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Exhibit 10.42  

 
 

EMPLOYMENT AGREEMENT    
  

        This Employment Agreement ("Agreement") is made and effective as of the 1st day of February, 2003, by and between Park Place Entertainment Corporation (the
"Company"), and Bernard E. DeLury, Jr. ("Executive"). 

        In
consideration of the premises and of the covenants and agreements herein contained, the parties agree as follows: 

        1.    Employment.

        A.    The
Employment Agreement between the parties dated August 8, 2002 ("the Prior Agreement") shall terminate effective as of the date hereof, and shall be of no
further force and effect. 

        B.    The
Company hereby agrees to employ Executive in the capacity of Senior Vice President, Secretary and General Counsel, or such other capacity or capacities of similar
status and responsibility (including regional senior vice president) as the Company shall determine, and Executive hereby accepts such employment, all upon and subject to the terms and conditions
herein set forth. 

        C.    During
the term of his employment hereunder Executive shall devote his best efforts to such employment and perform such duties as are reasonably assigned or delegated to
him by the Company, consistent with his position and capacities hereunder and such other related positions(s) and capacity or capacities as the Company shall from time to time determine. While it is
understood and agreed that Executive's job capacities may change at the Company's discretion during the Term (hereafter defined)
of this Agreement, his general level of responsibility shall not be substantially reduced at any time. Furthermore, Executive agrees that the Company may direct him to perform some or all of his
duties hereunder for the benefit of subsidiaries and affiliates of the Company. Executive shall devote his entire working time and attention to the business and related interests of, and shall be
loyal to, the Company and its subsidiaries and affiliates, and Executive agrees to render services hereunder on behalf of the Company and/or on behalf of such subsidiaries and affiliates. 

        D.    Except
for the inherent travel requirements of his position, Executive shall not be required to perform his duties outside of Atlantic City, New Jersey or to relocate his
present residence. 

        E.    During
the term of his employment hereunder Executive shall not; 

        (1)  Render
services of a business, professional or commercial nature to any person or entity, directly or indirectly, whether for compensation or otherwise, except that this
prohibition shall not be construed to prevent Executive from investing his assets in such form or manner as will not require any services on the part of Executive in the operation of the affairs of
the companies in which such investments are made and which are not in violation of subparagraph (2) immediately below, or from engaging in charitable or civic activities so long as such
activities do not interfere with the performance of his duties hereunder. 

        (2)  Engage
in any activity competitive with or adverse to the welfare of business or related interests of the Company or any of its subsidiaries or affiliates, whether
alone, as a partner, officer, director, employee or shareholder of any other corporation or other entity, or otherwise, directly or indirectly, except that the ownership of not more than one percent
of the stock of any one or more publicly traded corporations shall not be deemed a violation of this subparagraph (2); 

        (3)  Be
engaged by any person or entity which conducts business with or acts as a consultant or advisor to the Company or any of its subsidiaries or affiliates, whether
alone, as a partner, officer, director, employee or shareholder of any other corporation or entity, or otherwise, directly 

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or indirectly, except that ownership of not more than one percent of the stock of any one or more publicly traded corporations shall not be deemed a violation of this subparagraph (3). 

        2.    Term.

        The
term of this Agreement (the "Term") shall begin on the effective date stated above and shall continue until January 31, 2006. The Term shall automatically renew beginning
February 1, 2006 for successive periods of one year unless the Company or the Executive gives written notice to the other at
least six months prior to the end of the then applicable term, that the Agreement shall not be further extended. Otherwise, this Agreement may be terminated as specifically provided below. 

        3.    Compensation.

        A.    In
consideration of the services to be rendered by Executive hereunder, the Company agrees to pay or cause to be paid to Executive, and Executive agrees to accept, the
sum of $375,000 (the "Base Salary") for the initial full calendar year following the effective date of this Agreement, which shall be paid in accordance with the regular payroll practices of the
Company. During the Term, the Base Salary shall be reviewed for possible increase annually in accordance with the Company's then applicable merit policies, although any determination to increase the
Base Salary shall be within the Company's sole discretion. Employee acknowledges that ten percent of the Base Salary is being paid in consideration for the covenants contained in Paragraph 6
hereof. 

        B.    In
addition to Base Salary, the Executive shall be entitled to participate in the Company's annual incentive plan for executive personnel. Pursuant thereto, Executive
shall be eligible to receive a bonus (the "Annual Bonus") in the sole discretion of the Company based upon Executive's performance and the financial performance of the Company and its parent company
and affiliates. The target rate and bonus shall be 75% of Base Salary. Provided Executive's employment has not been terminated pursuant to Paragraph 8 of this Agreement, in the event the event
Executive's employment is not continued after January 31, 2006, and a bonus has not yet been paid for the last year of his employment, then Executive shall be eligible for bonus compensation,
when such payments are made or other officers of similar status. The amount of any such bonus shall be determined by either (i) the average of the last three annual bonus payments or,
(ii) the last annual bonus payment, whichever is greater, pro-rated for the number of months worked by Executive in such calendar year. 

        C.    In
addition to Base Salary and Annual Bonus, the Executive shall be entitled to participate in the Company's stock option grants, stock retention unit grants and other
long-term incentive plans as in effect from time to time in accordance with the terms of such Plans. The provisions of such plans shall govern all grants under such plans. 

        D.    Upon
execution of this Agreement, Executive shall be paid a one-time signing bonus of $25,000. 

        4.    Vacation and Other Benefits.

        Executive
shall be entitled to reasonable paid vacation annually, as well as other employment benefits, including death and retirement plans, and group insurance programs for medical,
hospitalization, life, and long term disability, and the like, afforded in general to senior executives of the Company of comparable status and tenure, and consistent with the Company's policies for
executive employment benefits. The Company may, in its sole discretion, change such benefits policies from time to time. 

        5.    Expenses.

        The
Company shall pay or cause to be paid all reasonable expenses incurred by Executive in the performance of his responsibilities and duties for the Company hereunder, as well those
reasonably incurred in the promotion of the Company's business, including but not limited to the costs of licensing 

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or qualification as may be required by any gaming jurisdiction. Executive shall submit to the Company periodic statements of all expenses so incurred in accordance with the Company's policy. Subject
to such audits as the Company may deem appropriate, the Company shall, promptly and in the ordinary course, reimburse Executive the full amount of any such expenses advanced by Executive. 

        6.    Covenants; Confidential Information.

        A.    Executive
agrees that, for the applicable period specified below, he shall not, directly or indirectly, do any of the following: 

        (1)  Own,
manage, control, or participate in the ownership, management or control of, or be employed or engaged by, or otherwise affiliated or associated with, as a
consultant, independent contractor or otherwise, any other corporation, partnership, proprietorship, firm, association or other business entity, or otherwise engage in any business that is competitive
with any business or enterprise in which the Company is engaged during the Term or at the time Executive's employment ceases including, without limitation, any gaming venture, Indian gaming, river
boat gaming or otherwise within any country or any state (or any metropolitan area involving multiple jurisdictions) in which there is located any gaming facility owned, managed or under development
to be owned or managed by the Company, determined as of the date Executive ceases to be employed hereunder; 

        (2)  Solicit
or induce any person who is an employee, officer, consultant or agent of the Company or of any subsidiary or affiliate of the Company, to terminate such
relationship; 

        (3)  Employ,
assist in employing, or otherwise be associated in business with any present or former employee or officer of the Company or of any subsidiary or affiliate of
the Company, including without limitation those who commence such positions with the Company or any such subsidiary or affiliate, after the effective date hereof; or 

        (4)  Disclose,
divulge, discuss, copy or otherwise use or suffer to be used in any manner, the customer lists, proprietary and confidential inventions, ideas, discoveries,
marketing methods, product research or
other data or any other methodologies of the Company (collectively, "Confidential Information"), it being acknowledged by Executive that all such Confidential Information compiled or obtained by, or
furnished to, Executive while he is or was employed by or associated with the Company, is confidential and proprietary information which is the exclusive property of the Company. 

        B.    The
provisions of subparagraphs 6A(1) through 6A(4) hereof shall be operative throughout the Term and for so long as Executive is receiving compensation (other than
benefit continuation) from the Company thereafter, except as provided in the following sentences. In the event that Executive is terminated pursuant to paragraph 8 hereof for Cause, the
provisions of subparagraphs 6A(1), 6A(2) and 6A(3) shall be operative during the Term and for a period of one year thereafter. In the event that Executive is terminated pursuant to paragraph 8
hereof without Cause, the provisions of subparagraph 6A(1) shall be operative for a period of six months after termination of employment and the provisions of subparagraphs 6A(2) and 6A(3) shall be
operative for a period of 12 months after the termination of employment. All obligations created by the terms of subparagraph 6A(4) are of a continuing nature and shall remain in effect at all
times during Executive's period of employment hereunder and for a period of five years thereafter; provided that if at any time following the
termination of this Agreement any Confidential Information shall become part of the public domain through no fault of Executive, then the restrictions and limitations of subparagraph 6A(4) shall not
apply to such particular information. 

        C.    The
Executive acknowledges and agrees that the restrictions contained in this paragraph are reasonable and necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company, that the Company would not have entered into this Agreement in the 

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absence of such restrictions and that irreparable injury will be suffered by the Company should the Executive breach any of those provisions. Executive represents and acknowledges that (i) the
Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, and (ii) that the Executive has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with the Executive's counsel. The Executive further acknowledges and agrees that a breach of any of the restrictions in this paragraph cannot be
adequately compensated by monetary damages. 

        D.    The
Company agrees to give the Executive written notice of any action taken by the Executive that it believes in good faith to constitute a violation of the Executive's
undertakings under Paragraph 6 and to give the Executive at least 10 days thereafter to cease any such action which, if he complies with such request, will preclude any further action or
any recovery by the Company. In the event that the Executive fails to do so, the Executive agrees that the Executive's right to any payment pursuant to Paragraph 8 shall be forfeited (but only
to the extent of those portions not previously received) and the Executive's right to exercise any and all stock options shall cease. In addition, in the case of any violation of the provisions of
this paragraph 6, the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable
accounting of all earnings, profits and other benefits arising from any violation of this paragraph (with appropriate credit for the amounts forfeited by the Executive and the
non-exercisability of the stock options), which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. 

        E.    In
the event that any of the provisions of this Paragraph 6 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by
applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by
applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by
law. The Executive irrevocably and unconditionally (x) agrees that any suit, action or other legal proceeding arising out of this Paragraph, including without limitation, any action commenced
by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought (without posting a bond) in the United States District Court for the District of New Jersey,
or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in New Jersey, (y) consents to the non-exclusive jurisdiction of
any such court in any such suit, action or proceeding, and (z) waives any objection which the Executive may have to the laying of venue of any such suit, action or proceeding in any such court.
The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Paragraph 12
hereof. 

        F.    For
purposes of this Paragraph 6, the term "Company" shall be deemed to mean the Company and/or any of its subsidiaries or affiliates, together with their
respective successors or assigns. 

        7.    Illness, Incapacity or Death During Employment.

        A.    If
Executive is unable to perform services hereunder by reason of illness or incapacity resulting in a failure to discharge his duties under this Agreement for six or
more consecutive months, then upon 30 days notice, the Company may terminate the employment of Executive and the Term under this Agreement, and upon such termination Executive shall be paid
(i) his Base Salary on a pro-rata basis to the date of termination through the 30-day period; (ii) an amount equal to his prior year's Annual Bonus on a
pro-rata basis to the date of termination through the 30-day notice period; (iii) reimbursement of all expenses reasonably incurred by Executive in performing his
responsibilities and duties for the Company prior to and including such date; and (iv) applicable insurance and other group benefits proceeds. In the event of termination pursuant to this
paragraph 7(A), 

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        (1)  Executive
shall have the right to the assignment of any and all of the Company group insurance policies or health protection plans if and to the extent that such
policies and plans permit assignment out of the group to the individual Executive, and 

        (2)  Executive
shall be entitled to a salary continuation benefit equal to 60% of his Base Salary, reduced by the value of any salary continuation received (whether in lump
sum or periodically) under the Company's Long Term Disability Plan or any other applicable insurance or other group benefits
provided by the Company. This salary continuation benefit shall be payable for the same period as benefits would be provided to a similarly situated senior officer of the Company under the Plan. 

        B.    In
the event of Executive's death, this Agreement shall automatically terminate; provided that the Company shall pay to the Executive's estate (i) his Base Salary
on a pro-rata basis to the date of death; (ii) an amount equal to the lesser of his prior year's Annual Bonus or the current year's target bonus at the then applicable rate of
achievement on a pro-rata basis to the date of death; (iii) reimbursement of all expenses reasonably incurred by Executive in performing his responsibilities and duties for the
Company prior to and including such date; and (iii) applicable insurance and other group benefits proceeds. 

        8.    Termination for Cause or without Cause.

        A.    The
employment of Executive under this Agreement, and the Term hereof, may be terminated by the Company for Cause at any time. If the Company properly terminates
Executive's employment hereunder for Cause, it shall be without liability to Executive except for all amounts and benefits accrued and due but not paid to the date of such termination. For all
purposes of this Agreement, the term "Cause" means: 

        (1)  Executive's
fraud, dishonesty, willful misconduct or gross or persistent negligence in the performance of his duties hereunder, including willful failure to perform such
duties as may properly be assigned him hereunder; 

        (2)  Executive's
material breach of any provision of this Agreement; or 

        (3)  Executive's
failure to qualify (or, having so qualified, being thereafter disqualified or suspended) under any suitability or licensing requirement to which Executive
may be subject by reason of his position with the Company or any of its affiliates or subsidiaries, under the laws of any applicable gaming regulatory body, except that any such failure to qualify or
disqualification or suspension resulting from Executive's corporate conduct, rather than individual conduct, shall not constitute "Cause" hereunder. 

