course
of business; (b) Investments in Subsidiaries; (c) Investments in
obligations issued or unconditionally guarantied by the United States of
America or any agency thereof, in each case maturing within one year from the
date of acquisition thereof; (d) Investments in obligations issued by any
political subdivision of the United States of America or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor’s Corporation or Moody’s
Investors Service, Inc. or some other mutually agreeable rating system if
either of these entities no longer exists; (e) commercial paper maturing
no more than 270 days from the date of creation thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Corporation or Moody’s Investors Service, Inc. or
some other mutually agreeable rating system if either of these entities no
longer exists; (f) certificates of deposit, repurchase agreements or
bankers’ acceptances maturing within one year from the date of acquisition
thereof issued by Borrower’s cash management concentration bank (provided that
such bank is rated investment grade or better by either Standard &
Poor’s Corporation or Moody’s Investors Services, Inc. or some other mutually
agreeable rating system if either of these entities no longer exists), Wells
Fargo Bank, N.A., or other commercial banks located in the United States of
America and Canada having combined capital, surplus and undivided profits of
not less than $100,000,000 and who have a rating at all times from
Standard & Poor’s Corporation or Moody’s Investors Services, inc., or
some other mutually agreeable rating system if either of these entities no
longer exists, of “A-” or better; (g) Investments in mutual funds and
money market accounts, which funds or accounts are traded on a national exchange
or are managed by a commercial bank and which invests solely in Investments
which satisfy the criteria set forth in the foregoing clauses (c) through (f);
and (h) other Investments existing on the Closing Date.

 

7

 

“Subsidiary”
means, with respect to any Person, any corporation or other entity
(a) organized under the laws of the United States, the District of
Columbia or Canada or any state or political subdivision of any thereof,
(b) all or substantially all of whose assets and business operations are
located or conducted within the United States of America or Canada and
(c) of which at least 51% of the outstanding Voting Stock is at the time
directly or indirectly owned or controlled by such Person or by one or more of
such Person’s wholly-owned Subsidiaries.

“Total
Capitalization” means the sum of (i) Consolidated Debt of IHOP,
Borrower and their Subsidiaries and (ii) Consolidated Tangible Net Worth.

“Voting Stock”
with respect to any Person shall mean capital stock of such Person of any class
or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of members of the Board (or
Persons performing similar functions) of such Person.

SECTION 1.2         USE OF DEFINED TERMS.  Any defined term used in the plural shall
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.

SECTION 1.3         ACCOUNTING TERMS.  All accounting terms used in this Agreement
shall be applied on a consolidated basis for IHOP, Borrower and their
Subsidiaries, unless otherwise specifically indicated herein.  All accounting terms not  specifically defined in this Agreement shall
be construed in conformity with, and all financial data required to be
submitted by this Agreement shall be prepared in conformity with, GAAP applied
on a consistent basis, as in effect on the date hereof, except as otherwise
specifically prescribed herein.

SECTION 1.4         EXHIBITS
AND SCHEDULES.  All exhibits and
schedules to this Agreement, either as originally existing or as the same may
from time to time be supplemented, modified or amended, are incorporated herein
by this reference.

ARTICLE II.

CREDIT TERMS

SECTION 2.1         LINE
OF CREDIT.

(a)           Line
of Credit.  Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make Advances to Borrower
from time to time up to and including the “Maturity Date” (as such term is
defined in the Line of Credit Note described below), not to exceed at any time
the aggregate principal amount of Twenty-Five Million Dollars ($25,000,000.00)
(“Line of Credit”), the proceeds of which shall be used for Borrower’s working
capital and other general corporate purposes. 
Borrower’s obligation to repay Advances under the Line of Credit shall
be evidenced by a promissory note substantially in the form of Exhibit D
attached hereto (“Line of Credit Note”), all terms of which are incorporated
herein by this reference.

 

8

 

(b)           Letter
of Credit Subfeature.  As a
subfeature under the Line of Credit, Bank agrees from time to time during the
term thereof to issue or cause an affiliate to issue standby letters of credit
for the account of Borrower for general corporate purposes, including without
limitation to finance the acquisition and development of real estate in the
ordinary course of Borrower’s business (each, a “Letter of Credit” and
collectively, “Letters of Credit”); provided however, that the aggregate
undrawn amount of all outstanding Letters of Credit shall not at any time
exceed Five Million Dollars ($5,000,000.00).  The form and substance of each Letter of
Credit shall be subject to approval by Bank, in its sole discretion.  Each Letter of Credit shall be issued for a
term not to exceed eighteen (18) months, as designated by Borrower; provided
however, that no Letter of Credit shall have an expiration date more than
ninety (90) days beyond Line of Credit Maturity Date.  The undrawn amount of all Letters of Credit shall be reserved
under the Line of Credit and shall not be available for borrowings
thereunder.  Each Letter of Credit shall
be subject to the additional terms and conditions of the Letter of Credit
agreements, applications and any related documents required by Bank in
connection with the issuance thereof. 
Each draft paid under a Letter of Credit shall be deemed an Advance
under the Line of Credit and shall be repaid by Borrower in accordance with the
terms and conditions of this Agreement applicable to such Advances; provided
however, that if Advances under the Line of Credit are not available, for any
reason, at the time any draft is paid, then Borrower shall pay to Bank within
two (2) Business Days of Bank’s written demand therefor the full amount of such
draft, together with interest thereon from the date such draft is paid to the
date such amount is fully repaid by Borrower, at the rate of interest
applicable to Advances under the Line of Credit.  In such event Borrower agrees that Bank, in its sole discretion,
may debit any account maintained by Borrower with Bank for the amount of any
such draft.

(c)           Borrowing
and Repayment.  Borrower may from
time to time during the term of the Line of Credit borrow, partially or wholly
repay its outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions contained herein or in the Line of Credit
Note; provided however, that the total outstanding borrowings under the Line of
Credit shall not at any time exceed the maximum principal amount available
thereunder, as set forth above.

(d)           Extension
of Line of Credit Maturity Date. 
Provided that Borrower has theretofore delivered to Bank the financial
statements required under Section 5.3 for the immediately preceding
fiscal year and immediately preceding fiscal quarter, as applicable, Borrower
may, by delivery of a written Request for Extension to Bank, request that the
Line of Credit Maturity Date (as then in effect) be extended by one year (365
or 366 days, as the case may be).  The
Request for Extension shall not be delivered earlier than March 31, 2004 nor
later than April 30, 2004 (or each March 31 and April 30 in a subsequent year
if the Line of Credit Maturity Date has been extended to such year).  Bank shall use its best efforts to respond
either affirmatively or negatively (in its sole and absolute discretion) to
such Request for Extension by written notice to Borrower within thirty (30)
days after receipt thereof from Borrower. 
If Bank so notifies Borrower in writing that Bank consents to the
extension of the 

 

9

 

Line
of Credit Maturity Date, then the Line of Credit Maturity Date shall be deemed
so extended and the term “Line of Credit Maturity Date” shall be deemed amended
to mean the date which is one year subsequent to the then effective Line of
Credit Maturity Date.  If Bank, in its
sole and absolute discretion, notifies Borrower in writing within said thirty
(30) day period that it does not consent to such extension of the Line of
Credit Maturity Date, or fails to respond in writing within said thirty (30)
day period, the Line of Credit Maturity Date shall not be so extended.

