Document:

EXHIBIT 4.2

 

IHOP CORP 10-K

 

IHOP Corp.

 

International House of Pancakes, Inc.

 

Senior Note Purchase Agreement

 

$35,000,000
7.42% Senior Notes Due 2008

 

Dated as of November 1, 1996

 

 

TABLE OF CONTENTS

 

	
  Section 1.

  	
  Authorization and Issue of Notes

  
	
   

  	
   

  
	
  Section 2.

  	
  Purchase and Sale of Notes

  
	
   

  	
   

  
	
  Section 3.

  	
  Payments of Notes

  
	
   

  	
   

  
	
  Section 3.1.

  	
  Mandatory Payments of Principal

  
	
  Section 3.2.

  	
  Optional Prepayments of the Notes

  
	
  Section 3.3.

  	
  Notice of Prepayment of the Notes

  
	
  Section 3.4.

  	
  Allocation of Payments

  
	
  Section 3.5.

  	
  Surrender of Notes; Notation Thereon

  
	
  Section 3.6.

  	
  Purchase of Notes

  
	
   

  	
   

  
	
  Section 4.

  	
  Representations and Warranties

  
	
   

  	
   

  
	
  Section 4.1.

  	
  Corporate Existence and Power

  
	
  Section 4.2.

  	
  Corporate Authority

  
	
  Section 4.3.

  	
  Binding Effect

  
	
  Section 4.4.

  	
  Capital Stock

  
	
  Section 4.5.

  	
  Business Operations and Other Information;
  Financial Condition

  
	
  Section 4.6.

  	
  Subsidiaries

  
	
  Section 4.7.

  	
  Litigation; No Violation of Governmental Orders
  or Laws

  
	
  Section 4.8.

  	
  Outstanding Debt

  
	
  Section 4.9.

  	
  Consent, Etc

  
	
  Section 4.10.

  	
  Title to Properties

  
	
  Section 4.11.

  	
  Taxes

  
	
  Section 4.12.

  	
  No Conflicts with Agreements, Etc

  
	
  Section 4.13.

  	
  Disclosure

  
	
  Section 4.14.

  	
  Offering of Securities

  
	
  Section 4.15.

  	
  Broker’s or Finder’s Commissions

  
	
  Section 4.16.

  	
  Labor Matters

  
	
  Section 4.17.

  	
  Environmental Matters

  
	
  Section 4.18.

  	
  Margin Regulations

  
	
  Section 4.19.

  	
  Compliance with ERISA

  
	
  Section 4.20.

  	
  Material Contracts

  
	
  Section 4.21.

  	
  Insurance

  
	
  Section 4.22.

  	
  Status under Certain Laws

  
	
  Section 4.23.

  	
  Intentionally Deleted

  
	
  Section 4.24.

  	
  Possession of Franchises, Licenses, Etc

  
	
  Section 4.25.

  	
  Franchises

  
	
  Section 4.26.

  	
  Use of Proceeds

  
	
  Section 4.27.

  	
  Patents and Trademarks

  
	
  Section 4.28.

  	
  Compliance with Laws

  

 

i

 

	
  Section 4.29.

  	
  Franchisees

  
	
  Section 4.30.

  	
  Other Agreements

  
	
  Section 4.31.

  	
  Solvency

  
	
  Section 4.32.

  	
  Foreign Assets Control Regulations

  
	
   

  	
   

  
	
  Section 5.

  	
  Representation of Purchasers

  
	
   

  	
   

  
	
  Section 5.1.

  	
  Authority

  
	
  Section 5.2.

  	
  Investment Intent

  
	
  Section 5.3.

  	
  Source of Funds

  
	
  Section 5.4.

  	
  Investor Status

  
	
   

  	
   

  
	
  Section 6.

  	
  Conditions to Obligations
  of the Purchasers

  
	
   

  	
   

  
	
  Section 6.1.

  	
  Proceedings Satisfactory

  
	
  Section 6.2.

  	
  Opinion of Purchasers’ Special Counsel

  
	
  Section 6.3.

  	
  Opinion of Counsel to the Borrower and
  Holdings

  
	
  Section 6.4.

  	
  Representations and Warranties True, Etc.;
  Certificates

  
	
  Section 6.5.

  	
  Absence of Material Adverse Change, Etc

  
	
  Section 6.6.

  	
  Consents and Approvals

  
	
  Section 6.7.

  	
  Absence of Litigation, Orders, Etc

  
	
  Section 6.8.

  	
  Other Purchasers

  
	
  Section 6.9.

  	
  Legal Investment

  
	
  Section 6.10.

  	
  Amendments to Outstanding Debt Agreements

  
	
  Section 6.11.

  	
  Fees

  
	
  Section 6.12.

  	
  PPN Number

  
	
  Section 6.13.

  	
  Subsidiary Guarantees

  
	
  Section 6.14.

  	
  Intercreditor Agreement

  
	
  Section 6.15.

  	
  Corporate Status and Documentation

  
	
   

  	
   

  
	
  Section 7.

  	
  Conditions to Obligations of
  the Borrower

  
	
   

  	
   

  
	
  Section 7.1.

  	
  Representations and Warranties True, Etc

  
	
  Section 7.2.

  	
  Absence of Litigation, Orders, Etc

  
	
  Section 7.3.

  	
  Other Purchasers

  
	
   

  	
   

  
	
  Section 8.

  	
  Financial Statements and Information

  
	
   

  	
   

  
	
  Section 9.

  	
  Inspection of Properties and Books

  
	
   

  	
   

  
	
  Section 10.

  	
  Affirmative Covenants

  
	
   

  	
   

  
	
  Section 10.1.

  	
  Payment of Principal, Prepayment Charge
  and Interest, Etc.

  
	
  Section 10.2.

  	
  Payment of Taxes and Claims

  
	
  Section 10.3.

  	
  Maintenance of Properties and Corporate
  Existence

  

 

ii

 

	
  Section 10.4.

  	
  Insurance

  
	
   

  	
   

  
	
  Section 11.

  	
  Negative and Maintenance
  Covenants

  
	
   

  	
   

  
	
  Section 11.1.

  	
  Restrictions on Liens

  
	
  Section 11.2.

  	
  Limitation on Funded Debt

  
	
  Section 11.3.

  	
  Consolidated Tangible Net Worth

  
	
  Section 11.4.

  	
  Limitation on Debt of Subsidiaries

  
	
  Section 11.5.

  	
  Restricted Payments; Restricted
  Investments

  
	
  Section 11.6.

  	
  Sale of Assets

  
	
  Section 11.7.

  	
  Consolidation or Merger

  
	
  Section 11.8.

  	
  Maintenance of Fixed Charge Coverage

  
	
  Section 11.9.

  	
  Transactions with Affiliates

  
	
  Section 11.10.

  	
  Acquisition of Margin Securities

  
	
  Section 11.11.

  	
  Conduct of Business

  
	
   

  	
   

  
	
  Section 12.

  	
  Definitions

  
	
   

  	
   

  
	
  Section 13.

  	
  Events of Default

  
	
   

  	
   

  
	
  Section 13.1.

  	
  Events of
  Default; Remedies

  
	
  Section 13.2.

  	
  Acceleration of Notes

  
	
  Section 13.3.

  	
  Rescission of Acceleration

  
	
  Section 13.4.

  	
  Suits for Enforcement

  
	
  Section 13.5.

  	
  Remedies Cumulative

  
	
  Section 13.6.

  	
  Remedies Not Waived

  
	
   

  	
   

  
	
  Section 14.

  	
  Registration, Exchange,
  and Transfer of Notes

  
	
   

  	
   

  
	
  Section 15.

  	
  Lost, Stolen, Damaged and
  Destroyed Notes

  
	
   

  	
   

  
	
  Section 16.

  	
  Miscellaneous

  
	
   

  	
   

  
	
  Section 16.1.

  	
  Home Office Payment

  
	
  Section 16.2.

  	
  Amendment and Waiver

  
	
  Section 16.3.

  	
  Expenses

  
	
  Section 16.4.

  	
  Survival of Representations and Warranties

  
	
  Section 16.5.

  	
  Successors and Assigns

  
	
  Section 16.6.

  	
  Notices

  
	
  Section 16.7.

  	
  Governing Law

  
	
  Section 16.8.

  	
  Submission to Jurisdiction; Waiver of
  Service and Venue

  
	
  Section 16.9.

  	
  Indemnification

  
	
  Section 16.10.

  	
  Integration and Severability

  
	
  Section 16.11.

  	
  Payments Due on Days not Business Days

  
	
  Section 16.12.

  	
  Further Assurances

  
	
  Section 16.13.

  	
  Counterparts

  
	
  Section 16.14.

  	
  Guarantee of Holdings

  
	
  Section 16.15.

  	
  Waiver of Right to Trial by Jury

  

 

iii

 

	
  Signature Page

  
	
   

  
	
   

  
	
  Schedule I

  	
  —

  	
  Manner of Payment and Communications to the
  Purchasers

  
	
  Schedule 4.5

  	
  —

  	
  Interim Changes

  
	
  Schedule 4.6

  	
  —

  	
  List of Direct and Indirect Subsidiaries

  
	
  Schedule 4.7

  	
  —

  	
  Litigation Summary

  
	
  Schedule 4.8

  	
  —

  	
  Existing Current and Funded Debt and Liens

  
	
  Schedule 4.9

  	
  —

  	
  Consents and Approvals

  
	
  Schedule 4.11

  	
  —

  	
  Taxes

  
	
  Schedule 4.16

  	
  —

  	
  Labor Matters

  
	
  Schedule 4.17

  	
  —

  	
  Environmental Matters

  
	
  Schedule 4.19

  	
  —

  	
  Compliance with ERISA

  
	
  Schedule 4.25

  	
  —

  	
  Franchises

  
	
  Schedule 12

  	
  —

  	
  Restricted Investments at Closing Date

  
	
  Exhibit A

  	
  —

  	
  Form of Note

  
	
  Exhibit B

  	
  —

  	
  Form of Opinion of Counsel for the Purchaser

  
	
  Exhibit C

  	
  —

  	
  Form of Opinion of Counsel for the Borrower

  
	
  Exhibit D-1

  	
  —

  	
  Form of IHOP Realty Guarantee

  
	
  Exhibit D-2

  	
  —

  	
  Form of IHOP Properties Guarantee

  
	
  Exhibit D-3

  	
  —

  	
  Form of IHOP Restaurants Guarantee

  
	
  Exhibit E

  	
  —

  	
  Form of IHOP Realty Lease

  
	
  Exhibit F-1

  	
  —

  	
  Form of Quarterly compliance Statement

  
	
  Exhibit F-2

  	
  —

  	
  Form of Compliance Certificate

  
	
  Exhibit G

  	
  —

  	
  Form of Franchise Agreement

  
	
  Exhibit H

  	
  —

  	
  Form of Intercreditor Agreement

  

 

iv

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

SENIOR NOTE PURCHASE AGREEMENT

 

November
1, 1996

 

To The Purchaser Whose Name

Appears in the Acceptance

Form at the End Hereof

 

Ladies and Gentlemen:

 

The undersigned,
International House of Pancakes, Inc., a Delaware corporation (the “Borrower”),
and IHOP Corp., a Delaware corporation of which the Borrower is a wholly owned
Subsidiary (“Holdings”), hereby agree with you as follows:

 

Section 1. Authorization and Issue of Notes.

 

The Borrower has duly
authorized the issue, sale and delivery of its 7.42% Senior Notes Due 2008 in
the aggregate principal amount of $35,000,000, to be dated the date of issue
thereof, to bear interest on the outstanding principal thereof (computed on the
basis of a 360-day year of twelve 30-day months) from such date, payable in
arrears in cash semi-annually on the eighth day of May and November in each
year (commencing May 8, 1997) and at maturity, at the rate of 7.42% per annum,
and to bear interest at a rate equal to the greater of 9.42% or the rate of
interest announced publicly from time to time by Bank of America Illinois in
Chicago, Illinois as its “prime rate” on any overdue principal and prepayment
charge and, to the extent permitted by applicable law, on any overdue interest
(determined as of the date such principal, payment charge or interest first
becomes overdue), until the same shall be paid in full, to mature on November
1, 2008, and to be substantially in the form of Exhibit A hereto attached (all
such Notes originally issued pursuant to this Agreement or the Other
Agreements, or delivered in substitution or exchange for any thereof, being
collectively called the “Notes” and individually a “Note”).

 

You, together with the other
purchasers named in Schedule I to this Agreement, are herein sometimes referred
to collectively as the “Purchasers” and individually as a “Purchaser.”

 

Section
2. Purchase and Sale
of Notes.

 

Subject to the terms and
conditions herein set forth, the Borrower hereby agrees to sell to you and you
agree to purchase from the Borrower, Notes in the respective aggregate
principal amounts set forth opposite your name in Schedule I hereto, at a
purchase price of 100% of the principal amount thereof. 

 

 

The purchase and delivery of
the Notes to be purchased by you shall take place at the offices of Chapman and
Cutler, 111 W. Monroe, Chicago, Illinois at 10:00 a.m., Chicago time on
November 8, 1996 (or such other time and place as the parties shall agree
provided, however, that in no event shall funding be provided after 1:00 p.m.,
New York time) (herein called the “Closing Date”). On the Closing Date, the
Borrower will deliver to you Notes registered in your name or in the name of
your nominee, each such Note to be duly executed and dated the Closing Date,
each to be in the respective aggregate principal amounts to be purchased by you
as specified above, in such denominations (multiples of $1,000) as you may
specify by timely notice to the Borrower (or, in the absence of such notice,
one Note registered in your name in a principal amount equal to the aggregate
principal amount of Notes to be purchased by you), against your delivery to the
Borrower of immediately available funds in the amount of the aggregate purchase
price therefor.

 

Section
3. Payments of Notes.

 

Section
3.1 Mandatory
Payments of Principal. The principal amount of the Notes shall be prepaid by
the Borrower in installments, payable on each of the dates set forth below in
the respective aggregate amounts set forth opposite such dates:

 

	
  Payment Date

  	
   

  	
  Principal Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2000

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2001

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2002

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2003

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2004

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2005

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2006

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  
	
  November 1, 2007

  	
   

  	
  $

  	
  3,888,888.00

  	
   

  

 

provided, however, that if
Notes aggregating less than $35,000,000 in principal amount are issued and sold
pursuant to this Agreement and the Other Agreements, each of the prepayment
amounts set forth above shall be reduced to an amount which is equal to the
product achieved by multiplying each amount set forth above by a fraction, the
numerator of which shall be the aggregate principal amount of all Notes issued
and sold pursuant to this Agreement and the Other Agreements and the
denominator of which shall be $35,000,000.

 

The entire remaining
principal amount of the Notes shall become due and payable on November 1, 2008.
Each payment of Notes made pursuant to this Section 3.1 shall be allocated as
provided in Section 3.4.

 

Section
3.2. Optional
Prepayments of the Notes. The Borrower, at its option, upon notice given as
provided in Section 3.3, may, on any Interest Payment Date, prepay all or any
part of the principal amount of outstanding Notes (in the minimum amount of
$100,000 and additional increments of integral multiples of $100,000), at a
price equal to the sum of (i) the greater of the principal amount of the Notes
being so prepaid or the Present Value

 

2

 

Amount of the Notes being so
prepaid, plus (ii) all accrued but unpaid interest on the outstanding principal
amount of the Notes being prepaid through the date of such prepayment.

 

Each prepayment made
pursuant to this Section 3.2 shall be allocated as provided in Section 3.4. All
principal amounts prepaid pursuant to this Section 3.2 shall be applied to
reduce the amounts of the mandatory payments of principal thereafter due
pursuant to Section 3.1 in the inverse order of maturity of those mandatory
payments.

 

Section
3.3. Notice of
Prepayment of the Notes. The Borrower shall call Notes for prepayment pursuant
to Section 3.2 by giving written notice thereof to each holder of Notes, which
notice shall be given not less than 30 nor more than 60 days prior to the date
fixed for such prepayment in such notice and shall specify the principal amount
so to be prepaid, the accrued interest applicable to such prepayment and the
date fixed for such prepayment. Notice of prepayment having been so given, the
aggregate amount to be paid as specified in such notice (together with the
prepayment charge, if any) shall become due and payable on the specified
prepayment date. At least three Business Days prior to the date of any such
prepayment, the Borrower shall furnish to each holder of Notes, via telecopy
(with delivery of the original by overnight courier on the next Business Day),
an Officer’s Certificate of the Borrower setting forth computations in
reasonable detail showing an estimate of the prepayment charge, if any,
required to be paid in connection with such prepayment, and the manner of
calculation of the prepayment charge and attaching a copy of the source of
market data by reference to which the Treasury Yield was determined in connection
with such computations. No later than noon eastern time one Business Day prior
to the date of any such prepayment, the Borrower shall furnish to each holder
of Notes, via telecopy (with delivery of the original by overnight courier on
the next Business Day), a certificate of an Appropriate Officer of the Borrower
setting forth computations in reasonable detail showing the manner of
calculation of the actual prepayment charge, if any, required to be paid in
connection with such prepayment and attaching a copy of the source of market
data by reference to which the Treasury Yield was determined in connection with
such computations. Prior to 2:00 p.m. eastern time on the Business Day referred
to in the immediately preceding sentence, the Borrower shall call each
Purchaser to confirm receipt of such certificate.

 

Section
3.4. Allocation of
Payments. In the event of any payment or prepayment of less than all of the
outstanding Notes pursuant to Section 3.1 or Section 3.2, the Borrower shall
allocate the principal amount so to be paid or prepaid by it (but only in units
of $1,000) and the interest and prepayment charge if any, among the Notes in
proportion, as nearly as may be practicable, to the respective unpaid principal
amounts thereof.

 

Section
3.5. Surrender of
Notes; Notation Thereon. Subject to the provisions of Section 16.1, the
Borrower shall not, as a condition of payment of all or any part of the
principal of, prepayment charge (if any) and interest on, any Note, require the
holder to present such Note for notation of such payment or require the
surrender thereof. Upon receipt of payment in full of the principal of,
prepayment charge (if any) and interest on, any Note, such Note shall be deemed
to be automatically cancelled, without any further

 

3

 

action on the part of the
Borrower or the Noteholder. However, each Noteholder shall make reasonable
efforts to promptly return all cancelled Notes .

 

Section
3.6. Purchase of
Notes. Except as set forth in Section 3.1, 3.2 or the next following sentence
of this Section 3.6, neither the Borrower nor Holdings will, nor will either of
them permit any of its Subsidiaries or Affiliates to, acquire directly or
indirectly by purchase or prepayment or otherwise any of the outstanding Notes
except by way of payment or prepayment in accordance with the provisions of
this Agreement. The Borrower may repurchase the Note or Notes of any holder
provided that, prior to any such repurchase, the Borrower offers, in a written
notice, to repurchase a Pro Rata Portion of each holders Notes on the same
terms, and, at such time, the Borrower shall have sufficient funds then
available to it to repurchase such Notes. Each holder of Notes shall have ten
(10) Business Days after receipt of such written notice to accept or reject the
Borrower’s offer set forth in such notice. Failure of any holder of Notes to
respond to any such notice within ten (10) Business Days after its receipt
thereof shall be deemed to be a rejection of the offer therein. In the event
that the Borrower has purchased less than the entire outstanding principal
balance of the Notes, the amount of the principal balance so purchased shall be
multiplied by a fraction, the numerator of which is 1 and the denominator of which
is the number of scheduled principal payments pursuant to Section 3.1
(including the payment scheduled to be made on November 1, 2008) which have not
yet been made as of the date of the purchase of the Notes and such product
shall be deducted from each of the payments otherwise due following the date of
the purchase of the Notes. The remaining payments due after giving effect to
this deduction shall be allocated in accordance with Section 3.4.

 

Section 4. Representations and Warranties.

 

The Borrower and Holdings,
jointly and severally, represent and warrant to Purchasers that:

 

Section
4.1. Corporate
Existence and Power. Each of the Borrower, Holdings, and each of their
respective Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation and is duly
qualified to do business in each additional jurisdiction where the failure to
so qualify would have a Material Adverse Effect. Each of the Borrower, Holdings
and each of their respective Subsidiaries has all requisite corporate power to
own its Properties and to carry on its business as now being conducted and as
proposed to be conducted, and in the case of the Borrower and Holdings to
execute, deliver and perform its obligations under this Agreement and the Other
Agreements, in the case of the Borrower to execute, issue, sell, deliver and
perform its obligations under the Notes, in the case of the Subsidiary
Guarantors to execute, deliver and perform their respective obligations under the
Subsidiary Guarantees, and in the case of each such Person to engage in the
respective transactions contemplated by this Agreement and the Other
Agreements.

 

Section
4.2. Corporate
Authority. The execution, delivery and performance (a) by the Borrower of this
Agreement, the Other Agreements and the Notes, (b) by Holdings of this
Agreement and the Other Agreements, and (c) by the Subsidiary Guarantors of the

 

4

 

Subsidiary Guarantees, are
within the respective corporate powers of such Persons and have been duly
authorized by all necessary corporate action on the part of the respective
Boards of Directors and stockholders of each of them.

 

Section
4.3. Binding Effect.
This Agreement and the Other Agreements are the legal, valid and binding
obligations of the Borrower and Holdings, and the Notes when issued and
delivered against payment therefor as herein provided will be the legal, valid
and binding obligations of the Borrower; and the Subsidiary Guarantees will,
when executed and delivered by the Subsidiary Guarantors on the Closing Date be
the legal, valid and binding obligations of the Subsidiary Guarantors; in each
case enforceable against such respective parties in accordance with their
respective terms, except, in each case, as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
relative to or affecting the enforcement of creditors rights generally in
effect from time to time and by general principles of equity.

 

Section
4.4. Capital Stock.
(a) On the Closing Date, the authorized capital stock of the Borrower will
consist of 1,000 shares of common stock, no par value, and all of the capital
stock of the Borrower is validly issued, fully paid and non-assessable and
owned, of record and beneficially, free and clear of any Liens, by Holdings. On
the Closing Date, the Borrower will not have outstanding any securities
convertible into or exchangeable for any of its capital stock, nor will it have
outstanding any rights to subscribe for or to purchase, or any options or
warrants for the purchase of, or any agreements (contingent or otherwise)
providing for the issuance of, or any calls, commitments or claims of any
character relating to, any of its capital stock or any securities convertible
into or exchangeable for any of its capital stock. The Borrower is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of its capital stock, or to any obligation (contingent or
otherwise) evidencing the right of the holder thereof to purchase any of its
capital stock.

 

(b) On the Closing Date, the
authorized capital stock of Holdings will consist of 40,000,000 shares of
common stock and 10,000,000 shares of preferred stock. On the Closing Date,
Holdings will not have outstanding any securities convertible into or
exchangeable for any of its capital stock, nor will it have outstanding any
rights to subscribe for or to purchase, or any options or warrants for the purchase
of, or any agreements (contingent or otherwise) providing for the issuance of,
or any calls, commitments or claims of any character relating to, any of its
capital stock or any securities convertible into or exchangeable for any of its
capital stock, except for options and other securities issued pursuant to the
IHOP Corp. 1991 Stock Incentive Plan, as Amended and Restated on February 23,
1994 and the 1994 Stock Option Plan for Non-Employee Directors. Holdings is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its capital stock, or to any obligation (contingent or
otherwise) evidencing the right of the holder thereof to purchase any of its
capital stock.

 

Section
4.5. Business
Operations and Other Information; Financial Condition. (a) The Borrower (or
Bank of America NT & SA, on behalf of the Borrower) has delivered to you
(or, in the case of clause (iv) below, made available and delivered to the
extent

 

5

 

requested) true and complete
copies of (i) the Confidential Private Placement Memorandum dated September
1996 prepared by the Borrower and Bank of America NT & SA in connection
with the offering of the Notes to be purchased by you hereunder (together with
the Exhibits thereto, the “Confidential Memorandum”), (ii) the audited
consolidated balance sheets of Holdings and its Subsidiaries as at December 31
for 1991, 1992, 1993, 1994, and 1995, and the related audited consolidated
statements of operations, shareholders equity and cash flows for the fiscal
years ended December 31, 1991, 1992, 1993, 1994 and 1995, together with the
notes thereto and the reports thereon of Coopers & Lybrand (the “Audited
Financial Statements”), (iii) (A) the unaudited consolidating balance sheets of
Holdings and its Subsidiaries as at December 31, 1995 and the related
consolidating statements of operations for the fiscal year then ended and (B)
the unaudited consolidated balance sheet of Holdings and its Subsidiaries as at
June 30, 1996, and the related consolidated statements of operations,
shareholders equity and cash flows for the six months then ended (the
“Unaudited Financial Statements”; the Audited Financial Statements and the
Unaudited Financial Statements are sometimes hereinafter collectively referred
to as the “Financial Statements”), and (iv) the SEC Reports. The Confidential
Memorandum and the SEC Reports correctly describe in all material respects the
businesses, operations and principal Properties of Holdings, the Borrower and
their Subsidiaries. The Financial Statements have been prepared in accordance
with GAAP (except as noted thereon) consistently applied throughout the periods
involved, and fairly present the consolidated and consolidating financial position
of Holdings and its Subsidiaries as at each of the dates and for each of the
periods covered thereby, subject to, in the case of the Unaudited Financial
Statements, year-end audit adjustments and the notes required by GAAP and, with
respect to the consolidating statements, the failure to prepare statements of
cash flows and stockholders equity and the failure to include notes thereon as
required by GAAP. As of the date of each of the balance sheets included in the
Financial Statements, neither Holdings, the Borrower nor any of their
Subsidiaries had any material Debt or liability, absolute or contingent,
liquidated or unliquidated, except Debt and liabilities reflected or reserved
against on the Financial Statements or described in the notes thereto. Neither
Holdings nor any of its Subsidiaries has made any filing with the SEC on Form
8-K since December 31, 1995.

 

(b) Except as contemplated
herein, or as disclosed in the Confidential Memorandum or the SEC Reports or on
Schedule 4.5 hereto, or reflected in the Financial Statements, since December
31, 1995, neither Holdings, the Borrower nor any of their Subsidiaries has:

 

(1) incurred or assumed any
Debt, obligations or liabilities which are, individually or in the aggregate,
material (absolute, accrued, or contingent and whether due or to become due),
except current liabilities incurred in the ordinary course of business, except
as set forth in Schedule 4.8 attached hereto and except for Capitalized Leases
not required to be disclosed on Schedule 4.8;

 

(2) paid any Debt (other
than reductions of outstanding revolving Debt made during such period pursuant
to the BA Credit Agreement), obligations or liabilities which are, individually
or in the aggregate, material, other than current liabilities in the ordinary
course of business, or discharged any Liens which are, individually or in

 

6

 

the aggregate, material,
other than Liens securing current liabilities discharged in the ordinary course
of business;

 

(3) declared or paid any
dividend or distribution to its shareholders, or purchased or redeemed any of
its shares, or incurred or paid any management fee or similar charge, or
obligated itself to do so;

 

(4) subjected any of its
Property to any Lien other than Permitted Liens;

 

(5) sold, disposed,
transferred, licensed or released any of its Property except in the ordinary
course of business;

 

(6) suffered any physical
damage, destruction, or loss (whether or not covered by insurance) which had or
could reasonably be expected to have a Material Adverse Effect;

 

(7) entered into any
material transaction other than in the ordinary course of business;

 

(8) encountered any strike,
work stoppage or other adverse collective labor action or any labor union
organizing activities;

 

(9) issued or sold any
shares or other securities or granted any material options or similar rights
with respect thereto, except for the issuance or sale of shares or other
securities pursuant to the 1991 IHOP Corp. Stock Incentive Plan as Amended and
Restated on February 23, 1994 and the 1994 Stock Option Plan for Non-Employee
Directors;

 

(10) made any change in
accounting methods, practices or principles;

 

(11) waived, released,
granted or transferred any rights having, individually or in the aggregate,
material value, or modified or changed in any material respect any existing
franchise, license, lease, contract or other document, other than in the
ordinary course of business; or

 

(12) agreed to do any of the
foregoing.

 

Section
4.6. Subsidiaries. Holdings
has no direct equity interest in any Person other than the Borrower, and no
indirect equity interest in any Person other than the Subsidiaries of the
Borrower. Set forth on Schedule 4.6 attached hereto is a true and complete list
of all Subsidiaries of the Borrower (the “Subsidiaries List”), setting forth as
to each such Subsidiary its jurisdiction of incorporation and the percentage of
capital stock of each such Subsidiary owned by the Borrower or a Subsidiary of
the Borrower. On the Closing Date, (i) except as disclosed in the Financial
Statements, the Borrower will have no direct or indirect equity interest in any
Person other than the Subsidiaries listed on the Subsidiaries List, the
Borrower will have good title to all of the shares it owns of each of its
Subsidiaries,

 

7

 

free and clear in each case
of any Lien, (ii) all such shares of each such Subsidiary will have been duly
and validly issued, and will be fully paid and non-assessable and owned of
record or beneficially by the Borrower and/or one or more of such Subsidiaries,
and (iii) there will be no securities outstanding that are convertible into or
exchangeable for any shares of the Borrower’s Subsidiaries, nor will there be
outstanding any rights to subscribe for or purchase, or any options or warrants
for the purchase of, or any agreements (contingent or otherwise) providing for
the issuance of, or any calls, commitments or claims of any character relating
to, any shares of the Borrower’s Subsidiaries or any securities convertible
into or exchangeable for any such shares.

 

Section
4.7. Litigation; No
Violation of Governmental Orders or Laws. Except as set forth on Schedule 4.7:

 

(a) There are no actions,
suits or proceedings pending, or, to the knowledge of Holdings or the Borrower
after due inquiry, threatened against or affecting Holdings or any of its
Subsidiaries or any Properties or rights of any of them which, if adversely
determined, individually or in the aggregate would have a Material Adverse
Effect.

 

(b) There are no actions,
suits or proceedings pending or, to the knowledge of Holdings or the Borrower
after due inquiry, threatened against or affecting Holdings or any of its
Subsidiaries which seek to enjoin, or otherwise prevent the consummation of,
the transactions contemplated herein or to recover any damages or obtain any
relief as a result of any of the transactions contemplated herein in any court
or before any arbitrator of any kind or before or by any Governmental Body.

 

(c) Neither Holdings nor any
of its Subsidiaries is or will be, after or as a result of giving effect to the
transactions contemplated herein, in default under or in violation of any Order
of any court, arbitrator or Governmental Body or of any statute or law or of
any rule or regulation of any Governmental Body, which default or violation has
or could reasonably be expected to have a Material Adverse Effect; and none of
them is subject to or a party to any Order of any court or Governmental Body
arising out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition or
similar matters.

 

(d) All cash payments
required to be paid pursuant to that certain Settlement Agreement entered into
on November 7, 1973, together with all amendments thereto, approved by an order
dated November 29, 1973 of the United States District Court for the Western
District of Missouri, with respect to In re: IHOP Franchise Litigation, M.D.L.
Docket No. 77 have been paid, all litigation regarding such Settlement
Agreement has been settled or dismissed and all payments required to be paid
pursuant thereto have been paid, and all of the Borrower’s current documents
evidencing its franchising arrangements with its franchisees are in a form
permitted by such Settlement Agreement.

 

8

 

Section
4.8. Outstanding
Debt. Schedule 4.8 sets forth a correct and complete list and description of
all Debt of Holdings and its Subsidiaries (after giving effect to the use of
proceeds from the sale and issuance of the Notes) other than Capitalized Leases
which (i) on any consolidated balance sheet of Holdings and its Subsidiaries
would have a capitalized value of less than $2.5 million and (ii) cover
Property on which a restaurant unit operated by the Borrower or a franchisee in
the ordinary course is located and all Liens on Property of Holdings or its
Subsidiaries securing such Debt outstanding or existing on the Closing Date
(excluding any Debt evidenced by the Notes or any Guaranty thereof), and there
exists no breach or default or event of default in the terms and provisions of
any instrument, agreement or contract pertaining to any such Debt.

 

Section
4.9. Consent, Etc. No
consent, approval or authorization of or declaration, registration or filing
with any Governmental Body or any nongovernmental Person, including, without
limitation, any creditor or shareholder of Holdings or any of its Subsidiaries,
is required in connection with the execution or delivery of this Agreement, the
Notes or the Subsidiary Guarantees, or the performance by the Borrower, its
Subsidiaries and Holdings of their respective obligations hereunder and
thereunder, or as a condition to the legality, validity or enforceability of
this Agreement or the Notes or the Subsidiary Guarantees, except for any
thereof as are set forth on Schedule 4.9, all of which have been made or
obtained and are in full force and effect and except for declarations,
registrations or filings with Governmental Bodies which, in accordance with
law, are to be made following the Closing Date.

 

Section
4.10. Title to
Properties. Holdings and each of its Subsidiaries (after giving effect to the
use of proceeds from the sale and issuance of the Notes) have (i) good and
marketable fee simple title to their respective real Properties (other than
real Properties which are leased from others), subject to no Lien of any kind
except Permitted Liens, and (ii) good title to all of their other respective Properties
and assets (other than Properties and assets leased from others), subject to no
Lien of any kind except Permitted Liens. Holdings and each of its Subsidiaries
have possession, not subject to encumbrances which materially affect the rights
of the lessee thereunder, under all leases under which they are lessees
(subject to the rights of sublessees, in their capacities as sublessees under
subleases entered into in the ordinary course of the Borrower’s business),
whether of realty or personalty, to which they respectively are parties, none
of which contains any unusually burdensome provisions, and all such leases are
the legal, valid and binding obligations of those of Holdings, the Borrower and
their Subsidiaries which are parties thereto and, to the knowledge of Holdings
and the Borrower, the other parties thereto and each is subsisting and in full
force and effect. Neither Holdings nor any of its Subsidiaries is in material
breach or violation of the terms of any such lease, and neither Holdings nor the
Borrower knows of any material breach or violation of any of such lease by any
third party.

 

Each of the leases under
which Holdings or any of its Subsidiaries is a lessee is in substantially the
form of Exhibit E hereto, if IHOP Realty is the lessor. Each such lease is the
legal, valid and binding obligation of Holdings or of the Subsidiary of
Holdings which is the lessee thereunder and IHOP Realty. Neither Holdings nor
the Borrower is aware of the

 

9

 

existence of a material
breach or default under any such lease, and each such lease is in full force
and effect on the Closing Date.

 

Each lease or sublease under
which Holdings or any of its Subsidiaries is lessor or sublessor is free of
unusually burdensome provisions and all such leases and subleases are the
legal, valid and binding obligations of those of Holdings, the Borrower and
their Subsidiaries which are parties thereto and, to the knowledge of Holdings
and the Borrower, the other parties thereto and each is, to the knowledge of
Holdings and the Borrower, subsisting and in full force and effect. Neither
Holdings nor any of its Subsidiaries is in material breach or violation of the
terms of any such lease, and neither Holdings nor the Borrower knows of any
breach or violation of any such lease by any third party, which breach or
violation could be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

Section
4.11. Taxes. Holdings
and each of its Subsidiaries has filed (or has had filed on its behalf), all
federal, state and local tax returns, which are required to have been filed by
any of them, and there have been paid all taxes shown to be due and payable on
such returns and all other material taxes and assessments payable by any of
them, to the extent the same have become due and payable and before they have
become delinquent. Except as set forth in Schedule 4.11, no material tax
assessment against Holdings or any of its Subsidiaries has been proposed and
all of their respective tax liabilities are adequately provided for or reserved
against on their respective books and financial statements in accordance with
GAAP. Neither Holdings nor any of its Subsidiaries have taken any reporting
position for which it does not have a reasonable basis. The tax returns of
Holdings and its Subsidiaries are currently being audited as set forth in
Schedule 4.11. Schedule 4.11 sets forth consents to the waiver or extension of
relevant statutes of limitations.

 

Section
4.12. No Conflicts
with Agreements, Etc. Neither the execution and delivery of this Agreement, the
Other Agreements, the Subsidiary Guarantees or the Notes, nor the offering,
issuance or sale of the Notes nor the fulfillment of or compliance with the
terms and provisions hereof or thereof, will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of any Lien on any Properties or assets of
Holdings or any of its Subsidiaries, or cause Holdings or any of its
Subsidiaries to be unable to pay any of its Debt when due, or result in any
violation of, or require for its validity any authorization, consent, approval,
exemption or other action by, or notice to any Governmental Body or any of the
stockholders of Holdings or any of its Subsidiaries, pursuant to the charter or
by-laws of any of them, or pursuant to any award of any arbitrator, or pursuant
to any material contract, agreement, mortgage, indenture, lease, instrument,
Order, statute, law, rule or regulation to which any of them or any of their
respective assets is subject. Neither Holdings nor any of its Subsidiaries is
in violation of, or in default under, any (i) Order, law or administrative
regulation binding upon it or any of its Properties, or (ii) contract,
mortgage, indenture, lease, instrument or agreement binding upon it or any of
its Properties, which breach, conflict, violation or default could reasonably
be expected to have a Material Adverse Effect.

 

Section
4.13. Disclosure.
Neither this Agreement, the Subsidiary Guarantees nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the

 

10

 

Borrower, Holdings or any of
their Subsidiaries in connection herewith, including the Confidential
Memorandum and the SEC Reports, contained (when taken together, to the extent
that any later document supersedes or supplements an earlier document), as of
its respective date, or now contains, any untrue statement of a material fact
or as of any such date omitted, or now omits, to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to the Borrower or Holdings which now has or
in the future could reasonably be expected to have (so far as the Borrower or
Holdings can reasonably foresee) a Material Adverse Effect other than (i) facts
with respect to economic conditions, generally and (ii) facts that have been
disclosed to the Purchasers in writing in connection with this transaction.

 

Section
4.14. Offering of
Securities. None of Holdings, the Borrower, any of their Subsidiaries or any of
their representatives has, directly or indirectly, offered any of the Notes or
any security similar to any of them for sale to, or solicited any offers to buy
any of the Notes, the Subsidiary Guarantees or any security similar to any of
them from, or otherwise approached or negotiated with respect thereto with,
more than 44 Persons including you, and none of Holdings, the Borrower, any of
their Subsidiaries or any such representative has taken or will take any action
which would subject the issuance or sale of any of the Notes to the
registration requirements of Section 5 of the Securities Act or violate the
provisions of any securities or Blue Sky laws of any applicable jurisdiction.

 

Section
4.15. Broker’s or
Finder’s Commissions. Neither the Borrower, Holdings nor any of their
Subsidiaries has engaged any broker or finder other than Bank of America NT
& SA with respect to the issuance and sale of the Notes. The Borrower and
Holdings agree, jointly and severally, to indemnify you and hold you harmless
against any loss, cost, claim or liability (including, without limitation,
reasonable attorneys fees and disbursements for the investigation and defense
of claims) arising out of or relating to any claim for a fee or commission by
any such actual or alleged broker or finder.

 

Section
4.16. Labor Matters.
During the past five years there has been no strike, work stoppage, slowdown or
other labor dispute or grievance involving Holdings or any of its Subsidiaries,
or employees of any of such Persons, which has had or could reasonably be
expected to have a Material Adverse Effect, nor to the knowledge of Holdings or
the Borrower after due inquiry is any such action, dispute or grievance
currently pending or threatened against Holdings or its Subsidiaries. Except as
set forth on Schedule 4.16, none of Holdings or any of its Subsidiaries is a
party to any collective bargaining agreement and none of them has any knowledge
after due inquiry of any pending or threatened effort to organize any employees
of Holdings or any of its Subsidiaries. There are currently no pending
retaliatory or wrongful discharge claims or federal, state or local employment
discrimination charges or complaints or administrative or judicial complaints
arising therefrom pending against Holdings or any of its Subsidiaries, or any
employees of any of such Persons, which has had or could reasonably be expected
to have a Material Adverse Effect, nor to the knowledge of the Borrower or
Holdings after due inquiry are any such charges or complaints threatened
against Holdings or any of its Subsidiaries. The Borrower and its Subsidiaries
are in compliance with all applicable federal, state and local statutes, laws,
rules, ordinances, regulations, codes, licenses and orders relating to the
employment of

 

11

 

labor, including, without
limitation, any provisions thereof relating to wages, bonuses, collective
bargaining agreements, equal pay, occupational safety and health, equal
employment opportunity and wrongful or retaliatory termination of employment,
except where non-compliance could not reasonably be expected to have a Material
Adverse Effect.

 

Section
4.17. Environmental
Matters. Except as disclosed in the SEC Reports or on Schedule 4.17,

 

(a) there is no
Environmental Matter relating to Holdings or any of its Subsidiaries or any
Properties of any of such Persons, which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, and Holdings and
the Borrower are aware of no facts that could reasonably be expected to result
in any such Environmental Matter. Neither Holdings nor any of its Subsidiaries
has agreed to assume by contract with any Person or consent order or other
written agreement with a Governmental Body any liability of any other Person
for cleanup, compliance, or required capital expenditures in connection with
any Environmental Matter arising prior to the date hereof and, to the best
knowledge of Holdings and the Borrower, no such liability has arisen by
operation of law;

 

(b) the Properties presently
and, to the best knowledge of Holdings and the Borrower, previously used,
owned, leased, operated, managed or controlled by Holdings or any of its
Subsidiaries are free of contamination from Hazardous Materials, including,
without limitation, any contamination of the associated air, soil, groundwater
or surface waters, except for such instances of contamination as could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

 

(c) Holdings and its
Subsidiaries are currently in compliance in all material respects with all
applicable Environmental Laws, are not currently in receipt of any notice of
violation, are not currently in receipt of any notice of any potential
liability for cleanup of Hazardous Materials and are not now subject to any
investigation known to Holdings or the Borrower, or information request by a
Governmental Body concerning Hazardous Materials or any Environmental Laws.
Holdings and its Subsidiaries hold and are in compliance in all material
respects with all governmental permits, licenses, and authorizations necessary
to operate their businesses that relate to siting, wetlands, coastal zone
management, air emissions, discharges to surface or ground water, discharges to
any sewer or septic system, noise emissions, solid waste disposal or the
generation, use, transportation or other management of Hazardous Materials.
Neither Holdings nor any of its Subsidiaries has generated, manufactured,
refined, recycled, discharged, emitted, released, buried, processed, produced,
reclaimed, stored, treated, transported, or disposed of any Hazardous Materials
except in compliance with all applicable laws and regulations, including permit
requirements (except for such instances of non- compliance as could not
reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect);

 

12

 

(d) no Properties of
Holdings or any of its Subsidiaries are subject to any material Lien or claim
for material Lien in favor of any Person as a result of any Environmental
Matter or response thereto;

 

(e) no Hazardous Materials,
including leachate and effluents, generated, disposed of, transported, managed
or released by Holdings or any of its Subsidiaries have caused or are
reasonably likely to cause in whole or in part any contamination or injury to
any Person, Property or the environment, except for such contamination or
injury as could not reasonably be expected to have, individually, or in the
aggregate, a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries has handled, transported, disposed of or managed any Hazardous
Material in any manner that may reasonably be expected to form the basis for
any present or future claim, demand or action seeking cleanup of any site,
location, or body of water, surface or subsurface, except for such claims,
demands or actions as could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, and none of them has any material
liabilities, absolute or contingent, on the date hereof with respect thereto;
and

 

(f) to the best knowledge of
Holdings and the Borrower, all facilities where any Person has treated, stored,
disposed of, reclaimed, or recycled any Hazardous Material on behalf of
Holdings or any of its Subsidiaries are in compliance in all material respects
with all applicable Environmental Laws.

 

Section
4.18. Margin
Regulations. None of Holdings or any of its Subsidiaries owns or now intends to
acquire any “margin stock” as defined in Regulation G of the Board of Governors
of the Federal Reserve System of the United States (12 CFR 207). No part of the
proceeds from the sale of the Notes will be used, and no part of the proceeds
of any loans repaid with the proceeds from the sale of the Notes was used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System of the United States (12 CFR 207), or for the purpose of buying
or carrying or trading in any securities under such circumstances as to involve
any of Holdings or any Subsidiary in a violation of Regulation X of said Board
(12 CFR 224) or to involve any broker or dealer in a violation of Regulation T
of said Board (12 CFR 220). Neither Holdings, any of its Subsidiaries nor any
agent acting on behalf of Holdings or any such Subsidiary has taken or will
take any action which might cause this Agreement or the Notes to violate
Regulation G, Regulation X, Regulation T or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Exchange Act, in
each case as in effect now or as the same may hereafter be in effect. As used
in this Section, the term “purpose of buying or carrying” has the meaning
assigned thereto in the aforesaid Regulation G.

 

Section
4.19. Compliance with
ERISA. (a) No Pension Plan which is subject to Part 3 of Subtitle B of Title 1
of ERISA or Section 412 of the Code had an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year that
such Pension Plan heretofore ended;

 

13

 

(b) no liability to the PBGC
(other than required insurance premiums, all of which have been paid) has been
incurred and is outstanding with respect to any Pension Plan, and there has not
been any Reportable Event, or any other event or condition, which presents a
material risk of involuntary termination of any Pension Plan by the PBGC;

 

(c) neither any
Multiemployer Plan or Plan nor any trust created thereunder, nor any trustee or
administrator thereof, has, to the knowledge of Holdings or the Borrower,
engaged in a prohibited transaction (as such term is defined in Section 4975 of
the Code or Section 406 of ERISA) that could subject Holdings or any of its
Subsidiaries or ERISA Affiliates to any material tax or penalty on prohibited
transactions imposed under said Section 4975;

 

(d) no material liability
has been incurred and is outstanding with respect to any Multiemployer Plan as
a result of the complete or partial withdrawal by Holdings or any of its
Subsidiaries or ERISA Affiliates from such Multiemployer Plan under Title IV of
ERISA, nor has Holdings or any of its Subsidiaries or ERISA Affiliates been
notified by any Multiemployer Plan that such Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Multiemployer Plan intends to terminate or has been
terminated under Section 4041A of ERISA;

 

(e) Holdings and its
Subsidiaries and ERISA Affiliates are in compliance in all material respects
with all applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder with respect to all Plans and
Multiemployer Plans;

 

(f) as of the Closing Date,
the actuarial present value of all benefit liabilities (as defined in Section
4001(a)(16) of ERISA) under all Pension Plans that are subject to Title IV of
ERISA did not exceed the fair market value of the assets allocable to such
liabilities, determined as if all such Plans were terminated as of the Closing
Date, and by using the Plans actuarial assumptions as set forth in the most
recent actuarial report pertaining to each Plan;

 

(g) as of the Closing Date,
none of Holdings, the Borrower or any of their Subsidiaries or ERISA Affiliates
is a party to a “multiple employer plan” (as defined in 29 CFR 2530.210(c)(3))
or, except as set forth on Schedule 4.19, a Multiemployer Plan. With respect to
the Multiemployer Plan listed on Schedule 4.19, as of the Closing Date, such
Multiemployer Plan has no unfunded vested benefits within the meaning of
Section 4213(c) of ERISA for which Holdings, the Borrower or any of their
Subsidiaries or ERISA Affiliates is or could become liable;

 

(h) no event has occurred
with respect to any Plan or with respect to any other employee benefit pension
plan (as defined in Section 3(2) of ERISA) established or maintained at any
time during the five-year period immediately preceding the Closing Date for the
benefit of employees of Holdings or any of its Subsidiaries or ERISA Affiliates
which presents a risk of material liability of Holdings or any of its
Subsidiaries or ERISA Affiliates under Section 4069 of ERISA;

 

14

 

(i) there are no material
liabilities under the Plans that are employee welfare benefit plans (as defined
in Section 3(l) of ERISA) providing for medical, health, life or other welfare
benefits that are not insured by fully paid non-assessable insurance policies,
and no such Plan provides for continued medical, health, life or other welfare
benefits for employees after they leave the employment of Holdings or any of
its Subsidiaries or ERISA Affiliates (other than any such welfare benefits
required to be provided under the Consolidated Omnibus Budget Reconciliation
Act or other similar law); and

 

(j) Schedule 4.19 contains a
complete and accurate list of each of the employee benefit plans (as defined in
Section 3(3) of ERISA) with respect to which the Borrower or Holdings or any of
their respective Subsidiaries or ERISA Affiliates is a “party in interest” as
defined in Section 3 of ERISA or a “disqualified person” as defined in Section
4975 of the Code.

 

Section
4.20. Material
Contracts. Each of the Material Contracts is valid, subsisting and in full
force and effect, and neither Holdings nor any of its Subsidiaries is in breach
or violation of the terms, conditions or provisions of any of the Material
Contracts to which it is a party which is reasonably likely to have a Material
Adverse Effect. On the Closing Date, neither Holdings nor any of its
Subsidiaries will be a party to any Material Contract or be subject to any
restriction contained in the charter or by-laws of any of them which has or is
reasonably likely to have a Material Adverse Effect.

 

Section
4.21. Insurance. All
policies of workers compensation, general liability, fire, property, casualty,
marine, business interruption, errors and omissions, flood and other insurance
carried by Holdings and its Subsidiaries are in full force and effect on the
date hereof, and neither Holdings nor any of its Subsidiaries has received
notice of cancellation with respect to any such policy.

 

Section
4.22. Status under
Certain Laws. None of Holdings or any Subsidiary of Holdings is an “investment
company” or a “person directly or indirectly controlled by or acting on behalf
of an investment company” within the meaning of the Investment Company Act of
1940, as amended, or a “holding company,” or a “subsidiary company” of a
“holding company,” or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company,” within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

 

Section
4.23. Intentionally
Deleted.

 

Section
4.24. Possession of
Franchises, Licenses, Etc. Holdings and its Subsidiaries possess all
franchises, certificates, licenses, permits, registrations, and other
authorizations from national, state and local governmental or regulatory
authorities, free from unusually burdensome restrictions, that are necessary
for the ownership, maintenance and operation of their respective Properties and
assets, and for the conduct of their respective businesses as now conducted and
as described in the Confidential Memorandum, and none of Holdings or any of its
Subsidiaries is in violation of any thereof in any material respect.

 

15

 

Section
4.25. Franchises.
Except as set forth on Schedule 4.25, each of the Borrower’s franchisees has
entered into documents evidencing its franchising arrangement with the Borrower
(including the sublease, if any, from the Borrower of the franchised premises)
which, with respect to such arrangements initially entered into prior to 1979
(or renewed, on substantially similar terms and conditions since that date)
were entered into (or renewed, as the case may be) in accordance with all then
applicable laws and regulations including, without limitation, all applicable disclosure
periods and waiting requirements and, with respect to such arrangements entered
into since 1979, are substantially in the forms of the agreements attached as
Exhibit G hereto which are substantially in the same form as the exhibits to
the Franchise Offering Circular for Prospective Franchisees Required by the
Federal Trade Commission as in effect on the date such arrangements were
entered into (the “Offering Circular”) and such documents have been entered
into in accordance with all applicable laws and regulations, including, without
limitation, all applicable disclosure requirements and waiting periods. All
such franchising documents are in full force and effect and neither Holdings
nor the Borrower is aware of any breaches of any such documents by the
franchisees thereunder which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

Section
4.26. Use of
Proceeds. The proceeds from the sale and issuance of the Notes will be used (i)
to fund capital expenditures, (ii) to refinance existing Debt of the Borrower,
and (iii) for general corporate purposes.