        B.    Any
termination for Cause shall not be in limitation of any other right or remedy the Company may have under law, pursuant to this Agreement or otherwise. 

        C.    In
the event that the Company exercises its right to terminate this Agreement for Cause, Executive shall have the right to challenge such action by seeking arbitration in
the manner provided in Paragraph 9. 

        D.    The
employment of Executive under this Agreement may be terminated without Cause at any time upon written notice to Executive. (A non-renewal of the Term
shall not be treated as a Termination without Cause.) In such case the Company shall have no liability arising out of such termination except that Executive shall be paid (a) the Base Salary
for the balance of the Term or for a period of twelve months, whichever is greater, paid in accordance with the regular payroll practices of the Company, plus (b) a lump sum amount equal to the
greater of the average of the Annual Bonuses, if any, paid to the Executive for the three prior years or the amount of the Annual Bonus, if any, paid for the prior year. If any Annual Bonus was
pro-rated, then, for purposes of this subsection, such bonus will be calculated on a full year basis. 

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        E.    Fifty
percent of amounts paid after termination hereunder shall be consideration for the Executive's undertaking not to breach the terms of the covenants contained in
Paragraph 6 hereof. The Company shall also pay to the Executive, in a lump sum in cash within ten (10) days after the date of termination, the Executive's accrued but unpaid cash
compensation (the "Accrued Obligations"), which shall include but not be limited to: (1) any portion of the Executive's Annual Base Salary through the date of termination that has not yet been
paid and an amount representing the Annual Bonus for the year of termination determined at the target rate under the Company's then applicable incentive bonus plan, and multiplying that amount by a
fraction, the numerator of which is the number of days in the current fiscal year through the date of termination, and the denominator of which is 365 (the "Annual Bonus Amount"); (2) any
compensation previously deferred by the Executive (together with any accrued interest or earnings thereof) that has not yet been paid; (3) any earned but unpaid vacation pay; and
(4) similar unpaid items that have accrued or to which the Executive has become entitled as of the date of termination, including declared but unpaid bonuses and unreimbursed employee business
expenses, and provided further that the Company's obligation to make any payments under this Paragraph 8, to the extent that any such payment shall not have accrued as of the day before the
date of termination shall also be conditioned upon the Executive's execution, and non-revocation, of a written release, substantially in the form attached hereto as Annex 1 (the
"Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive's employment by the Company (other than any entitlements under
the terms of this Agreement or under any other plans or programs of the Company in which the Executive participated and under which the Executive has accrued or become entitled to a benefit), or the
termination thereof. 

        F.    In
the event of a Change of Control (as defined below), and the successor in control, without cause, terminates this Employment Agreement, Executive shall be paid in lump
sum twenty four months of Base Salary or an amount equal to his Base Salary for the balance of the term of this Agreement, whichever is greater, and the greater of the (i) average of the
bonuses, if any, paid to Executive by the Company for the three prior years or (ii) bonus, if any, for the prior year. If the successor in control changes Executive's title or substantially
changes his duties or functions from those which he previously performed hereunder, as particularly described herein, the successor in control shall be deemed to have constructively terminated
Executive's services without cause. 

        A
"Change in Control" shall mean: 

          (i)  An
acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities") (a "Control Purchase"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (2) any acquisition by the Company, (3) Any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (4) any acquisition by any corporation pursuant to a transaction
which complies with clauses (1), (2) and (3) of subsection (c) of this definition, or (5) any acquisition by Barron Hilton or the Conrad N. Hilton Fund; or 

        (ii)  A
change in the composition of the Board such that the individuals who, as of the effective date of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes
of this definition, that any individual who becomes a member of 

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the Board subsequent to the effective date of this Agreement, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of
the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or 

        (iii)  The
consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the
outstanding Company common stock and outstanding Company voting securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly more than 60% of, respectively,
the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the outstanding Company common
stock and outstanding Company voting securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the
extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Transaction; or 

        (iv)  The
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 

        As
used in this Paragraph 8 with respect to a Change in Control, Company shall include the corporate parent of the Company. 

        If
it shall be determined that any payment or distribution to or for the benefit of Executive pursuant to this Paragraph 8 ("Severance Payments") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then Executive shall be entitled to receive from the Company an additional payment (the "Excise Tax
Gross-Up Payment") in an amount such that the net amount retained by Executive, after the calculation and deduction of any Excise Tax on the Severance Payments and any federal, state and
local income taxes and Excise Tax on the Excise Tax Gross up Payment provided for in this Section, shall be equal to the Severance Payments. In determining this amount, the amount of the Excise Tax
Gross Up Payment attributable to federal income taxes shall be reduced by the maximum reduction in federal income taxes that could be obtained by the deduction of the portion of the Excise Tax Gross
Up Payment attributable to state and local income taxes. Finally, the Excise Tax Gross Up Payment shall be reduced by income or excise tax withholding payments made by the Company to any federal,
state or local taxing authority with respect to the Excise Tax Gross Up Payment that was not deducted from compensation payable to Executive. 

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        9.    Arbitration.

        The
Company and the Executive mutually consent to the resolution by arbitration by a panel of three arbitrators, in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association, to be held in Atlantic County, New Jersey, of all claims or controversies arising out of the Executive's employment (or its termination) that the
Company may have against the Executive or that the Executive may have against the Company or against its officers, directors, shareholders, employees or agents in their capacity as such other than a
claim which is primarily for an injunction or other equitable relief. Each of the Company and the Executive shall choose one arbitrator and the arbitrators shall jointly choose a third. The Company
shall pay the fees and costs of the arbitrator and all other costs in connection with any arbitration, including reasonable legal fees and expenses, unless the arbitrator shall determine that such
claim or controversy was without reasonable basis or that payment such legal fees and expenses would otherwise be unfair to the Company. 

        10.  Severable Provisions.

        The
provisions of this Agreement are severable, and if any one or more provisions hereof may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions, and any partially unenforceable provision to the extent enforceable, shall nevertheless be binding and enforceable. 

        11.  Binding Agreement.

        The
rights and obligations of the Company and Executive under this Agreement shall be binding upon and inure to the benefit of, and be enforceable by and against, the parties hereto and
their respective heirs, personal representations, and successors and assigns. 

        12.  Notices.

        Any
notice, request, demand, waiver, consent, approval or other communication (a "Notice") which is required or permitted hereunder shall be in writing as referenced below. All Notices
may be delivered by telecopier or similar device, with a true copy thereof sent the same day by Federal Express, DHL Courier, or other similar overnight delivery service providing receipt against
delivery, and shall be deemed given or made upon receipt thereof. All Notices are to be given or made to the parties at the following addresses (or to such other address as any party may designate by
a Notice given in accordance with the provisions of this Section 12): 

	If to the Company:	Park Place Entertainment Corporation

3930 Howard Hughes Parkway

Las Vegas, NV 89109

Attention: President
	

If to Executive:	

Bernard E. DeLury, Jr.

807 Sterling Place

Brigantine, NJ 08203

          13.    Waiver.

        Either party's failure to enforce any provision(s) of this Agreement shall not in any way be construed as a waiver of any such provision(s) as to any future
violations(s) thereof, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted the parties herein are cumulative, and the waiver by a
party of any single remedy shall not constitute a waiver of such party's right to assert all other legal remedies available to him or it under the circumstances. 

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        14.  Governing Law.

        This
Agreement shall be governed by and construed and interpreted according to the internal laws of the State of Nevada, without reference to such State's principles of conflict of laws. 

        15.  Tax Withholding.

        Notwithstanding
anything the to contrary set forth in this Agreement, the Company may withhold from amounts payable under this Agreement, all federal, state, local and foreign income and
employment taxes that are required to be withheld by applicable laws or regulations. 

        16.  Captions and Paragraph Headings.

        Captions
and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it, 

        17.  Compliance Committee Approval

        Executive
shall cooperate with requests for information, documentation or assurances from the Park Place Entertainment Corporation Compliance Committee during the term of this Agreement.
In the event the Compliance Committee, in its absolute discretion, disapproves Executive's continued employment or determines that Executive's continued employment may adversely affect the licensing
status of Employer or any of its parents, subsidiaries, affiliates, successors and assigns with any gaming
or other regulatory agency, Employer shall have the right to immediately terminate this Agreement without further liability to Executive, other than for payment any accrued but unpaid portion of Base
Salary through the date of termination. 

        18.  Entire Agreement.

        This
Agreement constitutes the entire agreement between the Company and Executive with respect to the subject matter hereof, and may not be modified or terminated orally. No
modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by the party against whom the same is sought to be enforced. 

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

	 	 	PARK PLACE ENTERTAINMENT CORPORATION

"The Company"
	

 	
 	

By:	
 	

/s/  WALLACE R. BARR      
 Wallace R. Barr, President and Chief Executive Officer
	

 	
 	

By:	
 	

/s/  BERNARD E. DELURY, JR.      
 Bernard E. DeLury, Jr.

("Executive")

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ANNEX 1
  
    GENERAL RELEASE

        1.    I,                        ,
for and in consideration of certain payments to be made and the benefits to be provided to me under Paragraph 8 of my Employment Agreement
dated as of                        , 200    (the "Employment Agreement") with Park Place Entertainment
Corporation (the "Company"), and conditioned upon such payments and provisions, do hereby
REMISE, RELEASE, AND FOREVER DISCHARGE the Company and each of its subsidiaries and affiliates, their officers, directors, shareholders, partners, employees and agents, their respective successors and
assigns, heirs, executors and administrators (hereinafter collectively included within the term the "Company"), acting in any capacity whatsoever, of and from any and all manner of actions and causes
of actions, suits, debts, claims and demands whatsoever in law or in equity, which I ever had, now have, or hereafter may have, or which my heirs, executors or administrators hereafter may have, by
reason of any matter, cause or thing whatsoever from the beginning of my employment with Park Place Entertainment Corporation to the date of these presents arising from or relating in any way to my
employment relationship and the termination of my employment relationship with Park Place Entertainment Corporation, including but not limited to, any claims which have been asserted, could have been
asserted, or could be asserted now or in the future under any federal, state or local laws, including any claims under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §621  et seq.,
Americans with Disabilities Act ("ADA"), 42 U.S.C. §2000e et seq., Title VII of the
Civil Rights Act of 1964, 42 U.S.C. §2000e et seq., any contracts between the Company and me and any common law claims now or hereafter
recognized and all claims for counsel fees and costs; provided, however, that this General Release shall not apply to any entitlements under the terms of the Employment Agreement or under any other
plans or programs of the Company in which I participated and under which I have accrued and become entitled to a benefit. 

        2.    Subject
to the limitations of paragraph 1 above, I expressly waive all rights afforded by any statute which expressly limits the effect of a release with respect
to unknown claims, I understand the significance of this release of unknown claims and the waiver of statutory protection against a release of unknown claims which provides as follows: 

A
general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected
his settlement with the debtor. 

        3.    I
hereby agree and recognize that my employment by the Company was permanently and irrevocably severed on                        ,
            and the Company has no
obligation, contractual or otherwise to me to hire, rehire or re-employ me in the future. I acknowledge that the terms of the Employment Agreement provide me with payments and benefits
which are in addition to any amounts to which I otherwise would have been entitled. 

        4.    I
hereby agree and acknowledge that the payments and benefits provided by the Company are to bring about an amicable resolution of my employment arrangements and are not
to be construed as an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by the Company and that this Agreement and General Release is made
voluntarily to provide an amicable resolution of my employment relationship with the Company and the termination of the Employment Agreement. 

        5.    I
hereby certify that I have read the terms of this General Release, that I have been advised by the Company to discuss it with my attorney, and that I understand its
terms and effects. I acknowledge, further, that I am executing this General Release of my own volition with a full understanding of its terms and effects and with the intention of releasing all claims
recited herein in exchange for the consideration described in the Employment Agreement, which I acknowledge is 

10

 

adequate and satisfactory to me. None of the above-named parties, nor their agents, representatives, or attorneys have made any representations to me concerning the terms or effects of this General
Release other than those contained herein. 

        6.    I
hereby acknowledge that I have been informed that I have the right to consider this General Release for a period of 21 days prior to execution. I also understand
that I have the right to revoke this General Release for a period of seven days following execution by giving written notice to the Company at 3930 Howard Hughes Parkway, Las Vegas, NV 89101,
Attention: General Counsel. 

        Intending
to be legally bound hereby, I execute the foregoing General Release this            day of            ,
200            . 

	
 Witness	 	

11

QuickLinks

EMPLOYMENT AGREEMENT

ANNEX 1 GENERAL RELEASEEXHIBIT 4.1

 

IHOP CORP.

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

 

SENIOR NOTE PURCHASE AGREEMENT

 

$32,000,000 7.79% SENIOR NOTES DUE 2002

 

Dated as of November 19, 1992

 

 

TABLE OF CONTENTS

(Not
Part of Agreement)

 

	
  Section

  	
   

  	
  Heading

  
	
  1.