SECTION 2.2         INTEREST/FEES.

(a)           Interest.  The outstanding principal balance of the
Line of Credit shall bear interest, and the amount of each draft paid under any
Letter of Credit shall bear interest from the date such draft is paid to the
date such amount is fully repaid by Borrower, at the rate(s) of interest set
forth in the Line of Credit Note.

(b)           Computation
and Payment.  Interest shall be
computed on the basis of a 360-day year, actual days elapsed.  Interest shall be payable at the times and
place set forth in each promissory note or other instrument required hereby.

(c)           Unused
Commitment Fee.  Borrower shall pay
to Bank a fee equal to three-eighths of one percent (0.375%) per annum
(computed on the basis of a 360-day year, actual days elapsed) on the average
daily unused amount of the Line of Credit, which fee shall be calculated on a
quarterly basis by Bank and shall be due and payable by Borrower in arrears
each January 1, April 1, July 1 and October 1.

(d)           Letter
of Credit Fees.  Borrower shall pay
to Bank (i) fees upon the issuance of each Letter of Credit equal to one
and one-quarter percent (1.250%) per annum (computed on the basis of a 360-day
year, actual days elapsed) of the face amount thereof, and (ii) fees upon
the payment or negotiation of each draft under any Letter of Credit and fees
upon the occurrence of any other activity with respect to any Letter of Credit
(including without limitation, the transfer, amendment or cancellation of any
Letter of Credit) determined in accordance with Bank’s standard fees and
charges then in effect for such activity.

SECTION 2.3         COLLECTION OF PAYMENTS.  To the extent Borrower shall not have
otherwise paid any of the following on or before their due date, Borrower
authorizes Bank to collect all principal, interest and fees due under the Line
of Credit by charging Borrower’s deposit account number 4950038554 with Bank,
or any other deposit account maintained by Borrower with Bank, for the full
amount thereof.  Should there be
insufficient funds in any such deposit account to pay all such sums when due,
the full amount of such deficiency shall be immediately due and payable by
Borrower.  Notwithstanding the
foregoing, Bank shall not charge any such deposit account for fees due
hereunder or any other Loan Document (other than unused commitment fees referenced
in Section 2.2(c) above) without having first provided Borrower five (5)
Business Days prior written notice (or such longer notice period as may be
required hereunder or under any other applicable Loan Document) that any such
fees are due and payable.

 

10

 

SECTION 2.4         GUARANTIES.  All indebtedness of Borrower to Bank under the Line of Credit
shall be guaranteed jointly and severally by each of the IHOP Guarantors as
evidenced by and subject to the terms of guaranties in form and substance
satisfactory to Bank (collectively, the “IHOP Guaranties”)..

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

Borrower makes the
following representations and warranties to Bank, which representations and
warranties shall survive the execution of this Agreement and shall continue in
full force and effect until the full and final payment, and satisfaction and
discharge, of all obligations of Borrower to Bank subject to this Agreement.

SECTION 3.1         LEGAL STATUS.  Borrower is a corporation, duly organized and existing and in
good standing under the laws of the State of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required.

SECTION 3.2         AUTHORIZATION AND VALIDITY.  This Agreement and each other Loan Document
required hereby or at any time hereafter delivered to Bank in connection
herewith have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 3.3         NO VIOLATION.  The execution, delivery and performance by IHOP, Borrower and
their Subsidiaries of each of the Loan Documents to which they are a party do
not violate any provision of any Law or regulation, or contravene any provision
of the Articles of Incorporation or By-Laws of IHOP, Borrower or any such
Subsidiary, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which IHOP, Borrower or any such
Subsidiary, is a party or by which IHOP, Borrower or any such Subsidiary, may
be bound.

SECTION 3.4         LITIGATION.  There are no pending, or to the best of Borrower’s knowledge
threatened, actions, claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or administrative agency which
could have a Material Adverse Effect other than those disclosed by Borrower to
Bank in writing prior to the date hereof.

SECTION 3.5         CORRECTNESS OF FINANCIAL STATEMENT.  The financial statement of IHOP and its
Subsidiaries dated December 31, 2000, a true copy of which has been delivered
by Borrower to Bank prior to the date hereof, (a) is complete and correct
and presents fairly the consolidated financial condition of IHOP and its
Subsidiaries, (b) discloses (as of such date) all liabilities of IHOP and
its Subsidiaries that are required to be reflected or reserved against under
GAAP, whether liquidated or unliquidated, fixed or contingent, and (c) has
been prepared in accordance with GAAP consistently applied.  

 

11

 

Since
the date of such financial statement there has been no material adverse change
in the financial condition of IHOP and its Subsidiaries, nor has IHOP, Borrower
or any of their Subsidiaries mortgaged, pledged, granted a security interest in
or otherwise encumbered any of its assets or properties except as permitted
herein.

SECTION 3.6         INCOME TAX RETURNS.  Borrower has no knowledge of any pending
assessments or adjustments of any income tax payable with respect to any year
for IHOP, Borrower or any of their Subsidiaries.

SECTION 3.7         NO SUBORDINATION.  There is no agreement, indenture, contract
or instrument to which IHOP, Borrower or any of their Subsidiaries is a party
or by which IHOP, Borrower or any of their Subsidiaries may be bound that requires
the subordination in right of payment of any of their respective obligations
subject to this Agreement to any other obligation of any of them.

SECTION 3.8         PERMITS, FRANCHISES.  IHOP, Borrower and their Subsidiaries
possess, and will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks, trade names,
patents, and fictitious names, if any, necessary to enable it to conduct the
business in which they are now engaged in compliance with applicable law.

SECTION 3.9         ERISA.  To the best of Borrower’s knowledge, after
due inquiry, each of IHOP, Borrower and their Subsidiaries is in compliance in
all material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended or recodified from time to time; none
of IHOP, Borrower or any of their Subsidiaries has violated any provision of
any defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by any of them (each, a “Plan”); no Reportable Event as
defined in ERISA has occurred and is continuing with respect to any Plan
initiated by IHOP, Borrower and their Subsidiaries; each of IHOP, Borrower and
their Subsidiaries has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
GAAP.