 

Section
4.27. Patents and
Trademarks. Holdings and each Subsidiary own or possess all the patents,
trademarks, trade names, service marks, copyright, licenses and rights with
respect to the foregoing necessary for the present and planned future conduct
of their respective businesses, without any known conflict with the rights of
others.

 

Section
4.28. Compliance with
Laws. Neither Holdings nor any of its Subsidiaries is in violation of any
federal, state or local law, statute, regulation, ordinance or rule which
violation could reasonably be expected to have a Material Adverse Effect.

 

Section
4.29. Franchisees.
Except as disclosed in the SEC Reports, during the fiscal year ended December
31, 1995, no franchisee accounted for more than 10% of Holdings’ consolidated
revenues from sales of products or services or royalties.

 

Section
4.30. Other
Agreements. Simultaneously with the execution and delivery of this Agreement,
the Borrower and Holdings are entering into the Other Agreements, which are
identical in all respects with this Agreement (except for the respective
principal amounts of Notes to be purchased) with the other Purchasers named in
Schedule I hereto. The purchases by you and said other Purchasers are to be
separate and several transactions.

 

Section
4.31. Solvency. On
the Closing Date, and after the payment of all estimated legal, investment
banking, accounting and other fees related hereto, Holdings and each of its
Subsidiaries will be Solvent.

 

16

 

Section
4.32. Foreign Assets
Control Regulations. Neither the sale of the Notes by the Borrower hereunder
nor the use of the proceeds thereof as contemplated hereby will violate the
Foreign Assets Control Regulations, the Transaction Control Regulations, the
Cuban Assets Control Regulations, the Iranian Transactions Regulations, the
Iranian Assets Control Regulations, the Libyan Sanctions Regulations, the Iraqi
Sanctions Regulations, or the Haitian Transaction Regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), or the
restrictions on transactions with Yugoslavia contained in Executive Orders
12808 and 12810, dated May 30, 1992 and June 5, 1992, respectively .

 

Section 5. Representation of Purchasers.

 

You represent, and in making
this sale to you it is specifically understood and agreed, that:

 

Section
5.1. Authority. You
are authorized to enter into this Agreement and to perform your obligations
hereunder and to consummate the transactions contemplated hereby.

 

Section
5.2. Investment
Intent. You represent, and in entering into this Agreement the Company
understands, that you are acquiring the Notes for the purpose of investment and
not with a view to the distribution thereof, and that you have no present
intention of selling, negotiating or otherwise disposing of the Notes; provided
that the disposition of your property shall at all times be and remain within
your control.

 

Upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, the Notes shall bear a legend in
substantially the following form:

 

This Note Has Not Been
Registered under the Securities Act of 1933, as amended, and May Not Be Sold or
Otherwise Transferred in the Absence of Such Registration or an Exemption
Therefrom.

 

Section
5.3. Source of Funds.
You represent that at least one of the following statements concerning each
source of funds to be used by you to purchase the Notes is accurate as of the
Closing Date:

 

(a) the source of funds to
be used by you to pay the purchase price of the Notes is an “insurance company
general account” within the meaning of Department of Labor Prohibited
Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995) and there is no
employee benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the amount of the
general account reserves and liabilities for all contracts held by or on behalf
of such plan, exceed ten percent (10%) of the total reserves and liabilities of
such general

 

17

 

account (exclusive of
separate account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with your state of domicile;

 

(b) all or a part of such
funds constitute assets of one or more separate accounts, trusts or a
commingled pension trust maintained by you, and you have disclosed to the
Company the names of such employee benefit plans whose assets in such separate
account or accounts or pension trusts exceed 10% of the total assets or are
expected to exceed 10% of the total assets of such account or accounts or trusts
as of the date of such purchase (for the purpose of this clause (b), all
employee benefit plans maintained by the same employer or employee organization
are deemed to be a single plan);

 

(c) all or part of such
funds constitute assets of a bank collective investment fund maintained by you,
and you have disclosed to the Company the names of such employee benefit plans
whose assets in such collective investment fund exceed 10% of the total assets
or are expected to exceed 10% of the total assets of such fund as of the date
of such purchase (for the purpose of this clause (c), all employee benefit
plans maintained by the same employer or employee organization are deemed to be
a single plan);

 

(d) all or part of such
funds constitute assets of one or more employee benefit plans, each of which
has been identified to the Company in writing;

 

(e) you are acquiring the
Notes for the account of one or more pension funds, trust funds or agency
accounts, each of which is a “governmental plan” as defined in Section 3(32) of
ERISA;

 

(f) the source of funds is
an “investment fund” managed by a “qualified professional asset manager” or
“QPAM” (as defined in Part V of PTE 84-14, issued March 13, 1984), provided
that no other party to the transactions described in this Agreement and no
“affiliate” of such other party (as defined in Section V(c) of PTE 84-14) has
at this time, and during the immediately preceding one year has exercised the
authority to appoint or terminate said QPAM as manager of the assets of any
plan identified in writing pursuant to this clause (f) or to negotiate the
terms of said QPAMs management agreement on behalf of any such identified
plans; or

 

(g) if you are other than an
insurance company, all or a portion of such funds consists of funds which do not
constitute “plan assets.”

 

The Company shall deliver a
certificate on the Closing Date which certificate shall either state that (i)
it is neither a “party in interest” (as defined in Title I, Section 3(14) of
ERISA) nor a “disqualified person” (as defined in Section 4975(e)(2) of the
Internal Revenue Code of 1986, as amended), with respect to any plan identified
pursuant to paragraphs (b), (c) or (d) above, or (ii) with respect to any plan
identified pursuant to paragraph (f) above, neither it nor any “affiliate” (as
defined in Section V(c) of PTE 84-14) is described in the proviso to said
paragraph (f). As used in this Section 5.3, the terms

 

18

 

“separate account,”
“employer securities,” and “employee benefit plan” shall have the respective
meanings assigned to them in ERISA and the term “plan assets” shall have the
meaning assigned to it in Department of Labor Regulation 29 C.F.R.
(S)2510.3-101.

 

Section
5.4. Investor Status.
You are an “accredited investor” within the meaning of Rule 501 under the
Securities Act .

 

Section
6. Conditions to
Obligations of the Purchasers.

 

Your obligation to purchase
and pay for the Notes to be purchased by you hereunder on the Closing Date
shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions:

 

Section
6.1. Proceedings
Satisfactory. All corporate and other proceedings taken or to be taken by
Holdings and its Subsidiaries in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.

 

Section
6.2. Opinion of
Purchasers’ Special Counsel. You shall have received from Chapman and Cutler,
who are acting as special counsel for you in connection with this transaction,
an opinion addressed to you and dated the Closing Date, substantially in the
form of Exhibit B. Such opinion shall also cover such other matters incident to
the matters herein contemplated as you may reasonably request.

 

Section
6.3. Opinion of
Counsel to the Borrower and Holdings. You shall have received from Skadden,
Arps, Slate, Meagher & Flom, special counsel to the Borrower, Holdings and
the Subsidiary Guarantors, and Mark D. Weisberger, General Counsel to the
Borrower, Holdings and the Subsidiary Guarantors, legal opinions addressed to
you and dated the Closing Date. Such opinions shall cover the matters set forth
in the form of legal opinion attached hereto as Exhibit C, and shall also cover
such other matters incident to the matters herein contemplated as you may
reasonably request.

 

Section
6.4. Representations
and Warranties True, Etc.; Certificates. The representations and warranties
contained in Section 4 of this Agreement shall be true on and as of the Closing
Date with the same effect as if such representations and warranties had been
made on and as of the Closing Date. The Borrower shall have performed all
agreements on its part required to be performed under this Agreement prior to
the Closing Date; there shall exist on the Closing Date no Default or Event of
Default; the Borrower and Holdings shall have delivered to you an Officers
Certificate, dated the Closing Date, to the effect of the foregoing clauses of
this Section 6.4, and Sections 6.5, 6.6 and 6.7, and certifying that, on the
Closing Date, giving effect to the transactions contemplated by this Agreement
and the Other Agreements, the Borrower and its Subsidiaries could incur $1.00
of additional Debt pursuant to Section 11.2(c); and you shall have received
such certificates or other evidence

 

19

 

as you may request to
establish that the proceeds of the sale of the Notes on the Closing Date will
be applied as contemplated by Section 4.26.

 

Section
6.5. Absence of
Material Adverse Change, Etc. Since December 31, 1995, no change or changes
shall have occurred to the business, operations, Properties, assets, income,
prospects or condition, financial or otherwise, of Holdings and its
Subsidiaries, taken as a whole, which you reasonably believe in good faith to
constitute a Material Adverse Effect.

 

Section
6.6. Consents and
Approvals. All necessary consents, approvals and authorizations of, and
declarations, registrations and filings with, Governmental Bodies and
nongovernmental Persons required in order to consummate the transactions contemplated
herein shall have been obtained or made and shall be in full force and effect
except for declarations, registrations or filings with Governmental Bodies
which, in accordance with law, are to be made following the Closing Date.

 

Section
6.7. Absence of
Litigation, Orders, Etc. Except as disclosed on Schedule 4.7 attached hereto,
there shall not be pending or, to the knowledge of Holdings or the Borrower
after due inquiry, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting any of Holdings or its
Subsidiaries or their respective assets or Property (and, as to any action,
suit, proceeding, governmental investigation or arbitration so disclosed, there
shall not have occurred since the date of this Agreement any development) which
seeks to enjoin or restrain any of the transactions contemplated herein or
which you reasonably believe in good faith could have a Material Adverse
Effect. No Order of any court, arbitrator or Governmental Body shall be in effect
which purports to enjoin or restrain any of the transactions contemplated
herein or which you reasonably believe in good faith to constitute a Material
Adverse Effect.

 

Section
6.8. Other
Purchasers. The other Purchasers referred to in Section 1 shall have purchased
and made payment for the Notes to be purchased by them pursuant to the Other
Agreements referred to in said Section.

 

Section
6.9. Legal
Investment. Your purchase of and payment for the Notes to be purchased by you
hereunder on the Closing Date shall be permitted by the laws and regulations of
the jurisdictions to which you are subject, including without limitation all
applicable laws and regulations regulating investments for life insurance
companies (without reference to any “basket” or “leeway” provision which
permits the making of an investment without restriction as to the character of
the particular investment being made); and you shall have received such
certificates or other evidence as you may request to establish compliance with this
condition.

 

Section
6.10. Amendments to
Outstanding Debt Agreements. You shall have received on or prior to the Closing
Date all amendments or waivers to the outstanding Debt agreements of the
Borrower which are necessary to permit the compliance by the Borrower with the
closing conditions set forth in this Section 6 as of the Closing Date in form
and substance reasonably satisfactory to you.

 

20

 

Section
6.11. Fees. The fees
and out-of-pocket expenses and disbursements incurred by Chapman and Cutler in
connection with the preparation of this Agreement and the transactions
contemplated hereby shall be paid in full on the Closing Date.

 

Section
6.12. PPN Number. You
shall have been supplied with a private placement number for the Notes from
Standard and Poor’s Corporation.

 

Section
6.13. Subsidiary
Guarantees. IHOP Realty, IHOP Properties and IHOP Restaurants shall have each
executed and delivered a Subsidiary Guarantee.

 

Section
6.14. Intercreditor
Agreement. An Intercreditor Agreement in the form of Exhibit H attached hereto
shall have been duly executed and delivered by the parties thereto and shall be
in full force and effect and you shall have received a true, correct, and
complete copy thereof.

 

Section
6.15. Corporate
Status and Documentation.

 

(a) Certificates of
Incorporation. You shall have received true and correct copies of the
Certificates of Incorporation of Holdings, the Borrower and the Subsidiary
Guarantors, together with all amendments thereto, certified as of a recent date
by the Secretary of State of the jurisdiction of incorporation of each such
Person.

 

(b) Secretarys Certificate.
You shall have received certificates dated the Closing Date of the Secretary or
an Assistant Secretary of each of Holdings, the Borrower and the Subsidiary
Guarantors, duly certifying that:

 

(i) attached thereto is a
true, complete and correct copy of the by- laws of such Person, which have been
in full force and effect since the date specified in such certificate and to
which no amendments or modifications have been made since such date;

 

(ii) attached thereto is an
incumbency certificate, in a format satisfactory to the Purchasers, duly
executed by the Secretary or an Assistant Secretary and those other officers of
such Person who have executed documents and agreements in connection with the
transactions hereby contemplated; and

 

(iii) attached thereto are
true and correct copies of the resolutions, in form and substance satisfactory
to the Purchasers, adopted by the Board of Directors or authorized Executive
Committee of such Person (with evidence of such authorization), evidencing,
with respect to such Person, approval of the transactions contemplated by this
Agreement, the Other Agreements, the Notes, the Subsidiary Guarantees and the
other documents and instruments executed and delivered in connection therewith
or pursuant thereto, and authorizing the appropriate officers of such Person to
negotiate the form of, and to execute and deliver, this Agreement, the Other
Agreements, the Notes, the Subsidiary Guarantees and such other documents and
instruments (in each

 

21

 

case to the extent such
Person is a party thereto), with such modifications as such authorized officers
shall approve.

 

(c) Good Standing
Certificates. You shall have received a certificate of recent date of the
Secretary of State or other appropriate official of the jurisdiction of
incorporation of Holdings, the Borrower and the Subsidiary Guarantors certifying
that each such Person is in good standing in its jurisdiction of incorporation.
You shall also have received certificates of recent date of the appropriate
governmental officials in the jurisdiction in which Holdings, the Borrower or
the Subsidiary Guarantors conducts the material portion of its business as a
foreign corporation or owns a material portion of assets certifying that the
Borrower, Holdings or the Subsidiary Guarantors, as the case may be, is in good
standing as a foreign corporation in such jurisdiction, except where the
failure to so qualify would not have a Material Adverse Effect.

 

Section 7. Conditions to Obligations of the Borrower.

 

The Borrower’s obligation to
issue and sell the Notes to be sold by it hereunder on the Closing Date shall
be subject to the satisfaction, on or before the Closing Date, of the following
conditions:

 

Section
7.1. Representations
and Warranties True, Etc. The representations and warranties contained in
Section 5 of this Agreement shall be true on and as of the Closing Date with
the same effect as if such representations and warranties had been made on and
as of the Closing Date.

 

Section
7.2. Absence of
Litigation, Orders, Etc. There shall not be pending or, to the knowledge of
Holdings or the Borrower after due inquiry, threatened, any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
of Holdings or its Subsidiaries or their respective assets or Property which
seeks to enjoin or restrain any of the transactions contemplated herein. No
Order of any court, arbitrator or Governmental Body shall be in effect which
purports to enjoin or restrain any of the transactions contemplated herein.

 

Section
7.3. Other
Purchasers. Notes representing no less than $30 million of initial principal
amount shall have been purchased by the Purchaser and Purchasers purchasing
Notes pursuant to the Other Agreements on the Closing Date.

 

Section
8. Financial
Statements and Information.

 

The Borrower and Holdings
will furnish to you and to any of your Purchaser Affiliates, so long as you or
such Purchaser Affiliate shall be obligated to purchase or shall hold any
Notes, and to each other institutional holder of any Notes (such a holder in
any such case being hereinafter called an “Eligible Holder”), in duplicate:

 

22

 

(A) as soon as available and
in any event within 45 days after the end of each of the first three quarterly
accounting periods in each fiscal year of Holdings (“quarterly accounting
period”),

 

(1) either (a) copies of
Holdings’ Quarterly Report on Form l0-Q for the quarterly accounting period
then ended, as filed with the SEC or (b) if Holdings is not subject to Section
13 or 15(d) of the Exchange Act, copies of the consolidated balance sheet of
Holdings and its Subsidiaries as of the end of the quarterly accounting period
and of the related consolidated statements of operations, shareholders equity
and cash flows for such accounting period, all in reasonable detail and stating
in comparative form the consolidated figures as of the end of and for the
corresponding date and period in the previous fiscal year, all Certified by an
Appropriate Officer of Holdings; and

 

(2) a written statement in
the form of Exhibit F-1 hereto executed by Appropriate Officers of Holdings and
the Borrower setting forth computations or other pertinent information in
reasonable detail showing as at the end of such quarterly accounting period (a)
whether or not the financial covenants set forth in Sections 11.2 through 11.8
hereof, inclusive, have been met, accompanied by calculations setting forth the
maximum amount of Funded Debt that could have been incurred pursuant to
Sections 11.2(B) and 11.2(C) hereof, and the maximum amount of dividends or
distributions that could have been declared or paid pursuant to Section 11.5
hereof, and (b) whether or not Liens on Property or assets of Holdings or its
Subsidiaries or securing Debt of Holdings or its Subsidiaries, as the case may
be, exceed the threshold set forth in Section 11.1(I) hereof, accompanied by
calculations setting forth the maximum amount of additional Funded Debt secured
by Liens that could have been incurred under Section 11.1(I) hereof (a
“Quarterly Compliance Statement”);

 

(B) as soon as available and
in any event within 90 days after the end of each fiscal year of Holdings,

 

(1) either (a) copies of
Holdings’ Annual Report on Form 10-K and Annual Report to Shareholders, in each
case, for the year then ended and as filed with the SEC together with copies of
the consolidating balance sheets of Holdings and its Subsidiaries as of the end
of such fiscal year and the related consolidating statements of operations, or
(b) if Holdings is not subject to Section 13 or 15(d) of the Exchange Act,
copies of the consolidated and consolidating balance sheets of Holdings and its
Subsidiaries as of the end of such fiscal year, and of the related consolidated
and consolidating statements of operations and the related consolidated
statements of shareholders’ equity and cash flows, together with the notes to
such consolidated statements, which consolidated statements state in
comparative form the respective consolidated figures as of the end of and for
the previous fiscal year, and in the case of such consolidated financial
statements referred to in subclauses (a) or (b), accompanied by a report
thereon of Coopers & Lybrand or other independent

 

23

 

public accountants of
recognized national standing selected by Holdings (the “Accountants”), which
report shall be unqualified as to going concern and scope of audit and shall
state that such consolidated financial statements present fairly the
consolidated financial position of Holdings and its Subsidiaries as at the end
of such fiscal year and the consolidated results of operations and cash flow
for such fiscal year in conformity with GAAP, and that the examination by the
Accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards. Together with
each delivery of financial statements or Annual Reports required by this
subparagraph (1), the Accountants shall deliver to Holdings or the Borrower
(which recipient shall deliver the same to each Purchaser, Purchaser Affiliate
and Eligible Holder) their report (on which the Purchasers, Purchaser
Affiliates and Eligible Holders shall be entitled to rely) stating that, in
making the audit necessary to the certification of such financial statements,
they have obtained no knowledge of any Default or Event of Default or, if any
such Default or Event of Default has occurred, specifying the nature and period
of existence thereof; and

 

(2) a Quarterly Compliance
Statement.

 

(C) concurrently with the
financial statements or reports furnished pursuant to Subsections A and B of
this Section 8, a certificate of Appropriate Officers of the Borrower and
Holdings in the form of Exhibit F2, stating that, based upon such examination
or investigation and review of this Agreement as in the opinion of the signer
is necessary to enable the signer to express an informed opinion with respect
thereto, no Default or Event of Default by Holdings, the Borrower or any of
their Subsidiaries in the fulfillment of any of the terms, covenants,
provisions or conditions of this Agreement exists or has existed during such
period or, if such a Default or Event of Default shall exist or have existed,
the nature and period of existence thereof and what action Holdings, the
Borrower or such Subsidiary, as the case may be, has taken, is taking or
proposes to take with respect thereto;

 

(D) promptly after the same
are available and in any event within 15 days thereof, copies of all such proxy
statements, financial statements, notices and reports as Holdings or any of its
Subsidiaries shall send or make available generally to any of their security
holders, and copies of all regular and periodic reports and of all registration
statements which Holdings or any of its Subsidiaries may file with the SEC or with
any securities exchange;

 

(E) promptly (and in any
event within 5 days) after becoming aware of (1) the existence of any Default
or Event of Default, a certificate of Appropriate Officers of Holdings and the
Borrower specifying the nature and period of existence thereof and what action
the Borrower or Holdings is taking or proposes to take with respect thereto; or
(2) any Debt of Holdings, the Borrower or any Subsidiary being declared due and
payable before its expressed maturity,

 

24

 

because of the occurrence of
any default (or any event which, with notice and/or the lapse of time shall
constitute any such default) under such Debt or the agreement pursuant to which
such Debt was issued, a certificate of an Appropriate Officer describing the
nature and status of such letters and what action Holdings or such Subsidiary
is taking or proposes to take with respect thereto; provided, however, that any
Default or Event of Default which is deemed to have arisen upon Holdings or the
Borrower’s failure to promptly notify the Purchasers of another Default or
Event of Default in accordance with this Section 8(E) shall be deemed to be
waived so long as (i) such underlying Default or Event of Default as to which
notice is required to be given (the “Underlying Default”) has been completely
cured; (ii) the Underlying Default, if it had not been completely cured, would
not have had a Material Adverse Effect and (iii) notice of the Underlying
Default is delivered within 30 days of its occurrence;

 

(F) promptly and in any
event within 10 days after Holdings or the Borrower knows or, in the case of a
Pension Plan has reason to know, that a Reportable Event with respect to any
Pension Plan has occurred, that any Pension Plan or Multiemployer Plan is or
may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA, or that Holdings or any of its Subsidiaries or ERISA Affiliates
will or may incur any material liability to or on account of a Pension Plan or
Multiemployer Plan under Title IV of ERISA or any other material liability
under ERISA has been asserted against Holdings or any of its Subsidiaries or
ERISA Affiliates, a certificate of an Appropriate Officer of Holdings setting
forth information as to such occurrence and what action, if any, Holdings or
such Subsidiary or ERISA Affiliate is required or proposes to take with respect
thereto, together with any notices concerning such occurrences which are (a)
required to be filed by Holdings or such Subsidiary or ERISA Affiliate or the
plan administrator of any such Pension Plan controlled by Holdings or such
Subsidiary or ERISA Affiliate with the Internal Revenue Service or the PBGC, or
(b) received by Holdings or such Subsidiary or ERISA Affiliate from any plan
administrator of a Pension Plan not under their control or from a Multiemployer
Plan;

 

(G) promptly after the
Borrower or Holdings becomes aware of any Material Adverse Effect with respect
to which notice is not otherwise required to be given pursuant to this Section
8, a certificate of an Appropriate Officer setting forth the details of such
Material Adverse Effect and stating what action Holdings, the Borrower or any
of their respective Subsidiaries has taken or proposes to take with respect thereto;

 

(H) promptly (and in any
event within 15 days) after the Borrower or Holdings knows of (a) the
institution of, or threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Holdings or any of its
Subsidiaries or any Property of any of them, or (b) any material development in
any such action, suit, proceeding, governmental investigation or arbitration,
which, in either case, is likely to have a Material Adverse Effect, a
certificate of an Appropriate Officer describing the nature and status of such
matter in reasonable detail;

 

25

 

(I) in the event that
Borrower is no longer a consolidated Subsidiary of Holdings, financial
statements of Borrower and its consolidated Subsidiaries at such times and in
such form (together with such certifications) as are required to be delivered
pursuant to Sections 8(A), (B) and (C);

 

(J) to the extent prepared,
not later than 90 days following the end of each fiscal year of Holdings, a
copy of the consolidated budget of Holdings and its Subsidiaries prepared by
Holdings for the next succeeding fiscal year; and

 

(K) any other information,
including financial statements and computations, relating to the performance of
obligations arising under this Agreement and/or the affairs of Holdings, the
Borrower or any of their Subsidiaries that the Purchaser or any other Eligible
Holder may from time to time reasonably request and which is capable of being
obtained, produced or generated by Holdings, the Borrower or such Subsidiary or
of which any of them has knowledge, including, without limitation, a brief
statement describing any significant events relating to Holdings, the Borrower
and their Subsidiaries for any fiscal period.

 

It is further understood and
agreed that, for the purpose of effecting compliance with Rule 144A promulgated
by the SEC in connection with any resales of Notes that may hereafter be
effected pursuant to the provisions of such Rule, if Holdings is not subject to
Section 13 or 15(d) of the Exchange Act, each prospective purchaser of Notes
designated by a holder thereof shall have the right to obtain from Holdings and
the Borrower, upon the written request of such holder, the information required
pursuant to Rule 144A(d)(4) under the Securities Act.

 

Each of Holdings and the
Borrower will keep at its principal executive office a true copy of this
Agreement, and cause the same to be available for inspection at said offices
during normal business hours by any holder of any of the Notes or any
prospective purchaser of any thereof designated by the holder thereof.

 

Section 9. Inspection of Properties and Books

 

Each of the Borrower and
Holdings agrees that you or any Qualified Holder who agrees to abide by the
confidentiality requirement set forth below in this Section may, so long as you
or such Qualified Holder owns any Notes, after giving reasonable notice to
Holdings and the Borrower, visit at your or its own expense the offices and
Properties of Holdings, the Borrower or any of their Subsidiaries, and may
examine and make copies of the relevant books and records, and discuss the
affairs, finances and accounts of such companies with their officers and public
accountants (and by this provision the Borrower and each Subsidiary hereby
authorizes said accountants to discuss with you or such Qualified Holder its
affairs, finances and accounts) all at reasonable times during normal business
hours as often as you or it may reasonably desire.

 

At any time when a Default
or an Event of Default shall have occurred and be continuing, the Borrower
shall be required to pay or reimburse you or any such Qualified

 

26

 

Holder for expenses which
you or such Qualified Holder may reasonably incur in connection with any such
visitation or inspection.

 

You and any other Qualified
Holder shall use such information only for your own purposes, shall keep it
confidential and shall not disclose it to any third person (other than a
Purchaser Affiliate or an affiliate of a Qualified Holder or accountants
engaged by you or such Qualified Holder), except for disclosures to: (i) such
Qualified Holders or Purchaser Affiliates directors, trustees, partners,
officers, employees, agents and professional consultants, (ii) any other
Noteholder, (iii) any Person to which such Qualified Holder offers to sell such
Note or any part thereof, (iv) any Person to which such Qualified Holder sells
or offers to sell a participation in all or any part of such Note, (v) any Person
from which such Qualified Holder offers to purchase any security of the
Borrower, (vi) any federal, state or Canadian provincial regulatory authority
having jurisdiction over such Qualified Holder, (vii) the National Association
of Insurance Commissioners or any similar organization, (viii) any nationally
recognized financial rating service that is rating or reviewing the rating of
the Notes or (ix) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such Qualified Holder, (b) in response to any subpoena or
other legal process or informal investigative demand, (c) in connection with
any litigation to which such Qualified Holder is a party, or (d) to protect
such Qualified Holders investment in the Notes; provided, however, that, (1)
prior to any disclosure of any such information to any Person described in
clause (iii), (iv) or (v) above, such Person agrees to keep any non-public
information so delivered to it confidential or (2) if you (or such Qualified
Holder) are required to disclose any such information in connection with
judicial or governmental proceedings, you (or such Qualified Holder) shall
provide the Borrower and Holdings with prompt prior notice of such requirement.
Any bona fide transferee of any Note (or any participant in your interest in
the Notes), by its acceptance thereof, shall be bound by the provisions of this
Section 9 to the same extent as you are bound.

 

Section 10. Affirmative Covenants

 

The Borrower and Holdings
covenant and agree that so long as any of the Notes shall be outstanding:

 

Section
10.1. Payment of
Principal, Prepayment Charge and Interest, Etc. The Borrower will duly and
punctually pay the principal of, prepayment charge (if any) and interest on the
Notes in accordance with the terms of such Notes and this Agreement. The
Borrower and Holdings will comply with all of the covenants, agreements and
conditions contained in this Agreement.

 

Section
10.2. Payment of
Taxes and Claims. Holdings and the Borrower will, and will cause each of their
respective Subsidiaries to, pay before they become delinquent:

 

(A) all taxes (including
excise taxes), assessments and governmental charges or levies imposed upon it
or its income or profits or upon its Property, real, personal or mixed, or upon
any part thereof;

 

27

 

(B) all claims for labor,
materials and supplies which, if unpaid, might result in the creation of a Lien
upon its Property; and

 

(C) all claims, assessments,
or levies required to be paid by any of them pursuant to any agreement,
contract, law, ordinance or governmental rule or regulation governing any
pension, retirement, profit-sharing or any similar plan; provided, that the
taxes, assessments, charges and levies described in this Section 10.2 need not
be paid while being diligently contested in good faith and by appropriate
proceedings so long as adequate book reserves have been established with
respect thereto in accordance with GAAP. The Borrower and Holdings will timely
file, and will cause their Subsidiaries to file, all tax returns required to be
filed in connection with the payment of taxes required by this Section 10.2.

 

Section
10.3. Maintenance of
Properties and Corporate Existence. Holdings and the Borrower will, and will
cause each of their respective Subsidiaries to:

 

(A) maintain its Property in
good condition and make all renewals, repairs, replacements, additions,
betterments, and improvements thereto as are necessary in the reasonable
opinion of management;

 

(B) keep books, records and
accounts in accordance with GAAP;

 

(C) do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, rights and powers and franchises including, without
limitation thereof, any necessary qualification or licensing in any foreign
jurisdiction; and

 

(D) comply with all
applicable statutes, regulations, franchises, and orders of, and all applicable
restrictions imposed by, any Governmental Body (all as now or at any time
hereafter may be in effect), in respect of the conduct of its business and the
ownership of its Properties (including, without limitation, applicable
statutes, rules, ordinances, regulations and Orders relating to Environmental
Laws), except where non-compliance could not reasonably be expected to have a
Material Adverse Effect.

 

Section
10.4. Insurance.
Holdings and the Borrower will maintain, and will cause to be maintained on
behalf of each Subsidiary, insurance coverage by financially sound and
reputable insurers, against such casualties and contingencies, of such types
(including without limitation public liability, workmens compensation, larceny
and embezzlement or other criminal misappropriation insurance) and in such
amounts as are prudent, and in any event in such amounts as are adequate to
cover foreseeable losses to the business of Holdings, the Borrower and their
Subsidiaries. The Borrower or Holdings shall furnish to the Purchasers on or
prior to the Closing Date a summary of insurance presently in force in a
separate letter.

 

28

 

Section 11. Negative and Maintenance Covenants

 

The provisions of this
Section 11 shall remain in effect so long as any Notes shall remain
outstanding.

 

Section
11.1. Restrictions on
Liens. Holdings and the Borrower covenant that they will not, nor will they
permit any Subsidiary to, 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 10.2;

 

(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 therefore;

 

(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 therefore;

 

(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 Holdings, the Borrower
or any of their Subsidiaries;

 

(F) Liens securing Debt of a
Subsidiary to the Borrower or Holdings;

 

(G) Liens (other than Liens
created pursuant to Capitalized Leases) existing on the date hereof and
described in Schedule 4.8 attached hereto, securing Debt not exceeding
$1,500,000 in the aggregate in principal amount;

 

29

 

(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 Funded
Debt represented by such Capitalized Leases is permitted pursuant to Section
11.2(C); and

 

(I) Liens including Liens
arising out of purchase money financing not otherwise permitted by the
foregoing clauses of this Section 11.1 securing Debt (without duplication) of
Holdings, the Borrower or any Subsidiary of Holdings or the Borrower, provided
that the sum of (i) the principal amount of such Debt plus (ii) unsecured Debt
(other than Additional Permitted Guarantees) of Subsidiaries of Holdings (other
than the Borrower) and Subsidiaries of the Borrower not otherwise permitted
under Section 11.4(A) does not exceed at any time 15% of Consolidated Tangible Net
Worth.

 

The Liens referred to in
Section 11.1(A) through (I) are herein collectively referred to as “Permitted
Liens,” individually, a “Permitted Lien.”

 

Section
11.2. Limitation on
Funded Debt. Holdings and the Borrower shall not, and shall not permit (except
to the extent permitted in Section 11.4) any Subsidiary to, incur Funded Debt
other than:

 

(A) the Notes, the Guarantee
of Holdings as set forth herein and the Subsidiary Guarantees and all Funded
Debt of Holdings, the Borrower and their Subsidiaries existing as of the
Closing Date, as set forth on Schedule 4.8 attached hereto;

 

(B) any replacement,
refinancing or extension of any Funded Debt, provided that the aggregate
principal amount of such Funded Debt (or, if such Funded Debt is issued with an
original issue discount, the original issue price of such Funded Debt) does not
exceed the then outstanding principal amount of the Funded Debt so replaced,
refinanced or extended (or, if the Funded Debt being replaced, refinanced or
extended was issued with an original issue discount, the original issue price
plus the amortized portion of the original issue discount to the date that such
Funded Debt is replaced, refinanced or extended); and

 

(C) Additional Funded Debt
of Holdings, the Borrower and their Subsidiaries, provided that after giving
effect to such incurrence (including payment of interest and principal
following such incurrence) and to the application of any proceeds thereof (i)
the ratio of Consolidated Income Available for Fixed Charges to Fixed Charges
would be not less than that ratio required to be maintained pursuant to Section
11.8 and (ii) the aggregate consolidated Funded Debt (without duplication) of
Holdings, the Borrower and their Subsidiaries would not exceed 50% of Total
Capitalization, measured in each case on a pro forma basis as of the most
recently ended fiscal quarter as if such incurrence had occurred on the last
day of such fiscal quarter.

 

30

 

Section
11.3. Consolidated
Tangible Net Worth. Holdings and its Subsidiaries shall not permit Consolidated
Tangible Net Worth at any time to be less than the sum of $66,843,000 plus 50%
of Consolidated Net Income (but only if a positive number) on a cumulative
basis from June 30, 1996, to and including any date of determination hereunder.

 

Section
11.4. Limitation on
Debt of Subsidiaries. Holdings and the Borrower shall not permit any of their
Subsidiaries (other than the Borrower) to incur any Debt other than:

 

(A) Debt owed to Holdings or
the Borrower or to a wholly-owned Subsidiary of Holdings or the 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 Holdings, the Borrower and any of their
Subsidiaries which is secured by Liens not permitted by Sections 11.1(A) through
(H) does not exceed 15% of Consolidated Tangible Net Worth.

 

Section
11.5. Restricted
Payments; Restricted Investments. Holdings will not, directly or indirectly,
through any Subsidiary or otherwise, (a) pay or declare any dividend on any
class of its capital stock (but 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 Holdings or such Subsidiary
consists solely of shares of capital stock of Holdings); 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 Holdings and its
Subsidiaries after June 30, 1996 would not exceed the sum of: (i) $28,843,000
plus (ii) 50% of cumulative Consolidated Net Income from June 30, 1996 through
the date of determination (or if Holdings 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
Holdings which are not mandatorily redeemable or otherwise subject to
repurchase, retirement, call, put or other reacquisition prior to or on the
maturity date of the Notes (and not subject to acceleration or redemption
repurchase, retirement, call, put or other reacquisition prior to the maturity
date of the Notes) received after June 30, 1996; provided that at the time of
any such Restricted Payment or Restricted Investment, both immediately before
and immediately after giving effect thereto, (a) no Default or Event of Default
shall have occurred and be continuing, and (b) Holdings, the Borrower and their
Subsidiaries shall be able to incur, pursuant to Section 11.2(C)(ii) above, at
least $1 of additional Funded Debt. So long as no Default or Event of Default
has occurred or would

 

31

 

be continuing after giving
effect thereto, this Section 11.5 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 Holdings out of the proceeds of the substantially concurrent sale (other
than to a Subsidiary of Holdings) of, shares of capital stock of Holdings,
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 Holdings and its Subsidiaries to make future
Restricted Payments.

 

Section
11.6. Sale of Assets.
Holdings and the Borrower shall not, and shall not permit any of their
Subsidiaries to, effect a Disposition of any assets unless (i) no Default or
Event of Default has occurred (except in the case of subclause (a) below) and
is continuing, and (ii) one of the following applies:

 

(a) such Disposition is in
the ordinary course of business, including, without limitation, (i) sales and
leases of operating restaurants and (ii) financings in connection with asset
securitization programs, each in accordance with the Borrower’s ordinary course
franchising or financing operations and made pursuant to the reasonable
business judgment of the Borrower in accordance with past practice;

 

(b) in each fiscal year,
Holdings, the Borrower and their respective Subsidiaries may effect
Dispositions (other than Qualifying Dispositions of Excepted Properties) of
assets for Fair Market Value and which (A) 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 11.6), of less
than 10% of Gross Assets on a consolidated basis determined as at the date of
such sale; (B) 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 11.6), 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 (C) together with all assets previously disposed of since
September 30, 1996 (other than Dispositions permitted by clause (a), (c) or (d)
of this Section 11.6), 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),
Holdings, the Borrower or any of their Subsidiaries could incur at least $1 of
additional Funded Debt without being in default of their obligations under
Section 11.2(C)(ii);

 

(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 the Borrower or (ii) to repay
Debt of Holdings or its Subsidiaries which is not junior in right of payment to
the Notes; or

 

(d) the assets disposed of
were disposed of for Fair Market Value (taking into consideration the rental
rate to be paid by the Borrower in connection with the

 

32

 

Disposition and leaseback of
the assets so disposed of) and were constructed or acquired following September
30, 1996 and are immediately leased back from the purchaser thereof by Holdings
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 Holdings, the Borrower or any of their
Subsidiaries.

 

Section
11.7. Consolidation
or Merger. Holdings and the Borrower covenant that neither of them will, nor
will they permit any of their respective Subsidiaries to, 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) the Borrower may
merge with Holdings or any of Holdings other Subsidiaries, (ii) Holdings may
merge with the Borrower or any of Holdings other Subsidiaries and (iii) any
Subsidiary may merge with Holdings, the Borrower or any other Subsidiary, so
long as, with respect to any mergers of Holdings, the Borrower or any
Subsidiary Guarantor in which such party is not the surviving Person, (a) the
surviving Person of such transaction shall be a solvent U.S. or Canadian
corporation, and such surviving Person shall have assumed in writing all of the
obligations of the Borrower, Holdings or such Subsidiary Guarantor, as the case
may be, under this Agreement, the Notes and the Subsidiary Guarantees, as the
case may be, a copy of which writing shall be provided to you and each holder
of Notes not less than 10 Business Days prior to any such transaction and which
shall be acceptable in form and substance to the Majority Holders, (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 Funded Debt pursuant to Section
11.2(C)(ii) hereof; and

 

(B) Holdings or the Borrower
may merge with any other Person so long as (i) the surviving Person of such
transaction shall be a solvent U.S. or Canadian corporation, and such surviving
Person shall have assumed in writing all of the obligations of the Borrower
under the Notes and this Agreement or of Holdings under this Agreement, as the
case may be, a copy of which writing shall be provided to you and each holder
of Notes not less than 10 Business Days prior to any such transaction and which
shall be acceptable in form and substance to the Majority Holders, (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 Funded Debt pursuant to
Section 11.2(C)(ii) hereof.

 

Section
11.8. Maintenance of
Fixed Charge Coverage. Holdings and the Borrower covenant that on the last day
of any quarterly accounting period of Holdings and its Subsidiaries, the ratio
of Consolidated Income Available for Fixed Charges to Fixed Charges

 

33

 

for the period consisting of
any four of the immediately preceding five quarterly accounting periods shall
not be less than 1.5 to 1.

 

Section
11.9. Transactions
with Affiliates. Each of Holdings and the Borrower covenants that it will not,
and will not permit any of its Subsidiaries to, 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 Holdings, the
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 Holdings, the
Borrower and their Subsidiaries in the ordinary course of business and
consistent with past practices.

 

Section
11.10. Acquisition of
Margin Securities. Each of Holdings and the Borrower covenants that it will
not, and will not permit any of its Subsidiaries to, own, purchase or acquire
(or enter into any contract to purchase or acquire) any “margin stock” 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, the holders of the Notes shall have received an opinion of counsel
satisfactory to the holders of the Notes to the effect that such purchase or
acquisition will not cause this Agreement or the Notes to be in violation of
Regulation G or any other regulation of such Board then in effect.

 

Section
11.11. Conduct of
Business. Each of Holdings and the Borrower covenants that it will not, and
will not permit any of its Subsidiaries to, engage in any business activity if,
such business activity would result in a substantial change in the general
nature of the business of Holdings and its Subsidiaries, taken as a whole, from
that described in the Confidential Memorandum.

 

Section
12. Definitions

 

(A) For the purposes of this
Agreement, the following terms shall have the following respective meanings:

 

“Acceleration Price” is
defined in Section 13.2(A) hereof.

 

“Accountants” has the
meaning specified in Section 8.

 

“Additional Permitted
Subsidiary Guarantees” shall mean those Guarantees delivered by any Subsidiary
Guarantor which guarantees Debt of the 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.

 

“Affiliate” shall mean any
Person (other than a Subsidiary) (i) which directly or indirectly controls, or
is controlled by, or is under common control with, Holdings,

 

34

 

(ii) which beneficially owns
or holds 10% or more of any class of the Voting Stock of Holdings, (iii) 10% or
more of the Voting Stock of which is beneficially owned or held by Holdings or
a Subsidiary of Holdings or (iv) any officer or director of Holdings 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.

 

“Appropriate Officer” shall
mean, with respect to any corporation, such corporations President, Vice
President, Chief Executive Officer, Chief Financial Officer, Treasurer or
Controller.

 

“Audited Financial
Statements” has the meaning specified in Section 4.5(a).

 

“BA Credit Agreement” shall
mean that certain Letter Agreement dated as of June 30, 1993 among Bank of
America Illinois, Holdings and the Borrower, as amended by (i) a letter dated
July 15, 1993, (ii) the First Amendment to the Letter Agreement dated as of
December 31, 1994, (iii) the Second Amendment to the Letter Agreement dated as
of March 11, 1996, (iv) the Third Amendment to the Letter Agreement dated as of
September 3, 1996, and (v) the Fourth Amendment to the Letter Agreement dated
as of November 1, 1996, providing for certain credit facilities to the
Borrower.

 

“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” means International House of
Pancakes, Inc., a Delaware corporation, or any successor thereto.

 

“Business Asset Acquisition”
is defined in Section 11.6 hereof. “Business Day” means any day except a
Saturday, a Sunday or a legal holiday in Chicago, Illinois.

 

“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” shall mean 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.

 

35

 

“Certified” when used with
respect to any financial information of any Person to be certified by any of its
officers, indicates that such information is to be accompanied by a certificate
to the effect that such financial information has been prepared in accordance
with GAAP consistently applied, subject in the case of interim financial
information to non-recurring material year-end audit adjustments, and presents
fairly the information contained therein as at the dates and for the periods
covered thereby.

 

“Closing Date” has the
meaning specified in Section 2.

 

“Code” means the Internal
Revenue Code of 1986, as amended.

 

“Confidential Memorandum”
has the meaning specified in Section 4.5(a).

 

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

 

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

 

“Consolidated Tangible Net
Worth” shall mean shareholders equity of Holdings and its Subsidiaries less
intangible assets booked after the Closing Date, less Restricted Investments in
excess of 10% of shareholders equity of Holdings and its Subsidiaries at any
date of determination, all as determined for Holdings and its Subsidiaries on a
consolidated basis in accordance with GAAP.

 

“Debt” with respect to any
Person means, without duplication, (i) all indebtedness of such Person for
borrowed money, (ii) 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), (iii) Capitalized Lease
Obligations of such Person, to the extent such obligations exceed 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 (iv) the aggregate amount of all Guarantees given by such Person with
respect to any of the foregoing.

 

“Default” means any event or
condition which, with due notice or lapse of time or both, would become an
Event of Default.

 

36

 

“Disposition” shall mean any
sale, transfer, assignment, lease, conveyance or other disposition of any
asset.

 

“Eligible Holder” has the
meaning specified in Section 8.

 

“Environmental Laws” means
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S) 9601 to 9675, the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 to 6992, the Emergency Planning and Community Right to Know
Act, 42 U.S.C. (S)(S) 11001 to 11050, the Safe Drinking Water Act, 42 U.S.C.
(S)(S) 300f to 300j-26, the Hazardous Materials Transportation Act, 49 U.S.C.A.
(S)(S) 1801 to 1819, the Clean Air Act, 42 U.S.C. (S)(S) 7401 to 7671q, the
Clean Water Act, 33 U.S.C. (S)(S) 1251 to 1387, the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. (S)(S) 136 to 136y, the Noise Control Act, 42
U.S.C. (S)(S) 4901 to 4918, the Occupational Safety and Health Act, 29 U.S.C.A.
(S)(S) 651 to 678, the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 to
2671, any so-called “Superfund” or “Superlien” law, any regulation promulgated
under any of the foregoing or any other Federal, state, or local statute, law,
ordinance, code, rule, regulation, order, decree, common law or other
requirement of any Governmental Body regulating or imposing liability or
standards of conduct concerning the environment, health and safety, or any
Hazardous Material.

 

“Environmental Matter” means
any claim, investigation (known to Holdings or the Borrower), litigation,
administrative proceeding, whether pending or, to the knowledge of Holdings or
the Borrower, threatened, or judgment or Order, relating to any Hazardous
Materials, the release thereof, or any Environmental Law.

 

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

 

“ERISA Affiliate” means any
corporation or other Person which is a member of the same controlled group
(within the meaning of Section 414(b) of the Code) of corporations or other
Persons as Holdings or any of its Subsidiaries, or which is under common
control (within the meaning of Section 414(c) of the Code) with Holdings or any
of its Subsidiaries, or any corporation or other Person which is a member of an
affiliated service group (within the meaning of Section 414(m) of the Code) with
Holdings or any of its Subsidiaries, or any corporation or other Person which
is required to be aggregated with Holdings or any of its Subsidiaries pursuant
to Section 414(o) of the Code or the regulations promulgated thereunder.

 

“Event of Default” has the
meaning specified in Section 13.

 

“Excepted Properties” means
the real property of Holdings, the Borrower or any of their Subsidiaries and
the buildings and improvements constructed thereon at each of the following
locations: (1) Store #5, Hollywood, California; (2) Store #471, Fairfax,
Virginia; (3) Store #496, Leesburg, Virginia; (4) Store #690, Santa Rosa,
California; and (5) Store #1436, Houston, Texas.

 

37

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, or any similar U.S. statute then
in effect, and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar U.S. statute.

 

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

 

“Financial Statements” has
the meaning specified in Section 4.5(a).

 

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

 

“Funded Debt” shall mean (i)
all Debt of a Person (other than Guarantees) having a final maturity of more
than one year from the date of incurrence thereof (or which is renewable or
extendible at the option of the obligor for a period or periods of more than
one year from the date of incurrence), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not included in current liabilities,
(ii) in the case of Guarantees, all Guarantees of obligations maturing more
than one year after the date as of which the Guarantee is incurred, and (iii)
the recourse portion, if any, of obligations under sales of notes or
receivables programs.

 

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

 

“Governmental Body” means
any federal, state, Canadian provincial, county, city, town, village, municipal
or other governmental department, commission, board, bureau, agency, authority
or instrumentality, domestic or foreign.

 

“Gross Assets” means the
total assets and Properties of Holdings and its Subsidiaries less accumulated
depreciation, as indicated on the audited balance sheets of Holdings 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

 

38

 

Person in respect of
enabling such Person to satisfy any obligation (including 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.

 

“Hazardous Material” and
“Hazardous Materials” shall mean as follows:

 

(1) any “hazardous
substance” as defined in, or for purposes of, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.A. (S)(S) 9601 & 9602,
as may be amended from time to time, or any other so-called “superfund” or
“superlien” law and any judicial interpretation of any of the foregoing;

 

(2) any “regulated
substance” as defined pursuant to 40 C.F.R. Part 280;

 

(3) any “pollutant or
contaminant” as defined in 42 U.S.C.A. (S) 9601(33);

 

(4) any “hazardous waste” as
defined in, or for purposes of, the Resource Conservation and Recovery Act;

 

(5) any “hazardous chemical”
as defined in 29 C.F.R. Part 1910;

 

(6) any “hazardous material”
as defined in, or for purposes of, the Hazardous Materials Transportation Act;
and (7) any other substance, regardless of physical form, or form of energy or
pathogenic agent that is subject to any Environmental Law.

 

Without limiting the
generality of the foregoing, the term “Hazardous Material” thus includes, but
is not limited to, any material, waste or substance that contains petroleum or
any fraction thereof, asbestos, or polychlorinated biphenyls, or that is
flammable, explosive or radioactive that is subject to any Environmental Law.

 

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

 

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

 

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

 

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

 

39

 

“Intercreditor Agreement”
means the Intercreditor Agreement dated as of November 1, 1996 among the 1992
Noteholders (as defined therein), the Purchasers, Bank of America Illinois and
additional creditors which may become a party thereto from time to time,
substantially in the form attached hereto as Exhibit H.

 

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

 

“Interest Payment Date”
shall mean any date on which the payment of interest on any Note becomes due
and payable.

 

“Internal Revenue Service”
means the United States Internal Revenue Service and any successor or similar
agency performing similar functions.

 

“Investment” when used with
reference to any investment of Holdings, the 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 Holdings, the 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).

 

“Lien” means any security
interest, mortgage, pledge, lien, claim, charge, encumbrance, conditional sale
or title retention agreement, lessors interest under a Capitalized Lease or
analogous instrument, in, of or on any of a Persons 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 Holdings, the 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
Holdings, the Borrower or any of their Subsidiaries in the ordinary course of
business shall be deemed to constitute a Lien for purposes hereof.

 

“Majority Holders” means the
holders of at least a majority in principal amount of the Notes at the
applicable time outstanding.

 

“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 (i) the assets,
business, operations, income, prospects or condition (financial or otherwise)
of Holdings and its Subsidiaries taken as a whole or the Borrower and its
Subsidiaries taken as a whole, (ii) the transactions contemplated by this
Agreement, or (iii) taken as a whole, the ability of

 

40

 

the Borrower and Holdings to
fulfill their respective obligations under this Agreement and the Notes .

 

“Material Contracts” means
all supply agreements, requirements contracts, leases, customer agreements,
franchise agreements, license agreements, distribution agreements, joint venture
agreements, asset purchase agreements, stock purchase agreements, merger
agreements, agency or advertising agreements and other contracts, agreements
and commitments to which Holdings or any of its Subsidiaries are parties, and
which are material to the respective businesses, assets or operations of
Holdings and its Subsidiaries.

 

“Multiemployer Plan” means a
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA
or Section 414(f) of the Code contributed to by Holdings or any of its
Subsidiaries or ERISA Affiliates.

 

“Net Income” of any Person,
with respect to any period, shall mean the net income or net loss of such
Person after excluding the sum of (i) any net loss or any undistributed net
income of any Person other than a Subsidiary of such Person, (ii) 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, (iii) 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 (iv) extraordinary or nonrecurring
gains or losses (net of any tax effect), all as determined for the relevant
period in accordance with GAAP.

 

“Note” has the meaning
specified in Section 1.

 

“Offering Circular” has the
meaning specified in Section 4.25.