  	
   

  	
  Authorization and
  Issue of Notes

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Purchase and Sale of Notes

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Payments of
  Notes

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1.

  	
  Mandatory Payments of
  Principal

  
	
   

  	
   

  	
  3.2.

  	
  Optional Prepayments
  of the Notes

  
	
   

  	
   

  	
  3.3.

  	
  Notice of Prepayment
  of the Notes

  
	
   

  	
   

  	
  3.4.

  	
  Allocation
  of Payments

  
	
   

  	
   

  	
  3.5.

  	
  Surrender of
  Notes; Notation Thereon

  
	
   

  	
   

  	
  3.6.

  	
  Purchase of
  Notes

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Representations and
  Warranties

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.1.

  	
  Corporate Existence and Power

  
	
   

  	
   

  	
  4.2.

  	
  Corporate Authority

  
	
   

  	
   

  	
  4.3.

  	
  Binding
  Effect

  
	
   

  	
   

  	
  4.4.

  	
  Capital
  Stock

  
	
   

  	
   

  	
  4.5.

  	
  Business Operations and Other Information;
  Financial Condition

  
	
   

  	
   

  	
  4.6.

  	
  Subsidiaries

  
	
   

  	
   

  	
  4.7.

  	
  Litigation; No Violation of Governmental
  Orders or Laws

  
	
   

  	
   

  	
  4.8.

  	
  Outstanding
  Debt

  
	
   

  	
   

  	
  4.9.

  	
  Consents, Etc

  
	
   

  	
   

  	
  4.10.

  	
  Title to Properties

  
	
   

  	
   

  	
  4.11.

  	
  Taxes

  
	
   

  	
   

  	
  4.12.

  	
  No
  Conflicts with Agreements, Etc

  
	
   

  	
   

  	
  4.13.

  	
  Disclosure

  
	
   

  	
   

  	
  4.14.

  	
  Offering of Securities

  
	
   

  	
   

  	
  4.15.

  	
  Broker’s or Finder’s Commissions

  
	
   

  	
   

  	
  4.16.

  	
  Labor
  Matters

  
	
   

  	
   

  	
  4.17.

  	
  Environmental Matters

  
	
   

  	
   

  	
  4.18.

  	
  Margin Regulations

  
	
   

  	
   

  	
  4.19.

  	
  Compliance with ERISA

  
	
   

  	
   

  	
  4.20.

  	
  Material Contracts

  
	
   

  	
   

  	
  4.21.

  	
  Insurance

  
	
   

  	
   

  	
  4.22.

  	
  Status Under Certain Laws

  
	
   

  	
   

  	
  4.23.

  	
  Legality

  
	
   

  	
   

  	
  4.24.

  	
  Possession of Franchises, Licenses, Etc

  

 

i

 

	
  Section

  	
   

  	
  Heading

  
	
   

  	
   

  	
  4.25.

  	
  Franchises

  
	
   

  	
   

  	
  4.26.

  	
  Use of Proceeds

  
	
   

  	
   

  	
  4.27.

  	
  Patents and Tradernarks

  
	
   

  	
   

  	
  4.28.

  	
  Compliance with Laws

  
	
   

  	
   

  	
  4.29.

  	
  Franchisees

  
	
   

  	
   

  	
  4.30.

  	
  Other
  Agreements

  
	
   

  	
   

  	
  4.31.

  	
  Solvency

  
	
   

  	
   

  	
  4.32.

  	
  Foreign Assets Control Regulations

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Representations of
  Purchasers

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.1.

  	
  Authority

  
	
   

  	
   

  	
  5.2.

  	
  Investment
  Intent

  
	
   

  	
   

  	
  5.3.

  	
  Source of Funds

  
	
   

  	
   

  	
  5.4.

  	
  Investor Status

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Conditions
  to Obligation of Purchasers

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.1.

  	
  Proceedings
  Satisfactory

  
	
   

  	
   

  	
  6.2.

  	
  Opinion of
  Purchasers’ Special Counsel

  
	
   

  	
   

  	
  6.3.

  	
  Opinion
  of Counsel to the Borrower and Holdings

  
	
   

  	
   

  	
  6.4.

  	
  Representations and
  Warranties True, Etc.; Certificates

  
	
   

  	
   

  	
  6.5.

  	
  Absence of Material
  Adverse Change, Etc.

  
	
   

  	
   

  	
  6.6.

  	
  Consents
  and Approvals

  
	
   

  	
   

  	
  6.7.

  	
  Absence
  of Litigation, Orders, Etc

  
	
   

  	
   

  	
  6.8.

  	
  Other
  Purchasers

  
	
   

  	
   

  	
  6.9.

  	
  Legal
  Investment

  
	
   

  	
   

  	
  6.10.

  	
  Rating

  
	
   

  	
   

  	
  6.11.

  	
  Fees

  
	
   

  	
   

  	
  6.12.

  	
  PPN Number

  
	
   

  	
   

  	
  6.13.

  	
  Subsidiary
  Guarantee

  
	
   

  	
   

  	
  6.14.

  	
  Corporate Status and
  Documentation

  
	
   

  	
   

  	
  6.15.

  	
  Amended Bank Agreement

  
	
   

  	
   

  	
  6.16.

  	
  Use of Proceeds

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Condition to
  Obligations of Borrower

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.1.

  	
  Representations and
  Warranties True, Etc

  
	
   

  	
   

  	
  7.2.

  	
  Absence of Litigation, Orders,
  Etc

  
	
   

  	
   

  	
  7.3.

  	
  Other Purchasers

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Financial
  Statements and Information

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Inspection of
  Properties and Books

  

 

ii

 

	
  Section

  	
   

  	
  Heading

  
	
  10.

  	
   

  	
  Affirmative
  Covenants

  
	
   

  	
   

  	
  10.1.

  	
  Payment
  of Principal, Prepayment Charge and Interest; Etc

  
	
   

  	
   

  	
  10.2.

  	
  Payment of Taxes and Claims

  
	
   

  	
   

  	
  10.3.

  	
  Maintenance of Properties
  and Corporate Existence

  
	
   

  	
   

  	
  10.4.

  	
  Insurance

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Negative and
  Maintenance Covenants

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  11.1.

  	
  Restrictions
  on Liens

  
	
   

  	
   

  	
  11.2.

  	
  Limitation
  on Funded Debt

  
	
   

  	
   

  	
  11.3.

  	
  Consolidated Tangible
  Net worth

  
	
   

  	
   

  	
  11.4.

  	
  Limitation on Debt
  of Subsidiaries

  
	
   

  	
   

  	
  11.5.

  	
  Restricted
  Payments; Restricted Investments

  
	
   

  	
   

  	
  11.6.

  	
  Sale of Assets

  
	
   

  	
   

  	
  11.7.

  	
  Consolidation
  or Merger

  
	
   

  	
   

  	
  11.8

  	
  Maintenance of
  Fixed Charge Coverage

  
	
   

  	
   

  	
  11.9.

  	
  Transactions with
  Affiliates

  
	
   

  	
   

  	
  11.10

  	
  Acquisition of Margin
  Securities

  
	
   

  	
   

  	
  11.11

  	
  Conduct
  of Business

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Definitions

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  Events of
  Default

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13.1.

  	
  Events of Default; Remedies

  
	
   

  	
   

  	
  13.2.

  	
  Acceleration
  of Notes

  
	
   

  	
   

  	
  13.3.

  	
  Rescission of Acceleration

  
	
   

  	
   

  	
  13.4.

  	
  Suits
  for Enforcement

  
	
   

  	
   

  	
  13.5.

  	
  Remedies
  Cumulative

  
	
   

  	
   

  	
  13.6.

  	
  Remedies
  Not Waived

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  Registration, Exchange,
  and Transfer of Notes

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Lost, Stolen, Damaged and Destroyed
  Notes

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  Miscellaneous

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  16.1.

  	
  Home
  Office Payment

  
	
   

  	
   

  	
  16.2.

  	
  Amendment
  and Waiver

  
	
   

  	
   

  	
  16.3.

  	
  Expenses

  
	
   

  	
   

  	
  16.4.

  	
  Survival of
  Representations and Warranties

  

 

iii

 

	
  Section

  	
   

  	
  Heading

  
	
   

  	
   

  	
  16.5.

  	
  Successors
  and Assigns

  
	
   

  	
   

  	
  16.6.

  	
  Notices

  
	
   

  	
   

  	
  16.7.

  	
  Governing Law

  
	
   

  	
   

  	
  16.8.

  	
  Submission
  to Jurisdiction; Waiver of Service and Venue

  
	
   

  	
   

  	
  16.9.

  	
  Indemnification

  
	
   

  	
   

  	
  16.10.

  	
  Integration and
  Severability

  
	
   

  	
   

  	
  16.11.

  	
  Payments Due on
  Days not Business Days

  
	
   

  	
   

  	
  16.12.

  	
  Further
  Assurances

  
	
   

  	
   

  	
  16.13.

  	
  Counterparts

  
	
   

  	
   

  	
  16.14.

  	
  Guarantee
  of Holdings

  
	
   

  	
   

  	
  16.15.

  	
  Waiver of Right to
  Trial by Jury

  
	
   

  	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
   

  	
   

  

 

iv

 

	
  Schedules

  
	
   

  	
   

  	
   

  
	
  Schedule I

  	
  –

  	
  Purchaser Information and Payment
  Instructions

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.5

  	
  –

  	
  Interim
  Changes

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.6

  	
  –

  	
  Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.7

  	
  –

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  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

  	
  –

  	
  Non-Conforming
  Franchising Arrangements

  
	
   

  	
   

  	
   

  
	
  Schedule
  6.16

  	
  –

  	
  Surviving
  Obligations

  
	
   

  	
   

  	
   

  
	
  Schedule
  12

  	
  –

  	
  Existing
  Investments

  
	
   

  	
   

  	
   

  
	
  Exhibits

  
	
   

  	
   

  	
   

  
	
  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

  	
  –

  	
  Form of Subsidiary Guarantee

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
  –

  	
  Form of IHOP Realty Lease

  
	
   

  	
   

  	
   

  
	
  Exhibit
  F–1

  	
  –

  	
  Form
  of Quarterly Compliance Statement

  
	
   

  	
   

  	
   

  
	
  Exhibit
  F–2

  	
  –

  	
  Form
  of Compliance Certificate

  

 

v

 

IHOP CORP.

 

INTERNATIONAL HOUSE OF PANCAKES, INC.

 

SENIOR NOTE PURCHASE AGREEMENT

 

November
19, 1992

 

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 7.79% Senior
Notes Due 2002 in the aggregate principal amount of $32,000,000, 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 19th day of May and
November in each year (commencing May 19, 1993) and at maturity, at the rate of
7.79% per annum, and to bear interest at a rate equal to the greater of 9.79%
or the rate of interest announced publicly from time to time by Citibank, N.A.
in New York, New York 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 19, 2002, 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
Sonnenschein Nath & Rosenthal, 900 Third Avenue, New York, New York 10022
at 10:00 a.m., New York time on November 19, 1992 (or such other time and place
as the parties shall agree provided however, that in no event shall funding be
provided after 3:00 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.

 

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 19, 1996

  	
   

  	
  $

  	
  4,571,428.00

  	
   

  
	
  November 19, 1997

  	
   

  	
  4,571,428.00

  	
   

  
	
  November 19, 1998

  	
   

  	
  4,571,428.00

  	
   

  
	
  November 19, 1999

  	
   

  	
  4,571,428.00

  	
   

  
	
  November 19, 2000

  	
   

  	
  4,571,428.00

  	
   

  
	
  November 19, 2001

  	
   

  	
  4,571,428.00

  	
  ;

  
					

 

provided, however, that if
Notes aggregating less than $32,000,000 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 $32,000,000.

 

2

 

The entire remaining
principal amount of the Notes shall become due and payable on November 19,
2002. Each payment of Notes made pursuant to this Section 3.1 shall be
allocated as provided in Section 3.4.

 

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
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.

 

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

 

3

 

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 preceeding sentence, the Borrower shall call each Purchaser to
confirm receipt of such certificate.

 

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.

 

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

 

3.6. Purchase of Notes. Except as set forth in Sections
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 holder’s 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

 

4

 

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 19, 2002) 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 the
Purchasers that:

 

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 IHOP Realty to execute, deliver and perform its
obligations under the Subsidiary Guarantee, and in the case of each such Person
to engage in the respective transactions contemplated by this Agreement and the
Other Agreements.

 

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
IHOP Realty of the Subsidiary Guarantee, 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.

 

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 Guarantee will,
when executed and delivered by IHOP Realty on the Closing Date be the legal,
valid and binding obligation of IHOP Realty; in each case enforceable against

 

5

 

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.

 

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. 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.