SECTION 3.10       NO MATERIAL ADVERSE CHANGE.  Since the date of the financial statements
referenced in Section 3.5 above, no circumstance or event has occurred
that constitutes a Material Adverse Effect.

SECTION 3.11       OTHER OBLIGATIONS.  To the best of Borrower’s knowledge, after
due inquiry, none of IHOP, Borrower or any of their Subsidiaries is in default
on any obligation of $1,000,000 or more for borrowed money, any purchase money
obligation of $1,000,000 or more, or any other lease, commitment, contract,
instrument or obligation involving an amount payable by Borrower of $1,000,000
or more.

SECTION 3.12       ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to Bank in
writing prior to the date hereof, to the best of Borrower’s knowledge, after
due inquiry, each of IHOP, Borrower and their Subsidiaries are in compliance in
all material respects with all applicable federal or state environmental,
hazardous waste, health 

 

12

 

and
safety statutes, and any rules or regulations adopted pursuant thereto, which
govern or affect any of their respective operations and/or properties, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of 1976, and the
Federal Toxic Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time. 
To the best of Borrower’s knowledge, after due inquiry, none of the
operations of IHOP, Borrower and their Subsidiaries is the subject of any
federal or state investigation evaluating whether any remedial action involving
an expenditure exceeding $1,000,000 (either singularly or in the aggregate) is
needed to respond to a release of any toxic or hazardous waste or substance
into the environment.  None of IHOP, Borrower
or any of their Subsidiaries has any contingent liability exceeding $1,000,000
(either singularly or in the aggregate) in connection with any release of any
toxic or hazardous waste or substance into the environment.

ARTICLE IV.

CONDITIONS

SECTION 4.1         CONDITIONS OF INITIAL EXTENSION OF
CREDIT.  The obligation of Bank to
extend the initial credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

(a)           Documentation.  Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed by all
applicable parties:

(i)            This Agreement.

(ii)           The Line of Credit Note.

(iii)          The IHOP Guaranties.

(iv)          The Intercreditor Agreement.

(v)           A Continuing Standby Letter of Credit
Agreement, which agreement shall constitute a “Letter of Credit Agreement” for
purposes of Section 2.1(b).

(vi)          With respect to each of Borrower and
the Guarantors, such documentation as Bank may reasonably require to establish
the due organization, valid existence and good standing of Borrower and each
such Guarantor in its jurisdiction of formation, its qualification to engage in
business in California or, if different, the jurisdiction of its principal
place of business, its authority to execute, deliver and perform the Loan
Documents to which it is a party, the identity, authority and capacity of each
responsible official thereof authorized to act on its behalf, including,
without limitation, copies of its certificates or articles of incorporation and
amendments thereto certified by the applicable Secretary of State (or
equivalent government official), bylaws and amendments thereto certified by a
responsible official of such party, certificates of good standing and/or
qualifications to engage in business, certified copies of corporate
resolutions, incumbency certificates, certificates of responsible officials and
the like.

 

13

 

(vii)         The Opinion of Counsel.

(viii)        Written evidence that Borrower’s prior
revolving (unsecured) credit facility with Bank of America, N.A. (formerly
known as Bank of America National Trust and Savings Association, successor by
merger to Bank of America Illinois) have been or will be concurrently
terminated.

(ix)           Such other documents as Bank
reasonably may require under any other Section of this Agreement.

(b)           Financial
Condition.  There shall have been no
material adverse change, as determined by Bank, in the financial condition or
business of Borrower or any Guarantor.

(c)           Insurance.  Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower’s and the Guarantors’ Property,
in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank.

SECTION 4.2         CONDITIONS OF EACH EXTENSION OF
CREDIT.  The obligation of Bank to make
each extension of credit requested by Borrower hereunder shall be subject to
the fulfillment to Bank’s satisfaction of each of the following conditions:

(a)           Compliance.  The representations and warranties contained
herein and in each of the other Loan Documents shall be true on and as of the
date of the signing of this Agreement and on the date of each extension of
credit by Bank pursuant hereto, with the same effect as though such
representations and warranties had been made on and as of each such date, and
on each such date, no Default or Event of Default shall have occurred and be
continuing or shall exist.

(b)           Documentation.  Bank shall have received all additional
documents which reasonably may be required by Bank in connection with such
extension of credit.

ARTICLE V.

AFFIRMATIVE COVENANTS

Borrower
covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower shall (and shall cause each of its Subsidiaries to), unless
Bank otherwise consents in writing:

SECTION 5.1         PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees
or other liabilities due under any of the Loan Documents at the times and place
and in the manner specified therein.

 

14

 

SECTION 5.2         ACCOUNTING RECORDS.  Maintain adequate books and records in
accordance with GAAP consistently applied, and permit any representative of
Bank, at any reasonable time upon two (2) Business Days’ prior notice, to inspect,
audit and examine such books and records, to make copies of the same, and to
inspect the properties of Borrower, with any such inspection, audit, or
examination to occur during regular business hours.  Notwithstanding the foregoing, no prior notice for any such
inspection, audit or examination shall be required during any time that an
Event of Default shall remain in effect.

SECTION 5.3         FINANCIAL STATEMENTS.  Provide to Bank all of the following, in
form and detail satisfactory to Bank:

(a)           as
soon as available and in any event within 45 days after the end of each of
the first three fiscal quarters of each fiscal year of IHOP, as of the end of
any such fiscal quarter,

(i)            Form 10-Q for IHOP,
consolidated balance sheets of IHOP and its Subsidiaries as of the end of each
such fiscal quarter and consolidated statements of earnings and cash flow of
IHOP and its Subsidiaries for such fiscal quarter and for the period commencing
at the end of the previous fiscal year and ending with the end of such fiscal
quarter, certified by an Appropriate Officer of IHOP; and

(ii)           a Compliance Certificate executed by
an Appropriate Officer of IHOP and Borrower setting forth computations or other
pertinent information in reasonable detail showing as at the end of such fiscal
quarter (A) whether or not the financial covenants set forth in Sections 6.3
through 6.9 hereof, inclusive, have been met, accompanied by
calculations setting forth the maximum amount of Debt that could have been
incurred pursuant to Section 6.3 hereof, and the maximum amount of
dividends or distributions that could have been declared or paid pursuant to Section 6.6
hereof, and (B) whether or not Liens on property or assets of IHOP or its
Subsidiaries or securing Debt of IHOP or its Subsidiaries, as the case may be,
exceed the threshold set forth in Section 6.2(i) hereof,
accompanied by calculations setting forth the maximum amount of additional Debt
secured by Liens that could have been incurred under Section 6.2(i)
hereof;

