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PRIVILEGED AND CONFIDENTIAL
FOR DISCUSSION PURPOSES ONLY
DRAFT DATED 09/24/98
As filed with the Securities and Exchange Commission on September 29, 1998.
Registration No. 333-4578
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 4 ON
FORM S-3
TO FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CAFETERIA OPERATORS, L.P.
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(Exact name of registrant as specified in its charter)
DELAWARE 75-2186655
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6901 QUAKER AVENUE
LUBBOCK, TEXAS 79413
(806) 792-7151
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
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ALTON R. SMITH
Executive Vice President
Cafeteria Operators, L.P.
6901 Quaker Avenue
Lubbock, Texas 79413
(806) 792-7151
(Name, address, and telephone number,
including area code, of agent for service)
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COPIES TO:
MICHAEL W. TANKERSLEY
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
(214) 939-5500
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION
Preliminary Prospectus dated September 29, 1998
THIS PRELIMINARY PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT
TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BE ANY SALE OF, THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION,
QUALIFICATION OR FILING UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
CAFETERIA OPERATORS, L.P.
$13,041,007.53 SENIOR SECURED NOTES DUE DECEMBER 31, 2001
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This Prospectus relates to the public offering by the selling security
holders (the "Selling Security Holders") of up to $13,041,007.53 aggregate
principal amount of 12% Senior Secured Notes due December 31, 2001 (the
"Notes") of Cafeteria Operators, L.P. (the "Company"), a Delaware limited
partnership and indirect wholly owned partnership subsidiary of
Furr's/Bishop's, Incorporated, a Delaware corporation (the "Parent").
The Notes were originally issued by the Company pursuant to the
Indenture, dated as of March 27, 1992 (the "Original Indenture") as amended
and restated on November 15, 1995 (the "Indenture") between the Company and
Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.), as trustee
(the "Trustee"). Interest on the Notes is payable semi-annually on March 31
and September 30 of each year, commencing March 31, 1996.
The Notes are redeemable at the option of the Company at any time, upon
not less than thirty nor more than sixty days' notice, in whole or in part,
at 103% of the principal amount if the redemption occurs on or before
September 30, 1998 and at 100% of the principal amount if the redemption
occurs after September 30, 1998, in each case together with the accrued
interest thereon to the redemption date. The Company is required to redeem
Notes from the proceeds of certain property transfers and casualty losses
which are not, within 180 days of the date of receipt thereof, applied, in
the case of transfer, to purchase certain assets used or useful in the
business of the Company, or, in the case of casualty loss, to either repair
or replace the property that gave rise to such casualty loss.
The obligations under the Notes are secured by a security interest in
substantially all of the property and assets of the Company.
The Notes rank pari passu with all existing and future senior
indebtedness of the Company. As of the date hereof, there is no senior
indebtedness outstanding. The Indenture contains limitations with respect to
the amount of additional indebtedness that can be incurred by
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the Company and its subsidiaries. The Company, however, may obtain a
revolving credit facility in the amount of $5.0 million and, under certain
circumstances, release certain collateral, or subordinate to such facility
the liens, securing the Notes.
SEE "RISK FACTORS" ON PAGE [X] FOR A DISCUSSION OF CERTAIN RISKS
INVOLVED IN THE PURCHASE OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE
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The Selling Security Holders directly or through agents, dealers or
underwriters may sell the Notes from time to time on terms to be determined
at the time of sale. To the extent required, the specific Notes to be sold,
the names of the Selling Security Holders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter and
applicable commissions or discounts with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement or, if
appropriate, a post-effective amendment to the Registration Statement of
which this Prospectus is a part. See "Plan of Distribution." Each of the
Selling Security Holders reserves the sole right to accept or to reject, in
whole or in part, any proposed purchase of the Notes.
The Company will not receive any proceeds from this offering but, by
agreement, will pay substantially all expenses of this offering, other than
the commissions or discounts of underwriters, dealers or agents, but
including the fees and disbursements of one counsel to certain of the Selling
Security Holders. The Selling Security Holders, and any underwriters,
dealers or agents that participate with the Selling Security Holders in the
distribution of the Notes, may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions received by them and any profit on the resale of the Notes
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" and "Description of
Notes" for a description of indemnification arrangements between the Company
and the Selling Security Holders and indemnification arrangements for
underwriters.
THE DATE OF THIS PROSPECTUS IS _________, 1998
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO PURCHASE ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT WOULD
BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). The
Registration Statement, the exhibits and schedules forming a part thereof,
and the reports, proxy statements and other information filed by the Company
with the Commission in accordance with the Exchange Act can be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission at Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048 and are available at http://www.sec.gov on
the world wide web or by calling the Commission at 1-800-SEC-0330. Copies of
such material also can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at its public reference facilities in New York, New York and Chicago,
Illinois at prescribed rates. In addition, material filed by the Company can
also be inspected at the offices of the New York Stock Exchange ("NYSE"), 20
Broad Street, Seventh Floor, New York, New York 10005.
The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part) on Form S-3 (together with any amendments
thereto, the "Registration Statement") under the Securities Act with respect
to the Notes. This Prospectus does not contain all the information set forth
or incorporated by reference in the Registration Statement and the exhibits
and schedules relating thereto, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof, which are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the
Commission.
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Statements contained in this Prospectus as to the contents of other
documents referred to herein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, and
each such statement is qualified in all respects by such reference.
AFFILIATE FILING
Furr's/Bishop's, Incorporated, a Delaware corporation (the "Parent") of
which the Company is a direct and indirect wholly owned partnership
subsidiary, is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements, and other
information with the Commission as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission by
the Company, are incorporated herein by reference and made a part hereof:
(i) Annual Report on Form 10-K for the year ended December 30, 1997
(the "1997 10-K");
(ii) Quarterly Report on Form 10-Q for the 13 weeks ended March 31,
1998;
(iii) Quarterly Report on Form 10-Q for the 13 weeks ended June 30,1998
(the "June 30, 1998 10-Q"); and
(iv) Registration Statement on Form 8-A registering the Notes, filed in
connection with this Registration Statement.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of Notes to be made hereunder shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing thereof. Any statement contained herein or in a document
incorporated or deemed incorporated by reference herein shall be deemed to be
modified or superseded for all purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide, without charge, to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated by reference in
this Prospectus (other than exhibits and schedules thereto, unless such
exhibits or schedules are specifically incorporated by reference into the
information that this Prospectus incorporates). Written or telephonic
requests for copies should be
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directed to the Company's principal office: Furr's/Bishop's, Incorporated,
6901 Quaker Avenue, Lubbock, Texas 79413, Attention: Alton R. Smith
(telephone: (806) 792-7151).
The Indenture pursuant to which the Notes were issued requires the
Company to distribute to the Trustee and holders of the Notes copies of
quarterly, annual and current reports and of other information, documents and
other reports which the Company is required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act or the rules and
regulations of the Commission promulgated thereunder.
<TABLE>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Background; The Restructuring. . . . . . . . . . . . . . . . . . . . 7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Summary Financial Data . . . . . . . . . . . . . . . . . . . . . . . 11
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Selling Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . 17
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Description of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Optional Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 20
Required Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 20
Payment at Maturity. . . . . . . . . . . . . . . . . . . . . . . . . 21
Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Security and Guaranty. . . . . . . . . . . . . . . . . . . . . . . . 21
Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Events of Default and Remedies . . . . . . . . . . . . . . . . . . . 28
Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . 31
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Information Concerning the Trustee . . . . . . . . . . . . . . . . . 33
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Special Note Regarding Forward-Looking Statements . . . . . . . . . . . . 50
</TABLE>
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PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. It is not, and is not intended to be complete. Reference
is made to, and this summary is qualified in its entirety by, the more
detailed information contained elsewhere in this Prospectus. Unless
otherwise defined, capitalized terms used in this Summary have the meanings
ascribed to them elsewhere in this Prospectus. Prospective purchasers are
encouraged to read carefully all of the information contained in this
Prospectus in its entirety.
THE COMPANY
Cafeteria Operators, L.P., a Delaware limited partnership (the
"Company"), was formed on June 22, 1987. The Company's sole general partner
is Furr's/Bishop's, Incorporated, a Delaware corporation (the "Parent"). The
Parent owns 94% of the outstanding limited partnership interest in the
Company and Furr's/Bishop's Cafeterias, L.P., a Delaware limited partnership
and indirect wholly owned partnership subsidiary of the Parent ("FBLP"), owns
6% of the outstanding limited partnership interest in the Company. The
principal executive offices of the Company and the Parent are located at
6901 Quaker Avenue, Lubbock, Texas 79413, and the telephone number is
(806) 792-7151. Unless the context otherwise requires, all references in this
Prospectus to the "Company" include the Company and its subsidiaries.
The Company is one of the largest operators of family-style cafeteria
restaurants in the United States (based on the number of cafeterias
operated). The Company believes that its cafeterias and buffets, which are
operated under the "Furr's" and "Bishop's" names, are well recognized in
their regional markets for their value, convenience, food quality and
friendly service. The Company's 100 cafeterias and one buffet are located in
12 states in the Southwest, West and Midwest. In addition, the Company
operates Dynamic Foods, its food preparation, processing and distribution
division, in Lubbock, Texas. Dynamic Foods provides approximately 85% of the
food and supply requirements of the Company's cafeteria and buffet
restaurants. Dynamic Foods also sells bakery items, meats and seafood and
various prepared foods to the restaurant, food service and retail markets.
BACKGROUND; THE RESTRUCTURING
On January 2, 1996, the Company received the approval of its lenders and
the stockholders of the Parent of a restructuring of its financial position,
which resulted in a reduction of the Company's debt and other obligations by
over $200 million, a significant reduction in interest expense and an
increase in its net worth. Approval of the Restructuring concluded nearly
three years of discussions aimed at providing the Company with greater
financial stability and the resources to compete in an increasingly
competitive industry.
As part of the Restructuring, the Company executed the Indenture dated
as of November 15, 1995 between the Company and Fleet National Bank of
Massachusetts (f/k/a
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Shawmut Bank, N.A.), as trustee, pursuant to which, among other things, the
terms of $40.0 million aggregate principal amount outstanding under the
Company's 11% Senior Secured Notes due June 30, 1998 (the "11% Notes"),
issued pursuant to the Original Indenture were amended, with the consent of
the holders of the 11% Notes at such time (the "Original 11% Noteholders"),
to constitute $40.0 million (subject to the issuance of additional notes in
payment of the first interest installment) aggregate principal amount of 12%
Notes issued pursuant to the Indenture. In addition, the Company issued a
12% Note in the original principal amount of $1.7 million (plus interest) to
the Trustees of General Electric Pension Trust ("GEPT") in settlement of a
$5.4 million judgment against FBLP. As part of the Restructuring, Wells
Fargo Bank, National Association ("Wells Fargo") received an option to
purchase 2.5% of the outstanding Common Stock (the "Wells Fargo Option") in
satisfaction of approximately $6.1 million principal amount (plus
approximately $1.6 million of accrued and unpaid interest) of indebtedness of
a subsidiary of the Parent. State Street Bank and Trust Company is currently
the trustee under the Indenture.
As a result of the Restructuring, indebtedness of the Company in the
amount of approximately $153 million aggregate principal amount (plus
approximately $46.6 million in accrued and unpaid interest) outstanding under
the Original Indenture was exchanged by holders of the 11% Notes (the
"Exchanging 11% Noteholders" and together with the Original 11% Noteholders,
the "former 11% Noteholders") on January 2, 1996 for an aggregate of 95% of
the limited partnership interests of the Company and the right to put to the
Parent their 95% limited partnership interests in the Company in exchange for
95% of the outstanding Common Stock (the "Put Option"). In addition,
outstanding warrants to purchase capital stock of the Parent held by certain
of the Exchanging 11% Noteholders were canceled.
On March 12, 1996, a majority of the Exchanging 11% Noteholders
exercised the Put Option and, accordingly, all Exchanging 11% Noteholders put
their aggregate 95% limited partnership interests to the Parent in exchange
for 95% of the outstanding Common Stock of Parent. On March 15, 1996, Wells
Fargo exercised the Wells Fargo Option thereby becoming the beneficial owner
of 2.5% of the outstanding Common Stock of Parent.
RISK FACTORS
For a discussion of certain factors that should be considered in
evaluating an investment in the Notes, see "Risk Factors" on page 13.
THE OFFERING
Securities Offered . . . . . $13,041,007.53 aggregate principal amount of 12%
Senior Secured Notes due December 31, 2001 (the
"Notes") held by selling security holders (the
"Selling Security Holders"). Notes in the
aggregate principal amount of $40.0 million were
originally issued in a private placement by the
Company pursuant to the Amended and Restated
Indenture (the "Indenture") dated as of
November 15, 1995 between the Company and Fleet
National Bank of Massachusetts (f/k/a Shawmut
Bank, N.A.), as trustee (the
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"Trustee"), in exchange for 11% Notes of the
Company. A Note in the original principal
amount of $1.7 million was issued to GEPT in
settlement of a judgment and Notes in the
aggregate principal amount of approximately
$4.1 million were issued in payment of the
first interest installment under the Indenture.
The Notes offered hereby are being offered for
sale by the Selling Security Holders and the
Company will not receive any part of the
proceeds from any sale thereof. No additional
Notes were issued or may be issued pursuant to
the Indenture.
Interest Rate. . . . . . . . 12% per annum, except that upon a default in the
payment of interest for thirty days or principal
at maturity, such interest rate shall be increased
to the lesser of 13% per annum and the highest
rate allowed by applicable law.
Interest Payment Dates . . . January 24, 1996 and each March 31 and
September 30 thereafter, commencing on March
31, 1996. Interest accrued from April 1, 1995
through January 24, 1996 was paid on January
24, 1996 by the issuance of additional Notes.
All future interest payments must be made in
cash.
Maturity Date. . . . . . . . December 31, 2001.
Optional Redemption. . . . . The Notes are redeemable at the option of the
Company at any time, upon not less than thirty nor
more than sixty days notice, in whole or in part,
at 103% of the principal amount if the redemption
occurs on or before September 30, 1998 and at 100%
of the principal amount of the Notes to be
redeemed if the redemption occurs after September
30, 1998, in each case together with the accrued
interest thereon to the redemption date.
Required Redemption. . . . . The Company is required to redeem Notes from the
proceeds of certain transfers of property and
casualty losses which are not, within 180 days of
the date of receipt thereof, applied, in the case
of transfer, to purchase certain assets used or
useful in the business of the Company or its
subsidiaries, or, in the case of casualty loss, to
either repair or replace the property that gave
rise to such casualty loss.
Ranking. . . . . . . . . . . The Notes are senior obligations of the Company.
The obligations under the Notes are secured by a
security interest in substantially all of the
property and assets of the Company. The Notes
rank pari passu with all existing and future
senior indebtedness of the Company. As of the
date hereof, there is no other senior indebtedness
outstanding. The Indenture contains limitations
with
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respect to the amount of additional
indebtedness that can be incurred by the
company and its subsidiaries. The Company may
obtain a revolving credit facility in the
amount of $5.0 million and, under certain
circumstances, release certain collateral, or
subordinate to such facility the liens,
securing the Notes. See "Description of the
Notes -- Security and Guaranty."