 

4.5. Business Operations and Other
Information; Financial Condition.

 

(a) The Borrower (or
Continental Bank N.A., on behalf of the Borrower) has delivered to you (or, in
the case of clause (iv) below, made available and delivered to the extent

 

6

 

requested) true and complete
copies of (i) the Confidential Private Placement Memorandum dated September
1992 prepared by the Borrower and Continental Bank N.A. 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 1989,
1990 and 1991, and the related audited consolidated statements of operations,
shareholders’ equity and cash flows for the fiscal years ended December 31,
1989, 1990 and 1991, 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, 1991 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, 1992, and the related consolidated
statements of operations, shareholders’ equity and cash flows for the fiscal
quarter 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”), (iv) the Financial
Projections of Holdings and its Subsidiaries for 1992 through 1995 (the “Projections”),
and (v) 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, 1991. The Projections were prepared by the Borrower on the basis
of assumptions which the Borrower reasonably believes are fair and reasonable
in light of the historical financial performance of Holdings and its
Subsidiaries and of current and reasonably foreseeable business conditions.

 

7

 

(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, 1991, neither Holdings, the Borrower nor any of their Subsidiaries has:

 

(1) incurred or assumed any
Debt (other than draws of revolving Debt pursuant to the Existing Agreement (as
defined in Section 6.15) and the documents pursuant to which the Debt owing to
HomeFed (as defined in Section 6.16) was incurred which, when reduced by
repayment of such Debt, during such period do not increase the total amount of
revolving Debt outstanding under each of such facilities as reflected on the
financial statements included in the quarterly report on Form l0-Q as filed by
Holdings with the SEC for the quarterly period ended September 30, 1992 (the
“September 30, 1992 10-Q”)), 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 Existing Agreement (as defined in Section 6.15) and the documents
pursuant to which the Debt owing to HomeFed (as defined in Section 6.16) was
incurred), 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 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;

 

8

 

(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;

 

(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.

 

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, 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.

 

9

 

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.

 

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

 

10

 

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.

 

4.9. Consents,
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 Guarantee, 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 Guarantee, 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.

 

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.

 

11

 

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 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.

 

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.

 

4.12. No
Conflicts with Agreements, Etc. Neither the execution and delivery of this
Agreement, the Other Agreements, the Subsidiary Guarantee 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

 

12

 

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.

 

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

 

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 Guarantee 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

 

13

 

provisions of any securities
or Blue Sky laws of any applicable jurisdiction.

 

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 Continental Bank N.A. 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.

 

4.16. Labor
Matters. Except as set forth in the Confidential Memorandum, 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
in the Confidential Memorandum or 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. Except as set
forth in the Confidential Memorandum, 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 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.

 

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

 

14

 

(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);

 

15

 

(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.

 

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.

 

16

 

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.

 

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 of such Pension Plan heretofore ended;

 

(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

 

17

 

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 Plan’s 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;

 

(i) there are no material
liabilities under the Plans that are employee welfare benefit plans (as defined
in Section 3(1) 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.

 

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

 

18

 

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.

 

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.

 

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.

 

4.23. Legality.
The Borrower, upon giving effect to the issuance of the Notes will be, a
“solvent institution”, as such term is used in Section 1405(c) of the New York
Insurance Law, whose “obligations are not in default as to principal or
interest”, as such terms are used in Section 1405(c).

 

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.

 

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

 

19

 

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 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.

 

4.26. Use of Proceeds.
The proceeds from the sale and issuance of the Notes will be used (i) to repay
substantially all of the existing Debt of the Borrower’s Subsidiary, IHOP
Realty Corp., a Delaware corporation, (ii) to refinance existing Debt of the
Borrower, and (iii) for general corporate purposes.

 

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.

 

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.

 

4.29. Franchisees.
Except as disclosed in the SEC Reports, during the fiscal year ended December
31, 1991, no franchisee accounted for more than 10% of Holdings’ consolidated
revenues from sales of products or services.

 

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.

 

4.31. Solvency.
On the Closing Date, and after the payment of all estimated legal, investment
banking, accounting

 

20

 

and other fees related
hereto, Holdings and each of its Subsidiaries will be Solvent.

 

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

 

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

 

5.2. Investment Intent. You are purchasing the Notes being
purchased hereunder for your own account and with no intention of distributing
or reselling such Notes or any part thereof in any transaction which would be
in violation of the securities laws of the United States of America or any
state thereof, without prejudice, however, to your rights at all times to sell
or otherwise dispose of all or any part of said Notes pursuant to an effective
registration statement under the Securities Act and other applicable state
securities laws, or under an exemption therefrom, and subject, nevertheless, to
the disposition of your property being at all times 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.

 

5.3. Source
of Funds. No part of the funds to be used to purchase the Notes being
purchased by you hereunder constitutes assets of any employee benefit plan such
that the use of such

 

21

 

assets constitutes a
non-exempt prohibited transaction under ERISA. This representation is made in
reliance upon Schedule 4.19 and is based upon your determination that a
statutory or administrative exemption is applicable or that the Borrower or
Holdings are not parties in interest or disqualified persons with respect to
such employee benefit plan. As used in this paragraph, the terms “employee
benefit plan” and “party in interest” shall have the meanings assigned to such
terms in Section 3 of ERISA, and the term “disqualified person” shall have the
meaning assigned to such term in Section 4975 of the Code.

 

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:

 

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.

 

6.2. Opinion of Purchasers’ Special Counsel.
You shall have received from Sonnenschein Nath & Rosenthal, 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.

 

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 and Holdings, and Larry Alan Kay, general
counsel to the Borrower and Holdings, 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.

 

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

 

22

 

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 Officer’s 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 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.

 

6.5. Absence of Material Adverse Change,
Etc. Since December 31, 1991, 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.

 

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.

 

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 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.

 

23

 

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.

 

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.

 

6.10. Rating.
The investment represented by the Notes shall have received a preliminary
designation of “2” or better from the National Association of Insurance
Commissioners and neither Holdings nor the Borrower has received an indication
from the National Association of Insurance Commissioners that such designation
has been, or is expected to be, rescinded.

 

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

 

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

 

6.13. Subsidiary Guarantee. IHOP Realty shall have
executed and delivered the Subsidiary Guarantee.

 

6.14. 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 IHOP Realty,
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) SECRETARY’S CERTIFICATE.
You shall have received certificates dated the Closing Date of the Secretary or
an Assistant Secretary of each of Holdings, the Borrower and IHOP Realty, duly
certifying that:

 

24

 

(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 Guarantee 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 Guarantee and such other documents and
instruments (in each 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 IHOP Realty 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 each other jurisdiction in which Holdings, the Borrower or IHOP Realty
conducts business as a foreign corporation or owns assets certifying that the
Borrower, Holdings or IHOP Realty, 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.

 

(d) BRING-DOWN AND OTHER
CERTIFICATES. Each of the Borrower, Holdings and IHOP Realty shall have
delivered to the Purchasers certifications, each dated the Closing Date and
duly executed by an Appropriate Officer of such Person, to the effect that no
amendments to or changes in its Certificate of Incorporation have been made
since the date certified by the Secretary of State of the jurisdiction of its
incorporation and that no dissolution proceedings with respect to it have been
commenced or are contemplated.

 

25

 

6.15. New Credit Agreement. The Borrower and
Holdings shall have entered into a Credit Agreement with Continental Bank N.A.
(the “Bank”) (the “Credit Agreement”), which will replace in its entirety the
existing loan agreement dated April 7, 1992 with Bank of America National Trust
and Savings Association (“B of A”) (the “Existing Agreement”) and IHOP Realty
shall have executed a subsidiary guarantee in respect of the Credit Agreement.
Such Credit Agreement will be substantially in the form of the draft of such
Credit Agreement dated November 16, 1992, except that such Credit Agreement
shall not prohibit (i) amendments or modifications to this Agreement, the Other
Agreements, the Notes or the Subsidiary Guarantee (except those which prohibit
advancing any payment due pursuant to Section 3.1 to a date sooner than January
31, 1994) or (ii) the payment of principal of or interest or prepayment charges
on the Notes in accordance with the terms thereof and the terms of this
Agreement and the Other Agreements (except that optional prepayments may be
prohibited prior to January 31, 1994), and you shall have received an Officer’s
Certificate of the Borrower stating that the Existing Agreement has been
terminated (together with the Exhibits and Schedules thereto) and that the
Credit Agreement (together with the Exhibits and Schedules thereto) is in full
force and effect, binding on the Borrower and Holdings and to the best of their
knowledge, on the Bank, in accordance with its terms and you shall have
received evidence satisfactory to you that the Existing Agreement shall have
been terminated in its entirety (except as set forth in Schedule 6.16) and none
of Holdings, the Borrower or any of their Subsidiaries shall have any further
obligations thereunder and all Liens in favor of B of A have been released or
terminated.

 

6.16. Use
of Proceeds. You and your special counsel shall have received evidence
satisfactory to you that the proceeds of the issuance of the Notes are being
used substantially simultaneously with the closing of this transaction, for the
repayment in full of (i) the 12 1/4% Senior Subordinated Notes due 1997 issued
by the Borrower, (ii) the Debt of the Borrower and IHOP Realty to HomeFed
Savings Bank, Federal Savings Bank, its successors and assigns (“HomeFed”) and
(iii) the Debt of the Borrower to B of A and, in each case (except as set forth
on Schedule 6.16) there are no further obligations of Holdings or any of its
Subsidiaries thereunder and all commitments to lend in connection therewith
shall have been terminated and all Liens in favor of HomeFed or B of A on any
Property of Holdings or any of its Subsidiaries have been or substantially
contemporaneously herewith shall be released or terminated.

 

26

 

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:

 

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.

 

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.

 

7.3. Other Purchasers. Notes representing no less
than $29 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:

 

(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 Securities and Exchange Commission 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

 

27

 

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 Securities and Exchange
Commission 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
public accountants of recognized national standing selected by

 

28

 

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 F-2, 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 securityholders,
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;

 

29

 

(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, or any holder of such Debt having the
right to declare such Debt due and payable before its expressed maturity,
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 matters 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;

 

30

 

(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;

 

(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); and

 

(J) 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

 

31

 

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 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 Holder’s or Purchaser Affiliate’s 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 Holder’s investment in the Notes; provided, however, that, (1)
prior

 

32

 

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) is 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 l0. Affirmative Covenants. The Borrower and Holdings
covenant and agree that so long as any of the Notes shall be outstanding:

 

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.

 

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;

 

(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

 

33

 

connection with the payment
of taxes required by this Section 10.2.

 

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.

 

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.

 

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

 

11.1. Restrictions on Liens. Holdings and the Borrower
covenant that they will not, nor will they permit any

 

34

 

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 therefor;

 

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

 

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

 

(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

 

35

 

not exceeding $1,000,000 in
the aggregate in principal amount;

 

(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 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.”

 

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 Guarantee 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

 

36

 

(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.

 

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 $40,000,000 plus 50% of Consolidated Net Income
on a cumulative basis from September 30, 1992, to and including any date of
determination hereunder.

 

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,
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.

 

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

 

37

 

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 September 30, 1992
would not exceed the sum of: (i) $2,000,000, plus (ii) 50% of cumulative
Consolidated Net Income from September 30, 1992 through the date of
determination (or if 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 September
30, 1992; provided that at the time of any such Restricted Payment or
Restricted Investment, both immediately before and immediately after giving
effect thereto, (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 l1.2(C)(ii) above, at least $1 of additional
Funded Debt. So long as no Default or Event of Default has occurred or would 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.

 

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, sales and
leases of

 

38

 

operating restaurants in
accordance with the Borrower’s ordinary course franchising operations and is
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 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, 1992 (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 Disposition and
leaseback of the assets so disposed of) and were constructed or acquired
following September 30, 1992 and are immediately leased back from the purchaser
thereof by 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.

 

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

 

39

 

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 IHOP Realty
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 IHOP Realty, as the case may be, under this Agreement,
the Notes and the Subsidiary Guarantee, 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 1l.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.

 

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 for the period consisting
of any four of the immediately preceding five quarterly accounting periods
shall not be less than:

 

40

 

	
  Ratio

  	
   

  	
  Fiscal Quarter Ending in
  the Period

  
	
   

  	
   

  	
   

  
	
  1.40:1.00

  	
   

  	
  from
  Closing Date through September 29, 1993; and

  
	
   

  	
   

  	
   

  
	
  1.50:1.00

  	
   

  	
  from
  September 30, 1993 and thereafter.

  

 

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.

 

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 security” as defined by any
regulation of the Board of Governors of the United States Federal Reserve
System as now in effect or as the same may hereafter be in effect unless, prior
to any such purchase or acquisition or entering into any such contract, 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.

 

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.

 

41

 

“Accountants” has the
meaning specified in Section 8.

 

“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, (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 corporation’s President, Vice
President, Chief Executive Officer, Chief Financial Officer, Treasurer or
Controller.

 

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

 

“Bank” is defined in Section
6.15.

 

“B of A” is defined in
Section 6.15.

 

“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 New York City.

 

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

 

42

 

“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.

 

“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 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

 

43

 

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.

 

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

 

“Disposition Date” is
defined in Section 11.6 hereof.

 

“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. SS 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

 

44

 

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.

 

“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 arm’s-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
extendable 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

 

45

 

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 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,

 

46

 

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.

 

“HomeFed” is defined in
Section 6.16.

 

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

 

“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.

 

47

 

“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, lessor’s interest under a Capitalized Lease or
analogous instrument, in, of or on any of a Person’s Property (whether held on
the date hereof or hereafter acquired), or any signed or filed financing
statement which names such Person as the debtor, or the execution of any
security agreement or the like authorizing any other Person as the secured
party thereunder to file such a financing statement; provided that neither (a)
the interest of a lessee or a sublessee in its capacity as lessee or sublessee
under a lease or sublease entered into by 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 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

 

48

 

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 or Loss” of any
Person, with respect to any period, shall mean the net income or net loss of
such Person after excluding the sum of (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.