 

“Officers Certificate” shall
mean a certificate executed on behalf of Holdings, the Borrower or any of their
Subsidiaries, in each case by an Appropriate Officer thereof.

 

“Order” means any order,
writ, injunction, decree, judgment, award, determination or written direction
or demand of any court, arbitrator or Governmental Body.

 

“Other Agreements” shall
mean the agreements which are identical in all respects with this Agreement
(except for the respective principal amounts of the Notes to be purchased) and
executed and delivered to the other Purchasers named in Schedule I hereto
simultaneously with the execution and delivery of this Agreement.

 

“PBGC” means the Pension
Benefit Guaranty Corporation, and any successor agency or Governmental Body
performing similar functions.

 

“Pension Plan” means an
employee pension benefit plan, as defined in

Section 3(2) of ERISA,
excluding any Multiemployer Plans, maintained by or contributed to by Holdings
or any of its Subsidiaries or ERISA Affiliates.

 

“Permitted Lien” is defined
in Section 11.1.

 

41

 

“Person” means and includes
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

 

“Plan” and “Plans” means any
employee benefit plan as defined in Section 3(3) of ERISA, excluding a
Multiemployer Plan, established or maintained for the benefit of employees of
Holdings or any of its Subsidiaries or ERISA Affiliates.

 

“Present Value Amount” means
at any time with respect to any Notes being prepaid in whole or in part
pursuant to Section 3.2 hereof or being declared or becoming due and payable
pursuant to Section 13.2(A) or (B) hereof, the sum of the Present Values of (A)
the aggregate amount of the principal being so prepaid or being declared or
becoming due and payable plus (B) each amount of interest which would have been
payable on the amount of such principal being prepaid or being declared or
becoming due and payable (assuming that all payments and prepayments of
principal and interest would have been made in accordance with the terms of
this Agreement and the Notes and that interest accrued and unpaid on such principal
to the date of prepayment or the date such principal is declared or becomes due
and payable has been paid). “Present Value,” for any amount of principal or
interest, shall be computed on a semiannual basis at a discount rate equal to
the Treasury Yield plus 50 basis points. The “Treasury Yield” shall be
determined by reference to (i) the yields reported, as of 10:00 a.m. (New York
City time) on the Business Day next preceding the prepayment date or the date
any such principal is declared or becomes due and payable, on the display
designated as “Page 500” on the Telerate Service (or such other display as may
replace Page 500 on the Telerate Service) for actively traded U.S. Treasury
securities having a constant maturity equal to the then remaining Weighted
Average Life to Maturity of the principal being prepaid or being declared or
becoming due and payable, or if such yields shall not be reported as of such
time or the yields reported as of such time shall not be ascertainable, (ii)
the most recent Federal Reserve Statistical Release H.15 (519) which has become
available not more than two Business Days prior to the date of prepayment or
the date such principal becomes or is declared due and payable (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data acceptable to the Majority Holders), and shall be the most
recent yield on actively traded U.S. Treasury securities adjusted to a constant
maturity equal to the then remaining Weighted Average Life to Maturity of the
principal being prepaid or being declared or becoming due and payable. If the
Weighted Average Life to Maturity (so computed) is not equal to the constant
maturity of a U.S. Treasury security for which a yield is given, the Treasury
Yield shall be obtained by linear interpolation (calculated to the nearest one-
twelfth of a year) from the yields of U.S. Treasury securities for which such
yields are given, except that if the Weighted Average Life to Maturity (so
computed) is less than one year, the yield on actively traded U.S. Treasury
securities adjusted to a constant maturity of one year shall be used.

 

“Pro Rata Portion” shall
mean with respect to any Noteholder, the ratio of the principal balance
outstanding on the Note or Notes held by that Noteholder on the date of
determination to the aggregate principal balance outstanding on all the Notes
on the date of determination.

 

42

 

“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.

 

“Purchaser Affiliate” shall
mean any Person (i) which directly or indirectly controls, or is controlled by,
or is under common control with, a Purchaser, (ii) which beneficially owns or
holds 5% or more of any class of the Voting Stock of a Purchaser, or (iii) 5%
or more of the Voting Stock of which is beneficially owned or held by a
Purchaser; provided, however, that a director, officer or employee of a Purchaser
shall not be deemed to control, to be controlled by, or to be under common
control with, a Purchaser for purposes hereof solely by reason of such status.
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. For
the purposes of this Agreement, the Purchasers shall not be deemed to be
Affiliates of Holdings or any of its Subsidiaries.

 

“Qualified Holder” shall
mean, as of any date of determination, any original Purchaser or Purchaser
Affiliate and any direct or indirect successor, assign or transferee of any Purchaser
or Purchaser Affiliate holding Notes representing at least 10% of the aggregate
principal amount of all Notes at the time outstanding.

 

“Qualifying Disposition”
shall mean a sale and leaseback of an Excepted Property; provided that (a) upon
the sale thereof, the Excepted Property is immediately leased back from the
purchaser thereof by Holdings or any of its Subsidiaries and (b) the Excepted
Property must be sold and leased back within the third anniversary of the
original acquisition or construction thereof by Holdings, the Borrower or any
of their Subsidiaries.

 

“quarterly accounting
period” is defined in Section 8(A) hereof.

 

“Reportable Event” means any
of the events set forth in Section 4043(b) of ERISA or the regulations
thereunder for which the 30-day notice requirement applies.

 

“Restricted Investments”
shall mean all Investments made by Holdings, the Borrower or their Subsidiaries
in or to any Person except (i) 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
Holdings or its Subsidiaries to be used in the ordinary course of business,
(ii) Investments in Subsidiaries, (iii) Investments in obligations issued or
unconditionally guaranteed by the U.S. or any agency thereof, in each case
maturing within one year from the date of acquisition thereof; (iv) Investments
in obligations issued by any political subdivision of the U.S. 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; (v) 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; (vi) certificates
of deposit, repurchase agreements or bankers acceptances maturing within one year
from the date of acquisition thereof issued by commercial banks which are rated
“A-” or better by either Standard & Poor’s Corporation or Moody’s

 

43

 

Investors Services, Inc. (or by some other mutually agreeable rating
system if either of these entities no longer exists) located in the U.S. and
Canada and have combined capital, surplus and undivided profits of not less
than $100,000,000; (vii) 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 (iii) through (vi); and (viii)
other Investments existing on the Closing Date and set forth on Schedule 12
hereto.

 

“SEC” means the Securities
and Exchange Commission and any succeeding agency, authority, commission or
Governmental Body.

 

“SEC Reports” means,
collectively, (a) the annual report on Form 10-K as filed by Holdings with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act, for the fiscal year
ended December 31, 1995 and (b) the quarterly reports on Form 10-Q as filed by
Holdings with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, for
the quarterly periods ended March 31, 1996, and June 30, 1996.

 

“Securities Act” means, as
of any date, the Securities Act of 1933, as amended, or any similar federal
statute then in effect, and a reference to a particular section thereof shall
include a reference to the comparable section, if any, of any such similar
Federal statute.

 

“Solvent” means, when used
with respect to any Person, that:

 

(a) the present fair salable
value of such Persons assets is in excess of the total amount of such Persons
liabilities;

 

(b) such Person is able to
pay its debts as they become due; and

 

(c) such Person does not
have unreasonably small capital to carry on such Persons business as
theretofore operated and all businesses in which such Person is about to
engage.

 

“Subsidiaries List” is
defined in Section 4.6 hereof.

 

“Subsidiary” shall mean,
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 or Canada and (c) of which at least a majority 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 Persons wholly- owned Subsidiaries.

 

44

 

“Subsidiary Guarantees”
shall mean the Subsidiary Guarantees executed and delivered by the Subsidiary
Guarantors in the form of Exhibit D-1, Exhibit D-2 and Exhibit D-3.

 

“Subsidiary Guarantors”
shall mean collectively IHOP Realty, IHOP Properties and IHOP Restaurants.

 

“Total Capitalization” shall
mean the sum of (i) Funded Debt of Holdings, the Borrower and their Subsidiaries
and (ii) Consolidated Tangible Net Worth.

 

“Unaudited Financial
Statements” has the meaning specified in Section 4.5(a).

 

“U.S.” means the United
States of America.

 

“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.

 

“Weighted Average Life to
Maturity” means, with respect to any Debt, as at any time of determination, the
number of years obtained by dividing the then Remaining Dollar-years of such
Debt by the then outstanding principal balance of such Debt (before giving
effect to any prepayment to be made at the time of such determination). For
such purposes, the “Remaining Dollar-years” of any Debt shall be determined by
(1) multiplying (a) the amount of each required payment of principal of such
Debt (including each required installment payment or mandatory prepayment
thereof, if any, and payment of the principal balance thereof at final
maturity, but assuming no optional prepayments thereof are made) by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between the time of determination and the date the respective required payment
or mandatory prepayment of principal is due, and (2) adding all of the products
so obtained.

 

(B) Accounting Terms. All
accounting terms used in this Agreement shall be applied on a consolidated basis
for Holdings, the Borrower and their Subsidiaries, unless otherwise
specifically indicated herein. Any accounting terms not specifically defined
herein shall have the meanings customarily given them in accordance with GAAP.

 

Section
13. Events of Default.

 

Section 13.1. Events of Default; Remedies. If any of the following events shall have
occurred and be continuing (whatever the reason for such event and whether it
shall be voluntary or involuntary or by operation of law or otherwise), it
shall constitute an “Event of Default”:

 

(A) the Borrower shall
default in the due and punctual payment or prepayment of all or any part of the
principal of, or prepayment charge (if any) on, any Note when and as the same
shall become due and payable, whether at stated maturity, by acceleration, by
notice of prepayment or otherwise;

 

45

 

(B) the Borrower shall default in the due and punctual payment or
prepayment of any interest on any Note or any other sum or amount due under any
Note or this Agreement when and as such interest, sum or amount shall become
due and payable, and such default shall continue for a period of five (5)
Business Days;

 

(C) the Borrower shall
default in the performance or observance of any covenant, agreement or
condition contained in Section 8(E) and Sections 11.1 through 11.11 hereof,
inclusive;

 

(D) the Borrower shall
default in the performance or observance of any other covenant, agreement or
condition contained in this Agreement and such default shall continue for a
period of 30 days following the earlier to occur of (i) notice of such default
from any holder of a Note or (ii) the date on which any Authorized Officer of
Holdings, the Borrower or any of their Subsidiaries otherwise becomes aware of
the existence of such default;

 

(E) any event shall occur or
any condition shall exist in respect of any Debt of Holdings, the Borrower or
their Subsidiaries in excess of $2,000,000 in the aggregate for all such Debt
(other than the Funded Debt evidenced by this Agreement and the Notes), which
constitutes a breach, default or event of default under any agreement or
document securing or relating to any such Debt (following all applicable notice
or grace periods), the effect of which is to cause, or to permit any holder or
holders of such Debt or an agent or trustee to cause, the acceleration of the
maturity of such Debt;

 

(F) final order, decree or
judgment for the payment of money shall be rendered by a court of competent
jurisdiction against Holdings, the Borrower or any of their Subsidiaries, and
Holdings, the Borrower or such Subsidiary, as the case may be, shall not
discharge the same or provide for its discharge in accordance with its terms,
or procure a stay of execution thereof, within 60 days from the date of entry
thereof and within said period of 60 days, or such longer period during which
execution of such order, decree or judgment shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal, and
such order, decree or judgment together with all other such orders, decrees or
judgments then existing shall exceed in the aggregate $3,000,000 (net of
insurance proceeds actually received, if any);

 

(G) any representation,
warranty, certification or statement made by or on behalf of the Borrower or
Holdings in this Agreement or by or on behalf of any Subsidiary Guarantor in
the Subsidiary Guarantees or in any certificate, instrument, financial
statement or other document now or hereafter delivered hereunder or thereunder
or pursuant to or in connection with any provision hereof or thereof shall
prove to be false or incorrect or breached in any material respect on the date
as of which made;

 

46

 

(H) a proceeding or case shall be commenced, without the application or
consent of Holdings, the Borrower or any of their Subsidiaries in any court of
competent jurisdiction, seeking (1) the liquidation, reorganization,
dissolution, winding up of any thereof or composition or readjustment of the
debts of any of them, or (2) similar relief in respect of Holdings, the
Borrower or any of their Subsidiaries under any law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed
and in effect, for a period of 90 days; or an order for relief shall be entered
in an involuntary case under the applicable bankruptcy laws against Holdings,
the Borrower or any of their Subsidiaries; or action under the laws of the
jurisdiction of organization of any of Holdings, the Borrower or any of their
Subsidiaries analogous to any of the foregoing shall be taken with respect to
any of Holdings, the Borrower or any of their Subsidiaries and shall continue
undismissed, or unstayed and in effect, for a period of 90 days;

 

(I) Holdings, the Borrower
or any of their Subsidiaries shall (1) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its Property, (2) be
generally unable to pay its debts as such debts become due, (3) make a general
assignment for the benefit of its creditors, (4) commence a voluntary case
under the applicable bankruptcy laws (as now or hereafter in effect), (5) file
a petition seeking to take advantage of any other law providing for the relief
of debtors, (6) fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
under such bankruptcy laws, (7) admit in writing its inability to pay its debts
generally as such debts become due, (8) take any action under the laws of its
jurisdiction of organization analogous to any of the foregoing, or (9) take any
requisite action for the purpose of effecting any of the foregoing;

 

(J) a custodian, liquidator,
trustee or receiver is appointed for Holdings, the Borrower or any of their
Subsidiaries or for all or a substantial portion of the Property of any of
them, without the application or consent of Holdings or any such Subsidiary,
and is not discharged within 90 days after such appointment; or

 

(K) if any of the Subsidiary
Guarantees or the Guarantee of Holdings contained in Section 16.14 hereof shall
cease to be in full force and effect or any of Holdings or the Subsidiary
Guarantors or any Person acting by or on behalf of either of them shall deny or
disaffirm their respective obligations under such Guarantees.

 

Section
13.2. Acceleration of
Notes. (A) Upon the occurrence of an Event of Default described in Subsection (A)
or (B) of Section 13.1 with respect to any Note, the holder of any such Note
may, by written notice to the Borrower, declare such Note to be, and the same
shall forthwith become, immediately due and payable, at a price (the
“Acceleration Price”) equal to the sum of (i) the greater of the principal
amount being declared immediately due and payable or the Present Value Amount,
plus (ii) all accrued but unpaid interest on the principal amount being
declared immediately due and payable, all without presentment, demand, notice,
protest or other requirements of any kind, all of which are hereby expressly

 

47

 

waived. If any holder of any
Note shall exercise the option specified in this Subparagraph (A), the Borrower
shall forthwith give written notice thereof to the holders of all other
outstanding Notes and each such holder may (whether or not such notice is given
or received), by written notice to the Borrower, declare the principal of all
Notes held by it to be, and the same shall forthwith become, immediately due
and payable, at a price equal to the Acceleration Price.

 

(B) Upon the occurrence of
any Event of Default described in Subsection 13.1(C), (D), (E), (F), (G) or (K)
of Section 13.1, the Majority Holders may, by written notice to the Borrower,
declare all of the Notes to be, and the same shall forthwith become,
immediately due and payable, at a price equal to the Acceleration Price,
without any presentment, demand, notice, protest or other requirement of any
kind, all of which are hereby expressly waived.

 

(C) Upon the occurrence of
an Event of Default described in Subsections (H), (I) and (J) of Section 13.1,
all of the Notes shall automatically become immediately due and payable, at a
price equal to the Acceleration Price, without presentment, demand, notice,
protest or other requirements of any kind, all of which are hereby expressly
waived.

 

Section
13.3. Rescission of
Acceleration. The provisions of Section 13.2 are subject, however, to the
condition that if, at any time after any Note shall have become due and payable
pursuant to Section 13.2, (i) the Borrower shall pay all arrears of interest on
the Notes and all payments on account of the principal of and, to the extent
permitted by law, prepayment charge (if any) on the Notes which shall have
become due otherwise than by acceleration (with interest on all such overdue
principal and prepayment charge, if any, and, to the extent permitted by law,
on overdue payments of interest, at the applicable rate per annum provided for
in the Notes or this Agreement in respect of overdue amounts of principal,
prepayment charge and interest), and (ii) the Borrower shall pay to the
Noteholders all amounts that are then due and owing pursuant to this Agreement,
and (iii) all Events of Default (other than nonpayment of principal of,
prepayment charge (if any) and accrued interest on the Notes, due and payable
solely by virtue of acceleration) shall be remedied or waived by the Majority
Holders, and (iv) no judgment or decree has been entered by any court for the
payment of any amounts due and owing under the Notes or pursuant to this
Agreement or the Subsidiary Guarantees, then, and in every such case, the
Majority Holders, by written notice to the Borrower, may rescind and annul any
such acceleration and its consequences with respect to the Notes; but no such
action shall affect any subsequent Default or Event of Default or impair any
right consequent thereon.

 

Section
13.4. Suits for
Enforcement. If any Event of Default shall have occurred and be continuing, the
holder of any Note may proceed to protect and enforce its rights, either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the exercise of any power granted in this Agreement, and the holder of any
Note may proceed to enforce the payment of all sums due upon such Note, and
such further amounts as shall be sufficient to cover the costs and expenses of
collection (including, without limitation, reasonable counsel fees and
disbursements), or to enforce any other legal or equitable right of the holder
of such Note.

 

48

 

Section
13.5. Remedies
Cumulative. No remedy herein conferred upon you or the holder of any Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.

 

Section
13.6. Remedies Not
Waived. No course of dealing between the Borrower and you or the holder of any
other Note and no delay or failure in exercising any rights hereunder or under
any Note in respect thereof shall operate as a waiver of any of your rights or
the rights of any holder of such Note.

 

Section 14. Registration, Exchange, and Transfer of
Notes.

 

The Borrower will keep at
its principal executive office a register, in which, subject to such reasonable
regulations as it may prescribe, but at its expense (other than transfer taxes,
if any), the Borrower will provide for the registration and transfer of Notes.
Whenever any Note or Notes shall be surrendered either at the principal
executive office of the Borrower, or at the place of payment named in the Note,
for transfer or exchange, accompanied (if so required by the Borrower) by a
written instrument of transfer in form reasonably satisfactory to the Borrower
duly executed by the holder thereof or by such holders attorney duly authorized
in writing, the Borrower will execute and deliver in exchange therefor a new
Note or Notes in such denominations (multiples of $100,000) as may be requested
by such holder, of like tenor and in the same aggregate unpaid principal amount
as the aggregate unpaid principal amount of the Note or Notes so surrendered.
Any Note issued in exchange for any other Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried
by the Note so exchanged or transferred, and neither gain nor loss of interest
shall result from any such transfer or exchange. Any transfer tax or
governmental charge relating to such transaction shall be paid by the holder
requesting the exchange. The Borrower and any of its agents may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payment of the principal of, prepayment charge (if any)
and interest and other amounts on such Note and for all other purposes whatsoever,
whether or not such Note be overdue.

 

Section 15. Lost, Stolen, Damaged and Destroyed Notes.

 

At the request of any holder
of any Note, the Borrower will issue and deliver at its expense, in replacement
of any Note or Notes lost, stolen, damaged or destroyed, upon surrender
thereof, if mutilated, a new Note or Notes in the same aggregate unpaid
principal amount, and otherwise of the same tenor, as the Note or Notes so
lost, stolen, damaged or destroyed, duly executed by the Borrower. The Borrower
may condition the replacement of a Note or Notes reported by the holder thereof
as lost, stolen, damaged or destroyed, upon the receipt from such holder of an
indemnity or security reasonably satisfactory to the Borrower; provided, that
if such holder shall be you or your nominee or another Eligible Holder or its
nominee, your or such Eligible Holders unsecured agreement of indemnity shall
be sufficient for purposes of this Section.

 

49

 

Section 16. Miscellaneous.

 

Section
16.1. Home Office
Payment. Notwithstanding anything to the contrary in this Agreement or in the
Notes, the Borrower agrees that, so long as you or any nominee designated by
you shall hold any Notes, the Borrower shall cause all payments of principal,
prepayment charge (if any) and interest on the Notes to be made to you in the
manner and to the address specified in Schedule I hereto, or in such other
manner or to such other address as you may designate in writing. You agree that
prior to the sale, transfer or disposition of any Note you will make a notation
thereon of the portion of the principal amount paid or prepaid and the date to
which interest has been paid thereon or surrender the same in exchange for a
new Note or Notes of the same tenor and of authorized denominations in
aggregate principal amount equal to the aggregate unpaid principal amount of
the Note or Notes so surrendered, duly executed by the Borrower. Borrower shall
enter into an agreement similar to that contained in this Section with any
other Eligible Holder (or nominee thereof).

 

Section
16.2. Amendment and
Waiver. (A) Any term, covenant agreement or condition of this Agreement or of
the Notes may, with the consent of the Borrower, be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by one or more substantially concurrent
written instruments signed by the Majority Holders, except that

 

(1) no such amendment or
waiver shall (a) change the principal of, or the rate of interest on, any of
the Notes, (b) change the time of payment of all or any portion of the
principal of or interest on or any prepayment charge payable with respect to
any of the Notes, (c) modify any of the provisions of this Agreement or of the
Notes with respect to the payment or prepayment of the principal thereof or
prepayment charge or interest thereon, (d) change the percentage of Notes
required with respect to any such amendment or to effectuate any such waiver,
(e) modify any provision of this Section or (f) modify any provision of Section
13.1 or 16.14 hereof or of any of the Subsidiary Guarantees, without in each
case the specific prior written consent of the holders of all of the Notes at
the time outstanding; and

 

(2) no such waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon.

 

(B) Any amendment or waiver
pursuant to Subsection (A) of this Section 16.2 shall apply equally to all
holders of the Notes at the time outstanding and shall be binding upon them,
upon each future holder of any Note, and upon the Borrower, in each case
whether or not a notation thereof shall have been placed on any Note.

 

(C) Notwithstanding any
other provision contained in this Section 16.2 or elsewhere in this Agreement
to the contrary, Notes which at any time are held by Holdings, the Borrower or
by any or their Subsidiaries or Affiliates shall not be deemed outstanding for
purposes of any vote, consent, approval, waiver or other action required or
permitted to be taken by the holders of Notes, or by any of them, under the
provisions of this Section 16.2

 

50

 

or Section 13 of this
Agreement, and none of Holdings, the Borrower or any such Subsidiary or
Affiliate shall be entitled to exercise any right as a holder of Notes with
respect to any such vote, consent, approval or waiver or to take or participate
in taking any such action at any time.

 

(D) The parties hereto agree
that no amendments or waivers pursuant to this Section 16.2 shall be granted
unless each holder of Notes has had the opportunity to participate in
conferences and discussions with respect to any such amendments or waivers, and
has received the same information, drafts, notices, memoranda and other written
communications pertaining to such amendment or waiver as are received by any
other Purchaser or Eligible Holder.

 

Section
16.3. Expenses. The
Borrower agrees, whether or not the transactions hereby contemplated shall be
consummated, to pay and save you harmless against any and all liability for the
payment of all reasonable out-of- pocket expenses arising in connection with
this Agreement, the Subsidiary Guarantees and the other instruments and the
transactions hereby contemplated, including without limitation all such
expenses incurred with respect to the enforcement of any provision of any such
agreement or instrument, any proposed amendments or waivers (whether or not the
same shall be signed or shall become effective) under or in respect of any such
agreement or instrument and the consideration of any legal questions relevant
thereto, all expenses incurred in connection with the reproduction of such
agreements and instruments and all stamp and other similar taxes (together in
each case with interest and penalties, if any) which may be payable in respect
of the execution and delivery of such agreement or instruments, or the
issuance, delivery or acquisition by you of any Note or otherwise pursuant to
this Agreement, the Subsidiary Guarantees, and expenses incurred in obtaining a
private placement number from Standard & Poor’s Corporation and a rating
from the National Association of Insurance Commissioners, and the fees and
disbursements of Chapman and Cutler and of any special or local counsel in
connection with preparation of such agreements and instruments and the
transactions hereby and thereby contemplated (including, without limitation, in
connection with any such enforcement, amendment, waiver or consideration of
legal questions), and the fees and disbursements of the Accountants. The
obligations of the Borrower under this Section 16.3 shall survive the payment
or transfer of any Note, the enforcement of any provision hereof or thereof,
any such amendments or waivers and any such consideration of legal questions.

 

Section
16.4. Survival of
Representations and Warranties. All representations and warranties contained
herein or made in writing by or on behalf of any party to this Agreement or
otherwise in connection herewith, shall (i) survive the execution and delivery
of this Agreement and the delivery of the Notes to you and shall continue in
effect as long as any of the Notes is outstanding and thereafter as provided in
Section 16.3, and (ii) be deemed to be material to your decision to enter into
this transaction and to have been relied upon by you, regardless of any
investigation made by you or on your behalf.

 

Section
16.5. Successors
and Assigns. All representations, warranties, covenants and agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto

 

51

 

whether so expressed or not,
except that you shall not be obligated to purchase any Note from any issuer
other than the Borrower. The provisions of this Agreement are intended to be
for the benefit of all holders, from time to time, of any Notes purchased
pursuant hereto, and shall be enforceable by any such holder, whether or not an
express assignment to such holder of rights under this Agreement has been made
by you or your successor or assign.

 

Section
16.6. Notices. All
communications provided for hereunder shall be in writing and delivered by hand
or sent by first class mail or sent by telex or telecopy (with such telex or
telecopy to be confirmed promptly in writing sent by first class mail), sent
(i) if to you, to the address or telex or telecopy number set forth by you for
such communications on Schedule I hereto, or to such other address or telex or
telecopy number as you may have designated to the Borrower in writing; (ii) if
to any other holder of any Notes, to the address or telex or telecopy number
(if any) of such holder as set forth in the register maintained pursuant to
Section 15; and (iii) if to the Borrower or Holdings, to IHOP Corp., 525 North
Brand Boulevard, Glendale, California 91203- 1903, Attention: Mark D.
Weisberger, Vice President – Legal, Secretary and General Counsel; facsimile #
(818) 240-0270; or to such other address or addresses or telex or telecopy
number or numbers as the Borrower may most recently have designated in writing
to the holders of Notes by such notice. All such communications shall be deemed
to have been given or made when so delivered by hand or sent by telex (answer
back received) or telecopy, or three Business Days after being so mailed.

 

Section
16.7. Governing Law.
This Agreement and the Notes shall be construed in accordance with and shall be
governed by the laws of the State of Illinois (without giving effect to the
choice of law principles of such state).

 

Section
16.8. Submission to
Jurisdiction; Waiver of Service and Venue. (A) Each of Holdings and the
Borrower consents and agrees to the jurisdiction of any state or federal court
sitting in the County of Cook, State of Illinois, and waives any objection
based on venue or forum non conveniens with respect to any action instituted
therein, and agrees that any dispute concerning the relationship between the
Purchaser or holder of Notes, on the one hand, and the Borrower or Holdings, on
the other hand, or the conduct of any party in connection with this Agreement
or otherwise shall be only in the courts described above.

 

(B) Each of Holdings and the
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by hand delivery or mail
to Holdings and the Borrower at its address set forth in, and in accordance
with, Section 16.6. Each of Holdings and the Borrower hereby consents to
service of process as aforesaid.

 

(C) Nothing in this Section
16.8 shall affect the right of the Purchaser or any holder of Notes to serve
legal process in any other manner permitted by law or affect the right of the
Purchaser or any holder of Notes

 

52

 

to bring any action or
proceeding against Holdings or the Borrower or their respective property in the
courts of any other jurisdiction.

 

Section
16.9. Indemnification.
In consideration of the execution and delivery of this Agreement by you, the
Borrower and Holdings hereby agree, jointly and severally, to defend,
indemnify, exonerate and hold you and each of your and its officers, directors,
employees and agents (herein collectively called the “Indemnitees”) free and
harmless from and against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses in connection therewith, including,
without limitation, reasonable counsel fees and disbursements (herein
collectively called the “Indemnified Liabilities”), incurred by the Indemnitees
or any of them as a result of, or arising out of or relating to:

 

(A) any transaction financed
or to be financed in whole or in part directly or indirectly with proceeds from
the sale of any of the Notes, or

 

(B) any Environmental
Matter, any Environmental Law or the actual or alleged existence or release of
any Hazardous Material, except for any such Indemnified Liabilities arising on
account of any Indemnitees gross negligence or willful misconduct, and if and
to the extent that the foregoing undertaking may be unenforceable for any
reason, Holdings and the Borrower hereby agree to make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.

 

In addition to the
foregoing, all payments required to be made by the Borrower or Holdings under
this Agreement, by the Subsidiary Guarantors under the Subsidiary Guarantees or
by the Borrower under the Notes shall be made to the holder of the Notes free
and clear of, and without deduction for, any and all present and future taxes,
withholdings, levies, duties, interest, penalties and other governmental
charges of any nature whatsoever of Canada (“Withholding Taxes”), excluding
those Withholding Taxes which are imposed by any jurisdiction or political
subdivision thereof as a result of the relevant holder of the Notes (a)
carrying or deemed to be carrying on a trade or business thereof or having or
being deemed to have a permanent establishment therein, (b) being organized
under the laws of such jurisdiction or any political subdivision thereof, (c)
being or being deemed resident in such jurisdiction, or which would not have
been imposed but for a failure of such Person to satisfy relevant authority
that such Person was not a Person mentioned in (a), (b) or (c) above.

 

If the Borrower or Holdings
or any Subsidiary Guarantor is obligated to make any such withholding or
deduction from any such payment, it shall simultaneously pay to the relevant
holder of the Notes such additional amount or amounts as shall be necessary to
ensure that the payment that is made (including all such additional amounts)
equals the amount which would have been received or receivable by the relevant
holder of the Notes hereunder in the absence of such withholding or deduction.
Upon request by the holder of the Notes, the Borrower or Holdings or any
Subsidiary Guarantor shall furnish to such holder a receipt for any such
Withholding Taxes paid by the Borrower or Holdings or any Subsidiary Guarantor
pursuant to this Section, or, if no such Withholding Taxes are payable

 

53

 

with respect to any payments
required to be made by the Borrower or Holdings under this Agreement, by any
Subsidiary Guarantor under the Subsidiary Guarantees or by the Borrower under
the Notes, either a certificate from each appropriate taxing authority or an
opinion of counsel, in either case stating that such payment is exempt from or
not subject to such Withholding Taxes. If any such Withholding Taxes are paid
by the holder of the Notes, the Borrower or Holdings or any Subsidiary
Guarantor will, upon demand of the holder of the Notes, jointly and severally
indemnify the holder of the Notes for such payments, together with any
interest, penalties and expenses in connection therewith plus interest thereon
at the rate specified in the Notes (calculated as if such payments constituted
overdue amounts of principal as of the date of the making of such payments).

 

The obligations of the
Borrower and Holdings under this Section 16.9 shall survive the payment or
transfer of any Note and the enforcement of any provision hereof or thereof.

 

Section
16.10. Integration
and Severability. This Agreement embodies the entire agreement and
understanding among you, the Borrower and Holdings, and supersedes all prior
agreements and understandings relating to the subject matter hereof. In case
any one or more of the provisions contained in this Agreement or in any
instrument contemplated hereby for such date, or any application thereof, shall
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein, and
any other application thereof, shall not in any way be affected or impaired
thereby.

 

Section
16.11. Payments Due
on Days not Business Days. Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day, that payment
shall be made on the next succeeding Business Day and the extension of time
shall be included in the computation of interest due thereon.

 

Section
16.12. Further
Assurances. Each of the Borrower and Holdings covenants that, so long as you
shall hold any of the Notes, it shall, and shall cause its Subsidiaries to,
cooperate with you and execute such further instruments and documents as you
shall reasonably request to carry out to your satisfaction the transactions
contemplated by this Agreement.

 

Section
16.13. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall together constitute one and the
same instrument.

 

Section
16.14. Guarantee of
Holdings.

 

(a) Guarantees. Holdings, in
consideration of the Purchasers entering into this Agreement and purchasing
Notes, unconditionally and irrevocably guarantees to the Purchaser and each and
every holder from time to time of any of the Notes the due and punctual payment
of all sums which may become due or be stated in the Notes or in this Agreement
to become due under the terms and provisions of the Notes and this Agreement in
respect of the principal of and prepayment charge, if any, and interest on the
Notes

 

54

 

(including interest on any
overdue principal, prepayment charge, if any, and, to the extent permitted by
applicable law, on any overdue interest), whether at stated maturity, by
acceleration, by notice of prepayment or otherwise, and all other sums which
may become due from the Borrower or be stated to be or become so due under the
Notes or this Agreement. Holdings further guarantees to the Purchasers and each
holder as aforesaid the due performance and observance by the Borrower of all
covenants, agreements and conditions on the Borrower’s part to be performed
under this Agreement and any other document from time to time delivered by the
Borrower pursuant to this Agreement. Holdings further guarantees to the
Purchasers and each holder as aforesaid payment of all other amounts payable by
the Borrower under this Agreement or the Notes, including costs, expenses
(including fees and expenses of counsel) and taxes (such principal, prepayment
charge, if any, interest and other obligations guaranteed as aforesaid being
hereinafter collectively called the “Obligations”) and to the extent lawful
agrees to pay any and all expenses (including fees and expenses of counsel)
incurred by each holder of any Note in enforcing any rights in connection with
this Section.

 

(b) Waiver of Notice of
Acceptance, Etc. Holdings hereby waives notice of acceptance of this Agreement
by any holder of a Note, of any action taken or omitted in reliance hereon or
of any default in the payment of any of the Obligations or in the performance
of any covenants and agreements of the Borrower contained in this Agreement or
the Notes, and any diligence, presentment, demand, protest, dishonor or notice
of any kind.

 

(c) Guarantees Absolute. The
Guarantees of Holdings under this Agreement constitute present and continuing
Guarantees of payment and not of collectibility of the Obligations, and shall
be absolute, primary, present and unconditional, and to the extent permitted by
applicable law, the Obligations shall not be subject to any counterclaim,
setoff, reduction or defense based upon any claim Holdings may have against the
Borrower, or any other Person, and shall remain in full force and effect
without regard to, and shall not be released, discharged or in any way affected
or impaired by any thing, event, happening, matter, circumstance or condition
whatsoever (whether or not Holdings shall have any knowledge or notice thereof
or shall consent thereto), including, without limitation: (1) any amendment or
other modification of or supplement to any provision of this Agreement or the
Subsidiary Guarantees or any of the Notes, or any assignment or transfer
thereof, including without limitation any renewal or extension of the terms of
payment of any of the Notes or the granting of time in respect of any payment
thereof, or any furnishing or acceptance of security or any release of any
security furnished or accepted for any of the Notes or in respect of the
Obligations of Holdings hereunder; (2) any waiver, consent, extension, granting
of time, forbearance, indulgence or other action or inaction under or in
respect of this Agreement or the Subsidiary Guarantees or any of the Notes, or
any exercise or nonexercise of any right, remedy or power in respect hereof or
thereof; (3) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceedings with respect to
Holdings, the Borrower, the Subsidiary Guarantors or any other Person, or the
properties or creditors of any of them; (4) the occurrence of any Event of
Default or event which, with the giving of notice and/or lapse of time, would
become an Event of Default, or any invalidity or any unenforceability of, or
any

 

55

 

misrepresentation,
irregularity or other defect in, this Agreement or any of the Notes or any
other agreement; (5) any transfer of any assets to or from Holdings, any
Subsidiary Guarantor or the Borrower, including without limitation any transfer
or purported transfer to Holdings, any Subsidiary Guarantor or the Borrower
from any Person, any invalidity, illegality of, or inability to enforce, any
such transfer or purported transfer, any consolidation or merger of Holdings,
any Subsidiary Guarantor or the Borrower with or into any other corporation or
entity, or any change whatsoever in the objects, capital structure,
constitution or business of Holdings, any Subsidiary Guarantor or the Borrower
or any Affiliate or Subsidiary of Holdings, any Subsidiary Guarantor or the
Borrower; (6) any disposition by Holdings of any capital stock of the Borrower;
(7) any failure on the part of the Borrower, any Subsidiary Guarantor or any
other Person to perform or comply with any term of the Notes, this Agreement,
any Subsidiary Guarantee or any other agreement; (8) any suit or other action
brought by any stockholder or creditor of, or by, Holdings, the Borrower, any
Subsidiary Guarantor or any other Person for any reason whatsoever, including
without limitation any suit or action in any way attacking or involving any
issue, matter or thing in respect of the Notes, this Agreement, any Subsidiary
Guarantee or any other agreement; (9) any lack or limitation of status or
power, incapacity or disability of Holdings or the Borrower or of any officer,
director or agent of Holdings or the Borrower or any of their respective
stockholders; (10) the cessation from any cause whatsoever (other than payment
of the Obligations) of liability of the Borrower; (11) the termination of, or
release or compromise of this Agreement, any of the Notes, any Subsidiary
Guarantee or any other agreement (other than as a result of payment of the
Obligations); (12) any lack or limitation of the genuineness, validity,
regularity or enforceability of the Notes, this Agreement, the Other
Agreements, any Subsidiary Guarantee any other documents and agreements
executed or delivered in connection therewith or pursuant thereto, or any other
agreement; (13) any failure by any holder of Notes to take any steps to
preserve their rights with respect to the Obligations; (14) any election by any
holder of Notes, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. (S) 101 et seq.) (the “Bankruptcy Code”), of
the application of Section 1111(b)(2) of the Bankruptcy Code; (15) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion
of any of the Holders claims for repayment of the Obligations; or (16) any
other thing, event, happening, matter, circumstance or condition whatsoever,
not in any way limited to the foregoing, which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.

 

(d) Obligations of the
Borrower Independent. The obligations of Holdings and the Borrower under the
Notes and the other Sections of this Agreement (other than this Section 16.14)
are independent of the Obligations of Holdings under this Section 16.14, and a
separate action or actions may be brought or prosecuted against Holdings
irrespective of whether action is brought against the Borrower and/or any other
Guarantor or whether the Borrower and/or any other Guarantor is joined in any
action or actions.

 

(e) Waiver of Certain
Rights. Holdings expressly waives any right it may have to require any Person
seeking enforcement of its Obligations under this Section 16.14 and the
Guarantee in respect of any Note to (1) proceed against the Borrower or any
other Person, (2) proceed against or exhaust any security or (3) pursue any
other remedy in the power of

 

56

 

the Person seeking such
enforcement. The Borrower waives the right to have any security first applied
to the discharge of the Obligations. The Purchasers and the other holders from
time to time of the Notes may, at their election, exercise any right or remedy
they may have against the Borrower or Holdings or the Company, including
without limitation the right to foreclose upon any such security by judicial or
non-judicial sale, without affecting or limiting in any way the liability of
Holdings hereunder, except to the extent the Obligations have been paid.
Holdings waives any defense arising out of the absence, impairment or loss of
any right of reimbursement, contribution or subrogation or any other rights or
remedy of Holdings against the Borrower, or any such security, whether
resulting from such election by the holders of the Notes or otherwise.

 

(f) Reinstatement. Holdings
agrees that its obligations under this Agreement shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of the Borrower or Holdings or any Subsidiary Guarantor is rescinded or must be
otherwise restored by any holder of any Note, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. Holdings further
agrees that, without limiting the generality of such obligations, if an Event
of Default shall have occurred and be continuing and you or the holder of any
Note is prevented by applicable law from exercising any remedy under this
Agreement or under any of the Notes, the holders of the Notes shall be entitled
to receive from Holdings upon demand therefor, the sums which would have
otherwise been due from the Borrower had such remedies been exercised.

 

(g) Waiver of Subrogation.
Holdings waives and releases any claim (within the meaning of 11 U.S.C. (S)
101) which it may have against the Borrower and agrees not to assert or take
advantage of any subrogation rights or any right to proceed against the Borrower
for reimbursement. It is expressly understood that the waivers and agreements
of Holdings set forth above constituted additional and cumulative benefits
given to the Purchasers as further inducement for the purchase of the Notes.

 

(h) Waiver of Certain Rights.
Holdings hereby expressly waives any and all benefits under California Civil
Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433,
and California Code of Civil Procedure Sections 580(a), 580(b), 580(d) and 726.

 

Section
16.15. Waiver of
Right to Trial by Jury;. The Borrower, Holdings and the Purchaser hereby waive
any right to trial by jury of any claim, demand, action or cause of action (i)
arising under this Agreement or any other instrument, document or agreement
executed or delivered in connection herewith or (ii) in any way connected with
or related or incidental to the dealings of the parties hereto or any of them
in respect to this Agreement or any other instrument, document or agreement
executed or delivered in connection herewith or the transactions related
hereto, in each case whether now existing or hereafter arising, and whether
sounding in contract or tort or otherwise. Holdings, the Borrower and the
Purchaser hereby agree and consent that any such claim, demand, action or cause
of action shall be decided by court trial without a jury and that any party may

 

57

 

file an original counterpart or a copy of this Agreement with any court
as written evidence of the consent of the parties hereto to the waiver of their
right to trial by jury.

 

58

 

In Witness Whereof, the undersigned have signed
their names this 8th day of November, 1996.

 

	
  International House of Pancakes, Inc.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Richard K. Herzer

  	
   

  
	
   

  	
  Name: Richard K. Herzer

  
	
   

  	
  Title: President

  

 

 

	
  IHOP Corp.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Richard K. Herzer

  	
   

  
	
   

  	
  Name: Richard K. Herzer

  
	
   

  	
  Title: President

  

 

59

 

If you are in agreement with
the foregoing, please sign the form of acceptance in the space provided below
whereupon this letter shall become a binding agreement between you and the
undersigned.

 

Very truly yours,

 

	
  IHOP Corp.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Richard K. Herzer

  	
   

  
	
   

  	
  Richard K. Herzer, President

  

 

 

	
  International House of Pancakes, Inc.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Richard K. Herzer

  	
   

  
	
   

  	
  Richard K. Herzer, President

  

 

 

Accepted as of the date
first

above written:

 

Jackson National Life
Insurance Company

By: PPM AMERICA, INC., as
Agent

 

	
   

  	
  By:

  	
  /s/ David Brett

  	
   

  
	
   

  	
  Name: David Brett

  
	
   

  	
  Title: V.P.

  

 

 

	
  PHOENIX
  HOME LIFE MUTUAL INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Keith D. Robbins

  	
   

  
	
   

  	
  Name: Keith D. Robbins

  
	
   

  	
  Title: Vice President

  

 

 

	
  UNITED OF
  OMAHA LIFE INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Edwin H. Garrison 
  Jr.

  	
   

  
	
   

  	
  Name: Edwin H. Garrison
  Jr.

  
	
   

  	
  Title: First Vice
  President

  

 

 

	
  SECURITY
  FIRST LIFE INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   /s/ R.J. Ritchie

  	
   

  
	
   

  	
  Name: R.J. Ritchie

  
	
   

  	
  Title: Director, U.S. Fixed Income

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Ruth Ann McConkey

  	
   

  
	
   

  	
  Name: Ruth Ann McConkey  

  
	
   

  	
  Title: Manager, U.S. Fixed Income

  
						

 

60

 

MANNER OF PAYMENT AND

COMMUNICATIONS TO PURCHASERS

 

This Schedule I shows the
names and addresses of the Purchasers under the foregoing Senior Note Purchase
Agreement and the Other Agreements referred to therein, and the respective
principal amount of the Notes purchased, the name under which the Notes will be
registered and the purchase price thereof to be purchased by each.

 

	
  Purchaser

  	
   

  	
  Registered Name

  Appearing on the Note

  	
   

  	
  Principal

  Amount of

  the Note

  	
   

  	
  Purchase

  Price of the

  Note

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jackson National Life

  Insurance Company

  	
   

  	
  Jackson National Life

  Insurance Company

  	
   

  	
  $

  	
  21,000,000

  	
   

  	
  $

  	
  21,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phoenix Home Life Mutual

  Insurance Company

  	
   

  	
  Phoenix Home Life

  Mutual Insurance

  Company

  	
   

  	
  $

  	
  7,000,000

  	
   

  	
  $

  	
  7,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  United of Omaha Life

  Insurance Company

  	
   

  	
  United of Omaha Life

  Insurance Company

  	
   

  	
  $

  	
  4,000,000

  	
   

  	
  $

  	
  4,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Security First Life

  Insurance Company

  	
   

  	
  Security First Life

  Insurance Company

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  3,000,000

  

 

 

SCHEDULE I

(to
Senior Note Purchase Agreement)

 

 

NAME OF
NOTEHOLDER`

 

JACKSON
NATIONAL LIFE INSURANCE COMPANY

5901 Executive Drive

Lansing, Michigan 48909

 

Taxpayer I.D. Number:
38-1659835

 

MANNER OF
PAYMENT

 

All payments on account of
the Note shall be made by bank wire or transfer of immediately available funds
(specifying International House of Pancakes, Inc., 7.42% Senior Notes Due 2008,
PPN 459668 A@ 8 and the application of the payment as between interest,
principal and premium) to:

 

NORTHERN CHGO (ABA #0710-0015-2)

26-91241 Jackson National
Life Insurance Company for credit to: Jackson National Life Insurance Company
Account Number 5186041000

Ref: (IHOP Corp.)

PVTOPL, Date of Payment,
principal and interest breakdown. Attn: Sharon Stifter

 

ADDRESS FOR
COMMUNICATIONS FOR NOTICES OF PAYMENTS AND CONFIRMATION OF WIRE TRANSFERS AND
ALL OTHER COMMUNICATIONS

 

PPM America, Inc.

 

225 West Wacker Drive, Suite
1200

 

Chicago, Illinois 60606

 

Attention: Private
Placements (312) 634-2500

 

2

 

NAME OF
NOTEHOLDER

 

PHOENIX
HOME LIFE MUTUAL INSURANCE COMPANY

One American Row

Hartford, CT 06115

 

Taxpayer I.D. Number:
06-0493340

 

MANNER OF
PAYMENT

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(specifying International House of Pancakes, Inc.,

7.42% Senior Notes Due 2008,
PPN 459668 A@ 8 and the application of the payment as between interest,
principal and premium) to:

 

Chase Manhattan Bank, N.A.

ABA #021 000 021

New
York, New York

Account Number: 900 9000 200
Account Name: Income Processing Reference: Phoenix Home Life Account #G05143
OBI=IHOP Corp., PPN 459668 A@ 8, Rate=7.42%, Due=2008 (include principal and
interest breakdown and premium, if any)

 

ADDRESS FOR
COMMUNICATIONS FOR NOTICES OF PAYMENTS AND CONFIRMATION OF WIRE TRANSFERS AND
ALL OTHER COMMUNICATIONS

 

Phoenix
Home Life Mutual Insurance Company

c/o Phoenix Duff &
Phelps, Inc. 56 Prospect Street

P.O. Box 150480

Hartford, CT 06115-0480

Attention: Private
Placements Division Telecopier Number: (860) 403-5451

 

3

 

NAME OF
NOTEHOLDER

 

UNITED OF
OMAHA LIFE INSURANCE COMPANY

Mutual of Omaha Plaza

Omaha, Nebraska 68175

Attention: Investment
Division/Securities Accounting Telefacsimile: (402) 351-2913

Confirmation: (402) 351-2583

 

Taxpayer I.D. Number:
47-0322111

 

MANNER OF
PAYMENT

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(specifying International House of Pancakes, Inc.,

7.42% Senior Notes Due 2008,
PPN 459668 A@ 8 and the application of the payment as between interest,
principal and premium) to:

 

First Bank, N.A. (ABA
#1040-0002-9) 17th and Farnam Streets

Omaha, Nebraska

 

For credit to: United of
Omaha Life Insurance Company Account Number 1-487-1447-0769

 

ADDRESS FOR
COMMUNICATIONS FOR NOTICES OF PAYMENTS AND CONFIRMATION OF WIRE TRANSFERS AND
ALL OTHER COMMUNICATIONS

 

All notices to be addressed
as first provided above.

 

4

 

NAME OF
NOTEHOLDER

 

SECURITY
FIRST LIFE INSURANCE COMPANY

c/o London Life Insurance
Company

255 Dufferin Avenue

London, Ontario N6A 4K1

 

Attention: Manager U.S.
Fixed Income (Private Placements) Securities Department

 

Taxpayer I.D. Number:
540696644

 

MANNER OF
PAYMENT

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(specifying International House of Pancakes, Inc.,

7.42% Senior Notes Due 2008,
PPN 459668 A@ 8 and the application of the payment as between interest,
principal and premium) to:

 

Bank of New York

1 Wall Street

New York, New York 10286

 

Re: Account Name: Security
First Group Corporate Bond Account Account Number: 328175

ABA #: 021000018

 

ADDRESS FOR
COMMUNICATIONS FOR NOTICES OF PAYMENTS AND CONFIRMATION OF WIRE TRANSFERS AND
ALL OTHER COMMUNICATIONS

 

All notices to be addressed
as first provided above.

 

5

 

SCHEDULE
4.5

 

INTERIM CHANGES

 

1. Additional Debt in the
amount of $18,600,000 incurred pursuant to the BA Credit Agreement.

 

 

SCHEDULE
4.6

 

IHOP CORP.

 

LIST OF DIRECT AND INDIRECT SUBSIDIARIES

 

	
  ENTITY

  	
   

  	
  OWNERSHIP

  PERCENTAGE

  	
   

  	
  STATE OF

  INCORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  International
  House of Pancakes, Inc.

  	
   

  	
  100%
  owned by IHOP Corp.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IHOP
  Realty Corp.

  	
   

  	
  100% owned by International House of

  Pancakes, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IHOP
  Restaurants, Inc.

  	
   

  	
  100% owned by International House of

  Pancakes, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III
  Industries of Canada, Inc.

  	
   

  	
  100% owned by International House of

  Pancakes, Inc.

  	
   

  	
  Canada

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blue
  Roof Advertising

  	
   

  	
  100% owned by International House of

  Pancakes, Inc.

  	
   

  	
  California

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Copper
  Penny Corporation

  	
   

  	
  100% owned by International House of

  Pancakes, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IHOP
  Properties, Inc.

  	
   

  	
  100%
  owned by Copper Penny Corporation

  	
   

  	
  California

  

 

 

SCHEDULE
4.7

 

LITIGATION SUMMARY

 

NONE.

 

 

SCHEDULE
4.8

 

EXISTING CURRENT AND FUNDED DEBT AND LIENS

 

	
  Mortgage Note by and between IHOP Realty
  Corp. and Pizza Hut of America for Property in La Grange, Illinois (IHOP
  #1281)

  	
   

  	
  $

  	
  396,891

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease Agreement between IHOP Corp. and
  Hewlett-Packard for Financial system

  	
   

  	
  21,303

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease Agreement between IHOP CORP. and
  Hewlett-Packard for Financial system

  	
   

  	
  60,363

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease Agreement between IHOP CORP. and
  Hewlett-Packard for Financial system

  	
   

  	
  8,428

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease Agreement between IHOP CORP. and
  Hewlett-Packard for Financial system

  	
   

  	
  68,202

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Master Lease Agreement between IHOP CORP.
  and Forrest Financial Corporation and assignee:  First Bank, N.A. for Financial system

  	
   

  	
  171,780

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Master Lease Agreement between IHOP CORP.
  and Forrest Financial Corporation and assignee:  First Bank, N.A. for Financial system

  	
   

  	
  344,780

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Obligations Under Letters of Credit
  (Various)

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Installment Payment Agreement between
  IHOP Corp. and Ed Beck & Associates and assignee:  Sterling Bank & Trust, FSB

  	
   

  	
  299,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Senior Notes due November 2002

  	
   

  	
  32,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bank Revolving Credit Agreement due June
  1999 (to be repaid from the proceeds from the sale and issuance of the Notes)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  33,371,247

  	
   

  

 

 

SCHEDULE
4.9

 

CONSENTS AND APPROVALS

 

None.