(b)           as
soon as available and in any event within 90 days after the end of each
fiscal year of IHOP, a Compliance Certificate as of such year end and a copy of
the annual report to shareholders for such fiscal year for IHOP and its
Subsidiaries, including therein consolidated balance sheets of IHOP and its Subsidiaries
as of the end of such fiscal year and consolidated statements of operations and
cash flow of IHOP and its Subsidiaries for such fiscal year, in each case
certified (without any material qualification) in a manner reasonably
acceptable to Bank by PriceWaterhouseCoopers, another of the so-called
“Big 5” accounting firms or any other accounting firm reasonably
acceptable to Bank, and consolidating balance sheets of IHOP and its
Subsidiaries as of the end of such fiscal year and consolidating statements of
operations of IHOP and its Subsidiaries as of the end of such fiscal year,
certified by an Appropriate Officer of IHOP;

 

15

 

(c)           as
soon as available and in any event within 15 days, any information filed
by IHOP, Borrower or any of their Subsidiaries with the Securities and Exchange
Commission with respect to IHOP, Borrower and/or any of their Subsidiaries;

(d)           as
soon as available, any other public information released generally by IHOP,
Borrower or any of their Subsidiaries to financial or investment institutions,
brokers, investment bankers or any other entity in the financial community; and

(e)           as
soon as possible after an Appropriate Officer of IHOP or Borrower has knowledge
of the occurrence of a Default or Event of Default, IHOP or Borrower shall
furnish Bank with the details thereof.

In addition to the foregoing, Borrower shall furnish
Bank with copies of such other statements, reports, notices and information as
Bank may from time to time reasonably request in writing.

SECTION 5.4         COMPLIANCE.  Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of
Borrower’s and each Guarantor’s business; and comply with the provisions of all
documents pursuant to which Borrower or any such Guarantor is organized and/or
which govern Borrower’s or such Guarantor’s continued existence and with the
requirements of all Laws, rules, regulations and orders of any Governmental
Agency applicable to Borrower, any Guarantor and/or any of their respective
businesses.

SECTION 5.5         INSURANCE.  Maintain and keep in force insurance of the types and in amounts
customarily carried in lines of business similar to that of Borrower or any
such Guarantor, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers’ compensation, and deliver to
Bank from time to time at Bank’s request schedules setting forth all insurance
then in effect.

SECTION 5.6         FACILITIES.  Keep all properties useful or necessary to Borrower’s or any such
Guarantor’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto as are necessary in the
reasonable opinion of Borrower’s and/or any such Guarantor’s management.

SECTION 5.7         TAXES AND OTHER LIABILITIES.  Pay and discharge prior to delinquency any
and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower or
any such Guarantor may in good faith contest or as to which a bona fide dispute
may arise, and (b) for which Borrower or such Guarantor has made provision,
to Bank’s satisfaction, for eventual payment thereof in the event Borrower or
such Guarantor is obligated to make such payment.

SECTION 5.8         LITIGATION.  Promptly give notice in writing to Bank of any litigation pending
or threatened against Borrower or any such Guarantor with a claim that is
$1,000,000 or more in excess of the amount thereof that is fully covered by
insurance.

 

16

 

SECTION 5.9          NOTICE TO BANK.  Promptly
(but in no event more than five (5) days after the occurrence of each such
event or matter) give written notice to Bank in reasonable detail of:  (a) the occurrence of any Default or
Event of Default; (b) any change in the name or the organizational
structure of Borrower or any Guarantor; (c) the occurrence and nature of
any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
any funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower or any Guarantor is required
to maintain, or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause affecting Borrower’s
or such Guarantor’s property in excess of an aggregate of $1,000,000.

ARTICLE VI.

NEGATIVE COVENANTS

Borrower
further covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower will not (and will not permit any Subsidiary of
Borrower to) without Bank’s prior written consent:

SECTION 6.1         USE OF FUNDS.  Use any of the proceeds of any credit extended hereunder except
for the purposes stated in Section 2.1(a) hereof.

SECTION 6.2         RESTRICTIONS ON LIENS.  Directly or indirectly, create, assume or
suffer to exist any Lien upon any of their respective Properties or assets
whether now owned or hereafter acquired, except for:

(a)           Liens
for taxes, assessments or governmental charges or claims the payment of which
is not at the time required by Section 5.7;

(b)           Statutory
Liens of landlords, and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being diligently contested in good faith, so long as
a reserve or other appropriate provision, if any, shall have been made
therefor;

(c)           Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the
ordinary course of business in connection with obligations not due or
delinquent with respect to workers’ compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(d)           Any
attachment or judgment Lien (including judgment or appeal bonds) which shall,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or which shall have been discharged within
30 days after the expiration of any such stay, or which is being
diligently contested in good faith so long as a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;

 

17

 

(e)           Easements,
rights-of-way, restrictions and other similar rights in land which do not,
individually or in the aggregate, materially detract from the value of such
Property and do not interfere with the ordinary conduct of the business of
IHOP, Borrower or any of their Subsidiaries;

(f)            Liens
securing Debt of a Subsidiary to Borrower;

(g)           Liens
(other than Liens created pursuant to Capitalized Leases) (i) existing on the
date hereof, securing Debt not exceeding $1,500,000 in the aggregate in
principal amount, and (ii) whether now or hereafter existing, securing Debt
provided Borrower by Bank of America NA, provided that such Debt at no time
shall exceed $12,000,000 in aggregate principal outstanding;

(h)           Liens
pursuant to Capitalized Leases existing on the Closing Date and Liens created
following the Closing Date pursuant to Capitalized Leases so long as, with
respect to Liens pursuant to Capitalized Leases created following the Closing
Date, the Debt represented by such Capitalized Leases is permitted pursuant to Section 6.3;
and

(i)            Liens
including Liens arising out of purchase money financing not otherwise permitted
by the foregoing clauses of this Section 6.2 securing Debt (without
duplication) of IHOP, Borrower or any Subsidiary of IHOP or Borrower, provided
that the sum of (i) the principal amount of such Debt plus
(ii) unsecured Debt (other than Additional Permitted Subsidiary
Guarantees) of Subsidiaries of IHOP (other than Borrower) and Subsidiaries of
Borrower not otherwise permitted under Section 6.5(a) does not
exceed at any time 15% of Consolidated Tangible Net Worth.

The Liens referred to in Section 6.2(a)
through (i) are herein collectively referred to as “Permitted Liens,”
and individually, as a “Permitted Lien.”

SECTION 6.3         LIMITATION ON CONSOLIDATED DEBT.  Permit the ratio of (i) Consolidated
Debt to (ii) Total Capitalization to exceed 0.50 to 1.00 as of the last
day of any quarterly accounting period of IHOP and its Subsidiaries.