 

“Officer’s 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.

 

49

 

“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.

 

“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

 

50

 

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.

 

“Projections” is defined in
Section 4.5 hereof.

 

“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

 

51

 

at least 10% of the
aggregate principal amount of all Notes at the time outstanding.

 

“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 guarantied 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 the Borrower’s cash
management concentration bank (provided that such bank is rated investment
grade or better by either Standard & Poor’s Corporation or Moody’s
Investors Services, Inc. or some other mutually agreeable rating system if
either of these entities no longer exists), Continental Bank N.A., or other
commercial banks located in the U.S. and Canada having combined capital,
surplus and undivided profits of not less than $100,000,000 and who have a
rating at all times from Standard & Poor’s Corporation or Moody’s Investors
Service, Inc., or some other mutually agreeable rating system if either of
these entities no longer exists, of “A-” or better; (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

 

52

 

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
Securities and Exchange Commission pursuant to Section 13 or 15(d) of the
Exchange Act, for the fiscal year ended December 31, 1991, (b) the quarterly
report on Form l0-Q as filed by Holdings with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act, for the
quarterly period ended June 30, 1992, and (c) the quarterly report on Form l0-Q
as filed by Holdings with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Exchange Act, for the quarterly period ended
September 30, 1992.

 

“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.

 

“September 30, 1992 l0-Q”
has the meaning specified in Section 4.5(b).

 

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

 

(a) the present fair salable
value of such Person’s assets is in excess of the total amount of such Person’s
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 Person’s 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

 

53

 

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 Person’s wholly-owned Subsidiaries.

 

“Subsidiary Guarantee” shall
mean the Subsidiary Guarantee in the form of Exhibit D hereto.

 

“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.

 

54

 

Section 13. Events of Default.

 

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;

 

(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

 

55

 

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 IHOP Realty in the Subsidiary
Guarantee 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;

 

(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

 

56

 

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

 

13.2. Acceleration of Notes.

 

(A) Upon the occurrence of
an Event of Default described in Subsections (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 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 Subsections 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

 

57

 

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.

 

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 Guarantee,
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.

 

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.

 

58

 

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.

 

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 holder’s 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

 

59

 

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 Holder’s unsecured
agreement of indemnity shall be sufficient for purposes of this Section.

 

Section 16. Miscellaneous.

 

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).

 

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

 

60

 

provision of Section 13.1 or
16.14 hereof or of the Subsidiary Guarantee, 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 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.

 

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 Guarantee 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

 

61

 

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 Guarantee, 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
Sonnenschein Nath & Rosenthal 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.

 

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.

 

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 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.

 

16.6. Notices.
All communications provided for hereunder shall be in writing and delivered by
hand or sent by first

 

62

 

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: Larry Alan Kay, Executive Vice President –
Administration, 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.

 

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 NEW YORK (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES OF SUCH STATE).

 

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 NEW YORK, STATE OF NEW YORK, 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 HEARD 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

 

63

 

PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE PURCHASER OR ANY HOLDER OF NOTES TO
BRING ANY ACTION OR PROCEEDING AGAINST HOLDINGS OR THE BORROWER OR THEIR
RESPECTIVE PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

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 Indemnitee’s 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 IHOP Realty under the Subsidiary Guarantee 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 therein 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 a relevant authority
that such Person was not a Person mentioned in (a), (b) or (c) above. If the
Borrower or

 

64

 

Holdings or IHOP Realty 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 IHOP Realty shall furnish to such holder a
receipt for any such Withholding Taxes paid by the Borrower or Holdings or IHOP
Realty pursuant to this Section, or, if no such Withholding Taxes are payable
with respect to any payments required to be made by the Borrower or Holdings
under this Agreement, by IHOP Realty under the Subsidiary Guarantee 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 IHOP
Realty 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.

 

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.

 

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.

 

65

 

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.

 

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.

 

16.14. Guarantee of Holdings.

 

(a) Guarantees. Holdings, in
consideration of the Purchaser’s 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 (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

 

66

 

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 Guarantee 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 Guarantee 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 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 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 or the
Borrower, including without limitation any transfer or purported transfer to
Holdings 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 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 or the Borrower or any
Affiliate or Subsidiary of Holdings or the Borrower; (6) any disposition by
Holdings of any capital stock of the Borrower; (7) any failure on the part of
the Borrower or any other Person to perform or comply with any term of the
Notes, this

 

67

 

Agreement, or any other
agreement; (8) any suit or other action brought by any stockholder or creditor
of, or by, Holdings, the Borrower 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 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 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 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 1l11(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 the Person seeking such enforcement. The Borrower waives the right
to have any security first applied to the discharge of the

 

68

 

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 IHOP Realty 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.

 

69

 

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 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.

 

70

 

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

  	
   

  	 

	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
								

 

 

	
   

  	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.  

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
   

  	
  /s/ RICHARD K. HERZER

  	
   

  	 

	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
								

 

 

Accepted as of the date
first

above written:

 

	
  THE
  MUTUAL LIFE INSURANCE COMPANY OF NEW YORK

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ SUZANNE E. WALTON

  	
   

  
	
   

  	
  Name:

  	
  SUZANNE E. WALTON

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  

 

 

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, PRESIDENT

  	
   

  
	
   

  	
   

  	
  Its: 

  	
  Richard K. Herzer, President

  	
   

  
					

 

 

	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC. 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ RICHARD K. HERZER, PRESIDENT

  	
   

  
	
   

  	
   

  	
  Its: 

  	
  Richard K. Herzer, President

  	
   

  
					

 

Accepted as of the date
first

above written:

 

	
  MONY LIFE
  INSURANCE

  COMPANY OF AMERICA

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ SUZANNE E. WALTON

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  SUZANNE E. WALTON

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Authorized Agent

  	
   

  

 

 

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

  	
   

  	 

	
   

  	
   

  	
  Its: 

  	
  Richard K. Herzer, President

  	
   

  
						

 

 

	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.  

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ RICHARD K. HERZER

  	
   

  	 

	
   

  	
   

  	
  Its: 

  	
  Richard K. Herzer, President

  	
   

  
						

 

 

Accepted as of the date
first

above written:

 

 

	
  THE
  MANUFACTURERS LIFE

  INSURANCE COMPANY

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D.W. PARKINSON

  	
   

  
	
   

  	
   

  	
  Name:

  	
  D.W. Parkinson

  	
   

  	 

	
   

  	
   

  	
  Title:

  	
  Senior Vice President,

  	
   

  	 

	
   

  	
   

  	
   

  	
  U.S. Investments

  	
   

  

 

 

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

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

 

	
   

  	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RICHARD K. HERZER

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

Accepted as of the date
first

above written:

 

 

	
  THE
  FRANKLIN LIFE INSURANCE COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DANIEL C. LEIMBACH

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Daniel C. Leimbach, Vice President

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ELIZABETH E. ARTHUR

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Elizabeth E. Arthur, Assistant Secretary

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

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

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

 

	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RICHARD K. HERZER

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

Accepted as of the date
first

above written:

 

 

	
  THE
  CANADA LIFE ASSURANCE COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ G.N. ISAAC

  	
   

  
	
   

  	
  Name: 

  	
  G.N. ISAAC

  	
   

  
	
   

  	
  Title: 

  	
  Associate Treasurer

  	
   

  

 

 

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

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

 

	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RICHARD K. HERZER

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Richard K. Herzer, President

  	
   

  
					

 

Accepted as of the date
first above written:

 

 

	
  MODERN
  WOODMEN OF AMERICA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ W.B. FOSTER

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  W.B. Foster

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  

 

 

SCHEDULE I

TO SENIOR NOTE PURCHASE AGREEMENT 

 

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.

 

	
   

  	
   

  	
  Registered
  Name

  Appearing on

  the Note

  	
   

  	
  Principal

  Amount of

  the Note

  	
   

  	
  Purchase

  Price of

  the Note

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchaser

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Mutual Life Insurance Company of New
  York

  	
   

  	
  The
  Mutual LIfe Insurance Company of New York

  	
   

  	
  $

  	
  9,000,000

  	
   

  	
  9,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Mutual Life Insurance Company of New
  York

  	
   

  	
  The
  Mutual LIfe Insurance Company of New York

  	
   

  	
  3,000,000

  	
   

  	
  3,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MONY Life Insurance Company of America

  	
   

  	
  MONY
  Life Insurance Company of America

  	
   

  	
  3,000,000

  	
   

  	
  3,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Manufacturers Life Insurance Company

  	
   

  	
  Hullbird
  & Co.

  	
   

  	
  7,000,000

  	
   

  	
  7,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Franklin Life Insurance Company

  	
   

  	
  The
  Franklin Life Insurance Company

  	
   

  	
  4,000,000

  	
   

  	
  4,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Canada Life Assurance Company

  	
   

  	
  Ince
  & Co.

  	
   

  	
  1,000,000

  	
   

  	
  1,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Canada Life Assurance Company

  	
   

  	
  Ince
  & Co.

  	
   

  	
  2,000,000

  	
   

  	
  2,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Modern Woodmen of America 

  	
   

  	
  Modern
  Woodmen of America

  	
   

  	
  3,000,000

  	
   

  	
  3,000,000

  	
   

  
									

 

 

Name of
Noteholder 

 

THE MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK

 

Manner of
Payment 

 

All payments on account of
the Note shall be made by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Chemical Bank, ABA
#021000128, for credit to The Mutual Life Insurance Company of New York’s
Security Remittance account No. 321-023803

 

Tax Identification No.:
13-1632487

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

Telecopy Confirms and
Notices: (201) 907-6979 Attention: Securities Custody

 

Mailing
Confirms and Notices:

 

Glenpointe Marketing &
Operations Center - MONY Glenpointe Center West

500 Frank W. Burr Blvd.

Teaneck, NJ 07666-6888

Attention: Securities
Custody

 

Address for
all Other Communications

 

The Mutual Life Insurance
Company of New York 1740 Broadway

New York, New York 10019

Attention: MONY Capital
Management Unit

 

Address for
Delivery of Securities 

 

John R. McFeely, Esq.

The Mutual Life Insurance

Company of New York

1740 Broadway

New York, New York 10019

 

 

Name of
Noteholder 

 

THE MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Chemical Bank, ABA
#021000128, for credit to The Mutual Life Insurance Company of New York,
account No. 323-161235

 

Tax Identification No.:
13-1632487

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

Telecopy Confirms and
Notices: (201) 907-6979 Attention: Securities Custody

 

Mailing
Confirms and Notices:

 

Glenpointe Marketing &
Operations Center - MONY Glenpointe Center West

500 Frank W. Burr Blvd.

Teaneck, NJ 07666-6888

Attention: Securities
Custody

 

Address for
all Other Communications

 

The Mutual Life Insurance
Company of New York 1740 Broadway

New York, New York 10019

Attention: MONY Capital
Management Unit

 

Address for
Delivery of Securities

 

John R. McFeely, Esq.

The Mutual Life Insurance
Company of New York 1740 Broadway

New York, New York 10019

 

 

Name of
Noteholder 

 

MONY LIFE
INSURANCE COMPANY OF AMERICA

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Chemical Bank, ABA
#021000128, for credit to MONY Life Insurance Company of America, account No.
323-161243

 

TAX
IDENTIFICATION NO.: 86-0222062

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

Telecopy Confirms and
Notices: (201) 907-6979 Attention: Securities Custody

 

Mailing
Confirms and Notices:

 

Glenpointe Marketing &
Operations Center - MONY Glenpointe Center West

500 Frank W. Burr Blvd.

Teaneck, NJ 07666-6888

Attention: Securities
Custody

 

Address for
all Other Communications

 

MONY Life Insurance Company
of America

c/o The Mutual Life
Insurance

Company of New York

1740 Broadway

New York, New York 10019

ATTENTION:
MONY CAPITAL MANAGEMENT UNIT

 

Address for
Delivery of Securities 

 

John R. McFeely, Esq.

The Mutual Life Insurance
Company of New York 1740 Broadway

New York, New York 10019

 

 

Name of
Noteholder 

 

HULLBIRD
& CO.

(beneficial owner - The
Manufacturers Life Insurance Company)

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

State Street Bank &
Trust Company, N.A.

Boston, Massachusetts 02101

ABA
#011000028

 

BNF = New Money Private
Placement Free

AC-4362-720-7

 

OBI = New Money Private
Placement Free

Fund Number LN73

 

TAX
IDENTIFICATION NO.: 38-0788610

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

State Street Bank &
Trust Company, N.A.

1776 Heritage Drive

A4E

North Quincy, MA 02171

Attention: Mutual Funds

 

Re: The Manufacturers Life
Insurance Company Fund No.LN73, New Money Private Placement Free AC-4362-720-7

 

With copies to:

 

Manulife Financial

200 Bloor Street East

Toronto, Ontario Canada M4W
1E5

Attention: Securities Admin.
NT5

 

 

Address for
all Other Communications 

 

The Manufacturers Life
Insurance Company 200 Bloor Street East

North Tower 6

Toronto, Ontario, Canada M4W
1E5

Attention: U.S. Private
Placements, Investment Division

 

Telephone: (416) 926-5985

Fax: (416) 926-5262

 

Address for
Delivery of Securities 

 

State Street Bank &
Trust Company, N.A.