 

 

SCHEDULE
4.11

 

TAXES

 

	
  Current
  Audits:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State
  of Wisconsin

  	
   

  	
  1991-1994

  	
   

  	
  Income
  Taxes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State
  of Virginia

  	
   

  	
  1992-1995

  	
   

  	
  Income
  Taxes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State
  of New York

  	
   

  	
  1994-1995

  	
   

  	
  Income
  Taxes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  County
  of Maricopa, AZ

  	
   

  	
  1994-1996

  	
   

  	
  Personal
  Property Taxes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  County
  of San Bernardino, CA

  	
   

  	
  1990-1995

  	
   

  	
  Personal
  Property Taxes

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  County
  of Fresno, CA

  	
   

  	
  1993-1996

  	
   

  	
  Personal
  Property Taxes

  

 

 

CONSENTS TO
WAIVER OR EXTENSION OF THE STATUTE OF LIMITATIONS:

 

State of
Wisconsin 1991 - Extended 3/31/97

 

 

SCHEDULE
4.16

 

LABOR MATTERS

 

The Agreement between the
Borrower and Hotel Employees Union Local 340 which relates to IHOP restaurant
no. 648 expired by its terms on October 31, 1993. The Borrower and the Union
representatives are currently negotiating a new agreement on substantially
similar terms. 

 

 

SCHEDULE
4.17

 

ENVIRONMENTAL MATTERS

 

None.

 

 

SCHEDULE
4.19

 

COMPLIANCE WITH ERISA

 

San Mateo Hotel Employees
and Restaurant Employees Trust, a health and welfare benefit plan.

 

 

SCHEDULE
4.25

 

FRANCHISES

 

1. License Agreement for All
Japan

 

2. Area Franchise Agreement
(Florida and Southern Counties of Georgia)

 

3. License Agreement for
British Columbia, Canada 

 

 

SCHEDULE 12

 

RESTRICTED INVESTMENTS AT CLOSING DATE

 

	
  DESCRIPTION

  	
   

  	
  AMOUNT

  	
   

  
	
  Ex-Franchisee Notes Receivable (various)

  	
   

  	
  $

  	
  761,345

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Current Franchisee Note Receivable

  	
   

  	
  125,565

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Restricted Investments

  	
   

  	
  $

  	
  886,910

  	
   

  

 

 

EXHIBIT A

 

FORM OF NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED,

AND MAY NOT BE SOLD OR OTHERWISE

TRANSFERRED IN THE ABSENCE OF SUCH

REGISTRATION OR AN EXEMPTION THEREFROM.

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

 

7.42% Senior Note

 

Due November 1, 2008

 

	
  No. R

  	
   

  	
  Chicago, Illinois

  	
   

  
	
   

  	
   

  	
  November 8, 1996

  	
   

  
	
  $

  	
   

  	
  PPN:  459668 A@ 8

  	
   

  

 

 

INTERNATIONAL HOUSE OF
PANCAKES, INC., a company incorporated under the laws of the State of Delaware
(the “Borrower”), for value received, hereby promises to pay to
                         
(the “Lender”) or registered assigns, $               ,
payable in annual installments of
$               
(subject to adjustment pursuant to Section 3 of the Note Agreement, as
hereinafter defined) commencing on November 1, 2000, and on every November 1,
thereafter through November 1, 2007 with a final payment of the remaining
outstanding principal balance payable at maturity on November 1, 2008 and to
pay interest (computed on the basis of a 360-day year of twelve 30-day months)
on the principal amount from time to time remaining unpaid hereon at the rate
of 7.42% per annum, from the date hereof until maturity, payable semi-annually
on the 8th day of each May and November in each year commencing May 8, 1997,
and at maturity. The Borrower agrees to pay interest on overdue principal and
prepayment charge, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at a rate equal to the greater of 9.42% or the
rate of interest announced publicly from time to time by Bank of America
Illinois in Chicago, Illinois, as its “prime rate” after the due date, whether
by acceleration or otherwise, until paid. Both the principal hereof and
interest hereon are payable to the Lender in the manner and pursuant to the
instructions indicated on Schedule I to the Note Agreement, as hereinafter
defined, or in such other manner or pursuant to such other instructions as
shall be designated in writing in accordance with the terms of the Note Agreement,
in currency of the United States of America which at the time of payment shall
be legal tender for the payment of public and private debts.

 

This Note is issued pursuant
to the terms and provisions of the Senior Note Purchase Agreement, dated as of
November 1, 1996 (the “Note Agreement”), entered into by the

 

 

Borrower, IHOP Corp., a
Delaware corporation of which the Borrower is a wholly- owned Subsidiary
(“Holdings”), and the Lender. Reference is hereby made to the Note Agreement
for a statement of such terms and provisions.

 

This Senior Note is
guaranteed by (i) Holdings, as set forth in Section 16.14 of the Note
Agreement, (ii) IHOP Realty Corp., a Delaware corporation and a wholly-owned
indirect Subsidiary of the Borrower, pursuant to a Subsidiary Guarantee of even
date herewith, (iii) IHOP Properties, Inc., a California corporation and a
wholly-owned Subsidiary of the Borrower, pursuant to a Subsidiary Guarantee of
even date herewith, and (iv) IHOP Restaurants, Inc., a Delaware corporation and
a wholly-owned Subsidiary to the Borrower, pursuant to a Subsidiary Guarantee
of even date herewith.

 

This Note may be declared
due prior to its maturity date and certain prepayments may be made thereon, in
the events, on the terms and conditions, and in the amounts set forth in the
Note Agreement.

 

This Note is not subject to
prepayment or redemption at the option of the Borrower prior to its maturity
date except in the event, on the terms and conditions, and in the amounts set
forth in the Note Agreement.

 

This Note is registered on
the books of the Borrower and is transferable only by surrender thereof at the
principal office of the Borrower at 525 North Brand Boulevard, Glendale,
California 91203-1903, duly endorsed or accompanied by a written instrument of
transfer duly executed by the registered holder of this Note or its attorney
duly authorized in writing. Payment of or on account of principal and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.

 

The Note Agreement and this
Note shall be governed by, and shall be construed and enforced in accordance
with, the laws of the State of Illinois.

 

	
  INTERNATIONAL HOUSE OF PANCAKES, INC.

  
	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
					

 

A-2

 

EXHIBIT B

 

November
8, 1996

 

To the Parties listed on the

Schedule attached hereto:

 

	
   

  	
  Re:

  	
  $35,000,000 7.42% Senior Notes

  	
   

  
	
   

  	
   

  	
  Due 2008

  	
   

  
	
   

  	
   

  	
  of

  	
   

  
						

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

 

Ladies and Gentlemen:

 

We have acted as your
special counsel in connection with your separate purchases on the date hereof
of $35,000,000 aggregate principal amount of the 7.42% Senior Notes due 2008
(the “Notes”) of International House of Pancakes, Inc., a Delaware corporation
(the “Company”), issued under and pursuant to the separate and several Senior
Note Purchase Agreements each dated as of November 1, 1996 (collectively, the
“Note Agreement”), among the Company, IHOP Corp., a Delaware corporation
(“Holdings”) and each of you.

 

In that connection, we have
examined the following:

 

(a) The Note Agreement;

 

(b) A copy of the
Certificate/Articles of Incorporation of each of the Company and Holdings and
all amendments thereto certified by the Secretary of State of the State of
Delaware and the Certificates of the Secretary of State of the State of
Delaware evidencing that each of the Company and Holdings is in good standing
in such state (the “Good Standing Certificate”);

 

(c) A copy of the By-laws of
each of the Company and Holdings, as amended to the date hereof, and a copy of
the resolutions adopted by the Board of Directors of each of the Company and
Holdings with respect to the authorization of the Note Agreement, the issuance,
sale and delivery of the Notes and related matters, each as certified by the
(Assistant) Secretary of the Company and of Holdings;

 

(d) The opinion of Skadden,
Arps, Slate, Meagher, Flom, counsel to the Company and Holdings, dated the date
hereof and delivered responsive to Section 6.3 of the Note Agreement;

 

(e) The Notes delivered on
the date hereof; 

 

 

(f) Such certificates of
officers of the Company, Holdings and of public officials as we have deemed
necessary to give the opinions hereinafter expressed; and

 

(g) Such other documents and
matters of law as we have deemed necessary to give the opinions hereinafter
expressed.

 

We believe that the opinion
referred to in clause (d) above is satisfactory in scope and form and that you
are justified in relying thereon. Our opinion as to matters referred to in
paragraphs 1 and 2 below is based solely upon an examination of the
Certificate/Articles of Incorporation, the By-laws and the Good Standing
Certificate of each of the Company and Holdings and the general business law of
the State of Delaware. We have also relied, as to certain factual matters, upon
appropriate certificates of public officials and officers of the Company and
Holdings and upon representations of the Company, Holdings and you delivered in
connection with the issuance and sale of the Notes.

 

Based upon the foregoing, we
are of the opinion that:

 

1. The Company is a
corporation, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and the corporate authority to execute
and deliver the Note Agreement and to issue the Notes.

 

2. Holdings is a corporation,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and the corporate authority to execute and deliver
the Note Agreement.

 

3. The Note Agreement has
been duly authorized by all necessary corporate action on the part of the
Company, has been duly executed and delivered by the Company and constitutes
the legal, valid and binding contract of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors’ rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).

 

4. The Note Agreement has
been duly authorized by all necessary corporate action on the part of Holdings,
has been duly executed and delivered by Holdings and constitutes the legal,
valid and binding contract of Holdings enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar
laws affecting creditors’ rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).

 

5. The Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
the Notes being delivered on the date hereof have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting

 

B-2

 

creditors’ rights generally,
and general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).

 

6. The issuance, sale and
delivery of the Notes under the circumstances contemplated by the Note
Agreement do not, under existing law, require the registration of the Notes
under the Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.

 

Our opinion is limited to
the laws of the State of Illinois, the general business corporation law of the
State of Delaware and the Federal laws of the United States and we express no
opinion on the laws of any other jurisdiction.

 

Respectfully submitted,

 

B-3

 

CHAPMAN AND CUTLER

 

SCHEDULE I

 

Jackson
National Life Insurance Company

 

Phoenix
Home Life Mutual Insurance Company

 

United of
Omaha Life Insurance Company

 

First
Security Life Insurance Company

 

 

EXHIBIT C

 

[Opinion of counsel of
Holdings, the Borrower and the Subsidiary Guarantors addressed to each of the
Purchasers]

 

1. Holdings, the Borrower
and each of their Subsidiaries are corporations duly incorporated, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation, and each has the requisite corporate power and authority to
own, lease and operate its respective Properties and to carry on its respective
businesses as presently owned and conducted, and each is duly qualified and in
good standing in the jurisdictions in which the character of the Properties
owned or leased by it or the nature of the business transacted by it makes such
qualification necessary.

 

2. The Purchase Agreements,
the Notes and the Subsidiary Guarantees have been duly authorized, executed and
delivered by Holdings, the Borrower and the Subsidiary Guarantors, to the
extent each is a party thereto and such documents constitute the legal, valid
and binding agreements of Holdings, the Borrower and the Subsidiary Guarantors,
to the extent each is a party thereto, enforceable against Holdings, the
Borrower and the Subsidiary Guarantors, to the extent each is a party thereto,
in accordance with their terms.

 

3. The issuance and sale of
the Notes, the execution and delivery of, and performance by Holdings and the
Borrower of their respective contractually required obligations and
undertakings under, the Purchase Agreements and the execution and delivery of,
and performance by the Subsidiary Guarantors of their contractually required
obligations and undertakings under, the Subsidiary Guarantees, do not conflict with
or result in any breach of any provision of, constitute a default under, or
result in the creation or imposition of any Lien upon any of the respective
Properties of Holdings, the Borrower or the Subsidiary Guarantors or any of
their Subsidiaries pursuant to the provisions of the charter documents of any
of them, or any agreement, order, decree, indenture, judgment or other
instrument or document to which any of them is a party or by which any of them
or their respective Properties may be bound.

 

4. There are no proceedings
pending or threatened against Holdings, the Borrower or any of their
Subsidiaries in any court or before any Governmental Body or arbitration board
or tribunal which could materially and adversely affect the Properties,
business, profits or condition (financial or otherwise) of Holdings, the
Borrower or any of their Subsidiaries or the ability of Holdings or the
Borrower to perform their respective obligations under the Purchase Agreements
or the Notes or the ability of the Subsidiary Guarantors to perform their
obligations under the Subsidiary Guarantees.

 

5. The issuance, sale and
delivery of the Notes and the Subsidiary Guarantees under the circumstances
contemplated by the Purchase Agreements constitute an exempt transaction under
the registration provisions of the Securities Act of 1933, as amended, and do
not under existing law require the registration of the Notes or the Subsidiary
Guarantee under the Securities Act of 1933, as amended, or the qualification of
an indenture in respect thereof under the Trust Indenture Act of 1939, as
amended. 

 

 

6. Assuming that the
proceeds of the issuance and sale of the Notes are utilized as set forth in
Section 4.26 of the Purchase Agreements, neither the issuance of the Notes nor
the use of the proceeds from the sale thereof will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.

 

7. No consent, approval,
authorization, or order of, or other action by or filing with, any Governmental
Body is required in connection with the execution, delivery or performance of
the Purchase Agreements or the Subsidiary Guarantees, the issuance of the Notes
or compliance by Holdings, the Borrower and the Subsidiary Guarantors, to the
extent each is a party thereto with the terms and provisions thereof.

 

8. None of Holdings, the
Borrower nor any of their Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any franchising arrangement, material lease, agreement, indenture
or loan document to which it is a party, and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute such a
default.

 

9. None of Holdings, the
Borrower nor any of their Subsidiaries is, nor are any of them directly or
indirectly controlled by or acting on behalf of any Person which is, an
“investment company” within the meaning of the Investment Company Act of 1940,
and none of Holdings, the Borrower nor any of their Subsidiaries is subject to
any law, statute, rule or regulation limiting its ability to incur indebtedness
for money borrowed.

 

10. All of the shares of
issued and outstanding capital stock of the Borrower are owned of record and,
to our knowledge, beneficially, by Holdings and all of the shares of issued and
outstanding capital stock of the Subsidiary Guarantors are owned of record and,
to our knowledge, beneficially, by the Borrower, in each case free and clear of
Liens.

 

C-2

 

THE GUARANTEE AGREEMENT OF

 

IHOP REALTY CORP. (EXHIBIT D-1
TO

 

THE SENIOR NOTE PURCHASE AGREEMENT)

 

IS CONTAINED IN ITS ENTIRETY

 

AS DOCUMENT NO. 2 HEREIN.

 

 

THE GUARANTEE AGREEMENT OF

 

IHOP PROPERTIES, INC. (EXHIBIT D-2 TO

 

THE SENIOR NOTE PURCHASE AGREEMENT)

 

IS CONTAINED IN ITS ENTIRETY

 

AS DOCUMENT NO. 3 HEREIN.

 

 

THE GUARANTEE AGREEMENT OF

 

IHOP RESTAURANTS, INC. (EXHIBIT D-3
TO

 

THE SENIOR NOTE PURCHASE AGREEMENT)

 

IS CONTAINED IN ITS ENTIRETY

 

AS DOCUMENT NO. 4 HEREIN.

 

 

 

IHOP#         

 

EXHIBIT E

 

LEASE

 

between

 

IHOP REALTY CORP.,

a
Delaware corporation,

Lessor

 

and

 

INTERNATIONAL HOUSE OF PANCAKES, INC.,

a
Delaware corporation,

Lessee

 

                  ,    

 

 

LEASE

between

IHOP REALTY CORP.,

 

a
Delaware corporation, Lessor,

and

INTERNATIONAL HOUSE OF PANCAKES, INC.,

a
Delaware corporation, Lessee

 

TABLE OF CONTENTS 

 

	
  SECTION

  	
   

  	
  HEADING

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEMISED PREMISES; TERM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
   

  	
  Demised Premises

  	
   

  
	
  Section 1.2.

  	
   

  	
  Term

  	
   

  
	
  Section 1.3.

  	
   

  	
  Options to Extend Term

  	
   

  
	
  Section 1.4.

  	
   

  	
  Short Form of Lease

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  RENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
   

  	
  Minimum Monthly Rental

  	
   

  
	
  Section 2.2.

  	
   

  	
  Percentage Rent

  	
   

  
	
  Section 2.3.

  	
   

  	
  Statements of Gross
  Sales.

  	
   

  
	
  Section 2.4.

  	
   

  	
  “Gross Sales” Defined

  	
   

  
	
  Section 2.5

  	
   

  	
  Verification of Gross
  Sales; Audit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  TAXES AND ASSESSMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Taxes and assessments

  	
   

  
	
  Section 3.2.

  	
   

  	
  Installment Payments

  	
   

  
	
  Section 3.3.

  	
   

  	
  Personal Property
  Taxes.

  	
   

  
	
  Section 3.4.

  	
   

  	
  Proration

  	
   

  
	
  Section 3.5.

  	
   

  	
  Contest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  CONSTRUCTION OF
  IMPROVEMENTS; REPAIR AND MAINTENANCE; ALTERATIONS AND IMPROVEMENTS’

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Construction of
  Improvements

  	
   

  
	
  Section 4.2.

  	
   

  	
  Repair and Maintenance

  	
   

  
	
  Section 4.3.

  	
   

  	
  Alterations and
  Improvements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  LIENS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Discharge of Liens;
  Contest

  	
   

  

 

i

 

	
  ARTICLE VI

  	
   

  	
  USE OF PREMISES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
   

  	
  Permitted Use

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  LIABILITY INSURANCE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
   

  	
  Lessee’s Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  BANKRUPTCY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
   

  	
  Continuation of Lease

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
   

  	
  Assignment

  	
   

  
	
  Section 9.2.

  	
   

  	
  Subletting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  REMEDIES IN THE EVENT OF
  DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
   

  	
  Remedies.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
  PROPERTY INSURANCE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
   

  	
  Lessee to Obtain “All Risk” Insurance

  	
   

  
	
  Section 11.2.

  	
   

  	
  Blanket Policy

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
  DAMAGE AND DESTRUCTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
   

  	
  Abatement of Rent

  	
   

  
	
  Section 12.2.

  	
   

  	
  Restoration of Improvements -- Insured
  Loss

  	
   

  
	
  Section 12.3.

  	
   

  	
  Restoration of Improvements -- Uninsured
  Loss

  	
   

  
	
  Section 12.4.

  	
   

  	
  Extension of Lease

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
  CONDEMNATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
   

  	
  Complete Taking

  	
   

  
	
  Section 13.2.

  	
   

  	
  Partial Taking

  	
   

  
	
  Section 13.3.

  	
   

  	
  Allocation of Condemnation Award

  	
   

  
	
  Section 13.4.

  	
   

  	
  Rent Reduction in Case of Partial Taking

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
   

  	
  QUIET ENJOYMENT AND
  TITLE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.1.

  	
   

  	
  Covenant of Quiet Enjoyment

  	
   

  
	
  Section 14.2.

  	
   

  	
  Right to Possession.

  	
   

  
	
  Section 14.3.

  	
   

  	
  Superior Encumbrances

  	
   

  
	
  Section 14.4.

  	
   

  	
  Ownership; Authority; Restrictions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
   

  	
  TRADE FIXTURES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 15.1.

  	
   

  	
  Ownership; Removal

  	
   

  

 

ii

 

	
  ARTICLE XVI

  	
   

  	
  SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 16.1.

  	
   

  	
  Subordination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII

  	
   

  	
  RIGHT OF FIRST REFUSAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 17.1.

  	
   

  	
  Purchase

  	
   

  
	
  Section 17.2.

  	
   

  	
  Lease

  	
   

  
	
  Section 17.3.

  	
   

  	
  Incorporation in Short Form of Lease

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVIII

  	
   

  	
  REMOVAL OF
  DISTINCTIVE FEATURES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.1.

  	
   

  	
  Removal; Repairs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIX

  	
   

  	
  PROHIBITION AGAINST
  COMPETITION AND PROTECTION FOR EXPOSURE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 19.1.

  	
   

  	
  Lessor’s Covenant

  	
   

  
	
  Section 19.2.

  	
   

  	
  Lessee’s Remedies for Breach

  	
   

  
	
  Section 19.3.

  	
   

  	
  Incorporation in Short Form of Lease

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XX

  	
   

  	
  TITLE CONSIDERATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 20.1.

  	
   

  	
  CC&Rs; Lender’s Lien

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XXI

  	
   

  	
  HAZARDOUS SUBSTANCE OR
  WASTE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.1.

  	
   

  	
  Mutual Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XXII

  	
   

  	
  REAL ESTATE
  COMMISSIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 22.1.

  	
   

  	
  Payment; Mutual Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XXIII

  	
   

  	
  NOTICES AND DEMANDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 23.1.

  	
   

  	
  To Lessor

  	
   

  
	
  Section 23.2.

  	
   

  	
  To Lessee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XXIV

  	
   

  	
  ATTORNEYS’ FEES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 24.1.

  	
   

  	
  Paid to Prevailing Party

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XXV

  	
   

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 25.1.

  	
   

  	
  Binding on Successors

  	
   

  
	
  Section 25.2.

  	
   

  	
  Severability

  	
   

  
	
  Section 25.3.

  	
   

  	
  Entire Agreement

  	
   

  
	
  Section 25.4.

  	
   

  	
  Captions

  	
   

  
	
  Section 25.5.

  	
   

  	
  Gender and Number

  	
   

  
	
  Section 25.6.

  	
   

  	
  Approvals

  	
   

  
	
  Section 25.7.

  	
   

  	
  No Waiver

  	
   

  

 

iii

 

	
  Section 25.8.

  	
   

  	
  Holdover

  	
   

  
	
  Section 25.9.

  	
   

  	
  Time of Essence

  	
   

  
	
  Section 25.10.

  	
   

  	
  Governing Law

  	
   

  
	
  Section 25.11.

  	
   

  	
  Counterparts

  	
   

  
	
  Section 25.12.

  	
   

  	
  No Third Party Rights

  	
   

  
	
  Section 25.13.

  	
   

  	
  Unexecuted Lease

  	
   

  
	
  Section 25.14.

  	
   

  	
  Lessor’s Right of Entry

  	
   

  
	
  Section 25.15.

  	
   

  	
  Estoppel Certificates

  	
   

  
	
  Section 25.16.

  	
   

  	
  Due Authorization

  	
   

  
	
  Section 25.17.

  	
   

  	
  Relationship of Parties

  	
   

  

 

EXHIBITS:

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  “A”

  	
   

  	
  —

  	
   

  	
  Legal
  Description

  
	
  EXHIBIT
  “B”

  	
   

  	
  —

  	
   

  	
  Permitted
  Exceptions

  

 

iv

 

IHOP
#             

 

LEASE

 

AGREEMENT OF LEASE, made
this          day of
                               ,
1992, by and between IHOP REALTY CORP., a Delaware corporation, having its
principal place of business at 525 N. Brand Boulevard, Third Floor, Glendale,
California 91203-1903 (hereinafter called “Lessor”), and INTERNATIONAL HOUSE OF
PANCAKES, INC., a Delaware corporation, having its principal place of business
at 525 N. Brand Boulevard, Third Floor, Glendale, California 91203-1903
(hereinafter called “Lessee”).

 

WITNESSETH:

 

ARTICLE I

DEMISED PREMISES; TERM

 

Section
1.1. Demised
Premises. For and in consideration of the rents, taxes, insurance and other
charges and expenses to be paid by Lessee, and in consideration of the
performance by Lessee of the covenants herein set forth, Lessor does hereby
grant, demise and lease to Lessee all that certain real property consisting of
approximately
                                                                
(                )
square feet of land, together with the Improvements (as defined in Article 4.1
hereinbelow) constructed thereon and the rights appurtenant thereto, located
and situate in the City of
                   ,
County of
                  ,
State of
                                     ,
and more particularly described in Exhibit A attached hereto and, by this
reference, incorporated herein (hereinafter referred to as the “Demised
Premises”).

 

Section
1.2. Term. The term
of this Lease shall commence on the date of the first payment of rent pursuant
to Article 2.1 hereinbelow and shall terminate twenty-five (25) years
thereafter.

 

Section
1.3. Options to
Extend Term. Provided it shall not then be in default under this Lease (beyond
any applicable cure period), Lessee shall have the option to extend said term
for an additional period of five (5) years by giving notice to Lessor of its
intention to exercise said option at least ninety (90) days prior to the
expiration of the original term. Provided it shall not then be in default under
this Lease (beyond any applicable cure period), Lessee shall have the option to
extend said term for an additional period of five (5) years (less one day) by
giving notice to Lessor of its intention to exercise that option at least
ninety (90) days prior to the expiration of the first extended term. All of the
terms and conditions of this Lease shall apply during each of the
aforedescribed extended terms, except those pertaining to the initial
construction of the Improvements (as defined in Article 4.1 hereinbelow) and
expired options to extend the term of this Lease.

 

Section
1.4. Short Form of
Lease. Upon the commencement date of the term hereof in accordance with Article
1.2 hereinabove, the parties agree to execute and record a short form of this
Lease, which shall incorporate the provisions of Articles XVII and XIX
hereinbelow. In no event shall the parties record a long form lease.

 

 

ARTICLE II

RENT

 

Section
2.1. Minimum Monthly
Rental. Lessee agrees to pay to Lessor during the full term hereof a minimum
monthly rental of                          
Dollars
($             )
(hereinafter referred to as the “Minimum Monthly Rental”), payable in advance
on the first day of each calendar month. Said Minimum Monthly Rental shall
commence thirty (30) days after the date of completion of the Improvements (as
defined in Article 4.1 hereinbelow) to be erected an the Demised Premises or
when Lessee opens for business, whichever date is earlier. If the first day
upon which rent becomes payable is other than the first day of any calendar
month, the rent for the balance of said month shall be payable by Lessee at a
daily rate based upon the Minimum Monthly Rental.

 

Section
2.2. Percentage Rent.
In addition to the Minimum Monthly Rental agreed to be paid by Lessee, Lessee
shall pay to Lessor, at the time and in the manner specified in this Lease, an
additional rental in an amount (hereinafter referred to as “Percentage Rent”)
equal to five percent (5%) of the amount of Lessee’s gross sales made in, upon
or from the business on the Demised Premises during each calendar year of the
term hereof, less (a) the aggregate amount of the Minimum Monthly Rental
previously paid by Lessee for said calendar year, (b) all real property taxes
and general and special assessments levied against the Demised Premises as provided
in Article 3.1 hereinbelow and paid by Lessee or accrued, (c) all expenses for
exterior maintenance and upkeep of the building and adjacent walkways and
landscape areas, (d) all premiums for insurance required hereby, and (e) all
similar costs and expenses, if any, arising under the term of the CC&Rs (as
defined in Article 20.1 hereinbelow). If the amount of any such deductions in
any year exceeds the amount of Percentage Rent payable for said year, then such
excess shall be carried forward and applied to reduce the amount of Percentage
Rent payable in any succeeding year or portion thereof should this Lease
terminate prior to the expiration of a full year. The term “exterior
maintenance and upkeep” is not to be construed to include any janitorial or
regular maintenance service which is to be provided by Lessee or its assignee
without deduction or offset, but rather is intended to include repairs and
maintenance for wear and tear. The Percentage Rent shall be paid quarterly (as
herein provided) based upon gross sales during such quarterly period. In the
event the quarterly payments of Percentage Rent do not in the aggregate equal
the Percentage Rent when calculated on an annual basis, then, in such event, an
adjustment shall be made within forty-five (45) days after the end of each year
of the term hereof, and the party owing money shall promptly pay the amount
owed to the other party. Percentage Rent shall be paid quarterly on the
twenty-fifth (25th) day of the month immediately following the quarterly period
in which the gross sales are made. Notwithstanding expiration or sooner
termination of this Lease, Lessee shall pay to Lessor the Percentage Rent on
the twenty-fifth (25th) day of the month immediately following expiration or
sooner termination for the last quarterly period of the term of this Lease or
fraction thereof. For the purposes of computing Percentage Rent for the first
and last quarterly periods of the term or extended term of this Lease, if
either is less than a full calendar quarter, the prorated Minimum Monthly
Rental and other expenses enumerated above for such fractional period shall be
deducted from the percentage of sales realized during such fractional period.

 

E-2

 

Section
2.3. Statements of
Gross Sales. Together with the quarterly Percentage Rent, Lessee shall furnish
to Lessor a statement in writing, certified by Lessee to be correct, showing
the total gross sales made in, upon or from said restaurant during the said
calendar quarter or portion thereof.

 

Section
2.4. “Gross Sales”
Defined. The term “gross sales” as used herein shall include the entire
receipts of each kind and nature from sales and services made in, upon or from
the said restaurant, whether upon credit or for cash, whether operated by
Lessee or by a sublessee or sublessees, or by a concessionaire or
concessionaires, excepting therefrom any rebates and/or refunds to customers,
and the amount of all sales tax or similar tax receipts which have to be
accounted for by Lessee or by any sublessee or concessionairo to any government
or governmental agency. Sales upon credit shall be deemed cash sales and shall
be included in the gross sales for the period during which the merchandise is
delivered to the customer, whether or not title to the merchandise passes with
delivery. The term “gross sales” shall not include sales from coin operated
vending machines.

 

Section
2.5. Verification of
Gross Sales; Audit. Lessee shall keep full, complete and proper books, records
and accounts of its daily gross sales, both for cash and on credit, of each
separate department and concession at any time operated in the Demised
Promises. Lessor and its agents and employees. upon reasonable notice, shall
have the right at any and all times, during regular business hours, to examine
and inspect all of the books and records of Lessee (including any sales tax
reports) pertaining to the business of Lessee conducted in, upon or from the
Demigod Promises, which Lassos shall produce upon demand by Lessor or Lessor’s
agents for the purpose of investigating and verifying the accuracy of any
statement of gross sales. Lessor may once in any lease year cause an audit of
the gross sales of Lessee to be made by an independent certified accountant of
Lessor’s selection, and if the statement of gross sales previously made to
Lessor by Lessee shall be found to be understated by more than five percent
(5%), Lessee shall immediately pay to Lessor the cost of such audit, not to
exceed Five Hundred Dollars ($500), as well as the additional rental shown to
be payable by Lessee to Lessor; otherwise the cost of such audit shall be paid
by Lessor. If the statement of gross sales previously made to Lessor by Lessee
shall otherwise be found to be incorrect, then the party found to be owing
money shall promptly pay over such sums to the other party. It is understood
and agreed that the Percentage Rent provisions apply only to sales made in,
upon or from the business to be operated upon the Demised Promises and do not
apply to sales of any other business.

 

ARTICLE III

TAXES AND ASSESSMENTS

 

Section 3.1. Taxes and Assessments. Lessee shall pay, as
additional rent, all real estate taxes and assessments (or installments
thereof) coming due during the term hereof under any general or special
assessments created or imposed during the term hereof, sewer rent and water
charges, gas power, electric current and all other taxes and charges in the
same or similar categories (sometimes hereinafter referred to collectively as
“impositions” and individually as “imposition”) levied or imposed upon the
Demised Premises or improvements (as defined in Section 4.1 hereinbelow), or
arising from the use and

 

E-3

 

occupancy or possession of
the Demised Premises or the Improvements (as defined in Section 4.1
hereinbelow), it being the intention of the parties that the Minimum Monthly
Rental to be received by Lessor shall be a net rental to Lessor and not subject
to any deductions whatsoever arising from the use and occupancy of the Demised
Premises by Lessee. Lessee shall pay such additional rent directly to the
taxing authorities, utility companies or other entities to whom such charges
may be payable, and shall, upon written request therefor, furnish to Lessor
reasonably satisfactory evidence of the payment of the same. In the event that
Lessee fails to make any such payment within the period (or grace period)
provided for the payment thereof, Lessor may, at its option, pay the same, and
Lessee shall immediately reimburse Lessor therefor.

 

Section 3.2. Installment Payments. If any assessment is
payable at the option of a taxpayer in installments, Lessee may pay it in equal
annual installments as they respectively become due; provided, however, that in
no event shall Lessee be required to reimburse Lessor for any installments
attributable to any period after the expiration of the term of this Lease.

 

Section 3.3. Personal Property Taxes. Lessee shall also
pay all personal property tax levied upon the personal property on the Demised
Premises during the term of this Lease.

 

Section
3.4. Proration. All
of the above impositions (except utility or other charges attributable solely
to Lessee’s use) for the first year of the term hereof shall be prorated
between the parties as of the commencement date hereof, and during the last
year of the term hereof, shall be prorated as of the termination date.

 

Section
3.5. Contest. Lessee,
at its own expense, may contest any impositions in any manner permitted by law,
in Lessee’s name, and, whenever necessary, in Lessor’s name. Lessor will
cooperate with Lessee and execute any documents or pleadings required for such
purpose. Such contest may include appeals from any judgment(s), decree(s) or
order(s) until a final determination is made by a court or governmental
department or authority having final jurisdiction in the matter. Before
commencing any such contest, Lessee shall obtain a surety bond sufficient to
cover the amount of the possible imposition which would be due if the decision
were adverse to Lessee.

 

ARTICLE IV

CONSTRUCTION OF IMPROVEMENTS; REPAIR AND MAINTENANCE;

ALTERATIONS AND IMPROVEMENTS

 

Section 4.1. Construction of Improvements. Lessor has
heretofore constructed upon the Demised Premises, at Lessor’s sole cost and expense,
an air conditioned restaurant together with a paved parking lot and a
free-standing sign in accordance with plans and specifications, as approved by
all governmental agencies having jurisdiction therefor, the master plans for
which have been heretofore approved by the parties hereto (hereinafter referred
to as the “Improvements”).

 

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Section
4.2. Repair and
Maintenance. Lessee agrees that during the term hereof it will make, at its own
expense, all necessary repairs to the Improvements upon the Demised Premises,
including all parking areas and sidewalks, and that it will keep the Demised
Premises and the Improvements thereon in good condition and repair throughout
the entire term of this Lease.

 

Section 4.3. Alterations and Improvements. Lessee shall
have the right at any time and from time to time during the term of this Lease,
at its own expense, to make changes or alterations, structural or otherwise, to
the Improvements on the Demised Premises and to erect, construct or install
upon the Demised Premises buildings and improvements in addition to or in
substitution for those now or hereafter located thereon, and to demolish and
remove the Improvements or any other structures hereafter located on the
Demised Premises for the purposes of replacing the same; provided, however,
that the fair market value of all improvements on the Demised Premises
following each such change, alteration, construction or installation shall be
at least equal to the fair market value of all improvements on the Demised
Premises immediately prier to such change, alteration, construction or
improvement. Lessee shall make no structural changes or alterations at any
given time of a cost in excess of Ten Thousand Dollars ($10,000) without first
having secured the consent of Lessor, which consent shall not be unreasonably
delayed or withheld.

 

ARTICLE V

LIENS

 

Section 5.1. Discharge of Liens; Contest. Except as
hereinafter provided, Lessor reserves the fee in the Demised Premises and
specifically does not consent by virtue of this Lease that said fee or the
remainder interest of Lessor in the Demised Premises shall be subject to any
lien for labor or materials furnished to Lessee in the repair or improvement of
the Demised Premises. While the parties intend hereby that the interest of
Lessor hereunder cannot be subjected to any lien on account of Lessee’s use of
or actions with respect to the Demised Premises and that any future
modifications of law to the contrary would constitute an impairment of vested
rights hereunder, nevertheless, should a court of competent jurisdiction hold
that, or should a valid statute be enacted whereby, any interest of Lessor in
the Demised Premises at any time hereafter shall be subjected to any such lien,
then Lessee shall, within thirty (30) days after written notice to Lessee of
the existence and perfection of said lien, cause said lien to be bonded or
discharged and shall otherwise save Lessor harmless on account thereof;
provided, however, that if Lessee desires in good faith to contest the validity
or correctness of any such lien, it may do so and Lessor shall cooperate to
whatever extent shall be necessary, provided only that Lessee must indemnify
Lessor against any loss, liability or damage on account thereof.

 

ARTICLE VI

USE OF PREMISES

 

Section 6.1. Permitted Use. Lessee, its sublessees or
assignees, shall use the Demised Premises for the purpose of conducting thereon
the business of a restaurant or a coffee shop

 

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and for incidental purposes
related thereto, or for any other legally permissible business or commercial
venture; provided, however, that Lessee shall not use the Demised Premises in
such manner as to knowingly violate the CC&Rs (as defined in Section 20.1
hereinbelow) or any applicable law, rule, ordinance or regulation of any
governmental body.

 

ARTICLE VII

LIABILITY INSURANCE

 

Section 7.1. Lessee’s Insurance. Lessee agrees that on
or before the commencement of the term of this Lease it will obtain for the
mutual benefit of Lessor and Lessee public liability insurance covering the
Demised Premises from an insurance company authorized (or admitted) to do
business in the state in which the Demised Premises are located. Said policy or
policies shall be for an amount of at least Two Million Dollars ($2,000,000)
Combined Single Limit for the death or injury to one (1) or more persons or
property damage, which said policy or policies of insurance shall name Lessor
as an additional assured thereunder, and Lessee agrees to maintain same at
Lessee’s sole cost and expense in full force and effect during the entire term
of this Lease. Lessee shall furnish Lessor with a copy of such insurance
coverage, or with a certificate of the company issuing such insurance,
certifying that the same is in full force and effect. Lessee may, at its
option, bring its obligations to insure hereunder under any so-called blanket
policy or policies of insurance; provided, however, that the interests of
Lessor shall be as fully protected thereby as if Lessee obtained individual
policies of insurance.

 

ARTICLE VIII

BANKRUPTCY

 

Section
8.1. Continuation of
Lease. If at any time during the term hereof proceedings in bankruptcy,
insolvency or other similar proceedings shall be instituted by or against
Lessee, whether or not such proceedings result in an adjudication against
Lessee, or should a receiver of the business or assets of Lessee be appointed,
such proceedings or adjudications shall not affect the validity of this Lease,
so long as the Minimum Monthly Rental and additional rent reserved hereunder
continues to be paid to Lessor and the other terms, covenants and conditions of
this Lease on the part of Lessee to be performed, are performed, and in such
event this Lease shall continue to remain in full force and effect in
accordance with the terms herein contained.

 

ARTICLE IX

ASSIGNMENT AND SUBLETTING

 

Section
9.1. Assignment.
Lessee may not assign this Lease, in whole or in part, without first obtaining
the prior written consent of Lessor, which consent shall not be unreasonably
delayed or withheld; provided, however, that Lessee may, without such consent,
assign this Lease, in whole or in part, as security or otherwise to any
national or state chartered bank or lending institution or corporation
controlled by, controlling, or under common control with Lessee, it being
understood that Lessee shall remain liable

 

E-6

 

hereunder, or to any
surviving corporation resulting from a merger or consolidation of Lessee with
any other corporation, or to any corporation which purchases or otherwise
acquires all or substantially all of the assets of Lessee. Any consent to any
assignment shall not be deemed to be a consent to any subsequent assignment.
Any assignment by Lessee other than in accordance with this Article IX shall be
void.

 

Section
9.2. Subletting.
Lessee or its assignee shall have and is hereby given the unqualified right and
privilege, at its option, of subletting the Demised Premises, in whole or in
part, subject to all of the rents, terms and conditions of this Lease. It is
specifically understood and agreed by and between Lessor and Lessee that any
subletting which Lessee or its assignees make, as permitted herein, shall in no
event relieve Lessee of the obligations of Lessee hereunder, and that the right
of subletting shall be that of Lessee or its assignees only, and shall not
extend to any subtenant.

 

ARTICLE X

REMEDIES IN THE EVENT OF DEFAULT

 

Section
10.1. Remedies. In the
event of any breach of this Lease by Lessee which shall not have been cured
within fifteen (15) days after Lessee shall have received notice of such breach
(or if such breach is not in payment of money, if within such period Lessee
shall not have commenced to cure said breach and shall not thereafter continue
its efforts with due diligence), then Lessor may, at Lessor’s option and
without limiting Lessor in the exercise of any other rights or remedies which
Lessor may have at law or in equity by reason of such default or breach, with
or without notice of demand:

 

(A) without terminating this
Lease, reenter the Demised Premises with or without process of law and take
possession of the same and expel or remove Lessee and all other parties
occupying the Demised Premises, and at any time and from time to time to relet
the Demised Premises or any part thereof for the account of Lessee, for such
term, upon such conditions and at such rental as Lessor may deem proper. In
such event Lessor may receive and collect the rent from such reletting and
apply it against any amounts due from Lessee hereunder (including, without
limitation, such expenses as Lessor may have incurred in recovering possession
of the Demised Premises, placing the same in good order and condition, altering
or repairing the same for reletting, and all other expenses, commission and
charges, including attorney’s fees, which Lessor may have paid or incurred in
connection with such repossession and reletting). Lessor may execute any Lease
made pursuant hereto in Lessor’s name or in the name of Lessee, as Lessor may
see fit, and the lessee thereunder shall be under no obligation to see to the
application by Lessor of any rent collected by Lessor, nor shall Lessee have
any right to collect any rent thereunder. Whether or not the Demised Premises
are relet, Lessee shall pay to Lessor all amounts required to be paid by Lessee
up to the date of Lessor’s reentry, and thereafter Lessee shall pay to Lessor,
until the end of the term hereof, the amount of all rent and other charges
required to be paid by Lessee hereunder, less the proceeds of such reletting as
provided above. Such payments by Lessee shall be due at such times as are
provided elsewhere in this Lease, and Lessor need not wait until the termination
of this Lease to recover them by

 

E-7

 

legal action or otherwise.
Lessor shall not, by any reentry or other act, be deemed to have terminated
this Lease or the liability of Lessee for the total rent hereunder unless
Lessor shall give Lessee written notice of Lessor’s election to terminate this
Lease.

 

(B) terminate this Lease by
giving written notice to Lessee of Lessor’s election to so terminate, reenter
the Demised Premises with or without process of law and take possession of the
same and expel or remove Lessee and all other parties occupying the Demised
Premises. In such event, Lessor shall thereupon be entitled to recover from
Lessee:

 

(i) the worth at the time of
award of any unpaid rent which had been earned at the time of such termination;
plus

 

(ii) the worth at the time
of award of the amount by which (A), the unpaid rent which would have been
earned after termination until the time of award, exceeds (B), the amount of
such rental loss Lessee proves could have been reasonably avoided; plus

 

(iii) the worth at the time
of award of the amount by which (A), the unpaid rent for the balance of the
term after the time of award, exceeds (B), the amount of such rental loss that
Lessee proves could be reasonably avoided; plus

 

(iv) any other amount
reasonably necessary to compensate Lessor for all the detriment proximately
caused by Lessee’s failure to perform its obligations under this Lease or
which, in the ordinary course of things, would be likely to result therefrom.

 

As used in Subsections (i)
and (ii) above, the “worth at the time of award” is computed by allowing
interest at the rate of ten percent (10%) per annum. As used in Subsection
(iii) above, the “worth at the time of award” is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award, plus one percent (1%).

 

ARTICLE XI

PROPERTY INSURANCE

 

Section
11.1. Lessee to
Obtain “All Risk” Insurance. Lessee will, at Lessee’s own cost and expense,
carry and maintain fire insurance with extended coverage endorsement with an
insurance company authorized (or admitted) to do business in the state in which
the Demised Premises are located, for the mutual benefit of Lessee, Lessor, and
its mortgagee, if any, on all buildings erected upon the Demised Premises in an
amount equal to at least one hundred percent (100%) of the full replacement
cost thereof, excluding foundation and excavating costs. As often as any such
policy or policies shall expire or terminate, renewal or additional policies
shall be procured by Lessee in like manner and to like extent. Proceeds of any
such policies, in the event of fire or other casualty, shall be payable to
Lessor and

 

E-8

 

Lessee, as their respective
interests may appear, and in accordance with the terms of Article XII
hereinbelow. Lessee shall furnish Lessor with a copy of such insurance
coverage, or with a certificate of the company issuing such insurance,
certifying that the same is in full force and effect.

 

Section
11.2. Blanket Policy.
Lessee may, at its option, bring its obligations to insure under this Article
XI within the coverage of any so-called blanket policy or policies of insurance
which it may now or hereafter carry, by appropriate amendment, rider
endorsement, or otherwise; provided, however, that the interests of Lessor
shall thereby be as fully protected as they would otherwise be if this option
to Lessee to use blanket policies were not permitted.

 

ARTICLE XII

DAMAGE AND DESTRUCTION

 

Section
12.1. Abatement of
Rent. Notwithstanding any statute or rule of law of the state in which the
Demised Premises are located to the contrary, in the event of any damage or
destruction to the Improvements, or any part thereof, by fire or other
casualty, this Lease shall continue in full force and effect, except that until
either such damage or destruction shall be repaired, or in the alternative this
Lease shall be terminated as hereinafter provided in this Article XII, all
rent, additional rent and other charges payable hereunder by Lessee shall abate
so that Lessee shall be required to pay only a fraction thereof, the numerator
of which shall be the fair rental value of the Demised Premises and
Improvements thereto after such damage or destruction, and the denominator of
which shall be the fair rental value of the Demised Premises and Improvements
thereto immediately prior to such damage or destruction; provided, however, if
the damage or destruction is such that Lessee’s business at the Demised
Premises cannot reasonably or lawfully be continued after the date of said
damage or destruction, said rent, additional rent and other charges hereunder
shall abate entirely.

 

Section
12.2. Restoration of
Improvements — Insured Loss. If the damage or destruction of the Improvements
was caused by a peril or perils covered under a standard fire insurance policy,
with “extended coverage” endorsement, then Lessee shall proceed, within a
reasonable period of time after the date of the occurrence of such damage or
destruction, to repair, restore and replace said Improvements and shall have
available to it any proceeds from the property insurance to be maintained by
Lessee pursuant to Section 11.1 hereinabove.

 

Section
12.3. Restoration of Improvements
— Uninsured Loss. If the damage or destruction of the Improvements was not
caused by a peril or perils covered under a standard fire insurance policy,
with “extended coverage” endorsement, then Lessor may, within thirty (30) days
after the occurrence of said damage or destruction, pay to Lessee such amount
as shall be required by Lessee to make such repair, restoration and
replacement. Lessee shall then proceed with due diligence to so repair, restore
and replace said Improvements. In the event Lessor shall elect not to pay such
amount, Lessor shall give Lessee written notice thereof within thirty (30) days
after the occurrence of said damage or

 

E-9

 

destruction, and Lessee
shall then have fifteen (15) days to elect to pay such amount itself and to
serve Lessor with written notice of its said election. In the event Lessee
elects to pay such amount, then, in such event, Lessee shall, at its option, be
permitted to extend the term hereof for a period sufficient, if required, to
result in Lessee having a minimum term, including any available options to
extend, of ten (10) years remaining after the date of completion of the
repairs, replacement or restoration; said extended term to be under the same terms
and conditions in effect just prior to the expiration of the preceding term. In
the event Lessee elects to extend said term pursuant to this Article XII, it
shall serve Lessor with written notice thereof within the same fifteen (15) day
period during which Lessee has the right to elect to pay the aforementioned
amount. In the event neither party shall elect to pay such amount, then, upon
the expiration of the fifteen (15) day period during which Lessee has the right
to elect to pay such amount, this Lease shall terminate.

 

Section
12.4. Extension of
Lease. In the event this Lease continues in full force and effect and is not
terminated or otherwise extended pursuant to the provisions of this Article
XII, and there has been an abatement of rent, the then current term of this
Lease shall be extended by the total number of months during which there was
such an abatement; however, in no event shall the abatement of rent exceed six
(6) months duration in connection with each instance of damage or destruction during
the term or extended term hereof.

 

ARTICLE XIII

CONDEMNATION

 

Section
13.1. Complete
Taking. If at any time during the term of this Lease, or any extension thereof,
the whole of the Demised Premises shall be taken for any public or quasi-public
purpose by any lawful power or authority by the exercise of the right of
condemnation or eminent domain, including any such taking by “inverse
condemnation,” then this Lease shall terminate as of the date that title shall
vest in the condemnor, and the rent and additional rent payable hereunder shall
be adjusted and paid to the date of such termination.

 

Section
13.2. Partial Taking.
If at any time during the term of this Lease, or any extension thereof, any
part of the building, or twenty percent (20%) or more of the designated parking
spaces, or any part of a driveway or other access way reasonably necessary for
access to the business upon the Demised Premises shall be so taken, Lessee
shall have the right to terminate this Lease as of the date that title shall
vest in the condemnor, by giving written notice of such termination to Lessor
within ninety (90) days after notice to Lessee of the date of such vesting. In
such event, the rent and additional rent payable hereunder shall be adjusted
and paid to the date of such termination.

 

Section
13.3. Allocation of
Condemnation Award. In the event of such a condemnation of the whole or in part
of the Demised Premises, Lessor shall have the unqualified right to pursue its
remedies against the condemnor for the full value of Lessor’s fee interest and
other property interests in and to the Demised Premises. Similarly, Lessee
shall have the unqualified right to pursue its remedies against the condemnor
for the full

 

E-10

 

value of Lessee’s leasehold
interest and other property interest in and to the Demised Premises. If the
laws of the state in which the Demised Premises are located allow or require
the recovery from the condemnor to be paid into a common fund or to be paid to
Lessor only, and if such recovery is so paid into such common fund or to Lessor
only, then in that event the recovery so paid shall be apportioned between the
parties according to the value of their respective property interests as they
existed on the date of such condemnation. The provisions of this Article 13.3
shall survive any termination of this Lease pursuant to the provisions of
Articles 13.1 or 13.2 hereinabove.

 

Section
13.4. Rent Reduction
in Case of Partial Taking. If at any time during the term of this Lease, or any
extension thereof, a part of the Demised Premises shall be taken by
condemnation, and Lessee shall not be entitled to or shall not exercise its
right to terminate, this Lease shall continue in full force and effect, except
that the net Minimum Monthly Rental shall be reduced as of the date of vesting
in the condemnor so that Lessee shall pay, for the remainder of the term, only
such portion of the Minimum Monthly Rental as the rental value of the part
remaining after condemnation bears to the rental value of the entire Demised
Premises at the date of condemnation. Lessor shall have the obligation to pay
for the cost of and to perform the construction, repair, alteration or
restoration of the remaining part of the Demised Premises so the same shall
constitute a complete unit suitable for the use made by Lessee immediately
prior to said condemnation.