SECTION 6.4         CONSOLIDATED TANGIBLE NET WORTH.  Permit Consolidated Tangible Net Worth at
any time to be less than the sum of $150,000,000 plus 50% of Consolidated Net
Income on a cumulative basis from December 31, 1999, to and including any
date of determination.

SECTION 6.5         LIMITATION ON DEBT OF SUBSIDIARIES.  Permit any of the Subsidiaries (other than
Borrower) to incur any Debt other than:

(a)           Debt
owed to IHOP or Borrower or to a wholly-owned Subsidiary of IHOP or Borrower in
each case by a direct or indirect wholly-owned Subsidiary of the creditor
thereunder; and

(b)           additional
Debt (other than Additional Permitted Subsidiary Guarantees), provided that the
sum of the aggregate principal amount of such Debt plus the aggregate principal
amount of all other Debt (without duplication) of IHOP, Borrower and any of
their Subsidiaries which is secured by Permitted Liens permitted by Section 6.2(i)
does not exceed 15% of Consolidated Tangible Net Worth.

 

18

 

SECTION 6.6         RESTRICTED PAYMENTS; RESTRICTED
INVESTMENTS.  Permit IHOP, directly or
indirectly, through any Subsidiary or otherwise, (a) to pay or declare any
dividend on any class of its capital stock (but IHOP or any such Subsidiary may
declare and pay dividends payable solely in capital stock or warrants, rights
or options to acquire capital stock) or make any other distribution on account
of any class of its capital stock; retire, redeem, purchase or otherwise
acquire, directly or indirectly, any shares of any class of its capital stock
or any warrants, rights or options to acquire any such shares (other than any
such redemption, retirement, purchase or other acquisition in which the
consideration paid by IHOP or such Subsidiary consists solely of shares of
capital stock of IHOP); or make or provide for any mandatory sinking fund
payments required in connection with any class of its capital stock (all of the
foregoing being called “Restricted Payments”) or (b) make any
Restricted Investment, unless after giving effect to any Restricted Payment or
Restricted Investment the cumulative aggregate amount of all Restricted
Payments and Restricted Investments made by IHOP and its Subsidiaries after
September 30, 1992 would not exceed the sum of:  (i) $2,000,000, plus (ii) 50% of cumulative
Consolidated Net Income from September 30, 1992 through the date of
determination (or if IHOP and its Subsidiaries on a consolidated basis have a
cumulative Consolidated Net Loss for such period, then minus 100% of
such Consolidated Net Loss), plus (iii) the net proceeds from the
issuance or sale of any shares of any class of equity securities of IHOP which
are not mandatorily redeemable or otherwise subject to repurchase, retirement,
call, put or other reacquisition prior to or on the respective maturity dates
of the Fixed Rate Notes (and not subject to acceleration or redemption,
repurchase, retirement, call, put or other reacquisition prior to the
respective maturity dates of the Fixed Rate Notes) received after
September 30, 1992; provided that at the time of any such Restricted
Payment or Restricted Investment, both immediately before and immediately after
giving effect thereto, no Default or Event of Default shall have occurred and
be continuing.  So long as no Default or
Event of Default has occurred or would be continuing after giving effect thereto,
this Section 6.6 shall not prevent (a) the payment of any
dividend within 60 days after the date of its declaration if the dividend
would have been permitted on the date of its declaration, or (b) the
acquisition, repurchase, retirement, call, put or redemption of any shares of
capital stock of IHOP out of the proceeds of the substantially concurrent sale
(other than to a Subsidiary of IHOP) of, shares of capital stock of IHOP,
provided that any such acquisition, repurchase, retirement, call, put or
redemption shall be deemed to be a Restricted Payment for the purpose of
determining the ability of IHOP and its Subsidiaries to make future Restricted
Payments.

SECTION 6.7         SALE OF ASSETS.  Effect a Disposition of any assets unless (x) no Default or
Event of Default has occurred (except in the case of subclause (a) below) and
is continuing, and (y) one of the following applies:

(a)           such
Disposition is in the ordinary course of business, including, without
limitation, sales and leases of operating restaurants in accordance with
Borrower’s ordinary course franchising operations and is made pursuant to the
reasonable business judgment of Borrower in accordance with past practice;

 

19

 

(b)           in
each fiscal year, IHOP, Borrower and their respective Subsidiaries may effect
Dispositions of assets for Fair Market Value and which (i) have an
aggregate Book Value, together with all other assets disposed of in that fiscal
year (other than Dispositions permitted by clause (a), (c) or (d) of this Section 6.7,
of less than 10% of Gross Assets on a consolidated basis determined as at the
date of such sale; (ii) generate, together with all other assets disposed
of in that fiscal year (other than Dispositions permitted by clause (a), (c) or
(d) of this Section 6.7), net income, which is less than 10% of the
Consolidated Net Income (in each case, determined as of the end of the
immediately preceding fiscal year); and (iii) together with all assets
previously disposed of since September 30, 1996 (other than Dispositions
permitted by clause (a), (c) or (d) of this Section 6.7, have an
aggregate Book Value of less than 25% of Gross Assets on a consolidated basis
determined as at the date of such sale, provided that after giving effect to
any Disposition described in this subsection (b), IHOP, Borrower or any of
their Subsidiaries could incur at least $1 of additional Debt without being in
default of their obligations under Section 6.3.

(c)           such
Dispositions are made for Fair Market Value and the proceeds of such
Disposition are used (i) within six months following such Disposition, to
purchase assets (“Business Asset Acquisition”) used in the operations of
Borrower or (ii) to repay Debt of IHOP or its Subsidiaries which is not
junior in right of payment to the Line of Credit Note; provided that if the
aggregate principal amount of all outstanding Advances, Letters of Credit and
unreimbursed drawings under Letters of Credit shall exceed $4,000,000, then the
proceeds of such disposition shall be used to repay the Line of Credit Note
until the aggregate principal amount of all outstanding Advances, Letters of
Credit and unreimbursed drawings under Letters of Credit shall have been
reduced to $4,000,000; or

(d)           the
assets disposed of were disposed of for Fair Market Value (taking into
consideration the rental rate to be paid by Borrower in connection with the
Disposition and leaseback of the assets so disposed of) and were constructed or
acquired following September 30, 1992 and are immediately leased back from
the purchaser thereof by IHOP or any of its Subsidiaries; provided that no
assets may be sold and leased back pursuant to this clause (d)
following the third anniversary of the acquisition or construction of such
assets by IHOP, Borrower or any of their Subsidiaries.