Security and Guaranty. . . . Pursuant to the Collateral Documents (as defined
in the Indenture), the Notes are secured by a
valid, perfected security interest in certain
assets and property of the Company, including,
without limitation, certain real property,
inventory, equipment, accounts receivable and
intellectual property of the Company, and by a
pledge of the partnership interest of the Company
in and to Furr's/Bishop's Specialty Group, L.P.
("Specialty"). The obligations of the Company in
respect of the Notes and the Indenture are fully
and unconditionally guaranteed by Specialty, which
guarantee is secured by a security interest in
substantially all of the property and assets of
Specialty. Specialty, however, has no material
assets. The liens and security interests with
respect to certain property may be subject to
prior liens and encumbrances, including liens
which may be created to secure a working capital
facility not exceeding $5.0 million. In addition,
collateral may be released in connection with a
permitted sale of assets by the Company. There
can be no assurance that the amount realized upon
any enforcement in respect of such collateral
would be sufficient to satisfy the Company's
payment obligations in respect of the Notes.
Covenants. . . . . . . . . . In addition to certain customary affirmative
covenants, the Indenture contains covenants that,
among other things, restrict the ability of the
Company's and each of its subsidiaries, subject to
certain exceptions contained therein, to
(i) create, incur, assume or guarantee any
indebtedness, (ii) consolidate or merge with, or
transfer substantially all of its assets and
properties to any other person or entity,
(iii) make certain investments, (iv) make any
dividend or other distribution to the holders of
its partnership interests, make any payment on
account of the purchase, redemption, retirement or
acquisition of its partnership interests or make
any optional prepayment of any subordinated
indebtedness, (v) create or permit to exist any
liens (other than liens securing the Notes and
certain purchase money liens) securing any
indebtedness upon certain of the properties and
assets owned by the Company or any of its
subsidiaries, or agree for the benefit of certain
other creditors to restrict its right to create
any such liens, (vi) transfer all or any part of
its assets (other than transfers of inventory in
the
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ordinary course of business), (vii) enter into
any transaction with any affiliate of the
company or any subsidiary thereof on terms that
would be less favorable than those obtained
through an arm's length negotiation with an
unaffiliated third party or (vii) permit any
subsidiary of the Company to enter into certain
agreements, restricting the subsidiary's
ability to pay dividends and make distributions
to, create or pay indebtedness owing to or
transfer any of its property to, the Company.
Defaults and Remedies. . . . If the Company or certain of its subsidiaries
shall (i) fail to pay amounts due, or observe any
other covenant beyond certain grace periods, in
respect of the Notes, the Indenture or the Credit
Documents relating thereto, (ii) default in the
payment of certain other indebtedness or allow to
remain unpaid certain judgments, (iii) become the
subject of certain events of bankruptcy or
insolvency or (iv) sustain uninsured casualties in
respect of certain of their properties; or if
certain events rendering unenforceable the
obligations of the Company or the liens granted
for the benefit of the holders of the Notes shall
have occurred and be continuing, then the Trustee
or the holders of a majority in principal amount
of the Notes may accelerate the maturity of the
Notes, and the Trustee may (and upon direction by
holders of a majority of the outstanding principal
amount of the Notes shall) proceed against the
collateral securing the Notes and pursue all other
available legal remedies.
SUMMARY FINANCIAL DATA
The following table presents, in summary form, historical financial data
derived from the audited and unaudited historical consolidated financial
statements of the Company and subsidiaries. The interim unaudited financial
statements have been prepared pursuant to the rules and regulations of the
Commission. In management's opinion, all adjustments and eliminations,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial statements, have been made. The results of
operations for such interim period are not necessarily indicative of the
results of operations for the full year. The data should be read in
conjunction with the historical financial statements, and the respective
notes thereto, contained in the 1997 10-K and the June 30, 1998 10-Q,
incorporated herein by reference.
11
<PAGE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX FISCAL YEARS ENDED:
WEEKS WEEKS -------------------
ENDED ENDED DEC. 30, DEC. 31, JAN. 2, JAN. 3, DEC. 28,
JUNE 30, 1998 JULY 1, 1997 1997 1996 1996 1995 1993
------------- ------------ -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales (1). . . . . . . . . . . . $94,244 $97,140 $193,530 $197,196 $209,769 $224,819 $253,490
Gross Profit . . . . . . . . . . . . 66,478 67,796 135,238 135,869 142,360 154,631 177,700
Net Income (Loss) Before
Extraordinary Items (2). . . . . . 4,500 (108) (4,740) 8,550 (37,154)(3) (19,710) (163,386)(4)
BALANCE SHEET
DATA:
Cash . . . . . . . . . . . . . . . . 7,927 4,457 4,395 3,668 964 1,475 2,891
Net Working Capital
Deficiency (5) . . . . . . . . . . (10,839) (14,013) (13,646) (16,144) (20,323) (237,344) (223,931)
Total Assets . . . . . . . . . . . . 79,865 81,262 77,314 86,342 86,066 103,430 111,615
Total Debt (6) . . . . . . . . . . . 68,952 71,894 71,698 74,640 78,408 226,824 203,808
Partners' Capital (Deficit). . . . . (23,795) (24,075) (28,295) (23,967) (34,946) (160,120) (141,775)
Ratio of Earnings (Loss)
to Fixed Charges . . . . . . . . . 3.38:1 0.95:1 (0.19):1 3.20:1 (0.23):1 0.29:1 (5.14):1
Amount of Coverage
Deficiency . . . . . . . . . . . . N/A 108 4,740 N/A 37,154 19,710 163,386
</TABLE>
- ----------------
(1) The Company closed eight restaurants in 1997, five in 1996, fourteen in
1995 and fourteen in 1994.
(2) Excludes interest not expensed in accordance with SFAS 15 of $2,746 for the
26 weeks ended June 30, 1998 and July 1, 1997 and $5,493 for the years
ended December 30, 1997 and December 31, 1996. See Note 2 of Notes to
Consolidated Financial Statements included in the 1997 10-K.
(3) Excludes a net gain of $157,619 from financial restructuring transactions
in the fiscal year ended January 2, 1996.
(4) Includes a write-off of goodwill of approximately $135,208 in the fourth
quarter of the fiscal year ended December 28, 1993.
(5) Includes long-term debt classified as current of $192,854 at January 3,
1995 and December 28, 1993.
(6) Includes interest accrued to maturity on long-term debt of $20,629,
$26,121, $23,374, $28,867 and $33,913 at June 30, 1998, July 1, 1997,
December 30, 1997, December 31, 1996 and January 2, 1996, respectively,
and interest subject to restructuring of $33,903 and $10,838 at January 3,
1995 and December 28, 1993, respectively.
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<PAGE>
RISK FACTORS
In considering the matters set forth in this Prospectus, prospective
investors should carefully consider, among other things, the significant
factors described below which are associated with the Notes before making an
investment in the Notes.
CAPITAL EXPENDITURES, ACCESS TO CAPITAL
The Company has had limited funds in recent years to apply to capital
maintenance of many of its restaurants, and many of its restaurants have not
been recently updated. In 1997 the Company began implementing a plan to
remodel certain of its stores in designated markets, which has resulted in
generally positive effects on individual store revenues where the remodeling
has been completed. The results of the remodeling program to date suggest
that it would be beneficial for the Company to implement the remodeling
program more broadly. Management is also considering opening new restaurants
in selected markets to replace units closed due to lease terminations and to
build on the Company's name identification and marketing as well as to
enhance operating efficiencies in those markets. Substantial capital
expenditures will be required to meet the requirements of capital maintenance
and to implement these plans. Management believes that the proposed capital
expenditure program is necessary to enable the Company and its subsidiaries
to maintain or improve customer counts, increase revenues and improve
profitability.
The Company will be required to make significant payments with respect
to its debt and obligations incurred in connection with the settlement of
litigation. These payments will limit the Company's ability to make future
capital expenditures. The Company does not presently have access to
sufficient capital to satisfy all of the needs that have been identified. In
response, management is preparing a more detailed capital plan and plans to
seek additional capital in 1999, including a potential refinancing of the
Company's Notes. There is no assurance that the Company will be able to
obtain capital from sources outside the Company in amounts or at a cost that
will allow the Company to meet the capital needs identified above or to
refinance the Notes. In the meantime, a capital plan is being prepared to
address some of the Company's most pressing needs within the limits of the
Company's anticipated cash flow for 1998 and 1999.
The Company's ability to implement these plans will be impaired if the
Company experiences any unexpected cash requirements or a decline in
operating cash flow to devote to these projects. The Company's ability to
incur additional debt to fund capital requirements or for other purposes is
limited by the terms of the Indenture governing the Company's Notes (the
"Indenture"), which generally limit the Company to a $5 million revolving
line (which has not been implemented to date), purchase money debt and
leasing as sources of additional funding. Management believes that the
Company is likely to continue to experience impaired access to capital due to
its recent losses, the restructuring of its debt in 1995 and the absence of
an active trading market for its debt and equity securities. Management
believes that the Company can operate at levels comparable to recent periods
while relying on internal cash flow to fund capital requirements if recent
results continue and no unexpected contingencies arise. The Company's
prospects for improved operating results will depend on the availability of
outside sources of
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<PAGE>
capital. If the Company's near and long-term capital needs cannot be met,
the Company's results and financial condition will be materially adversely
affected.
LEVERAGE
As of June 30, 1998, the Company's total indebtedness was approximately
$69.0 million (including approximately $20.6 million of interest accrued
through maturity). At such date, the Company's total assets were
approximately $79.9 million.
In addition to certain customary affirmative covenants, the Indenture
contains covenants that, among other things, restrict the ability of the
Company and each of its subsidiaries, subject to certain exceptions contained
therein, to incur debt, make distributions to the Parent or transfer assets.
The restrictions may limit the ability of the Company to expand its business
and take other actions that the Parent considers to be in the Company's best
interest.
The Company and its subsidiaries presently have significant annual
interest expense payment obligations under outstanding debt instruments. The
interest payments on the Notes are not reflected as an expense on the
Company's income statement because of the manner in which that obligation was
created in the 1995 restructuring. Instead, the entire amount of future
interest payments is reflected as part of the balance of the Notes on the
Company's balance sheet. If the Notes were to be settled for an amount less
than their carrying value on the Company's balance sheet, the Company would
report an extraordinary gain on its statement of operations. Thereafter, if
the Notes were settled with proceeds from new indebtedness, interest on the
new indebtedness would be charged against the Company's earnings. See the
footnotes to the Company's financial statements.
The ability of the Company and its subsidiaries to satisfy their
respective obligations is dependent upon their future performance, which will
be subject to financial, business and other risk factors affecting the
business and operations of the Company, including risk factors beyond the
control of the Company and its subsidiaries, such as prevailing economic
conditions. The Company is presently in compliance with the terms of the
Indenture and its other debt obligations, but there is no assurance that the
Company will be able to maintain compliance with such terms, refinance its
existing debt or that any additional financing will be obtainable in order to
pursue the Company's plans.
OWNERSHIP OF THE PARENT, RECENT MANAGEMENT CHANGES
As a result of the comprehensive restructuring of the Company and the
Parent completed in 1995 and subsequent sales of Common Stock by the Selling
Security Holders and purchases by other investors, approximately 86% of the
outstanding Common Stock of the Parent is owned by seven investors who have
made filings with the Securities and Exchange Commission under Section 13 of
the Securities Exchange Act of 1934, of whom four are Selling Security
Holders who own in the aggregate approximately 47% of the Parent's
outstanding common stock. Management believes these holders intend to vote
separately upon all matters submitted to a vote of security holders of the
Parent. To the Company's knowledge, there are no agreements,
14
<PAGE>
arrangements or understandings among any of the Selling Security Holders
concerning the voting or disposition of any of such Common Stock or any other
matter regarding the Company or the Parent or which might be the subject of a
vote of the Parent's stockholders. Also, no Selling Security Holder (or
affiliated group of Selling Security Holders) is a beneficial owner of more
than 18% of the Common Stock; accordingly, no single Selling Security Holder
or affiliated group could itself approve any matter regarding the Company or
the Parent or which might be the subject of a vote of the Parent's
stockholders.
In March 1998, Teacher's Insurance and Annuity Association of America
("TIAA"), the Parent's largest single shareholder, filed a Schedule 13D
indicating, among other things, that TIAA might take action to influence the
composition of the Parent's Board of Directors. In April 1998, TIAA proposed
that the present members of the Board of Directors be elected as the Board of
Directors at the Parent's Annual Meeting of Stockholders in opposition to a
slate of directors nominated by the nominating committee of the Board of
Directors serving at that time. The directors nominated by TIAA were elected
by a vote of more than 95% of the shares present and entitled to vote at the
Annual Meeting. None of such directors, however, is affiliated with TIAA or
any Selling Security Holder and, to the Company's knowledge, there is no
agreement, understanding or arrangement among any Selling Security Holders or
any such director concerning any matter regarding the governance of the
Parent or the Company. In July 1998 TIAA withdrew its Schedule 13D, which
was replaced by a Schedule 13G.
The President and CEO of the Parent at the time of the May 1998 Annual
Meeting of Stockholders resigned immediately following the election of the
current Board of Directors at that meeting. The former President and CEO had
been hired by the Parent in March 1997 and had announced his resignation in
September 1997, which was followed by his service as interim CEO until March
1998 and as President and CEO through May 1998. Since the election of the
present Board of Directors in May 1998, Suzanne Hopgood, a member of the
Board of Directors since 1996 and currently Chairman of the Board, has served
as acting CEO while the Board of Directors conducts a search for a new
President and CEO. Only two of the seven members of the current Board of
Directors, Ms. Hopgood and Mr. Osnos, served as directors prior to the May
1998 Annual Meeting. It is likely that some period of time will be required
before a new CEO can be hired and begin influencing the management and
results of the Company.
HISTORY OF LOSSES, PARTNERS' DEFICIT
Through fiscal year 1995, the Company had not reported net income since
fiscal year 1990. Although the Company reported net income from continuing
operations of $8.6 million for fiscal year 1996, the Company reported a net
loss from continuing operations of $4.7 million for the fifty-two week year
ended December 30, 1997. The Company reported net income of $4.5 million for
the twenty-six week period ended June 30, 1998. Among the causes
contributing to the Company's losses have been excessive leverage, litigation
and settlement expenses and costs associated with closing of its restaurants.
The Company continues to have a significant amount of indebtedness and
related debt service will require the expenditure of significant sums by the
Company in the future. The Company continues to be party to various
litigation matters. While management believes that the Company has adequate
reserves established to address known
15
<PAGE>
contingencies, there is no assurance that adverse results in litigation will
not result in additional material expense in the future. Management does not
presently anticipate material additional expenses from restaurant closings in
1998 or 1999, but the Company is preparing a strategic plan that will seek to
improve the Company's overall operating efficiency by emphasizing focusing on
markets where the Company has significant operations. There is no assurance
that the strategic plan adopted by the Company will not contemplate
additional closings of weaker restaurants that could result in material
additional charges.