 

ARTICLE XIV

QUIET ENJOYMENT AND TITLE

 

Section
14.1. Covenant of
Quiet Enjoyment. Lessee, subject to the terms of this Lease, upon paying the
Minimum Monthly Rental and additional rent and performing the other terms,
covenants and conditions of this Lease, shall and may peaceably and quietly
have, hold, occupy, possess and enjoy the Demised Premises during the term of
this Lease.

 

Section
14.2. Right to
Possession. Lessor covenants, warrants and represents that the Demised Premises
are now unoccupied and tenant-free, and that absolute, tenant-free possession
of the Demised Premises will be delivered to Lessee on the date of the
commencement of the term hereof.

 

Section
14.3. Superior
Encumbrances. Lessor further covenants, warrants and represents that there are
no liens, mortgages or encumbrances on the Demised Premises superior to the
rights of Lessee under this Lease, except as set forth in Article 20.1
hereinbelow and for the lien of a first mortgage which may have been heretofore
or may hereafter be made by Lessor.

 

Section
14.4. Ownership;
Authority; Restrictions. Lessor further covenants, warrants and represents that
Lessor is the owner in fee of the Demised Premises and alone has the full right
to lease the Demised Premises for the term and/or extended term as aforesaid;
that there are no existing restrictions or encumbrances affecting the Demised
Premises which would prohibit the use and occupancy thereof as a restaurant;
and that the Demised Premises are not subject to any zoning laws or regulations
which would prohibit or restrict the

 

E-11

 

construction, maintenance
and operation of a restaurant. It is expressly understood and agreed that these
covenants by Lessor constitute a warranty by Lessor, and that in case Lessor is
not the owner or has not the right aforesaid, or in case there are any such
restrictions, (a) this Lease, at the option of Lessee, shall become null and
void and no rent shall accrue for the term aforesaid or for any part thereof,
and (b) Lessee may pursue any remedy available at law or in equity to recover
damages or other relief.

 

ARTICLE XV

TRADE FIXTURES

 

Section
15.1. Ownership;
Removal. Lessor and Lessee acknowledge, consent and agree that all furniture,
fixtures, and equipment installed in or on or located in or about the
Improvements or other parts of the Demised Premises, whether affixed to the
Demised Premises or otherwise (hereinafter referred to as the “Trade
Fixtures”), are being leased by Lessor to Lessee under the terms of that
certain Equipment Master Lease of even date herewith between Lessor, as lessor,
and Lessee, as lessee, and the Trade Fixtures shall at all times remain the
property of Lessor and the same may not be removed by Lessee at any time during
the term hereof or upon the expiration or earlier termination of the term
hereof.

 

ARTICLE XVI

SUBORDINATION

 

Section
16.1. Subordination.
Provided that Lessor furnishes to Lessee an agreement in writing and in
recordable form from any present or future mortgagee or holder of a deed of
trust or other encumbrance with respect to the Demised Premises, that:

 

(A) such person shall not
for any reason disturb the possession, use or enjoyment of the Demised Premises
by Lessee, its successors and assigns, so long as all of the obligations of
Lessee are fully performed in accordance with the terms of this Lease; and

 

(B) such person shall permit
application of the insurance proceeds and condemnation proceeds in accordance
with Articles XII and XIII hereinabove, respectively, in the event of damage or
destruction to the Improvements or condemnation of the improvements or any part
of the Demised Premises,

 

Lessee agrees to subordinate
its rights hereunder to the lien of such mortgage, deed of trust or other
encumbrance which may now or hereafter affect the Demised Premises. Provided
such agreement is obtained, Lessee shall, upon demand, promptly execute and
deliver to Lessor any instrument which may be necessary to effectuate such
subordination.

 

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ARTICLE XVII

RIGHT OF FIRST REFUSAL

 

Section
17.1. Purchase. If at
any time after the date of the mutual execution of this Lease and prior to the
date of the expiration of the term or extended term of this Lease, Lessor shall
desire to sell the Demised Premises or the property of which the Demised
Premises are a part, Lessee shall have the right of first refusal as follows:
Lessor shall give to Lessee a notice in writing specifying the terms and
conditions upon which it desires to sell the Demised Premises and offering to
sell same to Lessee upon said terms and conditions. Within ten (10) days after
receipt of said notice, Lessee shall either accept or reject said offer. If
Lessee shall reject said offer, then for a period of ninety (90) days after the
expiration of said ten (10) day period Lessor shall be free to sell to any
other person upon the terms and conditions specified in said notice. If the
sale is to be made on terms and conditions other than so specified, then the
right to purchase shall again be offered to Lessee as set forth above. The
rejections of any one or more such offers by Lessee shall not affect its right
of first refusal as to any other sales by Lessor or its successors or assigns.

 

Section
17.2. Lease. If at
any time after the date of the mutual execution of this Lease and prior to the
date of the expiration of the term or extended terms of this Lease, Lessor
shall desire to lease the Demised Premises for a term commencing after the
expiration of the term or extended term hereof, Lessee shall have the right of
first refusal as follows: Lessor shall give to Lessee a notice in writing
specifying the terms and conditions upon which it desires to lease the Demised
Premises and offering to lease same to Lessee upon said terms and conditions.
Within ten (10) days after receipt of said notice, Lessee shall either accept
or reject said offer. If Lessee shall reject said offer, then for a period of
ninety (90) days after the expiration of said ten (10) day period Lessor shall
be free to lease to any other person upon the terms and conditions specified in
said notice. If the lease is to be made on terms and conditions other than so
specified, then the right to lease shall again be offered to Lessee as set
forth above. The rejections of any one or more such offers by Lessee shall not
affect its right of first refusal as to any other proposed leases by Lessor or
its successors or assigns.

 

Section
17.3. Incorporation
in Short Form of Lease. The provisions of Articles 17.1 and 17.2 hereinabove
shall be included in the short form of this Lease provided in Article 1.4
hereinabove.

 

ARTICLE
XVIII

REMOVAL OF DISTINCTIVE FEATURES

 

Section
18.1. Removal;
Repairs. Lessor agrees that upon the expiration of the term of this Lease, or
any extension thereof, or upon the earlier termination thereof as provided for
herein, Lessee shall have the unqualified right to remove from the Demised
Premises and the Improvements thereon all signs or other distinctive features
of Lessee’s operation. Lessee shall, at its expense, repair any damage to the
building caused by such removal. In addition, Lessee, at its sole cost and
expense, shall have the right, but not the obligation, to paint the
Improvements in a neutral color. Lessor agrees that Lessor will not thereafter

 

E-13

 

cause, permit or suffer the
Improvements to be painted the colors or combination of colors associated with
the operations of Lessee or its corporate affiliates.

 

ARTICLE XIX

PROHIBITION AGAINST COMPETITION

AND PROTECTION FOR EXPOSURE

 

Section
19.1. Lessor’s
Covenant. Lessor agrees that during the term or extended term of this Lease it
will not permit, lease, allow or use, either by itself or any tenants thereof,
directly or indirectly, any portion of the property of which the Demised
Premises are a part or any property within one (1) mile of the Demised Premises
now or hereafter owned or controlled by Lessor for any kind of restaurant,
diner, coffee shop, luncheonette or any other business involving “on the
premises consumption of food or beverage.”

 

Section
19.2. Lessee’s
Remedies for Breach. The covenant of Lessor contained in Article 19.1
hereinabove is a material inducement for Lessee to enter into this Lease, and
upon any breach by Lessor of said covenant, which breach is not cured within
thirty (30) days after written notice thereof by Lessee to Lessor, Lessee shall
have the right to pursue all of its rights available at law or in equity,
including cancellation of this Lease, a suit for damages, and/or a suit for
injunctive relief (it being understood that the enumeration of the foregoing
rights and remedies shall not preclude the exercise of any other rights or
remedies which might be available at law or in equity).

 

Section
19.3. Incorporation
in Short Form of Lease. The provisions of Articles 19.1 and 19.2 hereinabove
shall be included in the short form of this Lease provided in Article 1.4
hereinabove.

 

ARTICLE XX

TITLE CONSIDERATIONS

 

Section
20.1. CC&Rs;
Lender’s Lien. Lessee hereby acknowledges, consents and agrees that the Demised
Premises and this Lease shall be subject and subordinate to all of those
covenants, conditions, restrictions, easements and other matters specified on
Exhibit B attached hereto and, by this reference, incorporated herein
(hereinbefore and hereinafter collectively referred to as the “CC&Rs”), as
well as the lien of any mortgage, deed to secure debt, or deed of trust, as the
case may be, securing the obligations of Lessor under the terms of any credit
agreement between Lessor, as borrower, and any third party, as lender, that may
heretofore or hereafter be secured against the Demised Premises. Additionally,
Lessee hereby agrees to perform and abide by all of the terms, covenants,
conditions, obligations and undertakings of Lessor under the CC&Rs.

 

E-14

 

ARTICLE XXI

HAZARDOUS SUBSTANCE OR WASTE

 

Section
21.1. Mutual
Indemnity. Lessor hereby represents and warrants that, to the best of its
knowledge, there does not exist on, in or under the Demised Premises (including
the parking area) any “hazardous substance” or “hazardous waste” as those term
are used under the various federal and state environmental laws (hereinafter
referred to as the “Hazardous Substance/Waste”); and in the event such
Hazardous Substance/Waste is discovered at any time during the term of this
Lease or extensions thereof under circumstances where it is reasonably clear
that such Hazardous Substance/Waste became present on or before the
commencement of the term hereof, Lessor shall indemnify, defend (with counsel
reasonably satisfactory to Lessee), and hold and save Lessee and its sublessees
harmless from and against all claims, liabilities, actions, judgments,
responsibilities and damages of every kind and nature arising from or related
to the presence of said Hazardous Substance/Waste; and in the event such
Hazardous Substance/Waste is discovered at any time during the term of this
Lease or extensions thereof, or any time thereafter, under circumstances where
it is reasonably clear that such Hazardous Substance/Waste became present at
any time after the commencement of the term hereof until the expiration or
earlier termination of this Lease, Lessee shall indemnify, defend (with counsel
reasonably satisfactory to Lessor) and hold and save Lessor harmless from and
against all claims, liabilities, actions, judgments, responsibilities and damages
of every kind and nature arising from or related to the presence of said
Hazardous Substance/Waste during said period.

 

ARTICLE XXII

REAL ESTATE COMMISSIONS

 

Section
22.1. Payment; Mutual
Indemnity. Each party represents to the other party that it has not dealt with
any real estate broker or other person acting in a similar capacity who might
be entitled to a commission or finder’s fee in this transaction; and each party
hereby indemnifies the other party and agrees to hold the other party harmless from
any commission and/or finder’s fee claims arising through actions of the
indemnifying party in derogation of the representations contained herein.

 

ARTICLE
XXIII

NOTICES AND DEMANDS

 

Section
23.1. To Lessor. Any
notices or demands required or permitted by law or any provisions of this Lease
shall be in writing, and, if the same is to be served upon Lessor, may be
deposited in the United States mail, registered or certified, with return
receipt requested, postage prepaid, and addressed to Lessor at the address
first above stated or at such other address as Lessor may designate in writing,
or in lieu of mailing any such notice or demand, the same may be personally
delivered to said party at such address. At all times, Lessor may designate in
writing any person(s), firs(s) or corporation(s) to receive all notices and
demands, and service upon any one of those persons, firms or corporations as so
designated shall constitute sufficient service upon Lessor.

 

E-15

 

Section
23.2. To Lessee. Any
such notice or demand to be served upon Lessee shall be in writing and in
duplicate, and shall be served either personally to the attention of the Legal
Department at 525 N. Brand Boulevard, Third Floor, Glendale California 91203-1903,
or by deposit in the United States mail, registered or certified, return
receipt requested, postage prepaid, addressed to Lessee, attention of Legal
Department, at P.O. Box 29018, Glendale, California 91209-9018, or any
other address that Lessee may designate in writing.

 

ARTICLE XXIV

ATTORNEYS’ FEES

 

Section
24.1. Paid to
Prevailing Party. In the event any action or proceeding is commenced with
respect to any claim or controversy by the parties hereto arising from the
breach, interpretation, or enforcement of this Lease or the exhibits attached
hereto, the prevailing party or parties in such action or proceeding shall
receive and be entitled to, in addition to any and all other relief, all costs
and expenses, including reasonable attorneys’ fees, incurred by it in such
action or proceeding.

 

ARTICLE XXV

GENERAL PROVISIONS

 

Section
25.1. Binding on
Successors. All of the covenants, agreements, provisions and conditions of this
Lease shall inure to the benefit of and be binding upon the parties hereto,
their successors, legal representatives and assigns.

 

Section
25.2. Severability.
If any term or provision of this Lease or the application thereof to any
persons or circumstances shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.

 

Section
25.3. Entire
Agreement. This Lease and the exhibits attached hereto contain the entire
agreement between the parties and shall not be modified in any manner except by
an instrument in writing executed by the parties hereto or their respective
successors in interest.

 

Section
25.4. Captions. The
captions are inserted only as a matter of convenience and for reference, and in
no way define, limit or describe the scope of this Lease or the intention of
the parties hereto, nor do they in any way affect this Lease.

 

Section
25.5. Gender and
Number. Words of any gender in this Lease shall be held to include any other
gender, and words in the singular number shall be held to include the plural
when the sense requires.

 

E-16

 

Section
25.6. Approvals.
Wherever Lessor’s approval or consent is required herein, such approval or
consent shall not be unreasonably delayed or withheld.

 

Section
25.7. No Waiver. No
waiver by Lessor or Lessee of any breach of any provision of this Lessee shall
be deemed a waiver of any breach of any other provision hereof or of any
subsequent breach by Lessee or Lessor of the same or any other provision.

 

Section
25.8. Holdover. In
the event Lessee shall hold over after the term of this Lease with the consent,
express or implied, of Lessor, such holding over shall be construed to be a
tenancy only from month to month, and Lessee shall pay the rent, additional
rent and other sums as herein required for such further time as Lessee may
continue its occupancy. The foregoing does not affect Lessor’s right of reentry
or any rights of Lessor hereunder or as otherwise provided by law.

 

Section
25.9. Time of
Essence. Time is of the essence of this Lease and the exhibits attached hereto
and every provision herein and therein.

 

Section
25.10. Governing Law.
This agreement shall be governed by and construed in accordance with the laws
of the state in which the Demised Premises are located.

 

Section
25.11. Counterparts.
This Lease may be executed in any number of counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
instrument.

 

Section
25.12. No Third Party
Rights. The terms and provisions of this Lease shall not be deemed to confer
any rights upon, nor obligate any parties hereto to, any person or entity other
than the parties hereto.

 

Section
25.13. Unexecuted
Lease. The submission of this Lease for review or execution does not constitute
a reservation of or option for the rights conferred herein. This Lease shall
become effective as a lease only upon execution and delivery thereof by both
Lessor and Lessee.

 

Section
25.14. Lessor’s Right
of Entry. Lessor reserves the right to enter upon the Demised Premises at any
time during business hours to inspect same or for the purpose of exhibiting
same to prospective purchasers, mortgagees, and, during the last six (6) months
of the term hereof or any extensions thereof, to prospective lessees. Lessor
may post any customary sign stating “for lease” or “for sale” during the last
six (6) months of the term or extended term hereof.

 

Section
25.15. Estoppel
Certificates. Lessor and Lessee agree that within fifteen (15) days following
the written request by either, or both, to the other, to execute and deliver to
the requesting party a certificate (a) certifying that this Lease is unmodified
and in full force and effect, or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect, and the date to which the rent and other charges hereunder are paid
in advance, if any, and (b) acknowledging that there are not, to

 

E-17

 

the certifying party’s
knowledge, any uncured defaults hereunder on the part of the requesting party,
or so specifying such defaults, if any, as are claimed by the certifying party.

 

Section
25.16. Due
Authorization. Each person executing this Lease on behalf of Lessor and Lessee,
respectively, warrants and represents that the partnership, joint venture or
corporation, as the case may be, for whom he or she is acting, has duly
authorized the transactions contemplated herein and the execution of this Lease
by him or her.

 

Section
25.17. Relationship
of Parties. Nothing contained in this Lease shall be deemed to constitute a
partnership or joint venture between Lessor and Lessee, and Lessor and Lessee’s
relationship herein shall only be deemed to be one of landlord and tenant.

 

E-18

 

IN WITNESS WHEREOF, the
parties have hereunto set their hands the day and year first above written.

 

Lessor:

 

IHOP
REALTY CORP., a Delaware corporation

 

By:

 

Its: 

Lessee:

 

INTERNATIONAL HOUSE OF PANCAKES,

INC.,
a Delaware corporation

 

By:

 

Its: 

 

E-19

 

IHOP#       

 

	
  State
  of California

  	
  )

  
	
   

  	
  )

  
	
  County
  of Los Angeles

  	
  )

  

 

 

On
                             ,
        , before me,                              ,
personally appeared                              ,
           of IHOP REALTY
CORP., personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to se that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official
seal.

 

	
  Signature
  

  	
   

  	
   

  	
  (Seal)

  

 

 

	
  State
  of California

  	
  )

  
	
   

  	
  )

  
	
  County
  of Los Angeles

  	
  )

  

 

 

On
                             ,.        ,
before me,                              ,
personally appeared
                             ,
                
of INTERNATIONAL HOUSE OF PANCAKES, INC., personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument

 

WITNESS my hand and official
seal.

 

	
  Signature 

  	
   

  	
   

  	
  (Seal)

  

 

 

EXHIBIT F-1

 

FORM OF QUARTERLY COMPLIANCE STATEMENT

 

THE UNDERSIGNED,
                             ,
                      
of International House of Pancakes, Inc., a Delaware corporation (the
“Borrower”), and
                             ,
                             
of IHOP Corp., a Delaware corporation (“Holdings”), pursuant to Section 8(A)(2)
of the several Senior Note Purchase Agreements, dated as of November 19, 1992
(the “Purchase Agreements”), among the Borrower, Holdings, and the Purchasers
listed in Schedule I thereto, do hereby certify as follows (capitalized terms
used herein shall have the meanings ascribed thereto in the Purchase
Agreements):

 

(a) as at the end of the
quarterly accounting period ending
                             ,
the financial covenants set forth in Sections 11.2 through 11.8 of the Purchase
Agreements, inclusive, have [have not] been met, and the maximum amount of
dividends or distributions that could have been declared or paid pursuant to
Section 11.5 of the Purchase Agreements is
$                             ,
and attached hereto as Exhibit A are computations and other pertinent
information demonstrating the accuracy of the matters set forth in this clause
(a);

 

(b) attached hereto as
Exhibit B are calculations setting forth the maximum amount of Funded Debt that
could have been incurred as at the end of the quarterly accounting period
ending                        ,
pursuant to Sections 11.2(B) and 11.2(C) of the Purchase Agreements;

 

(c) as at the end of the
quarterly accounting period ending
                             ,
the Liens on Property or assets of Holdings or its Subsidiaries or securing
Debt of Holdings or its Subsidiaries, as the case may be, do [do not] exceed
the threshold set forth in Section 11.1(I) of the Purchase Agreements, and
attached hereto as Exhibit C are computations and other pertinent information
demonstrating the accuracy of the matters set forth in this clause (c); and

 

(d) attached hereto as
Exhibit D are calculations (and materials in support of the basis therefor)
setting forth the maximum amount of additional Funded Debt secured by Liens
that could have been incurred under Section 11.1(I) of the Purchase Agreements.

 

 

IN WITNESS WHEREOF, the
undersigned have signed their names this
        day of
                             ,
         .

 

	
  INTERNATIONAL HOUSE OF PANCAKES, INC.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
	
   

  
	
  IHOP CORP.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
								

 

F-1-2

 

EXHIBIT F-2

 

FORM OF COMPLIANCE CERTIFICATE

 

THE UNDERSIGNED,
                             ,
                             
of International House of Pancakes, Inc., a Delaware corporation (the
“Borrower”), and
                             ,
                             
of IHOP Corp., a Delaware corporation (“Holdings”), pursuant to
Section 8(C) of the several Senior Note Purchase Agreements, each dated as
of November 1, 1996 (the “Purchase Agreements”), among the Borrower, Holdings
and the Purchasers listed in Schedule I thereto, do hereby certify as follows
(capitalized terms used herein shall have the meanings ascribed thereto in the
Purchase Agreements):

 

Based upon such examination
or investigation and review of the Purchase Agreements as in the opinion of the
undersigned is necessary to enable the undersigned to express an informed
opinion with respect thereto, no Default or Event of Default by Holdings, the
Borrower or any of their Subsidiaries in the fulfillment of any of the terms,
covenants, provisions or conditions of the Purchase Agreements exists or has
existed during the period ending
                              [,
other than Default[s] or Event[s] of Default arising under Section[s]
                     
of the Purchase Agreements, as more fully described on Annex A hereto].*

 

IN WITNESS WHEREOF, the
undersigned have signed their names this       
day of
                             ,
              .

 

	
  INTERNATIONAL HOUSE OF PANCAKES, INC.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
	
   

  
	
  IHOP CORP.

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
								

 

* In the event such a
Default or Event of Default exists or has existed, Annex A to this certificate
shall specify the nature and period of existence thereof and what action
Holdings, the Borrower or such Subsidiary, as the case may be, has taken, is
taking or proposes to take with respect thereto.

 

 

EXHIBIT G

 

IHOP# 

 

FRANCHISE AGREEMENT

 

THIS FRANCHISE AGREEMENT
(“Agreement”) is made and entered into as of this day of , 199 , by and between
INTERNATIONAL HOUSE OF PANCAKES, INC. (hereinafter referred to as “Franchisor”)
and , a (hereinafter referred to as “Franchisee”) with reference to the
following facts:

 

A. Franchisor has developed
and is continuing to develop certain unique systems, products, methods,
techniques and other trade secrets (hereinafter referred to as the “Systems”)
for operating restaurants selling pancakes and various other food products
under the names “The International House of Pancakes” and “International House
of Pancakes Restaurant” (hereinafter sometimes referred to as “IHOP”). The
System, conducted in accordance with the provisions of this Agreement and
Franchisor’s Operations Manual, Operations Bulletins, and all notices,
amendments and supplements relating thereto (collectively referred to herein as
“Operations Bulletins”) will enable such businesses to compete more effectively
in their respective marketplaces;

 

B. Franchisor now owns and
hereafter will develop or purchase valuable trademarks, service marks, trade
names, logotypes and other commercial symbols used to identify the System
(hereinafter referred to as the “Trademarks”); and

 

C. Franchisee desires to
obtain a franchise to use the System and the Trademarks associated therewith in
connection with the operation of a restaurant (hereinafter referred to as the
“Franchised Restaurant”) under the names “The International House of Pancakes”
and “International House of Pancakes Restaurant” at the Franchised Location, as
hereinafter defined, and Franchisor is willing to grant said franchise upon the
terms and subject to the conditions hereinafter set forth.

 

WHEREFORE, IT IS AGREED:

 

I

GRANT OF FRANCHISE

 

1.01 Use of System.
Franchisor hereby grants to Franchisee and Franchisee hereby accepts a
franchise for the operation of one Franchised Restaurant at the Franchised
Location (as hereinafter defined and described) during the term hereof in
accordance with the provisions of this Agreement and any ancillary documents
pertaining hereto.

 

II

FRANCHISED LOCATION AND EXCLUSIVE TERRITORY

 

2.01 Franchised Location.

 

Franchisor hereby grants and
Franchisee hereby accepts a franchise to operate one Franchised Restaurant at
the following location (hereinafter the “Franchised Location”):

 

 

Franchisee acknowledges and
agrees that selection of the Franchised Location is the sole responsibility of
the Franchisee, and that if Franchisor shall have, in its sole and absolute
discretion, provided any assistance to Franchisee in evaluating or selecting
the Franchised Location, such assistance shall not be construed as a warranty,
guaranty or other assurance of any kind that such Franchise Location will
necessarily be a successful or profitable site.

 

2.02 Exclusive Territory.

 

So long as Franchisee
faithfully performs and observes each and all of the obligations and conditions
to be performed and observed by Franchisee under or in connection with this
Agreement, Franchisor, during the term of this Agreement, shall not own,
operate, franchise or license any “International House of Pancakes” restaurant
within that area which is either described in Exhibit “A” attached hereto or
outlined on a map attached hereto as Exhibit “A” (hereinafter “Franchised
Area”). Franchisee acknowledges and agrees that Franchisor, or its direct or
indirect parent, subsidiary, or affiliated corporations, may now or hereafter
own, operate, franchise and license both within and without the Franchised Area
other restaurants under different trademarks, and trade names, or service
marks, including Copper Penny Family Coffee Shop, and that such other
restaurants offer products similar to those which are or may be offered by the
Franchised Restaurant.

 

III

TERM AND RENEWAL

 

3.01 Initial Term.

 

(a) If Franchisee is taking
over the operation of a Restaurant operated or developed by Franchisor or
Franchisor’s parent corporation or any of its subsidiaries (each, an
“Affiliate”) or participating in the Novation Program, the expiration of the
initial term of this Agreement (hereinafter referred to as the “Initial Term”)
shall be:

 

(Check
One)

 

o 25 years from the date hereof; or

 

o From the date hereof, to and until
                                  ,
which date is one day prior to the expiration of the lease (hereinafter
referred to as the “Master Lease”) between Franchisor or, if applicable, the
Affiliate from which Franchisee is subleasing (the “Leasing Affiliate”), and
Franchisor’s or the Leasing Affiliate’s landlord.

 

(b) If Franchisee is
constructing or converting the Franchised Restaurant pursuant to a lease
between Franchisee and its master landlord, the expiration of the Initial Term
shall be:

 

(Check
One)

 

o 25 years from the date hereof; or

 

o From the date hereof, to and until
                                  ,
which date is one day prior to the expiration of Franchisee’s lease with
Franchisee’s master landlord.

 

(c) The Initial Term is
subject to earlier termination pursuant to the provisions of this Agreement and
is subject to the leasehold contingencies set forth in paragraph 3.04. If
Franchisee is participating in the

 

2

 

Conversion Program,
Franchisee may have the option, if provided in paragraph 5.01(b), to terminate
this Franchise Agreement at an earlier date, provided that Franchisee fulfills
all conditions to such early termination set forth in Paragraph 5.01(b).

 

3.02 Renewal Term.

 

Subject to the provisions of
Paragraph 3.04, if there are fewer than ten years remaining on the term of the
Master Lease for the Franchised Location, including any options to renew or
extend the term thereof, at the time of Franchisee’s execution of this
Agreement, the franchise granted hereunder may be renewed upon the expiration
of the Initial Term at the option of Franchisee for one additional term
(hereinafter the “Renewal Term”) of a duration determined in accordance with
Paragraph 3.02(f) upon and subject to the following terms and conditions:

 

(a) Franchisor or the
Leasing Affiliate, as applicable, shall notify Franchisee within 30 days of
Franchisor’s or the Leasing Affiliate’s acceptance of any renewal, extension or
new Master Lease for the Franchised Location and shall submit with said notice
a copy of a sublease or amendment to sublease conforming to the provisions of
Paragraph 3.04(b);

 

(b) Franchisee shall notify
Franchisor or the Leasing Affiliate, as applicable, in writing of its intention
to exercise the option for the Renewal Term and shall execute and return, as
applicable, to Franchisor or the Leasing Affiliate the sublease or amendment to
sublease within 15 days of receipt of the notice and sublease or amendment to
sublease pursuant to Paragraph 3.02(a). If Franchisee fails or refuses to enter
into such sublease or amendment to sublease within 15 days of receipt of such
notice and sublease or amendment to sublease, this Agreement shall terminate
upon the expiration of the then effective sublease or the original Master
Lease, whichever occurs first, without giving effect to the exercise of any
option or any renewal, extension or new Master Lease pertaining to this
paragraph 3.02.

 

(c) At the time of
Franchisee’s election to renew said term and at the time of the commencement of
the Renewal Term Franchisee shall have fully performed all of its obligations under
this Agreement, all ancillary documents relating thereto and all other
agreements which may then be in effect between Franchisee and Franchisor and/or
each Affiliate;

 

(d) Where applicable,
Franchisee shall pay an additional Initial Franchise Fee pursuant to Paragraph
5.01(c)(ii);

 

(e) Franchisee shall, at its
sole expense, prior to the commencement of the Renewal Term, refurbish and
remodel the Franchised Restaurant including expenditures for capital
improvements, and otherwise bring it into conformity with the standards, as
respects building design, furniture, fixtures, signs, equipment and color
schemes, as may then be applicable for new franchises being granted by
Franchisor for the operation of Franchised Restaurants, and provide evidence
satisfactory to Franchisor or Franchisee’s financial ability to refurbish and
remodel the Franchised Restaurant;

 

(f) The Renewal Team shall
be for a period ending one day prior to the expiration of, as applicable,
Franchisor’s or the Leasing Affiliate’s renewal, extension or new Master Lease
of the Franchised Location, but in no event shall the combined terms of the
Initial Term and Renewal Term Exceed 25 years.

 

3

 

3.03 Option Term.

 

Subject to the provisions of
Paragraph 3.04, the franchise granted hereunder may be renewed upon the
expiration of the Initial Term or Renewal Term (if applicable) at the option of
Franchisee for one additional term of a duration determined in accordance with
Paragraph 3.03(f)(hereinafter the Option Term”) upon and subject to the
following terms and conditions:

 

(a) Franchisee shall notify
Franchisor in writing of its wish and intention to renew the term of the
franchise granted hereunder not less than 180 days and not more than 210 days prior
to the expiration of the Initial Term or Renewal Term (if applicable);

 

(b) At the time of
Franchisee’s election to renew said term and at the time of the commencement of
the Option Term Franchisee shall have fully performed all of its obligations under
this Agreement, all ancillary documents relating hereto and all other
agreements which may then be in effect between Franchisee and Franchisor and/or
each Affiliate;

 

(c) Prior to the expiration
of the Initial Term or Renewal Term, if applicable, Franchisee shall execute
the most recent form of agreement used by Fanchisor for granting franchises for
the operation of Franchised Restaurants; except that, notwithstanding the terms
of such agreement then being used by Franchisor, the initial franchise fee set
forth in said agreement will be waived, and there will be no further right of
renewal;

 

(d) Franchisee shall execute
and return to Franchisor or the Leasing Affiliate, as applicable, a sublease or
amendment to sublease within 15 days of receipt thereof from Franchisor or the
Leasing Affiliate; Franchisor or the Leasing Affiliate, as applicable, shall
prepare such sublease or amendment to sublease conforming to the provisions of
Paragraph 3.04(b) and submit same to Franchisee at the later of 30 days prior
to the expiration of Franchisee’s Initial Term (or Renewal Term if applicable)
or 15 days after Franchisor’s or the Leasing Affiliate’s exercise of any option
to renew or extend Franchisor’s or the Leasing Affiliate’s Master Lease or
execution by Franchisor or the Leasing Affiliate of any renewal, extension or
new Master Lease of the Franchised Location. If Franchisee fails or refuses to
enter into such sublease or amendment to sublease with 15 days of receipt
thereof from Franchisor or the Leasing Affiliate, as applicable, this Agreement
shall terminate upon the expiration of the then effective sublease or Master
Lease, whichever occurs first, without giving effect to the exercise of any
option or any renewal, extension or new Master Lease pertaining to this
Paragraph 3.03.

 

(e) Franchise shall, at its
sole expense, prior to the commencement of the Option Term, refurbish and
remodel the Franchised Restaurant, including expenditures for capital
improvements, and bring the Franchised Restaurant into conformity with the
standards, as respects building design, furniture, fixtures, signs, equipment
and color schemes, as may then be applicable for new franchises being granted
by Franchisor for the operation of Franchised Restaurants, and provide evidence
satisfactory to Franchisor of Franchisee’s financial ability to refurbish and
remodel the Franchised Restaurant.

 

(f) The Option Term shall be
for a period not to exceed ten years, ending one day prior to the expiration
of, as applicable, Franchisor’s, the Leasing Affiliate’s or Franchisee’s Master
Lease or any renewal, extension or new Master Lease of the Franchised Location,
but in no event shall the combined terms of the Initial Term, Renewal Term (if
applicable) and Option Term exceed 35 years.

 

4

 

3.04 Lease Contingencies,
Term Extension and Subordination.

 

(a) Notwithstanding the
Terms set forth in Paragraphs 3.01, 3.02 and 3.03, this Agreement (and any
other agreement entered into pursuant to the provisions of Paragraphs 3.01,
3.02 or 3.03) shall automatically terminate (1) upon the earlier termination
of, as applicable, Franchisor’s or the Leasing Affiliate’s Master Lease, if
any, or any lease or sublease, as applicable, for the Franchised Location, or
(2) upon the occurrence of any event which prevents or prohibits Franchisee
from occupying the Franchised Location or Franchised Restaurant; provided,
however, that Franchisee shall not do anything which will cause such Master
Lease, lease or sublease to be terminated or otherwise amended or modified
without the prior written consent of Franchisor or the Leasing Affiliate, as
applicable, which consent may be withheld for any reason in its sole
discretion.

 

(b) (i) If Franchisee
subleases the Franchised Location from Franchisor or the Leasing Affiliate, and
the stated term of Franchisor’s or the Leasing Affiliate’s Master Lease expires
at any time prior to or concurrently with the expiration of Franchisee’s
Initial Term, (or, if applicable, Franchisee’s Renewal Term, if same has
already come into effect), Franchisor or the Leasing Affiliate, as applicable,
shall determine in its sole discretion whether to exercise any option to renew
or extend Franchisor’s or the Leasing Affiliate’s Master Lease, if any renewal
or extension option is available for exercise by Franchisor or the Leasing
Affiliate. If, as applicable, no such renewal or extension option is available
to Franchisor or the Leasing Affiliate under its Master Lease, but an
opportunity to extend or renew the Master Lease or enter into a new Master
Lease for the Franchised Location is available to Franchisor or the Leasing
Affiliate, Franchisor or the Leasing Affiliate shall determine in its sole
discretion whether to accept any such renewal, extension or new Master Lease.
In no event shall Franchisor or the Leasing Affiliate, as applicable, be
obligated to exercise or accept any such option, renewal, extension or new
Master Lease. Any such option (if exercised) or renewal, extension or new
Master Lease (if accepted by Franchisor or the Leasing Affiliate, as
applicable) shall hereinafter be referred to in this Paragraph 3.04(b) as the
“New Master Lease.”

 

(ii) Should Franchisor or
the Leasing Affiliate, as applicable, as a condition to or in consideration for
the New Master Lease, be required to or otherwise agree to increases in base
rental, percentage rental, taxes and/or “other expenses” in excess of those
previously required of Franchisee as lessee, under the Master Lease, Franchisor
or the Leasing Affiliate, as applicable, shall have the right to increase in a
like dollar amount, any, all, or any combination of the base rental, percentage
rental, taxes and/or “other expenses”, respectively, to be paid by Franchisee
to Franchisor or the Leasing Affiliate pursuant to the sublease or amendment to
sublease to be executed by Franchisee under Paragraphs 3.02(b) and 3.03(d),
respectively. Any such increase(s) in Franchisee’s base rental, percentage
rental, taxes and/or “other expenses” shall be equal in dollar amount to the
increase(s) therein required of Franchisor or the Leasing Affiliate, as
applicable, as lessee in connection with the New Master Lease. By way of
illustration, if the original Master Lease called for a minimum monthly rental
of $1,000.00, and the New Master Lease called for a minimum monthly rental of
$2,000.00, with no change in the amount of percentage rental, the Franchisee’s
Sublease minimum rental would increase by $1,000.00 per month payable on a
weekly basis. “Other expenses” may include, by way of example and without
limitation, a onetime payment to Franchisor’s or the Leasing Affiliate’s Master
Landlord in consideration for the New Master Lease, new or increased
administrative fees or common area maintenance charges, and/or capital
expenditures or expenses for remodeling, refurbishment, expansion, renovation,
repair or decoration of the interior, exterior or surrounding areas of the
Franchised Location. Any such obligations shall be in addition to those
required under Paragraph 3.02(e) and 3.03(e) above; in the event of any
conflict between work to be performed under Paragraph 3.02(e) or 3.03(e), on
the one hand, and this Paragraph 3.04(b), on the other hand, the resolution
thereof shall be determined by Franchisor or the Leasing Affiliate, as applicable,
in its sole discretion.

 

5

 

(c) Franchisee expressly
agrees that any lease or sublease to which it is a party with Franchisor or the
Leasing Affiliate, as applicable, and Franchisee’s rights thereunder, shall be
subject to all of the terms, conditions, and covenants of any Master Lease,
mortgages, deeds of trust, or any other encumbrances now placed, charged or
enforced against the Franchised Location or any land, buildings or improvements
included thereon, or of which the Franchised Location is a part, or any portion
or portions thereof and to any first deed of trust encumbrance hereafter
encumbering the Franchised Location or any portion thereof or the use of said
Franchised Location or any portion thereof, provided, however, that (a) the
beneficiary or beneficiaries of such first deed of trust encumbrance are one or
more banks, insurance companies, savings and loan associations, real estate
investment trusts or other similar institutional lenders, (b) the aggregate
amount of indebtedness the repayment of which is secured by such first deed of
trust encumbrance does not exceed ninety percent (90%) of the fair market value
of said premises as determined by the lender or lenders providing such
financing or refinancing, and (c) the repayment of such indebtedness is
amortized over a term not to exceed 40 years and is repayable on any annual,
semi-annual, quarterly or monthly basis. All other terms of such indebtedness,
including, but not by way of limitation, the precise amount thereof and the
interest rate with respect to thereto, shall be as determined solely by
Franchisor or the Leasing Affiliate or Franchisor’s or the Leasing Affiliate’s
Master Landlord, if applicable, and such beneficiary or beneficiaries in their
sole and absolute discretion. Franchisee shall execute and deliver to
Franchisor or the Leasing Affiliate, as applicable, such documents and take
such further action as Franchisor or the Leasing Affiliate in its sole and
absolute discretion may deem necessary or advisable to effect or maintain such
subordination within ten days after written request of Franchisor or the
Leasing Affiliate or such beneficiary or beneficiaries to do so. Franchisee
further shall execute at any time, and from time to time, such documents as may
be required to effectuate such subordination, and, as applicable, upon
Franchisee’s or the Leasing Affiliate’s failure to execute any such documents
at Franchisor’s or the Leasing Affiliate’s request, Franchisor or the Leasing Affiliate
shall be, and hereby is, appointed Franchisee’s attorney- in-fact to do so.
This power of attorney granted by Franchisee is a special power of attorney
coupled with an interest and is irrevocable and shall survive the death or
disability of Franchisee.

 

3.05 Notice of Expiration
Required by Law.

 

If applicable law requires
that Franchisor give notice to Franchisee prior to the expiration of the
Initial Term, Renewal Term or Option Term, this Agreement shall remain in
effect on a month-to-month basis until the notice requirements of such
applicable law have been met.

 

IV

RESTAURANT CONSTRUCTION AND REFURBISHING

 

4.01 Standard Plans and
Specifications.

 

(a) If the Franchised
Restaurant has not been constructed as of the date hereof and is to be constructed
by Franchisee, Franchisor or its Affiliate shall furnish to Franchisee, at no
cost to Franchisee, Franchisor’s standard plans and specifications for the
erection of a Restaurant and for equipment and signs but excluding site plans.
Franchisee shall, at its sole expense, make such modifications in such plans
and prepare site plans so as to bring the plans and the Franchised Restaurant
and the entire Franchised Location into compliance with such building codes and
local zoning provisions as may be applicable and required from time to time. No
change or addition shall be made in or to the plans or specifications furnished
by Franchisor or its Affiliate without Franchisor’s or its Affiliate’s, as
applicable, prior written consent and approval, which consent and approval
shall not be unreasonably withheld.

 

(b) If the Franchised
Restaurant is to be converted to any International House of Pancakes restaurant
by Franchisee, Franchisor or its Affiliate will furnish to Franchisee, at no
cost to Franchisee, Franchisor’s

 

6

 

specifications for the
conversion of a restaurant. Franchisee shall then develop plans, at its sole
cost and expense, for submission to Franchisor or its Affiliate for its written
approval. Any further modifications to the plans or deviations from the
provided specifications are subject to the prior written approval of Franchisor
or its Affiliate, as applicable.

 

4.02 Construction.

 

(a) If the Franchised
Restaurant has not been constructed as of the date hereof and is to be
constructed by Franchisee, Franchisee shall, at its sole cost and expense,
acquire the Franchised Location through purchase or lease, and promptly erect,
or cause to be erected, a Restaurant on the Franchised Location in conformity
with the plans and specifications furnished to Franchisee, pursuant to
Paragraph 4.01. Franchisee shall break ground for construction of the
Franchised Restaurant not later than six months after the execution of this
Agreement by Franchisor, and shall thereafter use its best efforts to promptly
complete construction and have all fixtures, furnishings, machinery and
equipment installed, and parking areas completed, inventory delivered, business
and other permits obtained and personnel employed and all other necessary
things attended to so that the Restaurant shall be open for business to the
public as expeditiously as possible.

 

(b) If the Franchised
Restaurant is to be converted to an International House of Pancakes restaurant
by Franchisee, Franchisee shall, at its sole cost and expense, acquire the
Franchised Location through purchase or lease, and promptly convert the
restaurant building on the Franchised Location in conformity with the
specifications furnished to Franchisee, pursuant to paragraph 4.01(b) above.
Franchisee shall use its best efforts to promptly complete the conversion of
the Restaurant so that the same shall be open for business to the public within
16 weeks after the execution of this Agreement.

 

4.03 Maintaining and
Refurbishing of Restaurant.

 

(a) Franchisee shall at all
times during the term hereof maintain at its sole expense the interior and
exterior of the Franchised Restaurant and the entire Franchised Location,
including the parking lot, in fist class condition and repair, and in
compliance with the Operations Bulletins and all local rules, ordinances and
regulations; provided, however, that to the extent this provision is
inconsistent with any preexisting lease or sublease between Franchisor or the
Leasing Affiliate, as applicable, and Franchisee, the terms of such lease or
sublease shall be controlling.

 

(b) Every five years during
the entire term hereof, at Franchisee’s sole costs and expense, Franchisee
shall refurbish, remodel and improve the Restaurant in accordance with Franchisor’s
then current standards as set forth in the Operations Bulletins then in effect.
Franchisee shall commence the first such refurbishing, remodelling and
improving on the anniversary date occurring five years from the date hereof.
Each subsequent refurbishing, remodelling and improving shall commence five
years from the date on which the last such refurbishing, remodelling and
improving was commenced. Franchisee shall complete any such refurbishing,
remodelling and improving as expeditiously as possible, but in any event within
30 days of commencing same.

 

(c) Franchisor or its
Affiliate may, on one or more occasions, waive or defer for such period of time
as Franchisor may deem appropriate, Franchisee’s obligation to refurbish,
remodel and improve any such Restaurant, if Franchisor or its Affiliate
determines in its reasonable judgement that any such restaurant or restaurants
are, on the date scheduled for commencement of such refurbishing, remodelling
or improving, substantially in conformity with Franchisor’s then current
standards as aforesaid.

 

7

 

4.04 Lease Requirements and
Franchisor’s Succession Rights.

 

(a) If Franchisee leases the
Franchised Location or the Franchised Restaurant from a third party, the lease
shall expressly provide, unless Franchisor waives these requirements in its
sole discretion, that (i) in the event of any breach or claim by the Landlord
thereunder of any breach by Franchisee, said Landlord shall be obligated to
notify Franchisor in writing at least 30 days prior to the termination of said
lease, whereupon Franchisor or an Affiliate shall have the right, but not the
obligation, to cure such breach and succeed to Franchisee’s rights thereunder,
and (ii) in the event of the termination of this Agreement as a result of
Franchisee’s breach hereof, and upon Franchisor’s or such Affiliate’s written
election to Franchisee to be made within ten days after the date of said
termination, Franchisor or such Affiliate shall have the right to succeed to
Franchisee’s rights under the lease. In the event Franchisor or such Affiliate
elects to succeed to Franchisee’s rights under the lease, as aforesaid,
Franchisee shall assign to Franchisor or such Affiliate all of its right, title
and interest in and to said lease, whereupon the Landlord thereunder shall
attorn to Franchisor or such Affiliate as the tenant thereunder. Franchisee
shall execute and deliver to Franchisor or such Affiliate such assignment and
take such further action as Franchisor or such Affiliate, as applicable, in its
sole and absolute discretion, may deem necessary or advisable to effect such
assignment, within ten days after written demand by Franchisor or such
Affiliate to do so, and upon Franchisee’s failure to do so, Franchisor or such
Affiliate shall be, and hereby is, appointed Franchisee’s attorney in fact to
do so. This power of attorney granted by Franchisee to Franchisor or such
Affiliate is a special power of attorney coupled with an interest and is
irrevocable and shall survive the death or disability of Franchisee. Any sum
expended by Franchisor or such Affiliate to cure Franchisee’s breach of the
lease shall be deemed additional sums due Franchisor or its Affiliate hereunder
and shall be paid by Franchisee to Franchisor or its Affiliate upon demand. The
covenants of Franchisee contained in this Paragraph 4.04(a) shall survive the
termination of this Agreement.

 

(b) Franchisee shall deliver
the Franchisor a complete copy of such lease at least ten days prior to the execution
thereof by Franchisee and the Landlord.

 

V

INITIAL FRANCHISE FEE

 

5.01 Initial Franchise Fee
(check one):

 

o (a) If Franchisee is constructing or has
arranged for the construction of the Franchised Restaurant in connection with
the execution of this Agreement, Franchisee shall pay to Franchisor, as an
Initial Franchise Fee, the sum of Fifty Thousand Dollars ($50,000), payable as
follows:

 

$                                               
of the Initial Franchise Fee shall be payable upon execution of this Agreement.
The balance, if any, shall be payable in
              
equal weekly installments with interest computed at
                              
percent (        %) per annum, or the
maximum rate allowed by law, whichever is lower, on the unpaid balance,
evidenced by a promissory note. The first payment on the balance shall be due
on the second Wednesday following the date the Franchised Restaurant opens for
business with subsequent payments due on each succeeding Wednesday until paid
in full.

 

o (b) If Franchisee is converting or has
arranged to convert the Franchised Restaurant in connection with the execution
of this agreement, Franchisee shall pay to Franchisor, as an Initial Franchise
Fee, the sum of $50,000, payable as follows:

 

8

 

$                               of the Initial Franchise Fee shall be payable
upon execution of this agreement. The balance, if any, shall be payable in
          equal weekly
installments with interest computed at the rate of
                  
percent (         %) per annum, or
the maximum rate allowed by law, whichever is lower, on the unpaid balance,
evidenced by a promissory note. The first payment on the balance shall be due
on the second Wednesday following the date the Franchised Restaurant opens for
business with subsequent payments due on each succeeding Wednesday until paid
in full. Franchisee shall have the option to terminate this Franchise Agreement
at the end of the first                      
years of the Initial Term, upon written notice to Franchisor not less than 60
days prior to the expiration of the first
            years of the
Initial Term. As a condition to the exercise by Franchisee of such option to
terminate this Franchise Agreement, Franchisee shall pay to Franchisor in full
all sums due Franchisor from Franchisee, under this agreement or otherwise, as
of the end of the first          
years of the Initial Term, Franchisee shall convert the Franchised Restaurant
from an International House of Pancakes restaurant to some other type of
restaurant at Franchisee’s sole cost and expense, and Franchisee shall comply
fully with the provisions of Paragraph 15.01 below. Further, in the event
Franchisee elects to exercise Franchisee’s option to terminate this Franchise
Agreement prior to the expiration of the Initial Term as herein provided and if
Franchisee shall have fully performed all conditions to such early termination,
Franchisor shall waive any portion of the Initial Franchise Fee remaining unpaid
as of the date of termination for the period after the end of the first
                    
years of the Initial Term.

 

o (c) (i) If Franchisee is taking over the
operation of a Franchisor or Affiliate operated or developed IHOP restaurant,
Franchisee shall pay to Franchisor, as an Initial Franchise Fee, the sum of
$                                         ,
payable as follows:

 

$                                         
of the Initial Franchise Fee shall be payable upon execution of this Agreement.
The balance, if any, shall be payable in
                
equal weekly installments, with interest computed at the rate of
          percent
(       %) per annum, or the maximum rate of
interest allowed by law, whichever is lower, on the unpaid balance, evidenced
by a Promissory Note. The first payment on the balance shall be due on the
second Wednesday following the date hereof, with subsequent payments due on
each succeeding Wednesday until paid in full.

 

o (ii) If there are fewer than ten years
remaining on the term of the Master Lease for the Franchised Location at the
time of execution hereof, in the event (1) Franchisor or the Leasing Affiliate,
as applicable, accepts any renewal, extension or new Master Lease of the
Franchised Location and (2) Franchisee exercises its option to extend the
Initial Term of this Agreement pursuant to Paragraph 3.02, Franchisee shall pay
to Franchisor for the Renewal Term an additional Franchise Fee of
$                                         
for each year of said extended period not to exceed the additional total sum of
$                   ,
payable as follows:

 

$                                         
shall be payable on the first day of the Renewal Term, and the balance, if any,
shall be payable in          equal
weekly installments (or in the event the extension is for less than five years,
for the number of weeks of the Renewal Term) with interest computed at the rate
of           percent (         %) per
annum, or the maximum rate of interest allowed by law, whichever is lower, on
the unpaid balance, evidenced by a Promissory Note. The first payment on the
balance shall be due on the second Wednesday following

 

9

 

                                
, the expiration date of the Initial Term, with subsequent payments due on each
succeeding Wednesday until paid in full.

 

o (d) If, prior to the execution hereof,
Franchisee was a party to an executory IHOP franchise or license agreement
relating to the Franchised Location, there shall be no Initial Franchise Fee
payable pursuant to the execution of this Agreement, but any balance which
remains unpaid in respect of the franchise fee previously incurred by
Franchisee shall remain payable on the terms previously agreed, as shall Franchisee’s
general account balance and other obligations to Franchisor.

 

o (e) If Franchisee currently is a party to an
executory IHOP Area Development Agreement pursuant to which the Franchised
Location is in the Exclusive Territory defined therein, there shall be no
additional Initial Franchise Fee payable pursuant to the execution of this
Agreement, but any balance which remains unpaid in respect of the franchise fee
previously incurred by Franchisee pursuant to the Area Development Agreement
shall remain payable on the terms previously agreed, as shall Franchisee’s
other obligations to Franchisor.

 

VI

CONTINUING ROYALTY, DEFINITION OF

GROSS SALES AND RECORD KEEPING

 

6.01 Continuing Royalty.

 

In addition to the Initial
Franchise Fee required to be paid by Franchisee to Franchisor hereunder,
Franchisee shall pay in United States Dollars to Franchisor a Continuing
Royalty as follows:

 

o (a) An amount equal to four and one-half
percent (4.5%) of Franchisee’s weekly Gross Sales, as hereinafter defined, or

 

o (b) An amount equal to the percentage of
Franchisee’s weekly Gross Sales, as hereinafter defined, as set forth in the
schedule attached hereto, for a period of
                                        weeks following the date hereof and
thereafter an amount equal to four and one-half percent (4.5%) of Franchisee’s
Weekly Gross Sales for the balance of the term of this Franchise Agreement.