SECTION 6.8         CONSOLIDATION OR MERGER.  Enter into any transaction of merger or
consolidation, whether in one transaction or a series of related or unrelated
transactions and whether at the same time or over a period of time, provided
that:

(a)           (i)            Borrower may merge with IHOP or any
of IHOP’s other Subsidiaries, (ii) IHOP may merge with Borrower or any of
IHOP’s other Subsidiaries and (iii) any Subsidiary may merge with IHOP,
Borrower or any other Subsidiary, so long as, with respect to any mergers of
Borrower or any Guarantor (including IHOP) in which such party is not the
surviving Person, (a) the surviving Person of such transaction shall be a
solvent United States or Canadian corporation, and such surviving Person shall have
assumed in writing all of the obligations of Borrower, as the case may be,
under this Agreement, the Line of Credit Note and/or any applicable IHOP
Guaranty, as the case may be, a copy of which writing shall be provided to Bank
not less than 10 Business Days prior to any such transaction and which shall be
acceptable in form and substance to Bank, (b) at the time of, and
immediately after giving effect to, any such consolidation or merger, no
Default or Event of Default shall have occurred and be continuing, and
(c) immediately after any such consolidation or merger, the surviving
Person could incur an additional $1 of Debt pursuant to Section 6.3
hereof; and

 

20

 

(b)           IHOP
or Borrower may merge with any other Person so long as (i) the surviving
Person of such transaction shall be a solvent United States or Canadian
corporation, and such surviving Person shall have assumed in writing all of the
obligations of Borrower under the Line of Credit Note and this Agreement or of
IHOP under its IHOP Guaranty, as the case may be, a copy of which writing shall
be provided to Bank not less than 10 Business Days prior to any such
transaction and which shall be acceptable in form and substance to Bank,
(ii) at the time of, and immediately after giving effect to, any such
consolidation or merger, no Default or Event of Default shall have occurred and
be continuing, and (iii) immediately after any such consolidation or
merger, the surviving or continuing Person could incur an additional $1 of Debt
pursuant to Section 6.3 hereof.

SECTION 6.9         MAINTENANCE OF FIXED CHARGE
COVERAGE.  Permit, as of the last day of
any quarterly accounting period, the ratio of Consolidated Income Available for
Fixed Charges (excluding extraordinary losses or gains or non-recurring
charges) to Fixed Charges for the period consisting of any four of the
immediately preceding four quarterly accounting periods to be less than 1.50 to
100.

SECTION 6.10       TRANSACTIONS WITH AFFILIATES.  Directly or indirectly, enter into or permit
to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any Property or the rendering of any service), with any
Affiliate on terms that are less favorable to IHOP, Borrower or such Subsidiary,
as the case may be, than those that would be obtainable at the time in an
arms’-length transaction with any Person who is not such an Affiliate; provided
however, that this Section shall not prohibit the payment of compensation and
benefits to directors and officers of IHOP, Borrower and their Subsidiaries in
the ordinary course of business and consistent with past practices.

SECTION 6.11       ACQUISITION OF MARGIN SECURITIES.  Own, purchase or acquire (or enter into any
contract to purchase or acquire) any “margin security” as defined by any
regulation of the Board of Governors of the United States Federal Reserve
System as now in effect or as the same may hereafter be in effect unless, prior
to any such purchase or acquisition or entering into any such contract, Bank
shall have received an opinion of counsel satisfactory to Bank to the effect
that such purchase or acquisition will not cause this Agreement or the Line of
Credit Note to be in violation of Regulation G or any other regulation of
such Board then in effect.

SECTION 6.12       CONDUCT OF BUSINESS.  Engage in any business activity if, such
business activity would result in a substantial change in the general nature of
the business of IHOP and its Subsidiaries, taken as a whole, from that engaged
in as of December 31, 2000.

 

21

 

SECTION 6.13       FURTHER
UNDERTAKINGS.

(a)           incur
capital expenditures (net of all proceeds relating to sale/leaseback
transactions) in excess of $80,000,000 during any fiscal year;

(b)           expend
more than $5,000,000 in any fiscal year in connection with the purchase of the
capital stock of, or the acquisition of all or substantially all of the assets
of, any other Person; provided however that to the extent that IHOP’s capital
stock is given in connection with any such acquisition, the value of such stock
shall be excluded from this calculation and provided, further that expenditures
incurred by Borrower in connection with the acquisition of restaurants or
leasehold interests for restaurants or with the reacquisition of franchises in
the ordinary course of Borrower’s business shall also be excluded from this
calculation;

(c)           amend
the amortization schedule in effect as of the Closing Date as set forth in the
Note Purchase Agreements in such a manner as to increase the amount of, or
accelerate, payments of principal thereunder prior to the Line of Credit
Maturity Date;

(d)           make
any optional prepayment of the principal of any indebtedness outstanding under
the Note Purchase Agreements prior to the Line of Credit Maturity Date unless,
after giving effect thereto, the aggregate principal amount of all outstanding
Advances, Letters of Credit and unreimbursed drawings under Letters of Credit
does not exceed $4,000,000; or

(e)           notwithstanding
the provisions of Section 6.7 hereof, make any Disposition of any
of its accounts receivable or general intangibles.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.1         The occurrence of any of the following
shall constitute an “Event of Default” under this Agreement:

(a)           Borrower
shall fail to pay when due any principal or interest, or, within five (5) days
after Bank’s written notice, any fees or other amounts payable under any of the
Loan Documents.

(b)           Any
financial statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

(c)           Any
default in the performance of or compliance with any obligation, agreement or
other provision contained herein or in any other Loan Document (other than
those referred to in subsections (a) and (b) above), and with respect to any
such default which by its nature can be cured, such default shall continue for
a period of thirty (30) days from its occurrence.

 

22

 

(d)           Any
default in the payment or performance of any obligation, or any defined event
of default, under the terms of any contract or instrument (other than any of
the Loan Documents) pursuant to which Borrower or any Guarantor has incurred
any debt or other liability to Bank.

(e)           Borrower
or any Guarantor (i) fails to pay the principal, or any  principal installment, of any present or
future debt or other liability of $2,500,000 or more, or any guaranty of
present or future debt or other liability of $2,500,000 or more on its part to
be paid, when due (or with any stated grace period), whether at the stated
maturity, upon acceleration, by reason of required prepayment or otherwise or
(ii) fails to perform or observe any other term, covenant or agreement on
its part to be performed or observed, or suffers any event to occur, in
connection with any individual item of present or future debt or other
liability of $2,500,000 or more, or of any guaranty of present or future debt
or other liability of $2,500,000 or more, if as a result of such failure or
sufferance any holder or holders thereof (or an agent or trustee on its or their
behalf) has a right to declare such debt or other liability due before the date
on which it otherwise would become due.