The Company's losses have contributed to a material continuing partners'
deficit. The Company's partners' deficit at December 30, 1997 was $28.3
million and at June 30, 1998 was $23.8 million. The Company's operating cash
flow since completion of the 1995 restructuring has been sufficient to
support its operations and to satisfy all of its obligations as they have
come due, and management expects that this will continue to be the case.
However, it is likely that the Company will continue to have a substantial
partners' deficit for several years, at a minimum, and there is no assurance
that the Company's net income or additional capital infusions or other
transactions will be available or sufficient to produce a positive partners'
capital. Management believes that the principal disadvantages to the Company
of its partners' deficit are its diminished attractiveness as a recipient of
capital funding and favorable trade credit terms from vendors, potentially
resulting in higher capital and trade credit costs to the Company than would
otherwise be available.
ABSENCE OF AN ESTABLISHED PUBLIC MARKET
The Notes are not listed or admitted for trading on any securities
exchange or national market system. The Company has filed an application to
list the Notes on the New York Stock Exchange in conjunction with the filing
of the Registration Statement of which this Prospectus is a part. There is
no assurance that the Notes will be accepted for trading on the New York
Stock Exchange. At present, almost all of the Notes offered hereby are owned
by a small number of institutional investors, and there is no established
public market for the Notes. No assurance can be given as to the prices or
liquidity of, or trading markets for, the Notes. The liquidity of any market
for the Notes will depend upon the number of holders of Notes, interest of
securities dealers in making a market in the Notes and other factors. The
absence of any established active market for the Notes could adversely affect
the liquidity of the Notes. The liquidity of, and trading markets for, the
Notes may also be adversely affected by general declines in the market for
similar grade debt. Such declines may adversely affect the liquidity of, and
the trading markets for, the Notes, independent of the financial performance
of, and the prospects for, the Company. Accordingly, no assurance can be
given that a holder of the Notes will be able to sell its Notes in the future
or that any future sale can be consummated at a price equal to or higher than
the price at which the Notes were originally purchased.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes
offered pursuant to this Prospectus. The Selling Security Holders will
receive all of the net proceeds from any sale of the Notes offered hereby.
16
<PAGE>
SELLING SECURITY HOLDERS
The following table provides certain information with respect to the
Notes held by each Selling Security Holder. As a result of the comprehensive
Restructuring of the Company and the Parent and subsequent sales of Common,
par value $.01 per share, of the Parent (the "Common Stock") by Selling
Security Holders, certain of the Selling Security Holders own approximately
47% of the outstanding Common Stock of the Parent. Such Selling Security
Holders are four separate holders of Notes and no Selling Security Holder (or
affiliated group of Selling Security Holders) is a beneficial owner of more
than 18% of the Common Stock. Since the Selling Security Holders may sell
all or some of their Notes, no estimate can be made of the aggregate amount
of the Notes that are to be offered hereby or that will be owned by each
Selling Security Holder upon completion of the offering to which this
Prospectus relates.
As a part of the Restructuring, certain 11% Noteholders designated for
nomination a majority of the members of the Board of Directors of the Parent.
These directors were duly nominated and elected by holders of the former
classes of the Parent's capital stock at a meeting of stockholders held prior
to the Exchanging 11% Noteholders having exercised their Put Option. Certain
of these directors continue to serve on the Board of Directors of the Parent.
None of such directors, however, is affiliated with any former 11%
Noteholder or Selling Security Holder and to the Company's knowledge there is
no agreement, understanding or arrangement among any former 11% Noteholder,
Selling Security Holder or any such director concerning any matter regarding
the governance of the Parent or the Company.
The Notes offered by this Prospectus may be offered from time to time by
the Selling Security Holders named below:
<TABLE>
<CAPTION>
Aggregate Amount of
Notes Beneficially Owned
Name and Being Registered
- ------------------------------------------------- ------------------------
<S> <C>
EQ Asset Trust 1993 . . . . . . . . . . . . . . . $8,075,045.42
Principal Mutual Life Insurance Company . . . . . $3,122,435.77
The Ohio National Life Insurance Company. . . . . $ 935,048.67
CUNA Mutual Life Insurance Company. . . . . . . . $ 908,477.67
</TABLE>
Equitable Real Estate Investment Management, Inc. ("EREIMI"), a former
affiliate of EQ Asset Trust 1993, is the owner of six properties in Illinois
and Iowa which are leased by the Company. The aggregate amount paid by the
Company to EREIMI in respect of periodic rental installments during fiscal
1997 was $549,756. Such lease was entered into by the Company and EREIMI
prior to EQ Asset Trust 1993's acquisition of an interest in the Company in
connection with the Restructuring. Such lease was negotiated at arm's length
on terms no less favorable than the Company would have obtained from an
unrelated landlord.
17
<PAGE>
PLAN OF DISTRIBUTION
The Company will receive none of the proceeds from this offering. The
Notes may be sold from time to time to purchasers directly by any of the
Selling Security Holders. Alternatively, the Selling Security Holders may
from time to time offer the Notes through underwriters, brokers, dealers or
agents, pursuant to (a) a block trade in which a broker or dealer will
attempt to sell the Notes as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this prospectus or (c) ordinary brokerage transactions
and transactions in which the broker or dealer solicits purchasers. In
effecting such sales, underwriters, brokers or dealers engaged by the Selling
Security Holders may arrange for other brokers or dealers to participate in
the resales. Such sales may be effected at market prices and on terms
prevailing at the time of sale, at prices related to such market prices, at
negotiated prices or at fixed prices. In addition, the Selling Security
Holders may engage in hedging or other similar transactions, and may pledge
the Notes being offered, and, upon default, the pledgee may effect sales of
the pledged Notes pursuant to this prospectus. Underwriters, brokers,
dealers and agents may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Security Holders or
the purchasers of Notes for whom they may act as agent. The Selling Security
Holders and any underwriters, dealers or agents that participate in the
distribution of Notes may be deemed to be "underwriters" within the meaning
of the Securities Act and any profit on the sale of Notes by them and any
discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
There is currently no active market for the Notes. The Company has
filed an application to list the Notes for trading on the New York Stock
Exchange, but there is no assurance that the Notes will be accepted for
Listing or that an active trading market for the Notes will develop. The
Company has not been advised by any broker or dealer that it intends to make
a market in the Notes.
To comply with the securities laws of certain jurisdictions, if
applicable, the Notes may be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with.
There is no assurance that the Selling Security Holders will sell any of
the Notes. In addition, any Notes covered by this prospectus which qualify
for sale pursuant to Rule 144 under the Securities Act may be sold pursuant
to Rule 144 rather than pursuant to this prospectus.
Pursuant to the Exchange Agreement (the "Exchange Agreement") dated as
of November 15, 1995 between the Parent, the Company and former 11%
Noteholders, some of which are Selling Security Holders, the Company will pay
the expenses of former 11% Noteholders incident to this offering and sale of
the Notes to the public, other than commissions, concessions and discounts of
underwriters, dealers or agents, but including the fees and
18
<PAGE>
disbursements of one counsel to such Selling Security Holders. In addition,
the Company has agreed to indemnify the Selling Security Holders, and, if
requested, any underwriter they may utilize, against certain civil
liabilities, including liabilities under the Securities Act and, if such
indemnification is unavailable, to contribute to payments required to be made
by any of them in respect of such liabilities. The Exchange Agreement
requires the Company to keep the Registration Statement of which this
Prospectus is a part continuously effective until the earlier of (a) July 18,
1999, and (b) the date upon which all Notes have either (i) been disposed of
under this Prospectus, (ii) been distributed to the public pursuant to Rule
144 or Rule 145 under the Securities Act, (iii) been otherwise transferred
and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then
in force, or (iv) ceased to be outstanding.
DESCRIPTION OF NOTES
The following is only a summary of the material terms of the Notes, does
not purport to be a full description thereof and is qualified in its entirety
by reference to the Indenture, the Notes and the other exhibits to the
Indenture (including certain terms defined in such documents), copies of
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. See "Available Information." The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as in effect on the date of the
Indenture (the "Trust Indenture Act"). The definitions of the material terms
used herein are set forth in "Definitions" contained elsewhere in this
Prospectus.
GENERAL
Notes in the aggregate principal amount of $40.0 million were originally
issued in a private placement by the Company pursuant to the Indenture in
exchange for the 11% Notes of the Company. In addition, a Note in the
original principal amount of $1.7 million was issued to GEPT in settlement of
a judgment against FBLP. On January 24, 1996, approximately $4.1 million
aggregate principal amount of Notes were issued in payment of the first
interest installment under the Indenture. No additional Notes may be issued
pursuant to the Indenture and all future payments of interest must be made in
cash. The maturity date of the Notes is December 31, 2001. The Notes
offered hereby are being offered for sale by the Selling Security Holders,
and the Company will not receive any part of the proceeds from any sale
thereof.
The Notes are issuable only in registered form without coupons in
denominations of one thousand dollars ($1,000) and any integral multiple
thereof, except as necessary to reflect principal amounts not evenly
divisible by one thousand dollars ($1,000). As provided in the Indenture and
subject to certain limitations therein, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination,
as requested by the Holder surrendering the same. No service charge shall be
made for any registration of transfer or exchange or redemption of Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
19
<PAGE>
INTEREST
The Notes bear interest at 12% per annum, except that upon a default in
the payment of interest for thirty days or principal at maturity, such
interest rate shall be increased to the lesser of 13% per annum and the
highest rate allowed by applicable law. Interest on the Notes is payable
semi-annually on March 31 and September 30. Interest on the Notes shall be
computed on the basis of a 360-day year of twelve 30-day months. Interest on
the Notes which is payable, and is punctually paid by the Company to the
Trustee or duly provided for, on any Interest Payment Date shall be paid by
the Trustee to the Person in whose name the Notes are registered at the close
of business on the Regular Record Date for such interest. On January 24,
1996, approximately $4.1 million aggregate principal amount of Notes were
issued in payment of the first interest installment. No additional Notes are
issuable under the Indenture and all future interest payments shall be made
in cash.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company at any time, upon
not less than thirty nor more than sixty days notice, in whole or in part, at
103% of the principal amount of the Notes to be redeemed if the redemption
occurs on or before September 30, 1998 and at 100% of the principal amount if
the redemption occurs after September 30, 1998, in each case together with
the accrued interest thereon to the redemption date.
In the case of any redemption of Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Trustee for payment to the Holders of record of such Notes at the close of
business on the relevant Regular Record Date. Notes (or portions thereof)
for whose redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the date fixed for
redemption.
REQUIRED REDEMPTION
The Company is required to redeem Notes from the proceeds of certain
transfers of assets or property or casualty losses which are not, within 180
days of the date of receipt thereof, applied, in the case of transfer, to
purchase certain assets used or useful in the business of the Company, or, in
the case of casualty loss, to either repair or replace the property that gave
rise to such casualty loss except that such proceeds may not be used to
purchase assets if a Default or Event of Default shall have occurred and be
continuing.
In the event that a Specified Asset Sale shall be deemed to have
occurred, or a Specified Casualty Loss Event shall occur, the Company shall
irrevocably offer to redeem Notes without premium in the aggregate principal
amount equal to the Net Cash Proceeds of such Specified Asset Sale, or an
amount equal to such Specified Casualty Loss Payment, as the case may be, if
such proceeds exceed $1.0 million. Notwithstanding the preceding sentence,
the Company is required to irrevocably offer to redeem Notes without premium
in the aggregate principal amount equal to all Collected Amounts aggregating
$1.0 million. Failure to affirmatively accept such offer in the manner
specified in the Indenture shall be deemed to be a rejection of such
20
<PAGE>
prepayment offer. A Holder may not elect to have redeemed less than or more
than all of the portion of the Securities held by such Holder which the
Company offers to redeem.
PAYMENT AT MATURITY
The entire outstanding principal amount of all Notes, together with all
accrued and unpaid interest thereon and any and all other amounts owing in
respect thereof, shall become due and payable on December 31, 2001. If the
Trustee requests in writing following payment in full of all amounts due,
each Note holder is required to promptly return the Notes it holds to the
Trustee for cancellation.
RANKING
The Notes are senior obligations of the Company. The obligations under
the Notes are secured by a security interest in substantially all of the
property and assets of the Company. See "Security and Guaranty". The Notes
rank pari passu with all existing and future senior indebtedness of the
Company. As of the date hereof, there is no other senior indebtedness
outstanding. The Indenture contains limitations with respect to the amount
of additional indebtedness that can be incurred by the Company and its
subsidiaries. The Company may obtain a revolving credit facility in the
amount of $5.0 million and, under certain circumstances, release certain
collateral, or subordinate to such facility the liens, securing the Notes.
See "--Security and Guaranty."
SECURITY AND GUARANTY
Pursuant to the Collateral Documents, the Notes are secured by a valid,
perfected security interest in substantially all of the assets and property
of the Company, including, without limitation, certain real property, all
inventory, equipment, accounts receivable and intellectual property of the
Company. The liens and security interest with respect to certain property
may be subject to prior liens and encumbrances. In addition, property and
assets of the Company may be released from the liens of the Collateral
Documents in connection with a transfer permitted under the provisions
described in "Certain Covenants -- Restrictions on Transfers of Assets."
In the event the Company desires to obtain a revolving credit or similar
facility from another lender, the Trustee shall, at the request of the
Company, either (i) subordinate the Liens of the Collateral Documents to the
Lien of such lender in an amount not to exceed $5.0 million or (ii) release
the Lien of the Collateral Documents upon particularly identified Collateral
which has a fair market value not to exceed $8.0 million.
There can be no assurance that the amount that might be realized by a
holder upon any enforcement against the Collateral following an Event of
Default would be sufficient to satisfy the Company's payment obligations in
respect of the Notes.
21
<PAGE>
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
The Company will not declare or make, or incur any liability to declare
or make, or permit any of its Subsidiaries to declare or make, or incur any
liability to declare or make, any Restricted Payment or any Restricted
Investment, except that, at any time after March 31, 1996, the Company may,
and may permit any Subsidiary to take the foregoing actions, so long as,
immediately prior to giving effect to such declaration or payment, and
immediately thereafter and after giving effect thereto, both:
(a) no Default or Event of Default shall have occurred or be
continuing; and
(b) the aggregate amount of all Restricted Payments made during the
period (treated as a single accounting period) beginning on January 2, 1996
and ending on such date, plus the aggregate amount of all Restricted
Investments made after January 2, 1996 and remaining outstanding on such
date, does not exceed the difference of:
(i) fifty percent (50%) of Consolidated Net Income accrued
during the period (treated as a single accounting period) beginning on
January 2, 1996 and ending on the last day of the full fiscal quarter
of the Company most recently ended as of such date; minus
(ii) (A) if Consolidated Net Income for the period
commencing on the first day of the period of four (4) full consecutive
fiscal quarters then most recently ended and ending on the last day of
the fiscal quarter of the Company then most recently ended as of such
date is a loss, one hundred percent (100%) of the positive amount of
such loss; and
(B) if Consolidated Net Income for the period referred
to in (b)(ii)(A) above is not a loss, Zero Dollars ($0).