 

6.02 Payments.

 

Payments of said Continuing
Royalty for each weekly period and the Advertising Fee provided for in Paragraph
7.01 shall be due on Wednesday of each week following the end of the prior week
in which such Gross Sales were earned. All such payments shall be accompanied
by a statement in such form and detail as shall be from time to time required
by Franchisor from its Franchisees, showing how such Continuing Royalty was
computed for such week, and accompanied by the cash register or all electronic
point-of-sale system tapes of the Franchised Restaurant for such week and, on a
monthly basis, by a copy of Franchisee’s monthly sales tax reports. Such weekly
payments shall include, where applicable, any payments due pursuant to
Paragraph 5.01.

 

6.03 Definition of Gross
Sales.

 

The term “Gross Sales”, as
used in this Agreement, shall mean the total revenues derived by Franchisee in
and from the Franchised Restaurant, whether for cash sales of food and other
merchandise or otherwise, or charge sales thereof, or revenues from any source
arising out of the operation of the Franchised Restaurant, deducting therefrom:
(a) all refunds and allowances, if any; (b) any sales or excise taxes which are
separately

 

10

 

stated and which Franchisee
collects from customers and pays to any federal, state or local taxing
authority; and (c) any amounts deposited in any vending machines or pay
telephones which are located in or about the Franchised Restaurant, if said
vending machines and/or pay telephones are leased and not owned by Franchisee,
in which case only the commissions received by Franchisee in connection
therewith shall be included in the total revenues.

 

6.04 Records.

 

(a) Franchisee shall record
all sales on individual pre-printed machine serial numbered guest checks with
the IHOP logo purchased from a Franchisor approved, licensed vendor, and shall
keep and maintain accurate records thereof. Franchisee shall cause all such
sales to be registered upon a non-resettable cash register or electronic
point-of-sale system of a type specified by Franchisor, having a lock-in
running total, and shall, at any time at Franchisor’s sole discretion, provide
to Franchisor or its authorized representatives, a key to permit reading of the
running total of the cash register. Any cash register or electronic
point-of-sale system must at all times meet each and all of Franchisor’s
standard specifications and requirements then in effect for same.

 

(b) Franchisee shall keep
and preserve for a period of not less than 36 months after the end of each
calendar year or any longer period as may be required by applicable law, all
business records, including cash register receipts, cash register tape
readings, standardized numbered guest checks, sales tax or other tax returns,
bank books, duplicate deposit slips, and other evidence of Gross Sales and
business transactions in accordance with Franchisor’s requirements promulgated
from time to time. Franchisor or an Affiliate shall have the right at any time,
notwithstanding the terms contained in paragraph 10.07, to enter Franchisee’s
premises to inspect (including the right to inspect units and to take readings
of all registers, documenters, pre- checkers and point of sale systems at any
time), audit, verify sales and make or request copies of books of account, bank
statements, documents, records, tax returns, papers and files of Franchisee
relating to gross sales and business transacted and, upon request by
Franchisor, Franchisee shall make any such materials available for inspection
by Franchisor or an Affiliate at Franchisee’s premises. Such audit and/or sales
verification may include the on-site presence of one or more personnel of
Franchisor or an Affiliate for seven full consecutive days. If Franchisor
should cause an audit to be made and the gross sales and business transacted as
shown by Franchisee’s statements should be found to be understated by any
amount, Franchisee shall immediately pay to Franchisor or its Affiliate, if
applicable, the additional amount payable as shown by such audit, plus interest
thereon at the highest rate of interest allowed by law, and if they are found
to be understated by two percent (2%) or more, Franchisee shall also
immediately pay to Franchisor the cost of such audit shall be paid by
Franchisor. If Franchisee should at any time cause an audit of Franchisee’s
business to be made by a public accountant, Franchisee shall furnish Franchisor
with a copy of said audit, without any cost or expense to Franchisor.

 

(c) Franchisee shall allow
Franchisor and any Affiliate access to the state, federal and local income tax
returns of Franchisee and Franchisee hereby waives any privilege pertaining
thereto.

 

(d) Within 30 days after the
expiration of each three month period, Franchisee shall furnish Franchisor with
a profit and loss statement of the Franchised Restaurant for such previous
quarter and within 90 days after the end of each calendar year, Franchisee
shall furnish Franchisor with a profit and loss statement and balance sheet of
the Franchised Restaurant for the previous calendar year. All such financial
statements shall be prepared in accordance with Generally Accepted Accounting
Principles (“GAAP”) consistently applied from applicable period to period and
shall be certified by Franchisee’s Chief Executive Officer or Chief Financial
Officer, if Franchisee is a corporation, limited liability company, general
partnership, limited partnership, liability partnership or other entity
approved by Franchisor (“Business Entity”), as being true and correct, and as
being prepared in accordance with GAAP consistently applied period to period.
All such financial statements shall also comply with any specific requirements
as Franchisor may from time to

 

11

 

time designate. Franchisee
hereby irrevocably consents to the inspection of said financial statements by
Franchisor or any Affiliate and to Franchisor’s use of said financial
statements, at Franchisor’s election, in Franchisor’s offering circular for the
offer and sale of franchises. Unless otherwise expressly stated herein to the
contrary, references herein to “Owner” shall include the shareholders, general
partners, limited partners, members, and other owners of the Business Entity,
as applicable, and references to “Stock” include all corporate shares (whether
common, preferred or otherwise) in the case of a corporation, all membership
interests in the case of a limited liability company, all partner’s interests
in a partnership (whether general or limited), and in all cases all voting
rights in the Business Entity.

 

VII

ADVERTISING

 

7.01 National Advertising
Fee.

 

(a) In addition to all other
payments provided for herein, Franchisee shall pay in United States dollars a
fee (hereinafter “National Advertising Fee”) to Franchisor in an amount equal
to one percent (1%) of the weekly Gross Sales of the Franchised Restaurant.

 

(b) The National Advertising
Fee to be paid by Franchisee shall be placed in a National Advertising Fund
which Franchisor shall create and shall administratively segregate on its books
and records as hereinafter provided. The National Advertising Fund shall
consist of the aggregate of:

 

(i) All payments made by all
franchisees of National Advertising Fees as set forth in Paragraph 7.01(a);

 

(ii) Payments in a sum equal
to one percent (1%) of Gross Sales of Franchisor operated and Affiliate
operated International House of Pancakes Restaurants; and

 

(iii) All Table Allowances
(as that term is hereinafter defined) received by Franchisor and any Affiliate.
As used herein, the term “Table Allowances” shall mean all rebates, allowances,
discounts and other monetary compensation (hereinafter “Allowances”) received
by Franchisor or any Affiliate on account of the purchase of food items,
supplies or services by all franchisees in consideration for the open display
by all franchisees of a supplier’s product, trademark or logo. “Table
Allowances” shall not include any allowances granted on account of purchases by
less than all Franchisees.

 

(c) From sums available in
the National Advertising Fund, Franchisor shall develop advertising, public
relations, and promotional campaigns designed to promote and enhance the value
of all IHOP restaurants. In addition, should sufficient sums be available in
the National Advertising Fund, Franchisor may, but is not obligated to, make
expenditures from the National Advertising Fund for the purpose of paying for
advertising, public relations and promotional campaigns designed to promote and
enhance the value of all “IHOP” franchised and company operated restaurants. It
is expressly agreed that in all phases of such activities, including
development, type, quantity, timing, placement, and choice of media or agency,
the decision of Franchisor shall be final. Franchisee shall not engage in any
such activities, nor shall it erect or display any sign or notice of any kind without
the prior written consent of Franchisor, whose decision shall be final.

 

(d) Such advertising, public
relations, and promotional services shall be provided and administered as
follows:

 

12

 

(i) Franchisor shall consult
with franchisees at regularly scheduled meetings concerning the type, content,
frequency, development and nature of proposed National Advertising Programs,
and shall give due consideration to the views of franchisees. The allocation of
advertising expenditures from the National Advertising Fund shall be finally
determined by Franchisor.

 

(ii) Franchisor shall
disburse funds from the National Advertising Fund for the purpose of paying for
its actual administrative expenses with respect to said Fund, its reimbursement
of direct costs incurred by its Affiliate in providing administrative services
respecting the National Advertising Fund and costs of Franchisor’s internal
Advertising Department, including direct overhead and excluding any costs
relating to Franchisor’s Franchise Sales Program. To the extent the
Franchisor’s Affiliate provides administrative services for the direct benefit
of the National Advertising Fund, and incurs expenses as a result thereof, such
expenses will be reimbursed from the National Advertising Fund. Additionally,
Franchisor shall disburse funds from the National Advertising Fund for the
purpose of paying for the other expenses hereinabove set forth in paragraph
7.01(c).

 

(iii) Within a reasonable
time after the expiration of each of Franchisor’s fiscal years, Franchisor
shall furnish franchisees an accounting with respect to the receipt and
expenditure of moneys by and from the National Advertising Fund. Such
accounting shall contain the following information:

 

(1) The opening balance in
such Fund at the beginning of such fiscal year;

 

(2) The total amount of fees
paid into the National Advertising Fund by all franchisees during such fiscal
year;

 

(3) The total amount of
Table Allowances received by Franchisor or any Affiliate during such fiscal
year;

 

(4) A reasonably itemized
breakdown and description of all disbursements from the National Advertising
Fund during such preceding fiscal year, sufficient to indicate separately each
of the various classes of expenditures made from such Fund and the amount of
the expenditures made for each class thereof; and

 

(5) The net balance, if any,
remaining in the National Advertising Fund at the close of such fiscal year.

 

In the event Franchisor’s
National Advertising Fund expenditures in any one fiscal year shall exceed the
total amount contributed to said Fund during said fiscal year, Franchisor shall
have the right to be reimbursed to the extent of the excess of those amounts
subsequently contributed to said Fund. In the event the contributions to said
Fund exceed the expenditures from such Fund in any fiscal year, such excess
will be retained in said Fund for future advertising.

 

7.02 Local and Regional
Advertising Fee.

 

(a) In addition to all other
payments provided for herein, Franchisee shall pay in United States dollars a
fee (hereinafter “Local Advertising Fee”) to Franchisor in an amount equal to
two percent (2%) of the weekly Gross Sales of the Franchise Restaurant.

 

(b) Franchisees or
Franchisor may, from time to time, develop or assist in the development of
Regional Advertising cooperatives designed to promote and enhance the value of
all IHOP restaurants in each region.

 

13

 

Franchisor may establish and
modify from time to time guidelines and procedures which shall govern the
conduct and operation of the Regional Advertising Cooperatives. The
geographical description of each region (hereinafter “Advertising Region”)
shall be designated by Franchisor in its sole subjective judgment, exercised in
good faith, after consultation with franchisees in the proposed Advertising
Region. If a majority of the Franchised Restaurants in the Advertising Region
(each IHOP restaurant being entitled to one vote) vote to establish or participate
in a Regional Advertising Cooperative, Franchisee and all Franchisor operated
and Affiliate operated IHOP restaurants in the Advertising Region shall
participate therein and contribute thereto on an equal basis with all other
franchisees who are obligated to, or if applicable, voluntarily elect to,
participate in such Regional Advertising Cooperative. Each franchisee in the
proposed Advertising Region shall be entitled to vote in person at a meeting
called for the purpose of considering formation of a Regional Advertising
Cooperative, or by ballot submitted to Franchisor in writing within 30 days
thereafter.

 

(c) From Franchisee’s Local
Advertising Fee, but only to the extent that such fee actually has been paid by
Franchisee to Franchisor during Franchisor’s fiscal year then in progress,
Franchisor shall reimburse Franchisee or credit Franchisee’s account with
Franchisor, for: (i) Franchisee’s local advertising expenses incurred during
said fiscal year (after deducting any expenses that Franchisor has previously
paid or is or may be required to pay on account of advertising run by, for, or
on behalf of Franchisee), and, (ii) contributions made by Franchisee during
said fiscal year (whether through payment to Franchisor or directly to a third
party) to the Regional Advertising Cooperative, if any, of which Franchisee is
a member, for advertising of the Franchised Restaurant up to an amount not to
exceed the Local Advertising Fee actually paid by Franchisee; provided,
however, that such right of reimbursement shall be subject to the condition
that Franchisee furnish Franchisor with appropriate verification, satisfactory
to Franchisor, of such advertising expenditures and that the advertising
resulting therefrom has been placed and paid for either by Franchisee or the
Regional Advertising Cooperative of which Franchisee is a member and that no
liability to any party exists or may exist with respect to such advertising.
Local Advertising Fees which are contributed in a particular fiscal year of
Franchisor, but which Franchisor is not required to reimburse or credit on
account of advertising expenditures incurred by Franchisee during said fiscal
year, shall become part of Franchisor’s general operating funds.

 

VIII

TRADEMARKS

 

8.01 Nature of Grant.

 

Franchisor hereby grants to
Franchisee, and Franchisee hereby accepts, the right during the term hereof,
upon the terms and conditions contained herein, to use and display IHOP service
marks, trademarks, trade names and insignia and the labels and designs
pertaining thereto (herein called the “Trademarks”), and to use Franchisor’s
trade secrets, formulae, processes, methods of operation and goodwill, but only
in connection with the retail sale at the Franchised Restaurant of those items
contained on the standard menu of IHOP restaurants as established in the
Operations Bulletins from time to time. Nothing herein shall give Franchisee
any right, title or interest in or to said service marks, trademarks, trade
names, insignia, labels or designs, trade secrets, formulae, processes, methods
of operation or goodwill, or any of the same except a mere privilege and
license, during the term hereof, to display and use the same according to the
foregoing limitations and upon the terms, covenants and conditions contained
herein. Upon the expiration or termination of this Agreement for any reason,
Franchisee shall deliver and surrender up to Franchisor or its Affiliate each
and all manuals, Bulletins, instruction sheets, forms, marks, devices,
Trademarks, and the possession of any physical objects bearing or containing
any of said Trademarks, and shall not thereafter use any of the same or any
such trade secrets, formulae, processes, methods of operation, goodwill, or any
of them; provided Franchisor or its Affiliate shall purchase from Franchisee at
a price equal to Franchisee’s book value, consisting of Franchisee’s cost
therefor less depreciation computed in

 

14

 

accordance with GAAP, all
signs, paper goods, dishes, and other items of personal property purchased by
Franchisee in the ordinary course of its business which are, in Franchisor’s or
its Affiliate’s reasonable judgment, in good, usable condition and which bear
any Trademarks of Franchisor. Franchisee acknowledges that the material and
information now and hereafter provided or revealed pursuant to this Agreement
are revealed in confidence and Franchisee expressly agrees to keep and respect
the confidence so reposed. Franchisee shall cause all of its Owners and
employees, and others who may have access to the Operations Bulletins, to
maintain such confidentiality and, at Franchisor’s request, Franchisee shall
cause such persons to execute confidentiality agreements on a form prescribed
by Franchisor.

 

Nothing herein contained
shall be construed so as to require Franchisor to divulge any secret processes,
formulae or ingredients. Franchisor expressly reserves all rights with respect
to IHOP’s goods, products, Trademarks, trade secrets, formulae, processes,
ingredients and methods of operation, except as may be expressly granted to
Franchisee herein.

 

8.02 Acts in Derogation of
Franchisor’s Trademarks.

 

(a) Franchisee agrees that,
as between Franchisor and Franchisee, the Trademarks of Franchisor are the sole
and exclusive property of Franchisor and Franchisee now asserts no claim and
will hereafter assert no claim to any goodwill, reputation or ownership thereof
by virtue of Franchisee’s licensed use thereof. Franchisee agrees that it will
not do or permit any act or thing to be done in derogation of any of
Franchisor’s rights in connection with the same, either during the term of this
Agreement or thereafter, and that it will use same only for the uses and in the
manner licensed hereunder and as herein provided.

 

(b) Franchisee shall not
use, or permit the use, as part of its name, the phrases “IHOP”, “International
House of Pancakes”, “House of Pancakes”, or any phrase or combination of words
confusingly similar thereto.

 

8.03 Prohibition Against
Disputing Franchisor’s Rights.

 

Franchisee agrees that it
will not, during or after the term of this Agreement, in any way, dispute or
impugn the validity of the Trademarks licensed hereunder, or the rights of
Franchisor thereto, or the right of Franchisor, its Affiliates, or other
franchisees of Franchisor to use the same both during the term of this
Agreement and thereafter.

 

8.04 Use of Franchisor’s
Name.

 

Franchisee agrees that the
restaurant herein franchised shall be named the “International House of
Pancakes” or “International House of Pancakes Restaurant,” as specified by
Franchisor, without any suffix or prefix attached thereto and all signs,
advertising and slogans will only bear the name “International House of
Pancakes”, or “International House of Pancakes Restaurant,” or such other Trademarks
as Franchisor may hereafter specify in its Operations Bulletins. Franchisee
shall maintain a plaque of reasonable and suitable size and design, as approved
by Franchisor, behind the cash register on the interior of the premises,
designating Franchisee as proprietor of the Franchised Restaurant, and shall
use Franchisee’s correct name on all invoices, orders, vouchers, checks,
letterheads, and other similar materials, identifying the franchise as being a
franchise of Franchisor which is independently owned and operated by
Franchisee.

 

8.05 Relationship of
Franchisee to Franchisor.

 

It is expressly agreed that
the parties intend by this Agreement to establish between Franchisor and
Franchisee the relationship of franchisor and franchisee, and that it is not
the intention of either party to undertake

 

15

 

a joint venture or to make
Franchisee in any sense an agent, partner, employee or affiliate of Franchisor
or any Affiliate. It is further agreed that Franchisee has no authority to
create or assume in Franchisor’s or any Affiliate’s name or on behalf of
Franchisor or any Affiliate any obligation, express or implied, or to act or
purport to act as agent or representative on behalf of Franchisor or any Affiliate
for any purpose whatsoever.

 

IX

FURTHER OBLIGATIONS OF FRANCHISOR

 

9.01 Initial Training.

 

If Franchisee or the
proposed manager of the Franchised Restaurant has not previously undergone
training conducted by Franchisor for the operation of an IHOP restaurant,
Franchisor, itself or through its Affiliate, agrees:

 

(a) To furnish Franchisee or
the proposed manager of the Franchised Restaurant at no additional cost with
seven weeks of training (hereinafter “Initial Training”) in the operation of an
IHOP restaurant. Said training shall be given at an IHOP restaurant or a
training center designated from time to time by Franchisor. Neither Franchisor
nor any Affiliate will pay any compensation for any services performed by
trainee during such training period and all expenses incurred by Franchisee or
said trainee in connection with such training, including air fare and other
transportation costs, meals, lodging and other living expenses, shall be at the
sole expense of Franchisee. Franchisee or the proposed manager of the
Franchised Restaurant shall pursue and complete such training to Franchisor’s
sole subjective satisfaction, unless waived by Franchisor in its sole
subjective judgment, exercised in good faith, by reason of such person’s prior
training experience. If the manager of the Franchised Restaurant is replaced by
a new manager, such new manager must attend such Initial Training and complete
same to Franchisor’s sole subjective satisfaction (unless waived by Franchisor)
provided, however, that Franchisee shall pay Franchisor a training fee of
$5,000 and must bear all costs and expenses in connection therewith as
described above.

 

(b) At Franchisor’s
election, to furnish management seminars from time to time for the benefit of
its franchises. Franchisor shall have the right to require Franchisee, or the
manager employed by Franchisee for the Franchised Restaurant, to attend at
least one management seminar per year. Said management seminars shall be given
at an IHOP restaurant, a training center, or such other place designated from
time to time by Franchisor. Notwithstanding the fact that Franchisor shall
provide such management seminars at no additional cost to Franchisee,
Franchisee shall bear all expenses incurred by Franchisee or said manager in
connection with such seminar, including transportation costs, meals, lodging
and other living expenses.

 

9.02 Other Services.

 

Franchisor also shall
furnish through its staff or that of its Affiliates Franchisee with:

 

(a) On-location supervision,
if paragraph 5.01(a), (b) or (c) has been checked above, for such period of
time as Franchisor shall deem necessary, but not exceeding 30 days allocated at
Franchisor’s discretion between the time immediately prior to and after the
opening of the Franchised Restaurant.

 

(b) Promotional assistance,
if paragraph 5.01(a), (b) or (c) has been checked above, at the time that the
Franchised Restaurant opens.

 

(c) Periodic supervision and
assistance from field representatives who shall visit the Franchised Restaurant
from time to time.

 

16

 

(d) Ongoing availability at
its home office for consultation and guidance with respect to the operation and
management of the Franchised Restaurant.

 

(e) In addition to the
foregoing, additional assistance from the staff of Franchisor or its Affiliates
upon Franchisee’s request and subject to staff availability, at the then
prevailing price per person per day, as shall be specified from time to time in
the Operations Bulletins, plus reasonable transportation and living expenses.

 

9.03 Trademark Protection.

 

In the event that any third
party makes any claim, by suit or otherwise, against Franchisee because of
Franchisee’s use in accordance with this Agreement of the Trademarks,
Franchisee shall immediately notify Franchisor in writing. After receipt of
said notice, Franchisor shall promptly take such action as may be necessary to
protect and defend Franchisee against any such claim, suit or demand, and
Franchisor shall protect, indemnify and save Franchisee harmless from any loss,
costs or expenses arising out of or relating to any such claim, demand or suit.
Franchisee shall have no right to settle, compromise, or litigate any such
claim except in strict compliance with any specific directives provided by
Franchisor relating to such specific claim. Franchisor shall have the right to
defend, compromise, or settle any such claim at Franchisor’s sole cost and
expense, using attorneys of its own choosing, and Franchisee shall cooperate
fully with Franchisor in connection with the defense of any such claim.

 

X

OTHER OBLIGATIONS OF FRANCHISEE

 

10.01 Sales and Service of
Food Products.

 

Franchisee shall sell, serve
and dispense only those items and products as shall be designated by Franchisor
in the Operations Bulletins. In connection therewith, the parties agree that
Franchisor or its Affiliate may, from time to time, recommend or suggest those
prices to be charged by Franchisee for each menu item sold or offered at IHOP
restaurants; and, for purposes of economy and cost-saving to those Franchisees
who elect to follow such recommendations, may cause the production of
pre-priced menus and standardized numbered guest checks which Franchisor or its
Affiliate shall offer for sale to Franchisee. Such recommended or suggested
prices are not binding in any respect upon Franchisee, and Franchisee is and
shall be at all times, free to charge prices entirely of its own choosing,
regardless of whether the same do or do not conform to the recommended or
suggested prices. Franchisee shall not be required to use or to purchase any
pre-priced menus or pre-priced standardized numbered guest checks, and shall be
entirely free to procure menus and standardized numbered guest checks with
prices of its own choosing; provided however that such menus and standardized
numbered guest checks shall, in all respects except as to prices, strictly
comply with the specifications therefor contained in the Operations Bulletins.

 

10.02 Required Purchases of
Proprietary Products.

 

(a) Franchisee shall
purchase only from Franchisor or its Affiliate (if offered directly to
Franchisees by Franchisor) or from Franchisor approved distributors who have
purchased such products from Franchisor or an Affiliate, all of its
requirements for buckwheat flour, waffle mix, egg batter, buttermilk mix,
Harvest Grain ‘N Nut(R) mix and such other future products as may then be
required by Franchisor, all of which embody and shall embody secret formulas
owned by Franchisor (collectively referred to as “Required Products”).

 

(b) For purposes of insuring
consistency and uniformity of product, Franchisee shall purchase only from
Franchisor or its Affiliate (if offered directly to Franchisees by Franchisor
or its Affiliate) or from

 

17

 

Franchisor-designated
suppliers, all of its requirements for coffee. Further, Franchisee shall
purchase only such blends of coffee as Franchisor shall from time to time
designate.

 

(c) Except as provided in
Paragraphs 10.02 (a) and (b), Franchisee shall purchase for use in the
operation of the Franchised Restaurant certain products which bear IHOP
Trademarks that may include, as provided in the Operations Bulletins, dishware,
silverware, napkins, placemats, coasters and other items (herein referred to as
“Trademarked Products”). All such required Trademarked Products shall comply
with the specifications set forth in the Operations Bulletins. Franchisee may
purchase Trademarked Products from Franchisor or its Affiliate, if made
available by Franchisor or its Affiliate, suppliers designated by Franchisor or
its Affiliate, or suppliers chosen by Franchisee as provided in paragraph 10.03
below, provided such suppliers execute a royalty- free trademark license in a
form reasonably satisfactory to Franchisor.

 

10.03 Compliance with
Franchisor’s Specifications.

 

(a) All food products,
services, supplies, equipment, and materials, including standardized numbered
guest checks and menus, permitted or required to be used in the operation of
the Franchised Restaurant shall be in full compliance with the specifications
set forth in the Operations Bulletins and, except only those items referred to
in Paragraphs 10.02(a) and (b), shall be purchased and procured by Franchisee
from Franchisor or its Affiliate (if offered by Franchisor or its Affiliate),
from suppliers designated by Franchisor or its Affiliate, or from suppliers
selected by Franchisee and not disapproved in writing by Franchisor or its
Affiliate. With respect to each supplier designated by Franchisor or its
Affiliate, such suppliers shall only be those who have demonstrated, to the
reasonable satisfaction of Franchisor or its Affiliate, (i) the ability to
supply a product meeting the specifications of Franchisor, (ii) reliability
with respect to the quality of product or service, and (iii) willingness and
agreement to permit Franchisor or its Affiliate to make periodic inspections,
reasonable in respect of frequency, time and manner of inspection, to assure
continued conformity to specifications.

 

(b) In the event that
Franchisee should desire to procure any food product other than those described
in paragraphs 10.02(a) and (b), service, supply, equipment, or material from
any supplier other than Franchisor, its Affiliate, or a supplier designated by Franchisor
or its Affiliate, Franchisor or its Affiliate shall, upon request of
Franchisee, furnish to Franchisee specifications, by established brand name
wherever possible, for all such items. Franchisee shall deliver written notice
to Franchisor or its Affiliate of its desire to do so, which notice shall
identify the name and address of such supplier and the items desired to be
purchased from such supplier. Should Franchisor or its Affiliate not deliver to
Franchisee, within ten days after its receipt of such notice, a written
statement of disapproval with respect to such supplier, it shall be deemed that
such supplier is approved by Franchisor or its Affiliate as a supplier of the
goods described in the notice until such time as Franchisor or its Affiliate
may subsequently withdraw such approval. Franchisor or its Affiliate shall be
entitled to disapprove or to subsequently withdraw its approval of any supplier
selected by Franchisee only upon the ground that such supplier has failed to
meet one or more of the requirements hereinabove set forth. Once Franchisee has
delivered a notice of its desire to purchase the specified items from any such
supplier, it shall be entitled to purchase same from such supplier until it
shall have received a timely statement of disapproval from Franchisor or its
Affiliate; provided, however, that should Franchisee designate a supplier in
any such notice who shall previously have been disapproved by Franchisor or its
Affiliate, it shall not be permitted to purchase from such supplier unless and
until the ten day period from delivery of such notice shall have expired
without delivery from Franchisor or its Affiliate of a statement of
disapproval.

 

(c) In some instances,
Franchisor’s specifications may be such that only a single supplier or a
limited number of suppliers can meet such specifications. With respect to such
products, Franchisee shall purchase such products only from the source or
sources designated by Franchisor or its Affiliate.

 

18

 

10.04 Insurance.

 

(a) Subject to any other
requirements set forth in the Sublease or Equipment Lease, Franchisee shall
procure and maintain at Franchisee’s expense during the term hereof policies of
insurance meeting minimum standards, coverages, and limits and insuring
Franchisee against the insurable risks prescribed in Franchisor’s Operations
Bulletins. All such policies of insurance shall name Franchisor, its Affiliate,
if applicable, and such other parties as it may designate as additional
insureds, as their interests may appear, and shall provide that Franchisor, its
Affiliate, if applicable, and other parties shall receive at least ten days
prior written notification of any cancellation, termination, amendment or
modification thereof.

 

(b) Franchisee shall provide
Franchisor, its Affiliate, if applicable, and any other parties designated by
Franchisor with Certificates of Insurance evidencing the required coverage at
least ten days prior to the date on which the Franchised Restaurant opens for
business to the public, ten (10) days prior to the date on which any insurance
policy is scheduled to expire, and at such other times as Franchisor may
reasonably require.

 

(c) If Franchisee fails or
refuses to procure and maintain insurance conforming to the requirements
prescribed by the Operations Bulletins, or fails or refuses to provide
Franchisor or any other party designated by Franchisor with a certificate of
such insurance, Franchisor may but shall not be obligated to procure, through
agents and insurance companies of its own choosing, such insurance as is
necessary to meet such requirements, provided, however, such insurance need not
name Franchisee as an insured or additional insured thereunder. Payments for
such insurance shall be borne by Franchisee. Nothing herein shall be construed
or deemed to impose any duty or obligation on Franchisor to procure such
insurance or as an undertaking or representation by Franchisor that such
insurance as may be procured by Franchisee or by Franchisor for Franchisee will
insure Franchisee against any or all insurable risks of loss which may or can
arise out of, or in connection with the Franchised Restaurant. Franchisee may
obtain such other or additional insurance as Franchisee deems proper in
connection with the operation of its business.

 

10.05 Compliance with Laws
and Operations Bulletins.

 

Franchisee shall operate the
Franchised Restaurant in strict compliance with all applicable laws, rules and
regulations of duly constituted governmental authorities and in strict
compliance with the standard procedures, policies, rules and regulations
established by Franchisor and incorporated herein, or in Franchisor’s
Operations Bulletins. Such standard procedures, policies, rules and regulations
established by Franchisor may be revised from time to time as circumstances
warrant, and Franchisee shall strictly comply with all such procedures as they
may exist from time to time as through they were specifically set forth in this
Agreement and when incorporated in Franchisor’s Operations Bulletins the same
shall be deemed incorporated herein by reference. By way of illustration and
without limitation, such standard procedures, policies, rules and regulations
may or will specify accounting records and information, payment procedures,
specifications for required supplies and purchases, including Trademarked
Products, hours of operation (which may vary from location to location),
advertising and promotion, cooperative programs, specifications regarding
required insurance, minimum standards and qualifications for employees, design
and color of uniforms, menu items, methods of production and food presentation,
including the size and serving thereof, standards of sanitation, maintenance
and repair requirements, specifications of furniture, fixtures and equipment,
flue cleaning, and fire prevention service, appearance and cleanliness of the
premises, accounting and inventory methods and controls, forms and reports, and
in general will govern all matters that, in Franchisor’s judgment, require
standardization and uniformity in all IHOP restaurants. Franchisor or its
Affiliate will furnish Franchisee with Franchisor’s current Operations
Bulletins upon the execution of this Agreement. Said Operations Bulletins and
all notices, amendments and supplements relating thereto shall at all times
remain the property of Franchisor or its Affiliate. Franchisee shall not
reproduce any portion of such Operations Bulletins by any means, shall at all
times maintain same in a secure

 

19

 

place at the Franchised
Location and, upon termination or expiration of this Agreement shall deliver
said Operations Bulletins to Franchisor or its Affiliate. Franchisee further
acknowledges that said Operations Bulletins contain trade secrets of Franchisor
and Franchisee shall at all times maintain as confidential the contents of said
Operations Bulletins. Franchisee shall cause all of its Owners and employees,
and others who may have access to the Operations Bulletins, to maintain such
confidentiality and, at Franchisor’s request, Franchisee shall cause such
persons to execute confidentiality agreements on a form prescribed by
Franchisor.

 

10.06 Taxes.

 

Franchisee shall pay in full
any and all city, county, state and federal taxes arising in connection with or
levied or assessed by any of said governmental bodies in connection with all or
any part of this Agreement, or the operation of the Franchised Business, or all
or any of the merchandise and assets being sold hereunder, promptly when due,
and prior to any delinquency.

 

10.07 Inspection by
Franchisor.

 

Franchisee expressly
authorizes Franchisor, or its representatives, or those of its Affiliate, to
enter the Franchised Restaurant at any time it is open for business, without
notice, to inspect the premises, fixtures, furnishings and equipment therein,
and to examine and inspect the operations in all respects to determine
compliance with this Agreement and with Franchisor’s standard operating
procedures, policies, rules and regulations.

 

10.08 Participation in
Operation of Franchised Business.

 

Franchisee shall devote such
of its time as is reasonably necessary for the efficient operation of the
Franchised Restaurant and the performance of its obligations under this Agreement,
all ancillary documents relating hereto and all other agreements which may then
be in effect between Franchisor and/or any Affiliate and Franchisee, or
Franchisee may employ a manager to operate the Franchise Restaurant, who has
previously successfully completed training conducted by Franchisor for the
operation of an IHOP restaurant, subject to the prior approval of Franchisor,
unless waived by Franchisor in its sole subjective judgment, exercised in good
faith, by reason of such person’s prior training and experience. Franchisee
shall not divorce himself or herself from the active conduct of the operation
of the Franchised Restaurant. Franchisee shall be entitled to engage in other,
noncompetitive business activities (as defined in Paragraph 16.01 below) so
long as same do not unreasonably interfere with the conduct of the operation of
the Franchised Restaurant.

 

XI

ASSIGNMENT

 

11.01 Assignment by
Franchisor.

 

Franchisor shall have the
right to assign this Agreement and all of its rights and privileges hereunder
to any other person or Business Entity; provided that, in respect to any
assignment resulting in the subsequent performance by the assignee of the
functions of Franchisor, (a) the assignee shall be financially responsible and
economically capable of performing the obligations of Franchisor hereunder, and
(b) the assignee shall expressly assume and agree to perform such obligations.

 

20

 

11.02 Assignment by
Franchisee.

 

During the term of this Agreement,
Franchisee shall have the right to assign, transfer or sell its interest in
this Agreement, upon the terms and conditions provided herein, and subject to
the provisions contained in Paragraphs 11.03, and 11.04. The terms “Assign” and
“Assignment” shall include any sale, assignment, transfer or other disposition,
whether in a single transaction or a series of transactions, which results, in
the aggregate, in more than forty-nine percent (49%) of the Stock of any
Franchisee which is a Business Entity being held other than by the same Owners
who held such Stock on the execution date hereof in the same proportions as
presently constituted. Notwithstanding the foregoing, Franchisee shall not have
the right to pledge, encumber, hypothecate or otherwise give any third party a
security interest in this Franchise Agreement or any of the rights of
Franchisee hereunder, in any manner whatsoever, without the express written
permission of Franchisor, which permission may be withheld for any reason
whatsoever in Franchisor’s sole subjective judgment. In all events, Franchisor
shall have the right, but not the obligation, to furnish any prospective
assignee with copies of all financial statements which have been furnished by
Franchisee to Franchisor in accordance with this Agreement during the three
year period prior to the date for which approval of the proposed Assignment is
sought. Franchisor’s approval of such proposed transaction shall not, however,
be deemed a representation of guarantee by Franchisor that the terms and
conditions of the proposed transaction are economically sound or that, if the
transaction is consummated, the proposed assignee will be capable of
successfully conducting the Franchised Business and no inference to such effect
shall be made from such approval. Notwithstanding anything to the contrary
herein, in the event of the death or legal incapacity of Franchisee or, in the
case of a corporate franchisee, the stockholder holding 50% or more of the
capital stock or voting power, the transfer of Franchisee’s or such
stockholder’s interest in this agreement to its heirs, personal representatives
or conservators, as applicable, shall not give rise to Franchisor’s right of
first refusal hereunder, although such right shall apply to any proposed Assignment
by such heirs, personal representatives or conservators.

 

11.03 Conditions to
Assignment by Franchisee.

 

(a) Any Assignment by
Franchisee shall be subject to the following conditions:

 

(i) Except in the case of
Franchisee’s death or legal incapacity, Franchisee shall serve upon Franchisor
written notice of the proposed Assignment, setting forth all of its terms and
conditions and all available information concerning the proposed assignee.

 

(ii) Franchisee shall obtain
Franchisor’s written consent, not to be unreasonably withheld, of the proposed
Assignment. The withholding of such consent by Franchisor shall be reasonable
if, by way of illustration and not by limitation, the proposed assignee (1) is
not financially responsible and economically or otherwise capable of performing
the obligations of Franchisee hereunder; (2) does not meet the then-current
standards set by Franchisor with respect to its new franchisees; (3) fails to
complete Franchisor’s Initial Training program in accordance with Franchisor’s
then current standards, (4) if any of the assignee’s Owners fail or refuse to
execute a guaranty in form satisfactory to Franchisor, or (5) if the assignee
fails to designate a single individual acceptable to Franchisor, in its sole
discretion, with whom Franchisor may primarily communicate.

 

(iii) Franchisee, or
Franchisee’s heirs, personal representatives or conservators in the case of
Franchisee’s death or incapacity, shall pay Franchisor a fee which will be
specified from time to time in the Operations Bulletins, as defined in
Paragraph 10.05 hereinabove (hereinafter “Transfer Fee”). As of the date of
this agreement consists of a $1,000 transfer fee and a $5,000 training fee.
Franchisor may waive all or part of the training fee to the extent that Franchisor
determines in its sole subjective judgment that the assignee does not require
training.

 

21

 

(iv) As of the date of any
such Assignment, Franchisee shall be in compliance with all of its obligations
owing to Franchisor and any Affiliate whether pursuant to this Agreement, or
any other agreements with Franchisor or an Affiliate, and shall pay in full all
outstanding amounts owed to Franchisor and its Affiliates, and the remaining
balance, if any, of the Initial Franchise Fee, unless waived by Franchisor in
its sole discretion.

 

(v) As a condition precedent
to Franchisor’s written consent, Franchisor itself, or through its Affiliate,
shall have the right, at its sole discretion, to conduct an audit and/or sales
verification prior to the proposed Assignment.

 

(b) If Franchisee is an
individual and not a Business Entity, he or she shall have the right, without
complying with the provisions of Paragraph 11.03(a)(iii) nor the provisions of
Paragraph 11.04 to Assign this Agreement to a corporation formed by Franchisee
for the purpose of owning and operating the Franchised Restaurant, after first
complying with the following conditions:

 

(i) Franchisee shall be
together with said corporation, jointly and severally liable for all existing
or subsequent breaches of this Agreement and any other agreement entered into
between Franchisor and any Affiliate and Franchisee, and for all obligations
accrued or accruing thereunder. Franchisee shall waive notice or demand in the
event of default, and will be bound by any modifications or supplemental
agreements entered into between Franchisor and/or any Affiliate and the
assignee Business Entity, as hereinafter set forth;

 

(ii) The assignee Business
Entity shall provide Franchisor with all charter or other documents, and
execute an acceptance of such assignment, in the form prescribed by Franchisor
which shall contain covenants agreeing to be bound by all of the terms and
conditions herein contained;

 

(iii) Franchisee shall be possessed
of and retain at all times, legal and beneficial ownership of not less than
fifty one percent (51%) of all the outstanding Stock of the assignee (including
the voting power of such Stock), unless otherwise agreed to in writing by
Franchisor in its sole discretion;

 

(iv) All of the Stock
certificates or other evidence of Ownership issued by assignee Business Entity
shall have endorsed upon them the following legend: “The transfer of this
[Stock] is subject to the terms and conditions of a Franchise Agreement,
relating to an IHOP restaurant, dated
                            ,
19     ”, and the date of this Agreement shall be inserted
into such statement; and

 

(v) When incorporation shall
have been completed, Franchisee shall advise Franchisor and thereafter keep
Franchisor advised of the names, addresses and titles of the officers,
directors, and resident agent of the assignee corporation, the names and
addresses of the shareholders and the number of shares issued to each, and the
address of the principal office of said corporation.

 

(vi) No Assignment pursuant
to this paragraph 11.03(b) shall be deemed to be effective unless and until
Franchisee shall have complied with all of the provisions hereunder.

 

11.04 Franchisor’s Right of
First Refusal.

 

(a) Except with respect to
an Assignment to a Business Entity as provided for in paragraph 11.03(b), or an
Assignment to Franchisee’s heirs, personal representatives or conservators in
the case of Franchisee’s death or legal incapacity, within 30 days after Franchisor’s
receipt of Franchisee’s notice of its intent to assign its

 

22

 

interest in this Agreement
(or if Franchisor shall request additional information, within 30 days after
receipt of such additional information), Franchisor may, at its option, accept
the proposed Assignment to itself or its nominee, upon the terms and conditions
specified in the notice.

 

Should Franchisor not
exercise its option and Franchisee fails to consummate the proposed Agreement
within 90 days upon the same terms and with the same assignee as disclosed in
the notice to Franchisor, Franchisor’s right of first refusal shall revive.

 

11.05 Delegation by
Franchisor.

 

Franchisor shall have the
right to delegate to one or more of its Affiliates some or all of Franchisor’s
duties to Franchisee under this Agreement; provided, however, Franchisor shall
remain fully responsible to Franchisee for the full and faithful performance of
all its obligations to Franchisee hereunder.

 

XII

DEFAULT BY FRANCHISEE

 

12.01 Right of Termination
After Notice of Default.

 

Except as otherwise
expressly provided for in this Agreement, Franchisor may terminate this
Agreement prior to its expiration after providing written notice of
Franchisee’s Material Breach of this Agreement to Franchisee, if such Material
Breach shall not be cured within seven days. If any such Material Breach,
except those relating to the nonpayment of money, by its nature cannot be cured
within such seven day period, and Franchisee shall immediately commence and
diligently continue to cure such default, Franchisor shall allow Franchisee
such additional reasonable period of time as Franchisor deems reasonably
necessary to cure such Material Breach. As used herein, the phrase “Material
Breach” shall include, but not be limited to:

 

(a) The express repudiation
by Franchisee of any of its payment obligations under the agreements listed in
paragraph 18.01 hereinbelow (hereinafter, “the agreements”) or its stated or
announced refusal thereafter to meet any such payment obligations, which
repudiation or refusal shall not be expressly withdrawn in writing by
Franchisee within seven days after written notice from Franchisor so to do.

 

(b) The failure or refusal
by Franchisee to pay at least fifty percent (50%) of its payment obligations to
Franchisor arising under the agreements during each of two or more weekly
transmittal periods, either consecutive or nonconsecutive. Such failure to pay
will be deemed to have occurred whenever an insufficient payment (less than
50%) shall accompany any transmittal or whenever any transmittal shall not have
been submitted by Franchisee within five days after same is due.

 

(c) Any other failure to
meet Franchisee’s monetary obligations to Franchisor or its Affiliate, wherein
any part of such unpaid obligations shall be more than 35 days past due.

 

(d) Failure to keep the
Franchised Restaurant open for business during ordinary business hours for a
continuous period of more than three days, without the prior written consent of
Franchisor, (hereinafter “Voluntary Abandonment”), unless the Franchised
Restaurant was closed by reason of: (1) government action, not related to a
breach by Franchisee of this Agreement, (2) the death or disability of
Franchisee, or (3) force majeure not caused, directly or indirectly, by
Franchisee’s willful conduct.

 

23

 

(e) Any default by
Franchisee under any mortgage, deed of trust, lease or sublease, including any
lease or sublease with Franchisor or an Affiliate, covering the premises in
which the Franchised Restaurant is located, which results in Franchisee being
unable to continue operations at the Franchised Restaurant.

 

(f) Franchisee’s insolvency
(as revealed by its records or otherwise); or, if Franchisee files a voluntary
petition and is adjudicated a bankrupt; or if an involuntary petition is filed
against it and such petition is not dismissed within 30 days; or if it shall
make an assignment for the benefit of creditors; or if a receiver or trustee in
bankruptcy or similar officer, temporary or permanent, be appointed to take
charge of Franchisee’s affairs or any of its property; or if dissolution be
commenced by or against Franchisee or if any judgement against Franchisee
remains unsatisfied or unbonded of record for 15 days;

 

(g) Franchisee’s failure to
comply with any other material obligation of Franchisee under the agreements,
including a failure to comply with Franchisor’s Operations Bulletins as
described in paragraph 10.05.

 

12.02 Termination Without
Notice

 

Franchisor shall have the
right to terminate this Agreement immediately, without prior notice to
Franchisee, upon the occurrence of any or all of the following events, each of
which shall be deemed an incurable breach of this Agreement.

 

(a) Franchisee’s knowingly
withholding the rendering or reporting of any of Franchisee’s Gross Sales.

 

(b) Franchisee’s material
misrepresentation to Franchisor with respect to any information provided in
connection with its application to become an IHOP Franchisee, including any
relevant credit information.

 

(c) If Franchisee shall
attempt to Assign this Agreement, without the prior written consent of
Franchisor, or if an Assignment of this Agreement by Franchisee shall occur by
operation of law, or by reason of judicial process.

 

(d) If Franchisee shall
attempt to Assign Franchisor’s Trademarks, or the goodwill connected thereto,
or if Franchisee shall use, or permit the use of said Trademarks, or the
goodwill connected thereto in derogation of Franchisor’s rights pursuant to
this Agreement, or if Franchisee shall use or permit the use of said
Trademarks, or the goodwill annexed thereto in a manner, or at locations not
authorized by Franchisor pursuant to the terms of this Agreement.

 

(e) Conviction of
Franchisee, or any of its principal shareholders, of a felony or any other
criminal misconduct which is relevant to the operation of the franchise.

 

12.03 Form of Notice.

 

Franchisor shall provide
notice of default to Franchisee in accordance with the following:

 

(a) With respect to the
non-payment of financial obligations by Franchisee, said notice shall contain
an accounting, taken from the books and records of Franchisor or its Affiliate,
of the amounts of each of the unpaid obligations, the items for which such
obligations are unpaid, and the dates upon which such obligations became due,
as well as an allocation of credits made for partial payments, if any.

 

(b) With respect to notice
of default and of intent to terminate if said default is not cured, in respect
of a breach of contract other than the non-payment of money, such notice shall
contain the following:

 

24

 

(i) The specific provision
or provisions of the specific agreement or standard operating procedures
violated;

 

(ii) The nature of the
violation or violations;

 

(iii) The date such
violations were observed, and by whom they were observed and reported; and the
date or dates, if any, that Franchisor had given any previous written notice of
such violation or violations to Franchisee.

 

(c) The curing of any breach
within the time period specified in the notice of default shall nullify
Franchisor’s right of termination for the causes stated in said notice (but not
for a recurrence of any such cause thereafter); provided, however, that if
there shall be a course of conduct in bad faith followed by Franchisee over an
extended period in providing good cause for termination and, subsequently,
timely curing of deficiencies upon receipt of notice of default, such continued
and repeated course of conduct shall itself be good cause for immediate
termination of the Agreement without further notice of intention to terminate.

 

12.04 Conformity With Laws.

 

If any law or regulation by
any competent authority with jurisdiction over this Agreement shall limit
Franchisor’s rights of termination or require a longer or different notice than
that specified in this Article XII, same shall be deemed amended to conform
with the minimum requirements of such law or regulation.

 

XIII

ARBITRATION AND REMEDIES

 

13.01 Arbitration.

 

Any controversy or claim,
except those described in paragraph 13.03, arising out of or relating to this
Agreement, or any agreement relating thereto, or any breach of this Agreement
including any claim that this Agreement or any portion thereof is invalid,
illegal or otherwise voidable, shall be submitted to arbitration before and in
accordance with the rules of the American Arbitration Association provided that
the jurisdiction of the arbitrators shall be limited to a decision rendered
pursuant to California common and statutory law and judgment upon the award may
be entered in any court having jurisdiction thereof; provided, however, that
this clause shall not limit Franchisor’s or an Affiliate’s right to obtain any
provisional remedy, including injunctive relief, or to obtain writs of recovery
of possession, or similar relief, from any court of competent jurisdiction, as
Franchisor or any Affiliate deems to be necessary or appropriate in Franchisor’s
or such Affiliate’s sole subjective judgment, to compel Franchisee to comply,
or to prohibit Franchisee’s non-compliance, with its obligations hereunder or
under the Sublease, if applicable, or to obtain possession of the Franchised
Location, or to protect the Trademarks or other property rights of Franchisor.
Franchisor or such Affiliate may, as part of such action or proceeding, seek
damages, costs and expenses caused to or incurred by it by reason of the act or
action or non-action of Franchisee which caused Franchisor or such Affiliate to
institute such action or proceeding. The institution of any such action or
proceeding by Franchisor or an Affiliate shall not be deemed a waiver on its
part to institution of an arbitration proceeding pursuant to the provisions of
this Article. If Franchisee leases or subleases the Franchised Restaurant or
Franchised Location by or through Franchisor or an Affiliate, in the event of
an arbitration award which includes a determination that this Agreement is or
has expired or has been terminated by reason of Franchisee’s default thereof,
Franchisee consents to the entry of a judgment by a court of competent
jurisdiction containing an appropriate writ for the recovery of possession of
the premises. The situs of arbitration proceedings shall be in that city
nearest the Franchised Location which has an American Arbitration Association
office and facilities for arbitration.

 

25

 

13.02 Remedies of
Franchisor.

 

(a) In the event of a
Material Breach of this Agreement, Franchisor may, at its election pursue the
following remedies in addition to such other remedies as may be available to it
hereunder and at law or equity: (1) terminate this Agreement, and thereafter
bring such action as it may deem proper to protect its rights hereunder, in
accordance with the provision of this Article XIII, and (2) seek to recover
such damages, including all sums due and owing pursuant to this Agreement and
any other agreement relating thereto, and the benefit of its bargain hereunder,
as Franchisor may, in its discretion, deem appropriate. In computing such
damages, it is agreed that the benefit of Franchisor’s bargain shall include
Franchisor’s average Continuing Royalty fee of four and one-half percent (4.5%)
of Franchisee’s Gross Sales, computed on the basis of the last 26 weeks that
Franchisee conducted business at its Franchised Restaurant (or if any such
Franchised Restaurant is open for less than 26 weeks, the entire period that
any such Franchised Restaurant is open for business) multiplied by the number
of weeks remaining under this Franchise Agreement, computed from the effective
date of the termination of this Agreement. Said sum shall thereupon be “present
valued” by discounting the same, on an annual basis, predicated upon the prime
rate charged by the Chase Manhattan Bank of New York City, on the effective
date of such termination.

 

(b) Franchisor will not, nor
will it threaten to or state or represent that it has the right or intention
to, exercise self help in regaining possession of the Franchised Restaurant or
premises or physically evict or attempt to evict Franchisee from the Franchised
Restaurant other than by due process of law. In the event of termination,
Franchisor will obtain possession of the premises only through the voluntary
surrender thereof by Franchisee, or pursuant to the legal enforcement of a
judgment of a court of competent jurisdiction or of an award of an arbitration
tribunal in accordance with Paragraph 13.01.