61 Broadway

New York, New York 10006

 

Concourse Level, Securities
Cage

Re: LN73

The Manufacturers Life
Insurance Company Private Placement New Money Free

 

 

Name of
Noteholder 

 

THE
FRANKLIN LIFE INSURANCE COMPANY

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Morgan Guaranty Trust
Company

of New York

23 Wall Street ABA
#0210-0023-8 

 

	
  New
  York, New York 10015

  
	
   

  
	
  Attention :

  	
   

  	
  Money
  Transfer Department For

  
	
   

  	
   

  	
  The
  Franklin Life Insurance Company

  
	
   

  	
   

  	
  Account
  No. 022-05-988

  

 

Tax Identification No.:
37-0281650

 

Address for
Communications for Notices of Payments and Confirmation of wire transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

The Franklin Life Insurance
Company

Franklin Square

Springfield, IL 62713

 

Attention: Investment
Division

 

Address for
all Other Communications 

 

The Franklin Life Insurance
Company

Franklin Square

Springfield, IL 62713

 

Attention: Investment
Division

 

Address For
Delivery of Securities 

 

The Franklin Life Insurance
Company

c/o Robert G. Spencer

Vice President and Treasurer

Franklin Square

Springfield, IL 62713

 

 

Name of
Noteholder 

 

INCE &
CO.

(beneficial owner - The
Canada Life Assurance Company)

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Ince & Co.

c/o Morgan Guaranty Trust Company
of New York

ABA #021
000 238 

 

	
   

  	
  Account
  No. 999-99-024

  
	
   

  	
  Attn:  Custody Collection

  
	
   

  	
   

  
	
  for:

  	
  The
  Canada Life Assurance Company

  
	
   

  	
  Trust
  Account No. 41233

  
	
   

  	
   

  
	
  reference:  

  	
  Name
  of issuer, rate, type of security, maturity,

  whether principal or interest, and due date

  

 

 

Tax Identification No.:
38-0397420

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

	
   

  	
  Morgan
  Guaranty Trust Company

  
	
   

  	
  60
  Wall Street

  
	
   

  	
  New
  York, New York  10260

  
	
   

  	
  Attn:  Patricia Ewing

  
	
   

  	
   

  
	
  copy
  to:

  	
  The
  Canada Life Assurance Company

  
	
   

  	
  330
  University Avenue

  
	
   

  	
  Toronto,
  Ontario, Canada  MSG IR8

  
	
   

  	
  Attn:  Supervisor, Securities Accounting

  

 

 

Address for
all Other Communications 

 

The Canada Life Assurance
Company Investment Department, U-6

330 University Avenue

Toronto, Ontario, Canada M5G
1R8 Attn: U.S. Private Placements 

 

 

Address for
Delivery of Securities 

 

	
   

  	
  Morgan
  Guaranty Trust Company

  
	
   

  	
  15
  Broad Street

  
	
   

  	
  17th
  Floor

  
	
   

  	
  New
  York, N.Y.  10260-0023

  
	
   

  	
  Custody
  Incoming

  
	
   

  	
  Attn:  Bob Havener

  
	
   

  	
   

  
	
  for:

  	
  The
  Canada Life Assurance Company

  
	
   

  	
  Trust
  Account No.  41233

  

 

 

Name of
Noteholder 

 

INCE &
CO.

(beneficial owner - The
Canada Life Assurance Company)

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Ince & Co.

c/o Morgan Guaranty Trust
Company of New York

ABA #021
000 238 

 

	
   

  	
  Account
  No. 999-99-024

  
	
   

  	
  Attn:  Custody Collection

  
	
   

  	
   

  
	
  for
  :

  	
  The
  Canada Life Assurance Company

  
	
   

  	
  Trust
  Account No. 41235

  

 

reference : Name of issuer,
rate, type of security, maturity, whether principal or interest, and due date

 

Tax Identification No.:
38-0397420

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

Morgan Guaranty Trust
Company 60 Wall Street

New York, N.Y. 10260

Attn: Patricia Ewing

 

copy to: The Canada Life
Assurance Company 330 University Avenue

Toronto, Ontario, Canada M5G
1R8 Attn: Supervisor, Securities Accounting

 

Address for
all Other Communications 

 

The Canada Life Assurance
Company Investment Department, U-6

330 University Avenue

Toronto, Ontario, Canada M5G
1R8 Attn: U.S. Private Placements

 

 

Address for
Delivery of Securities 

 

	
   

  	
  Morgan
  Guaranty Trust Company

  
	
   

  	
  15
  Broad Street

  
	
   

  	
  17th
  Floor

  
	
   

  	
  New
  York, N.Y.  10260-0023

  
	
   

  	
  Custody
  Incoming

  
	
   

  	
  Attn:  Bob Havener

  
	
   

  	
   

  
	
  for:

  	
  The
  Canada Life Assurance Company

  
	
   

  	
  Trust
  Account No. 41235

  

 

 

Name of
Noteholder 

 

MODERN
WOODMEN OF AMERICA

 

Manner of
Payment 

 

All payments on account of
the Notes to be by bank wire or transfer of immediately available funds
(identifying the issue upon which payment is being made and the application of
the payment as between interest, principal and premium) to:

 

Account No.
347-904-5

 

Harris Trust & Savings
Bank

111 West Monroe Street

Chicago, IL 60690

ABA No. 071-000-288

For the account of Modern
Woodmen of America

 

Tax Identification No.:
36-1493430

 

Address for
Communications for Notices of Payments and Confirmation of Wire Transfers 

 

All notices of payments and
written confirmation of wire transfers should be sent to:

 

Modern Woodmen of America

1701 1st Avenue

Rock Island, IL 61201

Attn: Investment Department

 

Address for
all Other Communications 

 

Modern Woodmen of America

1701 1st Avenue

Rock Island, IL 61201

Attn: Investment Department

 

Address for
Delivery of Securities 

 

Modern Woodmen of America

1701 1st Avenue

Rock Island, IL 61201

Attn: Investment Department

 

 

SCHEDULE
4.5

 

INTERIM CHANGES

 

1. Additional Debt in the
amount of $1,727,000 incurred pursuant to the Existing 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

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Copper Penny Corporation

  	
   

  	
  100% owned
  by

  International House of Pancakes, Inc.

  	
   

  	
  Delaware

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III Industries of Canada, Ltd.

  	
   

  	
  100% owned
  by

  International House of Pancakes, Inc.

  	
   

  	
  Canada

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  International Industries, Inc.

  	
   

  	
  100% owned
  by

  International House of Pancakes, Inc.

  	
   

  	
  California

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blue Roof Advertising, Inc.

  	
   

  	
  100% owned
  by

  International House of Pancakes, Inc.

  	
   

  	
  California

  	
   

  

 

 

SCHEDULE
4.7 

 

LITIGATION SUMMARY

 

1. THE COASTAL GROUP v.
VERNON CHEVALIER, SR., et al.

 

IHOP has been named as a
defendant in a lawsuit filed by a real estate developer that purchased certain
real property in Sayreville, New Jersey, from three individuals who had
previously acquired the property from IHOP. The plaintiff contends that it
discovered petroleum hydrocarbon contaminants and construction debris on the
property. The plaintiff is seeking to recover approximately $6 million from
IHOP and numerous other defendants for the remediation of the property and
consequential damages, plus punitive damages in an unspecified amount. IHOP has
raised various defenses to the plaintiff’s claims and has asserted claims for
contribution and indemnity against several of the other named defendants, who in
turn have asserted claims for contribution and indemnity against IHOP. In
addition, IHOP has commenced a third party action against its liability
insurers seeking damages and declaratory relief for the insurers’ refusal to
defend and indemnify IHOP. In response to a motion for partial summary judgment
made by IHOP, in January 1992 the court entered an order requiring three of
IHOP’s liability insurers to pay IHOP’s past, present and future expenses for
the defense of the underlying lawsuit. An attempt by one of the insurers to
bring an interlocutory appeal of that order has been rejected by an
intermediate appellate court and the New Jersey Supreme Court. IHOP intends to
continue to contest these claims vigorously.

 

2. LORI A. HARRIS, et al. v.
IHOP and JOE SMITH 

 

On February 7, 1992, 15
individuals filed suit against IHOP and one its restaurant managers alleging
discriminatory actions at a restaurant in Milwaukee, Wisconsin, owned and
operated by IHOP. IHOP petitioned for removal of the case to the U.S. District
Court. The plaintiffs have alleged that they were denied admission to the
International House of Pancakes restaurant on the basis of their race and seek
to have the case certified as a class action on behalf of themselves and others
similarly situated. IHOP’s policies strictly prohibit race discrimination and
IHOP denies that any systematic or classwide discrimination has occurred.

 

The plaintiffs’ complaint
does not specify the amount of damages to which each plaintiff, or the
plaintiffs as a class, allege entitlement, but seeks both actual and punitive
damages as well as injunctive relief prohibiting discriminatory practices and
requiring certain remedial actions by IHOP. The plaintiffs also seek recovery
of an unspecified amount of litigation costs and expenses, including

 

1

 

attorneys’ fees, and statutory
payments to the State of Wisconsin. Discovery has been commenced by both the
plaintiffs and IHOP.

 

A settlement has been agreed
to by 19 of the 20 now-known plaintiffs, in which IHOP will pay the amount of
$185,000.00, include a summary of its non- discrimination policy in the
statement of policies formally acknowledged by IHOP management employees, and
take other steps to insure that IHOP employees are aware of its
non-discrimination policy. The settlement is subject to court approval.

 

IHOP is seeking
reimbursement from its insurance carrier for a portion or all of the amount of
the settlement plus its attorneys’ fees and expenses, although there are
arguments that coverage may not be available.

 

3. SYDNEY MINE WASTE
DISPOSAL SITE

 

By letters dated August 17,
1992, and October 1, 1992, IHOP received demands on behalf of certain parties
who have incurred or will incur costs of response with respect to the
remediation of the Sydney Mine Waste Disposal Site located in Hillsborough
County, Florida. The demands seek reimbursement and/or contribution from IHOP
pursuant to CERCLA and Chapter 376, Florida Statutes. According to the demands,
the parties have incurred response costs of $7,300,000 in the aggregate. The
basis of the demands is IHOP’s alleged disposal of materials at the disposal
site. IHOP has notified the parties making the demands that IHOP had little or
no activity in the State of Florida during the period in question, inasmuch as
all of the IHOP restaurants operating in the State of Florida during that time
period and subsequently were owned and operated by IHOP’s Florida area
franchisee, FMS Management Systems, Inc., and, therefore, it is unlikely that
IHOP directly or indirectly conducted any activity that could impose any
liability on IHOP pursuant to these statutes. IHOP has requested that the
parties furnish it with copies of the “trip tickets” so that IHOP can
investigate further.

 

2

 

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)

  	
   

  	
  $

  	
  429,250

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Obligations under Letters of Credit
  (Various)

  	
   

  	
  208,494

  	
   

  

 

 

SCHEDULE
4.9

 

CONSENTS AND APPROVALS

 

None.

 

 

SCHEDULE
4.11

TAXES

 

The Internal Revenue Service
(the “Service”) is presently auditing the tax returns of Holdings and its
Subsidiaries for the years 1987-1990. Although the examination has not yet been
completed, the Service has tentatively proposed certain nonrecurring
adjustments which, if agreed to by Holdings, would result in an increased
federal income tax liability (including interest) for such years in the
approximate amount of $350,000, and an increased state income tax liability
(including interest and net of federal income tax benefit) for such years in
the approximate amount of $125,000. Holding and the Service are currently
engaged in informal negotiations to resolve such issues at the audit level. Tax
returns of Holdings and/or of its Subsidiaries are currently being audited as
disclosed below. Consents waiving or extending the statute of limitations with
respect to taxes have been granted by Holdings and/or its Subsidiaries as
disclosed below.