LIMITATIONS ON INDEBTEDNESS.
The Company shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume, or Guarantee any Indebtedness except:
(a) the Company and the Subsidiaries may create, incur, assume or
Guarantee Indebtedness pursuant to a revolving credit or similar facility,
and may from time to time obtain advances in respect of such facility, so
long as the aggregate amount of Indebtedness outstanding thereunder at any
time, after giving effect to such creation, incurrence, assumption or
Guarantee, or such advance, shall not exceed Five Million Dollars
($5,000,000); and
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(b) any Subsidiary may incur unsecured Indebtedness to the Company or
any Guarantor Subsidiary, and the Company may incur Subordinated
Intercompany Indebtedness;
(c) the Company and its Subsidiaries may incur, create, assume or
Guarantee any other Indebtedness (including Indebtedness in excess of Five
Million Dollars ($5,000,000) in respect of the revolving credit or similar
facility referred to in clause (a) above) so long as immediately after, and
after giving effect to, such creation, incurrence, assumption or Guarantee
and the concurrent prepayment, redemption, retirement or acquisition of any
Indebtedness of the Company being prepaid, redeemed, retired or acquired
concurrently with the proceeds of such Indebtedness, the Pro Forma Interest
Coverage Ratio calculated at such time exceeds, for periods after January
7, 1998, 325%.
NEGATIVE PLEDGE.
The Company will not create or assume, or permit any of its Subsidiaries to
create or assume, any Lien securing any Indebtedness on any asset or property,
whether now owned or hereafter acquired by it, except:
(a) Liens in favor of the Trustee, for the benefit of the Trustee and
the Holders, including such Liens contemplated by the Collateral Documents;
(b) Liens upon property securing Indebtedness which refinances,
renews, replaces or extends Indebtedness secured by Liens on such Property
in existence on the date of the Indenture, but not any increase in the
principal amount of any thereof or the extension thereof to any other
property of the Company or any of its Subsidiaries (except as otherwise
permitted by the Indebtedness covenant and clause (e) of this covenant);
(c) Liens securing the revolving credit or similar facility referred
to in "Limitations on Indebtedness," so long as such Liens secure an amount
not in excess of Five Million Dollars ($5,000,000) (except as otherwise
permitted by certain provisions of the Indenture); with respect to such
Liens, the Trustee, if requested by the Company to take either the action
specified in clauses (i) or (ii) below (but not both) shall, if the lender
under such facility is unwilling to make such facility available upon terms
satisfactory to the Company unless the Trustee takes the action requested
by the Company, either:
(i) enter into an agreement for the benefit of such lender or
lenders subordinating the Liens of the Collateral Documents (but not
the rights of the Holders to receive payment generally) to the Lien of
such lender securing the obligations owing such lender under such
facility, but only insofar as such obligations do not exceed Five
Million Dollars ($5,000,000); or
(ii) release the Lien of the Collateral Documents upon
particularly identified Collateral specified in such Company Order
(but no other Collateral)
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including, without limitation, any particularly identified
Collateral thereafter acquired, which specified Collateral has a
fair market value of not greater than Eight Million Dollars
($8,000,000) at any time;
(d) Purchase Money Mortgages by the Company or any of its
Subsidiaries (including, without limitation, Capital Leases), so long as
(i) such Purchase Money Mortgage secures only the obligation to pay the
purchase price of such asset (or the obligations under such Capital Lease)
or a Subsidiary being acquired, together with related fees and expenses,
(ii) the initial amount secured by such Purchase Money Mortgage shall not
be more than one hundred percent (100%) of the purchase price of such asset
(or the obligation under such Capital Lease) or such Subsidiary being
acquired, together with related fees and expenses, and (iii) the aggregate
Indebtedness secured by all such Purchase Money Mortgages (other than
Capital Leases) shall not exceed in the aggregate for the Company and its
Subsidiaries twenty percent (20%) of the aggregate amount of assets
reflected on a consolidated balance sheet of the Company and the
Subsidiaries, as at the end of the fiscal quarter of the Company then most
recently ended; which Purchase Money Mortgages may rank senior to the Lien,
if any, of the Collateral Documents in respect of the property or assets so
acquired; provided, however, that in the event that the Company or any
Subsidiary shall apply any Entire Cash Proceeds in respect of any Transfer,
or any Casualty Loss Payment in respect of any Casualty Loss, to the
purchase of any property or assets in accordance with certain provisions of
the Indenture, as the case may be, and the purchase price of such property
or assets exceeds the amount of Entire Cash Proceeds or Casualty Loss
Payment, the Company or such Subsidiary (subject to certain provisions of
the Indenture) may finance the amount of such excess and may secure such
financing with a Purchase Money Mortgage upon such property or assets,
subject to the limitations set forth in this paragraph, as if the "purchase
price," as such term is used above, were equal to the amount of such
excess; and
(e) subject to the Liens described in clause (a) above, other Liens
securing Indebtedness, so long as, at the time such Lien is created or
assumed, the Indebtedness secured thereby is permitted to be created and
incurred pursuant to the provisions restricting Indebtedness.
LIMITATIONS ON NEGATIVE PLEDGES.
The Company will not, and will not permit any of its Subsidiaries to enter
into any agreement prohibiting the creation or assumption of any Lien upon the
properties or assets of the Company or any of its Subsidiaries in favor of the
Trustee (except under Capital Leases and Purchase Money Mortgage or Lien
documents permitted hereunder but only to the extent such prohibition relates
solely to the property or asset purchased or leased thereunder) or requiring an
obligation to be secured if any Obligations are secured.
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RESTRICTIONS ON TRANSFERS OF ASSETS.
The Company shall not, nor shall it permit any Subsidiary to, Transfer
all or any part of its assets (other than conveyances or transfers of the
properties and assets of the Company substantially as an entirety in
compliance with the provisions of the Indenture governing successors and
other than Permitted Transfers) or agree to do any of the foregoing, unless
the Company, no later than the date following the date of such Transfer, pays
the Entire Cash Proceeds in respect of such Transfer to the Trustee, subject
to release to the Company. All such Entire Cash Proceeds shall be held in
trust for the equal and ratable benefit of the Holders, and the Company
granted to the Trustee a Lien in all such Entire Cash Proceeds.
In the event that, within one hundred eighty (180) days after the
occurrence of any Transfer, the Company wishes to apply all or a portion of
the Entire Cash Proceeds therefrom to purchase one or more assets
constituting either fixed assets, real property, machinery or equipment, in
each case, used or useful in the business of the Company or such Subsidiary,
then, so long as no Default or Event of Default shall have occurred and be
continuing, the Company may request the Trustee to pay to the Company or to
its order all or any portion of the amount of such Entire Cash Proceeds
actually applied to any such purchase; provided, however, that the Company
and its Subsidiaries shall not be entitled to apply to any such purchase any
Entire Cash Proceeds, or any portion thereof, which have become Net Cash
Proceeds. As promptly as practicable following receipt by the Trustee of a
Company order specifying the amount of the Entire Cash Proceeds to be paid by
the Trustee, accompanied by an officers' certificate certifying that such
amount is to be applied to purchase one or more assets constituting either
fixed assets, real property, leasehold improvements, machinery or equipment,
in each case, used or useful in the business of the Company or such
Subsidiary, the Trustee shall pay the requested amount of such Entire Cash
Proceeds to the Company or its order in payment for the purchase price of
such purchase, so long as (i) at or prior to the time of such purchase, the
Company or such Subsidiary grants to the Trustee a Lien in such acquired
property and (ii) such acquired property shall be owned by the Company or
such Subsidiary, as the case may be, free and clear of all Liens, other than
Liens not securing Indebtedness and other than those permitted by certain
provisions of the Indenture.
Upon the transfer of property or assets permitted by these provisions,
the lien of the Collateral Documents in respect of the property or assets so
transferred shall be released, but the lien of the Collateral Documents shall
continue in the proceeds of such transfer.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction (including, without
limitation, the purchase, sale or exchange of property or the rendering of a
service), whether or not in the ordinary course of business, with any
Affiliate of the Company or such Subsidiary unless (a) such transaction is
entered into upon terms and conditions no less favorable to the Company, or
the affected Subsidiary, as those that would be obtained through an
arm's-length negotiation with an unaffiliated third party, and (b) the terms
of any such transaction shall be approved by a majority of the directors who
are not parties to,
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and have no interest in, such transaction. The foregoing restrictions shall
not apply to (i) any issuance of capital stock of the Parent, or options,
stock appreciation rights or similar rights in respect thereof, or other
awards or grants, in cash or otherwise, pursuant to, or the funding of,
employee benefit plans approved by a majority of the disinterested directors
of the board of directors of the Parent, (ii) loans or advances to employees
in the ordinary course of business, (iii) transactions between and among the
Company and the Guarantor Subsidiaries, (iv) transactions and the making of
payments contemplated by the Reimbursement Agreement and (v) any agreements
to do any of the foregoing acts described in clauses (i) through (iv).
FUTURE PROPERTY.
The Company will, with respect to all property (other than real property
and improvements thereon) acquired by the Company after the date of the
Indenture (and, if such acquisition were financed, if there were no
prohibition in the documents governing such financing to encumbrances on such
property), duly execute and deliver to the Trustee, not later than thirty
(30) days after the acquisition thereof, such pledge agreements, security
agreements or other like agreements with respect to such property creating in
the Trustee's favor for the ratable benefit of the Holders a valid, perfected
and enforceable first priority (except for Liens permitted by certain
provisions of the Indenture) Lien on such property, such pledge agreements,
security agreements or other like agreements to be, to the extent applicable,
substantially in the forms of such agreements executed by the Company in
favor of the Trustee on the date of the Original Indenture (except for
changes authorized under the Indenture) reasonably acceptable to the Trustee,
together with such other documents, certificates, opinions of counsel and the
like as the Trustee shall reasonably request in connection therewith.
The Company will, with respect to its real property and improvements
thereon (other than any leasehold interests of the Company in real property
and improvements thereon) acquired by the Company after the date hereof (and,
if such acquisition were financed, if there was no prohibition in the
documents governing such financing to encumbrances on such property), duly
execute and deliver to the Trustee, not later than thirty (30) days after the
acquisition thereof, Mortgages creating in the Trustee's favor for the
ratable benefit of the Holders, upon recordation thereof, a valid, perfected
and enforceable first priority (except for Liens permitted by certain
provisions of the Indenture) Lien on all such real property and improvements
thereon, such Mortgages to contain substantially the same terms as the
Mortgages securing the Obligations on the date after the date of the
Indenture and which shall be reasonably acceptable to the Trustee, and the
enforceability, proper filing and proper recording of which shall be
supported by an opinion of counsel acceptable to the Trustee. The Company
shall use its best efforts to cause to be executed and delivered to the
Trustee, prior to or concurrently with the delivery by the Company of the
aforesaid Mortgages to the Trustee (or if such is not possible, as promptly
as possible thereafter), any and all necessary estoppel certificates,
non-disturbance agreements, waivers, consents of third parties thereto to the
extent deemed necessary or appropriate by the Trustee, and the Company shall
cause such Mortgages to be duly recorded in the appropriate recording office
or offices and shall pay all fees and taxes payable in connection therewith.
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MAINTENANCE OF LIENS.
Except for the filing of continuation statements and the making of other
filings by the Trustee as secured party or assignee, the Company shall at all
times take all action necessary to maintain the Liens provided for under or
pursuant to the Collateral Documents as valid and perfected first priority
Liens on the property intended to be covered thereby (subject only to Liens
expressly permitted hereunder) and supply all information to the Trustee
necessary for such maintenance.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries to,
create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (a) pay dividends or make any other distribution on any of such
Subsidiary's Capital Stock owned by the Company or any Subsidiary of the
Company, (b) pay any Indebtedness owed to the Company or any other
Subsidiary, (c) make loans or advances to the Company or any other
Subsidiary, or (d) transfer any of its property or assets to the Company or
any other Subsidiary; except, in each case, for (i) any restrictions created
by the Credit Documents; (ii) any restrictions existing under any agreements
in effect on the date of the Original Indenture; (iii) any renewals or
extensions of the restrictions referred to in clause (i) or (ii); (iv) with
respect to clause (d) above only, Capital Leases or Purchase Money Mortgage
or Lien documents permitted hereunder (but only with respect to the property
leased or purchased thereunder), and customary non-assignment provisions of
any leases governing any leasehold interest or any supply, license or other
similar agreement entered into in the ordinary course of business; and (v)
any restrictions existing by reason of applicable law.
LIMITATIONS ON MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL
ASSETS.
The Company shall not consolidate with or merge with or into, Transfer
its properties and assets substantially as an entirety to or purchase or
acquire the properties and assets substantially as an entirety of any of the
Parent Restricted Subsidiaries. The Company shall not consolidate with or
merge with or into any other Person, or Transfer its properties and assets
substantially as an entirety to any Person, unless (a) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by Transfer the properties and assets of
the Company substantially as an entirety (the "Surviving Person") shall be a
corporation or partnership organized and existing under the laws of the
United States of America or any State or the District of Columbia, and shall
expressly assume by a supplemental indenture the due and punctual payment of
the principal of (and premium, if any) and interest on all the Notes, the
performance of every covenant of the Indenture and the other Credit Documents
on the part of the Company to be performed or observed, and all other
Obligations of the Company pursuant to the Indenture, the Notes and the
Credit Documents; (b) immediately after, and after giving effect to, such
transaction, no Default or Event of Default shall have occurred and be
continuing; (c) either (i) immediately after, and after giving effect to,
such transaction, both (A) the Tangible Net Worth of the Company or the
Surviving Person, as the case may be, and its Subsidiaries on a consolidated
basis shall be equal to or greater than the Tangible Net Worth of
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the Company and its Subsidiaries on a consolidated basis immediately prior to
the consummation of such transaction and (B) the Company or the Surviving
Person, as the case may be, shall be entitled to incur at least One Dollar
($1.00) of additional Indebtedness pursuant to certain provisions of the
Indenture or (ii) such transaction involves a merger of the Company with and
into, or a Transfer of its properties and assets substantially as an entirety
to, the Parent, so long as, but only so long as, the Parent shall not, at any
time prior to or contemporaneously with such transaction, have consolidated
with or merged with or into, Transferred its properties and assets
substantially as an entirety to or purchased or acquired the properties and
assets substantially as an entirety of, any of the Parent Restricted
Subsidiaries; and (d) the Company or the Surviving Person, as the case may
be, has executed and delivered to the Trustee certain certificates and
opinions and all necessary assignments, amendments to financing statements
under the Uniform Commercial Code of any jurisdiction and other documents
necessary to maintain the Trustee's right, title and interest in and to the
Trust Estate.
REPORTING REQUIREMENTS.