(f)            The
filing of a notice of judgment lien against Borrower or any Guarantor; or the
recording of any abstract of judgment against Borrower or any Guarantor in any
county in which Borrower or such Guarantor has an interest in real property; or
the service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower or any Guarantor or the
entry of a judgment against Borrower or any Guarantor, in any such case in any
amount in excess of $2,500,000, and which is not stayed, dismissed or satisfied
within thirty (30) days from the filing, recording, service or entry thereof,
as applicable.

(g)           Borrower
or any Guarantor shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself
or any of its property, or shall generally fail to pay its debts as they become
due, or shall make a general assignment for the benefit of creditors; Borrower
or any Guarantor shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time (“Bankruptcy Code”), or
under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Guarantor and is not stayed or dismissed within ninety
(90) days, or Borrower or any such Guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such Guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such Guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.

(h)           The
dissolution or liquidation of Borrower or any Guarantor or Borrower or any such
Guarantor or any of their directors, stockholders or members, shall take action
seeking to effect the dissolution or liquidation of Borrower or such Guarantor.

 

23

 

(i)            IHOP
shall fail to own 100% of the issued and outstanding common stock of Borrower.

SECTION 7.2         REMEDIES.  Upon the occurrence of any Event of Default:  (a) all indebtedness of Borrower under
each of the Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank’s option and without notice become immediately due and payable
without presentment, demand, protest or notice of dishonor, all of which are
hereby expressly waived by each Borrower; (b) the obligation, if any, of
Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights,
powers and remedies available under each of the Loan Documents, or accorded by
law.  All rights, powers and remedies of
Bank may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or equity.

ARTICLE VIII.

MISCELLANEOUS

SECTION 8.1         NO WAIVER.  No delay, failure or discontinuance of Bank in exercising any
right, power or remedy under any of the Loan Documents shall affect or operate
as a waiver of such right, power or remedy; nor shall any single or partial
exercise of any such right, power or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any other right, power
or remedy.  Any waiver, permit, consent
or approval of any kind by Bank of any breach of or default under any of the
Loan Documents must be in writing and shall be effective only to the extent set
forth in such writing.

SECTION 8.2         NOTICES. 
All notices, requests and demands which any party is required or may
desire to give to any other party under any provision of this Agreement must be
in writing delivered to each party at the following address:

	
  BORROWER:

  	
  INTERNATIONAL HOUSE OF PANCAKES, INC.

  
	
   

  	
  450 N. Brand Boulevard, 7th Floor

  
	
   

  	
  Glendale, California 91203-2306

  
	
   

  	
  Attention: 
  General Counsel

  
	
   

  	
  Tel. No.: 
  (818) 240-6055

  
	
   

  	
  Fax No.: 
  (818) 240-0270

  
	
   

  	
   

  
	
  BANK:

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
  Los Angeles RCBO

  
	
   

  	
  333 South Grand Avenue, Third Floor

  
	
   

  	
  Los Angeles, California  90071

  
	
   

  	
  Attention: 
  IHOP Account Officer

  
	
   

  	
  Tel. No.:  (213) 253-6832

  
	
   

  	
  Fax No.: 
  (213) 687-3501

  

 

or to such other address as any party may designate by
written notice to all other parties. 
Each such notice, request and demand shall be deemed given or made as
follows:  (a) if sent 

 

24

 

by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit
in the U.S. mail, certified mail or registered, return receipt requested; (c)
if sent by commercial overnight courier (such as Federal Express, United Parcel
Service or DHL), on the scheduled delivery date; and (d) if sent by
telecopy, upon receipt.

SECTION 8.3         COSTS, EXPENSES AND ATTORNEYS’ FEES.  Borrower shall pay to Bank immediately upon
demand the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of Bank’s in-house counsel), expended or incurred by Bank in
connection with (a) (i) the negotiation and preparation of this Agreement
and the other Loan Documents, (ii) the preparation of any amendments and
waivers hereto and thereto, and (iii) if and only if, a Default or Event of
Default shall have occurred and be continuing, Bank’s administration of this
Agreement and the Loan Documents, including without limitation Bank’s costs and
expenses to inspect, audit and examine the books and records of Borrower and
its Subsidiaries; (b) the enforcement of Bank’s rights and/or the
collection of any amounts which become due to Bank under any of the Loan
Documents, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other Person) relating to any Borrower or any other Person.

SECTION 8.4         SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank’s prior
written consent.  Bank reserves the
right to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in, Bank’s rights and benefits under each of the
Loan Documents.  In connection
therewith, Bank may disclose all documents and information which Bank now has
or may hereafter acquire relating to any credit subject hereto, Borrower or its
business, or any Guarantor or the business of such Guarantor.

SECTION 8.5         ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other Loan Documents
constitute the entire agreement between Borrower and Bank with respect to each
credit subject hereto and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof.  This Agreement may be amended or modified
only in writing signed by each party hereto.

SECTION 8.6         NO THIRD PARTY BENEFICIARIES.  This Agreement is made and entered into for
the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other Person shall be a third party
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which it
is not a party.

SECTION 8.7         TIME.  Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.

 

25

 

SECTION 8.8         SEVERABILITY OF PROVISIONS.  If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of
this Agreement.

SECTION 8.9         COUNTERPARTS.  This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original,
and all of which when taken together shall constitute one and the same
Agreement.

SECTION 8.10       GOVERNING LAW.  This Agreement shall be governed by and construed in accordance
with the laws of the State of California.

SECTION 8.11       INDEMNITY BY BORROWER.  Borrower agrees to indemnify, save and hold
harmless Bank and its directors, officers, agents, attorneys and employees
(collectively, the “Indemnitees”) from and against:  (a) Any and all claims, demands, actions or causes of action that
are asserted against any Indemnitee if the claim, demand, action or cause of
action arises out of or relates to the relationship between Borrower and Bank
under any of the Loan Documents or the transactions contemplated thereby; (b)
Any and all administrative or investigative proceedings by any Governmental
Agency or authority arising out of or related to any claim, demand, action or
cause of action described in clause (a) above; and (c) Any and all liabilities,
losses, costs or expenses (including reasonable attorneys’ fees and disbursements
and other professional services) that any Indemnitee suffers or incurs as a
result of the assertion of any of the foregoing; provided that no Indemnitee
shall be entitled to indemnification for any loss caused by its own or its
employees’ or agents’ gross negligence or willful misconduct.  Each Indemnitee is authorized to employ
counsel in enforcing its rights hereunder and in defending against any claim,
demand, action, cause of action or administrative or investigative proceeding
covered by this Section 8.11; provided that the Indemnitees as a
group may retain only one law firm to represent them with respect to any such
matter unless there is, under applicable standards of professional conduct,
conflict on any significant issue between the positions of any two or more
Indemnitees.  Any obligation or
liability of Borrower to any Indemnitee under this Section 8.11
shall be and hereby is covered by the Loan Documents  shall survive the expiration or termination of this Agreement and
the repayment of the Line of Credit and the payment and performance of all
other obligations owed to Bank.