 

13.03 Summary Possessory
Actions.

 

(a) If Franchisee leases or
subleases the Franchised Restaurant or Franchised Location from Franchisor or
an Affiliate, Franchisor or such Affiliate shall be entitled to maintain
actions in unlawful or forcible detainer or other appropriate summary
possessory action for recovery of the premises of said Franchised Restaurant or
Location, in a court of competent jurisdiction without being required to resort
to arbitration (except as provided in Paragraph 13.03(c)(ii) hereof), in respect
of any uncured default by Franchisee in payment of premises rental under the
Sublease or by reason of any of the causes specified in Paragraphs 12.01 (a),
(b) or (c), for a judgment which shall, if Franchisor or such Affiliate shall
prevail therein, include both an order for restitution of the premises and any
monetary relief incident thereto which may by law be awarded in any such
possessory action. In any such possessory action by Franchisor or such
Affiliate, Franchisee shall be entitled to assert defenses, set offs and
counterclaims, if any, which are permitted by applicable law in such a
possessory action, but no others; and, if Franchisee shall prevail thereon, it
may obtain any relief thereon which may by law be awarded in such possessory
action.

 

(b) With respect to any such
possesory actions provided and referred to in Paragraph 13.03(a), wherein such
possessory action is based on monetary default, neither Franchisor nor its
Affiliate shall base any claim of monetary default upon its having applied any
Franchisee payments to it to the accelerated and unaccrued portion of
Franchisee’s Initial Franchise Fee note or notes, if applicable, at any time
that such application would have left any other current or past due obligations
unpaid.

 

(c) Should Franchisee deny
or dispute the amount of the indebtedness described or referred to in the
notice of default, it shall within the time specified for the cure of such
default deliver to Franchisor or its Affiliate a written statement of the
amount claimed by it to be the correct amount of the indebtedness and of the
factual basis for such claim; and it shall either accompany such statement with
its remittance of full payment of the

 

26

amount acknowledged by it to be owing or shall make such
arrangements with Franchisor for the payment of such amount as shall be
satisfactory and acceptable to Franchisor or its Affiliate. Should Franchisee
have timely done so, it will then be permitted to litigate any such dispute as
to the amount, if any, of the remaining indebtedness as follows:

 

(i) In those states wherein
litigation of such dispute is permitted in possessory actions by law,
stipulation or agreement of the parties, such dispute shall be so litigated. It
shall not be a ground for denial of a judgment for possession to Franchisor or
an Affiliate that the amount of the indebtedness so determined may be less than
or different from the amount claimed by Franchisor or its Affiliate. Execution
upon such judgment, however, shall be stayed for seven days, during which time
Franchisee may retain possession of the Franchised Restaurant and obtain
vacation of the judgment by (1) paying to Franchisor or its Affiliate the full
amount of the adjudicated and unpaid indebtedness, plus the full amount of any
and all subsequently accruing and unpaid obligations to Franchisor or its
Affiliate up to and including the date of entry of such judgment, or by (2)
making such arrangements with Franchisor or its Affiliate for the payment of
such amount as shall be satisfactory and acceptable to Franchisor or its
Affiliate, as applicable.

 

(ii) In those states where
litigation of the amount of such indebtedness is not permitted in such
possessory actions, the possessory action may nonetheless be commenced and
maintained by Franchisor or the applicable Affiliate. Disputes as to the amount
of indebtedness will be concurrently submitted to arbitration. Following
arbitration, Franchisee shall have the same rights of payment and cure of
default, upon the same conditions, as are hereinabove provided in section (i)
of this subparagraph (c).

 

(iii) Nothing contained in
this subparagraph (c) shall be deemed, construed or interpreted as allowing
Franchisee in such possessory action to litigate any claims or defenses other
than the issue of the correct computation of its indebtedness (exclusive of set
offs or counterclaims) unless the litigation of such other claims or defenses
is permitted in possessory actions by the applicable law of the subject state.

 

13.04 Interest on Late
Payments.

 

In addition to the other
remedies available to Franchisor, in the event that Franchisee shall fail or
refuse to make any of the payments due under this Agreement, Franchisee shall
pay interest at the highest rate permitted by law, or one and one half percent
(1-1/2%) per month, whichever is less, of such late obligations to defray the
cost of maintaining Franchisee’s account in arrears, it being expressly
understood that payment of this charge shall not forgive or excuse any
arrearage.

 

XIV

RIGHT TO CURE DEFAULTS

 

14.01 General.

 

In addition to all other
remedies herein granted, if Franchisee shall default in the performance of any
of its obligations or breach any term or condition of this Agreement or any
related agreement, Franchisor or its Affiliate may, at its election,
immediately or at any time thereafter, without waiving any claim for breach
hereunder and without notice to Franchisee cure such default for the account
and on behalf of Franchisee, and the cost to Franchisor or its Affiliate
thereof shall be due and payable on demand and shall be deemed to be additional
compensation due to Franchisor or its Affiliate hereunder and shall be added to
the amount of compensation next accruing hereunder, at the election of Franchisor
or its Affiliate.

 

27

 

XV

OBLIGATIONS UPON TERMINATION

 

15.01 General.

 

In the event of the
termination or expiration of this Agreement for whatever reason, Franchisee
shall forthwith discontinue the use of Franchisor’s Trademarks and shall not
thereafter operate or do business under any name or in any manner that might
tend to give the general public the impression that it is either directly or
indirectly associated, affiliated, franchised or licensed by or related to, the
IHOP restaurant system, and shall not, either directly or indirectly, use any
name, logotype, symbol or format confusingly similar to the IHOP Trademarks or
formats, at either the Franchised Location, the Franchised Restaurant or any
other location not then franchised to Franchisee by Franchisor. In addition,
since Franchisor’s restaurants have a distinctive color scheme, unless
Franchisor exercises its right to cause an assignment of the lease for the
Franchised Location or Franchised Restaurant pursuant to paragraph 4.04(a),
Franchisee shall promptly upon demand by Franchisor or its Affiliate repaint
the Franchised Restaurant in a different color scheme. Further, upon such
expiration or termination, Franchisee shall not, either directly or indirectly,
for any purpose whatsoever, use any of Franchisor’s trade secrets, procedures,
techniques or materials acquired by Franchisee by virtue of the relationship
created by this Franchise Agreement, including, (a) recipes, formulae and descriptions
of food products; (b) the Operations Bulletins and all manuals, Bulletins,
instruction sheets, and supplements thereto; (c) all forms, advertising matter,
marks, devices, insignias, slogans and designs used from time to time in
connection with IHOP restaurants; and (d) all copyrights, Trademarks and
patents now or hereafter applied for or granted in connection with the
operation of IHOP restaurants. The covenants of Franchisee contained in this
paragraph 15.01 shall survive the termination of this Agreement.

 

XVI

NON-COMPETITION

 

16.01 General.

 

Without Franchisor’s prior
written consent which may be withheld for any reason in Franchisor’s sole
subjective discretion, Franchisee shall not, during the term of this Agreement,
or any extension or renewal thereof, directly or indirectly, own, operate,
control or have any financial interest in any family style restaurant, pancake
house or coffee shop, including but not limited to the Village Inn, Bob’s Big
Boy, Shoney’s, Denny’s, Perkins’, Waffle House, Baker’s Square, Coco’s, JB’s,
Allie’s, Cracker Barrel, Marie Callendar’s, Friendly’s, Bob Evans’ Farms, or
any other food service operation that sells pancakes. The foregoing
prohibitions shall not apply to ownership by Franchisee of less than three percent
(3%) of the issued and outstanding stock of any company whose shares are listed
for trading over any public exchange or over-the-counter market and whose
business includes the owning, operating, or franchising of family style
restaurants, pancake houses, or coffee shops, provided Franchisee does not
control any such company. Franchisee also agrees that it will not at any time
communicate, divulge, or use for the benefit of himself or herself or any other
person or entity, other than in the course of conduct of the restaurant
franchised hereunder, any information or knowledge which it may have acquired
in connection with the operation of the Franchised Restaurant, and that it will
not do any act prejudicial or injurious to the business or goodwill of Franchisor,
any of its Affiliates, or any other IHOP franchisee.

 

28

 

XVII

INDEMNITY BY FRANCHISEE

 

17.01 General.

 

Franchisee shall defend,
indemnify and hold Franchisor and each Affiliate harmless from and against any
and all claims, demands, losses, damages, costs, liabilities and expenses
(including attorneys’ fees and costs of suit) of whatever kind or character, on
account of any actual or alleged loss, injury or damage to any person, firm or
corporation or to any property arising out of or in connection with the
operation of the Franchised Restaurant.

 

XVIII

ENTIRE AGREEMENT

 

18.01 General.

 

This Agreement contains all
of the terms and conditions agreed upon by the parties hereto with reference to
the specific subject matter hereof; provided, however, that for purposes of
default, with respect to any other agreements relating hereto, including any
lease or sublease for the Franchised Location or Franchised Restaurant, any
equipment lease or sublease, any sign lease, or any purchase contracts for
equipment or supplies which were entered into prior to, contemporaneously with,
or subsequent to the date hereof between Franchisee and Franchisor or an
Affiliate, or between Franchisee and third parties, or any Franchise Fee
promissory Note, any material default thereof shall also be a material breach
of this Agreement. No officer or employee or agent of Franchisor has any
authority to make any representation or promise not contained in this
Agreement, and Franchisee agrees that it has executed this Agreement without
reliance upon any such representation or promise. This Agreement cannot be
modified or changed except by written instrument expressly referring to this
Agreement, signed by all of the parties hereto. All terms used in any one
number or gender shall extend to mean and include any other number and gender
as the facts, context, or sense of this Agreement or any article or paragraph
hereof may require. As used in this Agreement, the words “include” or “including”
are used in a non-exclusive sense.

 

XIX

SEVERABILITY

 

19.01 General.

 

Nothing contained in this
Agreement shall be construed as requiring the commission of any act contrary to
law. Whenever there is any conflict between any provisions of this Agreement or
the Operations Bulletins and any present or future statute, law, ordinance,
regulation, or judicial decision, contrary to which the parties have no legal
right to contract, the latter shall prevail, but in such event the provision of
this Agreement or the Operations Bulletins thus affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of the
law. In the event that any part, Article, paragraph, sentence or clause of this
Agreement or the Operations Bulletins shall be held to be indefinite, invalid
or otherwise unenforceable, the indefinite, invalid or unenforceable provision
shall be deemed deleted, and the remaining part of the Agreement shall continue
in full force and effect, unless said provision pertains to the payment of
fees, pursuant to Articles V, VI and VII hereof, in which case this Agreement
shall, at Franchisor’s option, terminate.

 

29

 

XX

WAIVER AND DELAY

 

20.01 General

 

No waiver by Franchisor of any
breach or series of breaches or defaults in performance by Franchisee and no
failure, refusal or neglect of Franchisor either to exercise any right, power
or option given to it hereunder or to insist upon strict compliance with or
performance of Franchisee’s obligations under this Agreement or the Operations
Bulletins, shall constitute a waiver of the provisions of this Agreement or the
Operations Bulletins with respect to any prior, concurrent or subsequent breach
thereof or a waiver by Franchisor of its rights at any time thereafter to
require exact and strict compliance with the provisions thereof.

 

XXI

SURVIVAL OF COVENANTS

 

21.01 General

 

The covenants contained in
this Agreement which by their terms require performance by the parties after
the expiration or termination of this Agreement shall be enforceable
notwithstanding said expiration or other termination of this Agreement for any
reason whatsoever.

 

XXII

SUCCESSORS AND ASSIGNS

 

22.01 General

 

This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of
Franchisor and shall be binding upon and inure to the benefit of Franchisee and
its or their respective heirs, executors, administrators, successors and
assigns, subject to the restrictions on Assignment contained herein.

 

XXIII

JOINT AND SEVERAL LIABILITY

 

23.01 General

 

If Franchisee consists of
more than one person or entity, or a combination thereof, the obligations and
liabilities of each such person or entity to Franchisor are joint and several.

 

XXIV

GOVERNING LAW

 

24.01 General

 

This Agreement and the legal
relations among the parties hereto shall be governed by and construed in
accordance with the laws of the state of California without giving effect to
conflict of laws.

 

30

 

XXV

COUNTERPARTS

 

25.01 General.

 

This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.

 

XXVI

FEES AND EXPENSES

 

26.01 General.

 

Should any party hereto
commence any action or proceeding for the purpose of enforcing, or preventing
the breach of, any provision hereof, whether by arbitration, judicial or
quasi-judicial action or otherwise, or for damages for any alleged breach of
any provision hereof, or for a declaration of such party’s rights or
obligations hereunder, or commence any appeal therefrom, then the prevailing
party shall be reimbursed by the losing party for all costs and expenses
incurred in connection herewith, including, but not limited to, reasonable
attorneys’ fees for the services rendered to such prevailing party.

 

XXVII

NOTICES

 

27.01 General.

 

All notices which Franchisor
is required or may desire to give to Franchisee under or in connection with
this Agreement may be delivered to Franchisee or may be sent by certified or
registered mail, postage prepaid, addressed to Franchisee at the Franchised
Location. All notices which Franchisee is required or may desire to give to
Franchisor under or in connection with this Agreement, must be sent by
certified or registered mail, postage prepaid, addressed to Franchisor as
follows:

 

General Counsel

International House of
Pancakes, Inc.

525
N. Brand Boulevard, Third Floor

Glendale,
California 91203-1903

 

The addresses herein given
for notice may be changed at any time by either party by written notice given
to the other party as herein provided. Notices shall be deemed effective five
days after deposit in the United States mails.

 

XXVIII

NOVATION COUNTERPART

 

28.01 General.

 

If Franchisee operates the
Franchised Restaurant at the Franchised Location pursuant to the terms of a
franchise agreement executed prior to the date hereof, this Agreement shall
become effective only upon execution by Franchisee of a Rider in the form
attached hereto as Exhibit “B”.

 

31

 

XXIX

SUBMISSION OF AGREEMENT

 

29.01 General.

 

The submission of this
Agreement does not constitute an offer, and this Agreement shall become
effective only upon the execution thereof by Franchisor and Franchisee. THIS
AGREEMENT SHALL NOT BE BINDING ON FRANCHISOR UNLESS AND UNTIL IT SHALL HAVE
BEEN ACCEPTED AND SIGNED BY AN AUTHORIZED OFFICER OF FRANCHISOR. THIS AGREEMENT
SHALL NOT BECOME EFFECTIVE UNTIL AND UNLESS FRANCHISEE SHALL HAVE RECEIVED A
FRANCHISE OFFERING CIRCULAR IN SUCH FORM AND MANNER AS MAY BE REQUIRED UNDER OR
PURSUANT TO APPLICABLE LAW.

 

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

 

FRANCHISOR

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

a
Delaware corporation

 

By:

Richard K. Herzer, President

 

I HEREBY ACKNOWLEDGE THAT AT
MY FIRST PERSONAL MEETING WITH FRANCHISOR, AT LEAST TEN BUSINESS DAYS PRIOR TO
THE DATE THAT I HAVE EXECUTED THIS AGREEMENT, OR HAVE PAID ANY CONSIDERATION
THEREFOR, I RECEIVED, AND HAVE SINCE READ, FRANCHISOR’S UNIFORM FRANCHISE
OFFERING CIRCULAR; I HEREBY ALSO ACKNOWLEDGE THAT I RECEIVED A COMPLETELY
PREPARED COPY OF THIS AGREEMENT MORE THAN FIVE BUSINESS DAYS PRIOR TO THE DATE
I HAVE EXECUTED SAME.

 

FRANCHISEE

 

By:

 

32

 

THE INTERCREDITOR AGREEMENT,

 

DATED AS OF NOVEMBER 1, 1996

 

(EXHIBIT H TO THE SENIOR NOTE PURCHASE AGREEMENT)

 

IS CONTAINED IN ITS ENTIRETY

 

AS DOCUMENT NO. 5 HEREIN

 

 

[CONFORMED COPY]

 

SUBSIDIARY GUARANTEE

 

IHOP REALTY CORP.

 

FOR VALUE RECEIVED and in
consideration of the purchase by the Purchasers (as hereinafter defined) of
those certain 7.42% Senior Notes Due 2008 (the “Notes”) of International House
of Pancakes, Inc., a Delaware corporation (herein called, together with its
successors and assigns, the “Borrower”), pursuant to the several Senior Note
Purchase Agreements, each dated as of November 1, 1996, by and among the
several purchasers named in Schedule 1 thereto (the “Purchasers”), IHOP Corp.,
a Delaware corporation (“Holdings”), and the Borrower, which is the
wholly-owned Subsidiary of Holdings (the “Purchase Agreements”), the
undersigned (the “Guarantor”), a wholly-owned Subsidiary of the Borrower,
unconditionally guarantees (a) the full and prompt payment, when due, whether
at maturity or earlier by reason of acceleration or otherwise, and at all times
thereafter of all obligations of the Borrower with respect to payment of the
principal of, prepayment charges (if any), and interest on the Notes (including
interest on any overdue principal and prepayment charges, if any, and, to the
extent permitted by law, on any overdue interest), and all other amounts due,
and (b) the prompt and faithful performance, discharge and observance of all
other obligations, covenants, agreements, conditions, representations,
warranties, indemnities and liabilities of the Borrower and Holdings to be
performed, discharged or observed by the Borrower and Holdings, under or
pursuant to the Purchase Agreements and all agreements, instruments and
documents executed or delivered in connection therewith or pursuant thereto
(all such obligations of the Borrower and Holdings guaranteed by the Guarantor
herein being hereinafter called the “Obligations”). In the event the Borrower
or Holdings defaults in the payment or performance, when due, of any of the
Obligations (whether at their stated maturity, by acceleration, or otherwise),
the Guarantor shall pay to the unpaid holders of the Notes (“Holders”), on
demand, the full amount of such Obligations in immediately available funds at
the place provided in the applicable Purchase Agreements or shall, on demand,
fully perform such Obligations. The Guarantor further agrees to pay (a) all
costs and expenses including, without limitation, all court costs and
reasonable attorneys’ fees and expenses paid or incurred by each of the Holders
in endeavoring to collect all or any part of the Obligations from, or in
prosecuting any action against, Holdings, the Borrower, the Guarantor, or any
other guarantor of all or any part of the Obligations, and (b) to the extent
permitted by law, interest on the Obligations and such costs and expenses at
the applicable per annum rate set forth in the Purchase Agreements. Unless
otherwise defined herein, the capitalized terms used herein which are defined
in the Purchase Agreements shall have the meanings specified therein.

 

The Guarantor hereby
represents and warrants that: 

 

 

(a) The Guarantor has full power, authority and legal right to execute
this Guarantee.

 

(b) This Guarantee has been
duly authorized, executed and delivered by the Guarantor and constitutes a
legal, valid and binding obligation of the Guarantor enforceable in accordance
with its terms.

 

(c) No consent, approval or
authorization of or filing with any Governmental Body or other Person on the
part of the Guarantor is required in connection with this Guarantee.

 

(d) The execution, delivery
and performance of this Guarantee will not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree
of any court, arbitrator or Governmental Body, domestic or foreign, or of the
charter or by-laws of the Guarantor or of any securities issued by the
Guarantor or of any mortgage, indenture, lease, contract or loan agreement to
which the Guarantor is a party, or any other agreement, instrument or
undertaking to which the Guarantor is a party or which purports to be binding
upon the Guarantor or upon any of its assets, and will not result in the
creation or imposition of any Lien on any of the assets of the Guarantor except
as contemplated by this Guarantee.

 

The Guarantor hereby waives
notice of acceptance of this Guarantee by any Holder, of any action taken or
omitted in reliance hereon or of any default in the payment of any of the
Obligations or in the performance of any covenants and agreements of the
Borrower contained in the Purchase Agreements or the Notes, and any diligence,
presentment, demand, protest, dishonor or notice of any kind.

 

This Guarantee constitutes a
present and continuing Guarantee of payment and performance and not of
collectability of the Obligations, and shall be absolute, primary, present and
unconditional, and to the extent permitted by applicable law, shall not be
subject to any counterclaim, setoff, reduction or defense based upon any claim
the Guarantor may have against the Borrower, or any other Person, and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way affected or impaired by any thing, event, happening,
matter, circumstance or condition whatsoever (whether or not the Guarantor
shall have any knowledge or notice thereof or shall consent thereto),
including, without limitation:

 

(i) any amendment or other
modification of or supplement to any provision of the Purchase Agreements, any
Subsidiary Guarantee, any other agreements or documents executed or delivered
in connection therewith or pursuant thereto or any of the Notes or any
assignment or transfer thereof, including without limitation any renewal or
extension of the terms of payment of any of the Notes or the granting of time
in respect of any payment thereof, or any furnishing or acceptance of security
or any release of any security furnished or accepted for any of the Notes or in
respect of the obligations of the Guarantor hereunder;

 

2

 

(ii) any waiver, consent, extension, granting of time, forbearance,
indulgence or other action or inaction under or in respect of this Guarantee or
any of the Notes or any exercise or nonexercise of any right, remedy or power
in respect hereof or thereof;

 

(iii) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceedings with respect to the Guarantor, the Borrower, Holdings,
the other Subsidiary Guarantors or any other Person, or the properties or
creditors of any of them;

 

(iv) the occurrence of any
Default or Event of Default, or any invalidity or unenforceability of, or any
misrepresentation, irregularity or other defect in, the Purchase Agreements,
any Subsidiary Guarantee, any other agreement or document executed or delivered
in connection therewith or pursuant thereto, any of the Notes or any other
agreement;

 

(v) any transfer of any
assets to or from the Guarantor, Holdings, any other Subsidiary Guarantor or
the Borrower, including without limitation any transfer or purported transfer
to the Guarantor, Holdings, any other Subsidiary Guarantor or the Borrower from
any Person, any invalidity, illegality of, or inability to enforce, any such
transfer or purported transfer, any consolidation or merger of the Guarantor,
Holdings, any other Subsidiary Guarantor or the Borrower with or into any other
corporation or entity, or any change whatsoever in the objects, capital
structure, constitution or business of the Guarantor, Holdings, any other
Subsidiary Guarantor or the Borrower or any Affiliate or Subsidiary of the
Guarantor, Holdings, any other Subsidiary Guarantor or of the Borrower;

 

(vi) any failure on the part
of the Borrower or any other Person to perform or comply with any term of the
Notes, the Purchase Agreements, any Subsidiary Guarantee or any other
agreement;

 

(vii) any suit or other
action brought by the Guarantor, Holdings, the Borrower, any other Subsidiary
Guarantor or any other Person, or by any stockholder or creditor of any such
Persons, for any reason whatsoever, including without limitation any suit or
action in any way attacking or involving any issue, matter or thing in respect
of the Notes, the Purchase Agreements, any Subsidiary Guaranty or any other
agreement;

 

(viii) any lack or
limitation of status or power, incapacity or disability of the Guarantor,
Holdings, any other Subsidiary Guarantor or the Borrower or of any officer,
director or agent of the Guarantor, Holdings, any other Subsidiary Guarantor or
the Borrower or any of their respective stockholders;

 

(ix) the cessation from any
cause whatsoever (other than payment of the Obligations) of liability of the
Borrower;

 

3

 

(x) the termination of, or release or compromise of the Purchase
Agreements, any other agreement or document executed or delivered in connection
therewith or pursuant thereto, any of the Notes or any other agreement,
including, without limitation, any other Subsidiary Guarantee and the Guarantee
of Holdings set forth in Section 16.14 of the Purchase Agreements (other than
as a result of payment of the Obligations);

 

(xi) any lack or limitation
of the genuineness, validity, regularity or enforceability of the Notes, the
Purchase Agreements, any other agreement or document executed or delivered in
connection therewith or pursuant thereto, or any other agreement including
without limitation any Subsidiary Guarantee;

 

(xii) any failure by any of
the Holders to take any steps to perfect or maintain their security interest
(if any) in or Liens (if any) upon, or to preserve their rights to, any
security or collateral for the Obligations;

 

(xiii) any election by any
of the Holders, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. (S)101 et seq.) (the “Bankruptcy Code”), of
the application of Section 1111(b)(2) of the Bankruptcy Code;

 

(xiv) the disallowance,
under Section 502 of the Bankruptcy Code, of all or any portion of any of the
Holders’ claims for repayment of the Obligations; or

 

(xv) any other thing, event,
happening, matter, circumstance or condition whatsoever, not in any way limited
to the foregoing, which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.

 

The obligations of the
Guarantor with respect to the guaranty and all other obligations under this
Guarantee of the Guarantor are and shall continue to be direct and unsecured
obligations of the Guarantor ranking pari passu as against the assets of the
Guarantor and pari passu with all other present and future Debt of the Guarantor
which is not expressed to be subordinate or junior in rank to any other Debt of
the Guarantor (except to the extent that the foregoing is not true by virtue
of, and solely by virtue of, Liens expressly permitted by the Purchase
Agreements securing other Debt insofar as such Debt represents a prior claim in
respect of the property or assets secured by such permitted Lien.

 

The liability of the
undersigned Guarantor under this Guarantee shall not exceed at any time the
greater of (i) 95% of the Adjusted Net Assets (as hereinafter defined) of the
Guarantor at the time of delivery hereof and (ii) 95% of the Adjusted Net
Assets of the Guarantor at the time of any payment hereunder. As used herein,
the term “Adjusted Net Assets” means at any time the lesser of (x) the amount
by which the fair market value of the assets of the Guarantor exceeds the total
amount of liabilities (including, without limitation, contingent liabilities,
but excluding liabilities under this Guarantee) of the Guarantor at such time,
and (y) the amount by which the present fair market value of the assets of the
Guarantor at such time exceeds the amount that will be required to pay the
probable liability

 

4

 

of the Guarantor on its debts (excluding debt in respect of this
Guarantee), as they become absolute and matured. Contingent liabilities of the
Guarantor (including, without limitation, liabilities in respect of guarantees,
pension and other employee benefit plans and pending or threatened litigation
and claims), shall be valued at amounts which, in light of all the facts and
circumstances existing at the time, represent amounts which can reasonably be
expected to become actual or matured liabilities.

 

Notwithstanding anything to
the contrary contained herein or in any other agreement, document or
instrument, the Guarantor hereby irrevocably waives all rights of subrogation
(whether such rights arise under common law, contract or Federal law,
including, without limitation, Section 509 of the Bankruptcy Code) to the
claims of the Holders against the Borrower, and waives all contractual,
statutory and common law rights of contribution, reimbursement, indemnification
and similar rights and claims (as such term is defined in the Bankruptcy Code)
against the Borrower which may arise in connection with, or as a result of,
this Guarantee.

 

The Guarantor expressly
waives any and all benefits under California Civil Code Sections 2809, 2810,
2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil
Procedure Sections 580(a), 580(b), 580(d) and 726.

 

The Guarantor expressly
waives any right it may have to require any Person seeking enforcement of its
obligations hereunder to (a) proceed against the Borrower, Holdings, any other
Subsidiary Guarantor or any other Person, (b) proceed against or exhaust any
security, or (c) pursue any other remedy in the power of the Person seeking
such enforcement, including, without limitation, its remedies pursuant to any
other Subsidiary Guarantee and the Holdings’ Guarantee set forth in Section
16.14 of the Purchase Agreements. The Holders from time to time may, at their
election, exercise any right or remedy they may have against the Guarantor,
including, without limitation, the right to foreclose upon any such security by
judicial or non-judicial sale, without affecting or limiting in any way the
liability of the Guarantor hereunder, except to the extent the Obligations have
been paid. The Guarantor waives any defense arising out of the absence, impairment
or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of the Guarantor against the Borrower, Holdings, any other
Subsidiary Guarantor or any such security, whether resulting from such election
by the Holders of the Notes or otherwise.

 

The Guarantor agrees that
its obligations hereunder shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Borrower,
Holdings, any other Subsidiary Guarantor or the Guarantor is rescinded or must
be otherwise restored by any Holder of any Notes, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Guarantor further
agrees that, without limiting the generality of the foregoing, if an Event of Default
shall have occurred and be continuing and the Holder is prevented by applicable
law from exercising any remedy under this Guarantee or under any of the Notes,
such Holder shall be entitled to receive from the Guarantor upon demand
therefor, the sums which would otherwise have been due from the Borrower had
such remedies been exercised.

 

5

 

The Guarantor agrees that this Guarantee shall continue in full force
and effect and may not be terminated or otherwise revoked by the Guarantor
until the Obligations shall have been fully discharged.

 

This Guarantee shall be
binding upon the Guarantor and upon the successors and assigns of the Guarantor
and shall inure to the benefit of each of the Purchasers and each other Holder
and their respective successors and assigns; all references herein to the
Borrower, Holdings, other Subsidiary Guarantors and to the Guarantor shall be
deemed to include their respective successors and assigns, including, without
limitation, a receiver, trustee or debtor-in-possession of or for the Borrower,
Holdings, other Subsidiary Guarantors or the Guarantor. All references to the
singular shall be deemed to include the plural where the context so requires.

 

THIS GUARANTEE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE).

 

THE GUARANTOR CONSENTS AND
AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF COOK, STATE OF ILLINOIS, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM
NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES THAT
ANY DISPUTE CONCERNING THE RELATIONSHIP BETWEEN ANY PURCHASER OR HOLDER OF
NOTES, ON THE ONE HAND, AND THE GUARANTOR, ON THE OTHER HAND, OR THE CONDUCT OF
ANY PARTY IN CONNECTION WITH THIS GUARANTEE OR OTHERWISE SHALL BE HEARD ONLY IN
THE COURTS DESCRIBED ABOVE.

 

THE GUARANTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY HAND DELIVERY OR MAIL TO THE GUARANTOR AT ITS
ADDRESS SET FORTH BELOW. THE GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.

 

NOTHING IN THIS GUARANTEE
SHALL AFFECT THE RIGHT OF ANY PURCHASER OR HOLDER OF NOTES TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY
PURCHASER OR HOLDER OF NOTES TO BRING ANY ACTION OR PROCEEDING AGAINST THE
GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

Wherever possible each
provision of this Guarantee shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Guarantee shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Guarantee.

 

THE GUARANTOR HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS GUARANTEE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN

 

6

 

CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE GUARANTOR IN RESPECT TO THIS GUARANTEE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE
GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTEE WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.

 

IN WITNESS WHEREOF, this
Guarantee has been duly executed by the Guarantor as of the 8th day of
November, 1996.

 

IHOP REALTY CORP.

 

	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  
	
   

  	
   

  
				

 

Address:

 

525
North Brand Boulevard

Glendale,
CA 91203

 

7

 

[CONFORMED COPY]

 

SUBSIDIARY GUARANTEE

 

IHOP PROPERTIES, INC.

 

FOR VALUE RECEIVED and in
consideration of the purchase by the Purchasers (as hereinafter defined) of
those certain 7.42% Senior Notes Due 2008 (the “Notes”) of International House
of Pancakes, Inc., a Delaware corporation (herein called, together with its
successors and assigns, the “Borrower”), pursuant to the several Senior Note
Purchase Agreements, each dated as of November 1, 1996, by and among the
several purchasers named in Schedule I thereto (the “Purchasers”), IHOP Corp.,
a Delaware corporation (“Holdings”), and the Borrower, which is the
wholly-owned Subsidiary of Holdings (the “Purchase Agreements”), the
undersigned (the “Guarantor”), a wholly-owned Subsidiary of the Borrower,
unconditionally guarantees (a) the full and prompt payment, when due, whether
at maturity or earlier by reason of acceleration or otherwise, and at all times
thereafter of all obligations of the Borrower with respect to payment of the
principal of, prepayment charges (if any), and interest on the Notes (including
interest on any overdue principal and prepayment charges, if any, and, to the
extent permitted by law, on any overdue interest), and all other amounts due,
and (b) the prompt and faithful performance, discharge and observance of all
other obligations, covenants, agreements, conditions, representations,
warranties, indemnities and liabilities of the Borrower and Holdings to be
performed, discharged or observed by the Borrower and Holdings, under or
pursuant to the Purchase Agreements and all agreements, instruments and
documents executed or delivered in connection therewith or pursuant thereto
(all such obligations of the Borrower and Holdings guaranteed by the Guarantor
herein being hereinafter called the “Obligations”). In the event the Borrower
or Holdings defaults in the payment or performance, when due, of any of the Obligations
(whether at their stated maturity, by acceleration, or otherwise), the
Guarantor shall pay to the unpaid holders of the Notes (“Holders”), on demand,
the full amount of such Obligations in immediately available funds at the place
provided in the applicable Purchase Agreements or shall, on demand, fully
perform such Obligations. The Guarantor further agrees to pay (a) all costs and
expenses including, without limitation, all court costs and reasonable
attorneys’ fees and expenses paid or incurred by each of the Holders in
endeavoring to collect all or any part of the Obligations from, or in
prosecuting any action against, Holdings, the Borrower, the Guarantor, or any
other guarantor of all or any part of the Obligations, and (b) to the extent
permitted by law, interest on the Obligations and such costs and expenses at
the applicable per annum rate set forth in the Purchase Agreements. Unless
otherwise defined herein, the capitalized terms used herein which are defined
in the Purchase Agreements shall have the meanings specified therein.

 

The Guarantor hereby
represents and warrants that: 

 

 

(a) The Guarantor has full power, authority and legal right to execute
this Guarantee.

 

(b) This Guarantee has been
duly authorized, executed and delivered by the Guarantor and constitutes a
legal, valid and binding obligation of the Guarantor enforceable in accordance
with its terms.

 

(c) No consent, approval or
authorization of or filing with any Governmental Body or other Person on the
part of the Guarantor is required in connection with this Guarantee.

 

(d) The execution, delivery
and performance of this Guarantee will not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree
of any court, arbitrator or Governmental Body, domestic or foreign, or of the
charter or by-laws of the Guarantor or of any securities issued by the
Guarantor or of any mortgage, indenture, lease, contract, or loan agreement to
which the Guarantor is a party, or any other agreement, instrument or
undertaking to which the Guarantor is a party or which purports to be binding
upon the Guarantor or upon any of its assets, and will not result in the
creation or imposition of any Lien on any of the assets of the Guarantor except
as contemplated by this Guarantee.

 

The Guarantor hereby waives
notice of acceptance of this Guarantee by any Holder, of any action taken or
omitted in reliance hereon or of any default in the payment of any of the
Obligations or in the performance of any covenants and agreements of the
Borrower contained in the Purchase Agreements or the Notes, and any diligence,
presentment, demand, protest, dishonor or notice of any kind.

 

This Guarantee constitutes a
present and continuing Guarantee of payment and performance and not of collectability
of the Obligations, and shall be absolute, primary, present and unconditional,
and to the extent permitted by applicable law, shall not be subject to any
counterclaim, setoff, reduction or defense based upon any claim the Guarantor
may have against the Borrower, or any other Person, and shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way affected or impaired by any thing, event, happening, matter,
circumstance or condition whatsoever (whether or not the Guarantor shall have
any knowledge or notice thereof or shall consent thereto), including, without
limitation:

 

(i) any amendment or other
modification of or supplement to any provision of the Purchase Agreements, any
Subsidiary Guarantee, any other agreements or documents executed or delivered
in connection therewith or pursuant thereto or any of the Notes or any
assignment or transfer thereof, including without limitation any renewal or
extension of the terms of payment of any of the Notes or the granting of time
in respect of any payment thereof, or any furnishing or acceptance of security
or any release of any security furnished or accepted for any of the Notes or in
respect of the obligations of the Guarantor hereunder;

 

2

 

(ii) any waiver, consent, extension, granting of time, forbearance,
indulgence or other action or inaction under or in respect of this Guarantee or
any of the Notes or any exercise or nonexercise of any right, remedy or power
in respect hereof or thereof;

 

(iii) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceedings with respect to the Guarantor, the Borrower, Holdings,
the other Subsidiary Guarantors or any other Person, or the properties or
creditors of any of them;

 

(iv) the occurrence of any
Default or Event of Default, or any invalidity or unenforceability of, or any
misrepresentation, irregularity or other defect in, the Purchase Agreements,
any Subsidiary Guarantee, any other agreement or document executed or delivered
in connection therewith or pursuant thereto, any of the Notes or any other
agreement;

 

(v) any transfer of any
assets to or from the Guarantor, Holdings, any other Subsidiary Guarantor or
the Borrower, including without limitation any transfer or purported transfer
to the Guarantor, Holdings, any other Subsidiary Guarantor or the Borrower from
any Person, any invalidity, illegality of, or inability to enforce, any such
transfer or purported transfer, any consolidation or merger of the Guarantor,
Holdings, any other Subsidiary Guarantor or the Borrower with or into any other
corporation or entity, or any change whatsoever in the objects, capital
structure, constitution or business of the Guarantor, Holdings, any other
Subsidiary Guarantor or the Borrower or any Affiliate or Subsidiary of the
Guarantor, Holdings, any other Subsidiary Guarantor or of the Borrower;

 

(vi) any failure on the part
of the Borrower or any other Person to perform or comply with any term of the
Notes, the Purchase Agreements, any Subsidiary Guarantee or any other
agreement;

 

(vii) any suit or other
action brought by the Guarantor, Holdings, the Borrower, any other Subsidiary
Guarantor or any other Person, or by any stockholder or creditor of any of such
Persons, for any reason whatsoever, including without limitation any suit or
action in any way attacking or involving any issue, matter or thing in respect
of the Notes, the Purchase Agreements, any Subsidiary Guaranty or any other
agreement;

 

(viii) any lack or
limitation of status or power, incapacity or disability of the Guarantor,
Holdings, any other Subsidiary Guarantor or the Borrower or of any officer,
director or agent of the Guarantor, Holdings, any other Subsidiary Guarantor or
the Borrower or any of their respective stockholders;

 

(ix) the cessation from any
cause whatsoever (other than payment of the Obligations) of liability of the
Borrower;

 

3

 

(x) the termination of, or release or compromise of the Purchase
Agreements, any other agreement or document executed or delivered in connection
therewith or pursuant thereto, any of the Notes or any other agreement,
including, without limitation, any other Subsidiary Guarantee and the Guarantee
of Holdings set forth in Section 16.14 of the Purchase Agreements (other than
as a result of payment of the Obligations);

 

(xi) any lack or limitation
of the genuineness, validity, regularity or enforceability of the Notes, the Purchase
Agreements, any other agreement or document executed or delivered in connection
therewith or pursuant thereto, or any other agreement including without
limitation any Subsidiary Guarantee;

 

(xii) any failure by any of
the Holders to take any steps to perfect or maintain their security interest
(if any) in or Liens (if any) upon, or to preserve their rights to, any
security or collateral for the Obligations;

 

(xiii) any election by any
of the Holders, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. (S) 101 et seq.) (the “Bankruptcy Code”), of
the application of Section 1111(b)(2) of the Bankruptcy Code;

 

(xiv) the disallowance,
under Section 502 of the Bankruptcy Code, of all or any portion of any of the
Holders’ claims for repayment of the Obligations; or

 

(xv) any other thing, event,
happening, matter, circumstance or condition whatsoever, not in any way limited
to the foregoing, which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.

 

The obligations of the
Guarantor with respect to the guaranty and all other obligations under this
Guarantee of the Guarantor are and shall continue to be direct and unsecured
obligations of the Guarantor ranking pari passu as against the assets of the
Guarantor and pari passu with all other present and future Debt of the
Guarantor which is not expressed to be subordinate or junior in rank to any
other Debt of the Guarantor (except to the extent that the foregoing is not
true by virtue of, and solely by virtue of, Liens expressly permitted by the
Purchase Agreements securing other Debt insofar as such Debt represents a prior
claim in respect of the property or assets secured by such permitted Lien.

 

The liability of the
undersigned Guarantor under this Guarantee shall not exceed at any time the
greater of (i) 95% of the Adjusted Net Assets (as hereinafter defined) of the
Guarantor at the time of delivery hereof and (ii) 95% of the Adjusted Net
Assets of the Guarantor at the time of any payment hereunder. As used herein,
the term “Adjusted Net Assets” means at any time the lesser of (x) the amount
by which the fair market value of the assets of the Guarantor exceeds the total
amount of liabilities (including, without limitation, contingent liabilities,
but excluding liabilities under this Guarantee) of the Guarantor at such time,
and (y) the amount by which the present fair market value of the assets of the
Guarantor at such time exceeds the amount that will be required to pay the
probable liability

 

4

 

of the Guarantor on its debts (excluding debt in respect of this
Guarantee), as they become absolute and matured. Contingent liabilities of the
Guarantor (including, without limitation, liabilities in respect of guarantees,
pension and other employee benefit plans and pending or threatened litigation
and claims), shall be valued amounts which, in light of all the facts and
circumstances existing at the time, represent amounts which can reasonably be
expected to become actual or matured liabilities.

 

Notwithstanding anything to
the contrary contained herein or in any other agreement, document or
instrument, the Guarantor hereby irrevocably waives all rights of subrogation
(whether such rights arise under common law, contract or Federal law,
including, without limitation, Section 509 of the Bankruptcy Code) to the
claims of the Holders against the Borrower, and waives all contractual,
statutory and common law rights of contribution, reimbursement, indemnification
and similar rights and claims (as such term is defined in the Bankruptcy Code)
against the Borrower which may arise in connection with, or as a result of,
this Guarantee.

 

The Guarantor expressly
waives any and all benefits under California Civil Code Sections 2809, 2810,
2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil
Procedure Sections 580(a), 580(b), 580(d) and 726.

 

The Guarantor expressly
waives any right it may have to require any Person seeking enforcement of its
obligations hereunder to (a) proceed against the Borrower, Holdings, any other
Subsidiary Guarantor or any other Person, (b) proceed against or exhaust any
security, or (c) pursue any other remedy in the power of the Person seeking
such enforcement, including without limitation, its remedies pursuant to any
other Subsidiary Guarantee and the Holdings’ Guarantee set forth in Section
16.14 of the Purchase Agreements. The Holders from time to time may, at their
election, exercise any right or remedy they may have against the Guarantor,
including, without limitation, the right to foreclose upon any such security by
judicial or non-judicial sale, without affecting or limiting in any way the
liability of the Guarantor hereunder, except to the extent the Obligations have
been paid. The Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution or subrogation
or any other right or remedy of the Guarantor against the Borrower, Holdings,
any other Subsidiary Guarantor or any such security, whether resulting from
such election by the Holders of the Notes or otherwise.

 

The Guarantor agrees that
its obligations hereunder shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Borrower,
Holdings, any other Subsidiary Guarantor or the Guarantor is rescinded or must
be otherwise restored by any Holder of any Notes, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Guarantor further
agrees that, without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing and the Holder is prevented by
applicable law from exercising any remedy under this Guarantee or under any of
the Notes, such Holder shall be entitled to receive from the Guarantor upon
demand therefor, the sums which would otherwise have been due from the Borrower
had such remedies been exercised.

 

5

 

The Guarantor agrees that this Guarantee shall continue in full force
and effect and may not be terminated or otherwise revoked by the Guarantor
until the Obligations shall have been fully discharged.

 

This Guarantee shall be
binding upon the Guarantor and upon the successors and assigns of the Guarantor
and shall inure to the benefit of each of the Purchasers and each other Holder
and their respective successors and assigns; all references herein to the
Borrower, Holdings, other Subsidiary Guarantors and to the Guarantor shall be
deemed to include their respective successors and assigns, including, without
limitation, a receiver, trustee or debtor-in-possession of or for the Borrower,
Holdings, other Subsidiary Guarantors or the Guarantor. All references to the
singular shall be deemed to include the plural where the context so requires.

 

THIS GUARANTEE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE).

 

THE GUARANTOR CONSENTS AND
AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF COOK, STATE OF ILLINOIS, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM
NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES THAT
ANY DISPUTE CONCERNING THE RELATIONSHIP BETWEEN ANY PURCHASER OR HOLDER OF
NOTES, ON THE ONE HAND, AND THE GUARANTOR, ON THE OTHER HAND, OR THE CONDUCT OF
ANY PARTY IN CONNECTION WITH THIS GUARANTEE OR OTHERWISE SHALL BE HEARD ONLY IN
THE COURTS DESCRIBED ABOVE.

 

THE GUARANTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY HAND DELIVERY OR MAIL TO THE GUARANTOR AT ITS
ADDRESS SET FORTH BELOW. THE GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.

 

NOTHING IN THIS GUARANTEE
SHALL AFFECT THE RIGHT OF ANY PURCHASER OR HOLDER OF NOTES TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY
PURCHASER OR HOLDER OF NOTES TO BRING ANY ACTION OR PROCEEDING AGAINST THE
GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

Wherever possible each
provision of this Guarantee shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guarantee
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Guarantee.

 

THE GUARANTOR HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS GUARANTEE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN

 

6

 

CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE GUARANTOR IN RESPECT TO THIS GUARANTEE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE
GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTEE WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.

 

IN WITNESS WHEREOF, this
Guarantee has been duly executed by the Guarantor as of the 8th day of
November, 1996.

 

IHOP PROPERTIES, INC.

 

 

	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  
	
   

  	
   

  
				

 

 

Address:

 

525
North Brand Boulevard

Glendale,
CA 91203

 

7

 

[CONFORMED COPY]

 

SUBSIDIARY GUARANTEE

 

IHOP RESTAURANTS, INC.

 

FOR VALUE RECEIVED and in
consideration of the purchase by the Purchasers (as hereinafter defined) of
those certain 7.42% Senior Notes Due 2008 (the “Notes”) of International House
of Pancakes, Inc., a Delaware corporation (herein called, together with its
successors and assigns, the “Borrower”), pursuant to the several Senior Note
Purchase Agreements, each dated as of November 1, 1996, by and among the
several purchasers named in Schedule I thereto (the “Purchasers”), IHOP Corp.,
a Delaware corporation (“Holdings”), and the Borrower, which is the
wholly-owned Subsidiary of Holdings (the “Purchase Agreements”), the
undersigned (the “Guarantor”), a wholly-owned Subsidiary of the Borrower,
unconditionally guarantees (a) the full and prompt payment, when due, whether
at maturity or earlier by reason of acceleration or otherwise, and at all times
thereafter of all obligations of the Borrower with respect to payment of the
principal of prepayment charges (if any), and interest on the Notes (including
interest on any overdue principal and prepayment charges, if any, and, to the
extent permitted by law, on any overdue interest), and all other amounts due,
and (b) the prompt and faithful performance, discharge and observance of all
other obligations, covenants, agreements, conditions, representations,
warranties, indemnities and liabilities of the Borrower and Holdings to be
performed, discharged or observed by the Borrower and Holdings, under or
pursuant to the Purchase Agreements and all agreements, instruments and
documents executed or delivered in connection therewith or pursuant thereto
(all such obligations of the Borrower and Holdings guaranteed by the Guarantor
herein being hereinafter called the “Obligations”). In the event the Borrower
or Holdings defaults in the payment or performance, when due, of any of the
obligations (whether at their stated maturity, by acceleration, or otherwise),
the Guarantor shall pay to the unpaid holders of the Notes (“Holders”), on
demand, the full amount of such Obligations in immediately available funds at
the place provided in the applicable Purchase Agreements or shall, on demand,
fully perform such Obligations. The Guarantor further agrees to pay (a) all
costs and expenses including, without limitation, all court costs and
reasonable attorneys’ fees and expenses paid or incurred by each of the Holders
in endeavoring to collect all of any part of the Obligations from, or in
prosecuting any action against, Holdings, the Borrower, the Guarantor, or any
other guarantor of all or any part of the Obligations, and (b) to the extent
permitted by law, interest on the Obligations and such costs and expenses at
the applicable per annum rate set forth in the Purchase Agreements. Unless
otherwise defined herein, the capitalized terms used herein which are defined
in the Purchase Agreements shall have the meanings specified therein.

 

The Guarantor hereby
represents and warrants that: 

 

 

(a) The Guarantor has full power, authority and legal right to execute
this Guarantee.

 

(b) This Guarantee has been
duly authorized, executed and delivered by the Guarantor and constitutes a
legal, valid and binding obligation of the Guarantor enforceable in accordance
with its terms.

 

(c) No consent, approval or
authorization of or filing with any Governmental Body or other Person on the
part of the Guarantor is required in connection with this Guarantee.

 

(d) The execution, delivery
and performance of this Guarantee will not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree
of any court, arbitrator or Governmental Body, domestic or foreign, or of the
charter or by-laws of the Guarantor or of any securities issued by the
Guarantor or of any mortgage, indenture, lease, contract, or loan agreement to
which the Guarantor is a party, or any other agreement, instrument or
undertaking to which the Guarantor is a party or which purports to be binding
upon the Guarantor or upon any of its assets, and will not result in the
creation or imposition of any Lien on any of the assets of the Guarantor except
as contemplated by this Guarantee.

 

The Guarantor hereby waives
notice of acceptance of this Guarantee by any Holder, of any action taken or
omitted in reliance hereon or of any default in the payment of any of the
Obligations or in the performance of any covenants and agreements of the
Borrower contained in the Purchase Agreements or the Notes, and any diligence,
presentment, demand, protest, dishonor or notice of any kind.