Notwithstanding that the Company may not be required to remain subject
to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Company shall file with the
Securities and Exchange Commission (the "Commission") and provide the Trustee
and Holders with such annual, quarterly and current reports and such
information, documents and other reports specified in Section 13 and 15(d) of
the Exchange Act which the Company would be required to file with the
Commission if it were subject to such reporting requirements.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines Event of Default as any one of the following
events: (a) if default shall be made in the due and punctual payment of the
principal, premium (if any) or interest when due and payable on any of the
Notes and, in the case of interest, such default shall continue unremedied
for a period of thirty (30) days; or (b) if (i) a default shall be made in
the performance or observance of any covenant, agreement or provision
described above in "--Certain Covenants" and such default shall continue
unremedied for a period of thirty (30) days after any officer of the General
Partner becomes aware of such default, (ii) a default shall be made in the
due and punctual payment of any amounts payable under the Indenture or under
any other Credit Document when due and payable or a default shall be made in
the performance or observance of any covenant, agreement or provision
contained in the Indenture or the Notes or in any other Credit Document, and
such default shall continue unremedied for a period of thirty (30) days after
there has been given, in the manner contemplated by the Indenture by the
Holders of twenty-five percent (25%) or more in aggregate principal amount of
outstanding Notes, a written notice specifying such default or breach,
requiring it to be remedied and stating that such notice is a "Notice of
Default," (iii) the Indenture or any other Credit Document shall terminate,
be terminated or become void or unenforceable without the prior written
consent of the Holders, or (iv) any of the Liens created by the Collateral
Documents shall cease to be enforceable or shall not have the priority
purported to be created thereby with respect to Collateral having a fair
market value in excess of two million five hundred thousand dollars
($2,500,000); or (c) if a default shall
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occur (i) in the payment of any principal or interest (after giving effect to
any applicable grace period) with respect to any Indebtedness of the Company
or any of its Subsidiaries or any General Partner (other than the Notes) or
(ii) under any agreement pursuant to which any such indebtedness may have
been issued, created, assumed, Guaranteed or secured by the Company or any of
its Subsidiaries or any General Partner, and, as a result thereof, such
Indebtedness shall be declared due and payable prior to the stated maturity
thereof or shall not be paid in full at the stated maturity thereof,
provided, however, that the aggregate amount of all Indebtedness as to which
such a payment default or such other default causing acceleration shall occur
exceeds (x) one million dollars ($1,000,000) in Indebtedness other than Non-
Recourse Indebtedness or (y) two million five hundred thousand dollars
($2,500,000) in Indebtedness consisting of Non-Recourse Indebtedness; or (d)
if the Company or any of its Significant Subsidiaries or any General Partner
(i) is dissolved, (ii) files a petition to take advantage of any insolvency
act, (iii) makes an assignment for the benefit of its creditors of itself or
of the whole or any substantial part of its property, (iv) commences a
proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its property
or (v) files a petition or answer seeking reorganization or similar relief
under applicable law or statute of the United States of America, any state
thereof or any foreign country; or (e) if a court of competent jurisdiction
(i) shall enter an order, judgment or decree appointing a custodian,
receiver, trustee, liquidator or conservator of the Company or any of its
Significant Subsidiaries or any General Partner or of the whole or any
substantial part of their respective properties, or approve a petition filed
against the Company or any of its Significant Subsidiaries or any General
Partner seeking reorganization or similar relief under applicable law or
statute of the United States of America, any state thereof or any foreign
country, (ii) under the provisions of any other law for the relief or aid of
debtors, shall assume custody or control of the Company or any of its
Significant Subsidiaries or any General Partner or of the whole or any
substantial part of their respective properties, or (iii) if there is
commenced against the Company or any of its Significant Subsidiaries or any
General Partner any proceeding for any of the foregoing relief and such
proceeding remains undismissed for a period of sixty (60) days or the Company
or any of its Significant Subsidiaries or any General Partner by any act
indicates its consent to or approval of any such proceeding or petition; or
(f) if (i) one or more judgments exceeding the insurance coverage in respect
thereof by more than two million five hundred thousand dollars ($2,500,000)
in the aggregate are rendered against any of the Company or any of its
Subsidiaries or any General Partner or (ii) there are any attachments or
executions against any of the properties of the Company or any of its
Subsidiaries or any General Partner for amounts in excess of two million five
hundred dollars ($2,500,000) in the aggregate and (iii) such judgments,
attachments or executions remain unpaid, unstayed or undismissed for any
period of sixty (60) consecutive days; or (g) if there shall occur the loss,
theft, substantial damage to or destruction of any portion of the Collateral
not fully covered by insurance (less deductibles in an amount permitted
hereunder), which uncovered portion of the Collateral by itself has a fair
market value in excess of two million five hundred thousand dollars
($2,500,000) or with other such losses, thefts, damage or destruction of
uncovered portions of Collateral occurring while the Indenture is in effect
have an aggregate fair market value in excess of two million five hundred
thousand dollars ($2,500,000); or (h) the partnership agreement of the
Company shall be amended in any manner so that the partnership agreement
shall violate, conflict with or breach any provision of the Indenture, any of
the Collateral Documents or any other document delivered thereunder or the
partnership agreement shall prohibit or prevent the
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performance by the Company of any of its obligations or agreements made in
the Indenture, any of the Collateral Documents or any other such documents.
If an Event of Default specified in clause (d) or (e) above with respect
to the Company occurs and is continuing, then the principal amount of the
Notes, together with accrued interest on the principal amount of such Notes
as well as all other Obligations, shall automatically become immediately due
and payable, without any declaration or other act on the part of the Trustee
or any Holder. If an Event of Default (other than an Event of Default
specified in clause (d) or (e) above with respect to the Company) occurs and
is continuing, then and in every such case the Holders of not less than a
majority of the principal amount of the Notes outstanding may, and the
Trustee upon the request of the Holders of not less than a majority of the
principal amount of the Notes outstanding shall, by written notice to the
Company (and to the Trustee if given by Holders) declare the principal of the
Notes, together with accrued interest on the principal amount of such Notes
as well as all other Obligations, to be immediately due and payable and the
same shall become immediately due and payable without any further declaration
or other act on the part of the Trustee or any Holder. Under certain
circumstances, the Holders of the Requisite Amount of the Notes outstanding
may rescind any such acceleration with respect to the Notes and its
consequences.
The Holders of the Requisite Amount of the Notes Outstanding may on
behalf of the Holders of all the Notes waive any past Default under the
Indenture or under any other Credit Document and its consequences, except a
Default in the payment of the principal of (or premium, if any) or interest
on any Note or in respect of a covenant or provision in the Indenture or
under any other Credit Document which under the provisions of the Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of the Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
The Holders of the Requisite Amount of the Notes outstanding shall have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, whether before or after the occurrence of an Event
of Default, provided that such direction shall not be in conflict with any
rule of law or with the Indenture and the Trustee may, but shall not be
required to, take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
In addition to exercise of all other rights and remedies permitted to be
exercised by the Trustee, in the event that either (a) the Stated Maturity of
the Notes is accelerated in accordance with the provisions of the Indenture
or (b) under certain circumstances, an Event of Default has occurred and is
continuing, and the Trustee is directed to do so in writing by the Holders of
the Requisite Amount of Notes, then the Trustee shall proceed, subject to
certain provisions of the Indenture, to enforce the rights of the Trustee and
the Holders of Notes pursuant to the provisions of the Collateral Documents.
In no event may a Holder exercise any right or remedy with respect to any
Collateral under any Collateral Document, such right of exercise being vested
solely in the Trustee as herein provided and as provided in the Collateral
Documents.
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No Holder of any Notes shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment
of a receiver or trustee, or for any other remedy, unless (a) such Holder has
previously given written notice to the Trustee of a continuing Event of
Default, (b) the Holders of not less than twenty-five percent (25%) in
principal amount of the Outstanding Notes shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee, (c) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request, (d) the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity has
failed to institute any such proceeding, and (e) no direction inconsistent
with such written request has been given to the Trustee during such sixty
(60) day period by the Holders of the Requisite Amount of the Notes
outstanding; it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by availing of,
any provision of the Indenture to affect, disturb or prejudice the rights of
any other Holders, or to obtain priority or preference over any other Holders
or to enforce any right under the Indenture, except in the manner provided in
the Indenture and for the equal and ratable benefit of all the Holders.
The Company will be required to furnish annually to the Trustee a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
AMENDMENTS AND WAIVERS
Without prior notice to or the Consent of the Holders of Notes
outstanding, the Company (and additionally for any Credit Document as to
which the Company is not the sole obligor, such other obligor(s); or for any
Credit Document as to which the Company is not the obligor, the obligor of
such document) and the Trustee may enter into an indenture or indentures
supplemental to the Indenture or amendments or waivers to other Credit
Documents constituting Collateral Documents or Guarantees, but solely for one
or more of the following purposes (a) to evidence the succession of a
successor to the Company or such obligor, and the assumption by such
successor of the covenants of the Company or such obligor under the
Indenture, in the Notes and in the other Credit Documents to which the
Company or such obligor is a party contained, (b) to add to the covenants of
the Company or such other obligor, for the benefit of the Holders, or to
surrender any right or power herein or therein conferred upon the Company or
such other obligor, (c) to cure any ambiguity, to correct or supplement any
provision of the Indenture which may be inconsistent with any other provision
of the Indenture or in such Credit Documents or to make any other provisions
with respect to matters arising thereunder which shall not be inconsistent
with the provisions of the Indenture; provided, however, such action shall
not adversely affect the interests of the Holders, and (d) to modify,
eliminate or add to the provisions of the Indenture to the extent necessary
to effect the qualification of the Indenture under, or the compliance by the
Indenture with the provisions of, the Trust Indenture Act.
With the Consent of the Holders, the Company (and additionally for any
Credit Document as to which the Company is not the sole obligor, such other
obligor(s); or for any Credit
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Document as to which the Company is not the obligor, the obligor of such
document) and the Trustee may enter into an indenture or indentures
supplemental to the Indenture or amendments or waivers to other Credit
Documents constituting Collateral Documents or Guarantees for the purpose of
adding, amending or waiving compliance with any provisions of the Indenture
or any such other Credit Document or of modifying in any manner the rights of
the Holders under the Indenture or under any such other Credit Document;
provided, however, that no such supplemental indenture, amendment or waiver
shall, without the consent of the Holder of each outstanding Note affected
thereby (a) change the Stated Maturity of or any Redemption Date with respect
to the principal of, or of any installment of interest on or any premium
payable upon the redemption of, any Note, or reduce the principal amount
thereof or the rate of interest thereon payable upon the redemption or other
payment thereof, or change the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after any Redemption Date), (b) reduce the
percentage in principal amount of the outstanding Notes, the consent of whose
Holders is required for any such supplemental indenture, amendment or waiver,
(c) modify certain remedial provisions of the Indenture, except to increase
any such percentage or to provide that certain or other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each Note affected thereby, (d) waive a Default or Event of Default in the
payment of principal of or interest on, or redemption payment with respect
to, any Security, or (e) modify any of the provisions of the Indenture
relating to the pro rata redemption of Notes.
It shall not be necessary for the Holders to approve the particular form
of any proposed supplemental indenture, amendment or waiver, but it shall be
sufficient if they shall approve the substance thereof.
After a supplemental indenture, amendment or waiver under the Indenture
with respect to a Credit Document is effective, the Company shall mail to
each Holder a copy of such supplemental indenture, amendment or waiver. Any
failure of the Company to so mail such copy shall not, however, in any way
impair or affect the validity of any such supplemental indenture, amendment
or waiver.
TRANSFER
The Notes will be issued in registered form in denominations of one
thousand dollars ($1,000) and any integral multiple thereof, except as
necessary to reflect principal amounts not evenly divisible by one thousand
dollars ($1,000), and will be transferable only upon surrender of the Notes
being transferred for registration of transfer. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection with certain transfers and exchanges.
DEFEASANCE
The Indenture shall cease to be of further effect (except as to any
surviving rights of transfer or exchange of Notes expressly provided for),
and the Trustee, on demand of and at the
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expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of the Indenture and release of the Liens of the
Collateral Documents securing the Obligations, when (a) either (i) all Notes
theretofore authenticated and delivered (other than Notes which have been
destroyed, lost or stolen and which have been replaced) have been delivered
to the Trustee canceled or for cancellation or (ii) all such Notes not
theretofore delivered to the Trustee canceled or for cancellation (A) have
become due and payable in full, or (B) will become due and payable at their
Stated Maturity within six (6) months or (C) are to be called for redemption
within six (6) months under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company; and the Company, in the case of (A), (B) or (C)
above, has deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount in cash sufficient (without giving
effect to any income or gain in respect of the investment of such amount) to
pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee canceled or for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case of
Notes which have become due and payable), or to the Stated Maturity or
Redemption Date, as the case may be (b) the Company has paid or caused to be
paid all other sums payable hereunder by the Company and (c) the Company has
delivered to the Trustee certain officers' certificates and opinions of
counsel. Notwithstanding the satisfaction and discharge of the Indenture,
the obligations of the Company pursuant to certain Sections of the Indenture
shall survive.
INFORMATION CONCERNING THE TRUSTEE
The Trustee and its subsidiaries may from time to time in the future
provide the Company and its Subsidiaries with banking and financial services
in the ordinary course of their business.
DEFINITIONS
Affiliate -- means, with respect to any Person, any other Person (the
"Subject Affiliate") that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, such Person and, without limiting the generality of the foregoing,
includes:
(a) any Subject Affiliate which beneficially owns or holds ten
percent (10%) or more of any class of voting securities of such Person or
ten percent (10%) or more of the equity interest in such Person;
(b) any Subject Affiliate ten percent (10%) or more of any class of
voting securities (or, in the case of any Person which is not a
corporation, ten percent (10%) or more of the equity interest) in which is
held by such Person; and
(c) any director or executive officer of such Person or an Affiliate
of such Person;
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provided, however, that in no event shall any Person who was a holder of
Original Securities on the day prior to the date of the Indenture be deemed,
at any time or for any purpose under the Indenture, to be an Affiliate of the
Company, the Parent, and General Partner or any of their respective
Subsidiaries; and provided, further, that the Parent, the General Partner and
their respective Subsidiaries shall be deemed to be Affiliates of the Company
whether or not they would otherwise be included by virtue of the foregoing
provisions of this definition.
The term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control") means the possession, directly or
indirectly, of the power either to direct or cause the direction of the
management or policies of a Person, or to vote a majority of the securities
having ordinary voting power for the election of directors of such Person, in
either case whether through the ownership of voting securities, by contract,
by proxy or otherwise. The term "Affiliate," when used with respect to any
particular Person, means an Affiliate of the Company.
Capital Expenditures -- means, with respect to any Person, any item
which, pursuant to GAAP, would be classified on the financial statements of
such Person as a "capital expenditure."
Capital Lease -- means, as to any Person, an y lease of property, real
or personal, the obligations under which are, or should be in conformity with
GAAP, capitalized on a consolidated balance sheet of such Person.
Casualty Loss -- means and includes each separate loss, damage or injury
to any tangible property subject to the Lien of the Trustee or any
condemnation or eminent domain proceedings in respect of any such property.
Casualty Loss Payment -- means and includes any payment of proceeds of
any insurance required to be maintained on account of each separate loss,
damage or injury to any tangible property subject to the Lien of the Trustee
or any payment of proceeds of any condemnation or eminent domain proceedings
in respect of any such property.