 

 

	
  CURRENT
  AUDITS:

  	
   

  	
   

  
	
  INTERNAL
  REVENUE SERVICE

  	
  –

  	
  INCOME
  TAXES - 1987 - 1990

  
	
  STATE
  OF CALIFORNIA

  	
  –

  	
  INCOME
  TAXES - 1984 - 1986

  
	
  STATE
  OF NEW YORK

  	
  –

  	
  INCOME
  TAXES - 1988 - 1990

  
	
  STATE
  OF PENNSYLVANIA

  	
  –

  	
  SALES
  & USE TAXES - 1986-1992

  
	
  COUNTY
  OF ADAMS, COLORADO

  	
  –

  	
  PERSONAL
  PROPERTY TAXES - 1991

  
	
  COUNTY
  OF LARIMER, COLORADO

  	
  –

  	
  PERSONAL
  PROPERTY TAXES - 1991

  
	
  CITY
  & COUNTY OF DENVER, CO

  	
  –

  	
  SALES
  & USE TAXES; BUSINESS OCCUPATIONAL PRIVILEGE TAXES-1989-1991

  
	
   

  
	
  CONSENTS
  TO WAIVER OR EXTENSION OF THE STATUTE OF LIMITATIONS

  
	
  INTERNAL
  REVENUE SERVICES

  	
  –

  	
  1987

  	
  –

  	
  EXTENDED
  TO 12/31/93

  
	
   

  	
  –

  	
  1988

  	
  –

  	
  EXTENDED
  TO 12/31/93

  
	
   

  	
  –

  	
  1989

  	
  –

  	
  EXTENDED
  TO 12/31/93

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STATE
  OF CALIFORNIA

  	
  –

  	
  1984

  	
  –

  	
  EXTENDED
  TO 10/15/93

  
	
   

  	
  –

  	
  1985

  	
  –

  	
  EXTENDED
  TO 10/15/93

  
	
   

  	
  –

  	
  1986

  	
  –

  	
  EXTENDED
  TO 10/15/93

  
	
   

  	
  –

  	
  1987

  	
  –

  	
  EXTENDED
  TO 10/15/93

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STATE
  OF NEW YORK

  	
  –

  	
  1988

  	
  –

  	
  EXTENDED
  TO 06/15/93

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STATE
  OF PENNSYLVANIA

  	
  –

  	
  1989

  	
  –

  	
  EXTENDED
  TO 12/31/92

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CITY
  & COUNTY OF DENVER, CO

  	
  –

  	
  1989

  	
  –

  	
  EXTENDED
  TO 11/30/92

  
	
   

  	
  –

  	
  1990

  	
  –

  	
  EXTENDED
  TO 11/30/92

  
							

 

 

SCHEDULE
4.16

LABOR MATTERS

 

“Agreement Between Hotel
Employees & Restaurant Employees Union Local 340 and International House of
Pancakes, September 1, 1990 Through June 30, 1992” which continues in effect
during negotiations on a successor agreement. This agreement applies only to
employees at IHOP #0648 in South San Francisco, CA. 

 

 

SCHEDULE
4.17  

 

ENVIRONMENTAL MATTERS 

 

Please see
Items 1 and 3 on Schedule 4.7.

 

IHOP #5 -
7006 Sunset Boulevard, Hol1ywood, CA 

 

Used prior to 1961 as auto
shop, including UST’s - UST’s and petroleum contamination discovered recently -
investigation by IHOP is ongoing - corrective action plan to be proposed.

 

 

SCHEDULE
4.19

 

COMPLIANCE WITH ERISA

 

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

 

 

SCHEDULE
4.25  

 

1. License Agreement for All
Japan

 

2. Area Franchise Agreement
(Florida)

 

3. License Agreement for
British Columbia, Canada

 

1

 

SCHEDULE
6.16

 

SURVIVING OBLIGATIONS 

 

1. Obligations of the
Borrower and Holdings pursuant to Section 12B of the Purchase Agreement, dated
as of April 15, 1987, by and among the Borrower, Holdings and New York Life
Insurance and Annuity Corporation, as amended.

 

2. Obligations of the
Borrower and IHOP Realty pursuant to Sections 3.4, 3.5, 10.3, 10.8, 10.20 and
10.22 of the Loan Agreement, dated as of April 7, 1992, among the Borrower,
IHOP Realty, Holdings and Bank of America National Trust and Savings Association,
as amended, to the extent such obligations survive termination of such
agreement; reimbursment obligations thereunder pursuant to outstanding standby
letters of credit not in excess of $210,000 in aggregate principal amount; and
the obligations of Holdings as guarantor of such obligations.

 

3. Obligations of IHOP
Realty, pursuant to Section 11.13 of the First Amended and Restated Real Estate
Credit Agreement, datid as of December 29, 1989, among IHOP Realty and HomeFed
Bank, Federal Savings Bank, as amended, and the obligations of the Borrower and
Holdings as guarantors of such obligations of IHOP Realty. 

 

 

SCHEDULE 12

RESTRICTED INVESTMENTS AT CLOSING DATE 

 

	
  DESCRIPTION

  	
   

  	
  AMOUNT

  	
   

  
	
  Note Receivable (Anthony Talarico)

  	
   

  	
  $

  	
  1,283,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash Surrender Value of Life Insurance
  Policy (Executive Life Insurance)

  	
   

  	
  575,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ex-Franchisee Notes Receivable (various)

  	
   

  	
  445,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Employee Notes Receivable and Advances
  (various)

  	
   

  	
  52,000

  	
   

  
	
  Total Restricted Investments

  	
   

  	
  $

  	
  2,355,600

  	
   

  

 

 

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.

 

7.79% Senior Note

 

Due November 19, 2002

 

	
  No.
  R–       

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
  November 19, 1992

  
	
  $               

  	
   

  	
   

  

 

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 19, 1996, and on every November 19 thereafter
through November 19, 2001, with a final payment of the remaining outstanding
principal balance payable at maturity on November 19, 2002 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 7.79%
per annum, from the date hereof until maturity, payable semi-annually on the
19th day of each May and November in each year commencing May 19, 1993, 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 9.79% or the
rate of interest announced publicly from time to time by Citibank, N.A. in New
York, New York, 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 l 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      , 1992 (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
and (ii) IHOP Realty Corp., a Delaware corporation and a wholly-owned
Subsidiary of the Borrower, pursuant to the 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 New York.

 

	
   

  	
  INTERNATIONAL
  HOUSE OF PANCAKES, INC.

  
	
   

  
	
   

  	
  By:

  
	
  Its

  
			

 

2

 

EXHIBIT B

 

November
19, 1992

 

To the Purchasers set forth
on

Schedule I attached hereto

 

Ladies and Gentlemen:

 

We have acted as your
special counsel in connection with the transactions contemplated by the several
Senior Note Purchase Agreements, each dated as of November 19, 1992 (the
“Purchase Agreements”), by and between International House of Pancakes, Inc., a
Delaware corporation (the “Company”), IHOP Corp., a Delaware corporation of
which the Company is a wholly-owned subsidiary (“Holdings”) and each of you.
Any term used herein without a definition shall have the meaning assigned to
such term in the Purchase Agreements. In acting as your special counsel, we
have participated in the preparation and negotiation of the Purchase
Agreements, the Notes and the Subsidiary Guarantee.

 

In connection with this
opinion, we have examined the following documents:

 

1. The Purchase Agreements.

 

2. The Notes.

 

3. The Subsidiary Guarantee.

 

4. The Restated Certificate
of Incorporation of the Company certified by the Delaware Secretary of State on
October 21, 1992.

 

5. The By-Laws of the
Company certified by the Secretary of the Company as of the date hereof.

 

6. Resolutions of the Board
of Directors of the Company, certified by the Secretary of the Company as of
the date hereof.

 

7. Long Form of Certificate
of Good Standing of the Company certified by the Delaware Secretary of State on
October 22, 1992. 

 

 

8. Certificate of Incumbency
for the officers of the Company certified by the Secretary of the Company as of
the date hereof.

 

9. The Restated Certificate
of Incorporation of Holdings certified by the Delaware Secretary of State on
October 21, 1992.

 

10. The By-Laws of Holdings
certified by the Secretary of Holdings as of the date hereof.

 

11. Resolutions of the Board
of Directors of Holdings, certified by the Secretary of Holdings as of the date
hereof.

 

12. Long Form of Certificate
of Good Standing of Holdings certified by the Delaware Secretary of State on
October 22, 1992.

 

13. Certificate of
Incumbency for the officers of Holdings certified by the Secretary of Holdings
as of the date hereof.

 

14. The Certificate of
Incorporation of IHOP Realty Corp. (the “Subsidiary”) certified by the Delaware
Secretary of State on October 21, 1992.

 

15. The By-Laws of the
Subsidiary certified by the Secretary of the Subsidiary as of the date hereof.

 

16. Resolutions of the Board
of Directors of the Subsidiary, certified by the Secretary of the Subsidiary as
of the date hereof.

 

17. Long Form of Certificate
of Good Standing of the Subsidiary certified by the Delaware Secretary of State
on October 22, 1992.

 

18. Certificate of
Incumbency for the officers of the Subsidiary certified by the Secretary of the
Subsidiary as of the date hereof.

 

19. Legal opinion, dated
November 19, 1992, from Skadden, Arps, Slate, Meagher & Flom (“Skadden”),
special counsel to the Company and Holdings. 

 

 

20. Legal opinion, dated
November 19, 1992, from Larry Alan Kay (“Kay”), general counsel to the Company
and Holdings.

 

We have also examined and
relied upon the representations and warranties as to factual matters contained
in and made pursuant to the Purchase Agreements and the Subsidiary Guarantee
and have relied upon the originals or copies identified to our satisfaction of
such records, documents, certificates and other instruments, and have made such
other investigations as in our judgment are necessary or appropriate to enable
us to render the opinion expressed below.

 

In giving our opinion set
forth herein, we have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents examined by
us, the conformity to original documents of all documents submitted to us as
copies, the due authorization, execution and delivery of all documents and
instruments by all parties thereto other than the Company, Holdings and the
Subsidiary, the accuracy of all representations and warranties made by the
Company, Holdings and you in the Purchase Agreements and by the Subsidiary in
the Subsidiary Guarantee and that the consideration to be paid in connection
with the transaction is adequate.

 

In addition, we attended the
closing held today at our offices in New York, New York at which delivery of
the Notes and the other transactions contemplated by the Purchase Agreements
were effected, all in accordance with the Purchase Agreements.

 

Based upon the foregoing and
having regard to legal considerations that we deem relevant, we render to you
our opinion, as follows:

 

1. Based solely upon the
opinions of Skadden and Kay and on our review of certificates of good standing
issued by the Secretary of State of the State of Delaware and certified copies
of the charter documents and by-laws of the Company, Holdings and the
Subsidiary, each of the Company, Holdings and the Subsidiary is a corporation
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power and authority to (a) own and operate its
properties, (b) to conduct its business as now being conducted, (c) to enter
into, to the extent each is a party 

 

 

thereto, the Purchase
Agreements and the Subsidiary Guarantee, (d) to perform its obligations under
each of such documents to the extent each is a party thereto and (e) in the
case of the Company, to issue, sell and deliver the Notes.

 

2. The Company has duly
authorized by all requisite corporate action, executed and delivered the
Purchase Agreements and the Notes, and such agreements and instruments
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.

 

3. Holdings has duly
authorized by all requisite corporate action, executed and delivered the
Purchase Agreements, and such agreements constitute the legal, valid and
binding obligations of Holdings, enforceable against Holdings in accordance
with their terms.

 

4. The Subsidiary has duly
authorized by all requisite corporate action, executed and delivered the
Subsidiary Guarantee, and such guarantee constitutes the legal, valid and
binding obligation of the Subsidiary, enforceable against the Subsidiary in
accordance with its terms.

 

5. Under existing
circumstances, the execution and delivery by the Company and Holdings of the
Purchase Agreements, the issue, sale, execution and delivery by the Company of
the Notes, the execution and delivery by the Subsidiary of the Subsidiary
Guarantee and the performance by the Company, Holdings and the Subsidiary of
their respective obligations under such documents and instruments, do not, as
of the date hereof, contravene any provisions of their respective charters or
by-laws.

 

6. Assuming, with your
permission, that (a) you are purchasing the Notes for your own account for
investment, and not with a view to the public resale or distribution thereof,
(b) the Notes were offered and sold in the manner described in the letter of
Continental Bank N.A. dated October 19, 1992 and furnished to you, (c) the
representations and warranties of the Purchasers in Sections 5.2 and 5.4 of the
Purchase Agreements and the representations and warranties of the Company and
Holdings in Section 4.14 of the Purchase Agreements are true and correct, and
(d) none of Holdings, the Company or anyone acting on their behalf has offered
or sold or will offer or sell any of the Company’s or Holdings’ securities, or
has solicited or will solicit any offer to acquire any of the Company’s or
Holdings’ securities from the Company or Holdings, 

 

 

if the sale of any such
securities and the sale of the Notes would be integrated as a single offering
for purposes of the Securities Act, the offering, issuance, sale and delivery
of the Notes under the circumstances contemplated by the Purchase Agreements
constitute exempt transactions under the registration provisions of the
Securities Act of 1933, as now in effect; and no qualification of an Indenture
with respect to the Notes under the Trust Indenture Act of 1939, as now in
effect, is required in connection therewith.

 

The opinions expressed above
as to the enforceability of any agreement are subject to the exceptions that
such enforceability may be limited by the application of general principles of
equity and by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting the enforcement of creditors’
rights generally.

 

We express no opinion as to
the enforceability of the indemnification provisions contained in Section 16.9
of the Purchase Agreements.

 

The opinions of Skadden and
Kay, dated the date hereof and delivered to you pursuant to Section 6.3 of the
Purchase Agreements, are satisfactory to us in form and scope with respect to
the matters specified therein, and we believe that you are justified in relying
thereon.

 

We express no opinion as to
the laws of any jurisdiction other than the State of New York, the Federal laws
of the United States of America and the General Corporation Law of the State of
Delaware.

 

Very truly yours,

 

 

SONNENSCHEIN NATH & ROSENTHAL

 

SCHEDULE I

 

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

 

Modern
Woodmen of America

 

 

EXHIBIT C

 

(Opinion of counsel of
Holdings, the Borrower and IHOP Realty addressed to each of the Purchasers and
Sonnenschein Nath & Rosenthal)

 

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 Guarantee have been duly authorized, executed and
delivered by Holdings, the Borrower and IHOP Realty, to the extent each is
party thereto and such documents constitute the legal, valid and binding
agreements of Holdings, the Borrower and IHOP Realty, to the extent each is a
party thereto, enforceable against Holdings, the Borrower and IHOP Realty, 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 IHOP Realty of its contractually required obligations and
undertakings under, the Subsidiary Guarantee, 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 IHOP Realty 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 IHOP Realty to perform its obligations under the Subsidiary
Guarantee.