 

This Guarantee constitutes a
present and continuing Guarantee of payment and performance and not of
collectability of the Obligations, and shall be absolute, primary, present and
unconditional, and to the extent permitted by applicable law, shall not be subject
to any counterclaim, setoff, reduction or defense based upon any claim the
Guarantor may have against the Borrower, or any other Person, and shall remain
in full force and effect without regard to, and shall not be released,
discharged or in any way affected or impaired by any thing, event, happening,
matter, circumstance or condition whatsoever (whether or not the Guarantor
shall have any knowledge or notice thereof or shall consent thereto),
including, without limitation:

 

(i) any amendment or other modification
of or supplement to any provision of the Purchase Agreements, any Subsidiary
Guarantee, any other agreements or documents executed or delivered in
connection therewith or pursuant thereto or any of the Notes or any assignment
or transfer thereof, including without limitation any renewal or extension of
the terms of payment of any of the Notes or the granting of time in respect of
any payment thereof, or any furnishing or acceptance of security or any release
of any security furnished or accepted for any of the Notes or in respect of the
obligations of the Guarantor hereunder;

 

2

 

(ii) any waiver, consent, extension, granting of time, forbearance,
indulgence or other action or inaction under or in respect of this Guarantee or
any of the Notes or any exercise or nonexercise of any right, remedy or power
in respect hereof or thereof;

 

(iii) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceedings with respect to the Guarantor, the Borrower, Holdings,
the other Subsidiary Guarantors or any other Person, or the properties or
creditors of any of them;

 

(iv) the occurrence or any
Default or Event of Default, or any invalidity or unenforceability of, or any
misrepresentation, irregularity or other defect in, the Purchase Agreements,
any Subsidiary Guarantee, any other agreement or document executed or delivered
in connection therewith or pursuant thereto, any of the Notes or any other
agreement;

 

(v) any transfer of any
assets to or from the Guarantor, Holdings, any other Subsidiary OSC Guarantor
or the Borrower, including without limitation any transfer or purported
transfer to the Guarantor, Holdings, any other Subsidiary Guarantor or the Borrower
from any Person, any invalidity, illegality of, or inability to enforce, any
such transfer or purported transfer, any consolidation or merger of the
Guarantor, Holdings, any other Subsidiary Guarantor or the Borrower with or
into any other corporation or entity, or any change whatsoever in the objects,
capital structure, constitution or business of the Guarantor, Holdings, any
other Subsidiary Guarantor or the Borrower or any Affiliate or Subsidiary of
the Guarantor, Holdings, any other Subsidiary Guarantor or of the Borrower;

 

(vi) any failure on the part
of the Borrower or any other Person to perform or comply with any term of the
Notes, the Purchase Agreements, any Subsidiary Guarantee or any other
agreement;

 

(vii) any suit or other
action brought by the Guarantor, Holdings, the Borrower, any other Subsidiary
Guarantor or any other Person, or by any stockholder or creditor of any of such
Persons, for any reason whatsoever, including without limitation any suit or
action in any way attacking or involving any issue, matter or thing in respect
of the Notes, the Purchase Agreements, any Subsidiary Guaranty or any other
agreement;

 

(viii) any lack or
limitation of status or power, incapacity or disability of the Guarantor,
Holdings, any other Subsidiary Guarantor or the Borrower or of any officer,
director or agent of the Guarantor, Holdings, any other Subsidiary Guarantor or
the Borrower or any of their respective stockholders;

 

(ix) the cessation from any
cause whatsoever (other than payment of the Obligations) of liability of the
Borrower;

 

3

 

(x) the termination of, or release or compromise of the Purchase
Agreements, any other agreement or document executed or delivered in connection
therewith or pursuant thereto, any of the Notes or any other agreement,
including, without limitation, any other Subsidiary Guarantee and the Guarantee
of Holdings set forth in Section 16.14 of the Purchase Agreements (other than
as a result of payment of the Obligations);

 

(xi) any lack or limitation
of the genuineness, validity, regularity or enforceability of the Notes, the
Purchase Agreements, any other agreement or document executed or delivered in
connection therewith or pursuant thereto, or any other agreement including without
limitation any Subsidiary Guarantee;

 

(xii) any failure by any of
the Holders to take any steps to perfect or maintain their security interest
(if any) in or Liens (if any) upon, or to preserve their rights to, any
security or collateral for the Obligations;

 

(xiii) any election by any
of the Holders, in any proceeding instituted under Chapter 11 of Title 11 of
the United States Code (11 U.S.C. (S)101 et seq.) (the “Bankruptcy Code”), of
the application of Section 1111(b)(2) of the Bankruptcy Code;

 

(xiv) the disallowance,
under Section 502 of the Bankruptcy Code, of all or any portion of any of the
Holders’ claims for repayment of the Obligations; or

 

(xv) any other thing, event,
happening, matter, circumstance or condition whatsoever, not in any way limited
to the foregoing, which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.

 

The obligations of the
Guarantor with respect to the guaranty and all other obligations under this
Guarantee of the Guarantor are and shall continue to be direct and unsecured
obligations of the Guarantor ranking pari passu as against the assets of the
Guarantor and pari passu with all other present and future Debt of the
Guarantor which is not expressed to be subordinate or junior in rank to any
other Debt of the Guarantor (except to the extent that the foregoing is not
true by virtue of, and solely by virtue of, Liens expressly permitted by the
Purchase Agreements securing other Debt insofar as such Debt represents a prior
claim in respect of the property or assets secured by such permitted Lien.

 

The liability of the
undersigned Guarantor under this Guarantee shall not exceed at any time the
greater of (i) 95% of the Adjusted Net Assets (as hereinafter defined) of the
Guarantor at the time of delivery hereof and (ii) 95% of the Adjusted Net
Assets of the Guarantor at the time of any payment hereunder. As used herein,
the term “Adjusted Net Assets” means at any time the lesser of (x) the amount
by which the fair market value of the assets of the Guarantor exceeds the total
amount of liabilities (including, without limitation, contingent liabilities,
but excluding liabilities under this Guarantee) of the Guarantor at such time,
and (y) the amount by which the present fair market value of the assets of the
Guarantor at such time exceeds the amount that will be required to pay the
probable liability

 

4

 

of the Guarantor on its debts (excluding debt in respect of this
Guarantee), as they become absolute and matured. Contingent liabilities of the
Guarantor (including, without limitation, liabilities in respect of guarantees,
pension and other employee benefit plans and pending or threatened litigation
and claims), shall be valued at amounts which, in light of all the facts and
circumstances existing at the time, represent amounts which can reasonably be
expected to become actual or matured liabilities.

 

Notwithstanding anything to
the contrary contained herein or in any other agreement, document or instrument,
the Guarantor hereby irrevocably waives all rights of subrogation (whether such
rights arise under common law, contract or Federal law, including, without
limitation, Section 509 of the Bankruptcy Code) to the claims of the Holders
against the Borrower, and waives all contractual, statutory and common law
rights of contribution, reimbursement, indemnification and similar rights and
claims (as such term is defined in the Bankruptcy Code) against Borrower which
may arise in connection with, or as a result of, this Guarantee.

 

The Guarantor expressly
waives any and all benefits under California Civil Code Sections 2809, 2810,
2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil
Procedure Sections 580(a), 580(b), 580(d) and 726.

 

The Guarantor expressly
waives any right it may have to require any Person seeking enforcement of its
obligations hereunder to (a) proceed against the Borrower, Holdings, any other
Subsidiary Guarantor or any other Person, (b) proceed against or exhaust any
security, or (c) pursue any other remedy in the power of the Person seeking
such enforcement, including without limitation, its remedies pursuant to any
other Subsidiary Guarantee and the Holdings’ Guarantee set forth in Section
16.14 of the Purchase Agreements. The Holders from time to time may, at their
election, exercise any right or remedy they may have against the Guarantor,
including, without limitation, the right to foreclose upon any such security by
judicial or non-judicial sale, without affecting or limiting in any way the
liability of the Guarantor hereunder, except to the extent the Obligations have
been paid. The Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution or subrogation
or any other right or remedy of the Guarantor against the Borrower, Holdings,
any other Subsidiary Guarantor or any such security, whether resulting from
such election by the Holders of the Notes or otherwise.

 

The Guarantor agrees that
its obligations hereunder shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Borrower,
Holdings, any other Subsidiary Guarantor or the Guarantor is rescinded or must
be otherwise restored by any Holder of any Notes, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Guarantor further
agrees that, without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing and the Holder is prevented by
applicable law from exercising any remedy under this Guarantee or under any of
the Notes, such Holder shall be entitled to receive from the Guarantor upon
demand therefor, the sums which would otherwise have been due from the Borrower
had such remedies been exercised.

 

5

 

The Guarantor agrees that this Guarantee shall continue in full force
and effect and may not be terminated or otherwise revoked by the Guarantor
until the Obligations shall have been fully discharged.

 

This Guarantee shall be
binding upon the Guarantor and upon the successors and assigns of the Guarantor
and shall inure to the benefit of each of the Purchasers and each other Holder
and their respective successors and assigns; all references herein to the
Borrower, Holdings, other Subsidiary Guarantors and to the Guarantor shall be
deemed to include their respective successors and assigns, including, without
limitation, a receiver, trustee or debtor-in- possession of or for the Borrower,
Holdings, other Subsidiary Guarantors or the Guarantor. All references to the
singular shall be deemed to include the plural where the context so requires.

 

THIS GUARANTEE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPALS OF SUCH STATE).

 

THE GUARANTOR CONSENTS AND
AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF COOK, STATE OF ILLINOIS, AND WAIVES ANY OBJECTION BASED ON THE VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES
THAT ANY DISPUTE CONCERNING THE RELATIONSHIP BETWEEN ANY PURCHASER OR HOLDER OF
NOTES, ON THE ONE HAND, AND THE GUARANTOR, ON THE OTHER HAND, OR THE CONDUCT OF
ANY PARTY IN CONNECTION WITH THIS GUARANTEE OR OTHERWISE SHALL BE HEARD ONLY IN
THE COURTS DESCRIBED ABOVE.

 

THE GUARANTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY HAND DELIVERY OR MAIL TO THE GUARANTOR AT ITS
ADDRESS SET FORTH BELOW. THE GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.

 

NOTHING IN THIS GUARANTEE
SHALL AFFECT THE RIGHT OF ANY PURCHASER OR HOLDER OF NOTES TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY
PURCHASER OR HOLDER OF NOTES TO BRING ANY ACTION OR PROCEEDING AGAINST THE
GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

Wherever possible each
provision of this Guarantee shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Guarantee shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Guarantee.

 

THE GUARANTOR HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS GUARANTEE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN

 

6

 

CONNECTION HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE GUARANTOR IN RESPECT TO THIS GUARANTEE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE
GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS GUARANTEE WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GUARANTOR TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.

 

IN WITNESS WHEREOF, this
Guarantee has been duly executed by the Guarantor as of the 8th day of
November, 1996.

 

IHOP RESTAURANTS, INC.

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  
	
   

  	
   

  
				

 

 

Address:

 

525
North Brand Boulevard

Glendale,
CA 91203

 

7

 

[CONFORMED COPY]

 

INTERCREDITOR AGREEMENT

 

Dated as of November 1, 1996

 

Among

 

BANK OF AMERICA ILLINOIS

 

And

 

THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK

MONY LIFE INSURANCE COMPANY OF AMERICA

THE MANUFACTURERS LIFE INSURANCE COMPANY

THE FRANKLIN LIFE INSURANCE COMPANY

THE CANADA LIFE ASSURANCE COMPANY

and

MODERN WOODMEN OF AMERICA

 

And

 

JACKSON NATIONAL LIFE INSURANCE COMPANY

PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY

UNITED OF OMAHA LIFE INSURANCE COMPANY

and

SECURITY FIRST LIFE INSURANCE COMPANY

 

And

 

Additional Lenders

 

 

TABLE OF CONTENTS

 

	
  SECTION

  	
   

  	
  HEADING

  	
   

  
	
  Parties

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Recitals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  1.

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  SHARING OF RECOVERIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  AGREEMENTS
  AMONG THE CREDITORS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Independent Actions by
  Creditors

  	
   

  
	
  Section 3.2.

  	
   

  	
  Relation of Creditors

  	
   

  
	
  Section 3.3.

  	
   

  	
  Acknowledgment of
  Guarantees

  	
   

  
	
  Section 3.4.

  	
   

  	
  Additional Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Entire Agreement

  	
   

  
	
  Section 4.2.

  	
   

  	
  Notices

  	
   

  
	
  Section 4.3.

  	
   

  	
  Successors and Assigns

  	
   

  
	
  Section 4.4.

  	
   

  	
  Consents, Amendment,
  Waivers

  	
   

  
	
  Section 4.5.

  	
   

  	
  Governing Law

  	
   

  
	
  Section 4.6.

  	
   

  	
  Counterparts

  	
   

  
	
  Section 4.7.

  	
   

  	
  Severability

  	
   

  
	
  Section 4.8.

  	
   

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature
  Page

  	
   

  	
   

  	
   

  

 

i

 

INTERCREDITOR AGREEMENT

 

INTERCREDITOR AGREEMENT
dated as of November 1, 1996 among BANK OF AMERICA ILLINOIS (the “Lender”), THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, MONY LIFE INSURANCE COMPANY OF
AMERICA, THE MANUFACTURERS LIFE INSURANCE COMPANY, THE FRANKLIN LIFE INSURANCE
COMPANY, THE CANADA LIFE ASSURANCE COMPANY and MODERN WOODMEN OF AMERICA (each
institution is referred to herein as a “1992 Noteholder” and the institutions
are collectively referred to as the “1992 Noteholders”) and JACKSON NATIONAL
LIFE INSURANCE COMPANY, PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY, UNITED OF OMAHA
LIFE INSURANCE COMPANY and SECURITY FIRST LIFE INSURANCE COMPANY (each
institution is referred to herein as a “1996 Noteholder” and the institutions
are collectively referred to herein as the “1996 Noteholders”; the 1996
Noteholders, the 1992 Noteholders and the Lender and each of the additional
Persons, if any, that become a party hereto as contemplated by (S)3.4 hereof
(each such Person is referred to as an “Additional Lender”) are individually
referred to herein as a “Creditor” and are collectively referred to herein as
the “Creditors”).

 

RECITALS:

 

A. Under and pursuant to the
separate and several Senior Note Purchase Agreements each dated as of November
1, 1996 (collectively, the “1996 Note Agreements”), among International House
of Pancakes, Inc., a Delaware corporation (the “Borrower”), IHOP Corp., a
Delaware corporation (“Holdings”) and each of the 1996 Noteholders, the
Borrower has issued and sold to the 1996 Noteholders $35,000,000 aggregate
principal amount of its 7.42% Senior Notes, Due November, 2008 (the “1996
Notes”).

 

B. Under and pursuant to the
separate and several Senior Note Purchase Agreements each dated as of November
19, 1992 (collectively, as amended the “1992 Note Agreements”), among the
Borrower, Holdings and each of the 1992 Noteholders, the Borrower has issued
and sold to the 1992 Noteholders $32,000,000 aggregate principal amount of its
7.79% Senior Notes, Due November, 2002 (the “1992 Notes”).

 

C. Under and pursuant to
that certain Letter Agreement dated as of June 30, 1993 (as such agreement may
be modified, amended, renewed or replaced, including any increase in the amount
thereof, the “Bank Credit Agreement”) among the Borrower, Holdings, and the
Lender, the Lender has made available to the Borrower certain credit facilities
in a current aggregate principal amount up to $20,000,000 (all amounts
outstanding in respect of said credit facilities being hereinafter collectively
referred to as the “Loans”).

 

D. In connection with the
execution of the 1992 Note Agreements and as security for the 1992 Notes issued
thereunder, IHOP Realty Corp., IHOP Properties, Inc. and IHOP Restaurants,
Inc., (individually, a “Subsidiary Guarantor” and collectively, the “Subsidiary
Guarantors”) each of which is a wholly-owned subsidiary of the Borrower, have
guaranteed to the 1992 Noteholders the payment of the principal of, premium, if
any, and interest on 

 

 

the 1992 Notes and payment and performance of all other obligations of
the Borrower under the 1992 Note Agreements under the Subsidiary Guarantee
dated as of November 19, 1992 executed by IHOP Realty Corp., the Subsidiary
Guarantee dated as of December 29, 1993 executed by IHOP Properties, Inc., and
the Subsidiary Guarantee dated as of December 29, 1993 executed by IHOP
Restaurants, Inc. (as such agreements may be modified, amended, renewed or
replaced, including any increase in the amount thereof, individually, a “1992
Noteholder Guaranty” and collectively, the “1992 Noteholder Guarantees”).

 

E. In connection with the
execution of the Bank Credit Agreement and as support for the Loans made
thereunder, the Subsidiary Guarantors have guaranteed to the Lender the payment
of the Loans and all other obligations of the Borrower under the Bank Credit
Agreement under the Subsidiary Guarantee dated as of June 30, 1993 executed by
IHOP Realty Corp., the Subsidiary Guarantee dated as of December 29, 1993
executed by IHOP Properties, Inc., and the Subsidiary Guarantee dated as of
December 29, 1993 executed by IHOP Restaurants, Inc. (as such agreements may be
modified, amended, renewed or replaced, including any increase in the amount
thereof, individually, an “Lender Guaranty” and collectively, the “Lender
Guarantees”).

 

F. Each Subsidiary Guarantor
is entering into a Guaranty Agreement (individually, a “1996 Noteholder
Guaranty” and collectively, the “1996 Noteholder Guarantees”) dated as of the
date hereof pursuant to which each Subsidiary Guarantor shall guarantee to the
1996 Noteholders the payment of the principal of, premium, if any, and interest
on the 1996 Notes and the payment and performance of all other obligations of
the Borrower under the 1996 Note Agreements. The Lender Guarantees, the 1992
Noteholder Guarantees, the 1996 Noteholder Guarantees and the Additional
Permitted Subsidiary Guarantees, if any, are each hereinafter referred to
individually, as a “Subsidiary Guaranty” and collectively, as the “Subsidiary
Guarantees.”

 

G. Each of the Creditors
desires to provide for their respective rights in respect of the Subsidiary
Guarantees and certain collections from the Subsidiary Guarantors and to make
certain other commitments and undertakings in connection with the 1992 Note
Agreements, the Bank Credit Agreement, the 1996 Note Agreements, the Additional
Debt Facility Agreements, if any, the Subsidiary Guarantees, the obligations
incurred by the Subsidiary Guarantors under such agreements and the rights of
the Creditors under such agreements.

 

H. The 1992 Noteholders, the
Lender, and the 1996 Noteholders hereby contemplate that in the event that any of
the Subsidiary Guarantors execute and deliver an Additional Permitted
Subsidiary Guarantee, the beneficiary of such Additional Permitted Subsidiary
Guarantee shall become a party to this Agreement upon compliance with the terms
and conditions set forth in (S)3.4 hereof.

 

NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

2

 

SECTION
1. DEFINITIONS.

 

The following terms shall
have the meanings assigned to them below in this (S)1 or in the provisions of
this Agreement referred to below:

 

“Additional Debt Facility”
shall mean Debt of the Borrower which is guaranteed by an Additional Permitted
Subsidiary Guarantee.

 

“Additional Debt Facility
Agreement” shall mean the agreement executed and delivered by the Borrower and
the Additional Lenders evidencing the Additional Debt Facility.

 

“Additional Lender” shall
have the meaning assigned thereto in the introductory paragraph hereto.

 

“Additional Permitted
Subsidiary Guarantees” shall mean those Guarantees delivered by any Subsidiary
Guarantor which guarantees any of the Borrower’s Guaranteed Obligations 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.

 

“Bank Credit Agreement”
shall have the meaning assigned thereto in the Recitals hereof.

 

“Bankruptcy Proceeding”
shall mean, with respect to any person, a general assignment of such person for
the benefit of its creditors, or the institution by or against such person of
any proceeding seeking relief as debtor, or seeking to adjudicate such person as
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of such person or its debts, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for such person or for
any substantial part of its property.

 

“Borrower” shall have the
meaning assigned thereto in the Recitals hereof.

 

“Borrower’s Guaranteed
Obligations” shall mean all principal of, premium, if any, and interest on, the
1996 Notes, the 1992 Notes, the Loans and the Additional Debt Facilities, if
any, and all other obligations of the Borrower under or in respect of the 1996
Notes, the 1992 Notes, the Loans and the Additional Debt Facilities, if any, under
the 1996 Note Agreements, the 1992 Note Agreements, the Bank Credit Agreement
and the Additional Debt Facility Agreements and any other obligations of the
Borrower to the Creditors which are guaranteed by the Subsidiary Guarantees;
provided that any amount of such Borrower’s Guaranteed Obligations which is not
allowed as a claim enforceable against the Borrower in a Bankruptcy Proceeding
under applicable law shall be excluded from the computation of “Borrower’s
Guaranteed Obligations” hereunder.

 

3

 

“Creditor” shall have the meaning assigned thereto in the introductory
paragraph hereto.

 

“Excess Guaranty Payment”
shall mean as to any Creditor an amount equal to the Guaranty Payment received
by such Creditor less the Pro Rata Share of Guaranty Payments to which such
Creditor is then entitled.

 

“Guaranty Payment” shall
have the meaning assigned thereto in (S)2.

 

“Lender” shall have the
meaning assigned thereto in the introductory paragraph hereto.

 

“Lender Guaranty” and
“Lender Guarantees” shall have the meanings assigned thereto in the Recitals
hereof.

 

“Loans” shall have the
meaning assigned thereto in the Recitals hereof.

 

“1992 Note Agreements” shall
have the meaning assigned thereto in the Recitals hereof.

 

“1996 Note Agreements” shall
have the meaning assigned thereto in the Recitals hereof.

 

“1992 Noteholder” shall have
the meaning assigned thereto in the introductory paragraph hereto.

 

“1996 Noteholder” shall have
the meaning assigned thereto in the introductory paragraph hereto.

 

“1992 Noteholder Guaranty”
and “1992 Noteholder Guarantees” shall have the meanings assigned thereto in
the Recitals hereof.

 

“1996 Noteholder Guaranty”
and “1996 Noteholder Guarantees” shall have the meanings assigned thereto in
the Recitals hereof.

 

“1992 Notes” shall have the
meaning assigned thereto in the Recitals hereof.

 

“1996 Notes” shall have the
meaning assigned thereto in the Recitals hereof.

 

“Pro Rata Share of Guaranty
Payments” shall mean as of the date of any Guaranty Payment to a Creditor under
any Subsidiary Guaranty an amount equal to the product obtained by multiplying
(x) the amount of all Guaranty Payments made by the Subsidiary Guarantors to
all Creditors concurrently with the payments to such Creditor less all
reasonable costs incurred by such Creditors in connection with the collection
of such Guaranty Payments by (y) a fraction, the numerator of which shall be
the Specified Amount owing to such Creditor, and the denominator of which is
the aggregate amount of all

 

4

 

outstanding Borrower’s Guaranteed Obligations (without giving effect in
the denominator to the application of any such Guaranty Payments).

 

“Receiving Creditor” shall
have the meaning assigned thereto in (S)2.

 

“Specified Amount” shall
mean as to any Creditor the aggregate amount of the Borrower’s Guaranteed
Obligations owed to such Creditor.

 

“Subsidiary Guarantor” and
“Subsidiary Guarantors” shall have the meanings assigned thereto in the Recitals
hereof.

 

“Subsidiary Guaranty” and
“Subsidiary Guarantees” shall have the meanings assigned thereto in the
Recitals hereof.

 

SECTION
2. SHARING OF RECOVERIES.

 

Each Creditor hereby agrees
with each other Creditor that payments (including payments made through setoff
of deposit balances or otherwise or payments or recoveries from any security
interest granted to any Creditor) made pursuant to the terms of any Subsidiary
Guaranty (a “Guaranty Payment”) (x) within 90 days prior to the commencement of
a Bankruptcy Proceeding with respect to any Subsidiary Guarantor or the
Borrower or (y) following the acceleration of the 1996 Notes, the 1992 Notes or
the Loans or the acceleration of any other Borrower’s Guaranteed Obligation,
shall be shared so that each Creditor shall receive its Pro Rata Share of
Guaranty Payments. Accordingly, each Creditor hereby agrees that in the event
(a) an event described in clauses (x) or (y) above shall have occurred, (b) any
Creditor shall receive a Guaranty Payment (a “Receiving Creditor”), and (c) any
other Creditor shall not concurrently receive its Pro Rata Share of Guaranty
Payments from the same Subsidiary Guarantor, then the Receiving Creditor shall
promptly remit the Excess Guaranty Payment to each other Creditor who shall then
be entitled thereto so that after giving effect to such payment (and any other
payments then being made by any other Receiving Creditor pursuant to this (S)2)
each Creditor shall have received its Pro Rata Share of Guaranty Payments.

 

Any such payments shall be
deemed to be and shall be made in consideration of the purchase for cash at
face value, but without recourse, ratably from the other Creditors such amount
of 1996 Notes, 1992 Notes, Loans or Additional Debt Facility, if any, as the
case may be, to the extent necessary to cause such Creditor to share such
Excess Guaranty Payment with the other Creditors as hereinabove provided;
provided, however, that if any such purchase or payment is made by any
Receiving Creditor and if such Excess Guaranty Payment or part thereof is
thereafter recovered from such Receiving Creditor by any Subsidiary Guarantor
(including, without limitation, by any trustee in bankruptcy of any Subsidiary
Guarantor or any creditor thereof), the related purchase from the other Creditors
shall be rescinded ratably and the purchase price restored as to the portion of
such Excess Guaranty Payment so recovered, but without interest; and provided
further nothing herein contained shall obligate any Creditor to resort to any
setoff, application of deposit balance or other means of payment under any
Subsidiary Guaranty or avail itself of any

 

5

 

recourse by resort to any property of the Borrower or any Subsidiary
Guarantor, the taking of any such action to remain within the absolute
discretion of such Creditor without obligation of any kind to the other
Creditors to take any such action.

 

SECTION 3. AGREEMENTS AMONG THE CREDITORS.

 

Section
3.1. Independent
Actions by Creditors. Nothing contained in this Agreement shall prohibit any
Creditor from accelerating the maturity of, or demanding payment from any
Subsidiary Guarantor on, any Borrower’s Guaranteed Obligation of the Borrower
to such Creditor or from instituting legal action against the Borrower or any
Subsidiary Guarantor to obtain a judgement or other legal process in respect of
such Borrower’s Guaranteed Obligation, but any funds received from any
Subsidiary Guarantor in connection with any recovery therefrom shall be subject
to the terms of this Agreement.

 

Section
3.2. Relation of
Creditors. This Agreement is entered into solely for the purposes set forth
herein, and no Creditor assumes any responsibility to any other party hereto to
advise such other party of information known to such other party regarding the
financial condition of the Borrower or any Subsidiary Guarantor or of any other
circumstances bearing upon the risk of nonpayment of any Borrower’s Guaranteed
Obligation. Each Creditor specifically acknowledges and agrees that nothing
contained in this Agreement is or is intended to be for the benefit of the
Borrower or any Subsidiary Guarantor and nothing contained herein shall limit
or in any way modify any of the obligations of the Borrower or any Subsidiary
Guarantor to the Creditors.

 

Section
3.3. Acknowledgement
of Guarantees. The Lender hereby expressly acknowledges the existence of the
1992 Noteholder Guarantees and the 1996 Noteholder Guarantees. The 1992
Noteholders hereby expressly acknowledge the existence of the Lender Guarantees
and the 1996 Noteholder Guarantees. The 1996 Noteholders hereby expressly
acknowledge the existence of the Lender Guarantees and the 1992 Noteholder
Guarantees.

 

Section
3.4. Additional
Lenders. Additional Persons may become “Creditors” hereunder by executing and
delivering to each of the then existing Creditors (i) a copy of this Agreement
so executed and (ii) a copy of the agreement or documents pursuant to which
such Person becomes a creditor of the Borrower and of any Subsidiary Guarantor.
Accordingly, upon the execution and delivery of such copy of this Agreement by
any such Person, such Person shall, upon the acknowledgement of the then
existing Creditors, thereinafter become a Creditor for all purposes of this
Agreement.

 

Section
4. MISCELLANEOUS.

 

Section
4.1. Entire
Agreement. This Agreement represents the entire Agreement among the Creditors
and, except as otherwise provided, this Agreement may not be altered, amended
or modified except in a writing executed by all the parties to this Agreement.

 

6

 

Section 4.2. Notices. Notices hereunder shall be given
to the Creditors at their addresses as set forth in the 1996 Note Agreements,
the 1992 Note Agreements, the Bank Credit Agreement or the Additional Debt
Facility Agreements, as the case may be, or at such other address as may be
designated by each in a written notice to the other parties hereto.

 

Section
4.3. Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of each
of the Creditors and their respective successors and assigns, whether so
expressed or not, and, in particular, shall inure to the benefit of and be
enforceable by any future holder or holders of any Borrower’s Guaranteed
Obligations, and the term “Creditor” shall include any such subsequent holder
of Borrower’s Guaranteed Obligations, wherever the context permits.

 

Section
4.4. Consents,
Amendment, Waivers. All agreements, waivers or consents of any provision of
this Agreement shall be effective only if the same shall be in writing and
signed by all of the Creditors.

 

Section
4.5. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Illinois.

 

Section
4.6. Counterparts.
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one Agreement, and any of the parties hereto
may execute this Agreement by signing any such counterpart.

 

Section
4.7. Severability. In
case any one or more of the provisions contained in this Agreement shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.

 

Section
4.8. Expenses. In the
event of any litigation to enforce this Agreement, the prevailing party shall
be entitled to its reasonable attorney’s fees (including the allocated costs of
in-house counsel).

 

7

 

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first above written.

 

BANK OF AMERICA ILLINOIS, this Lender

 

	
   

  	
   

  
	
   

  	
  By  

  	
  /s/ Gina M. West

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
				

 

 

THE MUTUAL LIFE INSURANCE COMPANY OF

NEW YORK, a 1992 Noteholder

 

 

	
   

  	
   

  
	
   

  	
  By  

  	
   /s/ Suzanne E.
  Walton

  	
   

  
	
   

  	
  Managing Director

  
				

 

 

MONY LIFE INSURANCE COMPANY OF

AMERICA, a 1992 Noteholder

 

 

	
   

  	
   

  
	
   

  	
  By  

  	
   /s/ Suzanne E.
  Walton

  	
   

  
	
   

  	
  Authorized Agent 

  
				

 

 

THE MANUFACTURERS LIFE INSURANCE

COMPANY, a 1992 Noteholder

 

 

	
   

  	
  By  

  	
   /s/ Richard R.
  Davis

  	
   

  
	
   

  	
  Portfolio Manager -

  
	
   

  	
  High Yield Securities

  
	
   

  	
   

  

 

 

THE FRANKLIN LIFE INSURANCE COMPANY,

a 1992 Noteholder

 

 

	
   

  	
  By  

  	
   /s/ Julia S.
  Tucker

  	
   

  
	
   

  	
  Investment Officer

  
	
   

  	
   

  

 

8

 

THE CANADA LIFE ASSURANCE COMPANY, a

1992 Noteholder

 

 

	
   

  	
  By  

  	
  /s/ Brian J. Lynch

  	
   

  
	
   

  	
  Associate Treasurer

  	
   

  
	
   

  	
   

  

 

 

MODERN WOODMEN OF AMERICA, a 1992

Noteholder

 

 

	
   

  	
  By  

  	
  /s/ G. E. Stoefen

  	
   

  
	
   

  	
  Director, Treasurer

  	
   

  
	
   

  	
  and Investment Manager

  	
   

  

 

 

JACKSON NATIONAL LIFE INSURANCE

COMPANY, a 1996 Noteholder

 

 

By:
PPM AMERICA, INC., as Agent

 

 

	
   

  	
  By  

  	
  /s/ David Brett

  	
   

  
	
   

  	
  Vice President

  	
   

  

 

 

PHOENIX HOME LIFE MUTUAL INSURANCE

COMPANY, a 1996 Noteholder

 

 

	
   

  	
  By  

  	
  /s/ Keith Robbins

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  

 

9

 

UNITED OF OMAHA LIFE INSURANCE

COMPANY, a 1996 Noteholder

 

 

	
   

  	
  By  

  	
  /s/ Edwin H. Garrison, Jr.

  	
   

  
	
   

  	
  First Vice President

  	
   

  

 

 

SECURITY FIRST LIFE INSURANCE COMPANY,

a 1996 Noteholder

 

 

	
   

  	
  By  

  	
  /s/ R.J. Ritchie

  	
   

  
	
   

  	
  Director — U.S. Fixed Income

  	
   

  
	
   

  	
   

  
	
   

  	
  By  

  	
  /s/ Ruth Ann McConkey

  	
   

  
	
   

  	
  Manager — U.S. Fixed
  Income

  	
   

  

 

 

[ADDITIONAL LENDER]

 

	
  By 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Its 

  	
   

  	
   

  
					

 

The undersigned hereby
acknowledge and agree to the foregoing Agreement.

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

 

 

	
   

  	
  By  

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  
	
   

  	
   

  

 

 

IHOP CORP.

 

 

	
   

  	
  By  

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  
	
   

  	
   

  

 

10

 

IHOP REALTY CORP.

 

 

	
   

  	
  By  

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  

 

 

IHOP PROPERTIES, INC.

 

 

	
   

  	
  By  

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  

 

 

IHOP RESTAURANTS, INC.

 

 

	
   

  	
  By  

  	
  /s/ Mark D. Weisberger

  	
   

  
	
   

  	
  Vice President — Legal

  	
   

  

 

11Exhibit
4.3

 

 

FIRST
AMENDMENT AGREEMENT

TO

 

Re:          SeniorNote Purchase Agreements Dated as of November 1, 1996

 

Dated as of

October 28, 2002

To each of the holders

listed in Schedule I to

this First Amendment Agreement

 

 

Ladies and Gentlemen:

 

Reference is made to
(i) the separate Note Purchase Agreements each dated as of
November 1, 1996 (the “Existing Note Purchase Agreements” and,
as amended hereby, the “Note Purchase Agreements”), among
International House of Pancakes, Inc., a Delaware corporation (the “Borrower”),
IHOP Corp., a Delaware corporation of which the Borrower is a wholly-owned
subsidiary (“Holdings”),
and the Purchasers named on Schedule I attached thereto, respectively, and
(ii) the $27,222,224 aggregate principal amount of outstanding 7.42% Senior
Notes due November 1, 2008 of the Borrower (the “Notes”) issued pursuant to
the Existing Note Purchase Agreements.

 

For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrower and Holdings request the amendment of certain provisions of the
Existing Note Purchase Agreements as hereinafter provided.

 

Upon your acceptance
hereof in the manner hereinafter provided and upon satisfaction of all
conditions to the effectiveness hereof and receipt by the Borrower and Holdings
of similar acceptances from the Majority Holders (as defined in the Existing
Note Purchase Agreements), this First Amendment Agreement shall constitute a
contract between us amending the Existing Note Purchase Agreements, as of
October 28, 2002, but only in the respects hereinafter set forth.  Capitalized terms used herein shall have the
respective meanings ascribed to such terms in the Note Purchase Agreements,
unless otherwise specifically indicated.

 

Section 1.                                                 Amendments to Existing Note Purchase
Agreements.

 

Section 1.1                    Section 8(A)(2) of the Existing
Note Purchase Agreements shall be and is hereby amended by (i) deleting
the phrase “and the maximum amount of dividends or distributions that could
have been declared or paid pursuant to Section 11.5 hereof,” and
(ii) by changing the section reference in clause (b) from “11.1(I)”
in both instances where it appears to “11.1(J)” in both such instances.

 

 

Section 1.2.                 (a) Subpart
(H) of Section 11.1 of the Existing Note Purchase Agreements shall be and
is hereby amended by deleting the reference to “and” at the end thereof.

 

(b)            Subpart (I) of
Section 11.1 of the Existing Note Purchase Agreements shall be and is
hereby deleted in its entirety and replaced with the following:

 

“(I)         any Lien created
to secure all or any part of the purchase price, or to secure Debt of Holdings,
the Borrower or any Subsidiary of Holdings or the Borrower incurred or assumed
to pay all or any part of the purchase price or cost of construction, of
property (or any improvement thereon) acquired or constructed by Holdings, the
Borrower or a Subsidiary of Holdings or the Borrower after the First Amendment
Agreement Closing Date, including any Lien existing on property of a Person
immediately prior to its being consolidated with or merged into Holdings, the
Borrower or any Subsidiary of Holdings or the Borrower or its becoming a
Subsidiary of Holdings or the Borrower, or any Lien existing on any property
acquired by Holdings, the Borrower or any Subsidiary of Holdings or the
Borrower at the time such property is so acquired (whether or not the Debt
secured thereby shall have been assumed), provided that

 

(i)                any such
Lien shall extend solely to the item or items of such property (and/or
improvement thereon) so acquired or constructed and, if required by the terms
of the instrument originally creating such Lien, other property (and/or
improvement thereon) which is an improvement to or is acquired for specific use
in connection with such acquired or constructed property (and/or improvement
thereon) or which is real property being improved by such acquired or
constructed property (or improvement thereon),

 

(ii)             the
principal amount of the Debt secured by any such Lien shall at no time exceed
an amount equal to 100% of the fair market value (as determined in good faith
by the board of directors of Holdings, the Borrower or such Subsidiary
incurring such Lien) of such property (and/or improvement thereon) at the time
of such acquisition or construction, and

 

(iii)          any
such Lien shall be created contemporaneously with, or within the period
beginning 365 days before and ending 365 days after, the acquisition or
construction of such property; and

 

(J)              other
Liens securing Debt of Holdings, the Borrower or any Subsidiary of Holdings or
the Borrower not otherwise permitted by paragraphs (A) through (I) of this
Section 11.1, provided the Debt secured thereby is
permitted by Sections 11.2 and 11.4.”

 

(c)             The last paragraph of
Section 11.1 of the Existing Note Purchase Agreements shall be and is
hereby deleted in its entirety and replaced with:

 

2

 

“The Liens referred to in
Section 11.1(A) through (J) are herein collectively referred to as “Permitted
Liens,” and individually, a ‘Permitted Lien’.”

 

Section 1.3.                 Section 11.2(C) of the Existing
Note Purchase Agreements shall be and is hereby amended by changing the
reference therein from “50%” to “60%”.

 

Section 1.4.                 Section 11.3 of the Existing Note
Purchase Agreements shall be and is hereby deleted in its entirety and replaced
with the following:

 

“Section 11.3.    Consolidated Adjusted
Net Worth. 
Holdings will at all times keep and maintain Consolidated Adjusted Net
Worth at an amount not less than the sum of (i) $275,000,000 plus
(ii) 25% of aggregate Consolidated Net Income (but only if a positive
number) for the period beginning on December 31, 2002 and ending on the
date of the end of the most recent financial statements of Holdings previously
provided (or required to be provided) to the holders of the Notes pursuant to
Section 8.”

 

Section 1.5.                 Section 11.4 of the Existing Note
Purchase Agreements shall be and is hereby deleted in its entirety and replaced
with the following:

 

“Section 11.4.    Priority Debt.  Holdings and the Borrower will not, at any
time, permit Priority Debt to exceed 15% of Consolidated Adjusted Net Worth.”

 

Section 1.6.                 Section 11.5 of the Existing Note
Purchase Agreements shall be and is hereby deleted in its entirety and replaced
with the following:

 

“Intentionally
Deleted.”

 

Section 1.7.                 Section 11.8
of the Existing Note Purchase Agreements shall be and is hereby deleted in its
entirety and replaced with the following:

 

Section 11.8.          Maintenance of Fixed
Charges Coverage. 
Holdings will keep and maintain as of the end of each fiscal quarter,
the ratio of Consolidated Cash Flow to Fixed Charges for each period of four
consecutive fiscal quarters (ending on the date of determination and taken as a
single accounting period) at not less than 1.75 to 1.00.

 

Section 1.8.                 The defined terms “Consolidated Income Available for
Fixed Charges” and “Consolidated Tangible Net Worth” shall be
deleted from Section 12(a) of the Existing Note Purchase Agreements and
the following definitions shall be added to said Section 12(a) in alphabetical
order:

 

“Consolidated
Adjusted Net Worth” means as of the date of any determination thereof, the
amount of consolidated stockholders equity of Holdings, the Borrower and their
respective Subsidiaries, as determined in the most recent financial statement
of Holdings previously provided to the holders pursuant to Section 8, plus
(but without duplication and only to the extent excluded or deducted from
stockholders’ equity) 

 

3

 

(i) any “LIFO Reserve” referred to
in the most recent financial statement of Holdings previously provided to the
holders pursuant to Section 8, (ii) any goodwill incurred (whether
capitalized on Holding’s or the Borrower’s balance sheet or written off as
incurred), and (iii) deferred income taxes.

 

“Consolidated Cash Flow”
for any period means the sum of (a) Consolidated Net Income during such
period plus
(to the extent deducted in determining Consolidated Net Income),
(b) provisions for Federal, State and local income taxes for the period,
(c) depreciation and amortization taken during such period and
(d) Fixed Charges during such period provided that, in the event any Person (or
the assets thereof) is acquired by Holdings, the Borrower or any Subsidiary
(whether by merger, consolidation, asset or stock acquisition or otherwise) at
any time during the period of calculation, such acquisition shall be deemed to
have been made on the first day of such calculation period.

 

“First
Amendment Agreement Closing Date” means October 28, 2002.

 

“Priority
Debt” means the sum, without duplication, of (i) Debt of
Holdings or the Borrower secured by liens not otherwise permitted by
clauses (A) through (I) of Section 11.1 and all Debt of any
Subsidiary of Holdings or the Borrower other than the Borrower (other than to
Holdings, the Company or another Subsidiary of Holdings or the Borrower);
provided that notwithstanding anything to the contrary herein, no Additional
Permitted Subsidiary Guarantees shall be deemed to constitute Priority Debt for
the purposes hereof.”

 

Section 1.9.                 The
defined term “Total Capitalization” contained in Section 12(a) of
the Existing Note Purchase Agreements, shall be and is hereby amended by
changing the reference therein from “Consolidated Tangible Net Worth” to
“Consolidated Adjusted Net Worth”.

 

Section 1.10.          Exhibit F-1
of the Existing Note Purchase Agreements, shall be and hereby is deleted in its
entirety and replaced with Exhibit F-1, attached hereto.

 

Section 2.                                                 Conditions Precedent.

 

Section 2.1.                 This First Amendment Agreement shall
not become effective until, and shall become effective on, the Business Day
when each of the following conditions shall have been satisfied:

 

(a)                     This First
Amendment Agreement shall have been duly executed and delivered by the Borrower
and Holdings.

 

(b)                    The Majority
Holders (as defined in the Existing Note Purchase Agreements) shall have
consented to this First Amendment Agreement as evidenced by their execution
thereof.

 

4

 

(c)                     The representations
and warranties of the Borrower and Holdings set forth in Section 3 hereof
shall be true and correct in all material respects as of the date of the
execution and delivery of this First Amendment Agreement.

 

(d)                    Any consents
or approvals from any holder or holders of any outstanding security of the
Borrower or Holdings or any Subsidiary of the Borrower or Holdings and any
amendments of agreements pursuant to which any securities may have been issued
which shall be necessary to permit the consummation of the transactions
contemplated hereby shall have been obtained and all such consents or
amendments shall be reasonably satisfactory in form and substance to the
holders and their special counsel.

 

(e)                     The Borrower
and Holdings shall have paid the fees and disbursements of the holders’ special
counsel, Chapman and Cutler, incurred in connection with the negotiation,
preparation, execution and delivery of this First Amendment Agreement and the
transactions contemplated hereby which fees and disbursements are reflected in
the statement of such special counsel delivered to the Borrower at the time of
the execution and delivery of this First Amendment Agreement.  Upon receipt of any supplemental statement
after the execution of this First Amendment Agreement, the Borrower and
Holdings will pay such additional fees and disbursements of the holders’
special counsel which were not reflected in its accounting records as of the
time of the delivery of the initial statement of fees and disbursements.

 

(f)                       Each of the
parties thereto shall have executed and delivered the Note Purchase Agreement
dated as of October 28, 2002 among Holdings, the Borrower and the
Purchasers listed in Schedule A attached thereto, satisfactory in form and
substance to the holders.

 

(g)                    In consideration
of the execution and delivery hereof by the requisite holders of the Notes, the
Borrower shall pay to each holder an amendment fee equal to 1.00% of the
outstanding principal amount of such holder’s Notes on the First Amendment
Agreement Closing Date.

 

(h)                    All
corporate and other proceedings in connection with the transactions
contemplated by this First Amendment Agreement and all documents and
instruments incident to such transactions shall be satisfactory to you and your
special counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

 

Section 3.                                                 Representations and Warranties.

 

The Borrower and Holdings
hereby represent and warrant that as of the date hereof and as of the date of
execution and delivery of this First Amendment Agreement:

 

5

 

(a)             The Borrower
and Holdings are each duly incorporated, validly existing and in good standing
under the laws of the State of Delaware.

 

(b)            Each of the
Borrower and Holdings has the corporate power to own its property and to carry
on its business as now being conducted.

 

(c)             Each of the
Borrower and Holdings is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the failure
to do so would, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or other), assets, operations, properties
or prospects of the Borrower or Holdings, as the case may be.

 

(d)            This First
Amendment Agreement and the transactions contemplated hereby are within the
corporate powers of the Borrower and Holdings, have been duly authorized by all
necessary corporate action on the part of the Borrower and Holdings and this
First Amendment Agreement has been duly executed and delivered by the Borrower
and Holdings and constitute legal, valid and binding obligations of the
Borrower and Holdings enforceable in accordance with their respective terms.

 

(e)             The Borrower
and Holdings represent and warrant that there are no defaults under the
Existing Note Purchase Agreements.

 

(f)               The
execution, delivery and performance of this First Amendment Agreement by the
Borrower and Holdings does not and will not result in a violation of or default
under (A) the articles of incorporation or bylaws of the Borrower or
Holdings, (B) any material agreement to which the Borrower or Holdings is
a party or by which it is bound or to which the Borrower or Holdings or any of
its properties is subject, (C) any material order, writ, injunction or
decree binding on the Borrower or Holdings, or (D) any material statute,
regulation, rule or other law applicable to the Borrower or Holdings.

 

(g)            No authorization,
consent, approval, exemption or action by or notice to or filing with any court
or administrative or governmental body (other than periodic filings with
regulatory authorities, none of which are required to be filed as of the
effective date of this First Amendment Agreement) is required in connection
with the execution and delivery of this First Amendment Agreement or the
consummation of the transactions contemplated thereby.

 

(h)            The Borrower
and Holdings have not paid or agreed to pay any fees or other consideration, or
given any additional security or collateral, or shortened the maturity or
average life of any indebtedness or permanently reduced any borrowing capacity,
in each case, in connection with the obtaining of any consents or approvals in
connection with the transactions contemplated hereby.

 

6

 

Section 4.                                                 Miscellaneous.

 

Section 4.1.                 Except as amended herein, all terms
and provisions of the Existing Note Purchase Agreements, the Notes and related
agreements and instruments are hereby ratified, confirmed and approved in all
respects.

 

Section 4.2.                 Any and all notices, requests,
certificates and other instruments, including the Notes, may refer to the Note
Purchase Agreements without making specific reference to this First Amendment
Agreement, but nevertheless all such references shall be deemed to include this
First Amendment Agreement unless the context shall otherwise require.

 

Section 4.3.                 This First Amendment Agreement and all
covenants herein contained shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereunder.  All covenants made by the Borrower and
Holdings herein shall survive the closing and the delivery of this First
Amendment Agreement.

 

Section 4.4.                 This First Amendment Agreement shall
be governed by and construed in accordance with Illinois law.

 

Section 4.5.                 The capitalized terms used in this
First Amendment Agreement shall have the respective meanings specified in the
Note Purchase Agreements unless otherwise herein defined, or the context hereof
shall otherwise require.

 

7

 

The execution hereof by
the holders shall constitute a contract among the Borrower, Holdings and the
holders for the uses and purposes hereinabove set forth.  This First Amendment Agreement may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.

 

	
   

  	
  International House of Pancakes, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  IHOP Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  

 

8

 

Each of the undersigned,
severally, hereby acknowledges, approves and agrees to the foregoing First
Amendment Agreement and ratifies and confirms each of its obligations under
(i) in the case of Holdings, Section 16.14 of the Note Purchase
Agreement and, (ii) in the case of each of the other signatories below,
its obligations under its respective Subsidiary Guarantee.

 

 

	
   

  	
  IHOP Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  IHOP Properties, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  IHOP Realty Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  IHOP Restaurants, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  

 

9

 

This foregoing
First Amendment Agreement is hereby accepted and agreed to as of the date
aforesaid.  The execution by each holder
listed below shall constitute its respective several and not joint confirmation
that it is the owner and holder of the Notes set opposite its name on Schedule I
hereto and that it has not sold or otherwise transferred any of the Notes
originally purchased by it pursuant to the Note Purchase Agreements.

 

	
   

  	
  Jackson National Life Insurance Company

  
	
   

  	
   

  
	
   

  	
  By:  PPM America,
  Inc., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

10

 

This foregoing
First Amendment Agreement is hereby accepted and agreed to as of the date
aforesaid.  The execution by each holder
listed below shall constitute its respective several and not joint confirmation
that it is the owner and holder of the Notes set opposite its name on
Schedule I hereto and that it has not sold or otherwise transferred any of
the Notes originally purchased by it pursuant to the Note Purchase Agreements.

 

	
   

  	
  Phoenix Life Insurance Company (formerly
  known as Phoenix Home Life Mutual Insurance Company)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

11

 

This foregoing
First Amendment Agreement is hereby accepted and agreed to as of the date
aforesaid.  The execution by each holder
listed below shall constitute its respective several and not joint confirmation
that it is the owner and holder of the Notes set opposite its name on
Schedule I hereto and that it has not sold or otherwise transferred any of
the Notes originally purchased by it pursuant to the Note Purchase Agreements.

 

	
   

  	
  United of Omaha Life Insurance Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

12

 

This foregoing
First Amendment Agreement is hereby accepted and agreed to as of the date
aforesaid.  The execution by each holder
listed below shall constitute its respective several and not joint confirmation
that it is the owner and holder of the Notes set opposite its name on
Schedule I hereto and that it has not sold or otherwise transferred any of
the Notes originally purchased by it pursuant to the Note Purchase Agreements.

 

	
   

  	
  MetLife Investors USA Insurance Company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Metropolitan
  Life Insurance Company, as Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

13

 

	
  Name of Holder

  	
   

  	
  Outstanding Principal
  Amount 

  of Notes Held as of 

  October 28, 2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Jackson
  National Life Insurance Company

  	
   

  	
  $

  	
  16,333,334.40

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Phoenix
  Life Insurance Company

  	
   

  	
  $

  	
  5,444,444.80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  United
  of Omaha Life Insurance Company

  	
   

  	
  $

  	
  3,111,111.32

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MetLife
  Investors USA Insurance Company

  	
   

  	
  $

  	
  2,333,333.48

  	
   

  

 

 

EXHIBIT 1

(to First Amendment
Agreement)

 

 

Form of Quarterly Compliance
Statement

 

The Undersigned,
                                ,
                                
of International House of Pancakes, Inc., a Delaware corporation (the “Borrower”),
and
                                
of IHOP Corp., a Delaware corporation (“Holdings”), pursuant to Section 8(A)(2)
of the several Senior Note Purchase Agreements, dated as of November 1,
1996 (collectively, the “Purchase Agreements”), among the
Borrower, Holdings, and the Purchasers listed on Schedule I thereto, do hereby
certify as follows (capitalized terms used herein shall have the meanings
ascribed thereto in the Purchase Agreements):

 

(a)             as at the
end of the quarterly accounting period ending                                 , the
financial covenants set forth in Sections 11.2 through 11.8 of the Purchase
Agreements, inclusive, have [have not] been met, and attached hereto as Exhibit
A are computations and other pertinent information demonstrating the accuracy
of the matters set forth in this clause (a);

 

(b)            attached
hereto as Exhibit B are calculations setting forth the maximum amount of Funded
Debt that could have been incurred as at the end of the quarterly accounting
period ending                                 , pursuant
to Sections 11.2(B) and 11.2(C) of the Purchase Agreements;

 

(c)             as at the
end of the quarterly accounting period ending                                 , the Liens
on Property or assets of Holdings or its Subsidiaries or securing Debt of
Holdings or its Subsidiaries, as the case may be, do [do not] exceed the
threshold set forth in Section 11.1(J) of the Purchase Agreements, and attached
hereto as Exhibit C are computations and other pertinent information
demonstrating the accuracy of the matters set forth in this clause (c); and

 

(d)            attached
hereto as Exhibit D are calculations (and materials in support of the basis
therefor) setting forth the maximum amount of additional Funded Debt secured by
Liens that could have been incurred under Section 11.1(J) of the Purchase
Agreements.

 

EXHIBIT
F-1

(to
First Amendment Agreement)

 

 

In
Witness Whereof, the undersigned have signed their names this
          day of
                                ,
         .

 

	
   

  	
  International House of Pancakes, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  IHOP, Corp.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

2

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