Collateral -- means all property and interests therein (real and
personal, tangible and intangible) in which a Lien is now or hereafter held
by the Trustee or granted by the Company or any other Person to the Trustee
for the ratable benefit of the Holders as security for the payment and
performance of any or all of the Obligations.
Collateral Documents -- means and includes each document, agreement,
assignment, mortgage or deed of trust executed or delivered with the Old
Indenture, the Indenture or from time to time granting a Lien in any property
in favor of the Trustee for the ratable benefit of the Holders to secure the
payment and performance of any or all of the Obligations.
Collected Amount -- Redemption Amounts less than $1,000,000 plus certain
excess amounts of past Redemption Amounts.
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Consent of the Holders -- means the requisite principal amount of the
Securities Outstanding with respect to any consent of the Holders pursuant to
the Indenture which, except as otherwise specifically stated in any provision
of the Indenture, shall be more than fifty percent (50%) of the principal
amount of the Securities Outstanding.
Consolidated Cash Flow -- means, for any period, the sum of:
(a) Consolidated Net Income for such period; provided, however, that
for purposes of calculating Consolidated Cash Flow only:
(i) extraordinary non-cash charges (to the extent deducted in
calculating Consolidated Net Income) shall be added back to
Consolidated Net Income; and
(ii) extraordinary non-cash revenue (to the extent included in
calculating Consolidated Net Income) shall be deducted from
Consolidated Net Income;
plus
(b) the sum of (but in each case, only to the extent not included in
Consolidated Net Income for such period) the following, without
duplication:
(i) Consolidated Interest Expense; plus
(ii) Consolidated Income Tax Expense; plus
(iii) Consolidated Depreciation and Amortization Expense.
Consolidated Depreciation and Amortization Expense -- means, for any
period, the consolidated depreciation and amortization expense of the Company
and its Subsidiaries for such period, calculated on a consolidated basis in
accordance with GAAP.
Consolidated Income Tax Expense -- means, for any period, the aggregate
of all current and deferred taxes based upon income and franchise tax expense
of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
Consolidated Interest Expense -- means, for any period, the interest
expense of the Company and its Subsidiaries (including amortization of
original issue discount on any Indebtedness, the interest portion of any
deferred payment obligation, the net costs associated with interest rate swap
obligations or agreements and the interest component of rentals in respect of
Capital Leases) for such period calculated on a consolidated basis, such
consolidation to be performed in accordance with GAAP.
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Consolidated Net Income -- means, for any period, the aggregate of the
Net Income of the Company and its Subsidiaries, determined on a consolidated
basis.
Consolidated Revenues -- means, for any period, the aggregate revenue
for such period of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
Credit Documents -- means, collectively, the Indenture, the Securities,
the Collateral Documents, the Specialty Guaranty, any other Guarantees of any
or all of the Obligations and any and all other documents, instruments and
agreements now or hereafter executed and/or delivered in connection therewith.
Default -- means an event, act or condition that, with notice or lapse
of time, or both, would become an Event of Default.
Defaulted Interest -- any interest which is payable, but is not
punctually paid or duly provided for on any Interest Payment Date.
Entire Cash Proceeds -- means, with respect to any Transfer of assets,
the difference of:
(a) the cash proceeds (whenever received) actually received by the
Company or any Subsidiary of the Company from such Transfer; minus
(b) the sum of:
(i) commissions and other fees and expenses (including fees
and expenses of counsel, accountants and investment bankers) related
to such Transfer; plus
(ii) provisions for all taxes paid or payable as a result
thereof and in connection therewith and payments made to retire
Indebtedness (other than the Securities or the Original Securities)
secured by or otherwise relating directly to such assets being sold or
otherwise disposed of where payment of such Indebtedness is required
in connection therewith.
Event of Default -- has the meaning described in "Description of
Notes -- Events of Default."
GAAP -- means generally accepted accounting principles in effect from
time to time in the United States applied on a consistent basis.
General Partner -- means the Parent or any other general partner of the
Company.
Governmental Authority -- means any federal, state, local, foreign or
other governmental or administrative body, instrumentality, department or
agency or any court, tribunal,
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administrative hearing body, arbitration panel, commission or other similar
dispute resolving panel or body.
Guarantee -- means, with respect to any Person, any guarantee or other
contingent liability (other than any endorsement for collection or deposit in
the ordinary course of business), direct or indirect, of such Person with
respect to any obligation 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 obligation; and
(b) any agreement:
(i) to purchase, or to advance or supply funds for the
payment or purchase of, any such obligation;
(ii) to purchase, sell or lease property, products, materials,
supplies, transportation or services, to enable 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, supplies, transportation or services; or
(iii) to make any Investment in, or to otherwise provide funds
to or for, such other Person to enable 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 any Guarantee shall be equal to the outstanding amount of the
obligation directly or indirectly guaranteed. The term "Guarantee" used as a
verb has a corresponding meaning.
Guarantor Subsidiary -- means Specialty.
Holder -- means a Person in whose name a Security is registered in the
Security register.
Indebtedness -- of a Person means, without duplication:
(a) all indebtedness of such Person for borrowed money or evidenced
by bonds, notes, debentures or similar instruments;
(b) all obligations of such Person under leases which have been or,
in accordance with GAAP, should be, recorded as Capital Leases;
(c) all indebtedness of such Person arising under acceptance
facilities;
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(d) the face amount of all letters of credit (other than letters of
credit securing solely the payment of insurance premiums) issued for the
account of such Person and, without duplication, all drafts drawn
thereunder;
(e) all liabilities secured by any Lien on any property owned by such
Person, to the extent attributable to such Person's interest in such
property, even though such Person has not assumed or become liable for the
payment thereof;
(f) all obligations of such Person under any interest rate swap,
interest rate future, interest rate cap, interest rate option or other form
of interest rate hedging agreement or arrangement designed to protect
against fluctuations in interest rates; and
(g) any Guarantee of such Person with respect to Indebtedness of
another Person.
Investment -- means any investment in any Person, whether by means of
asset or share or equity purchase, capital contribution, loan, advance, time
deposit, purchase of notes, bonds or other evidences of Indebtedness or
otherwise, other than:
(a) the purchase by such Person of assets either constituting Capital
Expenditures or made in the ordinary course of such Person's business;
(b) the exchange of the Original Securities pursuant to the
provisions of, and the consummation of the transactions contemplated by,
the Exchange Agreement; and
(c) repurchases of the Securities.
Junior Indebtedness -- means any Indebtedness of the Company which is
subordinated to the Securities in right of payment.
Lien -- means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, deposit arrangement, encumbrance, lien (statutory or
other), security interest, easement, defect in or exception to title or
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement, any Capital Lease having
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement (other than notice filings not perfecting a
security interest) under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing.
Mortgages -- means each and every mortgage, deed of trust, collateral
assignment of leases, collateral assignment of rents or similar instrument
granting the Trustee an interest in or Lien upon any real property and
securing the Obligations, in each case, as amended through and including the
date hereof and as hereafter amended.
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Net Cash Proceeds -- means:
(a) in respect of a Specified Asset Sale described in clause (a) of
the definition of "Specified Asset Sale", the Entire Cash Proceeds with
respect to such Specified Asset Sale; and
(b) in respect of a Specified Asset Sale described in clause (b) of
the definition of "Specified Asset Sale", an amount equal to the difference
of:
(i) the Entire Cash Proceeds in respect of such Transfer;
minus
(ii) the amount of such Entire Cash Proceeds in respect of
such Transfer actually applied to purchase assets used or useful in
the business of the Company or its Subsidiaries;
together, in either case, with any amounts previously retained by the Trustee
required to be added thereto.
Net Income -- means, for any Person and for any period, the net income
(loss) of such Person for such period, determined in accordance with GAAP;
provided, however, that:
(a) no gains and no losses realized by such Person and its
Subsidiaries upon the sale or other disposition (including, without
limitation, pursuant to Sale-Leaseback Transactions, sales or disposals of
business segments, or sales or abandonment of properties, plants and
equipment of such Person and its Subsidiaries) of property or assets which
are not sold or otherwise disposed of in the ordinary course of business,
or pursuant to the sale of any Capital Stock of or other equity or
ownership interest in such Person or any Subsidiary, shall be considered in
calculating Net Income;
(b) no writedowns, writeoffs or writeups by such Person and its
Subsidiaries of receivables, inventories, fixed assets, real property, real
estate leasehold interests or intangible assets (not including amortization
of intangible assets in accordance with GAAP) shall be considered in
calculating Net Income;
(c) net income or net loss of any Person combined with such Person on
a "pooling of interests" basis attributable to any period prior to the date
of such combination shall not be considered in calculating Net Income; and
(d) net income or net loss of any Person which is not consolidated
with such Person shall not be considered in calculating Net Income except
to the extent of the amount of dividends or distributions paid to such
Person or any of its Subsidiaries.
Non-Recourse Indebtedness -- owing by any Person means Indebtedness for
money borrowed or evidenced by a Lien, wherein liability is limited solely to
the security therefor without any liability on the part of such Person for
any deficiency, or with respect to which the holder of
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such Indebtedness has irrevocably made the election under Section
1111(b)(1)(A)(i) of Title 11 of the United States Code, as amended.
Obligations -- means any and all obligations and liabilities of the
Company, now or hereafter incurred, under or with respect to the Securities,
the Indenture, the Collateral Documents or any other Credit Document, whether
or not such obligations and liabilities are reduced to judgment, liquidated,
unliquidated, evidenced by any note or other instrument, direct or indirect,
absolute or contingent, due or to become due, disputed, undisputed, legal,
equitable, secured or unsecured, and whether or not any such obligations and
liabilities are discharged, stayed or otherwise affected by any dissolution,
insolvency or similar proceeding such obligations and liabilities to include
without limitation:
(a) the payment of the principal and interest (and premium, if any)
on all of the Securities now and hereafter issued and delivered and
outstanding;
(b) the payment of all other sums owing hereunder and under each of
the other Credit Documents to any Holder or to the Trustee;
(c) all costs and expenses (including attorneys' fees) incurred or
payable in connection with any Credit Document; and
(d) the performance of the respective covenants of the Company herein
and in each of the other Credit Documents contained.
Omnibus Amendment -- means that certain Omnibus Amendment Agreement,
dated as November 15, 1995, among the Company, Specialty and the Trustee.
Original Holders -- means the holders of the Original Securities on the
day preceding the date of the Indenture.
Parent Restricted Subsidiaries -- means and includes Cavalcade Holdings,
Inc.; Cavalcade Foods, Inc.; Cavalcade Development, L.P.; Furr's/Bishop's
Cafeterias, L.P.; any of their respective subsidiaries; or any of their
respective successors and assigns.
Paying Agent -- means the Person or Persons authorized by the Company to
pay the principal of (and premium, if any) or interest on any Securities on
behalf of the Company. The Company initially appoints the Trustee to act as
Paying Agent. For purposes of redemption of the Notes, neither the Company
nor any Affiliate may act as Paying Agent.
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Permitted Transfers -- means and includes:
(a) sales of inventory in the ordinary course of business;
(b) Transfers of obsolete or worn-out machinery and equipment, and
subleases of leased property, no longer used or useful in the conduct of
the business of the Company and its Subsidiaries;
(c) Transfers of assets from any Subsidiary of the Company to the
Company; and Transfers from the Company to any Guarantor Subsidiary;
(d) with respect to cafeteria or other restaurant properties acquired
after the date of the Indenture and in accordance with the terms thereof,
Transfers of land adjacent to or in the immediate proximity of any such
cafeteria or restaurant not necessary for the operation of such cafeteria's
or restaurant's business;
(e) so long as no Default or Event of Default shall have occurred and
be continuing, with respect to any land, buildings or equipment acquired
after the date of the Indenture and in accordance with the terms thereof,
Sale-Leaseback Transactions of any such assets; and
(f) so long as no Default or Event of Default shall have occurred and
be continuing, Transfers of any assets or property of the Company, so long
as the aggregate fair market value for all such assets or property so sold
or disposed of in any one calendar year does not exceed Five Million
Dollars ($5,000,000).
Person -- means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Authority or any agency or political subdivision thereof.
Priority Indebtedness -- means and includes, without duplication:
(a) Indebtedness secured by any Lien (including, without limitation,
any Purchase Money Mortgage) on any property owned by the Company or any of
its Subsidiaries, to the extent attributable to such Person's interest in
such property, whether or not such Person has not assumed or become liable
for the payment thereof;
(b) all Indebtedness of, and all preferred stock (valued at the
liquidation preference thereof), of Subsidiaries of the Company (other than
Guarantor Subsidiaries), except:
(i) such Indebtedness owing to, or such preferred stock
beneficially owned by, the Company; and
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(ii) in the case of any such Indebtedness owing to, or
preferred stock beneficially owned by, a Subsidiary of the Company,
for the amount thereof owing (directly or indirectly through
Subsidiaries of the Company) to the Company; and
(c) with respect to any Sale-Leaseback Transaction, the net amount of
all rent required to be paid in respect of the lease of the property
subject thereto by the Company or any of its Subsidiaries during the
remaining primary term thereof, discounted from the respective due dates
thereof to such date at the rate per annum implicit in such lease.
Pro Forma - means, for any period, with respect to any calculation of
Consolidated Cash Flow or Consolidated Interest Expense, in connection with
the incurrence of any Indebtedness during such period, the amount of
Consolidated Cash Flow or Consolidated Interest Expense, as the case may be,
which would have resulted during and for such period, assuming that:
(a) any assets acquired with the proceeds of the Indebtedness being
incurred had been acquired, and such Indebtedness had been incurred,
created, assumed or Guaranteed, on the first day of such period;
(b) any other Indebtedness repaid with the proceeds of such
Indebtedness had been repaid on the first day of such period;
(c) the rate of interest in effect for floating rate Indebtedness
shall at all times be the rate of interest in effect on the date of
determination;
(d) the entire principal amount of such newly incurred Indebtedness
shall be outstanding for each day during such period; and
(e) if the Second Closing Date occurred during such period, the
Second Closing Date had occurred, and the transactions contemplated to
occur on the Second Closing Date pursuant to the provisions of the Exchange
Agreement had occurred, on the first day of such period.
Pro Forma Interest Coverage Ratio -- means, at any time of calculation,
the ratio, expressed as a percentage, of:
(a) Pro Forma Consolidated Cash Flow for the period of four (4) full
consecutive fiscal quarters of the Company most recently ended at such
time; to
(b) Pro Forma Consolidated Interest Expense for such period.
Purchase Money Mortgage -- means:
(a) a Lien held by any Person (whether or not the seller of such
assets) on tangible property (other than assets acquired to replace,
repair, upgrade or alter tangible property owned by the Company or any of
its Subsidiaries on the date hereof) acquired or
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constructed by the Company or any of its Subsidiaries after the date of
the Indenture, which Lien secures all or a portion of the related
purchase price or construction costs of such property; provided,
however, that such Lien is created not later than one hundred eighty
(180) days after acquisition or completion of construction of such
property;
(b) any Lien existing on any fixed assets at the time such fixed
assets are acquired by the Company or any of its Subsidiaries; and
(c) any Lien existing on any fixed assets of any Person at the time
it becomes a direct or indirect Subsidiary of the Company;
provided, however, that no such Lien extends to any other asset or property
of the Company or any of its Subsidiaries.