 

5. The issuance, sale and
delivery of the Notes and the Subsidiary Guarantee 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 Guarantee, the issuance of the Notes
or compliance by Holdings, the Borrower and IHOP Realty, 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.

 

2

 

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 IHOP Realty are owned of record and, to our
knowledge, beneficially, by the Borrower, in each case free and clear of Liens.

 

3

 

EXHIBIT D

 

SUBSIDIARY GUARANTEE

 

IHOP REALTY CORP.

 

FOR VALUE RECEIVED and in
consideration of the purchase by the Purchasers (as hereinafter defined) of
those certain 7.79% Senior Notes Due 2002 (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 19, 1992, 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:

 

2

 

(i) any amendment or other
modification of or supplement to any provision of the Purchase Agreements, 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 the obligations of the
Guarantor hereunder;

 

(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 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 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 or the Borrower, including without
limitation any transfer or purported transfer to the Guarantor, Holdings 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 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 or the Borrower or any
Affiliate or Subsidiary of the Guarantor, Holdings 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, or any other agreement;

 

(vii) any suit or other
action brought by the Guarantor, Holdings, the Borrower or any other Person, or

 

3

 

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 or any other
agreement;

 

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

 

(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, 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;

 

(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 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

 

4

 

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 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 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 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

 

5

 

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 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 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.

 

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 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 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
NEW YORK (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 NEW YORK, STATE OF NEW YORK, 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.

 

6

 

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 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 WHETHER
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.

 

7

 

IN WITNESS WHEREOF, this
Guarantee has been duly executed by the Guarantor as of the
     day of November, 1992.

 

	
   

  	
  IHOP
  REALTY CORP.

  
	
   

  
	
   

  	
  By:

  
	
  Title:

  
	
   

  
	
   

  	
  Address:

  
				

 

8

 

EXHIBIT E

 

LEASE 

 

between

 

IHOP REALTY CORP.,

a
Delaware corporation,

Lessor

 

and

 

INTERNATIONAL HOUSE OF PANCAKES, INC.,

a
Delaware corporation,

Lessee

 

              ,
1992

 

 

LEASE 

between

IHOP REALTY
CORP.,

a
Delaware corporation, Lessor,

and

INTERNATIONAL HOUSE OF PANCAKES, INC.,

a
Delaware corporation, Lessee

 

TABLE OF CONTENTS

 

	
  ARTICLE I – DEMISED
  PREMISES; TERM

  
	
   

  	
  1.1

  	
  Demised Premises

  
	
   

  	
  1.2

  	
  Term

  
	
   

  	
  1.3

  	
  Options to Extend Term

  
	
   

  	
  1.4

  	
  Short Form of Lease

  
	
   

  	
   

  	
   

  
	
  ARTICLE II – RENT

  
	
   

  	
  2.1

  	
  Minimum Monthly Rental

  
	
   

  	
  2.2

  	
  Percentage Rent

  
	
   

  	
  2.3

  	
  Statements of Gross
  Sales

  
	
   

  	
  2.4

  	
  “Gross Sales” Defined

  
	
   

  	
  2.5

  	
  Verification of
  Gross Sales; Audit

  
	
   

  	
   

  	
   

  
	
  ARTICLE III – TAXES AND
  ASSESSMENTS

  
	
   

  	
  3.1

  	
  Taxes
  and Assessments

  
	
   

  	
  3.2

  	
  Installment Payments

  
	
   

  	
  3.3

  	
  Personal Property Taxes

  
	
   

  	
  3.4

  	
  Proration

  
	
   

  	
  3.5

  	
  Contest

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV – CONSTRUCTION
  OF IMPROVEMENTS; REPAIR AND MAINTENANCE; ALTERATIONS AND IMPROVEMENTS

  
	
   

  	
  4.1

  	
  Construction of
  Improvements

  
	
   

  	
  4.2

  	
  Repair and Maintenance

  
	
   

  	
  4.3

  	
  Alterations and
  Improvements

  
	
   

  	
   

  	
   

  
	
  ARTICLE V – LIENS

  
	
   

  	
  5.1

  	
  Discharge of Liens;
  Contest

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI – USE OF
  PREMISES

  
	
   

  	
  6.1

  	
  Permitted Use

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII – LIABILITY
  INSURANCE

  
	
   

  	
  7.1

  	
  Lessee’s Insurance

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII –
  BANKRUPTCY

  
	
   

  	
  8.1

  	
  Continuation of
  Lease

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX – ASSIGNMENT
  AND SUBLETTING

  
	
   

  	
  9.1

  	
  Assignment

  
	
   

  	
  9.2

  	
  Subletting

  
	
   

  	
   

  	
   

  
	
  ARTICLE X – REMEDIES IN THE
  EVENT OF DEFAULT

  
	
   

  	
  10.1

  	
  Remedies

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI – PROPERTY
  INSURANCE.

  
	
   

  	
  11.1

  	
  Lessee to Obtain “All Risk”
  Insurance

  
	
   

  	
  11.2

  	
  Blanket Policy.

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII – DAMAGE AND
  DESTRUCTION

  
	
   

  	
  12.1

  	
  Abatement of Rent

  
	
   

  	
  12.2

  	
  Restoration of
  Improvements – Insured Loss

  
	
   

  	
  12.3

  	
  Restoration of
  Improvements – Uninsured Loss

  
	
   

  	
  12.4

  	
  Extension of Lease

  

 

i

 

	
  ARTICLE XIII –
  CONDEMNATION

  
	
   

  	
  13.1

  	
  Complete Taking

  
	
   

  	
  13.2

  	
  Partial Taking

  
	
   

  	
  13.3

  	
  Allocation of
  Condemnation Award

  
	
   

  	
  13.4

  	
  Rent Reduction in Case of Partial
  Taking

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV – QUIET
  ENJOYMENT AND TITLE

  
	
   

  	
  14.1

  	
  Covenant of Quiet Enjoyment

  
	
   

  	
  14.2

  	
  Right to Possession

  
	
   

  	
  14.3

  	
  Superior Encumbrances

  
	
   

  	
  14.4

  	
  Ownership; Authority;
  Restrictions

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV – TRADE
  FIXTURES

  
	
   

  	
  15.1

  	
  Ownership;
  Removal

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI –
  SUBORDINATION

  
	
   

  	
  16.1

  	
  Subordination

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII – RIGHT
  OF FIRST REFUSAL

  
	
   

  	
  17.1

  	
  Purchase

  
	
   

  	
  17.2

  	
  Lease

  
	
   

  	
  17.3

  	
  Incorporation in
  Short Form of Lease

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVIII –
  REMOVAL OF DISTINCTIVE FEATURES

  
	
   

  	
  18.1

  	
  Removal; Repairs

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX –
  PROHIBITION AGAINST COMPETITION AND PROTECTION FOR EXPOSURE

  
	
   

  	
  19.1

  	
  Lessor’s Covenant

  
	
   

  	
  19.2

  	
  Lessee’s
  Remedies for Breach

  
	
   

  	
  19.3

  	
  Incorporation in
  Short Form of Lease

  
	
   

  	
   

  	
   

  
	
  ARTICLE XX – TITLE
  CONSIDERATIONS

  
	
   

  	
  20.1

  	
  CC&Rs; Lender’s Lien

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXI – HAZARDOUS
  SUBSTANCE OR WASTE

  
	
   

  	
  21.1

  	
  Mutual Indemnity

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXII – REAL
  ESTATE COMMISSIONS

  
	
   

  	
  22.1

  	
  Payment; Mutual Indemnity

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXIII –
  NOTICES AND DEMANDS

  
	
   

  	
  23.1

  	
  To Lessor

  
	
   

  	
  23.2

  	
  To Lessee

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXIV –
  ATTORNEYS’ FEES

  
	
   

  	
  24.1

  	
  Paid to Prevailing Party

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXV – GENERAL
  PROVISIONS

  
	
   

  	
  25.1

  	
  Binding on Successors

  
	
   

  	
  25.2

  	
  Severability

  
	
   

  	
  25.3

  	
  Entire Agreement

  
	
   

  	
  25.4

  	
  Captions

  
	
   

  	
  25.5

  	
  Gender and Number

  
	
   

  	
  25.6

  	
  Approvals

  
	
   

  	
  25.7

  	
  No Waiver

  
	
   

  	
  25.8

  	
  Holdover

  
	
   

  	
  25.9

  	
  Time of Essence

  
	
   

  	
  25.10

  	
  Governing Law

  
	
   

  	
  25.11

  	
  Counterparts

  
	
   

  	
  25.12

  	
  No
  Third Party Rights

  
	
   

  	
  25.13

  	
  Unexecuted
  Lease

  
	
   

  	
  25.14

  	
  Lessor’s
  Right of Entry

  
	
   

  	
  25.15

  	
  Estoppel
  Certificates

  
	
   

  	
  25.16

  	
  Due
  Authorization

  
	
   

  	
  25.17

  	
  Relationship
  of Parties

  

 

ii

 

E X H I B I T S 

 

Exhibit “A” - Legal
Description Exhibit “B” - Permitted Exceptions

 

iii

 

L E A S E 

 

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”).

 

W I T N E S S E T H:

 

ARTICLE I

DEMISED PREMISES; TERM

 

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”).

 

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.

 

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.

 

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

 

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 herein-below) to be erected on 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.

 

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 terms
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.

 

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.

 

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 concessionaire 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

 

2

 

title to the merchandise
passes with delivery. The term “gross sales” shall not include sales from coin
operated vending machines.

 

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
Premises. 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
Demised Premises, which Lessee 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 Premises and do not
apply to sales of any other business.

 

ARTICLE III

TAXES AND ASSESSMENTS

 

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 Article 4.1 hereinbelow), or arising
from the use and occupancy or possession of the Demised Premises or the
Improvements (as defined in Article 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.

 

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.

 

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.

 

3.4 Proration.
All of the above impositions (except utility or other charges attributable
solely to Lessee’s use) for the first

 

3

 

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.

 

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

 

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”).

 

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.

 

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 prior 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

 

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

 

4

 

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

 

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 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 Article 20.1 hereinbelow) or any applicable law, rule,
ordinance or regulation of any governmental body.

 

ARTICLE VII

LIABILITY INSURANCE

 

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 to 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

 

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.

 

5

 

ARTICLE IX

ASSIGNMENT AND SUBLETTING

 

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 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.

 

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

 

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

 

6

 

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
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

 

11.1 Lessee to
Obtain “A1l 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 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.

 

11.2 Blanket
Policy. Lessee may, at its option, bring its obligations to insure under this
Article XI within the coverage of any so-

 

7

 

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
interest 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

 

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.

 

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 Article 11.1 hereinabove.

 

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 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.

 

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

 

8

 

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

 

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.

 

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.

 

13.3 Allocation
of Condemnation Award. In the event of such a condemnation of the whole or
a 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 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.

 

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

 

14.1 Covenant
of Quiet Enjoyment. Lessee, subject to the terms of this Lease, upon paying
the Minimum Monthly Rental and additional

 

9

 

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.

 

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.

 

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.

 

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 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

 

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

 

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

 

10

 

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.

 

ARTICLE XVII

RIGHT OF FIRST REFUSAL

 

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.

 

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 term 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.

 

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

 

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
or 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,

 

11

 

to paint the Improvements in
a neutral color. Lessor agrees that Lessor will not thereafter 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

 

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.”

 

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).

 

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

 

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.

 

ARTICLE XXI

HAZARDOUS SUBSTANCE OR WASTE

 

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 terms 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

 

12

 

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

 

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

 

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), firm(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.

 

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

 

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.

 

13

 

ARTICLE XXV

GENERAL PROVISIONS

 

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.

 

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.

 

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.

 

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.

 

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.

 

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

 

25.7 No
Waiver. No waiver by Lessor or Lessee of any breach of any provision of
this Lease 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.

 

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.

 

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

 

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.

 

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.

 

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.

 

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.

 

14

 

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.

 

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 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.

 

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.

 

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.

 

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:

  	
   

  	
   

  
	
  Richard
  K. Herzer

  
	
   

  
	
   

  	
  Its:
  President

  	
   

  
	
   

  
	
  LESSEE:

  
	
   

  
	
  INTERNATIONAL HOUSE OF PANCAKES, INC.,

  
	
  a
  Delaware corporation

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Richard
  K. Herzer

  
	
   

  
	
   

  	
  Its:
  President

  	
   

  
					

 

15

 

State of California )

County of Los Angeles )

 

On
                          ,
1992, before me,
                                  
, personally appeared RICHARD K. HERZER, President 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 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)

  
	
   

  	
   

  	
   

  
	
   

  	
  State
  of California )

  	
   

  
	
   

  	
   

  	
   

  
	
  County of Los Angeles )

  	
   

  	
   

  

 

On                       ,
1992, before me,
                                    
, personally appeared RICHARD K. HERZER President of INTERNATIONAL HOUSE OF
PANCAKES, INC., personally known to me (or proved to me on the basis of
satisfactory evidence) to be the parson 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)

  

 

16

 

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 l 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:

  	
   

  

 

 

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, dated as of November
        , 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):

 

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.

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