SECTION 8.12       NONLIABILITY OF BANK.  Borrower acknowledges and agrees that:

(a)           By
accepting or approving anything required to be observed, performed, fulfilled
or given to Bank pursuant to the Loan Documents, including any certificate,
financial statement, insurance policy or other document, Bank shall not be
deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Bank; and

 

26

 

(b)           The
relationship between Borrower and Bank in connection with this Agreement and
the other Loan Documents is, and shall at all times remain, solely that of a
borrower and lender; Bank shall not under any circumstance be construed to be a
partner or joint venturer of Borrower; Bank shall not under any circumstances
be deemed to be in a relationship of confidence or trust or a fiduciary
relationship with Borrower, or to owe any fiduciary duty to Borrower as a
result of the transactions arising under this Agreement and the other Loan
Documents; Bank does not undertake or assume any responsibility or duty to
Borrower to select, review, inspect, supervise, pass judgment upon or inform
Borrower of any matter in connection with its property or the operations of
Borrower; Borrower shall rely entirely upon its own judgment with respect to
such matters; and any review, inspection, supervision, exercise of judgment or
supply of information undertaken or assumed by Bank in connection with such
matters is solely for the protection of Bank and neither Borrower nor any other
Person is entitled to rely thereon.

SECTION 8.13       FURTHER ASSURANCES.  Borrower shall, at its expense and without
expense to Bank, do, execute and deliver such further acts and documents as
Bank from time to time reasonably requires for the assuring and confirming unto
Bank of the rights hereby created or intended now or hereafter so to be, or for
carrying out the intention or facilitating the performance of the terms of any
Loan Document.

SECTION 8.14       CONFIDENTIALITY.  Bank agrees (and any assignee of all or part of Bank’s interests
hereunder and any holder of a participation interest in the Line of Credit Note
shall be required) to hold any confidential information that it may receive
from Borrower pursuant to this Agreement in confidence, except for
disclosure:  (a) to legal counsel
and accountants for IHOP, Borrower or any of their Subsidiaries or Bank;
(b) to other professional advisors to IHOP, Borrower or any of their
Subsidiaries or Bank; provided that the recipient has been informed in advance
of the confidential nature of such information; (c) to regulatory
officials having jurisdiction over Bank; (d) as required by law or legal
process or in connection with any legal proceeding or litigation involving Bank
and IHOP, Borrower or any of their Subsidiaries or any Affiliate thereof; and
(e) to another financial institution in connection with a disposition or
proposed disposition to that financial institution of all or part of Bank’s
interests hereunder or a participation interest in the Line of Credit Note,
provided that the recipient has been informed in advance of the confidential
nature of such information.  For
purposes of the foregoing, “confidential information” shall mean any
information respecting IHOP, Borrower or their Subsidiaries reasonably
considered by IHOP, Borrower or such Subsidiary, as applicable, to be
confidential, other than (i) information previously filed with any
Governmental Agency and available to the public, (ii) information previously
published in any public medium from a source other than, directly or
indirectly, Bank, and (iii) information previously disclosed by IHOP,
Borrower or any Subsidiary to any Person not associated with IHOP, Borrower or
such Subsidiary, as applicable, without a confidentiality agreement or
obligation substantially similar to this Section 8.14.  Nothing in this Section shall be construed
to create or give rise to any fiduciary duty on the part of Bank to IHOP,
Borrower or any of their Subsidiaries.

SECTION 8.15       ARBITRATION.

(a)           Arbitration.  The parties hereto agree, upon demand by any
party, to submit to binding arbitration all claims, disputes and controversies
between or among them (and their respective employees, officers, directors,
attorneys, and other agents), whether in 

 

27

 

tort,
contract or otherwise arising out of or relating to in any way (i) the loan and
related Loan Documents which are the subject of this Agreement and its
negotiation, execution, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination; or
(ii) requests for additional credit.

(b)           Governing
Rules.  Any arbitration proceeding
will (i) proceed in a location in Los Angeles, California selected by the
American Arbitration Association (“AAA”); (ii) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding
any conflicting choice of law provision in any of the documents between the
parties; and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which case the arbitration shall be conducted in accordance with the AAA’s
optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the

“Rules”).  If there is any
inconsistency between the terms hereof and the Rules, the terms and procedures
set forth herein shall control.  Any
party who fails or refuses to submit to arbitration following a demand by any
other party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. 
Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

(c)           No
Waiver of Provisional Remedies.  The
arbitration requirement does not limit the right of any party to obtain
provisional or ancillary remedies before, during or after the pendency of any
arbitration proceeding.  This exclusion
does not constitute a waiver of the right or obligation of any party to submit
any dispute to arbitration or reference hereunder.

(d)           Arbitrator
Qualifications and Powers.  Any
arbitration proceeding in which the amount in controversy is $5,000,000.00 or
less will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00.  Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must
actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The
arbitrator will determine whether or not an issue is arbitratable and will give
effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in
accordance with the substantive law of California and may grant any remedy or
relief that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to
award recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a 

 

28

 

judge
could pursuant to the Federal Rules of Civil Procedure, the California Rules of
Civil Procedure or other applicable law. 
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction.  The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.

(e)           Discovery.  In any arbitration proceeding discovery will
be permitted in accordance with the Rules. 
All discovery shall be expressly limited to matters directly relevant to
the dispute being arbitrated and must be completed no later than 20 days before
the hearing date and within 180 days of the filing of the dispute with the AAA.  Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery
is essential for the party’s presentation and that no alternative means for
obtaining information is available.

(f)            Class
Proceedings and Consolidations.  The
resolution of any dispute arising pursuant to the terms of this Agreement shall
be determined by a separate arbitration proceeding and such dispute shall not
be consolidated with other disputes or included in any class proceeding.

(g)           Payment
Of Arbitration Costs And Fees. 
The arbitrator shall award all costs and expenses of the arbitration
proceeding.

(h)           Miscellaneous.  To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA.  No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary
course of its business or by applicable law or regulation.  If more than one agreement for arbitration
by or between the parties potentially applies to a dispute, the arbitration
provision most directly related to the Loan Documents or the subject matter of
the dispute shall control.  This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the day and
year first written above.

 

	
  INTERNATIONAL HOUSE OF 

  PANCAKES, INC., a Delaware corporation

  	
  WELLS FARGO BANK, 

  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Title:

  	
   

  

 

 

29

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