Redemption Amount -- the aggregate Net Cash Proceeds and Specified
Casualty Loss Payments prompting an offer of redemption.
Redemption Date -- when used with respect to any Securities to be
redeemed means the date fixed for such redemption by or pursuant to the
Indenture.
Redemption Price -- when used with respect to any Security to be
redeemed means the price at which it is to be redeemed pursuant to the
Indenture (including, without limitation, any accrued and unpaid interest
thereon payable with respect to such redemption).
Regular Record Date -- for the interest payable on any Interest Payment
Date (other than the first Interest Payment Date and other than on December
31, 2001) means the March 15 or September 15 (whether or not a business day),
as the case may be, next preceding such Interest Payment Date or, in the case
of the first Interest Payment Date, the Second Closing Date.
Reimbursement Agreement -- means the Reimbursement Agreement, dated as
of the date of the Indenture, among the Company, the Parent and
Furr's/Bishop's Cafeterias, L.P., a Delaware limited partnership.
Requisite Amount -- means the requisite principal amount of the
Securities Outstanding with respect to any request, demand or other action of
the Holders pursuant to the Indenture which, except as otherwise specifically
stated in any provision of the Indenture, shall be more than fifty percent
(50%) of the principal amount of the Notes outstanding.
Restricted Investment -- means any Investment made by the Company or any
Subsidiary of the Company except:
(a) Investments in stock or partnership interests of any Subsidiaries
of the Company existing on the date of the Indenture, but not any increase
in the amount thereof;
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(b) Temporary Cash Investments, which shall be pledged to the Trustee
for the ratable benefit of the Holders as collateral security for the
payment of the Obligations pursuant to a pledge agreement in form and
substance stated in an opinion of counsel to be effective to accomplish the
valid pledge thereof to the Trustee; provided, however, that to the extent
that such pledge agreement and such opinion of counsel covers specified
after-acquired Temporary Cash Investments, no new pledge agreement or
opinion of counsel shall be necessary upon the subsequent acquisition of
such after-acquired Temporary Cash Investments if the Lien thereupon is
perfected in the manner contemplated in such opinion of counsel and the
Company so states in an officers' certificate delivered to the Trustee;
(c) Investments in Guarantor Subsidiaries or Persons which,
contemporaneously with the making of such Investment become Guarantor
Subsidiaries;
(d) for the formation of other Subsidiaries of the Company created
and utilized solely to satisfy state and local alcoholic beverage licensing
requirements for the Company's businesses and any of its current or future
retail liquor sales establishments; and
(e) Investments in Subsidiaries of the Company:
(i) in which the Company has contributed less than One
Million Dollars ($1,000,000) (whether in cash, property, assets or
otherwise) in the aggregate, which contributions (to the extent
subject to a Lien in favor of the Trustee) shall remain subject to the
Lien of the Trustee after giving effect to such contribution (and such
Subsidiaries shall acknowledge same); and
(ii) so long as the Company has no Indebtedness and no other
obligations owing to such Subsidiaries or to any third party with
respect to such Subsidiary.
Restricted Payment -- means, with respect to any Person:
(a) any dividend or other distribution in respect of such Person's
capital stock, or incurrence of a liability for such dividend or
distribution, in cash, properties or other assets, on any shares of such
Person's capital stock, but excluding any dividend or distribution
consisting solely of capital stock of such Person;
(b) any payment (including, without limitation, the setting aside of
assets or the deposit of funds therefor) on account of the purchase,
redemption, retirement or acquisition of:
(i) any capital stock of such Person, the Company or any of
its Subsidiaries; or
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(ii) any option, warrant or other right to acquire any
security or interest described in the immediately preceding clause
(i); and
(c) any optional payment or prepayment of principal or premium on
account of Junior Indebtedness (other than Non-Recourse Indebtedness paid
solely out of the property or assets securing such Non-Recourse
Indebtedness) or any optional purchase, defeasance, redemption, retirement
or acquisition of any principal on any such Junior Indebtedness (including,
without limitation, the setting aside of assets or the deposit of funds
therefor);
provided, however, that:
(A) no such dividend, distribution or payment made by any Subsidiary
to the Company or any Guarantor Subsidiary shall be deemed to be a
Restricted Payment;
(B) no such dividend, distribution or payment made by any Subsidiary
to another Subsidiary shall be deemed to be a Restricted Payment to the
extent of the Company's direct or indirect equity interest in such
Subsidiary;
(C) the exchange, conversion or exercise of any option on the part of
holders of the limited partnership interests of the Company to exchange,
convert, exercise or otherwise transfer such interests to the Parent or any
Affiliate of the Parent, solely in exchange for Capital Stock of the Parent
or such Affiliate, shall not constitute a Restricted Payment; and
(D) payments made by the Company and the Subsidiaries pursuant to the
Reimbursement Agreement shall not constitute Restricted Payments; and
(E) payments made by the Company to any Person which is or was a
partner of the Company solely to reimburse such Person for income taxes
payable and paid by such partner in respect of the income of the Company
for any period, shall not constitute a Restricted Payment.
Sale-Leaseback Transaction -- means any arrangements, directly or
indirectly, with any Person, whereby the Company or any of its Subsidiaries
shall sell or transfer any property, whether now owned or hereafter acquired,
used or useful in its business, in connection with the rental or lease of the
property so sold or transferred or of other property which the Company or
such Subsidiary intends to use for substantially the same purpose or purposes
as the property so sold or transferred.
Significant Subsidiary -- means a Subsidiary, including its
Subsidiaries, which meets any of the following conditions:
(a) the Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed ten percent (10%) of the total assets of
the Company and its
45
<PAGE>
Subsidiaries consolidated as of the end of the most recently completed
fiscal year of the Company; or
(b) the total assets (after intercompany eliminations) of the
Subsidiary exceed ten percent (10%) of the total assets of the Company and
its Subsidiaries consolidated as of the end of the most recently completed
fiscal year of the Company; or
(c) the Company's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the Subsidiary
exceeds ten percent (10%) of such income of the Company and its
Subsidiaries consolidated for the most recently completed fiscal year of
the Company.
Specialty -- means Furr's/Bishop's Specialty Group, L.P., a Delaware
limited partnership.
Specialty Guaranty -- means that certain Unlimited Guaranty of
Specialty, dated March 27, 1992, for the benefit of the Trustee, as amended
by the Omnibus Amendment and as thereafter amended from time to time.
Specified Asset Sales -- means:
(a) the receipt by the Company or any of its Subsidiaries of any
Entire Cash Proceeds in respect of any Transfer (other than Permitted
Transfers), if any Default or Event of Default is continuing at the time of
receipt of such proceeds; and
(b) the failure of the Company to apply the entire amount of Entire
Cash Proceeds from any such Transfer to purchase assets used or useful in
the business of the Company or its Subsidiaries within one hundred eighty
(180) days of the date of receipt thereof.
Specified Casualty Loss Event -- means:
(a) the receipt by the Company or any of its Subsidiaries of any
Casualty Loss Payment in respect of any Casualty Loss, if any Default or
Event of Default is continuing at the time of receipt of such Casualty Loss
Payment; and
(b) the failure of the Company to apply the entire amount of any
Casualty Loss Payment to either repair or replace the property that gave
rise to such Casualty Loss within one hundred eighty (180) days of the date
of receipt thereof.
46
<PAGE>
Specified Casualty Loss Payment -- means:
(a) in respect of a Specified Casualty Loss Event described in
clause (a) of the definition of "Specified Casualty Loss Event", the entire
Casualty Loss Payment with respect to such Specified Casualty Loss Event;
and
(b) in respect of a Specified Casualty Loss Event described in clause
(b) of the definition of "Specified Casualty Loss Event", an amount equal
to the difference of:
(i) the entire Casualty Loss Payment in respect of such
Casualty Loss; minus
(ii) the amount of such Casualty Loss Payment in respect of
such Casualty Loss actually applied to either repair or replace the
property that gave rise to such Casualty Loss;
together, in either case, with any excess amounts previously retained by the
Trustee and required to be added thereto.
Stated Maturity -- when used with respect to any Security or any
installment of interest thereon means the date specified in such Security as
the fixed date on which the principal of such Security (disregarding any
mandatory redemption payments required by the terms of the Indenture) or such
installment of interest is due and payable.
Subordinated Intercompany Indebtedness -- means unsecured Indebtedness
of the Company or any Guarantor Subsidiary, owing solely to one or more
Guarantor Subsidiaries, which is subordinated to the Securities in right of
payment and the terms of which do not permit the Company to make any payment
in respect thereof at any time:
(a) during which an Event of Default shall have occurred or shall be
continuing; or
(b) following acceleration of the maturity of the Securities or
the exercise of any other remedy in respect thereof, pursuant to any
Collateral Document or otherwise, until after the final and indefeasible
payment in full of all the Securities.
Subsidiary -- means, with respect to any Person, any corporation or
other Person with respect to which more than fifty percent (50%) of the
Capital Stock or other equity or ownership interests having ordinary voting
power (other than stock or other equity or ownership interests having such
power only by reason of the happening of a contingency) is at the time owned
by such Person or by one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
Tangible Net Worth -- means, with respect to any Person or group of
consolidated Persons, at any time, the difference of:
47
<PAGE>
(a) the stockholders' equity (or, in the case of a partnership, the
partners' equity) of such Person or group determined on a consolidated
basis in accordance with GAAP at such time; minus
(b) the sum of:
(i) the aggregate amount of deferred assets, other than
prepaid insurance and prepaid taxes;
(ii) patents, copyrights, trademarks, trade names, franchises,
goodwill and other similar intangible assets; and
(iii) unamortized debt discount and expense;
of such Person or group of consolidated Persons at such time.
Temporary Cash Investments -- means and includes Investments in:
(a) securities issued or directly and fully guaranteed or insured by
the United States Government or any agency or instrumentality thereof
having maturities of not more than one (1) year from the date of
acquisition;
(b) certificates of deposit and Eurodollar time deposits with
maturities of not more than six (6) months from the date of acquisition,
bankers' acceptances with maturities not exceeding six (6) months and
overnight bank deposits, in each case, with:
(i) Amarillo National Bank;
(ii) any domestic commercial bank having capital and surplus
in excess of One Hundred Million Dollars ($100,000,000) and a
long-term unsecured debt rating from both Moody's Investors
Services, Inc. and Standard & Poor's Ratings Group (a division of
McGraw Hill, Inc.) of at least "A";
(c) repurchase obligations with respect to securities of the types
described in clauses (a) and (b), entered into with any financial
institution meeting the qualifications specified in clause (b) above and
having a term not in excess of fourteen (14) days;
(d) commercial paper rated at least A-2 or the equivalent thereof by
Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.) or at
least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and
in either case maturing within six (6) months after the date of
acquisition;
(e) certificates of deposit with maturities of not greater than
six (6) months from the date of acquisition with any domestic commercial
bank at which the Company
48
<PAGE>
has an operating account aggregating not greater than One Hundred
Thousand Dollars ($100,000) at any one time outstanding for all such
certificates of deposit at any one such bank and not greater than Five
Hundred Thousand Dollars ($500,000) at any one time outstanding for all
such certificates of deposits under this clause (e); and
(f) money market mutual funds subject to regulation as investment
companies under the Investment Company Act of 1940, as amended, so long as
such mutual fund:
(i) has assets of at least One Hundred Million Dollars
($100,000,000);
(ii) is either:
(A) an Affiliate of, or managed by, Fidelity
Management & Research Company; or
(B) rated "A" or better by Standard & Poor's Ratings
Group (a division of McGraw Hill, Inc.) or an equivalent rating
by another nationally recognized rating service;
(iii) invests solely in Investments listed in clause (a) and
clause (c) of this definition of "Temporary Cash Investments;"
(iv) permits redemptions to be made on any Business Day; and
(v) has as a fundamental investment goal the maintenance of a
constant net asset value.
Transfer -- means, with respect to any assets or property, to sell,
lease, transfer, convey or otherwise dispose of such assets or property.
Trust Estate -- means all Collateral granted to the Trustee.
LEGAL MATTERS
The legality of the Securities offered hereby has been passed upon for
the Company by Fulbright & Jaworski, L.L.P. Certain other legal matters with
respect to the Securities have been passed upon for the Company by Hughes &
Luce, L.L.P.
EXPERTS
The consolidated financial statements and schedule of Cafeteria
Operators, L.P. as of December 30, 1997 and December 31, 1996, and for the 52
week years then ended, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat
49
<PAGE>
Marwick LLP covering the December 30, 1997 and December 31, 1996 consolidated
financial statements and schedule refers to a change, effective January 2,
1996, in the method of accounting for impairment of long-lived assets and for
long-lived assets to be disposed of to conform to Statement of Financial
Accounting Standards No. 121.
The consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for the fifty-two week year ended January 2, 1996
incorporated by reference in this Prospectus, have been audited by Deloitte &
Touche LLP, independent certified public accountants, as stated in their
report incorporated by reference herein, and are so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes and incorporates by reference certain
statements that may constitute "forward-looking" information (as defined in
the Private Securities Litigation Reform Act of 1995). Words such as
"anticipate", "estimate", "project" and similar expressions are intended to
identify such forward-looking statements. Forward-looking statements may be
included in this Prospectus in, among other places, under "Prospectus Summary
- -- The Company," "Risk Factors" and "Use of Proceeds" and in certain portions
of the 1997 10-K incorporated herein by reference. Such forward-looking
statements may include, but are not limited to statements concerning
estimates of current and future results of operations, earnings, the
development of new production facilities, future capacity under the Company's
credit arrangements, and future capital expenditure and liquidity
requirements.
Such forward-looking statements are subject to certain risks,
uncertainties and assumptions, including without limitation those discussed
under "Risk Factors" and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1997 10-K incorporated
herein by reference. Should one or more of these risks materialize, or should
any of the underlying assumptions prove incorrect, actual results of current
and future operations may vary materially from those anticipated, estimated
or projected. Prospective investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. The Company assumes no obligation to update any such forward-looking
statements.
50
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, that were paid in connection
with the sale of the Notes being registered, all of which will be paid
by the registrant. All amounts are estimates except the registration
fee.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . $ 15,784
Accounting Fees and Expenses . . . . . . . . . . . . $ 5,000
Legal Fees and Expenses. . . . . . . . . . . . . . . $ 60,000
Trustee's Fees and Expenses. . . . . . . . . . . . . $ 5,000
Printing and Engraving Fees and Expenses . . . . . . $ 7,500
Miscellaneous. . . . . . . . . . . . . . . . . . . . $ 7,500
--------
Total . . . . . . . . . . . . . . . . . . . . . $100,784
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of Delaware enables a
Delaware corporation to provide in its certificate of incorporation, and
the Parent has so provided in its Restated Certificate of Incorporation,
for the elimination or limitation of the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director; provided, however, that a
director's liability is not eliminated or limited: (1) for any breach
of the director's duty of loyalty to the corporation or its
stockholders; (2) for acts or omissions not in good faith or which
involve an intentional misconduct or a knowing violation of law; (3)
under Section 174 of the General Corporation Law of Delaware (which
imposes liability on directors for unlawful payment of dividends or
unlawful stock purchases or redemptions); or (4) for any transaction
from which the director derived an improper personal benefit. The
Restated Certificate of Incorporation further provides that if the
Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the
liability of a director shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as amended.
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or witness or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent
of another corporation or enterprise. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including
attorneys' fees),
51
<PAGE>
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the
person indemnified acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. If the
person indemnified is not wholly successful in such action, suit or
proceeding, but is successful, on the merits or otherwise, in one or
more but less than all claims, issues or matters in such proceeding, he
or she may be indemnified against expenses actually and reasonably
incurred in connection with each successfully resolved claim, issue or
matter. In the case of an action or suit by or in the right of the
corporation, no indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is
fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Section 145 provides that to the extent a
director, officer, employee or agent of a corporation has been
successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or manner therein, he or she
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
The By-laws of the Parent provide that, to the fullest extent permitted
by the General Corporation Law of the State of Delaware, the Parent
shall indemnify any person who was or is a party or is threatened to be
made a party to any action, suit or proceeding of the type described
above by reason of the fact that he or she is or was a director or
officer of the Parent or is or was serving at the request of the Parent
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. No expenses will
be paid in advance except, as authorized by the Board of Directors, to a
director or officer for expenses incurred while acting in his or her
capacity as a director or officer, who has delivered an undertaking to
the corporation to repay all amounts advanced if it should be later
determined that such director or officer was not entitled to
indemnification. The By-laws further provide that the above rights of
indemnification are not exclusive of any other rights of indemnification
that a director or officer may be entitled to from any other source.
In addition, the Partnership Agreement of the Company provides that the
Company shall indemnify and hold harmless each general partner, and any
former general partner, of the Company, their respective affiliates and
all officers, directors, partners, employees and agents of each general
partner, former general partner and their respective affiliates
(individually, an "Indemnitee"; provided, however, under no
circumstances shall Michael J. Levenson or any of his affiliates be
considered an Indemnitee) from and against all losses, claims, demands,
costs, damages, liabilities, joint and several, expenses (including
attorneys' fees and disbursements), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits,
or proceedings, civil, criminal, administrative or investigative, in
which an Indemnitee may be involved, or threatened to be involved, as a
party or otherwise, relating to or arising out of the Company, its
52
<PAGE>
property, business or affairs, regardless of whether the Indemnitee
continues to be a general partner, an affiliate or an officer, director,
partner, employee or agent of a general partner or an affiliate at the
time any such liability or expense is paid or incurred, if the
Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in the best interest of the Company and the Indemnitee's
course of conduct does not constitute actual fraud, gross negligence or
willful or wanton misconduct; provided, however, that such
indemnification will be recoverable only out of the assets of the
Company. The indemnification provided by the Partnership Agreement of
the Company is in addition to any other rights to which the Indemnitee
may be entitled to under any agreement with the Company or by vote of
the partners, as a matter of law, or otherwise, as to both an action in
the Indemnitee's capacity and any action in another capacity, and shall
continue as to Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns,
administrators, and personal representatives of the Indemnitee. An
Indemnitee shall not be denied indemnification because the Indemnitee
had an interest in the transaction with respect to which the
indemnification applies if the transaction was not prohibited by the
terms of the Partnership Agreement of the Company.
Expenses incurred (including legal fees and expenses) by, or on behalf
of, the Indemnitee shall, from time to time, be paid by the Company in
advance of any final disposition upon the approval of the general
partner and the receipt of a written undertaking by, or on behalf of,
the Indemnitee to repay such amounts if it shall ultimately be
determined by a final, non-appealable judgment of a court of competent
jurisdiction that the Indemnitee is not entitled to be indemnified by
the Company. The Company may purchase and maintain insurance on behalf
of any Indemnitee, enter into indemnity contracts with Indemnitees and
adopt written procedures pursuant to which arrangements are made for the
advancement of expenses and the funding of indemnification obligations.
Each current director of the Parent has entered into an Indemnification
Agreement by and between the Parent and such director pursuant to which
the Parent will indemnify such director and hold such director harmless
from any and all losses, expenses and fines to the fullest extent
authorized, permitted or not prohibited (i) by the Delaware General
Corporation Law or any other applicable law (including judicial,
regulatory or administrative interpretations or readings thereof), the
Parent's Certificate of Incorporation or By-laws as in effect on the
date of execution of the agreement or other statutory provision
authorizing such indemnification. In the event that after the date of
the agreements the Parent provides any greater right of indemnification,
in any respect, to any other person serving as an officer or director of
the Parent, then such greater right of indemnification shall inure to
the benefit of the respective director and shall be deemed to be
incorporated in the relevant agreement as a basis for indemnity, at each
director's election, together with the indemnity expressly set forth
therein.
53
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
*4.1 -- Amended and Restated Indenture, dated as of November 15,
1995, between Cafeteria Operators, L.P. and Fleet National
Bank of Massachusetts (f/k/a Shawmut Bank, N.A.).
***4.2 -- First Supplemental Indenture, dated as of January 24, 1996,
between Cafeteria Operators, L.P. and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.).
*4.3 -- General Security Agreement, dated March 27, 1992, between
Cafeteria Operators, L.P. and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.).
*4.4 -- Security Agreement, dated March 27, 1992, between Cafeteria
Operators, L.P. and Fleet National Bank of Massachusetts
(f/k/a Shawmut Bank, N.A.).
*4.5 -- Form of Assignment and Security Agreements relating to
deposits at Amarillo National Bank and Carlsbad National
Bank, dated March 27, 1992, between Cafeteria Operators,
L.P. and Fleet National Bank of Massachusetts (f/k/a Shawmut
Bank, N.A.).
*4.6 -- General Security Agreement, dated March 27, 1992, between
Furr's/Bishop's Specialty Group, L.P. and Fleet National
Bank of Massachusetts (f/k/a Shawmut Bank, N.A.).
*4.7 -- Assignment for Security (Trademarks), dated as of March 27,
1992, by Cafeteria Operators, L.P., filed with the Patent
and Trademark Office.
*4.8 -- Assignment for Security (Trademarks), dated as of December
28, 1995, by Cafeteria Operators, L.P., filed with the
Patent and Trademark Office.
*4.9 Assignment for Security (Trademarks) dated as of December
28, 1995 by Furr's/Bishop's Specialty Group, L.P. filed with
the Patent and Trademark Office.
*4.10 Amended and Restated Security Agreement and
Mortgage-Trademarks and Patents dated as of December 31,
1995 by and among Cafeteria Operators, L.P., Furr's/Bishop's
Specialty Group, L.P. and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.).
*4.11 -- Special Power of Attorney, dated March 27, 1992, by
Cafeteria Operators, L.P.
*4.12 -- Special Power of Attorney, dated as of December 28, 1995, by
Cafeteria Operators, L.P.
*4.13 -- Special Power of Attorney, dated as of December 28, 1995, by
Furr's/Bishop's Specialty Group, L.P.
**4.14 Omnibus Agreement dated November 15, 1996 by and among
Cafeteria Operators, L.P., Specialty Group, L.P. and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
(included as Exhibit E to the Exchange Agreement filed as
Exhibit 10.1).
*4.15 First Amendment to Deed of Trust, dated as of November 15,
1995 by and between Cafeteria Operators, L.P. and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
for premises located at Pima County, Arizona.
54
<PAGE>
EXHIBIT DESCRIPTION
<S> <C>
*4.16 First Amendment to Deed of Trust dated as of November 15,
1995 by and between Cafeteria Operators, L.P. and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
for premises located at Jefferson County, Colorado.
*4.17 First Amendment to Deed of Trust, dated as of November 15,
1995 by and between Cafeteria Operators, L.P. and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
for premises located at Clark County, Nevada.
*4.18 First Amendment to Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Rents
and Leases, dated as of November 15, 1995 by and between
Cafeteria Operators, L.P. and Fleet National Bank of
Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at San Bernardino County, California.
*4.19 First Amendment to Mortgage, Security Agreement and
Assignment of Lease and Rents, dated as of November 15, 1995
by and between Cafeteria Operators, L.P. and Fleet National
Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) for
premises located at Johnson County, Kansas.
*4.20 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases and Rents, dated as of November 15,
1995 by and between Cafeteria Operators, L.P., and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
for premises located at St. Louis County, Missouri.
*4.21 First Amendment to New Mexico Deed of Trust, of November 15,
1995 by and between Cafeteria Operators, L.P., and Fleet
National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.)
for premises located at Bernadillo County, New Mexico.
*4.22 First Amendment to Mortgage with Power of Sale, dated of
November 15, 1995 by and between Cafeteria Operators, L.P.,
and Fleet National Bank of Massachusetts (f/k/a Shawmut
Bank, N.A.) for premises located at Tulsa County, Oklahoma.
*4.23 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) premises
located at Taylor County, Texas.
*4.24 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at Cameron County, Texas.
*4.25 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at Dallas County, Texas.
*4.26 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at Lubbock County, Texas.
55
<PAGE>
EXHIBIT DESCRIPTION
<S> <C>
*4.27 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at Grayson County, Texas.
*4.28 First Amendment to Deed of Trust, Security Agreement and
Assignment of Leases, dated as of November 15, 1995 by and
between Cafeteria Operators, L.P., and Fleet National Bank
of Massachusetts (f/k/a Shawmut Bank, N.A.) for premises
located at Hopkins County, Texas.
**4.29 -- Exchange Agreement, dated as of November 15, 1995, among
Furr's/Bishop's, Incorporated, Cafeteria Operators, L.P. and
holders of 11% Senior Secured Notes.
*5.1 Opinion of Fulbright & Jaworski, L.L.P.
*12.1 -- Statement re Computation of Ratios.
23.1 Consent of KPMG Peat Marwick, LLP, as independent certified
public accountants.
23.2 Consent of Deloitte & Touche, LLP, as independent certified
public accountants.
*23.3 Consent of Fulbright & Jaworski, L.L.P. (included in their
opinion filed as Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement).
*25.1 Statement of Eligibility of Trustee.
</TABLE>
- ----------------------------
* Previously filed.
** Incorporated by reference from Furr's/Bishop's, Incorporated's Registration
Statement on Form S-4, File No. 33- 92236.
*** Incorporated by reference from Furr's/Bishop's, Incorporated's Form 10-K
for the year ended January 2, 1996.
- ----------------------------
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
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<PAGE>
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar amount of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel in the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public
57
<PAGE>
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Lubbock, state of Texas, on
September 29, 1998.
CAFETERIA OPERATORS, L.P.
By: Furr's/Bishop's, Incorporated
Its general partner
By: /s/ SUZANNE HOPGOOD
----------------------------------
Suzanne Hopgood
Chief Executive Officer (Acting)
POWER OF ATTORNEY
Each person whose signature appears below constitutes Suzanne Hopgood
for his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all Amendments
(including post-effective Amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing appropriate or necessary to be
done in connection therewith, as fully to all intents and purposes as he or
she might or could do in person hereby ratifying and confirming all that said
attorney-in-fact and agent, acting alone, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/ JACOB C. BAUM Director
---------------------------
Jacob C. Baum September 29, 1998
/s/ BEN EVANS Director
---------------------------
Ben Evans September 29, 1998
/s/ SUZANNE HOPGOOD Director and Chief Executive
--------------------------- Officer (Acting)
Suzanne Hopgood September 29, 1998
59
<PAGE>
/s/ DAMIEN KOVARY Director
----------------------------
Damien Kovary September 29, 1998
/s/ WILLIAM J. NIGHTINGALE Director
----------------------------
William J. Nightingale September 29, 1998
/s/ GILBERT C. OSNOS Director
----------------------------
Gilbert C. Osnos September 29, 1998
/s/ BARRY W. RIDINGS Director
----------------------------
Barry W. Ridings September 29, 1998
/s/ ALTON R. SMITH Chief Financial and
---------------------------- Accounting Officer
Alton R. Smith September 29, 1998
60
<PAGE>
Exhibit 12.1
Statement re Computation of Ratios
(Dollars in thousands)
<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX FISCAL YEARS ENDED:
WEEKS WEEKS
ENDED ENDED
JUNE 30, JULY 1, Dec. 30, Dec. 31, Jan. 2, Jan. 3, Dec. 28,
1998 1997 1997 1996 1996 1995 1993
------------- ------------ --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from
continuing operations . . . $4,500 $ (108) $ (4,740) $ 8,550 $(37,154) $(19,710) $(163,386)
Adjustments for fixed
charges . . . . . . . . . . 1,887 1,974 3,968 3,878 30,185 27,695 26,593
------ ------ --------- ------- -------- -------- ---------
Earnings (loss) . . . . . . . $6,387 $1,866 $ (772) $12,428 $ (6,969) $ 7,985 $(136,793)
------ ------ --------- ------- -------- -------- ---------
------ ------ --------- ------- -------- -------- ---------
Interest expense. . . . . . . $ 114 $ 134 $ 289 $ 239 $ 26,209 $ 23,570 $ 22,105
Interest factor in rental
expense (1) . . . . . . . . 1,773 1,840 3,679 3,639 3,976 4,125 4,488
------ ------ --------- ------- -------- -------- ---------
Total fixed charges . . $1,887 $1,974 $ 3,968 $ 3,878 $ 30,185 $ 27,695 $ 26,593
------ ------ --------- ------- -------- -------- ---------
------ ------ --------- ------- -------- -------- ---------
Ratio of earnings (loss)
to fixed charges. . . . . . 3.38:1 0.95:1 (0.19):1 3.20:1 (0.23):1 0.29:1 (5.14):1
------ ------ --------- ------- -------- -------- ---------
------ ------ --------- ------- -------- -------- ---------
Amount of coverage
deficiency. . . . . . . . . n/a $ 108 $ 4,740 n/a $ 37,154 $ 19,710 $ 163,386
------ ------ -------- ------- -------- -------- ---------
------ ------ -------- ------- -------- -------- ---------
</TABLE>
(1) Based on one-third of rental expense estimated to be the portion
attributable to interest.
61
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
amendment No. 4 to Registration Statement File No. 333-4578 of Cafeteria
Operators, L.P. on Form S-3 to Form S-1 of our report dated March 28, 1996,
appearing in the Annual Report on Form 10-K of Cafeteria Operators, L.P. for
the year ended December 31, 1997, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
---------------------------------------
DELOITTE & TOUCHE LLP
Dallas, Texas
September 29, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cafeteria Operators, L.P.:
We consent to the use of our report incorporated herein by reference,
and to the reference to our firm under the heading "Experts" in the
Prospectus. Our report refers to a change in the method of accounting for
impairment of long-lived assets and for long-lived assets to be disposed of.
/s/ KPMG PEAT MARWICK LLP
---------------------------------------
KPMG PEAT MARWICK LLP
Dallas, Texas
September 29, 1998
